StanChart Weighs Break Up of Corporate, Investment Bank

(Bloomberg) -- Standard Chartered Plc is considering restructuring its institutional banking arm, the unit that houses the firm's investment bankers and traders, as part of the latest effort by Chief Executive Officer Bill Winters to improve the lender's returns. 

The lender has been weighing options including separating its investment bank from its corporate and commercial banking operations, according to people familiar with the matter. The move could lead to job cuts and is one of several possibilities being weighed with no final decisions made yet, the people said, asking not to be identified discussing matters still under consideration.

A spokesman for Standard Chartered declined to comment. 

The revamp would be the latest effort by Winters to improve returns. The bank's shares have languished under the 62-year-old CEO and currently trade about 40% below where they were when he took the reins in 2015. 

The London-listed bank has been weighed down in recent years, in part as it was forced to set aside more in reserves for souring loans tied to Chinese commercial real estate. In recent quarters, it has been taking actions to boost its return on tangible equity above 11% by the end of this year. Rival HSBC Holdings Plc, though, has said its on track to achieve returns in the mid-teens for 2023.

Read More: China Woes Hit Global Banks as StanChart Shares Slump on Results

“This is a business that has performed well through challenging markets in recent years,” Standard Chartered's then-Chief Financial Officer Andy Halford said in October. “We are feeling positive about the outlook as we push through the 10% RoTE level for the first time in many years and on to 11% and above thereafter.”

Asia Focus

One of the largest European banks operating in emerging markets, Standard Chartered makes almost all of its money in Asia, the Middle East and Africa, and serves thousands of corporate clients and millions of retail customers. 

“Standard Chartered is in a vulnerable position as its large Asian footprint has proven to be its Achilles' heel,” said Mark Williams, senior finance lecturer at Boston University. “The Chinese economy combined with the wobbly commercial real estate market has increased the bank's urgency in making deep cuts to stem earning declines and improve profits.”

Helmed by Simon Cooper, the corporate, commercial and institutional banking division provides the vast majority of the bank's revenue. Next week, analysts expect the lender to post slowing revenue growth in transaction banking for the fourth quarter, while the firm's trading division is expected to record a 2.5% increase in revenue, according to estimates compiled by Bloomberg. 

The division has been hit with senior departures in recent weeks, including Paul Skelton, who led client coverage, and James Cameron, who headed up commercial real estate. 

Standard Chartered would join rivals including Citigroup Inc. and Goldman Sachs Group Inc. if the job cuts come to pass. Citigroup last month said it would eliminate 20,000 roles as part of CEO Jane Fraser's quest to boost its returns, while Goldman said its number of staff decreased 7% last year, which reflected a “headcount reduction initiative” across the firm.

Standard Chartered shares in Hong Kong fell 1.1% to HK$57.05 in morning trading. 

Read More: StanChart's $15 Billion in Lost Value Justifies Deeper Overhaul

--With assistance from Preeti Singh and Dinesh Nair.

(Adds analyst comments in eighth paragraph.)

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