Regime change at Standard Chartered offers high hopes for shareholders

Standard Chartered Shanghai Towers at night

It’s a boardroom “refresh”, says Standard Chartered chairman Sir John Peace.

But this isn’t a light rub-down with a damp towel. It’s a full immersion with deep scrub. Chief executive Peter Sands is going, to be replaced by perennial big-job contender Bill Winters, a former JP Morgan deputy. Asia boss Jaspal Bindra is also out. Peace himself will depart next year, following the exit of three other long-serving non-executive directors.

In the slow-moving world of Asian banking, where stable relationships are highly prized (or so Standard always tells us), this is a regime change. Most shareholders will conclude it’s long overdue. Aberdeen Asset Management and the Singaporeans at Temasek – the two big investors – have barely disguised their frustration. Their applause for Winters’ appointment came quickly, almost unnaturally so.

Sands deserves some of Peace’s lavish praise (he lauded his “immense contribution”), since his first six years in the hot seat brought success, even as western banks crumbled. But the past two years have been horrible.

There was the badly handled run-in with US regulators for busting sanctions against Iran. Sands also stands accused of being slow to smell the slowdown in Asia, and being timid in his cost-cutting when he did. Standard’s profits have doubled during his reign, but there’s a reason the share price is lower than it was eight years ago: regulators demand solid capital buffers these days, and Standard’s – after three profits warnings – may need reinforcement.

On paper, there isn’t a serious problem: 10.7% on the core tier-one measure is within official guidelines. In practice, the market worries that an overexposure to Asian property developers and miners can only lead to a rise in bad debts.

Winters lacks experience in Asia and retail banking, but so what? An outsider’s eyes are required. He’s regulator-friendly, too, and thus not the type to sound off about banks being treated “like criminals” (Bindra) or to try to airbrush a corporate admission of “past knowing and wilful criminal conduct” as a “clerical error” (Peace).

Winters is also an investment banker, so he will know the game on raising cash from shareholders: if you think you need a rights issue, go early when optimism is high. Shareholders have a chief executive they like, but let’s see whether they like what he has to say on capital.

Powered by Guardian.co.ukThis article was written by Nils Pratley, for theguardian.com on Thursday 26th February 2015 16.17 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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