Standard Chartered (02888.HK) is seeking to revive market confidence by shuttering its equity business and shedding 4,000 jobs.
Dominic Chan, executive director and head of HK Financials Research at BNP Paribas, said the UK-based bank took the move to shore up earnings amid investor disappointment over its weakening business performance and lack of growth driver.
“At least the market will think that Standard Chartered is really making some large-scale cost-cutting effort. I think this will be positive to the share price,” he said.
The stock rose 2.86 percent to close at HK$115 after its announcement on Thursday. But it dropped 1.2 percent to HK$113.8 as of 2:53pm on Friday.
Chan said he is unsure what other strategies the bank can employ to further slash cost after the massive job cuts.
The Asia-focused bank is facing increasing competition from other foreign banks as a result of the quantitative easing measures and lower capital cost in Europe, he said.
The bank’s yuan business, which has been expanding over the years, is likely to see lower profits following the end of the unilateral appreciation of the renminbi exchange rate, Chan said.
Other structural problems include the low interest rate environment and BASEL III regulations, which increase the cost of financial products such as long-term interest rate swaps and weaken demand for them.
The bank’s operating profit fell 16 percent to US$1.53 billion in the three months to December from a year ago. Its share price has dropped about 30 percent over the past 12 months.
As part of the plan to reduce costs by US$400 million, the bank is exiting the unprofitable cash equities, equity capital market and equity research operations, which will result in about 200 job losses and save US$100 million in 2016. Among those affected are 100 positions in Hong Kong.
It also plans to cut another 2,000 consumer-banking jobs this year, after eliminating about the same number in the past three months, it said in the statement on Thursday.
It is the biggest round of cuts since its chief executive Peter Sands took the helm in 2006, and will help cut costs by about US$200 million in 2015.
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