Alfred Liu Hong Kong
STANDARD Chartered is shutting its institutional equities business and eliminating about 4 000 jobs at its consumer operations as chief executive Peter Sands seeks to restore the UK bank’s profit growth.
The bank was “on track” to lower costs by at least $400 million (R5 billion) this year after eliminating about 2 000 consumer banking jobs in the past three months, with plans to cut that many again this year, it said yesterday from London.
Shutting the unprofitable cash equities, equity capital market and equity research operations would result in about 200 job losses and save about $100m in 2016, it said.
Sands, who turned 53 yesterday, has been under pressure to cut costs and stem faltering earnings that sparked the biggest slump in shares last year since the global financial crisis in 2008. Royal Bank of Scotland Group, the UK’s largest government-owned bank, has also shut its cash equities and equity capital markets operations as regulators pressure banks to hold more capital versus risks.
“The shares are up today (yesterday) on the news, but this announcement is not enough to convince the market that the bank is on the road to recovery,” Jim Antos, an analyst at Mizuho Securities Asia, said. “What we need is a clear statement from management about the way forward.”
Shares rose as much as 3.45 percent in London yesterday, the biggest intraday gain since October. The stock plummeted 29 percent last year, the worst performance among major UK banks.
The bank said it was trimming its consumer business as it focused on key cities and accelerated a switch to digital banking. It shut 22 branches in the second half of 2014 as part of a previously announced target of 80 to 100 closings, which will help cut costs by about $200m in 2015.
Cash equities was “a small business and a loss-making one so knocking it off for a struggling bank is a good move”, Chirantan Barua, a London-based analyst at Sanford C Bernstein, said. “$400m in cost saves are a good start, but does not really solve structural problems in profitability or capital.”
Standard Chartered reiterated its plans to exit or restructure “non-core” operations. The remaining $200m of cost savings targeted this year will come from “other client segments, product groups and global functions”, the bank said. – Bloomberg