Standard Chartered would do better being more upfront
BEFORE and during the financial crisis, which rocked so many banks to their foundations, Standard Chartered could seemingly do nothing wrong.
While their rivals dodged in and around write-downs, rescue rights issues and increased impairment charges, the stock of both chief executive Peter Sands and his ebullient finance director Richard Meddings rose sky-high.
So highly were the pair rated that Gordon Brown went to them for advice on the previous administration’s recapitalisation schemes.
Sadly for them, and for Standard Chartered investors, their reputations have taken something of a knock over the past year or so.
First, the bank was fined $667m for sanctions-busting by the US regulator last year, and more recently it has been hit by trading problems connected to a slowdown in emerging markets generally and especially in South Korea.
Following a profits warning earlier this month investors are naturally feeling a little jumpy and nervous and some are concerned the bank isn’t being as frank as it could be about the level of impairment charges it needs to make.
In such a climate, there is nothing to be gained by not being completely frank. Markets want to feel there are no shocks left in the locker.
However, some investors voiced concern yesterday about the way the bank handled a recent change in governance, citing it as an example of an institution “appearing to want to bury bad news.”
On 29 November, Standard Chartered announced to the London Stock Exchange it was appointing the highly-acclaimed Naguib Kheraj, a former JP Morgan and Barclays executive, to its board. It also reported a long-awaited announcement about the retirement plans of three of its directors.
Right at the bottom of the announcement came news that Meddings had been stripped of his responsibilities for risk which were being shifted to Sands.
Curiously there was no mention in the official statement of the involvement of the Bank of England in this decision and some yesterday expressed concern about the way the bank had conveyed the governance change.
One US investor, who had taken some time off for Thanksgiving (the day before the Friday announcement was a public holiday) was especially annoyed.
Just as Joanne Moore, the adviser to Stephen Byers during Tony Blair’s time in government, famously found out to her cost 12 years ago, there is really no good time to bury bad news. She tried to bury news of a U-turn on pensions on the day of the World Trade Center atrocity in New York and ended up being out of a job.
Unlike Moore, Standard Chartered almost certainly didn’t deliberately try to keep the Meddings development quiet. But the way the bank presented it ended up looking a little less up-front than it could have been.
The bank and its chairman Sir John Peace need to restore greater openness as soon as it can.
Premium pricing Eat your heart out, investors in Royal Mail. Shares in Moncler, the upmarket Italian clothing group, rose 47 per cent in first day trading yesterday in Milan, even higher than the premium enjoyed in Royal Mail stock after its flotation earlier this year.
Yet the bank advisers are not in the dock for having priced the issue too low, unlike their counterparts on the Royal Mail issue.
Moncler chairman and chief executive Remo Ruffini appeared more than happy with things, given he’s not selling any of his stock. While there’s work like this to be had, who in their right mind would want to work on UK government privatisations?
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Allister Heath is away