This June, Bill Winters will have been CEO of Standard Chartered for two years. During that time, the ex head of J.P. Morgan's markets division has made some big changes to the corporate and investment bank (CIB). He's closed Standard Chartered's equities business. He's cut 25% of Standard Chartered's managing directors (MDs). He's laid off 10% of Standard Chartered's CIB staff at all levels. And he's hired in Roberto Hoornweg, a former senior fixed income trader at UBS, as head of global markets. So far, however, Winters' efforts haven't had the desired effect.
While other investment banks have been riding a recovery in fixed income sales and trading revenues, Standard Chartered has been languishing. Last year's 7% profit rise in the corporate investment bank looks good - until you look across to J.P. Morgan, where CIB profits were up 36% on 2015, or Barclays where they were up 14%.
Although Winters was a fixed income trader by profession, Standard Chartered's fixed income sales and trading businesses under-performed in 2016. FX revenues were down 18% on 2015. Rates revenues were down 11%. Credit revenues were stable. By comparison, credit trading revenues at Barclays were up 44% and macro (FX and rates) revenues were up 9%. At HSBC, rates revenues were up 54%, credit revenues were up 27% and FX revenues were up 4%. At Standard Chartered, something went wrong.
The blame for last year's poor performance can't be pinned on Hoornweg, who only turned up in December. However, Hoornweg will be expected to make amends in 2017. There are already signs that he's shaking things up - a memo went out at the start of last month announcing that Vinod Aachi, global head of financial sales, was leaving and that Neh Thaker was becoming sole global head of rates, FX and credit. Six weeks later, however, insiders say a replacement for Aachi has yet to be announced. This is a shame: Deutsche says its fixed income trading business has enjoyed a buoyant start to the year. Standard Chartered risks losing out on a strong first half.
It's not all bad. Stan Chart's share price is up nearly 51% over the past year - more than HSBC's (47%) or Barclays' (39%). Bernstein analyst Chirantan Barua has got a buy rating on the bank's stock, which he says should benefit from rising Asian trade volumes. Barua points out that Standard Chartered has "best in class" capital levels and that most of the "heavy lifting" has been done in removing costs. Even so, there are more costs to come out. Barua points out that spending at the bank went from ~$7.5bn in 2008 to around $11bn in 2014. Last year costs were trimmed to $10bn but Barua thinks a further $300m needs to go. The challenge for Winters - and for Hoornweg - is to achieve this while reinvigorating the CIB so that it benefits from the booming fixed income market. Replacing Aachi might be good place to start. - The question is, with whom: Standard Chartered insiders may not bring the requisite oomph, and big hires from big name banks may struggle to perform on Stan Chart's more challenging platform.