Thursday, 8 January 2015

Standard Chartered is closing its' equity business. What a way to start 2015!

Today, I was greeted with a rude shock when browsing the news.



This headline caught my attention instantly.

Standard Chartered to close equities business worldwide 'with immediate effect'


With a pounding heart, I clicked on the article. http://www.channelnewsasia.com/news/business/standard-chartered-to/1576052.html


HONG KONG: Standard Chartered Bank will exit the institutional cash equities, equity research and Equities Capital Market (ECM) "with immediate effect", a Singapore-based spokesperson told Channel NewsAsia on Wednesday (Jan 8).

The move will lead to about 200 layoffs in the region - on top of a wider plan that will see about 4,000 cuts, half of which were made in the last three months of last year, with the remainder expected during 2015, the bank said.

"This decision is purely related to our institutional cash and research business, along with ECM, and does not impact our core strategic aim of supporting the international trade, wealth and fixed income, currencies and commodities (FICC) needs of our corporate and affluent retail client base, under the refreshed strategy announced last year," the spokesperson in Singapore said, adding that a transition team will remain to manage the interim period.

"This will impact around 200 jobs, mainly in Hong Kong, Indonesia, Korea, India and Singapore," the spokesperson said, without offering a breakdown of the layoffs by territory. "There is a minimal presence in the UK and US."

4,000 LAYOFFS PLANNED

The bank's main British office on the same day issued a press release stating that the decision is part of a series of actions being taken to deliver at least US$400 million of cost savings targeted for 2015, as communicated to investors last November. The Group is already on track to achieve this aim, the bank said.

In the Retail Clients segment, for example, the Group’s strategy of focusing on key cities and accelerating the switch to digital has resulted in around 2,000 job cuts announced or completed in the last three months. A reduction of a further 2,000 is expected during 2015, primarily to be achieved by not replacing staff when they leave, the bank said.

The bank - which has been struggling with rising bad loans - will close its stock broking, equity research and equity listing desks around the world, and cut more than 200 jobs, Reuters had reported earlier on Wednesday, quoting an internal memo and unnamed sources.

“(Standard Chartered) has not made any money in the last two years,” Reuters quoted a source as saying. The bank had failed to be among the top 10 banks globally for research or trading at the end of 2013, reported Reuters, citing a survey by Greenwich Associates.

The Asia-focused bank will be one of the first global banks to completely exit the equity capital markets business, according to Reuters. London-based Standard Chartered had said it would aim to cut costs by more than US$400 million in a bid to reverse declining profit growth, Reuters added.





The few sentences that caught my eye and had my utmost attention has been bolded. Questions after questions were flowing through my head. What now? What will happen to our investments? Can I still trade in the future? Does this means I have to start all over again?

As the day progressed, I frantically searched other news articles in hope of finding something concrete, a better explanation but I was bitterly disappointed.

You can refer to this article by the Straits Times
http://www.straitstimes.com/news/business/banking/story/standard-chartered-says-singapore-job-cuts-minimal-20150108

SINGAPORE - Standard Chartered told the Straits Times on Thursday (Jan 8) that the impact on its headcount in Singapore from announced job cuts "has been minimal."

"Singapore is one of the 85 high-growth cities which we have identified as strategic, based on market opportunity and growth and we will continue to invest here to better serve our clients," the spokesman said. The bank says it currently employs about 7,000 people in Singapore.

The London-based bank is closing the bulk of its global equities business, resulting in the loss of over 200 jobs. The spokesman did not disclose the number of jobs cut in Singapore, saying: "We won't be giving a breakdown. This will impact around 200 jobs mainly in Hong Kong, Indonesia, Korea, India and Singapore. There is a minimal presence in the Britain and United States."

Standard Chartered also plans to axe 4,000 retail banking jobs worldwide, 2,000 of which have already been announced.

Its spokesman told the Straits Times the further 2,000 reductions in retail banking jobs will be made by end of 2015 and "will primarily be through attrition and by not replacing staff when they leave, across our global network."

Standard Chartered also said that its retail clients will not be affected from the bank's closure of its institutional cash equities, equity research and equities capital market (ECM) business. (??? What does this means for us?)
"The exit of the institutional equities part will not have an impact on the retail clients in terms of executing any trades in equities," its spokesman said. (<-- Please be more clear, sigh.)

The spokesman added that the bank is implementing organisational changes and remapping roles within the retail clients segment globally, including Singapore, "to focus more on affluent clients and move from a product approach to a segment focus".

Exiting the bulk of its loss-making equities business will save the bank about US$100 million in 2016, Standard Chartered said on Thursday, while the retail banking job cuts will deliver another US$200 million in savings.

Reuters reported that some Standard Chartered staff in Singapore in its equity business were escorted from their workplaces when they arrived there on Thursday morning while some in Hong Kong found they were locked out of the office.

"We came in this morning and were told the equity business was being shut down," a woman who identified herself as an ex-employee at the bank's offices in Singapore's business district told Reuters. She said she had worked in research and had been with the bank for three years.



Perhaps the saddest part about this move by Standard Chartered are the huge number of people who lost their jobs overnight. My heart goes out to them. But I'm indignant as a consumer that no information was given prior to this and this was incredibly sudden. I was looking to StanChart to have some changes as the board lot was set to drop, but never in my wildest dream did I expect them to exit the equities business completely.

Refer to article here: http://www.businessweek.com/news/2015-01-07/standard-chartered-said-to-shut-global-equities-business

Standard Chartered Plc (STAN) is shutting its institutional equities business and eliminating about 4,000 jobs at its consumer operations as Chief Executive Officer Peter Sands seeks to restore the U.K. bank’s profit growth.

The bank is “on track” to lower costs by at least $400 million this year after eliminating about 2,000 consumer-banking jobs in the past three months, with plans to cut that many again in 2015, it said in a statement from London today. Shutting the unprofitable cash equities, equity capital market and equity research operations will result in about 200 job losses and save about $100 million in 2016, it said.

Sands, who turns 53 today, has been under pressure to cut costs and stem faltering earnings that sparked the biggest slump in shares last year since the global financial crisis in 2008. Royal Bank of Scotland Group Plc, the U.K.’s largest government-owned bank, has also shut its cash equities and equity capital markets operations as regulators pressure banks to hold more capital versus risks.
VIDEO: Standard Chartered to End Equities Business, Cut Jobs

“The shares are up today on the news but this announcement is not enough to convince the market that the bank is on the road to recovery,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. with an underperform rating, said in an e-mail. “What we need is a clear statement from management about the way forward.”

Shares rose 2.4 percent to 984.80 pence at 9:17 a.m. in London, increasing as much as 3.5 percent, the biggest intraday gain since October. The stock plummeted 29 percent in London last year, the worst performance among major U.K. banks.
Retail Cuts

The bank said it’s trimming its consumer business as it focuses on key cities and accelerates a switch to digital banking. It shut 22 branches in the second half of 2014 as part of a previously announced target of 80 to 100 closings, which will help cut costs by about $200 million in 2015.
VIDEO: U.S. Oversight Extended for Standard Chartered

Cash equities is “a small business and a loss-making one so knocking it off for a struggling bank is a good move,” said Chirantan Barua, a London-based analyst at Sanford C. Bernstein, who has an underperform rating on the bank. “$400 million in cost saves are a good start, but doesn’t really solve for structural problems in profitability or capital.”

Standard & Poor’s downgraded the bank in November for the first time in 20 years, after the lender forecast a second year of declining profit. Standard Chartered reported declining revenue, increasing operating expenses and higher loan impairments in the third quarter.
India, Singapore

Most of the jobs cut from the equities withdrawal are in Asia, a spokesman for Standard Chartered said, asking not to be named. Of those, Hong Kong had the largest number, with jobs in Singapore, India, South Korea and Indonesia also affected, he said. The bank will keep convertible bonds and equity derivatives businesses, and economic and fixed-income research.
VIDEO: Traditional Asset Class Returns to Diminish: Brice

The firm will reduce its headcount in Malaysia by 11 percent this quarter, with cuts stretching across areas including marketing and consumer operations, according to a memo obtained by Bloomberg News. Standard Chartered declined to comment on the document or the number of employees involved. More than 900 of Standard Chartered’s more than 1,600 branches are in Asia, according to its website.

Standard Chartered reiterated its plans to exit or restructure “non-core” operations. The remaining $200 million of cost savings targeted this year will come from “other client segments, product groups and global functions,” the bank said, without giving details.
‘Right Direction’

The U.K. bank announced last year the sale or closing of businesses including consumer finance in China, Hong Kong, Germany and South Korea, its retail bank in Lebanon and private banking in Geneva.
VIDEO: Oil Will Be Erratic and Volatile in 1Q: StanChart

“Investors should feel reassured that Standard Chartered is moving forward on its cost-cutting measures,” said Edmond Law, a Hong Kong-based analyst at UOB-Kay Hian (Hong Kong) Ltd. “It’s the right direction to focus on its core business.”

Earnings are under pressure amid falling commodity prices and a faltering economic expansion across Asia, where the bank makes about three-quarters of its profit. Pretax profit fell 16 percent in the third quarter to $1.53 billion as impairments for bad loans almost doubled and regulatory and compliance costs increased.






To be honest, all these articles did nothing to further enlighten me on what would happen to my investments hahaha. How disappointing.

Perhaps the top questions I would like answered are:

1. What will happen to my investments? Will they sell for us or give us a time period to sell?
2. What's next? For small retail investors, which broker can we go to now?
3. Is it possible to keep our shares and have them transferred to CDP account?

All I can do is wait. I expect more news over the next few days.

Till then,
Teenage Investor

13 comments:

  1. Hi TI,

    Chillax. It'll take some time for them to exit so it won't be a sudden withdrawal. From what I read from other sources, the retail side seems okay. It's just the institutional side that is let go. If the retail side also goes, you'll be given time to transfer ur shares out. But there'll be fees involved usually for the transfer and thereafter custody fees.

    Wait for them to sort it out and give an official statement.

    ReplyDelete
    Replies
    1. Hi LP! I'm thinking if institutional side goes out, retail side should be less profitable. If that happens, I hope no transfer fees. Quite sucky to be in that position.

      Delete
  2. Hey TI,

    Heard from Turtle Investor and an Anon reader that we won't be affected.

    Cheers!

    ReplyDelete
    Replies
    1. Hi GMGH! Hopefully that is true! But they might close in the future and we should be prepared for that possibility.

      Delete

  3. Excellent post and it also comprises a lot of useful facts- Thanks for valuable information. Really enjoyed reading it. Please visit my World News page and please leave comments.

    ReplyDelete
  4. They will never sell for you. Too much litigation risks. Anyway, heard only institution trading affected, retail traders, the dance goes on.

    ReplyDelete
    Replies
    1. Hi Jimmy! My viewpoint is if institutional trading is closed because of falling profits, how profitable can retail investing be? In the future, they may still close.

      Delete
  5. Hi TI,

    They are just closing their *institutional* equities business and not the retail side (investors like us). So don't worry. Although you never know -- they might just close the retail side as suddenly.

    ReplyDelete
    Replies
    1. Hi OWQ! Agreed, they may just close the retail side as suddenly. From what I see from the news, StanChart is doing quite badly and has many plans to cut businesses that are not as profitable.

      Delete
  6. I think they way they have managed this shows that in the longer term, it's probably not a good idea to use their brokerage services (even if us retail investors are not affected). Are they someone you still feel comfortable using? I think it's time to look for other brokers..

    ReplyDelete
    Replies
    1. Hi RetailTrader! You have summarized my concerns in one paragraph!
      If institutional investors are affected and are not profitable, what more for retail investors? When my ability to increase my monthly investments increase, it's time to switch brokers where my shares are not stored in custodian accounts. Perhaps it's time to actively source for better/more reliable brokers. The sad thing is StanChart has very low commission which was perfect...until now.

      Delete
  7. then we continue to use SCB trading platform. business as usual for us?

    ReplyDelete