Standard Chartered Q3 income falters, fresh compliance trouble ahead

[LONDON] Standard Chartered reported a third quarter underlying pretax profit of US$458 million on Tuesday, up from a US$139 million loss a year ago as the Asia-focused bank showed modest progress in rebuilding revenues hurt by a sweeping overhaul of its business.

The result marks a second consecutive quarter of profitability for the London-based lender after it swung to an annual loss for 2015, hit by the costs of revamping its management team and exiting out-of-favour markets as part of a restructuring plan under Chief Executive Bill Winters.

But the bank also flagged fresh compliance and regulatory challenges after confirming Hong Kong's financial regulator planned to take action against it in relation to its role as a joint sponsor of an initial public offering in 2009.

It also reported falling income of US$3.47 billion for the third quarter, down from US$3.68 billion for the same period a year ago, sending the bank's shares down 3.8 per cent at 0843 GMT.

"We now have a stronger balance sheet...but income and profit levels are not yet acceptable," Mr Winters said in the statement on Tuesday.

Since he joined the bank, former JPMorgan investment banker Winters has announced plans to axe more than 15,000 jobs, closed the bank's stock trading business and raised US$5.1 billion in capital as part of efforts to restore profitability.

Those efforts have slashed costs at the lender but also hit revenues, prompting the bank to defer its goal to reach a return on equity of 8 per cent by 2018 - a target analysts had long deemed unrealistic.

Standard Chartered said its common equity tier one capital ratio - a key measure of financial strength - dipped slightly to 13.0 per cent from 13.1 per cent.

The lender scrapped its dividend and launched a US$5 billion rights issue a year ago in order to bolster its capital levels, which were a cause of concern to investors and analysts having fallen to 11.4 per cent by the end of September 2015.

REUTERS