Standard Chartered, however, took top, or is that bottom honours, announcing not only that it had to report an underlying loss of $139m and that it had cancelled its dividend, but also that it is planning a £3.3bn rights issue at a significant discount.
Understandably, investors were unimpressed and pushed the shares as much as 9% lower. But, it is the shift in strategy that is worth dwelling on, especially when considered in light of the rest of the sector.
Indeed, as Filippo Alloatti, Senior Credit Analyst, Hermes Credit pointed out: “Market conditions have dampened fee growth across the sector, while lower rates taken a toll on margins. Any ‘excess capital’ is likely to be accrued for regulatory purposes, not handed back to shareholders.”
While, he argued that this will ultimately be positive for credit spreads of the sector, it is important to note that it follows on from a rather subdued third quarter for US banks.
“Most large institutions and brokers either beat or met expectations, but the bricks and mortar lenders largely missed on declining asset yields,” he said.
According to Standard Chartered, following a review of the firm’s strategy initiated by new CEO Bill Winters it will: “drive a fundamental change in the business mix towards more profitable and less capital-intensive Retail, Private Banking and Wealth Management businesses, where the Group has clear advantages, and Transaction Banking and Capital Markets activities that leverage the Group’s unique footprint and network.”
The bank also plans to cut 15,000 staff and almost 30% of its cost base .
Some analysts argue that it is a strategy that is overdue, and the earnings numbers out on Tuesday lend credence to that, especially when compared to those of HSBC, which is also heavily weighted toward emerging markets.
