LONDON/HONG KONG (Reuters) - Standard Chartered (STAN.L) shares fell as much as 5 percent on Friday as the British bank said it would not pay a dividend for 2016 due to restructuring costs, but increased its staff bonus pool by 5 percent.
The bonus boost, which Chief Executive Bill Winters said was needed to motivate and retain staff, came as the lender swung back to a pretax profit of $409 million (326 million pounds) for 2016, a year after reporting its first loss in more than a quarter of a century.
The move comes after rivals reported shrinking bonus pools due to underwhelming results.
"We continue to ensure that our pay remains competitive, and rewarding good performance. We had a meaningful improvement in performance ... so we concluded that this small increase was appropriate," Winters told reporters on a conference call.
Emerging markets-focused StanChart is in the midst of an overhaul under Winters that has seen it shed 15,000 jobs and close its stock trading unit. Other underperforming units such as its private equity business are also earmarked for the chop.
Winters said that despite the rise in pay, compensation was still about 27 percent lower than what the bank paid out in dollar terms in 2012.
StanChart will not pay a dividend for 2016 to shareholders as its restructuring is not complete and the bank faces regulatory uncertainty, Chief Financial Officer Andy Halford told reporters on a conference call.
The profit result beat the $366 million expected by analysts, Thomson Reuters data showed.
The bank's shares fell as much as 5 percent in London before recovering to be down 2.8 percent by 1235GMT.
Former JPMorgan executive Winters has expressed dissatisfaction with the bank's performance, last November branding its income and profit levels unacceptable.
"Our financial returns are not yet where they need to be and do not reflect the group's earnings potential," Winters said in Friday's statement.
Previous StanChart chairman John Peace said last year Standard Chartered would risk a staff exodus if it cut bonuses, responding to investor anger over high pay when the bank is not paying a dividend. It said in November 2015 that it was scrapping its final dividend.
Winters himself received total pay for 2016 of 3.4 million pounds, excluding an additional long-term incentive plan if performance targets are met.
A total of 139 employees earned over 1 million euros ($1.06 million), with the highest earning 6-7 million euros, according to the bank's statement.
The results showed that StanChart is still suffering losses from underperforming parts of its business that it is trying to shed, including its private equity division and Indonesian bank.
Its principal finance unit, which houses the private equity business and which it is winding down, lost $650 million in 2016.
The lender said exposure to the diamond and jewellery sector, a business the bank is also exiting, drove impairments up to $795 million in the second half of 2016 from a $606 million charge in the first half.
StanChart also reported a $215 million loss from its stake in Indonesian lender PT Bank Permata Tbk (BNLI.JK), on rising bad loans and restructuring costs.
StanChart is seeking to reduce its interests in the Southeast Asian country to a single entity to comply with regulations, either by merging its branch with Permata or selling its stake in the local lender.
Indonesian tycoon Tahir last month expressed interest in buying all of Permata, starting with StanChart's stake.
"Standard Chartered is making some progress, with costs falling and the group's 'bad bank' being rapidly wound down. The problem is the smaller core business that the bank is aiming for isn’t performing all that well," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
The bank also said it expects an additional extension to U.S. supervision by an independent monitor over its anti-money laundering controls.
The lender settled with the New York State Department of Financial Services in 2014 after the head of that body, Benjamin Lawsky, called the bank a "rogue institution" over lapses in surveillance of transactions at its New York branch.
StanChart on Friday said it expects a further extension beyond the two years agreed at that time, confirming a Reuters report.
Reporting by Lawrence White and Sumeet Chatterjee, additional reporting by Andrew MacAskill and Michelle Price; editing by Jason Neely and Keith Weir