Peter Sands, the outgoing chief executive of Standard Chartered, is waiving his bonus for 2014 after the bank reported a 30% fall in profits and embarked on further cost-cutting measures.
Sands, who is being replaced by veteran investment banker Bill Winters in June, said the last set of results were “clearly disappointing” and that he took responsibility for the slide in performance.
Profits fell to $4.2bn (£2.7bn) – due in part to a 32% rise in bad debt charges, extra compliance costs, a $300m (£196m) fine from the US authorities for breaches of money laundering rules and continuing problems with its Korean arm.
The emerging markets-focused bank issued its results after last week’s dramatic boardroom clearout which will also see the chairman Sir John Peace and four other directors leave.
After 13 years at the bank, Sands moved to allay fears that it needed to embark on a major fundraising exercise to bolster its capital levels and pointed out that despite the fall in profits, the bank held its dividend at last year’s level of 82 cents a share.
Sands and four other executive directors on the board will forgo their bonuses, but Andy Halford, who became finance director in August, will take his payout. Details will be released on March 16 and Sands said the size of payments was irrelevant.
He declared that the executive directors were not taking bonuses in order to “show leadership”.
However, the total bonus pool is only down 9% – less than the fall in overall profits. Sands said that 98% of Standard staff were based outside the UK and working in markets where they risked being poached by rivals.
The reassurance over the dividend supported the shares, which rose 5% to £10.29.
Sands said: “There are no plans to raise capital. We have maintained the dividend. We understand the importance of the dividend to our shareholders...We start from a very strong capital position.”
Yet he added: “I am clearly disappointed with our performance in 2014. I’m taking responsibility for that as the CEO. The buck stops here but I’m also proud of what the bank has achieved during the 13 years I have been both finance director and CEO.”
Until 2012, Standard Chartered reported 10 consecutive years of rising revenue and profits, but this came to an abrupt halt in 2013 as problems in Korea and increasing bad debts started to dent profits. The bank wrote off another $726m (£474m) from the value of its Korean business, on top of $1bn (£650m) last year, underlining that it had overpaid when it bought Korea First Bank in 2005.
Sands said of last year’s difficulties: “We faced a perfect storm: negative sentiment towards emerging markets, a sharp drop in commodity prices, persistent low interest rates and surplus liquidity, low volatility, and a welter of regulatory challenges”.
He navigated the bank through the financial crisis after being promoted from finance director to chief executive in 2006. “This will be my last group chief executive’s review, and it is obviously one of the more challenging sets of numbers I have had to explain. In my 13 years at the group, I have seen lots of ups and downs,” Sands said.
The chairman defended the bonus pool at the bank, which has endured protests over pay its annual general meetings. “We are, of course, mindful of the external sentiment in some markets on bankers’ pay, and conscious of our disappointing performance in 2014, but it is essential that we remain able to pay competitively in the markets where we operate and where wage inflation, on average, is around 5%,” said Peace.
Sandy Chen, analyst at Cenkos, said: “The big news is that there isn’t big news; no ballooning of bad debts, no emergency rights issue. There’s just a lot of basic bank restructuring for the new CEO to lead.”
This article was written by Jill Treanor, for theguardian.com on Wednesday 4th March 2015 11.07 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010