London - Standard Chartered said it will cut 15 000 jobs and raise 3.3 billion pounds ($5.1 billion) in a rights offer after posting a surprise loss as loan impairments in India soared. Shares of the lender plunged.
The bank pledged savings of $2.9 billion by 2018 and will restructure or exit $100 billion of assets, according to a statement on Tuesday. Standard Chartered’s shares fell as much as 6.2 percent in Hong Kong after the announcement of a $139 million pretax loss for the third quarter, extending this year’s decline to 31 percent.
Chief Executive Officer Bill Winters is seeking to reverse damage caused by predecessor Peter Sands’s expansion in emerging markets such as India, which has saddled it with delinquent debt. His fundraising plan comes ahead of the publication next month of British regulators’ bank stress tests. Standard Chartered, which generates most of its revenue in Asia, said it has also been hurt by China’s slowdown and slumping commodity prices.
“The business environment in our markets remains challenging and our recent performance is disappointing,” Winters, 54, said in a statement.
The sweeping job cuts, part of creating a “simplified” structure, is on a gross basis, Standard Chartered said. The London-based lender had almost 91 000 employees at the end of 2014, data compiled by Bloomberg show. Besides strengthening the balance sheet, the capital raising will help fund a planned $3 billion investment over three years into “strategic opportunities”, technology and upgrading regulatory and compliance systems, the lender said.
Standard Chartered’s third-quarter loss compared with a $1.53 billion profit a year earlier. The average of five analyst estimates compiled by Bloomberg was for a $903 million profit.
Temasek participation
The two-for-seven rights issue offered at 465 pence per share will boost the lender’s common-equity Tier-1 capital ratio to 13.1 percent from 11.5 percent as of June 30, the bank said. Largest shareholder Temasek Holdings intends to take up rights for 15.8 percent of existing share capital, the bank said.
A rights offer had been “only a matter of time”, said Andrew Clarke, director of trading at Hong Kong brokerage Mirabaud Asia Ltd., adding that the lender had “far too many issues” that it still needed to resolve.
Standard Chartered said it targets a 10 percent return on equity and a common-equity Tier-1 capital ratio of 12 percent to 13 percent.
Impairment losses rose 129 percent from a year earlier to $1.23 billion, with the bank citing exposures to India and commodities. Raul Sinha, an analyst at JPMorgan Chase & Company with an overweight rating on the stock, had forecast impairments at $831 million, adding to $1.7 billion of loan losses in the first half.
BLOOMBERG