Bloomberg News

Standard Chartered Cuts Bonuses, Boosts Dividend After Fine

March 05, 2013

Standard Chartered 2012 Profit Increases Even After U.S. Fine

A sign sits above the entrance to Standard Chartered Plc's headquarters in London. Photographer: Simon Dawson/Bloomberg

Standard Chartered Plc (STAN), Britain’s second-largest lender by market value, cut bonuses by 7 percent and boosted its dividend after it was fined $667 million for U.S. sanctions violations. The shares rose.

The bank will pay a final dividend of 56.77 cents a share, bringing the total for the year to 84 cents, 11 percent more than in 2011, the London-based lender said in a statement today. Pretax profit rose to $6.88 billion from $6.78 billion in 2011, beating the $6.84 billion estimate of 23 analysts surveyed by Bloomberg and marking the firm’s 10th consecutive year of record results. Revenue advanced 8 percent to $19.1 billion.

Chief Executive Officer Peter Sands, 51, is trying to attain revenue growth of at least 10 percent while keeping expenses under control as the bank hires and adds branches in China and Africa. The bank, which gets most of its profit from Asia, last year reached a settlement with U.S. regulators over allegations the bank violated sanctions with Iran.

The “amount paid in bonuses is less than the amount paid to our shareholders by way of a dividend, less than corporate taxation and well under half of the retained earnings,” Sands said in today’s statement. “We have started the year with very good momentum and an exceptionally strong balance sheet.”

Bank Accused

In August, the lender was accused by Benjamin Lawsky, head of the New York Department of Financial Services, of helping Iran launder about $250 billion in violation of federal laws, keeping false records and handling lucrative wire transfers for Iranian clients.

Standard Chartered’s shares have rebounded about 50 percent since tumbling to a low of 1,228.5 pence on Aug. 7. The bank rose 3.2 percent to 1,837.5 pence in London, valuing it at about 44 billion pounds ($67 billion). The stock is up 17 percent this year, making it the second-best performer among Britain’s five biggest lenders, trailing Barclays Plc.

Sands told reporters on a call today that the firm reduced the bonus pool to $1.43 billion from $1.54 billion. Bonuses for Sands and Finance Director Richard Meddings fell 10 percent to $3.15 million and $2.16 million respectively. Forty-seven of the bank’s employees were awarded a bonus of 1 million pounds or more, said Sands.

The bank may add as many as 2,000 employees in 2013, said Meddings.

Corporate Banking

Standard Chartered, whose origins date to 19th century British colonial rule in Africa and India, earns more than three-quarters of its profit from corporate banking. Operating profit at the division, led by Michael Rees, declined 1.5 percent to $5.14 billion after the fine. Revenue at the division increased 8.6 percent to $11.78 billion. Profit from consumer banking, run by Steve Bertamini, climbed 7.8 percent last year to $1.78 billion, the lender said today.

“Consumer was a little bit better than we expected and wholesale a little bit worse,” said Gary Greenwood, a banking analyst at Shore Capital Ltd. who recommends buying Standard Chartered shares. “The outlook statement looks pretty confident. They talk about very good momentum into the new year and how they’re taking market share.”

Operating costs for the bank rose to $10.9 billion from $9.9 billion.

In India, operating profit for wholesale banking fell 18 percent to $581 million as the country’s economic growth slowed to 5.2 percent from 7.9 percent, the rupee fell against the dollar and impairments rose.

Asian Earnings

Standard Chartered said Hong Kong, mainland China and Taiwan contributed about $4.9 billion in revenue, or about a quarter of the bank’s total. In Korea, the bank’s consumer unit returned to an operating profit after losing money a year earlier, earning $164 million on that basis after cutting expenses by 22 percent.

Net interest income grew 8 percent, making Standard Chartered the only U.K. bank to post an increase in that source of revenue, according to Ian Gordon, an analyst at Investec Plc (INVP) in London who rates the bank buy.

HSBC Holdings Plc (HSBA) yesterday said full-year profit declined after it paid a record penalty for compliance failures and said costs rose for a third year, missing its target. Pretax profit for 2012 dropped 5.6 percent to $20.65 billion.

Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc, Britain’s two biggest government-owned banks, posted net losses for the year last week as they set aside a combined 2.9 billion pounds related to wrongly sold loan insurance and interest-rate-hedging products in the U.K. Barclays Plc posted its first loss in two decades last month and set aside an additional 1 billion pounds to compensate clients.

While the bank has clawed back bonuses from employees for wrongdoing before, it didn’t recall any payments from staff in relation to its fine for breaking U.S. sanctions last year, Chairman John Peace said at a press conference today.

The lender had “not found any wilful acts by individuals” and the infractions were “mistakes,” Peace said.

Separately, he said the bank had no immediate plans to move from the U.K., in part because “people see us as a British bank.”

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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