Standard Chartered shares dive on third profit warning

Chief executive Peter Sands is under pressure with increasing bad debts and a big rise in the bank levy

Standard Chartered Group Chief Executive Peter Sands (GETTY IMAGES)

Shares in Standard Chartered fell to a five-year low after the bank issued its third profits warning in 12 months, piling the pressure on its chief executive Peter Sands.

The London-based but Asian-facing bank said rising bad debts and a big hike in the UK bank levy it has to pay to the Treasury meant profits in the second half would be lower than last year’s.

It saw pre-tax profits fall by 16 per cent to $1.53 billion (£950 million) after provisions for bad debts almost doubled, rising from $289 million to $539 million in the three months to September.

Sands, who faced a huge pay revolt at this year’s shareholder meeting, said: “We saw a number of cyclical factors in the quarter with low interest rates, weak commodity price and volatile currencies. We are exiting non-core businesses and keeping costs strictly under control.”

He said that the bank would try to take out an extra $400 million in costs from the business during next year to counter slowing growth in some of its key countries.

He added: “The increased impairments came mainly from a relatively small number of clients in our corporate and institutional business. We are paying particular attention to business customers in China and India and to commodity-related clients. But we are still a hugely profitable business.”

The bank also said that it expects the annual levy paid to the UK Treasury to rise by $100 million to around $375 million this year although it will not be settled until the final quarter.

Finance director Andy Halford said: “The way the levy is calculated has changed but we are also paying a larger share of the cake.”

Standard Chartered was forced to deny reports of a rift between Sands and chairman Sir John Peace earlier this year.

But disquiet among institutional shareholders continued to mount and at the annual meeting in May 41 per cent of shareholders voted against its pay policy.

Analysts had been expecting second-half profits to show a modest improvement and immediately took the knives to their full-year forecasts, cutting them by around 5 per cent.

Sands emphasised he would give investors more details on his strategy during a series of meetings next month. James Chappell of Berenberg warned the shares would remain weak until then.

He said: “The negative outlook and further downgrades are unlikely to draw investors back to Standard Chartered even though it may look cheap on a headline basis.”

Shares in the bank fell 106.2p, or 9.6 per cent, to 988.8p, the first time they have been below 1000p since May 2009.