March 4, 2014 / 11:09 PM / 5 years ago

StanChart to sharpen strategy after rare profit drop

LONDON (Reuters) - Standard Chartered (STAN.L) on Wednesday will show how it intends to sharpen its focus and potentially sell several small businesses to revive its fortunes in the face of slower growth and its first fall in profits in a decade, people familiar with the matter said.

A man walking past a foot bridge leading to the Standard Chartered main branch is reflected on a window glass in Hong Kong March 5, 2013. REUTERS/Bobby Yip

The bank - which makes 90 percent of its profit in Asia, the Middle East and Africa - is expected to report a 2013 profit of $7.1 billion, down from $7.5 billion in 2012, after stripping out one-off items, according to the average forecast compiled by the company.

Standard Chartered warned in December that 10 years of record earnings would end in 2013 due to losses in Korea, weak investment banking income and a slowdown in Asia.

Chief Executive Peter Sands reorganized his bank’s structure a month later, which included the surprise exit of two top lieutenants, and said the bank will focus more on profitability and making better use of its capital.

That could see it follow rival HSBC (HSBA.L) and sell businesses that are unprofitable, lack scale or do not align with other parts of the bank.

Standard Chartered is seeking buyers for its Hong Kong consumer finance business PrimeCredit Ltd, worth $500 million to $700 million, Reuters reported last month. It is expected to cut operations in South Korea and could sell businesses in Lebanon and its Swiss private bank.

The London-listed bank had a torrid 2013 after a long run of strong growth that set it apart from its western rivals, and is facing scrutiny on growth prospects and its capital strength.

Its shares have tumbled 28 percent in the last year, compared to a 19 percent rally by Europe’s bank index .SX7P.

“2013 was by its usual standards an annus horribilus for Standard Chartered with only flat revenues and a $1 billion goodwill writedown in Korea,” said Ian Gordon, analyst at Investec.

“We believe that 2014 will morph into a revival year,” he said, predicting a pick-up in its investment bank revenues.

But other analysts are less upbeat, and said Standard Chartered faces a slowdown in loan growth and pressure to build capital that could constrain its dividends and income growth in the next few years.

Joseph Dickerson, analyst at Jefferies, predicted loan growth will slow to 3 percent a year through 2016, from 10 percent over the last five years, and said it will not be able to counter that with better margins.

Reporting by Steve Slater, editing by William Hardy

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