StanChart’s cost cut plan to win over investors

Tim Wallace
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Peter Sands is hoping to win over investors with cuts in the number of StanChart branches
BRITISH bank Standard Chartered plans to cut more branches in a bid to save costs and turn around its ailing fortunes, under plans unveiled yesterday.

The emerging markets specialist has been struggling with the slowdown in key economies such as China, and chief executive Peter Sands is meeting investors in Hong Kong this week to update them on his strategy.

He wants to cut up to 100 retail branches, taking the total down to around 1,150.

Sands also hopes to increase digital transactions by 10 per cent next year. So far this year, the bank has processed 47m such transactions.

These should help reduce the cost to income ratio from 67 per cent this year to 65 per cent next year.

StanChart’s shares have fallen by almost 50 per cent since March 2013, and some commentators fear the bank will need a rights issue to bolster its capital position.

But analysts think the bank might just avoid having to tap investors for more funds.

This would happen as long as legal bills stay in the hundreds of millions rather than billions of dollars.

“I think they have a pretty adequate capital position. There are a lot of contingent liabilities, litigation risks pose a threat, but that is apparently true for the other banks too,” said Shailesh Raikundlia from Espirito Santo.

“One of the brokers has estimated the litigation costs could be as high as $9bn (£5.7bn), because of the BNP Paribas settlement, but that is probably really extreme. We don’t expect a rights issue.”

The bank argues its capital position is very sturdy.

Standard Chartered’s shares barely moved, ending the day down 0.18 per cent at 940.6p.