Market volatility 'to last through the year'

Mr Winters, who took over as StanChart CEO in June, said he is hoping the bank can grow income over the course of this year.
Mr Winters, who took over as StanChart CEO in June, said he is hoping the bank can grow income over the course of this year.

Big challenge to revive depressed revenue amid sluggish economy and commodity price slump: StanChart CEO

LONDON • Standard Chartered chief executive officer Bill Winters expects erratic swings in global markets to continue for at least the rest of this year, complicating his efforts to reinvigorate earnings and restore the Asia-focused lender's dividend.

Reviving "depressed" revenue in the face of a sluggish economy and a slump in commodities prices is "the big challenge", Mr Winters told Bloomberg Television yesterday, eight months into his tenure.

The bank could resume dividends this year, if it keeps showing improvement. But first, he is waiting to see how the firm performs as emerging markets in which it operates face headwinds, potentially rattling investors anew.

"I am expecting very high volatility for the rest of this year and probably into next year," said Mr Winters, 54. "It's too early to call the risk-off theme. We could have episodes of real risk aversion."

StanChart jumped 9.8 per cent on Tuesday after saying loan impairments declined and capital levels improved during the first quarter.

Mr Winters, who was hired in June with a mandate to turn around the struggling lender, has picked a new management team, bolstered risk controls, sold 19 businesses and identified US$100 billion (S$135 billion) of risky assets he wants to restructure or exit.

"I am hoping we can grow income over the course of this year," he said. Historically, he added, employees prioritised "growing income at the top line and were not so focused on returns. We have shifted the focus to returns, and there is always this risk in that transition, you lose the focus on growth. I think we've got the balance right. We need to resume growth with our clients".

Mr Winters has sought to shrink the lender's balance sheet after years of unchecked growth, cutting assets 12 per cent last year. He said he discovered a "looseness" to the way the bank was managed when he joined, developed over years of good performance.

Shareholders are "quite supportive" of his efforts, he said. Still, he added, they play a role in encouraging excessive risk-taking when they set unrealistic growth targets. The stock has fallen over two-thirds from its level of 1,856 pence in 2010.

Temasek Holdings spokesman Paul Ewing-Chow declined to comment. The investment firm became StanChart's largest investor a decade ago and holds about 16 per cent of the stock, according to data compiled by Bloomberg.

While pre-tax profit fell 64 per cent and revenue dropped 24 per cent in the quarter, the shares erased their loss for the year. That placed StanChart in a group of only five major European banks with a positive return this year.

"The earnings were poor and the profitability is poor," Mr Winters said. "The market took our earnings as something of an encouraging sign because... there's a ton of business for us to do and we're well positioned to do it."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on April 28, 2016, with the headline 'Market volatility 'to last through the year''. Print Edition | Subscribe