Stanchart to exit equity derivatives, convertible bonds

Standard Chartered will continue to offer equity financing advice for corporate and institutional clients and will still offer securities trading for retail and private banking clients, said a spokesman.
Standard Chartered will continue to offer equity financing advice for corporate and institutional clients and will still offer securities trading for retail and private banking clients, said a spokesman.ST PHOTO: NEO XIAOBIN
Standard Chartered CEO Bill Winters.
Standard Chartered CEO Bill Winters.

Businesses to be phased out by end of Q1 next year as bank tries to reverse 2-year profit slide

HONG KONG • Standard Chartered said it was closing its equity derivatives and convertible bonds businesses as chief executive officer Bill Winters tries to turn around the lender's performance.

The bank will phase out the businesses, exiting from institutional cash equities, equity research and equity capital markets, it said in an e-mailed statement yesterday.

At least 10 jobs will go, according to a person with knowledge of the matter, who asked not to be identified because the details are private.

Standard Chartered CEO Bill Winters is trying to reverse a two-year profit slide at the bank. Shares of Stanchart, which generates most of its revenue in Asia, have fallen 24 per cent in Hong Kong this year after commodity prices slumped and China's economy cooled.

"With effect from today, we have commenced the wind-down of the equity derivatives and convertible bonds businesses in a phased manner," a spokesman said via e-mail. "We anticipate that most of the process will be completed by the end of the first quarter next year."

Mr Winters is trying to reverse a two-year profit slide at the emerging market-focused lender.

Standard Chartered, which generates most of its revenue in Asia, has seen its stock price fall 24 per cent in Hong Kong this year after commodity prices slumped and China's economy cooled.

"Regulators are pretty negative about commercial banks' trading activities, so this move probably helps improve capital ratios, reduces earnings volatility and cuts staff, so costs," Mr Jim Antos, an analyst at Mizuho Securities Asia in Hong Kong, told Bloomberg. "They are going back to basic banking."

Standard Chartered will continue to offer equity financing advice for corporate and institutional clients and will still offer securities trading for retail and private banking clients, a spokesman said by e-mail.

Getting out of equity derivatives and convertible bonds, businesses run mainly out of Hong Kong, is part of efforts to position the bank for growth and to "kick-start performance", the lender said in the statement. The bank remains "fully committed to Hong Kong", it said.

"We are taking action to position the bank for growth and driving a step change in performance," the spokesman said.

Global investment banks such as Goldman Sachs Group and Citigroup saw increases in their derivatives sales and trading income in Asia during the first half of this year. But the business is expected to fall off in the second half of the year due to the drop in China's stock market.

Sales of equity-linked securities in Japan and South Korea fell to a one-year low in September.

Since taking over in June, Mr Winters, 54, has eliminated 1,000 senior positions and cut the bank's dividend in half to save about US$1 billion (S$1.4 billion). Some analysts have forecast that a capital gap of between US$4 billion and US$10 billion will be revealed when the Bank of England releases its second round of stress tests on Dec 1.

Standard Chartered's board will meet as early as next month to discuss whether the bank needs to raise capital as it struggles under rising bad loans and an economic slowdown in Asia, the Wall Street Journal has reported, citing people familiar with the matter.

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A version of this article appeared in the print edition of The Straits Times on October 27, 2015, with the headline 'Stanchart to exit equity derivatives, convertible bonds'. Print Edition | Subscribe