StanChart says stake in Indonesia’s Bank Permata ‘no longer core’, hints at exit

The Standard Chartered Plc logo is displayed atop the Standard Chartered Wealth Management Centre, foreground, as Two International Finance Centre (IFC) stands in Hong Kong, China, on Saturday, Feb 16, 2019. Photographer: Anthony Kwan/Bloomberg

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.

Expand Table

Name of BankMarket Capitalisation (millions)P/B ValueReturn on Equity (ROE) (%)Dividend Yield (%)
Standard Chartered plcGBP 20,460.0039.5804.60%0.03%
HSBC plcGBP 124,550.0076.9007.66%0.08%
Barclays Bank plcGBP 27,290.0043.0301.66%0.03%
DBS Bank Group LimitedSGD 64,417.291.31011.34%4.77%
UOB LimitedSGD 42,292.471.12410.74%3.94%
Overseas Banking Corporation LimitedSGD 48,145.861.14310.98%-
The Bank of East Asia LimitedHKD 84,940.000.8307.15%3.74%
Hang Seng Bank LimitedHKD 367,650.002.27015.40%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.

Source: StanChart

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.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.