Standard Chartered Unsettles Investors -- WSJ

By Margot Patrick Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 2, 2017).

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Standard Chartered PLC shares sank on Wednesday after the bank's quarterly report revealed drags on a turnaround plan and as hopes dimmed for a dividend this year.

The company's third-quarter results also missed some analysts' expectations. Revenue rose 4% from the year-earlier period, but so did costs, and the bank said margins in some of its key markets remain under pressure.

The stock fell more than 6% to GBP7.05 ($9.35) in London trading.

The Asia-focused bank has been exiting businesses, unloading assets and resetting its culture after earlier rapid growth left it with sprawling operations and piles of bad loans. Uncertainty around the pace of the turnaround has caused its share price to lag behind rivals. Previously, some targets set by Chief Executive Bill Winters and Chief Financial Officer Andy Halford in late 2015 had to be revised.

Mr. Halford on Wednesday didn't rule out paying a dividend this year, saying the bank would decide at year-end. Standard Chartered started reducing, then suspended, dividends in 2015 when it announced overhaul plans.

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Mr. Halford said the bank is investing in technology and automation for retail banking, and that other spending to attract wealth-management and corporate clients should pay off in the longer term. He said one big cost contributor, improving regulatory compliance systems, is close to peaking now.

For analysts, one sore point in the results was a reduction in the bank's capital position due to a change in the way it calculates possible losses on exposure to certain financial institutions. The changes to its risk models, which require Standard Chartered to be more conservative about how much money it could lose from those exposures, were made after discussions with the U.K. banks regulator. Further changes to its models on some corporate exposures will be made next year, Standard Chartered said.

Capital will also be slightly reduced from next year by a major accounting rule change, the bank said. Under IFRS9, banks must continually make provisions for expected losses on their loans, instead of only when there are actual or imminent losses.

Despite such headwinds, Standard Chartered said pretax profit in the third quarter more than doubled, to $774 million from $317 million. The rise was mainly because of a decrease in bad loans and lower restructuring costs compared with the third quarter of 2016.

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

November 02, 2017 02:47 ET (06:47 GMT)