StanChart axes senior bankers in energy M&A team

HONG KONG: Standard Chartered plc (StanChart) has axed at least half a dozen oil and gas advisory banking roles in recent weeks, ending an eight-year attempt to build a global energy M&A team as new CEO Bill Winters moves to rein in costs, people familiar with the matter said.

Asia-focused lender StanChart expanded its energy M&A advisory team just before the global financial crisis by acquiring Harrison Lovegrove, a well regarded boutique advisory firm for oil and gas. At the time, more than two dozen bankers came over to StanChart from Harrison Lovegrove.

But Winters, who is cutting 15,000 jobs globally to restore profitability, is getting rid of expensive specialised bankers and taking a step to reduce the bank's global ambitions in the M&A space.

The senior managing directors to leave the bank include the London-based head of the energy M&A team, three people aware of the situation said. The sources declined to be identified.

Four Singapore-based managing directors in the team were also let go, the sources added, including one, who was an expert on energy and power financing, in July. Some less senior bankers were also axed.

E-mails sent to the bankers went unanswered. A StanChart spokeswoman declined comment on the departures.

The downsized team is now led by Alok Sinha and most of its members are based in Singapore, the sources said.

The bank wants to move away from depending on advisory fees, and rely more on revenues generated by selling forex hedging products used in M&A transactions, the sources said.

"The model of pure advice doesn't fit with Standard Chartered's new scheme of things. It's an expensive proposition," one person familiar with the development said.

PLUNGING OIL PRICES

The sharp fall in oil prices has resulted in less M&A opportunities in the energy sector, in particular from national oil companies who were key drivers of deal-making, resulting in less work for bankers.

The changing landscape has resulted in some other investment banks, including Nomura Holdings, trimming their oil and gas M&A teams in recent months although the scale of the reductions was smaller, separate sources said. Nomura declined comment.

Winters is seeking to bring down StanChart's bloated cost. Under previous CEO Peter Sands, employee expenses had jumped to US$6.7 billion in 2014, pushing up the widely tracked cost-to-income ratio to 60%. 

In contrast, DBS Group Holdings Ltd, a bank with a higher market value than StanChart, spent just US$1.6 billion on employee expenses in 2014, achieving a cost-to-income ratio of 45%.

Following the Harrison Lovegrove acquisition, StanChart's Asia-Pacific M&A league table ranking improved to 13th in 2013 from 35th in 2008, according to Thomson Reuters data. But as the bank's overall performance dropped due to higher regulatory problems, its energy M&A business also suffered and StanChart's ranking slipped to 44th this year.

When StanChart acquired Harrison Lovegrove in 2007, it had advised on about US$20 billion worth of M&A. One of the founders, Martin Lovegrove, later quit StanChart and now is a senior adviser to US energy major Chevron Corp.

Harrison Lovegrove had a pure advisory business model and relied on industry bankers who at times worked on projects for two to three years without fees. But in a more commercial bank set up like that at StanChart, there is a strong focus on generating revenue.

The focus has grown sharper as StanChart's golden days of riding the emerging market boom ended, bankers say. - Reuters