Standard Chartered considers revamp of institutional banking arm to boost returns

The London-listed bank’s returns have suffered in recent years as it was forced to set aside more in reserves for souring loans tied to Chinese commercial real estate
Options include separating its investment bank from its corporate and commercial banking operations, according to people familiar with the matter

Banking & finance

Bloomberg

Published: 11:25am, 14 Feb 2024

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Standard Chartered is considering restructuring its institutional banking arm, the unit that houses the firm’s investment bankers and traders, as part of the latest effort by chief executive officer Bill Winters to improve the lender’s returns.

The lender has been weighing options including separating its investment bank from its corporate and commercial banking operations, according to people familiar with the matter. The move could lead to job cuts and is one of several possibilities being weighed with no final decisions made yet, the people said, asking not to be identified discussing matters still under consideration.

A spokesman for Standard Chartered declined to comment.

The revamp would be the latest effort by Winters to improve Standard Chartered’s returns. The bank’s shares have languished under the 62-year-old CEO and currently trade about 40 per cent below where they traded when he took the reins in 2015.

The London-listed bank’s returns have suffered in recent years as it was forced to set aside more in reserves for souring loans tied to Chinese commercial real estate. In recent quarters, it has been taking actions to boost its return on tangible equity (ROTE) above 11 per cent by the end of this year. Rival HSBC Holdings, though, has said it is on track to achieve returns in the mid-teens for 2023.

The bank’s shares have languished under CEO Bill Winters and currently trade about 40 per cent below where they traded when he took the reins in 2015. Photo: Bloomberg

“This is a business that has performed well through challenging markets in recent years,” Standard Chartered’s then-chief financial officer Andy Halford said in October. “We are feeling positive about the outlook as we push through the 10 per cent ROTE level for the first time in many years and on to 11 per cent and above thereafter.”

One of the largest European banks operating in emerging markets, Standard Chartered makes almost all of its money in Asia, the Middle East and Africa, and serves thousands of corporate clients and millions of retail customers.

Helmed by Simon Cooper, the corporate, commercial and institutional banking division provides the vast majority of the bank’s revenue. Next week, analysts expect the lender to post slowing revenue growth in transaction banking for the fourth quarter, while the firm’s trading division is expected to record a 2.5 per cent increase in revenue, according to estimates compiled by Bloomberg.

The division has been hit with senior departures in recent weeks, including Paul Skelton, who led client coverage, and James Cameron, who headed commercial real estate.

Standard Chartered would join rivals including Citigroup and Goldman Sachs if the job cuts came to pass. Citigroup last month said it would eliminate 20,000 roles as part of CEO Jane Fraser’s quest to boost its returns, while Goldman said its number of staff decreased 7 per cent last year, which reflected a “headcount reduction initiative” across the firm.