StanChart axes top bankers in energy M&A team

HONG KONG/SINGAPORE • Standard Chartered has axed at least half a dozen oil and gas advisory banking roles in recent weeks, ending an eight-year attempt to build a global energy mergers and acquisitions (M&A) team, as new chief executive Bill Winters moves to rein in costs.

Asia-focused lender Standard Chartered expanded its energy M&A advisory team just before the global financial crisis by acquiring Harrison Lovegrove, a well-regarded boutique advisory firm for oil and gas. At that time, more than two dozen bankers came over to Standard Chartered from Harrison Lovegrove.

But Mr Winters, who is cutting 15,000 jobs globally to restore profitability, is getting rid of expensive specialised bankers and taking a step to reduce the bank's global ambitions in the M&A space.

The senior managing directors to leave the bank include the London-based head of the energy M&A team, three people aware of the situation said. The sources declined to be identified.

Four Singapore-based managing directors in the team were also let go, the sources added, including one, who was an expert on energy and power financing, in July.

Some less senior bankers were also axed.

E-mail sent to the bankers went unanswered. A Standard Chartered spokesman declined comment on the departures.

The downsized team is now led by Mr Alok Sinha and most of its members are based in Singapore, the sources said. The bank wants to move away from depending on advisory fees, and rely more on revenues generated by selling forex hedging products used in M&A transactions, the sources said.

"The model of pure advice doesn't fit with Standard Chartered's new scheme of things. It's an expensive proposition," one person familiar with the development said.

The sharp fall in oil prices has resulted in less M&A opportunities in the energy sector, in particular from national oil companies who were key drivers of deal-making, resulting in less work for bankers.

The changing landscape has resulted in some other investment banks, including Nomura Holdings, trimming their oil and gas M&A teams in recent months although the scale of the reductions was smaller, separate sources said. Nomura declined comment.

Mr Winters is seeking to bring down Standard Chartered's bloated cost. Under previous CEO Peter Sands, employee expenses had jumped to US$6.7 billion (S$9.4 billion) last year, pushing up the widely tracked cost-to-income ratio to 60 per cent.

In contrast, DBS Group Holdings, a bank with a higher market value than Standard Chartered, spent just US$1.6 billion on employee expenses last year, achieving a cost-to-income ratio of 45 per cent.

Following the Harrison Lovegrove acquisition, Standard Chartered's Asia-Pacific M&A league table ranking improved to 13th in 2013 from 35th in 2008, according to Thomson Reuters data.

But as the bank's overall performance dropped, its energy M&A business also suffered and Standard Chartered's ranking slipped to 44th this year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 16, 2015, with the headline 'StanChart axes top bankers in energy M&A team'. Print Edition | Subscribe