StanChart: bonus onus | Financial Times

You might call it value for money. The pay of Standard Chartered chief executive Bill Winters fell 29 per cent to £3.8m in 2020. Meanwhile, the Asia-focused lender restored its dividend and buybacks.

Yet instead of rallying, shares fell 5 per cent in morning trading, presaging a tough year ahead.

Investors focused on the 57 per cent decline in full-year annual pre-tax profit triggered by the pandemic. This was worse than expected. Credit impairments more than doubled to $2.3bn. Return on tangible equity fell 340 basis points to 3 per cent.

StanChart’s $254m buyback and dividend was the maximum allowed by the Bank of England. Its group bonus pool was slashed by nearly a quarter. Further cost cuts are in the works, with plans to reduce office space by a third in the next few years.

Shares have gained about 42 per cent since the start of November. They trade at 0.6 times tangible book value, back at pre-pandemic levels. The gains reflect StanChart’s heavy exposure to markets least affected by the economic downturn, such as China.

The problem is that StanChart’s strength in China and North Asia, which accounted for 41 per cent of income, has caught the attention of global peers. Demand for wealth management services is growing in Asia. But it is an increasingly crowded trade.

StanChart is a relatively small bank competing with global giants. These have stronger brands, wider relationships and the vast asset pools that bring economies of scale. They can also buy market share.

StanChart cannot do this if it is to meet its return on tangible equity target of 7 per cent by 2023, or 10 per cent long-term. Any weakness in Asian wealth management this year would leave it with less profit to offset falling income in its commercial banking unit and in Africa and the Middle East. Deposit margins in its retail banking business are expected to remain compressed. This year, Winters will be running hard just to keep still.

If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT”, which appears at the top of this page above the headline.