Standard Chartered Plc is planning to cut 15,000 jobs by 2018 in a restructuring exercise that includes raising $5.1 billion in new capital, according to a statement. The lender, which has a large presence in India, will raise the funds via a rights issue in which Singapore’s Temasek Holdings—its largest shareholder—will also take part.
The reduction of around 17 per cent workforce is expected to help the bank cut costs by $2.9 billion by 2018. The lender also plans to sell or restructure $100 billion of loans, on a risk-adjusted basis.
Standard Chartered’s CEO Bill Winters, a former JPMorgan investment bank boss who took the helm of Standard Chartered from Peter Sands in June this year, has charted out the plan to restore the company’s profitability, which was hit by the economic slowdown in Asia where it earns more than two-thirds of its profits.
The move came after the Asia-focused bank posted an operating loss of $139 million in the third quarter (July-September), due to rising global regulatory costs and loan impairments in India. Revenues also dropped 18 per cent year on year.
“The group continues to assess the quality of the loan book and has taken a loan impairment charge of $1.2 billion in the third quarter, broadly in line with the second quarter, which reflects continued adverse trends in particular in India and commodities, offset by an improvement in retail clients,” the statement said.
“The plans we have outlined reallocate resources to change the mix of the group towards more profitable and less capital intensive businesses,” Winters said in the statement.
Further, he said the bank will look to get through the transition stage as quickly as possible and “ensure our people are focused on providing value to our clients across Asia, Africa and the Middle East.”
The rights issue, which is StanChart’s first capital-raising in five years, will be launched at a price of 465 pence per share, a 35 per cent discount to its last traded price in London. Two new shares will be issued for every seven existing shares. Temasek Holdings will take up rights for 15.8 per cent of the firm’s existing share capital.
The capital-raising and asset-restructuring will together push the bank towards a new common equity tier-1 capital (CET1) ratio goal of 12-13 per cent, according to the company.
Moreover, the company will also not pay a final dividend for this year, which would help it save $700 million.
“The scrapping of the final dividend payment would in itself have been a setback, let alone the overall quarterly loss against expectations of a profit for the period, but these are eclipsed by the announcement of a rights issue which is an admission of the need for assistance,” he said.
Standard Chartered is the largest overseas lender by branch network in India with 100 branches across 43 cities in the country. Its operating subsidiaries in India include Standard Chartered Securities (India) Ltd, Standard Chartered Private Equity Advisory (India) Private Ltd and Standard Chartered Investments and Loans (India) Ltd.