The Euromoney 25 Class of 2018: Standard Chartered

Euromoney, January 2019

A year ago there was a sense that Standard Chartered had turned the corner after a series of difficult years.

Numbers were moving in the right direction, the right staff had been hired and the culture had shifted.

But, 12 months on, you couldn’t say the progress has been consistently upward.

It has been in some respects. Third-quarter net profit, announced in October, was dramatically up over the year, to $752 million from $557 million a year earlier. Pre-tax profit, at $1.1 billion, was up 37% over the previous year and has outpaced analysts’ expectations. Common equity tier-1 was up, to 14.5% of risk-weighted assets, well above the bank’s stated target range of 12% to 13%; non-performing loans were down, reflecting progress in digesting distressed debt.

“We set out the plan three years ago to get the bank repositioned and back up and running,” says Andy Halford, group chief financial officer at Standard Chartered, who has been instrumental in the bank’s transformation alongside chief executive Bill Winters.

“This is year three of that process, and I think on a number of fronts we are moving forwards pretty significantly.”

In his view, those areas of positive momentum include the top line, balance-sheet strength and culture – “getting 85,000 people across the world pointing in the right direction.”

And on the negative side?

“If I was reflecting on the ‘not yet’, we have yet to get to the 8% return on equity we targeted,” he says, much less the 10% Winters has pledged to reach in the medium term. The last stated number was 6.1%, obstinately low, and it is clear that frustrations have bubbled internally.

In October, an email Halford sent to staff was leaked, saying that the bank faced a big challenge to meet its 2018 cost reduction targets and had made “virtually no progress” in doing so since adjusting budgets in May.

And clearly a US-China trade war will not help a bank that has most of its business in emerging markets. “There is a lot of rhetoric on trade wars,” says Halford. “We’ve got an interesting period ahead of us to work through. We hope it will not be too consequential, but time will tell.”

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