Standard Chartered cuts dividend due to profit fall
The British bank, Standard Chartered, has reduced dividends by 50 percent after its profits fell in the first half of the current year.
The announcement on Wednesday has been an unwelcome revelation for the new leadership of the bank, which is trying hard to make Standard Chartered once more profitable, AFP reported.
According to new reports, the banks’ net profit has slumped 36.7 percent in the six months to June in comparison to the same period last year, while pre-tax profits have also fallen 44 percent.
In terms of figures, this means a net profit fall from USD 2.31 billion to USD 1.46 billion, while pre-tax adjusted profit has fallen from USD 3.27 billion to USD 1.82 billion.
As a result of these developments, the bank has cut shareholder dividends by half from 28.8 cents per share to 14.4 cents per share.
The bank’s CEO Bill Winters, who was already co-chairman of JP Morgan, took control of the company from Peter Sands in June after shareholders called for a boardroom cull following profit warnings.
Last month, Winters appointed a new management team whose members directly report to him, in a bid to cut costs and improve performance.
"We have delivered good progress on our target of strengthening the group's capital ratio and will continue to do so," said chairman, John Peace, in a statement to the Hong Kong stock exchange, adding, "However, these actions have also impacted our return on equity, and combined with a disappointing earnings performance and the current near-term outlook for the group, the board has decided to reduce the dividend by 50 per cent."
Noting that the bank faces some "very real challenges," Winters said, "But they are fixable and it is important to remember that there is a strong business at the heart of the group."
Critics, however, have noted that the dividend cut will affect the shareholders’ sentiments, with analyst Francis Lun saying, "They are keeping the cash close to their chest. It's not good news. People don't like dividend cuts."
Unlike many other banks, Standard Chartered could survive the 2008 global financial crisis without state assistance, but it has suffered in recent months due to reduced growth in emerging market economies in Asia, Africa and the Middle East, where the bank makes about 90 percent of its profits.
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