StanChart CEO Said to Mull Spinning Out PE Unit to Managers

  • Standard Chartered Private Equity said to manage $5 billion
  • Bank’s principal finance unit posted losses in first half

Standard Chartered Plc is considering spinning out its private-equity business to its managers, as Chief Executive Officer Bill Winters continues efforts to simplify the bank and reduce the amount of risk it takes, according to two people familiar with the matter.

The London-based lender may exit Standard Chartered Private Equity, or SCPE, as it faces tougher capital rules and losses from the unit, said the people, who asked not to be identified because no decision has been reached. The unit’s managers, led by Joseph Stevens, would take control of a business that oversees about $5 billion of assets, including stakes in a Nigerian bank and a Singaporean chain renowned for spicy noodles, said the people.

Bill Winters
Bill Winters
Photographer: Simon Dawson/Bloomberg

Winters, who took charge of Standard Chartered last year, is seeking to help the bank recover from losses on soured loans by exiting and restructuring $100 billion of risky assets. The Principal Finance unit that houses SCPE posted $167 million losses in the first half of 2016, after losing $105 million in the second half of 2015.

“It’s been a more difficult business to carry from a regulatory perspective, and we’re looking at ways that we can effectively reposition the funding of that business,” Winters said of Principal Finance on a conference call last month. “It’s not surprising that it’s part of the cycle where we’re experiencing some pain.”

‘Tightened Risk’

Regulators in Europe and the U.S. have made it harder for banks to invest shareholders’ cash in illiquid funds since the financial crisis, leading to a series of so-called spin-outs where employees become owners of newly independent firms.

“I’d view any potential disposal as an attempt to both de-risk the business and make the attainment of management’s return targets more credible,” said Ian Gordon, an analyst at Investec Plc in London with a sell rating on Standard Chartered’s shares. “This potentially makes sense, dependent on pricing, but the key challenge for the bank remains revenues.”

The SCPE business manages more than $2 billion of Standard Chartered’s cash and another $3 billion for third-party investors, the people said. The bank has reduced its investment over the past three years, one of the people said.

The company “is looking at non-core businesses, or those that do not sit within our tightened risk tolerance,” Simon Kutner, a spokesman for Standard Chartered, said in an e-mailed statement.

SCPE has been involved in deals worth at least $1.5 billion since the start of 2015, according to data compiled by Bloomberg. Acquisitions include stakes in Singaporean companies Phoon Huat & Co., a vendor of baking ingredients such as pie fillings and confectioners’ sugar, and Crystal Jade Culinary Concepts Holding Pte, a restaurant chain known for its steamed dumplings and spicy noodles. SCPE is also among the biggest shareholders in Union Bank of Nigeria Plc, a lender whose stock has plunged 35 percent so far this year.

The Principal Finance division has made “good returns” for Standard Chartered in the past, Winters said in August. The operation had more than $600 million of revenue for 2013 and 2014 combined. The business has been loss-making since last year amid “weaker equity market valuations,” the bank said as it reported first-half results.

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