The boss of Standard Chartered admitted that the share price of the FTSE 100 bank was “crap” as he unveiled a $1 billion share buyback and a fresh cost-cutting drive in an effort to lift its stock market value.
Bill Winters is under pressure to boost the group’s shares after a recent slump that has taken the stock more than one third lower than it had been when he took charge in June 2015. This has left Standard Chartered vulnerable to a takeover, with First Abu Dhabi Bank considering a bid last year before walking away.
The stock is languishing despite a painful turnaround drive by Winters, 62, an American, whose tenure has involved thousands of job losses. He unveiled a fresh push to find savings in the bank’s annual results on Friday with a new initiative to cut $1.5 billion in expenses over three years.
The bank also revealed that it would return $1 billion to investors via a share buyback and declared a final dividend worth 21 cents a share, or $560 million, to buoy its stock price further. It is handing back surplus capital after enjoying a 19 per cent rise in pre-tax profits to $5.1 billion last year. Winters was awarded £7.8 million in pay for 2023, up 22 per cent on 2022 and his most generous package since the year he joined.
While the profits, buyback and cost-cutting plan sent Standard Chartered shares up by 4.9 per cent, or 29½p, to 635p at the close, they remain down by almost 17 per cent over the past 12 months.
Advertisement
“The stock price is crap,” Winters said in unusually candid remarks from a FTSE 100 boss, which echoed the infamous comment made by Gerald Ratner in 1991, when he described a product sold by his jewellery chain as “total crap”. Ratner’s gaffe fuelled a spiral of decline that almost caused the business to collapse.
Winters said that although the bank’s costs had fallen in recent years, its bosses needed to “address the perception that our costs are too high relative to our income”. The new savings drive was “an absolutely essential part of that” and would tackle investor worries that Standard Chartered was too complex and spread too thin, he said.
Winters said Standard Chartered had no plans to follow a string of other companies and drop London as its primary listing in search of a better valuation on another exchange overseas. Despite also being headquartered in London, the lender’s sprawling businesses are focused on Asia, Africa and the Middle East.
Its biggest market is Hong Kong and Winters has been increasing its profits in mainland China. However, its exposure to China is another source of concern for investors, who are worried that the bank will be hit by problems in the world’s second largest economy, including a recent crisis in the vast Chinese property sector.
Standard Chartered took a $282 million impairment charge last year to account for bad loans in Chinese commercial property. It also disclosed a further $153 million writedown on a stake it owns in China Bohai Bank in the fourth quarter, on top of a $697 million impairment charge on the investment in the third. HSBC rattled investors on Wednesday by taking a surprise $3 billion hit on a stake it owns in another Chinese bank.
Advertisement
Winters said there were “clearly cross-currents” in the Chinese economy: “The old economy sectors, led by real estate, are shrinking reasonably fast.”
Bohai is based in Tianjin, which is a big centre for industry. Winters said: “It’s a good bank with a good future that’s going through a tough time, like a lot of Chinese banks, but also in particular banks that are based in the industrial heartlands.”
