StanChart may exit private equity business

The Standard Chartered headquarters in London. Regulators in Europe and the US have made it harder for banks to invest shareholders' cash in illiquid funds since the financial crisis, leading to a series of so-called spin-outs where employees become
The Standard Chartered headquarters in London. Regulators in Europe and the US have made it harder for banks to invest shareholders' cash in illiquid funds since the financial crisis, leading to a series of so-called spin-outs where employees become owners of newly independent firms.PHOTO: BLOOMBERG

Bank may spin out unit to its managers as it faces losses and tougher capital rules

LONDON • Standard Chartered is considering spinning out its private-equity business to its managers, as chief executive officer Bill Winters continues efforts to simplify the bank and reduce the amount of risk it takes, according to two people familiar with the matter.

The lender may exit Standard Chartered Private Equity, or SCPE, as it faces tougher capital rules and losses from the unit, said the people, who asked not to be identified because no decision has been reached.

The unit's managers, led by Mr Joseph Stevens, would take control of a business that oversees about US$5 billion (S$6.83 billion) of assets, including stakes in a Nigerian bank and Singaporean restaurant chain Crystal Jade, said the people.

Mr Winters, who took charge of StanChart last year, is seeking to help the bank recover from losses on soured loans by exiting and restructuring US$100 billion of risky assets. The Principal Finance unit that houses SCPE posted US$167 million in losses in the first half of this year, after losing US$105 million in the second half of last year.

"It's been a more difficult business to carry from a regulatory perspective, and we're looking at ways that we can effectively reposition the funding of that business," Mr Winters said of Principal Finance on a conference call last month. "It's not surprising that it's part of the cycle where we're experiencing some pain."

Regulators in Europe and the US have made it harder for banks to invest shareholders' cash in illiquid funds since the financial crisis, leading to a series of so-called spin-outs where employees become owners of newly independent firms.

The SCPE business manages more than US$2 billion of StanChart's cash and another US$3 billion for third-party investors, the people said. The bank has reduced its investment over the past three years, one of the people said.

SCPE has been involved in deals worth at least US$1.5 billion since the start of last year, according to data compiled by Bloomberg.

Acquisitions include stakes in Singaporean companies Phoon Huat & Co, a vendor of baking ingredients such as pie fillings and confectioners' sugar, and Crystal Jade Culinary Concepts Holding, a restaurant chain known for its steamed dumplings and spicy noodles.

SCPE is also among the biggest shareholders in Union Bank of Nigeria, a lender whose stock has plunged 35 per cent so far this year.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 17, 2016, with the headline 'StanChart may exit private equity business'. Print Edition | Subscribe