Hong Kong / AP
Asia-focused bank Standard Chartered said on Tuesday it swung to a surprise $2.36 billion net loss in 2015 against a backdrop of global market volatility, restructuring costs and bad loans.
Chairman John Peace described the performance as “poor” in what he called a watershed year, which saw the company announce it would axe 15,000 jobs under new CEO Bill Winters.
The company’s stock plunged as much as 12 percent in London on the news, but recovered to sit 4.73 percent down by mid-morning.
Pre-tax profits fell 84 percent to $834 million in 2015, well short of the estimates by 20 analysts polled by Bloomberg, who forecast $1.37 billion.
The bank’s underlying loan impairment nearly doubled, soaring 87 percent to $4.0 billion — the highest in its history, according to Bloomberg.
Standard Chartered said the bad loans were driven by “falling commodity prices and deterioration in financial markets in India”.
Like many global banks, Standard Chartered is battling turmoil in global financial markets that has seen stocks and commodities plunge.
“While our 2015 financial results were poor, they are set against a backdrop of continuing geo-political and economic headwinds and volatility across many of our markets as well as the effects of deliberate management actions,” said Peace in a statement.
Winters added that the bank’s 2016 performance would remain “subdued”.
Analysts said the extent of the bad loans had come as a surprise hit.
“Nobody expected such a large loan impairment loss, that’s really quite a lot,” financial analyst Francis Lun of Geo Securities said.
“They have two areas — India and oil related loans — that are going to hurt them in the coming years.”
Revenue also dropped 15 percent to $15.44 billion for the year, short of the $15.9 billion expected by analysts polled by Bloomberg.
Simsen Financial group analyst Jackson Wong also attributed the loss to bad loans.
“If oil prices can go back up to around $40 (a barrel) quickly then that will solve a lot of problems,” Wong told reporters.
No executive bonuses
There will be no bonus payments to executive directors for 2015, the report said, with overall incentive payments for the year down by 22 percent.
The bank also confirmed that there would be no final end-of-year dividend for shareholders.
Standard Chartered announced in November that it was refocusing on “affluent retail clients” rather than corporate and institutional banking businesses and would exit or restructure $100 billion of assets.
It said it would cut 15,000 jobs around the world — the bank had already announced last January plans to axe 2,000 jobs in 2015 and also cut 2,000 jobs towards the end of the previous year.
In a further blow, Winters said in November that Britain’s financial watchdog had opened investigations into dealings at Standard Chartered.
It was also being probed by “an ongoing US sanctions-related investigation”, he said. Tuesday’s report said the investigation was connected with transactions conducted by “clients with Iranian interests”.
Standard Chartered paid $667 million in 2012 to settle charges it violated US sanctions by handling thousands of money transactions involving Iran, Myanmar, Libya and Sudan.
In Tuesday’s statement, Winters said the bank would “continue to cooperate fully with the US authorities and the Financial Conduct Authority in their ongoing investigations”.
“We remain unable to determine when these investigations will conclude or the size of any potential fines that might result,” he said.
In August 2014, the bank was hit by US regulators with a $300 million fine and restrictions on its dollar-clearing business for failing to detect possible money-laundering.