Standard Chartered said it incurred a full-year loss last year after the price of some commodities fell to multi-decade lows.
Shares of the bank in London fell by as much as 12 per cent after it announced the loss, which was also exacerbated by foreign exchange losses and costs booked from divesting businesses, including its small- and medium-sized lending operation in the UAE.
The bank said it booked a loss of US$2.36 billion last year compared with a profit of $2.51bn in 2014. Impairment losses on loans rose by 87 per cent to $4bn compared with a $2.14bn loss in 2014. The lender did not break out fourth- quarter results.
“It is clear that we have real challenges to fully realise our potential – challenges we created for ourselves and those produced by a difficult environment,” said Bill Winters, the bank’s chief executive.
“The economic geopolitical backdrop for the group clearly deteriorated over 2015 and has not improved into 2016. Chinese equity markets have been increasingly volatile, impacting sentiment around the world, and commodity prices have plumbed to new lows.”
Most of Standard Chartered’s problems have stemmed from emerging markets, where the bank has more than 90 per cent of its business.
Growth in these commodity-rich regions has slowed in the past couple of years as the price of everything from oil, steel and palm oil collapses amid a drop-off in demand from heavy consumers such as China.
At the same time, emerging market currencies have weakened against the dollar and deficits have widened. Loans to businesses that have been hurt by the fluctuation of commodity prices have also not helped.
Not only is Standard Chartered’s core lending business suffering, but the bank has also been battling regulatory issues.
It was fined $300 million in August 2014 by the New York Department of Financial Services for suspicious transactions involving clients in Hong Kong and the Middle East. As a result, the bank announced that it would close most of its SME accounts in the UAE.
The bank then said last July that it appointed a new chief executive to lead its business in the Middle East and Africa as it undertakes a global overhaul to help it become profitable again. The main thrust of that global plan is to cut costs by $1.8bn and remove overlapping layers of management.
“We have made good progress in a number of areas, though there is much work still to do during 2016 and beyond,” Mr. Winters said in the annual report released yesterday.
“The strategy’s three core priorities are to secure our foundations, get lean and focused and invest in our franchises.”
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