Standard Chartered chief executive Bill Winters said he hoped the election of President Joe Biden would help de-escalate US-China tensions that have hung over the bank in recent years, ending “tit for tat” escalations in trade and geopolitics.
Like its London-based rival HSBC, StanChart has been navigating an increasingly fraught relationship between the US, UK and China. The situation worsened last year after Beijing imposed a controversial national security law on Hong Kong, which the lender publicly supported to avoid compromising its most important market.
“[It] was pretty tense last year . . . by no means do we think the tension goes away but should be much more manageable” as both sides came up with a framework for engagement, Winters said on Thursday. A continuation of the “tit for tat escalations that we saw last year . . . could end up doing real harm to both parties”.
Hugh Young, head of Asia at asset manager Standard Life Aberdeen, said the bank was “a bit like HSBC, caught between two stools”. He added: “Doing as well as they can but boy what a struggle.”
Winters was speaking alongside the emerging markets-focused bank’s results, when it announced it would resume paying dividends and would buy back stock, despite slipping to a bigger-than-expected fourth-quarter loss.
The chief also warned that the coronavirus pandemic and low interest rates would continue to hit profit for years, and that it would take longer than forecast to meet its return on equity target. He said 2021 revenue was unlikely to exceed that of 2020, when it fell 3 per cent.
In response to these pressures, the lender slashed its bonus pool by about a fifth. It added that it would seek to save hundreds of millions in costs by restarting job cuts that were paused during the pandemic and by reducing its global office footprint by a third in the next three to four years as it shifted to flexible working.
“2020 was a tale of two sides,” said Winters, pointing to encouraging recovery signs in the second half of the year after the “transitory impact of coronavirus on trade and credit impairments” in the first six months.
He added that the bank had “clearly taken a step back due to low interest rates . . . that will be with us for some time”.
StanChart reported a $449m loss in the last three months of 2020. Annual pre-tax profit dropped 57 per cent to $1.6bn — falling short of analysts’ expectations — as credit impairment charges more than doubled to $2.3bn.
Hong Kong generated the bulk of the bank’s operating income, followed by Singapore, India, South Korea and China. Pre-tax profit last year was $2.8bn in Asia, and the bank outlined an expansion of its wealth management division, particularly in mainland China and Hong Kong, to capitalise on “the rising wealth of its population”.
Following rival HSBC, the lender said it would issue a dividend of $0.09 per share, becoming the latest UK bank to resume payouts since the Bank of England partially lifted a ban on dividends in December. It will also buy back $254m of stock, the maximum allowed by regulators.
StanChart has fared slightly better than some of its British and European rivals during the pandemic as a result of its focus on Asia and Africa. Still, the shares fell 5 per cent after the announcement, extending their decline in the past 12 months to 13 per cent.
“The profitability outlook remains challenging,” said Citigroup analyst Ronit Ghose. “StanChart is pledging a minimum 7 per cent return in 2023. It feels like the bank is promising investors jam tomorrow and relatively thin gruel today.”
StanChart’s bonus pool dropped 23 per cent to $990m last year, but it boosted pay for its traders to reward them for an increase in revenue in volatile markets.
Winters personally had his total pay cut 29 per cent, to $5.4m, as the bank missed profit estimates and generated a return of only 3 per cent, far below its 10 per cent long-term ambition.
Despite speculation about his future after six years in the job, the 59-year-old said he was not preparing to leave yet.
“Don’t let the grey hair fool you . . . I’m here to do a job, and the job is not yet done.”