Peter Sands has quit Standard Chartered after months of speculation surrounding the beleaguered chief executive’s position at the UK bank.
He will be replaced by former JP Morgan executive Bill Winters, who will join the bank in London on May 1 and become group chief executive in June. Sands will stay on until June.
Jaspal Bindra, Asia chief executive, is also leaving as part of a broad management shake-up following a prolonged spell of underperformance.
“After more than eight years as group chief executive, now is the right moment to hand over to new leadership,” Sands said in a statement on Thursday.
As part of the reorganisation John Peace, chairman, will leave the bank next year and the board will be revamped, StanChart said.
Peace paid tribute to Sands in the statement but the reality is that the CEO has been under relentless pressure from shareholders due to poor results, strategy missteps, and a tumbling share price.
The shares have fallen more than 25% in the past year and the fact they rose more than 5% on Thursday goes some way to telling the story. Analysts were broadly upbeat about Winters but warned he will have a tough job turning the bank around.
"What a great hire," said Chintan Joshi, an analyst at Nomura, but he added fourth-quarter earnings results would likely come in below expectations.
StanChart reports the results on March 4. The first nine months of the 2014 financial year saw a 19% year-on-year drop in profit before tax.
Winters needs to push profitability back above cost of equity and draw up a growth strategy. He also needs to address the bank's capital shortfall. Analysts expect Winters will not complete a full review of the business until September.
Goldman Sachs analysts said StanChart’s capital position appeared vulnerable in light of the upcoming stress tests and compared with UK peers. The weakening commodity cycle has the potential to cause the bank's capital position to deteriorate further, via higher loan loss provisions and an increase in risk-weighted assets. It estimated potential additional provisioning at about $2 billion.
Winters joins StanChart with 28 years' of experience in the investment industry, including 26 years at JP Morgan. He moved to London in 1992 as head of European fixed-income and, in 2004, was promoted to co-CEO of JPMorgan's investment bank.
Winters played a key role in steering JP Morgan through the 2008 financial crisis. He was also a member of the Independent Commission on Banking in the UK, which submitted its report to the Chancellor in September 2011. He is a member of the board of the International Rescue Committee and the Institute of International Finance, where he co-chairs the Committee on Effective Regulation.
Disgrunteled shareholders
Given the bank's deteriorating performance there had been speculation in the UK press that StanChart’s major shareholders were pushing for Sands to resign sooner rather than later.
Temasek, which owns 17.7% of StanChart, reacted positively to the news and said it appreciated the “orderly” management succession.
“We are of the view that boards should have in place an annual succession review as a matter of good governance and board discipline,” it said in a statement.
Temasek thanked Sands for his leadership and wished him well. However, it added that “this ongoing process for board renewal must continue as the requirements and challenges facing the banking and financial sector … have become much more complex and onerous.”
Onerous indeed.
Turmoil
StanChart is not alone in facing up to the harsh realities of a post-global financial crisis investment banking world, which has seen banks retreat from non-profitable areas amid intensifying regulation.
But StanChart has also made mistakes.
Its position as an emerging markets-focused bank gave it an edge after the crisis, when most rivals were hurting as investors shied away from the US and Europe.
Profits were consistently strong in the years that followed but this only served to create a false sense of security.
“The problem was that for equities and broader investment banking you really need a global platform,” a StanChart investment banker who was recently axed told FinanceAsia.
So as conditions improved in developed markets the bank found itself less able to compete with banks with a more global footprint, such as Citi and HSBC, leading to a decline in profits.
In terms of investment banking fees, StanChart did less well than its global rivals. Whereas its income from fees rose in Asia to $191 million in 2014 from $163 million in 2010, globally they fell from $307 million to $302 million, according to Dealogic data.
Its strategy also faltered. The equities business proved a particular misstep and was under review for about a year, with consultancy McKinsey advising Sands to exit the business at the end of 2013, a person close to the situation told FinanceAsia in January.
StanChart’s decision to exit the business resulted in 200 job cuts, mostly in Hong Kong, Singapore, Korea, India and Indonesia, with minimal reductions in the UK and US. Also, the bank said in January that it would cut 4,000 jobs in its retail division.
Asia
With Asia accounting for three-quarters of StanChart profits – Hong Kong is its biggest market – the exit of Bindra creates further turmoil for the region.
Bindra, 54, pictured, will step down from the board on April 30 after a 16-year career with StanChart and will leave shortly afterwards.
He joined StanChart in 1998 and was named group executive director to the board in January 2010. He is based in Hong Kong.
Before joining StanChart Bindra was with UBS. He began his career with Bank of America in 1984 and worked across treasury markets and consumer banking in India and Singapore.
StanChart said on Thursday that an announcement on his replacement would be made “in due course.”
Peace, meanwhile, welcomed Winters – former co-chief executive of JP Morgan’s investment bank – to StanChart and offered Sands a glowing send off.
“Peter has made an immense contribution to the success of the group and has had a transformative impact,” he said in a statement.
“Since becoming CEO in 2006, the group has more than doubled in size, has been consistently profitable, and has returned over $12 billion of dividends to shareholders,” he said.
Those shareholders now have a scalp or two to go with their cash.
