Guy Fawkes, 2010. It may not mean much to most people – 5 November comes round every year, after all. But at the top of Standard Chartered, among the bank’s hierarchy, and for its investors, the date is etched in the memory.
That was when the bank’s shares reached an all-time high of 1950p. Today, they’re virtually half that figure.
Yesterday, the London-based but Asian-focused bank issued its third profits warning in 12 months. Profits in the second half of the year would be lower than last year’s. Pre-tax profits for the three months to September fell 16 per cent to $1.53m (£950m). Shares in the bank dropped to 988.8p.
While chief executive Peter Sands said he would give shareholders more details of his strategy during a round of meetings in November, few were convinced. He was under pressure before yesterday; now it’s intensified still further.
It’s fascinating, this business. Perish those who say that following the fate of companies is all about dry-as-dust numbers. It’s not; it’s about human beings, their strengths and failings. The figures are merely the outcome of that endeavour. Twice this autumn, I’ve been required to write the word hubris. Once, in relation to events at Tesco. Now, in response to the unfolding drama that is Standard Chartered.
In truth, the City has had it in for Standard Chartered and Sands for a while, ever since it avoided the banking rescue of 2008. And it is the case there was an air of smugness about Standard Chartered and its management, of being different from other banks.
While the rest went in for modernist paintings and bronzes in their entrance lobbies, Standard Chartered chose to build a full-scale ancient shrine brought over from northern Thailand. Everywhere you went in the bank’s London building, there were constant references to the far-flung countries in which it operates. More than 90 per cent of its profits came from overseas, principally Asia, Africa and the Middle East. Standard Chartered had grown to become one of Britain’s biggest banks but had no high street presence here.
While rivals were left reeling by the banking crisis and were subjected to a braying public, media and politicians, Standard Chartered powered on regardless. In 2012, it announced a tenth successive year of record results.
But, as is often the case with organisations that are doing extraordinarily well (witness Tesco), the management became careless. They started to believe their own publicity. They thought they were somehow superior, when, as yesterday made clear, they were nothing of the sort. The first sign was the US authorities’ investigation of the bank for money laundering. Standard Chartered paid a $667m penalty in 2012 after it was accused of scheming with Iran to hide billions of pounds worth of transactions from the US authorities over a period going back eight years.
The cases, and the bank’s settlement, were shocks – until then Standard Chartered had sold itself on being squeaky clean. Investors were unhappy at the scale of the fine and evidence of sustained wrongdoing; their feelings were exacerbated by the claim that the bank had not taken the US move seriously enough. The US report even quoted one Standard Chartered executive as saying: “You fucking Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
That sense was compounded this summer when the bank was fined a further $300m, incredibly for failing to follow the US agreement and to reform its procedures. If the first offence could be billed as a lapse, the second was evidence, surely, of a deeper malaise.
By then, the finance director, Richard Meddings, had gone, following clashes with Sands. At Meddings’ leaving do, Sands made a gracious, fulsome speech in praise of the FD. No one around the top of the bank was fooled, however: they knew that Sands and Meddings had barely been on cordial terms for months.
There were other cracks, apart from the money laundering scandal. Standard Chartered’s wholesale business made some huge plays that may never be recovered (among them a $1bn loan to Samin Tan, the Indonesian investor in mining company, Bumi). Following the money-laundering charges, it’s had to close thousands of small to medium-sized business accounts in the United Arab Emirates – a loss of potentially valuable future revenue.
While others have raised doubts about China’s ability to keep interest rates down and maintain its growth, Standard Chartered remains blinkered, totally committed to the country. If China’s rates should rise, the bank will be exposed – and the rest of its vast Asian business will also come a cropper.
All of which can be laid at the door of Sands. When times were buoyant, his character was not an issue. Now they’re hard, his enemies are hovering.
Sands is not a banker by background. He’s ex-McKinsey, cerebral. To the chagrin of his rivals, he was called in by the Government to advise on the bank bailouts. He’s been outspoken in his criticism of other banks, accusing them of all being the same and calling for a stronger regulatory framework. The knives are out for him now. In May, a substantial 41 per cent of investors voted against his pay award. Sir John Peace, the chairman, who was thought to be working on a succession plan with a view to a change next year, has run out of road. Shareholders, led by Temasek and Aberdeen Asset Management, are unlikely to give Sir John much more leeway: Sands must go.
There will be few tears when he does depart. Someone who told his fellow bankers, “there are strong arguments for letting banks fail, it improves the discipline of the system” cannot expect their applause.
They are relishing every moment of Standard Chartered’s and its boss’s discomfort.Reuse content