By Emily Nicolle

Of Financial News

 

Standard Chartered PLC has announced a dividend and share buyback scheme amid falling profit, along with a cut to the chief executive's pay and plans to reduce its office space significantly in the coming years.

The lender posted a 40% fall in annual underlying pretax profit for 2020 to $2.5 billion, and forecast that income for 2021 is likely to be at a similar level. However, it said it would restore its dividend of 9 cents per share and revealed a $254 million buyback--the maximum permitted under the Bank of England's temporary restrictions, after suspending payouts during the pandemic.

The pay packet for group chief executive Bill Winters fell 29% to 3.8 million pounds ($5.4 million), which the bank's annual report said was "directly linked to the group scorecard outcome" and personal performance. The London-headquartered bank's Chief Financial Officer Andy Halford's pay similarly dropped 27%.

Like many other financial institutions, Standard Chartered has struggled to keep profit and revenue high as the global coronavirus crisis took its toll on businesses and lending income. The salaries of bank chief executives have also taken a beating, with Barclays PLC boss Jes Staley receiving a 32% pay cut and Citi's Michael Corbat dropping 21% last year.

Mr. Winters said the bank is "weathering the health crisis and geopolitical tensions very well," adding that its outlook is "bright."

"We remain strong and profitable, although returns in 2020 were clearly impacted by higher provisions, reduced economic activity and low interest rates, in each case the result of Covid-19," he said in a statement Thursday.

Mr. Halford also told Bloomberg TV that Standard Chartered is likely to downsize its office footprint by a third in the next three to four years.

Meanwhile the bank's bonus pool was reduced by 23% to $990 million, with focus primarily being placed on group performance. The one "notable exception" to this was in its corporate and institutional banking business, where incentives "were differentiated" for the financial markets division "to reward colleagues for the strong performance in 2020."

In a statement attached to the results, the lender said it hopes a continued focus on its transformation plan will aid its recovery as the pandemic recedes, as two-thirds of its income is based in Asia.

Return on tangible equity, a key profit measure for Standard Chartered, is expected to rise from 3% in 2020 to at least 7% by 2023. Meanwhile it forecast that income will return to between 5% and 7% growth per annum from 2022, thanks to strong performances in its financial markets and wealth management businesses.

"The board's position on capital returns remains essentially the same as it was before our regulator requested us to withdraw the recommended 2019 final dividend," said Jose Vinals, Standard Chartered's chairman.

"Having now resumed it, we expect to be able to increase the full-year dividend per share over time as we execute our strategy and progress towards a 10% return on tangible equity."

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said the bank's results were "full of promise, but not yet delivering."

"Standard Chartered's numbers may have disappointed the market this morning, but compare them to numbers we've seen from more U.K.-focused rivals and the performance is remarkably strong," he said.

"The big question for some time has been around Standard Chartered's ability to grow," Mr. Hyett added. "Combine steady income growth with Standard Chartered's 10% return on equity target and a commitment to return surplus capital to shareholders and the result would be an attractive and growing dividend. That's been the promise for some years though, and so far it remains just a promise."

 

Website: www.fnlondon.com

 

(END) Dow Jones Newswires

February 25, 2021 09:23 ET (14:23 GMT)

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