The pressure on the Asia-focused bank Standard Chartered to find new leadership increased yesterday as it admitted it is facing a second heavy fine from New York banking watchdogs and reported that first-half profits had fallen by a fifth.
News that the troubled lender was again in the crosshairs of New York’s top banking regulator, Benjamin Lawsky, came two years to the day after he issued a devastating report accusing the bank of sanctions-busting.
Having initially denied the charges, the bank subsequently apologised and paid a $340m (£201m) settlement with Lawsky. Further penalties totalling $327m from the US Department of Justice and the Federal Reserve followed.
Yesterday, Standard Chartered chief executive, Peter Sands, confirmed “ongoing discussions” with Mr Lawksy over “certain issues with respect to the group’s post-transaction surveillance systems and money-laundering controls”. This, he said, would probably mean an extension of the term of the government monitoring regime the bank is under, plus a financial penalty. But he added: “We believe this will be less than in 2012.”
Investors have been calling for proper plans for a successor to Mr Sands, having seen the bank buffeted by scandal and falling profits since its heyday of surviving the global financial crisis relatively unscathed.
A series of top executives have left the business, leading to reports that big investors including the Singaporean investment fund Temasek want to see new leadership.
Some sources had suggested that yesterday’s profits announcement could include details of succession planning. These did not materialise, although some analysts noted chairman Sir John Peace’s prepared statement referred to how “the intensity of regulatory pressure and political risk, at a time of market weakness, is putting huge pressure on bank boards and management leadership generally”.
As Standard Chartered’s woes mount, Sir John’s position has also come under question. As leader of the board, it is his job to find a successor to Mr Sands. The company has denied any such plans.
Unusually, Mr Sands led yesterday’s conference call with analysts, where he was grilled over figures which showed that in the first six months of the year, adjusted pre-tax profits were $3.3bn on income of $9.3bn, down 5 per cent, driven lower by losses in South Korea and a $432m fall in revenues from the bank’s financial markets business.
Despite pouring money into boosting its compliance function, costs increased by just 1 per cent. But loan losses and impairments surged to more than $1bn. Mr Sands described the results as “clearly disappointing” and warned that there would be no “quick fix” for the bank’s problems.
“It is not what we strive for and not what our investors expect,” he added, blaming the problems on “continued financial markets weakness, challenges in Korea as we reshape our business there, and an uptick in impairment, largely due to a commodity-fraud exposure in China and write-offs relating to pre-crisis strategic investments”.
But with a note of defiance he said: “To put this in context, we made more profit in these six months than in the whole 12 months of 2006.
“We are not struggling to match pre-crisis profitability. We are taking action. It is not knee jerk.”