Standard Chartered sinks after earnings, loan impairments double

Shares of the bank in London fell by as much as 12 per cent after it announced the loss, which was also exacerbated by foreign exchange losses and costs booked from divesting businesses, including its small- and medium-sized lending operation in the UAE.

Standard Chartered revealed write-downs on its loans totalling $4bn (£2.8bn) – up 87% on 2014 – and admitted its performance in 2015 was “poor”. The loss was the second largest among the United Kingdom based banks main markets, behind only the $1.40 billion pre tax loss reported by its home market.

The bank has posted its first annual loss in more than a quarter of a century after it was hit by hefty write-downs amid plunging commodity prices and weaker Indian markets.

Loan impairments, including the liquidation charges, more than doubled to US$5bn from 2014.

Operating income was $15.44 billion, compared to $18.24 billion a year ago.

As crumbling commodity prices led to revenue shrinking 37% to $15.71bn, continuing operations during the period generated underlying earnings before interest, tax, depreciation and amortisation of $5.99bn, a decline of 54%, with underlying attributable profits plunging 92% to just $412m and underlying earnings per share down by the same degree to 7.7 cents.

Winters said: “While 2015 performance was poor, the actions we took on capital throughout past year and in particular in December have positioned us strongly for the current macro environment”.

Shares in the firm are at historic lows of 417p and board confirmed it would not be paying a final dividend for the year.

Former JPMorgan (JPM.N) investment banker Winters last November announced plans to ax 15,000 jobs and raised $5.1 billion in capital as part of a plan to restore profitability and shore up the balance sheet.

“The external challenges increase our urgent need to take all necessary steps to address the structural and operational issues we have identified as critical to improving returns”. It is targetting to reduce costs by $2.9 billion in two years’ time. “The most important point is whether Bill and team are doing the right things and tidying up and whether there’s a decent business left at the end of it. I think the answer to both is in the affirmative”. Excluding some one-time items, pretax profit was $834 million.

The strengthening of the dollar against emerging market currencies a year ago wiped around $700 million from reported revenue.

“We are dealing with our expense problem as aggressively as anyone in the industry”, Winters said on the call.