Standard Chartered near 21st Century low

"We are under no illusions that a lot more needs to be done," said Standard Chartered's chairman Tuesday. Due to step down this year, Sir John Peace signs off with a shock $1.5 billion (£1.1 billion) annual loss, no dividend for shareholders, and no bonuses for top brass.

New chief executive Bill Winters has got a £3.3 billion rights issue away and kickstarted a huge, and expensive, restructuring of the Far East-focused bank. But it will take time to deliver meaningful results, something shareholders clearly do not have. It explains why Standard shares have plunged as much as 12% to within a stone's throw of a new 18-year low.

The 2015 results missed on many key levels. Operating income fell 15% to $15.4 billion and a reported pre-tax profit of $4.2 billion in 2014 turned to a $1.5 billion loss this time. Analysts thought Standard would make $602 million. Loan impairments almost doubled to $4 billion.

Strip out another slug of one-offs, including a $1.8 billion restructuring bill for redundancies and write-downs, plus $362 million goodwill impairment, and underlying pre-tax profit plunged by 84% to just $834 million.

A 12.6% Common Equity Tier 1 ratio - a core measure of financial strength - was also about 30 basis points shy of some estimates, although Standard still expects it to be near the top end of the 12-13% target range. A $20 billion portfolio of risk-weighted assets will be "assertively managed out", which will certainly help.

Standard laid the blame for the income slump evenly between a strong dollar, asset sales, lower commodity prices, and a dip in business activity generally. And Peace had a warning for shareholders:

"There remains a broad range of macroeconomic uncertainties and challenges in the global economy, including the rebalancing of China's economy, the impact of lower commodity prices, and ongoing geo-political tensions."

But the lender has delivered annualised cost efficiencies of $0.6 billion, and begun a programme to save $2.3 billion over the next three years.

Investec Securities said recently that, on 0.5 times 2015-17 tangible net asset value, Standard Chartered remains "optically cheap". However, return on tangible equity forecasts of 0% in 2015, 0% in 2016 and 4% in 2017 "offer context".

Until there's an obvious uptick in business activity and further restructuring benefits come through, Standard Chartered shares will remain a dangerous place for investors.

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