Standard Chartered has identified 75 per cent of the US$400 million in costs it plans to cut over the next two years as the bank shutters its cash equities and capital markets businesses while slashing 4,000 retail banking jobs worldwide.
The bank yesterday also announced the retirement of its chief risk and information officers.
Shutting down its equities and capital markets businesses would save about US$100 million next year, Standard Chartered said.
Slashing 2,000 more retail banking jobs after an initial cut of 2,000 in November last year would bring down costs by a further US$200 million.
Chief executive Peter Sands, who came under shareholder pressure last year for an immediate succession plan, told investors in November the bank was "derisking" and exiting non-core businesses while also targeting US$400 million in "productivity gains" or cuts next year.
The shuttering of the equities and capital markets businesses was no easy pick for Sands, who led the drive into those businesses five years ago. While the bank has retreated from those markets, it has also signalled a drive into wealth management and private banking in Asia, which are likely to suffer from the cuts.
Cutting loose equities and capital markets would save some costs in the short term but it would also shut off private banking clients' access to equities deals such as initial public offerings, dulling its competitive edge in that segment of the market, said Chirantan Barua, a senior analyst at Sanford C. Bernstein in London.
"It all looks very shortsighted," Barua said. "They are trying to eke out earnings."
He added that the cuts would not help solve Standard Chartered's capital shortfall and that a rights issue was still highly likely.
Operating profit at the bank sank 16.4 per cent in the third quarter of last year and prospects for a quick turnaround seem unlikely over the short term. Underlying profit was expected to fall in the second half of the year.
Impairment losses on loans and advances rose 86 per cent to US$536 million in the third quarter. The bank's finance director said the rise was concentrated among a small number of institutional and corporate clients with exposure to commodities.
Sands has promised to return the bank to profitability but has not given a timeframe for how long that turnaround would take.
"Would [Sands] like to keep these businesses? I think the answer is yes," Christopher Wheeler, an analyst at Atlantic Equities in London, said of the latest cuts. "But at the moment he's being attacked on all sides and he needs to reduce costs quickly."
Wheeler agreed the move was somewhat shortsighted but said it was also pragmatic, given the pressure on Sands to show progress in restructuring the business.
In a separate announcement yesterday, the bank said chief risk officer Richard Goulding and chief information officer Jan Verplancke would retire.
Don Weinland
