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Standard Chartered CEO vows to go it alone after Abu Dhabi takeover interest

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Standard Chartered Chief Executive Bill Winters has unveiled a $1 billion share buyback plan and vowed his bank can succeed on its own as it tries to block a potential takeover by Abu Dhabi First Bank.

On Thursday, the U.K.-based bank announced that pre-tax profit rose to $123 million in the fourth quarter from a loss of $208 million a year earlier. While that fell short of analysts’ expectations of $571 million due to a sharp rise in credit losses in China, the stock rose 4% on larger-than-expected buybacks and a fatter dividend.

It was the first gain since reports emerged that FAB had been considering a bid for the U.K.-listed emerging market lender. While FAB said it was no longer seeking a deal – preventing them from formally approaching for six months – several people close to the bank told the FT that transaction can be resumed When the deadline expires in July.

That has increased pressure on Winters, now in his eighth year at the helm of the bank, to prove to shareholders that Standard Chartered can grow as a separate entity.

“We’re excited to be here and do our mission alone,” Winters said of the reported interest.

“None of us want to be distracted by what’s just a story at this point,” he added. We “didn’t participate and didn’t ask for anyone’s participation.”

Standard Chartered shares have lost about a fifth of their value since he took over in June 2015, trading at a whopping 56% discount to book value. It has a market cap of $26 billion and total assets of $820 billion.

After inheriting massive losses and compliance issues, Winters has since faced the daunting challenge of restoring revenue growth and profitability after being forced to drastically shrink its balance sheet and rein in risk-taking.

More generous buybacks and a final dividend of 14 cents per share announced on Thursday – up from 9 cents in 2021 – would bring shareholder distributions up to the 50 cents it has set since early 2022, the chief executive of Standard Chartered said. over half of the US$100 million target by 2024. The package represents a concerted effort to win over shareholders should FAB (or a rival bidder) make a formal offer.

Winters said he had no plans to resign anytime soon, despite his longest tenure at a European bank. “I’d love to see that shift,” he said. “Thank goodness we’re in good shape and energy.”

His total pay has increased by 16%, bringing his compensation to £5.5m. The bank said this reflected “improved performance achieved”.

Share price line chart (for pennies) shows StanChart pinning hopes on China reopening in 2023 and growth in Asia

In the last three months of 2022, Standard Chartered’s wealth management business has suffered setbacks, and growth has been the top priority. Revenue at the unit fell 19% in the final quarter of 2022, which the bank blamed on “risk-averse client sentiment and the impact of Covid-19 restrictions”.

still, Standard Chartered Bank said China’s reopening should help its performance, and it was bullish on Asian economies, where the bank earns most of its money, due to rising interest rates and growth.

Return on tangible equity, a measure of profitability, is estimated to be close to 10% in 2023 and surpass 11% next year. Chief Financial Officer Andy Halford said about half of the lender’s revenue growth came from the impact of higher interest rates.

The bank has a credit-impairment provision of $582 million for its exposure to Chinese real estate in 2022, for a total exposure of $3 billion. “We need to take a step back and put it in context,” Halford said. “It’s very absorbing throughout the book.”

Real estate in the world’s second-largest economy faces a protracted liquidity crisis as authorities crack down on excessive leverage.

Standard Chartered, which operates in 59 markets in Asia, Africa and the Middle East, also took charges of $283 million related to sovereign rating downgrades for Pakistan, Ghana and Sri Lanka.

Expenses rose 14% in the fourth quarter due to inflation and higher investment spending, the bank said.

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