All change at Standard Chartered

Standard Chartered has announced a business reorganisation and the departure of two senior executives

January 10, 2014

Standard Chartered (STAN) has announced an unexpected business reorganisation along with the departure of the group’s finance director, Richard Meddings, and the head of the lender’s consumer arm, Steve Bertamini.

IC TIP: Buy at 1287p

Specifically, Standard is to integrate its consumer and wholesale arms into one business that’s organised into three customer segment groups. That, according to the bank, should “achieve cost savings by removing the duplication that exists” in the two businesses. Mike Rees, who currently runs the wholesale arm, will be appointed as deputy group chief executive and will become responsible for managing the combined business. The changes will take effect from 1 April.

While the announcement’s timing seems a little odd, the reorganisation - described by broker Numis as “the removal of a border, rather than the merging of businesses” - possibly isn’t as deep as it first appears. Still, the finance director’s departure has fuelled low-level rumours about the lender’s capital adequacy. But, given the bank’s Basel III-basis capital ratio stands at a healthy of 10.5 per cent, that fear lacks credibility. At 1,287p the shares are down our buy tip (1,440p, 11 July 2013). But the bank is focused on fast-growth Asian markets, boasts a decent 4 per cent prospective yield, and the shares trade at an inexpensive 1.3 times Numis’ end-2013 net tangible assets estimate. Buy.

Last IC View: Buy, 1,299p, 16 December 2013