Bill Winters: Saviour or axeman for Standard Chartered?
Peter Sands is now keeping the chair warm for Bill Winters for when he takes the reins at the helm of Standard Chartered in June. Activist shareholders have their wish and the well-respected Winters was broadly given the thumbs up when news of his appointment emerged last month. But will the bank’s employees welcome him with open arms?
The investment banking question
One thing to address is what Winters will do with Standard Chartered’s wholesale bank. The bank shut down its equities division earlier this year, at the cost of 200 jobs, and is thought to be trimming elsewhere. Winters’ traditional strength is in investment banking – one of Standard Chartered’s weaknesses – so does this mean a renewed focus on the wholesale division?
"Not really," says Arun Melmane, an analyst at Canaccord Genuity, who says that StanChart didn't have a very big investment bank anyway. "It never had an IB business. It's a lending business."
Minal Shah, an analyst at investment firm Charles Stanley, doesn’t think Standard Chartered’s investment bankers will get an easier ride, either. "Bill is not a diehard investment banker," he says. “Don’t forget he used to be a regulator."
For the last four years, Winters has been CEO of private debt fund management firm, Renshaw Bay. Before that he used to sit on the UK’s five-member Independent Commission on Banking, which proposed rules for ring-fencing retail banking from investment banking. This doesn’t appear an overly friendly stance towards investment banks.
In fact, Winters’ regulatory experience is considered a boon for Standard Chartered, which is in the midst of a huge compliance hiring spree. Some are hopeful that Winters takes a different angle when taking over, and that this alternative outlook might be helpful in bringing StanChart back on track. The bank lost direction under Peter Sands. In its latest results, the bank reported a 25% drop of profit before tax. Not to mention the dismal share price performance in the past year.
The need for “efficiencies”
Both Melmane and Shah agree that the bank needs to “improve efficiencies”, which inevitably means cutting back headcount further. There’s little visibility on the scale of the job cuts, or in which divisions they might occur, they said but a target of $1.8bn in cost-savings over the next three years will inevitably mean that cuts could be deep.
The other option is to raise capital – a possible route if the bank is to achieve the 11-12% Tier 1 capital ratio it outlined in its latest results. Some analysts believe this is value-destructive, while others believe it’s necessary. There’s one thing they agree on, however – Winters has to act quickly.
Shah says that shareholders have been increasingly fed up with Peter Sands in the past year, so they need someone who can turn things around. "Bill Winters is able to run a global bank. He's able to deal with the regulatory pressure. At least on CV he can do it," adds Melmane from Cannacord. "For StanChart, he is just at the right place at the right time.”
"Shareholders have been jerked around by a McKinsey consultant for long enough," said one anonymous StanChart insider. "Now they want a real banker to carry the flag forward."
Turmoil at the heart of Standard Chartered
Finally, concerns have been raised about Winters’ lack of Asian experience. Standard Chartered is headquartered in London, but it’s focused on emerging markets, particularly Asia-Pacific.
Melmane doesn't seem overly bothered. "He will learn about Asia in time," he says. He then added that it's unlikely for Bill Winters to refocus the bank to other areas simply because he lacks Asian exposure. After all, StanChart is "still largely an Asia-focused bank".
Jaspal Bindra, Standard Chartered’s Asia head, was one of half a dozen executives also heading for the door in the wake of Sands’ exit. This implies turmoil at the heart of the banks’ operation, but again analysts seem relative sanguine about this.
"He can always bring someone in with good Asian experience to help him," says Shah. "Meanwhile, he will listen to the current management team in Asia."