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Losing £billions in paper losses in StanChart, Temasek puts pressure on bank’s CEO

The UK-based Financial Times published an article yesterday reporting that Temasek Holdings is stepping up pressure on Standard Chartered’s CEO as losses continue to mount for Temasek in its investments in Standard Chartered (‘Temasek steps up pressure over Standard Chartered turnaround‘, 21 Jan).

It reported that Temasek, which is currently the largest shareholder of Standard Chartered at about 16%, has grown “frustrated” with Standard Chartered’s chief executive Bill Winters’ turnaround plan. Apparently, the plan is not working well and share price of Standard Chartered has plummeted considerably.

The bank’s share price has fallen almost 40 per cent since Winters took over in June 2015. It now hovers around £6 currently compared with a price of £15.24 when Temasek first bought in during 2006. That is to say, Temasek could be sitting on losses as high as 60%, losing £billions in paper losses.

StanChart CEO doing his best for the bank he inherited

Winters inherited a bank saddled with billions of dollars of bad loans and regulatory penalties caused by the reckless expansion across emerging markets overseen by his predecessor Peter Sands.

As such, Winters has spent much of his time overhauling compliance and risk management systems while drumming home the importance of culture to its 86,000 employees in 60 countries.

“I’m afraid Standard Chartered is pretty much as before. Bill is doing all the right things, but it was in a bad mess and current economic weakening doesn’t help,” said Hugh Young, head of Asia Pacific at Aberdeen Standard Investments, which holds about 5 per cent in the bank.

“Although it’s smaller than the supertanker of HSBC, it doesn’t have the engine of Hong Kong that HSBC does, so it’s taking every bit as long, if not longer, to reform. But we’re still very supportive,” said Young.

But Temasek is less supportive than Aberdeen Standard Investments. It has asked for more frequent and detailed briefings from Standard Chartered and started floating the idea of taking a board seat in the bank. Temasek rarely gets involved in the day-to-day running of its portfolio companies. However, its interest to get involved in Standard Chartered shows that it is desperately trying to help revive the share price of the bank.

Temasek has asked the bank’s executives why, even after three years of restructuring, they are unable to generate close to the double-digit return on equity (ROE) enjoyed by Asian rivals such as Singapore’s DBS Group.

A source told FT that Temasek is also concerned about the bench of internal candidates that could replace Winters. It said that Temasek would prefer someone such as DBS CEO Piyush Gupta, who has a proven record in turning round DBS.

Temasek declined to comment for the article, FT said.