By Matt Scuffham and Steve Slater of Reuters:
LONDON – Standard Chartered’s finance director is leaving as part of a reorganisation, depriving the Asia-focused bank of one of its key executives as it navigates a new era of weaker growth and tougher regulation.
The surprise move, which sent shares in the bank down some 3 percent to their lowest in more than a year, comes a month after StanChart warned its 10-year record of earnings growth would likely end in 2013.
Richard Meddings, who had been seen as front-runner to succeed Chief Executive Peter Sands, said the decision to quit as finance director by the end of June was his own and had not been prompted by the board or any outside parties.
“It is wholly my decision. After 11 years on the board of this bank and seven years as finance director it seems a natural time to step away,” Meddings told reporters.
Sands denied there had been any disagreements among board members over the bank’s capital strength and dismissed speculation the bank could be forced to raise funds from shareholders.
“We remain very comfortable with our capital position and have no plans (for a rights issue of new stock). We have a unified board which is fully behind the strategy and has been fully involved in the organisational changes which we’ve announced today,” Sands told reporters.
Medding’s departure, which he said he had decided on over the Christmas holidays, left StanChart’sLondon-listed shares down 40.5 pence or 3 percent by 1107 GMT. The stock has lost a quarter its value since last April, compared with a 30 percent rise in the European banking sector.
The London-based bank makes more than three-quarters of its profits in Asia, Africa and the Middle East, which helped it come through the 2008 finiancial crisis relatively unscathed and made it a stock-market favourite because of its exposure to faster growth in those emerging markets.
Yet after a decade of sustained growth, it has hit a rocky patch and said in December its earnings had been hit by big losses in Korea, a slowdown in its key Asian markets and tougher regulations.
Ian Gordon, analyst at brokerage Investec, said the decline in StanChart shares was “predictable given the speculation you’ve had around capital-raising issues.” He said the departure gave fresh ammunition to anyone with a negative view of the stock, though he said capital-raising concerns were overdone.
“Standard Chartered doesn’t need any capital. It starts from the position of having the strongest capital ratio in the market,” Gordon said. “This is an undervalued franchise with a strong re-acceleration of growth in 2014 which isn’t currently reflected in the share price.”
The bank, which had a core capital ratio of 11.4 percent at the end of June against a UK regulatory requirement of a minimum 7 percent, also said on Thursday it would combine its wholesale and consumer banking operations into one business from the start of April.
“This will sharpen our focus on distinct customer segments, enabling us to deploy capital, liquidity and investment spend more effectively,” Sands said in a statement.
The CEO said the move would help the bank “deliver both productivity gains and improvements in the quality of the service and products we offer our customers”.
He said more changes would take place in support and control functions as they adapt to the reshaping of the business and regions.
Steve Bertamini, head of consumer banking, will also leave the bank, while Mike Rees, head of wholesale banking, will run the combined business and become deputy chief executive.
Meddings is well regarded in the UK financial sector and had been tipped for other top jobs, as well as being seen as the most likely replacement when Sands steps down.
But he was last month stripped of responsibility for risk oversight, due to concerns expressed by Britain’s financial regulator. Sources said the regulator was concerned about StanChart’s combination of risk and finance roles, rather than any issues with Meddings himself.
StanChart has said it expects 2013 operating profit in its consumer bank to fall by at least 10 percent from 2012 because of problems in Korea, while profit from wholesale banking is expected to be flat, leaving overall profit down. – Reuters
