Standard Chartered Plc on Tuesday said its stake in Indonesia’s PT Bank Permata Tbk is no longer core, signalling its intention to exit the investment.
StanChart and Indonesian conglomerate PT Astra International each own a 44.56 per cent stake in the Indonesian bank. Based on Bank Permata’s current market cap of $2 billion, StanChart’s stake is worth about $891 million.
During its earnings call on Tuesday, StanChart noted that Bank Permata accounts for $9 billion in risk-weighted assets (RWA). While it did not provide a breakdown of the profits relating to the re-classification of its holdings, the bank registered an overall operating loss of $248.0 million under the restructuring column in FY 2018. This compares to a positive operating income of $58.0 million in FY 2017.
Source: Company’s financials
In October 2018, StanChart CEO Bill Winters had told Reuters that the bank was “actively working” on options for its stake in Bank Permata.
“But, frankly the bank is doing well,” he had then said. “The bank needed to be fixed up, it’s now fixed up. Now we can talk about what we need to do.”
StanChart reported a $215.0 million loss in 2016 from its stake in Permata, due to rising bad loans, and restructuring costs. The lender’s financial performance has improved since then.
On Tuesday, Winters said the company also plans to eliminate “the residual drags on returns from low-returning markets, including India, Korea, the United Arab Emirates (UAE), and Indonesia.” He said that the firm’s retail business in Indonesia, along with the other markets, is still skewed towards mass affluence instead of the much preferred high net-worth individual (HNWI) segment.
StanChart has outlined its target to raise the return on equity to 10 per cent by 2021, or double last year’s level. The company’s underlying ROE and dividend yields still lag against its European and Asian peers.
|Name of Bank||Market Capitalisation (millions)||P/B Value||Return on Equity (ROE) (%)||Dividend Yield (%)|
|Standard Chartered plc||GBP 20,460.00||39.580||4.60%||0.03%|
|HSBC plc||GBP 124,550.00||76.900||7.66%||0.08%|
|Barclays Bank plc||GBP 27,290.00||43.030||1.66%||0.03%|
|DBS Bank Group Limited||SGD 64,417.29||1.310||11.34%||4.77%|
|UOB Limited||SGD 42,292.47||1.124||10.74%||3.94%|
|Overseas Banking Corporation Limited||SGD 48,145.86||1.143||10.98%||-|
|The Bank of East Asia Limited||HKD 84,940.00||0.830||7.15%||3.74%|
|Hang Seng Bank Limited||HKD 367,650.00||2.270||15.40%||7.50%|
Source: Yahoo! Finance, SGX StockFacts (February 26, 2018)
Other targets include:
- Income growth target of 5-7 per cent
- Cost growth below the rate of inflation
- Gross aggregate cost reduction of $700 million
- Target CET1 ratio range of between 13-14 per cent (FY2018: 14.2 per cent)
- Double the ordinary dividend per share by 2021
- Distribute to shareholders surplus capital that is not deployed to fund additional growth.
ASEAN and South Asia performance
In its FY 2018 earnings release, StanChart noted that income in ASEAN and South Asia was 4 per cent higher than most markets, particularly in Singapore where income was up 9 per cent, largely driven by retail banking. The underlying profit for ASEAN and South Asia rose 97 per cent YoY to $970.0 million.
Temasek’s stake in Stanchart
The bank disclosed that Temasek Holdings continues to hold 15.77 per cent indirect interest, or 517,051,383 ordinary shares, in the bank in FY 2018. This is largely unchanged from the 15.68 per cent indirect interest in FY 2017.