Standard Chartered plans to cut 15,000 jobs after disappointing third quarter results

The FTSE 100 listed bank posted its results to 30 September on Tuesday and launched a capital raise to strengthen the balance sheet and support its strategic review.

The bank said they were hit by challenging market conditions combined with business divestments and de-risking initiatives, which led to poor results.

It saw an $832m dip in income for the period, down to $3.68bn, due to a decline in client activity as a result of volatile market conditions and the impact of de-risking actions.

That led the company to report a loss of $139m for the quarter, down from $1.53bn in the previous year.

In the year to date, profit is down from $4.8bn in 2014 to $1.68bn.

The bank also announced a two for seven fully underwritten rights issue to raise approximately £3.3bn to help fund its strategic review programme.

Among the proposals, the bank said it will have a new business strategy aligned with a tightened risk tolerance, shifting its focus to affluent retail clients and less on asset intensive corporate and institutional banking businesses.

It will restructure a number of businesses that utilise more than $100bn of risk weighted assets including low returning relationships in corporate and institutional banking, and commercial banking where the group intends to improve returns or exit.

It will also cover restructuring charges from potential losses on the liquidation of non-strategic businesses and assets, as well as a step-up in cash investment to reposition the bank's retail client systems and digital capability among other services.

The company plans to cut more costs, increasing its gross cost reduction target to $2.9bn between 2015 to 2018 as well as cutting 15,000 jobs.

Chief executive Bill Winters said the business environment remains challenging and its recent performance is “disappointing”.

“Today we have announced a strategy that makes big changes to how we will manage ourselves going forward. We are positioning the group for improved return on equity on a strengthened capital base.

“We will execute as quickly as possible to get through this transition phase, start delivering improved performance, and ensure our people are focused on providing value to our clients across Asia, Africa and the Middle East."

Hargreaves Lansdown’s Richard Hunter said the results and rights issue brought the curtain down on the banks’ reporting season in a disappointing fashion.

“The scrapping of the final dividend payment would in itself have been a setback, let alone the overall quarterly loss against expectations of a profit for the period, but these are eclipsed by the announcement of a rights issue which is an admission of the need for assistance.

“The contributors to the requirement for a rights issue are many – the protection of the capital cushion, less cash generation given depressed commodity prices, the effect of a slowdown in China and impairments which are continuing an extremely adverse trend, especially in the likes of India.”

However Hunter hinted there could be an upside to the news.

“It may be that this kitchen sinking prepares the ground for a real turnaround, whilst also underling the determination of the new chief executive to make his mark – and quickly.

“Further out, the group’s exposure to the regions which are causing it problems today may yet return to being an asset rather than a liability.”

Goldman Sachs said the details of the capital raise are in line with their expectations and recent press coverage.

“However based on a first take whilst the $1.1bn of incremental cost savings is a positive, in our view the scope of incremental risk weighted asset reductions appears to be relatively limited.”

Standard Chartered shares were down 58.70p (8.23%) to 654.90p at 0954 GMT.