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%.
Posts Tagged ‘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.”
Related article: http://blogs.reuters.com/breakingviews/2015/02/26/stanchart-board-clearout-is-only-the-first-step/
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.
Temasek is one of the shareholders pressing for a change of mgt, other reports claim.
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.
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
— a CPF annuity where the Standard Plan is lousy, really lousy https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/
And where it’s our money but CPF Life solvency is our problem –https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/
— Medisave’s incentive to spend on medical insurance that may not be needed
— MediShield being probably not a value proposition
— Medishield’s lifetime limit [This item added at 7.00am]
The Hard Truths behind immigration:
— more people means better growth; and
— S’poreans are daft and lazy.
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).
Above is FT’s headline for today.
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.
They will be celebrating.
Is StanChart a rogue bank?
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.
Temasek wants clear succession plan at stanChart
Standard Chartered has announced a 16% fall in operating profit because of a restructuring of its South Korean business and an increase in bad loans.
The Asia-focused lender said pre-tax profits fell to $1.5bn (£930m) in the July-to-September quarter compared to the same period a year ago.
Standard Chartered also warned full-year earnings would fall because of weak trading activity.
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.
First HSBC’s results and now StanChart’s result show that regional economies are slowing down
Example Singapore, where first half income fell 3% and profits dropped 12% (not reported by our constructive, nation-building media).
Other Asean round-up news
And here’s the third confirmation. Indonesia’s exports are dropping, GDP growth is slowing and inflation is rising.
Forget about India, China, Thai or Indon markets
Think frontier markets: like Vietnam, Cambodia. Laos and Burma are coming too
And here’s a plug for M’sia
Another Lion Air air crash since May (then into sea) this year: now into into a cow
And UOB recently set up a unit offering loans to Chinese companies looking to move into the region, including in renminbi
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.
HSBC’s Profit Fell 17% in 2012 on Money Laundering Fine. HSBC has since hired the former chief of the US Treasury department’s sanction unit to assist with compliance.
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.
(Updated on 13 October)
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.
On 12 October 2010, StanChart was up 2% on rumours that JP Chase would bid.
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.
This makes clear why the Chinese authorities had earlier asked the banks to use a 60% haircut in estimating residential property losses.https://atans1.wordpress.com/2010/08/11/temasek-what-abt-these-chinese-property-charts/
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.