New StanChart boss faces cash call, dividend squeeze
LONDON (Reuters) - Standard Chartered's incoming Chief Executive Bill Winters is expected to raise capital and cut the bank's dividend later this year, potentially forced to act by a tough stress test of its Asian loans, investors and analysts said.
Few believe the ex-JPMorgan rainmaker will miss the chance to bolster the balance sheet during his honeymoon at the Asian-focused lender, especially as Britain's Prudential Regulation Authority plans a fresh assessment on how shock-proof banks have become since the financial crisis.
The bank has already outlined ambitions to raise a key measure of its capital strength by the end of this year and Winters is expected to sound out investors on further capital raising plans after he takes the reins on June 10.
If he chooses not to raise capital, he could find his strategic choices crimped for at least two years and profits have already shown the strain of trying to "muddle through", analysts said.
"The approach we think that would protect medium term shareholder value best would be to take decisive action by raising capital up front, followed by balance sheet and business restructuring and a return to growth in the ongoing core bank," said Jason Napier, banking analyst at Deutsche Bank.
Napier estimated the bank needs to raise $5.25 billion.
"Given the choice, a highly regarded new chief executive would probably always plump for the budget to accelerate balance sheet growth and restructure the business as rapidly as the organization can stand, and write down any existing assets that might be in doubt," he said.
This year's PRA "stress test" could hurt Standard Chartered as Asian exposures, a mainstay of its balance sheet, will be tested hard over a 5 year scenario.
The test will include a sharp slowdown in China's growth, deep recession in Hong Kong, a plunge in commodities prices and currencies and losses from trading book positions. Continued...