Stanchart Plc, based in the UK, has announced plans to downsize its global staff numbers to around 400 to cut long-term costs. This is after the British bank reported a more robust than expected first-quarter profit. The lender is also putting in place measures to enable fast recovery from the negative effects of COVID-19 pandemic.
Stanchart global network
The Asia, Africa and Middle East-focused lender, which had as many as 1,200 branches worldwide in 2014, said on Thursday it would shrink the network to a third of that total as it also gives up office space worldwide.
Closer home, Stanchart Bank Kenya Limited(SCBK) is one of the most established lenders and was the first to introduce Automated Teller Machines to customers. Its closest rival Barclays Bank Plc has already exited the Kenyan market after selling to Standard Bank of South Africa, which goes by the brand name Absa Bank.
“Those markets that are higher on branch numbers we’ll be looking at more closely,” StanChart’s CFO Andy Halford told reporters, without giving more details, beyond noting branch numbers in the lender’s most profitable market Hong Kong were modest.
The cost-cutting drive came as the lender posted an 18% increase in first-quarter pre-tax profit, beginning recovery from the economic hit caused by the coronavirus pandemic.
Pre-tax profit for January-March was $1.4 billion, versus $1.2 billion a year earlier, and compared with an average analyst forecast of $1.08 billion compiled by the British bank.
The improvement was driven by StanChart setting aside less cash to cover bad loans than it had done one year ago, as well as a solid performance in its wealth management business.
The move to cut branches and previously announced plans to trim a third of the bank’s office space worldwide, show how StanChart is looking past short-term improvements in its results to tackle long-standing profitability challenges.
StanChart’s results showed how rock-bottom interest rates globally are squeezing banks’ profits, with its cash management division – usually a steady earner – seeing income fall 32%.
StanChart said it expected income to be similar this year to 2020 and grow more the following year as fee-based businesses offset those being crushed by low-interest rates.
One bright spot for StanChart was its often underperforming wealth management business, which had a record quarter with income up 21% on strong sales of foreign exchange and equities-related products.
Halford also confirmed that StanChart would look at the businesses rival Citi has put up for sale since some were in markets where the bank already had operations, though it was too early to decide which.
Citi said earlier this month it would pull out from consumer banking in 13, primarily Asian markets.
Last year, the bank pushed back its long-standing profitability goal of reaching a return on tangible equity of 10%, as it increased charges for bad loans due to the economic damage following the COVID-19 pandemic.
StanChart did not release a hefty chunk of the cash it set aside to cover bad loans, instead of taking a further US$20 million charge in the first quarter.
This, however, was down US$354 million from the previous quarter and US$936 million from the year-ago period.
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