Standard Chartered cuts 15,000 jobs and raises $5.1bn

Standard Chartered, the Asia-focused UK bank, is to cut 15,000 jobs by 2018 and raise $5.1bn (£3.3bn) to create a “focused and well-capitalised” group.

About $3bn being raised in the rights issue will cover reorganisation costs.

The remainder will be used to strengthen the bank’s balance sheet.

The restructuring was announced as Standard Chartered reported a “disappointing” third-quarter pre-tax loss of $139m for the three months to September.

That compared with a profit of $1.5bn for the same period last year.

Revenue fell 18.4% to $3.68bn and losses on bad loans almost doubled to $1.23bn for the quarter.

The job cuts are part of a restructuring programme to take place over the next three years.

Standard Chartered gave few details about the staff reductions, but the figure could include businesses it plans to sell. It employs 86,000 people.

Bill Winters announced a strategic review of Standard Chartered when he took over as chief executive in June.

He put a new management team in place the following month and analysts had been expecting the bank to seek additional capital to shore up its balance sheet.

Mr Winters acknowledged the challenging business environment facing the bank.

“This is … an aggressive and decisive set of actions to fundamentally shore up the underpinnings of the bank,” he said on a conference call.

Standard Chartered shares fell more than 6% in early trading in London and by 3.2% in Hong Kong.

Michael Hewson, chief market analyst at CMC Markets, told Radio 4’s Today programme that Standard Chartered was “way behind the curve” on cutting costs after it had belatedly concluded that its business model was broken.

Analysis: Kamal Ahmed, business editor

At the bottom of page 8 of the voluminous slide pack presentation offered to investors this morning by Standard Chartered is this telling sentence: “The Bank of England will publish the results of its 2015 stress tests on 1 December, including the results for the group, the outcome of which is unknown to the company and not yet finalised.”

The Bank’s work is focused on what could happen in the event of a significant collapse in the Chinese economy and a subsequent global downturn.

Its effect will be most acute on the UK’s two banks most focused on the Asian market: HSBC and Standard Chartered.

Bill Winters, the Standard Chartered chief executive, appears keen to get his capital raising punch in first. He has also made it clear he wants Standard Chartered to compete on international renminbi trading, which the bank believes will become a reserve currency up against the US dollar.

Mr Winters has moved before the Bank of England sticks its weighty oar in.

Growing regulatory costs and controls in the wake of the financial crisis have weighed on big lenders in the UK, US and Australia.

Standard Chartered has already shed some businesses, in Hong Kong, China and Korea, to help improve its capital position.

Among the plans announced on Tuesday, Standard Chartered said it would invest more than $1bn to reposition its retail banking, private banking and wealth management businesses, as well as upgrade its Africa franchise and yuan services.

The rights issue had the backing of Temasek, Singapore’s state investment firm and Standard Chartered’s largest shareholder.

Hugh Young, managing director at Aberdeen Asset Management, the bank’s second-biggest shareholder, said: “[There is] still a lot of hard work to put in but the path is clear.”

The rights issue, Standard Chartered’s first since 2010, will be launched on Tuesday at a price of 465p a share – a 35% discount to its closing price on Monday. Two new shares will be issued for every seven existing shares.

The bank has also axed the final dividend for this year to conserve cash.

Credit: BBC