Standard Chartered makes changesStandard Chartered named Mike Rees as deputy to Chief Executive Officer Peter Sands as the U.K. bank struggling with write-downs in Korea combines its corporate and consumer-banking units to cut costs.
Chief Financial Officer Richard Meddings, 55, and Steve Bertamini, 49, head of the consumer-banking unit that oversaw the Korean business, will both step down from the board and leave the company in the first half of the year, the London-based bank said yesterday. Rees, 57, joined the bank in 1990, was named to the board nine years later and appointed head of the corporate unit, the largest, in 2002.
Meddings had responsibility for risk controls wrested from him last year at the request of regulators, while analysts said Rees’s promotion may pave the way for him to succeed Sands, 52, the longest-serving CEO of Britain’s five largest banks. Full-year revenue will probably be little changed, the bank has said, after earlier scrapping a sales-growth target of at least 10 percent and writing down its Korean business by $1 billion.
“It looks like it’s about a reorganization of the business and succession planning where Mike Rees is now in line to get the top job,” said Simon Willis, an analyst at Daniel Stewart Securities in London. “The growth story has slowed down,” while the “costs to restructure Korea have been a running sore for many years,” he said.
Britain’s Prudential Regulation Authority didn’t want Meddings, who oversaw financial duties including treasury and strategy, to also manage the bank’s risk controls, a person with knowledge of the matter said last month. Risk responsibilities were transferred to Sands.
Standard Chartered fell 2.2 percent to 1,283.5 pence in London, valuing the lender at 31.1 billion pounds ($51 billion). The shares dropped 14 percent in 2013, making Standard Chartered the worst performer among Britain’s five biggest banks.
The bank’s “weak capital position has not yet been addressed,” while the management changes and revamp “create further uncertainty on the stock,” analysts at Credit Suisse Group AG led by Amit Goel in London wrote in a note. They have an underperform rating on Standard Chartered.
The bank is “very comfortable on capital,” Sands said in a conference call with journalists yesterday. The lender will plan for earnings to outpace growth in assets, adjusted for risk, Meddings said on the call.
The bank may try to focus on less-capital intensive business like wealth management, corporate finance advisory and transaction banking to do this, said Mike Trippitt, a London-based analyst at Numis Securities, by phone. He has a hold rating on the stock.
Corporate banking and consumer banking will be integrated to form one business, organized into three segments - corporate and institutional clients, commercial and private-banking clients and retail customers - with Rees reporting to Sands. Corporate and institutional clients accounted for about 60 percent of the group’s 2012 revenue.
Sands and Rees will lead a bank grappling with rising regulatory costs after it was fined $667 million by the United States in 2012 for breaches of sanctions against Iran.
Meddings, who joined the board in 2002 and was appointed CFO in 2006, decided that it’s “an appropriate time to step down” as a director, according to the statement.
He will leave the bank at the end of June after “playing a critical role in the group’s growth and transformation,” it said.
“It’s wholly my decision” to depart, said Meddings, a comment echoed by Sands.
“After 11 years on the board of the bank and seven years as finance director, it seems like a natural time,” Meddings said. He said he hasn’t decided on his future plans.
Sands said Bertamini’s departure is due to his role being eliminated, and was “not a performance issue.” The lender said in August that its Korean consumer unit, part of Bertamini’s division, swung to a loss of $6 million after making a $100 million profit a year earlier. Korea has been “a challenging environment” for “every single bank,” Sands said.
The bank’s business plan will involve a “smallish number of positions that become redundant, that fall away,” partly due to duplication in the consumer and commercial divisions being merged, Sands said.
Rees will receive an annual base salary of 975,000 pounds ($1.6 million) starting in April, up from 735,000 pounds. The company said his maximum “earnings potential” would be cut by 40 percent due to the role change, while he will continue to receive benefits such as a car allowance, pension provision and medical cover.
The bank said last year that Rees received $12.2 million in compensation for 2012, down from $13.4 million in 2011.
Meddings will be paid his salary until January 2015, about six months after his planned departure from the firm in the summer, which is in line with his contract. There is “no payoff,” said Sands.
Sands said Temasek Holdings, the Singaporean sovereign- wealth fund that owns 18 percent of the bank’s shares, had no involvement in the decision, and the personnel changes were not requested by shareholders.
Temasek raised governance concerns at the bank and pressed it to hire more independent directors, a person with knowledge of the matter said in October 2012.