THIS was never going to be pretty. Standard Chartered’s shares have trended down since March last year. A $667m fine from US regulators in 2012 for sanctions-busting didn’t help, but the real problem was the cooling of emerging market euphoria.
As developed markets stumbled in a punchdrunk, post-crisis haze, investors searched their atlases for more promising geographies. Standard Chartered, specialising in Asia, Africa and the Middle East, seemed to be sitting pretty, plugged into the only nations left where high growth rates were almost guaranteed.
It isn’t so clearcut any more. Korea proved Standard Chartered’s Achilles heel, incurring a $1bn impairment charge. But the problem is far wider. Even as an improving outlook from the US creates other options, the Federal Reserve’s tapering of its quantitative easing regime has toughened conditions in the emerging regions that once benefited from its easy money. And, as chief executive Peter Sands said yesterday, in some cases this has only served to highlight underlying structural weaknesses.
Standard Chartered is hoping this year will be less bad than the last, but at best sees only modest growth, with no double-digit income growth for at least two years.
Restructuring plans, such as focusing on mid-sized corporate clients, seem sensible enough. But emerging markets will need their mojo back for this plan to take off.