StanChart rules out share sale, targets US$1.8 billion of cost cuts as profit plunges 25%

A woman walks past an electronic board displaying the logo of the Standard Chartered bank in Hong Kong on March 4, 2015. Standard Chartered ruled out plans to raise capital on Wednesday despite reporting a 25 per cent slide in annual pretax prof
A woman walks past an electronic board displaying the logo of the Standard Chartered bank in Hong Kong on March 4, 2015. Standard Chartered ruled out plans to raise capital on Wednesday despite reporting a 25 per cent slide in annual pretax profits on the back of soaring bad loans. -- PHOTO: AFP

LONDON (Reuters) - Standard Chartered ruled out plans to raise capital on Wednesday despite reporting a 25 per cent slide in annual pretax profits on the back of soaring bad loans.

The Asia-focused bank instead vowed to cut costs and shrink its loan book in an effort to quell lingering concerns of balance sheet weakness, underlining the challenge facing incoming chief executive officer Bill Winters.

The bank is braced for a strategic revamp when the former investment banker takes over as chief executive in June tasked with reversing a prolonged slump in profits.

Underlying pretax profits came in at just US$5.2 billion (S$7.10 billion) last year after loan impairments, centred among commodity-exposed businesses, jumped by a third. Standard Chartered said it was premature to call the peak on bad debts but said it had seen no sign of deterioration this year.

Outgoing CEO Peter Sands, who ruled out tapping shareholders for cash, described 2014 as "a perfect storm" of falling commodity prices, persistent low interest rates and negative sentiment towards emerging markets.

He was ousted last week in a boardroom purge that also saw the departure of three non-executive directors and the bank's veteran head of Asia Jaspal Bindra. Chairman John Peace is to step down next year amid investor anger at management's failure to move faster to deal with the bank's problems.

To arrest the decline in earnings, the bank said it would aim to save US$1.8 billion from 2015 to 2017 and cut between US$25 billion and US$30 billion in risk-weighted assets from its balance sheet.

But the bank avoided any major overhaul.

"The board continues to believe that there are significant opportunities for the group in the medium to long term across our footprint, and that is why we have been careful not to take any knee-jerk actions which may damage the long-term prospects of the business," Peace said in a statement.

It said it was on target to save US$600 million in headline costs this year, beyond its target of $400 million in savings.

The bank's board of directors will not take a bonus for 2014.