Standard Chartered has reported a sharp drop in profits in the first quarter of the year but reassured investors over its financial strength, sparking a 10% jump in its shares.
Bill Winters, chief executive of the London-listed emerging markets focused bank, said it had reviewed its operations since the publication of 11.5m leaked files from the Panama-based law firm Mossack Foncesa shed light on the way wealthy individuals use secretive offshore tax havens.
Winters said the bank had looked at its operations more broadly than the Panama Papers but had “not identified anything out of the Panama Papers per se”.
Within days of the publication of the Panama Papers, the Financial Conduct Authority had contacted 20 financial firms to ask them about their dealings with Mossack Fonseca.
Shares in the bank were the biggest risers in the FTSE 100, up more than 10% to 574.5p, even as it reported a 59% fall in first quarter profits to £589m and warned of a challenging period ahead.
A year ago the shares were trading at over £11 and Winters – who replaced longstanding boss Peter Sands in June – raised £3.3bn from shareholders at 465p a share by giving investors two shares for every seven they already hold.
For 2015, he reported the bank’s first loss since 1989 as a result of embarking on a huge restructuring, scaling back of riskier operations and incurring rising bad debts. While the bank weathered the financial crisis relatively unscathed it started to run into trouble after being hit by regulatory charges in 2012 and then suffered falling profits.
But the shares rose on Tuesday after investors were reassured over its capital position and the fact that its debt charge of $471m was also down on the fourth quarter.
“It seems like the new management team is settling in well, and the new chief risk officer hasn’t found any other unexploded ordnance,” said Sandy Chen, analyst at Cenkos Securities.
Standard Chartered also incurred regulatory costs of $243m for the first quarter, down on a year ago. The Financial Conduct Authority (FCA) in the UK is conducting two investigations into the bank’s internal safeguards against financial crime.
When Winter’s appointment was announced in February 2015, the bank also said it would replace chairman Sir John Peace this year. Winters would only say that the bank was making good progress with its search.
The bank has been held back by slower growth in China and falling commodity prices.
“Given the ongoing challenging market conditions and the early implementation of our strategy, we expect group performance to remain subdued in 2016,” the bank said.
“Trading conditions in the first quarter of 2016 remained similar to the final quarter of 2015, including depressed commodity prices, volatility in Chinese markets, weak emerging market sentiment and concerns around interest rate and other policy actions. Despite the external environment, we have made good progress on our strategic objectives, tightly managing costs, implementing our investment programme, further reducing areas of risk concentration, and maintaining a well capitalised and liquid balance sheet.”
