Will Standard Chartered PLC Be Able To Turn Things Around?

Standard Chartered (LSE: STAN) entered 2014 on high, after receiving investor support for its new multi-year growth plan, which the bank’s management revealed to shareholders last November. 

The plan was put together to try and restructure Standard into a more focused bank. In particular, management lowered the bank’s growth targets and told shareholders that the company was going to pull out of some unprofitable market’s, undoing mistakes made in the past. 

However, management has been slow to take action and now some shareholders are getting restless. 

Plans for growth

Standard’s strategic plan was focused around South Korea, where the bank has been struggling recently. The bank revealed that it was planning to pull back from its consumer finance operations within South Korea, closing around 25% of branches within the region. 

Moreover, Standard told investors that it was going to pay more attention to its Indian wealth management business, taking advantage of the country’s growing wealth. 

Standard also planned to review it business operations around the world, trimming the fat as it were, closing subsidiaries that did not meet certain performance metrics, such as growth, dividends and return on capital. All in all, the bank was expecting to reduce its headcount by 2,500 this year. 

But key to this strategic plan was Standard’s lower growth outlook. The company is now targeting high single-digit annual sales growth for the next couple of years, dropping a longstanding target to generate double-digit revenue growth each year.

While a lower rate of growth is always disappointing, it does highlight the bank’s drive to seek out quality earnings rather than an all-out charge for growth.

Running into trouble

Unfortunately, now nearly seven months on from Standard’s November strategy update, investors are losing patience with the bank’s management, as there is a noticeable lack of progress. 

There have been complaints that Standard’s management has a strong reluctance to take on reforms. Some Investors have even gone so far to say that the investor day, where the bank’s strategy update was given, was a false dawn.

Shareholders are basing this argument on the fact that Standard continues to operate within too many markets, and the bank is depending on the global economic recovery to pull it out of trouble.

Specifically, Standard is still trying to run more sub-scale businesses than it should be, within too many countries, creating multiple management layers and inefficiencies within the group. 

Foolish summary

So, after promising to restructure the bank late last year, it would appear as if Standard’s management is failing to deliver. 

This lack of inaction is testing shareholder patience; however, this could be a good thing as it might jolt the bank into action, especially if shareholders start to make a fuss.