Shareholder doubts need for Asia CEO at StanChart

Hugh Young, Asia chief at Aberdeen Asset Management, welcomes board changes at Standard Chartered, but questions the need to replace its Asia CEO as he sees it as too top-heavy.
Shareholder doubts need for Asia CEO at StanChart

The need for a regional CEO at Standard Chartered has been questioned by the Asia chief at one of the bank's biggest shareholders. 

Hugh Young, Asia managing director at Aberdeen Asset Management, cited a declining share price and regulatory issues as reasons why board changes at StanChart were necessary.

He was speaking to AsianInvestor after the bank announced that its group CEO Peter Sands would be replaced in June and its Asia chief executive Jaspal Bindra would exit its board of directors next month, as reported. Former investment banker Bill Winters is scheduled to take over from Sands. 

Aberdeen, which holds an 11.2% stake in StanChart, has been widely reported as being one of the chief agitators pushing for a board shakeup due to the bank's falling share price. 

Asked by AsianInvestor whether StanChart should replace its Asia CEO, Young replied: "Not necessarily." He suggested one of the bank's problems was that it was too top-heavy.

"As [Winter's] coming in in June, unless he’s getting his hands dirty now they won’t make an appointment [for Asia CEO] until he comes in, if at all," added Young. "So maybe they’ll find if they survive three months without [an Asia CEO] they can survive longer.  

"Arguably the bank still has a big structure built for growth, [for] when it was growing at a very strong rate, and now that rate has slowed it can afford to do without one or two people."  

But Young conceded this was a decision for Winters and the bank.

Major shareholders have been pushing for change and in a statement last Thursday the bank said it would reduce its 16-strong board to 14 directors "in due course". 

As for Bindra, the bank said only that a further announcement on "his current role" would be made soon. It stopped short of confirming Bindra would be replaced, and StanChart did not respond to AsianInvestor requests for clarity on the matter.

But Young said he was happy with the appointment of Winters: "It was very good news with Winter’s pedigree, he checks out very well, obviously it’s the start of something new rather than the end of everything. He’s got to get there and then work his magic.  

"We were very supportive of it. It’s not the end, not static, he’s got to come in, possibly make changes, that’s up to him and the management team." 

The bank's shares have dropped 44.9% over the past two years, having fallen from £1,800 in March 2013 to £991 at the close in London last Friday. Young described StanChart shares as "pretty cheap".  

He added: "It has not been a particularly pleasant ride over the past few years, but hopefully it will be a more pleasant one over the next few." 

In general Young noted he was a big supporter of shareholder activism. "Shareholders have a voice and should exercise it sensibly," he said. "It’s a democracy, people can say whatever they want.

"In the West people are very sensitive to shareholders, including StanChart. It has been sensitive, although this change has felt slow, but change often is slow and it’s important to get the right changes." 

Young cited the bank's declining share price, regulatory issues and rising numbers of bad loans in India as reasons for the need for change. 

Standard Chartered's non-performing assets rate in India increased to a record 7.9% in 2013, up from 6.7% in 2012 and 3% in 2011. 

Last year Standard Chartered was fined $300 million by the New York State Department of Financial Services over money-laundering failures, while in 2012 the bank agreed to a $340 million fine from the same body after accusations it hid suspicious Iranian transactions. 

Singaporean sovereign wealth fund Temasek, which owns an 18% stake in Standard Chartered, indicated last week that it, too, was satisfied with the board changes at StanChart. It noted that a CEO review and succession planning was an important responsibility for company boards.

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