Standard Chartered to exit equity derivatives, convertibles businesses

People walk past the main branch of Standard Chartered in Hong Kong.
People walk past the main branch of Standard Chartered in Hong Kong. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - 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 after in January exiting from institutional cash equities, equity research and equity capital markets, it said in an e-mailed statement on Monday (Oct 26). 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.

Mr Winters is trying to reverse a two-year profit slide at the emerging markets-focused lender. Standard Chartered, which generates most of its revenue in Asia, has fallen 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," said Jim Antos, an analyst at Mizuho Securities Asia in Hong Kong. "They are going back to basic banking."

Standard Chartered shares rose 0.2 per cent in Hong Kong as of 10:55 am on Monday, compared with a 0.3 per cent gain in the benchmark Hang Seng Index.

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 spokeswoman 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 "kick-start performance," the lender said in the statement. The bank remains "fully committed to Hong Kong," it said.

Global investment banks such as Goldman Sachs 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 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. Some analysts have forecast 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.