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Standard Chartered plans rights issue, job cuts

Standard Chartered PLC unveiled a major overhaul of its operations Tuesday that will involve raising capital and cutting jobs and costs, exiting from certain businesses and countries, and establishing new profitability targets.

The U.K.-based lender plans to raise US$5.1 billion in a rights issue to shore up its balance sheet and implement its updated strategy. For every seven existing shares held by shareholders, the bank will offer two rights shares at the price of 465 pence (US$7.17) a share in London, a 34.8% discount to the last closing price, and at 55.60 Hong Kong dollars (US$7.17) a share in Hong Kong, a 29.4% discount. The lender also said it would omit a final dividend for the year ended December 2015.

As part of the revamp, the bank also will eliminate a gross 15,000 positions by 2018. It has already begun the process of cutting 1,000 senior managers around the world.

Shares of Standard Chartered were down 3.8% in afternoon Hong Kong trading.

The bank listed a number of initiatives it would tackle in coming years to expand profitability and move toward more capital-light businesses such as retail, private banking and wealth management and away from institutional and corporate banking. It is aiming to restructure businesses that use more than $100 billion, as it seeks to meet a new common equity Tier 1 capital ratio of 12% to 13%, up from the 11% to 12% target announced in March, as well as a return on equity of 10% in the medium term.

The lender said it was hoping to achieve cost reductions of $2.9 billion between 2015 and 2018. It expects restructuring charges associated with the new strategy, including losses from liquidating nonstrategic assets and goodwill write downs, to total about $3 billion by the end of 2016. In addition, a new risk-tolerance framework aimed at reducing the bank's China, India and commodities exposures will be put in place.

The new plan was unveiled the same day Standard Chartered reported a third-quarter loss before tax of US$139 million, compared with a profit before tax of US$1.53 billion in the same period a year ago. The bank said in a statement that the results "highlight a clear need for change" as income fell 18% to US$3.68 billion from US$4.51 billion a year ago.

Since his appointment in June, Chief Executive Bill Winters has been analyzing the bank's balance sheet, which expanded rapidly in the past decade fueled by emerging-market growth. Now the bank is wrestling with a slowing Chinese economy and falling commodities prices.

The bank's third-quarter impairments on loans and other provisions remained flat compared with a quarter ago, at US$1.2 billion, reflecting "adverse trends" in India and commodities, it said.

Income from retail clients declined by 16% to US$1.3 billion and from private banking declined by 15% to US$131 million, due in part to weaker demand for wealth-management products in Hong Kong and Singapore, the bank said.

Standard Chartered said it would invest $3 billion over the next three years in its technology infrastructure and other areas it was seeking to expand, such as its Africa business as well as its yuan offerings in China.

Anjie Zheng contributed to this article

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