Standard Chartered Board Backs Sands, Not Seeking Successor

Jul 24, 2014 4:49 am ET

(Updates with comment from analyst in fourth paragraph.)

July 24 (Bloomberg) -- Standard Chartered Plc’s board said it’s “united in its support” of Chief Executive Officer Peter Sands, rejecting a newspaper report that it’s considering replacing him due to investor pressure over declining profit.

“Robust and considered succession plans are in place for all of the senior leaders,” the London-based bank said in a statement last night. “We will ensure orderly succession takes place at the appropriate times. No succession planning is taking place as a result of recent investor pressure.” The board also said it supports Chairman John Peace.

The Financial Times reported yesterday that Peace has been urged to search for a new CEO, with Temasek Holdings Pte, the Singapore state-owned investment company that owns about 18 percent of the bank, pressing for a clearer succession plan, citing people it didn’t identify. Aberdeen Asset Management Plc, another stakeholder, also wants Sands replaced, the FT said.

“This reminds us very much of the dreaded ‘vote of confidence’ often issued to football managers just before they get the bullet,” said Gary Greenwood, an analyst at Shore Capital Stockbrokers Ltd. based in Liverpool, England, who has a buy recommendation on shares. “What is clear to us is that operational performance needs to improve quickly if senior management are to remain in place.”

Shares Decline

Standard Chartered shares have dropped 11 percent this year as clients moved away from trading interest-rate and foreign- exchange products amid low volatility. The stock fell as much as 0.9 percent today and traded 0.3 percent lower at 1,217.50 pence at 9:44 a.m. in London.

The bank said in May it was “concerned” that 41 percent of voting shareholders opposed its new pay policy after reporting a “high single-digit percentage” drop in first- quarter operating profit.

Aberdeen, which owns about 7.7 percent of shares, declined to comment on the bank’s leadership.

“As an investor in banks with a long-term view, we look for stability in the banking system, and banks specifically,” Stephen Forshaw, a spokesman for Temasek, said in an e-mailed statement today. “We have well-established principles on governance issues, which we discuss with the bank, as we do with all the companies in which we invest.”

Lower Profit

Standard Chartered, which generates more than three- quarters of its earnings in Asia, said on June 26 that first- half operating profit probably slumped 20 percent and forecast full-year profit, excluding goodwill impairment and swings in the value of its own debt, to be lower than in 2013.

Sands, 52, became CEO in November 2006, making him the longest-serving boss of any major British bank. He last year suspended a target to increase revenue by at least 10 percent after writing down the South Korean business by $1 billion.

“We can understand why there is pressure for change at the top,” Sandy Chen, an analyst at Cenkos Securities Plc in London, said in an e-mailed note today. Chen has a buy recommendation on the shares.

Former Vodafone Group Plc Chief Financial Officer Andrew Halford became Finance Director of the bank in June, replacing Richard Meddings, who helped steer the bank to a decade of profit growth. Mike Rees became deputy CEO in April.

Standard Chartered is scheduled to report first-half earnings on Aug. 6.

--With assistance from Richard Partington in London and Klaus Wille in Singapore.