I couldn’t help but think of Temasek when I saw the first chart in an article on DBS. It owns controlling stakes in DBS and Stan Chart.
It has to thank the FT CEO of DBS (OK, OK, he’s now a citizen). The “T” stands for “Talent”. But then S’poreans deserve a break. For a long time, the “T” in FT stood for “Trash” when it came to the quality of DBS’s FT CEOs, two ang mohs and one ABC. One ang moh and the ABC came from JPMorgan. It specialised in corporate and investment banking, not consumer banking.
Gupta came from the consumer banking side of Citicorp.
Btw, if anyone is wondering about UOB’s price to book value, it’s 1.2, a shade below OCBC’s 1.3.
I regret my inability to get my points across in the manner I intended and certainly meant no disrespect to our shareholders.
He explained that when talking to FT
about leadership I urged a conversation about the pressing questions of inequality, fairness of executive compensation and the role of corporations. The focus on a single component of pay, which in the case of Standard Chartered had no effect on total compensation, has crowded out this important debate.
Ha, Ha, Ha. Pull the other leg, it’s got bells on it.
The FT helps him out
He bristles at the suggestion that he is overpaid. Although he was Britain’s second-highest-paid bank CEO last year — his total package was almost £6m — he earns a fraction of what he did at JPMorgan. Critics counter that StanChart’s share price has fallen by about 20 per cent since he took over in 2015, versus double-digit gains for competitors HSBC and DBS.
(With friends like the FT who needs enemies?)
The very latest from the FT is that Temasek has told the directors of StanChart to sort the matter out in a way that wins support from the bank’s other large shareholders. FT reports the bank is considering asking its chief executive to take a pay cut.
What? He’ll resign given that he’s paid peanuts (albeit his performance amounts to monkeying around). But maybe that’s what Temasek wants?
The good news is that the accusation comes not from the US marshals that have been making life difficult for the go-to bank for Iran’s activities to by-pass US sanctions, but by whistleblowers in a civil law suit.
StanChart has been accused of handling U$56.8bn of dollars in allegedly illegal transactions with Iran-connected entities in a civil suit. They allege StanChart cleared far more transactions in violation of Iran sanctions between 2009 and 2014 than the US government used as the basis for fines paid by the bank in April (This prediction came true: HoHoHo: StanChart gets into more trouble).
The new claim filed on Thursday piles further legal woes on the emerging markets bank which has been hit with a series of penalties by US law enforcement and regulators in the past seven years for lax financial controls and for handling transactions for companies in Iran and other sanctioned countries.
The FT had a piece on Tuesday in which Bill Winters, the CEO of StanChart, criticised shareholders after almost 40% of them voted against the bank’s pay policy at its annual meeting in May: Temasek stood by him. They were upset about the pension contributions made to Mr Winters.
“Picking on individual pension arrangements . . . and suggesting that there is some big issue there is immature and unhelpful,” the CEO of StanChart KPKBed.
On Wednesday the FT quoted shareholders hitting back.
Five top-20 shareholders (not Temasek with 16% though) in the bank told the FT that they were unimpressed by Mr Winters’ decision to attack shareholders. One big asset manager described the chief executive as “tin eared”.
Another large shareholder said: “As an immature investor, I’m going to not make any rash comments, but look forward to the fallout coming.”
Sounds like what Secret Squirrel told me is true: Temasek has warned him his end is nigh if he can’t improve the bank’s performance soon. So he’s frustrated and angry and hits out unthinkingly.
This outburst can’t help his relations with Temasek as there are now many comments online on FT website pointing out Temasek’s failure to get rid of him.
To be fair to him, his pay is “peanuts”. He got a lot more as a JPMorgan senior executive.
Another influential shareholder advisory influencer, Institutional Shareholder Services, has recommended that investors vote against Standard Chartered’s pay policy at its annual meeting next month and described the bank’s method of calculating executive pension allowances as “disingenuous”.
ISS said that investors should cast their ballot against the emerging-markets bank in a binding vote on its pay policy on May 8 because of a change in how it calculates executive pension allowances.
Glass Lewis published a similar recommendation earlier.
Together,Glass Lewis and ISS usually influence over roughly a quarter of votes in any listco: a sizeable number. But Temasek is relaxed about the bank’s pay policy: StanChart mgt think they like PAP ministers isit?
Glass Lewis, a proxy advisory group, recommended that shareholders vote against the company’s pay policy at the coming AGM. The influential advisory group said it was concerned by the bank’s decision to change its methodology for calculating the pensions of executives including chief Bill Winters.
How to? Given our ministers earn so much but their performance is only so-so. Their only credible claim of success is that things have not regressed to the standards of one-party states like Cuba, N Korea, California, New York and Venezuela. Hey what about Vietnam and China? They also one-party states.
Make S’pore Great Again. Summon Harry, Dr Goh, the other Chinese Old Guards and Ahmad Ibrahim. The Indians, other Malays and Eurasians in the Old Guard can remain in their graves.
(Updated on 10 April at 5am: StanChart will pay US and UK authourities US$1.1bn to settle charges that it violated sanctions and ignored red flags about its customers: more than expected. It’s deferred prosecution deal with the US marshals extended until 2021. Ho Ho Ho.)
Standard Chartered is bracing itself for a bumper fine this week that could total hundreds of millions of pounds as it settles US charges over Iranian sanctions violations.
The London-headquartered but Asia-focused bank is expected to draw a line under a long-running investigation into sanctions busting by Wednesday when a six-year deferred prosecution agreement (DPA) with US authorities is set to expire.
DPAs allow firms to settle charges with state authorities without facing criminal prosecution. The companies must agree to specified conditions, which can include a fine and their conduct being monitored for a set period.
FT reports that StanChart is facing an investor rebellion over its chief executive’s pay after the bank changed how it calculated his pension in a way that falls foul of UK corporate governance guidelines. This comes as executives at the UK’s largest listed banks are being subjected to rising pressure to reduce their pension payments so that they are in line with the majority of staff.
StanChart’s CEO will receive a pension allowance of £474,000, which is the highest of any chief executive of a large UK-listed bank.
But unlike UK investors, Temasek, StanChart’s biggest shareholder, a person close it said it did not share other investors’ concerns on pay at the bank.
But the gd news is that FT reported recently that Temasek had very recently told the mgt that it was not happy. I wrote last October HoHoHo: Time for StanChart’s CEO to go?. Shumeone in Temasek reads me? Ho Ho Ho
Have a prosperous and Happy Chinese New Year. To ensure this vote wisely. And certainly not for Mad Dog, Lim Tean and Meng Seng . But do think of voting for good SDP teams if they are better than the PAPpies.
There’s an FT report that Temasek is putting pressure on StanChart to shape up. It’s tired of being reminded that under the current CEO, the share price has fallen 40%. Worse, share price is roughly at half of Temasek’s entry point 13 years ago.
Temasek forgot when it bot into StanChart that StanChart did not and still does not have have a major, thriving, prosperous market that it dominates.
Although it’s smaller than the supertanker of HSBC, it doesn’t have the engine of Hong Kong that HSBC does, so it’s taking every bit as long, if not longer, to reform. But we’re still very supportive.
(Hugh Young, head of Asia Pacific at Aberdeen Standard Investments, which holds a stake of about 5 per cent in the bank talking to the FT)
GST sure to go up leh. Jialat for PAP govt and us.
Ex-Standard Chartered banker prepares to plead guilty in Iran case
Emerging markets lender under investigation for alleged sanctions breaches
FT headline
Goes on
Although no formal charges have been brought, an internal Standard Chartered investigation found at least one of the bankers under scrutiny was receiving secret kickback payments, one of the people said.
If the ex-employee does plead guilty, it would be one of the few instances of an individual banker being successfully prosecuted in the US over sanctions abuses.
Depending on what the former employee says in any plea deal, an admission of guilt could put Standard Chartered in a weaker position in its negotiations with regulators and enforcement officials, who are seeking to impose fines of as much as $1.5bn on the bank, the people said.
So why GST sure to go up?
The potential fine could complicate the bank’s plan to return capital to investors for the first time in a generation, details of which the bank would like announce alongside its strategy update and full-year results at the end of February, according to people briefed on the proposal.
Ho Ho Ho.
Fyi, over the last 10 years, Singapore’s net investment returns (NIR) contribution (NIRC) to the Budget has more than doubled from S$7 billion in FY2009 to an estimated S$15.9 billion in FY2018.
NIRC consists of 50 per cent of the Net Investment Returns (NIR) on the net assets invested by GIC, the Monetary Authority of Singapore and Temasek Holdings and 50 per cent of the Net Investment Income (NII) derived from past reserves from the remaining assets.
In other words, we spend 50 per cent of the estimated gains from investment, and put the remaining 50 per cent back into the reserves to preserve its growth for future use.
Associate Professor Randolph Tan is Director of the Centre for Applied Research at the Singapore University of Social Services, and a Nominated Member of Parliament.
And for HSBC and JPMorgan Citibank. This trio are the biggest players in the trading financing biz and there’s plenty of biz to finance.
There was a US$1.5tn gap in financing needs for international trade transactions in 2017.according to Alisa DiCaprio, head of research at R3 and formerly an economist at the Asian Development Bank.
“We are feeling the pains of restructuring, but not yet seeing the dividends of our hard work. But we are pursuing all the right strategies, and I am confident that given time these strategies will work for us.”
smacks of “Jam to-morrow and jam yesterday – but never jam to-day”
Pardon my cynicism.
We’ve been here before. How many times has economy been “restructured” since the 80s? And how many times have SMEs been helped to “restructure and tide through challenging times”?”
Well it seems that StanChart is taking a leaf from it’s largest shareholder. This is the FT’s headline
Standard Chartered promises new plan to boost profitability
Lender’s new strategy will mean further job cuts as it aims to become a simpler bank
Well after three years of a turnround plan, however, there’ll be a new plan next yr.
chief executive Bill Winters has done a poor job of preserving shareholder value — never mind building some — since he joined just over three years ago. The shares are down 40 per cent.
Ideas are only ever as good as their implementation.
Btw, talking about execution in Capitalism in America: A History, by Alan Greenspan and Adrian Wooldridge, talking about men like Carnegie, Rockefeller,
“These great entrepreneurs earned their place in history not by inventing new things but by organizing them.”
Here’s a comment about the book, “Three themes are highlighted — productivity as the measure of economic progress; the “Siamese twins of creation and destruction” as the sources of productivity growth; and the political reaction to the consequences of creative destruction”
Another one for the repair shop is UK-listed Standard Chartered. After damaging revelations about the bank breaching US-led sanctions against doing business with Iran, it had already paid a $667m fine to avoid criminal charges in 2012. This week another $1.5bn in fines from US authorities was highlighted after allegations that the bank continued to defy certain sanctions. Even without the added headache, Lex adjudged that chief executive Bill Winters has done a poor job of preserving shareholder value — never mind building some — since he joined just over three years ago. The shares are down 40 per cent.
Emphasis mine. FT’s Letter from Lex summarising it’s article that’s behind a pay wall.
Time for Temasek, the controlling shareholder, to talk to other top 10 shareholders about removing him? Pigs will fly first. The CEO that ran the bank into the ground was kicked out because another top 10 shareholder,Aberdeen Asset Mgt, as it then was, organised a campaign against him.
But then Temasek’s paper general CEOs would also have to go if they are judged by best practices ang moh private sector standards,
FT reported that US prosecutors have told StanChart that they are preparing to bring criminal charges against two of the bank’s former employees over alleged sanction breaches involving Iran-linked companies.
S’poreans have few good things to say about our paper generals and scholars: think SPH’s CEO and ex-SMRT’s CEO.
Well StanChart’s CEO, a true blue ang moh life long banker, makes these guys look good.
When Bill Winters became the Messiah CEO of StanChart in June 2015, the bank’s shares were around £10. Now they are around £6. He was brought in because the previous CEO had run the bank into the ground. The bank overextended, trying to take advantage of other banks’ problems. Unlike them it had a great time during the financial crisis.
Well Winters failed. The shares have dropped about 37%, while Bloomberg’s global banking index has gained 47%.
StanChart hasn’t been able to clean up its dirty linen despite a 2012 deferred prosecution agreement (DPA) in which it admitted secretly moving billions of dollars through the U.S. on behalf of Iranian clients, in violation of sanctions.
As part of the DPA, the bank agreed to have an outside, independent monitor to scrutinize its business practices and the U.S. agreed to eventually dismiss charges once the bank has complied. A failure to comply would typically allow prosecutors to reopen the case.
The DPA has been extended multiple times, including as recently as this summer, and will now run until the end of 2018. Authorities said the bank’s sanctions-compliance program “has not yet reached the standard required.”
Naturally the price came off when the mkts heard this. Ho Ho Ho
On Tuesday (London time), StanChart reported half-year operating income of US$7.6bn, 6% more than in the same period last year. The stock dropped 3.5% trading because operating income was below expectations. Blame higher IT spending: costs in general have outgrown revenues by a whole percentage point. Not good.
FT’s Lex
StanChart investors must be counting on costs soon falling, relative to revenues. The hope should be for a leaner and cleaner bank ready to grow at the bottom of the next cycle.
adding
Shares in HSBC, another London-listed bank with an Asian focus, have climbed 63 per cent in the past two years, compared to 13 per cent at StanChart.
Standard Chartered (STAN.L) has agreed to a further extension of its U.S. deferred prosecution agreement (DPA) until the end of December this year, it said on Friday.
StanChart entered the DPA with the U.S. Department of Justice and New York County District Attorney’s Office in December 2012, accepting that it had broken laws by processing payments for sanctions targets in countries including Iran, Burma, Sudan and Libya.
The bank avoided prosecution in exchange for a cash settlement of $327 million and an agreement with the U.S. authorities to improve its sanctions compliance.
…
The DPA was extended for three years in 2014 and a further nine months in November 2017 as StanChart sought to strengthen its controls under the scrutiny of an independent monitor.
Soon, Temasek will be contributing a bit more to the Budget.
“StanChart restarts dividends as profit returns” is the FT’s headline on the turnaround in StanChart. It stopped paying dividends several years ago.
And there’s still plenty of room for it to improve
[D]espite stellar economic growth in Asia, which accounts for over two-thirds of underlying pre-tax profit, the group is still destroying economic value. Return on equity, at 1.7 percent or 3.5 percent excluding exceptional items, is still far below the group’s cost of equity, which is probably more like 10 percent. Costs are rising, even as the group clamps down on loan losses.
After years of retrenchment, Winters needs turbocharged revenue growth and restraint on costs to hit his modest medium-term target for an ROE of 8 percent. Suppose operating costs grow just 2 percent annually, with flat loan losses and restructuring charges and taxes at 30 percent. StanChart would need 7 percent annual revenue growth to fulfil its aim by 2020, according to a Breakingviews calculation. That is more than double last year’s rate and at the top of the bank’s projected 5 to 7 percent range.
In 2016, when China as a country grew at close to 7 per cent, StanChart’s revenue across greater China and north Asia declined by 15 per cent. While Southeast Asia GDP grew by nearly 5 per cent, StanChart’s revenue there shrank by 5 per cent. And in Africa and the Middle-East, another fast-growing region, the bank’s revenue was down 4 per cent. StanChart’s full-year numbers for 2017 have yet to be published, but at the last count its ROE was running at about 5 per cent …
What were the people behind a StanChart event thinking? If SMRT can get away with doing bad things to S’poreans, so can StanChart isit? After all Temasek owns shares in both.
More likely though they tot they could get away with doing bad things to S’poreans because Sport S’pore a govt organisation was another sponsor of the event?
StanChart fell 6.5% to a six-month low of 702p in London after investors showed their disappointment with the slow turnaround.
Although there was a more than doubling of quarterly net profits, the bank had falling revenue in corporate finance, credit cards and personal loans. Analysts unhappy that there was only 4 % in revenues, which missed expectations, as well as higher than expected costs (also up 4%)
Worse, still no revival of dividend, “Andy Halford, chief financial officer at Standard Chartered, said the firm would assess whether or not to reinstate its much-anticipated dividend at the end of the year.”
HOHoHo.
Update at 10.45am: DBS is a better investment http://www.reuters.com/article/us-stanchart-results-breakingviews/breakingviews-stanchart-has-yet-to-reward-shareholders-patience-idUSKBN1D14KJ
Global investors buy banks for the yield but StanChart stopped paying dividends last yr.
For yrs, Temasek looked good because the bank was minting money regularly with double-digit growth in revenues and profits: even during the banking crisis that hurt Temasek’s other ang mohbanking investments (Barclays and Merrill Lynch). But then two yrs ago, it suffered heavy losses on some of its vast loans to risky Asian companies in Indonesia and India.
Standard Chartered PLC said it isn’t ready to start paying dividends again but will reconsider it at the end of the year.
The Asia-focused bank’s shares fell 4% after it said it still has a long way to go to improve returns, despite improvements in underlying profits.
First-half revenue rose to $7.2 billion from $6.8 billion a year earlier. Revenue in the second quarter met analysts’ expectations, at $3.6 billion. Net profit for the first half climbed to $971 million from $465 million a year earlier.
I can’t think of any foreign bank that has made a success of its US ambitions unless the ambitions are limited. Certainly not the case here. StanChart is taking on two JP Morgan and Citi in trade financing on their home turf. And Ho Ching has other things on her mind.
Standard Chartered aims to expand its U.S. presence with a local hiring push and by bolstering its team in the country with senior staff from its main regions of Asia, the Middle East and Africa, its top bankers said.
The world’s top economy contributed $661 million (518.6 million pounds) to Standard Chartered’s operating income in 2016, or 5 percent of the total, making it the smallest of its major markets – Hong Kong, China, India, and the United Arab Emirates.
“We really view the Americas as a growth area. When I say that, we are not looking to be JPMorgan or BAML (Bank of America Merrill Lynch) or Wells Fargo,” StanChart’s Americas CEO Torry Berntsen told Reuters at the bank’s New York office.
“We think we have a special calling card in terms of what our network looks like.”
The plan is to offer StanChart’s trade finance, transaction banking, cash management and forex market products to large U.S. firms, senior bankers said.
Standard Chartered is the only western bank left in Zimbabwe.
Yup the country ruled by Mugabe the guy who gives glowing references to our Gleneagles Hospital to his fellow dictators.He’s a regular customer. And his wife loves shopping here.
Standard Chartered has been accused of potential wrongdoing by officials at an Indonesian power company in which it is an investor.
The United States Justice Department is looking into the accusations, a person briefed on the matter said. The investigation was related to accusations that officials at the company, MAXpower, had paid bribes to win contracts, according to The Wall Street Journal, which earlier reported the inquiry.
A recording of a conversation with the company’s chief executive, who used to work at Standard Chartered, featured discussions about illicit payments and joking references to soccer balls stuffed with cash, The Journal reports.
The situation is particularly tricky for the bank, which is based in London but does most of its business in Asia, because of the settlement it reached after an investigation into accusations that it had transferred money for countries affected by United States sanctions.
Misconduct could prompt prosecutors to re-evaluate whether to revoke the deferred-prosecution agreement and force the bank to plead guilty.
It’s also a blow to William T. Winters, the chief executive who has been trying to overhaul the bank.
Standard Chartered said it was being investigated by the US Department of Justice over claims that an Indonesian subsidiary had paid bribes to secure contracts.
The London-based but Asia-focused bank said it had referred the matter to the “appropriate authorities” and launched its own review.
The Wall Street Journal newspaper said that an internal audit at Indonesian energy company Maxpower Group found evidence of possible bribery and US prosecutors were examining whether the bank was culpable for not stopping it.
Double confirm that StanChart is a rogue bank and the PAP apologist is a fool because now: The management of Standard Chartered is facing renewed pressure after being placed under fresh scrutiny by US regulators.
The US authorities are now investigating whether Standard Chartered breached its sanctions rules beyond 2007, the period when the previous offences for which the bank was penalised took place.
The bank is cracking down after “recent transgressions” concerning employees’ outside business interests, close financial dealings with co-workers and excessive expenses, Bloomberg reports, citing a series of memos issued over the past two months.
According to a recent survey, HT says HSBC’s market penetration of corporate banking relationships in Asia (ex Japan) at 60%, StanChart’s at 50% and Citi’s at 44%. ANZ and DBS followed with 34 and 33%.
Standard Chartered shares surged 10% in London after the bank — which generates almost three quarters of its revenue from Asia — reported a surprise decline in loan impairments and capital increased more than some analysts estimated.
Pretax adjusted profit fell 64 per cent to US$539 million (S$729 million) for the first three months of 2016, from US$1.5 billion a year earlier, said the London-based bank in a statement yesterday. Losses on bad loans fell 1 per cent to US$471 million in the quarter, well short of the US$650 million of impairments estimated by Mr Chirantan Barua, an analyst at Sanford C Bernstein.
But there are still huge problems.
Revenue dropped 24 per cent in the quarter to US$3.35 billion, as income from every business unit declined.
UBS expects the share price to fall to 430p within 12 months.
With many funds short or underweight at the start of the year, commodity prices regaining some poise, EM equities rallying and EM funds seeing a return to inflows, a rally is directionally easy to rationalise.
But the StanChart rally has happened against a ~60% fall in consensus profit forecasts for this year and 30% decline for next. Our estimates are unchanged and so is our view: we see great businesses within StanChart – predominantly Transaction Banking, Financial Markets and bits of Retail – but we think the headwinds of de-risking, deleveraging, and flat and low yield curves will combine with elevated loan losses to make life particularly difficult near term (we forecast a loss for this year), leaving the 8% ROE target for 2018 out of reach.
Standard Chartered Said to Plan Sale of $4.4 Billion in Asian Assets Standard Chartered is seeking to sell at least $4.4 billion of assets in Asia, Bloomberg reports, citing people with knowledge of the matter.
In London, StanChart fell 7.8% after after Australian peer ANZ warned of a further deterioration in credit quality.
FT reports
“Whilst we believe to some extent ANZ’s issues are company specific, ongoing commodity price weakness is likely to translate into higher losses for the sector,” said Macquarie. Oil and metals producers account for about 6 per cent of StanChart’s lending book.
More bad news
Separately, Morgan Stanley advised clients to sell into StanChart’s 25 per cent rally from February lows.
Lower-for-longer interest rates, contracting Asian export volumes and pressure on Hong Kong mortgages as lenders compete for low-risk assets make StanChart’s long-term targets look “heroic”, Morgan Stanley said, adding: “We see revenue as the next challenge and without deeper cost cutting we struggle to see how the 8 per cent 2018 return-on-equity guidance can be met.”
CEO said: “It rips at our soul every time we look at these numbers and we don’t ever want to have to stand up and tell this story again.”
And that’s not all.
StanChart faces accusations over ‘dirty debt’. It bought a $100 million “dirty debt” from a M’sian bank and used it to demand compensation from the Tanzanian government despite knowing that the loan had been part of an embezzlement scheme, according to claims in a legal row in Tanzania. The debt was originally owed to the M’sian bank by a M’sian company, Mechmar.
Update qt 7.00am: HoHoHo woild endorse this spin Sir John Peace, Standard Chartered’s outgoing chairman, said: “While our 2015 financial results were poor, they are set against a backdrop of continuing geo-political and economic headwinds and volatility across many of our markets as well as the effects of deliberate management actions.”
Don’t blame us. World’s in bad shape. We juz reflecting it.
Standard Chartered is valued at less than less than it was before the financial crisis of 2007/ 2008. Another one of this select club is Deutsche. HOHOHO
Hamish McRae (a former editor of the Economist) offers some encouragement in the Independent. Studying past crises has taught only one certainty, he concludes: “Share prices will eventually bounce back, provided you wait long enough for them to do so.”
StanChart which suffered the biggest share price falls this year, will announce its results on February 23. Analysts expect it to report an 85% fall in earnings per share, FT reports.
Last yr it was the second worse performer on FT100, down 47%, I think.
One analyst says there is debate that its business model is fundamentally broken. Another says that its strategic review released in Nov shows that it’s a collection of biz, none of whch cover their cost of capital.
Whatever China and other emerging mkts are in trouble and StanChart is an emerging markets bank. Until these mkts recover, StanChart can only cut costs (Sack more staff from Little India Marina Bay? Move jobs from London and S’pore?) and be more efficient.
DBS, StanChart kanna mark by China for gaming the Chinese FX regome:
FT reported last week:
The latest tightening comes after the central bank temporarily suspended some foreign banks in China, including Standard Chartered, Deutsche Bank and Singapore’s DBS, from conducting certain foreign exchange transactions designed to arbitrage the gap between the onshore and offshore renminbi exchange rates.
HSBC is really an old friend of China. It may be the bank of choice for Chaqco and other Mexican drug lords, but it doesn’t game PRC regulations.
StanChart yesterday fell a further 1.7%, although it remained off the previous session’s intraday low.
In 2015, it was the second worst performer in the UK’s FT 100 index, falling 47%
From FT
Matthew Sutherland, investment director for Asian equities at Fidelity International said wild rides in regional stocks are likely to be the norm for 2016. “We’d better get used to it,” he said.
It’s important that investors don’t panic on weak days, but continue to take a disciplined and calm approach to investing. This is particularly true with regard to China. Yes, China’s growth is slowing, but the quality of that growth (in other words more consumption and less debt-fuelled investment) is far more important, and the difficulties are more than discounted in cheap valuations.
Accentuating the positive, he adds:
The really good thing is that the Chinese stock markets are very broad, which enables us to find lots of great bottom-up ideas irrespective of the macro environment.
Coming back to StanChart, on 15th Dec it led a London market rally on after JPMorgan Cazenove argued that the bank is at least 50 per cent undervalued versus peers.
Capital concerns have been addressed by StanChart’s $5.2bn rights issue, said JPMorgan, which was joint co-ordinator and underwriter to the cash call.
It forecast that, even if loan defaults return to the levels of the 1997 Asian crisis, StanChart’s capital buffer will remain within management’s target range.
Downside protection comes from StanChart’s new strategy to shrink risk-weighted assets by a third and move away from low-return business, with rising US interest rates providing a tailwind, JPMorgan said.
Yet the shares are trading at half their 2016 tangible net asset value and are on less than 10 times next year’s earnings, falling to just five times earnings in 2018, it forecast.
JPMorgan repeated an 870p target price on StanChart, which gained 6.4 per cent to 512.7p.
Temasek is willing to give Standard Chartered (STAN.L) time to work on its turnaround before deciding on the fate of its underperforming $4 billion (3 billion pounds) stake in the UK bank as part of a portfolio reshuffle, people familiar with the matter said.
…
“Temasek is giving them time. They’ve had a lot of engagement with the board, and Bill has sort of managed expectations in terms of turning this ship around,” said one of the people familiar with Temasek’s thinking.
Temasek declined to comment.
It was not clear how long Temasek will wait to see the results of the restructuring.
By subscribing this month to its allotted portion of Standard Chartered’s $5 billion share sale, the Singapore investor has buttressed that position for now. But Temasek may become increasingly uncomfortable with the investment if shares in the bank do not recover.
Its paper loss on the Standard Chartered investment was $1.2 billion, excluding dividends, just on the 12 percent stake it bought in 2006, according to calculations by Reuters. Temasek raised its stake to 18 percent in December 2007. Since then Standard Chartered’s shares have lost about two-thirds of their value.
StanChart completed its rights issue late last week. What the local MSM doesn’t tell us
StanChart .. has suffered because of poor peer-market conditions since it priced its shares. But investors, even though they took up almost all of their rights, are also giving a vote of diminished confidence. After StanChart old shares were shorn of the right to buy new shares on Nov. 23, the stock fell to 15 percent below its theoretical settling price. And the 9.8 percent further fall since then is worse than the decline in the Euro Stoxx Banks index.
That’s perhaps not surprising. StanChart, under new boss Bill Winters, is years from earning a return above its cost of equity. Since the new money will mostly go to bolstering the balance sheet rather than promoting productive lending, the return on the new money may be even lower. That might explain why, while Lonmin seemingly faces graver challenges, it’s StanChart to whom the market has blown a bigger raspberry.
Royal Bank of Scotland and Standard Chartered were the weakest of Britain’s seven largest lenders in a Bank of England stress test.
For the second year, the central bank has subjected the UK’s biggest lenders to tests to measure whether they would survive a financial shock.
This time, it was assumed that oil had fallen to $38 a barrel and that the global economy had slumped.
No bank was ordered to come up with a new capital plan.
Out of the seven banks tested, RBS and Standard Chartered were found not to have enough capital strength, but both took steps to raise capital …
Standard Chartered’s chief executive Bill Winters said: “The results of the test demonstrate our resilience to a marked slowdown across the key markets in which we operate.
“The test was conducted on our balance sheet as at the end of 2014. Since then we have made further significant progress in strengthening our capital position.
“We are operating at capital levels above current minimum regulatory requirements and have a number of additional levers at our disposal to further manage capital.”
The UK’s banking sector is heavily (relatively) exposed to China much more so than other countries by a country mile. The exposure is concentrated between HSBC and Standard Chartered. Loan exposure to China represents around 30% of their loan books.
By compaeison our local banks’ exposure is “peanuts”.
Btw, Aberdeen Asset Mgt is a top 10 shareholder in both banks.
A CNA story* on Sunday said that StanChart will be cutting jobs here in Technology and Operations. Now this is an area dominated in StanChart by FTs from India like two-timing New Citizen Raj**
FT reported that India is so impt to StanChart that it’s planning to set up a subsidiary so that it can expand its branch network there. A wag commented: “In Singapore there is an area known as “Little India” (I had lunch in the area yesterday). Go into the offices of StanChart’s regional office here and any S’porean would think that “Little India” has expanded into the Marina Bay area.”
Marina Bay’s Little India, will be no more? This will be the last Deepavali in StanChart’s Marina Bay office? Next yr will be the first Chinese New Year there?
——————————-
*Following Standard Chartered’s announcement that it will axe 15,000 jobs globally, the bank has declined to reveal how many of these job losses will come from Singapore.
However, recent high-profile departures are said to include the bank’s global head of FX research Callum Henderson and global head of aviation finance Simon Perkins.
A source familiar with the Asia-focused British lender told Channel NewsAsia on condition of anonymity that Technology and Operations is an area in Singapore targeted for cuts.
When contacted by Channel NewsAsia on Friday (Nov 6), a StanChart spokesperson said a large number of the total headcount reductions will be through attrition. The spokesperson said the bank was unable to provide further details at this point in time.
Standard Chartered currently employs around 7,000 people in Singapore.
The bank on Tuesday said it will cut 15,000 of 86,000 jobs around the world, meaning that nearly one in five employees will lose their jobs.
**I understand that New Citizen Raj works in StanChart.
The constructive, nation-building media should have reported or analysed or quoted analysts that
— Temasek could have prevented the problems from growing out of control by kicking previous mgt’s ass* when yellow lights were flashing Ang moh tua kee isit? HoHoHo);
— the shake-up restructuring plans are underwhelming investors (shares have fallen over 11% this week; and
— the changes will not be that rewarding.
It’s not me, or TRE cybernuts or Uncle Redbean (they too didn’t), it’s the UK’s Guardian that writes:
The big long-term shareholders – Temasek, from Singapore, and our own Aberdeen Asset Management – are obliged to sound supportive, swallow the lack of a final dividend and back the rights issue. But they should also look in the mirror. The market smelled trouble at Standard Chartered for at least two years, but the pressure from the wings rarely rose above the level of mumbles. Temasek and Aberdeen were too willing to believe the boasts from the highly remunerated boardroom about Standard Chartered’s specialness.
The consequences of delay are now horribly clear: a decade of chasing growth will be followed by half a decade of clean-up and cost-cutting. This story could have been different.
Yup it could have been different. Temasek has an over 20% stake in StanChart which should give it a strong voice, if it uses it.
And the MSM doesn’t tell us that some analysts are not impressed by the plans to launch a capital raising, cut 15,000 jobs, slash almost 30% of its $10bn cost base and restructure almost a third of its US$315bn risk-weighted assets.
In fact credit rating has juz been downgraded by Fitch Ratings in the latest sign that the new strategy is not being well received.
And finally the MSM doesn’t tell us that the clean-up will not bring great rewards
Yet these rewards are humdrum and distant. StanChart expects return on equity to remain below 10 percent until 2020. That’s no better than troubled investment banks like Deutsche Bank. A further economic slowdown in its main markets, or increased regulatory demands, could throw it off course. Even after a 10 percent drop on the morning of Nov. 3, StanChart shares trade on about 80 percent of tangible book value, after adjusting for the rights issue. With a long slog ahead, it’s hard to see much upside.
Never believe a big bank that boasts that its culture is so different: its lending principles conservative, its business immune to the traditional banking vices of over-confidence, over-expansion and bad behaviour.
For a decade, Standard Chartered told us that its rising income and profits flowed from a unique winning formula. Here was chairman John Peace in the annual report a few years ago describing the supposed magic: “2012 was another year of good performance for Standard Chartered, thanks to a consistent strategy, a stable management team, supportive clients, customers and shareholders, and, above all, our great people.”
(Guardian)
——————————–
*It was already unhappy over corporate governance over the number of executive directors on the biard and had expressed its unhappiness publicly by voting against the reappointment of the executive directors yrs ago when the bank was a jewel in the Temasek portfolio and management were considered geniuses.
Standard Chartered has to hope that a quarter of its top brass really aren’t very good at their jobs. That is the portion of the UK-listed emerging markets bank’s 4,000 most senior staff who will find themselves surplus to requirements, Reuters reported on Oct. 9. Although StanChart could gain from a big cull, it’s a risky move.
Will ang mohs or Indians get terminated? Not many Chinese to sack despite 50% of revenues related to China business. (Related post: StanChart is Little India)
More for HoHoHo to ponder when she returns to work
— StanChart’s shares have underperformed the European peer group by 30 percentage points this year. The bank’s 7.7 percent return on equity in 2014 was unacceptable, especially as it was earned on a relatively low 10.7 percent Basel III capital ratio.
— Some bearish analysts reckon Winters should completely cover the bank’s $8.7 billion of non-performing loans to better match Asian peers like DBS. That would cost $4 billion, more than StanChart’s expected $3.1 billion of forecast 2015 pre-tax profit.
Goldman Sachs analysts predicted on Thursday that StanChart would face an estimated capital shortfall of $4bn in the Bank of England’s stress tests, which measure how the lender would fare in an emerging markets crisis. But Goldman estimated that StanChart could cover this shortfall by selling its stakes in several Asian lenders and exiting low-returning clients and businesses, such as its smaller retail branch networks.
But let’s be fair: When emerging mkts and commodities (StanChart has high levels of lending to the crumbling commodities sector) were fashionable 9lucrative) it was the right bank to be invested in. FYI according to Nomura 50% of its revenue is related to China.
Given the exposure to China by HoHo Ho and GIC, ttme for Ah Loong to call Xi and offer him advice on how to fix the Chinese economy? Can lend him Tharman who is lauded in int’l circles.
Skeptics of HSBC Dividend Are in for a Surprise The bank’s prospective dividend yield of about 6.5 percent is high, but investors worried about its payout shouldn’t fret much, Paul J. Davies writes in the Heard on the Street column.
FT reported that India is so impt to StanChart that it’s planning to set up a subsidiary so that it can expand its branch network there. A wag commented: “In Singapore there is an area known as “Little India” (I had lunch in the area yesterday). Go into the offices of StanChart’s regional office here and any S’porean would think that “Little India” has expanded into the Marina Bay area.”
It was reported last week in the FT that Standard Chartered awarded Bill Winters, its CEO, shares worth more than 6 million pounds, or about $9 million, to compensate the bank’s new CEO for income he forfeited by leaving the hedge fund he founded. The upfront payment comes as the shares have hit new six-year lows.
Meanwhile GIC must be ruing not selling out of Glencore because on Monday in London
Shares in commodity giant Glencore plunged 30% after analysts raised fears about lower metal prices.
The company’s shares dropped to a new record low of 69p on Monday, helping push the FTSE 100 down 2%.
Analysts warned slumping metal prices could leave Glencore shares almost worthless because of its heavy debts.
Documents seen by the FT suggest that the bank continued to seek new business from Iranian and Iran-connected companies after it had committed to stop working with such clients in 2007.
The US authorities are looking into the matter.
Rogue bank strikes again? Think got Temasek as major shareholder can be as yaya papaya as Amos Yee?
FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015. More https://atans1.wordpress.com/2015/09/10/hohoho-two-brokers-views-on-stanchart/
NYT Dealbook last Tuesday.
MORE SIGNS OF A SHARPER SLOWDOWN IN CHINA Once the world’s workshop, China’s exports are facing their most protracted declines since the global financial crisis, Neil Gough writes in The New York Times. China’s trade slump deepened in August – an indication of a sharper industrial slowdown at home and weaker demand from overseas. Exports fell 5.5 percent in August and 1.4 percent in dollar terms in the first eight months of the year.
The country’s manufacturing sector is losing competitiveness as labor costs rise and the renminbi remains relatively strong despite its devaluation, making Chinese goods more expensive for foreign buyers.
Imports are falling even more steeply. They fell for the 10th month in a row in August, recording a drop of 14 percent by value. Economists blame the rout in commodity prices, but imports have fallen in volume too. The falling imports of industrial raw materials point to weakening domestic demand, driven by a slump in manufacturing and new housing construction.
The weak trade data weighed on markets, with Japan’s main index, the Nikkei 225, closing 2.4 percent lower. In Shanghai, stocks initially fell when the trade figures were released, but heavy buying in the afternoon set off a rally. Shares closed 2.9 percent higher – a pattern seen often in recent weeks, as China’s government appears to continue its efforts to support the slumping stock markets.
China’s leadership made the surprise decision last month to devalue the currency by about 3 percent, the renminbi’s sharpest drop in two decades. But the central bank has since intervened in the markets on a massive scale, fighting pressure to weaken the currency further by selling dollars and buying renminbi.
As a result, China is burning through foreign exchange reserves at the fastest pace yet. Reserves fell by nearly $100 billion in August alone, though they are still huge at $3.56 trillion.
Still, analysts say that the recent devaluation was most likely too modest to give China’s exports much of a boost, and that the exchange rate is still stronger than China’s slowing economic growth would otherwise support.
With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.
A FTSE 100 rebound helped lift Standard Chartered away from its six-year low on Wednesday.
With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.
“The faster you drive into a crisis, the more you will get hit,” Bernstein said. “The speed at which the bank is hitting turbulence is dramatically different between the last crisis and this one.”
Bernstein added that, while StanChart does not need to raise cash, new chief executive Bill Winters may want to top up capital buffers by $3bn-$4bn “to give it significant leverage when the cycle turns next year”.
StanChart rose 3.2 per cent to 744p as the wider market extended its rally into a third day.
Monday’s FT (Again apologies for lifting. Promise no more after this)
shares hit a six-year low on Monday as worries grew over the depth of restructuring required under new chief executive Bill Winters.
The Asia-focused lender slid 1.7 per cent to 701.4p on reports it may cut a quarter of senior banking roles as part of a new business plan expected within the next few months.
Funding a deep restructuring would put further pressure on StanChart’s cash flow and capital ratios, which already include $49bn of commodities exposure and a further $43bn of risky Chinese and Indian debt, said analysts.
StanChart might need to raise as much as $5bn to cover bad loans, in addition to between $3bn and $4bn to boost its capital buffer to peer levels, forecast Morgan Stanley.
While the broker did not assume StanChart will need to launch a cash call, it put a one-in-five chance on China causing an Asian slowdown economic equivalent to the 1997 crisis, under which it said the shares would be worth 410p.
Standard Chartered’s Puzzling Currency Questions The more dollar loans it has made in emerging markets, the more bad debts it will face as the renminbi, ringgit or rupiah fall. However, if it has lent widely in local currency instead, credit quality may remain stronger, but good loans will still produce weaker revenues in dollars, the bank’s reporting currency.
The three major Chinese banks that Temasek invested in ICBC, BoC and CCB reported only marginal gains in net profit for the first half of the year, while official measures of non-performing loans surged.
Bad debts are already eating into profitability. Increased provisions are the main reason why China’s big four banks reported little or no growth in pre-tax profit in the first half. Industrial and Commercial Bank of China, China Construction Bank, Bank of China now classify more than 1.4 percent of their loans as non-performing. Eighteen months ago, the ratio was around 1 percent.
StanChart is expected to call for a rights issue by yr end. But mkt turmoil will make this difficult and expensive.
FT reports
“StanChart has been one of the hardest hit by the market turmoil. Shares in the bank, which is listed in London but specialises in Asia, the Middle East and Africa, have fallen a quarter this month and are down two-thirds in the past two years.
‘One investment banker said worries about slowing Asian growth and falling commodity prices risked creating “a perfect storm” for StanChart that would make it “much tougher to sell new shares” to investors.”
Note that FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10% of HSBC’s came from China proper.
And that “from trading at more than double its tangible book value, its market value is now a third less than its assets, a discount even to big victims of the financial crisis, such as Royal Bank of Scotland.”
FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10 per cent of HSBC’s came from China proper.
Both “could be in for a rough ride if the swing in China’s currency is the start of a prolonged devaluation
The most obvious effect of a weaker currency is valuation losses on banks’ loans and trading assets in China, which many have used as a bridgehead in the world’s second-largest economy. A lower currency could also spell trouble for customers in China who have borrowed US dollars or euros but are earning renminbi — the “classic FX mismatch,” in the words of Keith Pogson, senior partner of EY’s Asia-Pacific financial services team.”
Western banks also face risks from domestic Chinese counterparts which have borrowed dollars to lend to their own clients. “Asian banks are extremely used to borrowing cheap dollars through interbank markets and then relending it,” said one London-based banker. “In the next couple of years there could be bigger problems if China’s going to carry on devaluing.”
But first, shumething from the respected Terry Xu of TOC http://www.theonlinecitizen.com/2015/07/leaked-cables-on-the-failed-leadership-transition-of-temasek-holdings/
Standard Chartered Shakes Up Management Structure The British bank will be organized around three business lines, and top managers will report directly to the new chief executive, William T. Winters.
Did the recruiters at Standard Chartered and Credit Suisse get their dossiers mixed up?
Bill Winters is beginning his tenure as the new boss of the London-based emerging market lender at around the same time that Tidjane Thiam takes charge of the Swiss bank. Both are capable financial executives, but their experiences seem uncannily to better suit the other’s job. That they’ve wound up where they did, rather than where their resumes would suggest they should have, may say more about where the institutions they lead are headed.
Winters, who on July 19 reshaped StanChart’s management structure so that the heads of its major business units now report to him directly rather than to deputy Mike Rees, made his career leading JPMorgan’s investment bank in London … This would appear to eminently qualify him to run Credit Suisse. Its investment bank – stronger in the United States than elsewhere – competes directly with JPMorgan. And its private bank needs to more aggressively poach the very rich folks that Renshaw Bay, the firm he founded, calls customers.
Instead, $48 billion Credit Suisse got an insurance executive, French-educated Ivorian Thiam. True, he showed an affinity for deals as chief executive of Prudential, the UK insurer: an aborted attempt to snatch American International Group’s Asian operations was particularly bold. Private banking arguably should be run more like insurance than investment banking or trading.
Similar thinking prevailed when Barclays named a retail banker to the helm three years ago. But the British lender let Antony Jenkins go on July 8 partly because it needs someone capable of making an investment bank hum.
Though Credit Suisse may not be pre-eminent in Asia, Thiam’s experience there could help rectify that. Of course, that’s the region where $39 billion StanChart is strongest. And Africa, where Thiam was born, is one of StanChart’s prime growth areas. By contrast, Winters’ orientation has been to developed markets – places his bank shows zero interest in pursuing.
Standard Chartered Said to See Exodus in Mideast Operations The high-profile departures at Standard Chartered include the global head of Islamic banking, the chief executive for the United Arab Emirates and the chief executive for Bahrain, Bloomberg News reports, citing people with knowledge of the matter.
Up to 20,000 people (8% of current work force) could be sacked at HSBC as the chief executive attempts to pacify investors by reducing costs to improve profits (see below): Us shareholders getting shirty.
Temasek, Aberdeen and other major shareholders should tell StanChart to cut its headcount. Although an ang moh bank, many of its senior and middle managers are “countrymen”, especially here in S’pore (Brits and Hongkies don’t love FTs that much). Ask presedential candidate Tan Jee Say and PAP FT MP Ms Foo: They had Indian FTs ahead, behind and beside them. Rumour has it that Indian FTs sacked both for non-performance, replacing them with less experienced and qualified “countrymen”.
The chief executive of HSBC, Stuart Gulliver, is expected to signal next week that thousands of jobs are to be cut when he outlines his latest strategy for the global banking business, according to reports.
After he took the helm in 2011, Gulliver outlined the need for 25,000 job cuts from a global workforce that then stood at 296,000. The annual report for 2014 puts the current number of employees at 266,000, or 257,600 full-time equivalents.
Another 10,000-20,000 cuts are reported to be on the cards as Gulliver attempts to pacify investors by reducing costs in an effort to bolster profitability. He is also expected to use the strategy day on 9 June to provide an update on plans to further retrench internationally, including from Brazil and Turkey.
Last yr when Temasek gave a media presentation on its results, the question on StanChart elicited a BS reply but which when viewed today tells a lot about Temasek’s strategy in dealing with dogs with fleas: “Everything will be alright in the long term”. Err remember Keynes said in the long run, we are all dead.
QUESTION: Could you give us some comments on how do you see StanChart performing in your portfolio because over the last few years, especially in the last year and a half and looking at the outlook as well, they seem to be finding it quite challenging and there was a profit warning as well. What is your plan for StanChart? Do you think that… is that something that you would like to exit in the long term or you would treat StanChart as another Olam where you could actually try to take over?
RS: So look, it’s obviously not fair for us to comment on individual companies but all I would say is that yes, a lot of our stocks go through volatility. Standard Chartered is an emerging markets bank and like all emerging markets banks, the stock over the last year has been quite volatile. We, however, see ourselves as long term investors, short term volatility doesn’t concern us. We look at our investments over a longer term and use our value test to decide whether what we do with those stocks and we remain as an active investor always engaged with the companies.
The big concentration on financials is to play the rising Asian middle class theme. A lot of the exposure goes into China banks (not looking good going forward) and StanChart.
Err should have juz bot Apple leh? Look at its price since 2005 when Jobs returned https://sg.finance.yahoo.com/q/bc?s=AAPL&t=my&l=on&z=l&q=l&c= Ho Ching became CEO of Temasek in 2004, and Temasek started buying StanChart in 2006. She should have bot Apple.
Here’s why based on her thinking of riding the expansion of the Asian middle class (Not Italic bits below are my tots, snide comments).
What do two big American and European multinational corporations have in common? Not much on the surface when comparing consumer giant Apple to the FTSE-listed Standard Chartered bank.
However, both have been significantly affected by emerging markets in their first-quarter earnings. And how they’ve been affected is revealing of the way emerging economies have matured, particularly in Asia.
The emerging markets-focused bank, Standard Chartered, reported a big fall in pre-tax profits of more than one-fifth in the first quarter (22% to $1.47bn) as revenues fell by 4% and costs rose by 1%.
By contrast, Apple had a strong quarter where revenues rose by 27% to $58bn, driven by a 40% increase in sales of iPhones. More than 61 million were sold globally, and notably, the biggest market was China for the first time and no longer the US. [Demand from China’s middle classes, iPhone sales leapt 40% to 61.2m units.]
But iPad sales fell sharply by 29%, reflecting a weak spot in their figures. [Apple fixing this introducing new model for Jap aging market. If works in Jap, another big global winner.]
So, it’s a really tale of two emerging markets. [Ho, Ho, Ho]
One side of emerging economies is a concern over their slowdown in growth, which raises risks over loan repayments, not just in Asia but also commodity exporters in Africa and the Middle East.
These are Standard Chartered’s key markets. Indeed, Standard Chartered took a $476m charge on bad loans, which is 80% higher than the first quarter of last year, although loan impairments were lower than in the previous six months.
[Ho, Ho, Ho]
However, there’s also the consumer side of emerging markets to consider.
For Apple, China’s rapidly growing middle class generated an impressive 72% increase in sales of iPhones. And Greater China has even overtaken Europe to become Apple’s second largest market for the first time with revenues rising by 71% in that region to $16.8bn, which accounts for much of Apple’s strong performance. Net profit was a third higher at $13.6bn for the quarter.
So, as emerging markets, particularly in Asia, become middle income countries, companies that sell to those emerging consumers are well-positioned to benefit.
But the period of rapid economic growth, particularly via debt-heavy investment, of key emerging markets is seemingly over. And companies, particularly banks, are liable to struggle as those economies restructure toward being increasingly driven by consumption.
[Ho Ho Ho: so waz Temasek doing to get into the consumption plays? Olam? Asians eating more peanuts?]
My serious point that by focusing so much on financial services (30% of portfolio and not on consumer plays (outside of the Telecoms, Media & Technology sector: 24%), Temasek has for the last few years been betting on a three-legged horse. Other consumer plays are only a subset of Life Sciences, Consumer & Real Estate: 14%)
The Hong Kong Monetary Authority says that it “takes a positive attitude should HSBC consider relocating its headquarters back to Hong Kong”, where it is the largest bank.
HSBC WEIGHS MOVE FROM LONDON HSBC was established in Hong Kong 150 years ago and moved its headquarters to London in 1993. Now it is considering a return trip. Citing changes in regulation, HSBC says it will study whether to relocate its headquarters out of London, reports Chad Bray in DealBook.
A big part of the issue is Britain’s bank levy, which was instituted in 2010 to help pay for the government’s financial crisis bailouts. While all banks operating in Britain pay the tax, Mr. Bray writes that “The levy hits British-based banks particularly hard, however, as they are taxed on their global balance sheets.” HSBC’s announcement could become a political issue as Britain nears a general election on May 7.
(NYT’s Dealbook)
Hongkong Bank is a HK quitter. It moved to UK in 1993, juz before PRC regained HK in 1997. But all is forgiven.
Both HK have S’pore have similar sized economies (about US$300bn in GDP).
HK is willing to be lender-of-last-resort to HSBC a bank with US$2,6 trillion in assets, despite HSBC being almost 9 times bigger than HK’s GDP.
Yet the S’pore authorities, it’s clear from hints in the FT, are unwilling to have StanChart HQed here (only 1.1 trillion in assets), despite Temasek being the largest single shareholder (which will benefit from reduced tax: HSBC shares were up 6% in HK yesterday), and despite many of StanChart’s operations being run from here.
The PAP administration is afraid of another of Temasek’s investments blowing up? After all StanChart is not as safe as our local banks: https://atans1.wordpress.com/2015/03/25/stanchart-not-as-solid-as-local-banks/
It also has weaker capital ratios than HSBC and the big US banks. So weak that the new CEO is expected to call for yet another massive rights issue.
Remember LKY and his bank investments that are forever? OK 30 yrs leh) Even longer than Buffett’s investments, he once said
In 2007/2008, our SWFs’ bot into UBS (GIC), Citi (GIC) and Merrill Lynch (Temasek) in a big way that ST characterised then as showing S’pore was a tua kee investor.
We lost serious money in two of the 30-yr investments by 2009.
— Estimate of Temasek’s realised losses on ML and Barclays:
As readers will know Ho Ching has big markers on StanChart and Chinese banks.
Once regarded as a proxy for the growth of Asian markets in commodity-rich nations like Indonesia, StanChart has today become a victim of the reversal of fortune suffered by many emerging markets and their heavily indebted corporate borrowers …
Much of the lending to Asia outside of China assumed the region would grow on the back of insatiable demand from China. Much of the lending to China itself was based on that same expectation. That faulty thinking was then compounded by assuming that the value of the Chinese property used to back the loans would also continue to rise. But local banks in China, such as Agricultural Bank of China, are beginning to report that their bad loans have doubled — although officially they remain under 3 per cent. (Excerpt from recent FT article)
Ho Ho HO.
But it’s our problem too now that Tharman is now using projected long term returns from Temasek to spend our money on ourselves. Cybernuts might want to note that their heloo, Ong Teng Cheong, wanted to lock-up all the returns from the reserves (more LKY and Dr Goh). It was Ah Loong that fought him. Ah loong is the real people’s hero. if Ong had his way, we’d be pressing our noses on the iron bars guarding our reserves: Money, money everywhere/ Not a cent to spend/ Give thanks to Ong Teng Cheong
But the pix’s not that great for our local banks either: what with DBS’s exposure to Greater China and Indonesia, OCBC’s exposure to Greater China, and UOB’s and OCBC’s exposure to M’sia. Btw, OCBC has FTs as its Chairman and CEO, while DBS and UOB have true blue S’porans (Yes, I’m counting Gupta as a local. He’s a real talent.)
Following the coming change in CEOs, the resignation of a very senior manager and a planned change of chairman, Viswanathan Shankar (new citizen and a real talent like DBS’s Gupta), head of the bank’s Europe, Middle East, Africa and Americas business, is said to be planning to start a private equity fund. The bank it seems wanted to give him additional responsibilities. This not not good as the deputy CEO (passed over for the job) is also expected to leave.
Temasek and other major shareholders wanted change. May be they’ll end up with serious instability.
Singapore requires its banks (OCBC, UOB, BDS) to hold significantly more capital than the global minimums. For Singaporean banks, the average core tier one ratio — the main measure of bank safety — currently stands at 14%.
StanChart has a core tier one capital ratio of 10.7% and has set a goal of 11 to 12% this year.
The higher its capital ratio, the harder it is to make money. Taz why pre-crisis Temasek and GIC were big into banks that had juz adequate capital: think Citi, Merrill Lynch, UBS and StanChart.
Yesterday, StanChart was the top performer in the FTSE 100, adding 7% thanks to JP Morgan upgrading its rating on the bank’s shares to “overweight” from “neutral”.in a note to clients.
The British bank added the former leaders of Interpol (a S’porean) and the Swift bank messaging network and a former counterterrorism adviser to President George W. Bush.
But this lack of Asian experience shows that the directors think that the main priorities for the bank are to shore up capital (rights issue coming) and mending ties with US regulators. He has great credentials for these tasks. Temasek seems to agree. it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”
(*Btw, “inspired choice” is FT’s description)
Still the lack of Asian experience could become a major issue because there is expected to be an exodus of experienced managers. He may find replacements but changes will be disruptive if not problematic.
STANDARD CHARTERED OVERHAULS LEADERSHIP The British bank Standard Chartered responded on Thursday to shareholders’ calls for change, announcing a sweeping management overhaul including the departure of its chief executive, its chairman, the head of Asian markets and several directors, Jenny Anderson and Chad Bray write in DealBook. In a move that surprised many, it named William T. Winters, the 53-year-old former head of JPMorgan Chase’s investment bank ‒ who was once seen as a candidate to succeed Jamie Dimon ‒ to take the helm.
Mr. Winters, who will join the bank on May 1 and become chief executive in June, will succeed Peter Sands, one of the longest-serving chief executives in British finance. He will receive a base salary of 1.15 million pounds, or about $1.8 million, as well as a pension and other benefits. As the bank’s leader, Mr. Winters will not have it easy. The bank has been hurt in recent years by regulatory fines and investigations and by its focus on emerging markets. It has slashed thousands of jobs, closed its stock trading and underwriting unit and is looking to cut $400 million in costs. Impairments for bad loans, including in the mining sector, have soared.
But Mr. Winters, an American, appears up to the task. In a call with reporters, John W. Peace, the chairman, said that Mr. Winters had “great respect among regulators, clients and the market” and a solid understanding of the global regulatory environment. Temasek Holdings, which owns almost 18 percent of Standard Chartered, declined to comment on whether it had pressed for management changes. But it said that it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”
NYT’s Dealbook
Related article: http://blogs.reuters.com/breakingviews/2015/02/26/stanchart-board-clearout-is-only-the-first-step/
Double confirm that StanChart is a rogue bank and the PAP apologist is a fool because now: The management of Standard Chartered is facing renewed pressure after being placed under fresh scrutiny by US regulators.
The US authorities are now investigating whether Standard Chartered breached its sanctions rules beyond 2007, the period when the previous offences for which the bank was penalised took place.
The second biggest shareholder in Standard Chartered (after Temasek with around 27%) is standing by the embattled Asia-focused bank, continuing to buy the stock and insisting that nothing is “fundamentally wrong” with the company.
Martin Gilbert, chief executive of Aberdeen Asset Management PLC, said that funds run by his company have been “buyers of the stock in a fairly modest way,” despite a series of profit warnings that have sent Standard Chartered’s share price down 33% this year.
“We do not think there is anything fundamentally wrong with the bank,” said Mr. Gilbert, during a call to discuss Aberdeen’s results. He said that revenue growth had slowed but added that he would prefer the bank’s existing management team, headed by chief executive Peter Sands, to “sort it out” rather than looking for a replacement: “They have to really get on with it, I would say, and have a look at the costs.”
Aberdeen owns 7% of the bank, according to Factset, and, as of Oct. 31 2014, that had not changed since last year. Some Aberdeen funds have “topped up” their positions this month however, according to an Aberdeen spokesman.
The value of Standard Chartered shares held by the emerging markets-focused fund manager slid from a peak of $5.1 billion in February last year to $2.6 billion in October, according to Factset data. Part of that was due to an 8% reduction in the size of Aberdeen’s stake at the end of last year, but most was due to the bank’s falling share price.
But no need to panic or curse Temasek*: Standard & Poor’s says bank is going through times but it still among world’s most creditworthy commercial lenders.
It has some big exposures to heavily indebted clients, such as India’s Ruia brothers, who control the Essar Group, and Indonesian billionaire Samin Tan.
Honest mistakes.
—-
But the facts won’t stop Philip Ang, TOC’s and TRE’s star analyst, from cursing and ranting: he’s so bad that in a piece on a GIC, London investment, he left out the rental yields out of his calculation because he said that the income was “peanuts” (my word, not his). Well commercial property yields are a gd 6%, and have been as high as 8% in some yrs recently.
Top bosses at Standard Chartered admitted the bank’s performance had been disappointing as they announced plans to close 100 branches in a $400m (£250m) cost-cutting drive to win back support from disgruntled investors.
The admission was made as the bank’s top management team began three days of presentations to investors, who have endured a 30% drop in share values. There are also concerns about whether the bank has enough capital.
At the start of the three-day presentation, the new finance director, Andy Halford, said: “We recognise our recent performance has been disappointing and are determined to get back on to a trajectory of sustainable, profitable growth, delivering returns above our cost of capital.”
The chairman of StanChart said to 300 of the bank’s senior managers in Singapore last week, “We’re making changes. But all you have to do is go out in the field, go out into our markets, and you very quickly realise that it’s not broken. It just needs to go in for its 10-year service and we are in there for that 10-year service now … it’s a question of going through this difficult period, gritting our teeth”.
He said: “Humility is a very important word. It’s very important that we recognise we make mistakes”.
(And Chairman Sir John Peace was in Singapore last week insisting the bank is not ‘broken’. Three profit warnings say otherwise http://www.theguardian.com/business/2014/nov/09/standard-chartereds-charm-offensive-may-not-save-sands)
Well the PAP has been making changes, gritting fangs and sheathing claws since 20111: spending more of our money to make life more comfortable for ourselves.
But it doesn’t ever do humility (OK PM did apologise once during a 2011 GE rally speech, but hey he had an election to win). It won’t even admit that the PAP’s Hard Truths need servicing every now and then. It’s all a question of new blood to uphold Hard Truths.
Taz the impression I get after this
— “Today is the time to re-dedicate ourselves to the party and to Singapore. In the next 60 years, the path ahead will be different.”
— “One thing has not and will not change, that is the need for good leadership. The PAP commits to provide the leadership and serve Singaporeans better…The PAP will always be on Singapore and Singaporeans’ side.”
— “The PAP will always do its best for Singapore and Singaporeans.”
PM made these statement at the Victoria Concert Hall on 7 Nov in celebration of PAP’s 60th anniversary.Victoria Concert Hall was the venue because this was where the PAP launched way back in 21 November 1954, with its inaugural political meeting held there.
So because the PAP is not prepared to service its Hard Truths to see if they need throwing out, we are stuck with
The Hard Truth behind the other difficulties S’poreans face listed above is that govt should not spend tax-payers money on “welfare”, only on toys for the military and govt running expenses (which includes ministers’ and civil servants salaries).
Ho, Aberdeen, Blackrock and L&G baring their fangs? TRE ranters and other anti-PAP paper activists, pls note that Temasek has been pushing for a succession plan for some time.
But they can rejoice ’cause sharesclosed at £9.39 on Friday – down from £18 less than two years ago.
Standard Chartered Plc (STAN) fell for a fourth consecutive day in London after U.S. prosecutors reopened investigations to determine whether the bank, which entered into a deferred prosecution agreement in 2012, withheld evidence of Iran sanctions violations.
The U.S. Justice Department, Manhattan District Attorney Cyrus Vance Jr. and Benjamin Lawsky, superintendent of New York’s Department of Financial Services, are all reopening their original inquiries into the London-based lender to determine whether it intentionally withheld information from regulators before the 2012 settlements, according to two people briefed on the matter, who asked not to be identified because the probes are confidential.
FT reports that some of the major shareholders have been pressing for the CEO to be sacked if things don’t improve soon. It also reports that Temasek is “pressing for a clear plan of succession”.
One problem after another. Can’t do anything right. Please American regulators, upset an Arab one.
Standard Chartered Could Face U.A.E. Legal Action Standard Chartered’s unit in the United Arab Emirates may face legal challenges after the British bank agreed to close some accounts as part of a deal with New York State’s banking regulator. Standard Chartered agreed on Tuesday to pay a $300 million fine for running afoul of a 2012 settlement to resolve accusations that the bank processed transactions for Iran and other countries blacklisted by the United States.
Star British fund manager Neil Woodford sold his fund’s stake in HSBC (HSBA.L) last month, citing concerns about the impact of potential fines from several industry-wide investigations on the banking group.
Banks in Europe and the United States have been fined for a variety of transgressions as regulators increase their scrutiny of financial institutions
“I am worried that the ongoing investigation into the historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties,” Woodford said in a blog posting on his fund’s website.
“Not only are these potentially serious offences in the eyes of the regulator, but HSBC is very able to pay a substantial fine,”
…
For Woodford, who began building a stake in the UK’s biggest lender in 2013 after avoiding the sector since 2002, HSBC was “a different beast” to its peers, many of which still had problems over the quality of their loan books, capital adequacy and high leverage ratios.
In spite of the fact he considered HSBC a “conservatively-managed, well-capitalised business with a good spread of international assets”, Woodford said he had become concerned in recent weeks about the threat of “fine inflation”.
From the $1.9 billion paid by HSBC in 2012 over money laundering to the $16.7 billion set to be paid by Bank of America over its role in selling toxic mortgages, fines were increasing, Woodford said, and looked to be based on a company’s ability to pay “rather than the scale of the transgression”.
With the size of any potential fine “unquantifiable”, Woodford said he was concerned about HSBC’s dividend payouts. The stock currently yields 4.8 percent, against a FTSE100 average of 3.8 percent.
“A substantial fine could hamper HSBC’s ability to grow its dividend, in my view. I have therefore sold the fund’s position in HSBC, reinvesting the proceeds into parts of the portfolio in which I have greater conviction,” he said. Reuters
For the record, HSBC is trading at 1.1x book, its European peers are at 0.9, while StanChart is at 1.03. Our banks are at 1.3.
Carson Block Is Shorting Debt of Standard Chartered
Carson Block, the short-seller who runs Muddy Waters LLC, said he’s betting against the debt of Standard Chartered Plc (STAN) (STAN) because of “deteriorating” loan quality, triggering a 13.5 percent jump in the cost of insuring against losses on the debt of the British lender.
Somehow I don’t expect StanChart to go berserk like Olam, “Carson Block is outside of the bank and does not have access to the bank’s loan files,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. “He has very little ammunition in his gun to shoot at Standard Chartered at this point. He’s got one example of a large loan that appears to be something that possibly would not have been prudent to book.”
StanChart also does well in Asia (wholesale banking profits in Asia rose 10% over 2010-12). but it is a minnow compared to these banks.
And investment banks are looking increasingly for deals in Asean region. In the IPO league table in 2012with KL at 5th place and HK at 4th. SGX with two FTs leading it was nowhere.
Both were narco banks. They were founded in the 19th century to finance the trade in opium between British India and Manchu China. They moved on with HSBC becoming one of the biggest banks in the world while StanChart remained like HSBC, once was, a an emerging markets bank. But HSBC returned to its roots: HSBC was fined for providing help to the Mexican drug cartels (bank counters were made bigger to facilitate the handing over of bank notes). StanChart was fined for a technical offence.
Standard Chartered posted a slight increase in annual net profit in 2012. Its businesses in emerging economies offset a US$667 million fine in the United States connected to illegal money transfers.net income rose less than 1, to US$4.8 billion, compared with 2011, while revenue rose 8%, to US$19.1 billion. It was the 10th consecutive year that Standard Chartered had reported a yearly increase in its profit. Its vast operations across Asia, Africa and the Middle East helped protect the bank from many of the problems affecting developed economies like the United States and Europe … Standard Chartered has continued to expand in emerging markets by taking advantage of growing demand for financial services from both local companies and international entities looking to invest.
The bank said its operating income in China grew 21 percent last year, to $1 billion, as it benefited from expanding its local branch network sixfold since 2003. Standard Charted said it was now active in 25 emerging economies where its annual growth was in double digits.
“Analysts at Barclays recently highlighted concern over StanChart’s bad debt trends, evident in a 42 per cent increase in loan impairments in the first half of the year, compared with pre-tax profit growth of only 9 per cent,” reports FT. The growth is fastest since 2002.
So as StanChart still trades at a 25% to HSBC (1.5x book value versus 1.2X), this may account for the stories that Temasek wants out of its stake.
The British bank where Temasek has a controlling stake of 19%, which agreed in August to pay the New York state’s top banking regulator US$340 million to settle money-laundering allegations (and in the process making a PAP apologist look even more stupid: he attacked the NY regulator as a “rogue prosecutor”), may be at risk of losing money on a US$1 billion loan to an Indonesian tycoon to buy shares in an Indon mining company*controlled by the family of an indon presidential candidate. He bought the shares at abt 11 sterling last yr. Now under 150 pence.
In the 70s and 80s, StanChart was the go-to bank for goofs but in the 1990s and noughties (aside from employing one TJS) it gained a reputation as a bank that didn’t do silly things: not anymore.
So far in the scheme of things, the losses are “peanuts”. Let’s hope there is no mega encore.
The CEO of StanChart’s SE Asian operations said recently that Standard Chartered had no plans to spend the proceeds of a £3.3bn (US$5.3bn) rights issue on a significant acquisition in Asia. The bank planned to expand in the region largely through organic growth, rather than acquisitions.
The bank was not looking for any “transformational transactions” in SE Asia, although it might seek to acquire small businesses specialising in sectors or products that would add to its operations.
This would rule out a bid for DBS. Many had speculated (self included) that the bank might be preparing to spend part of the rights issue proceeds on a large acquisition. A very few (self included) speculated that DBS was a target, given that DBS is so badly managed and Temasek is a controlling shareholder in both.
DBS reminds me of StanChart in the 70s and 80s, when the latter got almost everything wrong. Only in the 90s did it get its act together. For younger readers, in the 60s Hongkong Bank and StanChart were roughly the same size, even though the former was already the leading bank in HK.
Standard Chartered bought two smallish S’pore-based businesses
— an aircraft leasing business in 2008; and
— a small factoring business earlier this year.
In 2008, it bot the private banking business of American Express in £430m.
No not Temasek as predator. Remember it has 18% of StanChart.
But what abt JP Morgan? Top FT reporter Francesco Guerrera analyses
The international conundrum is more complex. JPMorgan earns some 75 per cent of its revenues in the US, a slow-growing, developed country. By contrast, Citi derives some 40 per cent of its revenues from Latin America and Asia, emerging economies with a bright future that are also HSBC’s stomping ground.
Those lenders’ competitive advantage is their ability to offer boring-but-lucrative commercial banking and cash management services to thousands of companies.
JPMorgan has a deep commercial banking network in the US – its most profitable business – but lags overseas.
The bank already works with more than 2,000 foreign companies but Mr Dimon would love to get that number to nearer 4,000 and do more with each of them.
To this end, JPMorgan is adding 250 bankers and $50bn in extra lending to lure foreign companies. But that could take decades and the bank might want to shorten the wait with bolt-on acquisitions (as its investment bank did with Britain’s Cazenove and RBS Sempra).
The recent moves by Heidi Miller, a veteran executive, to lead the international effort, and Doug Braunstein, a takeover specialist, to the role of finance chief, certainly point in that direction.
But, as my GPS intones when I get lost, “there is a better way” – in theory at least – and it leads to Standard Chartered.
A well-run, commercial and retail bank with strongholds in Asia, Latin America and Africa, StanChart could be the answer to Mr Dimon’s problems.
It would not come cheap – its valuation is well above JPMorgan’s – and a bid by Mr Dimon would trigger a war with HSBC and China’s ICBC, among others.
But JPMorgan’s good health affords its chief the luxury of time.
Of the 90 publicly listed Chinese property developers listed on the Shanghai and Shenzhen stock exchanges, almost two-thirds of them reported negative operating cash flows for the first half of 2010.
Looks like trouble for the Chinese property developers and banks may be coming sooner than later, and for China bank bull Temasek. A repeat of Merrill Lynch and Barclays?
Remember Temasek owns 4% of Bank of China; and 6% of China Construction Bank. And StanChart is a cornerstone investor in Agricultural Bank of China with abt 1% paying US$500m for this privilege). Temasek owns 18% of StanChart.
And what about CapLand and KepLand, with their biggish exposure to Chinese residential properties?
Might sound dumb to ask given that the Chinese banks that Temasek invests in are some of the largest in the world, and given that China’s economy is growing like the bean stalk in the story Jack and the Bean Stalk. But then Shin, Merrill Lynch and ABC Learning were “no brainers”.
State agency Central Huijin Investments did something strange recently. It has controlling stakes in nearly all of China’s largest banks, including China Construction Bank (6% owned by Temasek), Agricultural Bank of China (StanChart is a cornerstone investor with abt 1% paying US$500m for this privilege) and Bank of China (4% by Temasek) . Temasek owns 18% of StanChart.
Huijin just raised Rmb40bn (US$5.9bn) as part of a Rmb187.5bn fund raisng. The aim of raising the Rmb187.5bn is to recapitalise Chinese banks it controlled.
Sounds prudent given the explosive loan growth rates of the banks brought about by Chinese attempts to stimulate the economy.
But this is the weird bit: the state-controlled banks were estimated to have bought more than 80% of Huijin’s first bond issue, on orders from their shareholder. If this is repeated, this means the Chinese banks are lending money to their controlling shareholder so that the shareholder can buy shares in them. No new cash is invested by the controlling shareholder.
Sounds something that only Wall Street cowboys would dream of doing.
Except that the Wall Street cowboys would be in jail for pulling off this stunt, unless of course, if a Texan is president.
Standard Chartered moved V. Shankar from S’pore to Dubai, a few months ago, to head the bank’s Gulf base in the Dubai International Financial Centre. He is chief executive responsible for Europe, the Middle East, Africa and the Americas.
He is a S’porean, home-grown talent, I’ve been assured by people from Stan Chart.
StanChart also does well in Asia (wholesale banking profits in Asia rose 10% over 2010-12). but it is a minnow compared to these banks.
Thoughts of a Cynical Investor 