By Denny Thomas and Lawrence White
HONG KONG (Reuters) - Standard Chartered Plc (L:STAN) is seeking a leader with a tough-to-find mix of Asian experience and regulatory clout as it kicks off the search for a successor to CEO Peter Sands, investors, bankers and headhunters told Reuters.
The list of potential candidates is wide and includes Piyush Gupta, CEO of Singapore-based DBS (SI:DBSM), outgoing Westpac CEO (AX:WBC) Gail Kelly, National Bank of Abu Dhabi's boss Alex Thursby, ANZ (AX:ANZ) CEO Mike Smith and Antonio Horta-Osorio, CEO of Lloyds Banking Group (L:LLOY).
Sands steered the global bank out of the financial crisis and into a string of record earnings during his eight-year tenure, but is now under pressure from top shareholders after a surge in bad loans on the back of slower Asian growth hit profits and triggered a 43 percent slump in its share price.
Three of the bank's top 30 investors, fed up with the pace of Sands' turnaround strategy, told Reuters in December Sands should be replaced, probably this year.
Insiders have told Reuters shareholders are looking for a banker with a deep understanding of Asia, the main area of focus for StanChart but currently a major troublespot following a slump in oil prices and receding growth in China.
Any successor to Sands would also need to be able to speak head-to-head with U.S. regulators, these insiders say.
Standard Chartered has faced a string of legal issues in the United States, including having to pay $667 million over sanctions violations involving Iran and other countries.
"The role almost needs three people doing it. You've got outward facing regulatory and political challenges if you're a bank of that size, and then inward looking you're sorting out the bank's problems," said an investor whose firm has a substantial stake in StanChart.
Standard Chartered is using several headhunting firms, including Egon Zehnder, which is involved in assessing potential CEOs, three people familiar with the matter said.
StanChart's No.1 shareholder, Singapore-based sovereign investor Temasek (TEM.UL), is unhappy about the performance of its 18 percent stake and has called for a succession plan for the CEO, people with direct knowledge of the matter said.
EXTERNAL CANDIDATES
Deputy CEO Mike Rees, Sands' natural successor, does not enjoy the support of some investors as he is considered too close to the current CEO.
Rees ascended to the number two spot following the shock departure a year ago of former finance director Richard Meddings.
The lack of an obvious internal candidate makes it likely the search for a successor will mostly focus on candidates working elsewhere, insiders said.
"Piyush Gupta has to be in the mix, he ticks many boxes," said one senior Asia-based investment banker who advises financial institutions on their corporate strategy.
"He has quietly improved DBS's performance and surely has Temasek's blessings for the job."
Since he took over in late 2009, Gupta has overseen DBS's expansion in Southeast Asia. The bank's stock has risen about 40 percent over the last five years, outperforming the benchmark stock market index.
Gupta, 55, told Reuters he was focussed on his job at DBS, which also counts Temasek as its biggest shareholder.
"With the full support of the board, I am committed to the task of leading DBS in its journey to be Asia's leading bank," he said in an email.
A spokesman for Temasek declined to comment. It has said in the past succession plans are an issue for the boards of the companies they invest in, not for shareholders.
A spokesman for Standard Chartered in London said Sands and his management team were focussed on executing the group's refreshed strategy, delivering growth, cost savings and shareholder returns, and he had the full support of the board.
"The group is clearly aware of its disclosure obligations in respect of executive directors, and we are not making any announcement," he said.
Horta-Osorio, the Portuguese banker who has turned around Britain's Lloyds, could also make a strong candidate given his good relations with regulators. This is a key issue for Standard Chartered, one of 30 global systemically important banks that face tougher regulatory scrutiny and have to hold extra capital.
But industry sources said it was unlikely he would be prised from a bank double the size of StanChart while he has not yet returned it to full private ownership. Lloyds declined to comment.
Westpac's Kelly, who has just retired, is a veteran banker who knows the Asia-Pacific region well, but lacks the experience of a global bank.
ANZ's Smith, on the other hand, spent 29 years at StanChart's rival HSBC before joining the Australia-based bank.
He and other past and present HSBC executives are likely to be on any list of potential candidates given the Asia focus of the London-headquartered bank, one source said.
Kelly and Smith declined to comment through their company representatives.
British-born Thursby has been CEO of National Bank of Abu Dhabi (AD:NBAD) since 2013. He was formerly with ANZ and the key person behind Australian bank's push into Asia.
"We are entering the second year of a 5-year strategy which was approved in 2013," said a spokesman for NBAD, which reported earnings on Wednesday. "Alex Thursby ... is leading the execution of this strategy, and is delivering what he has committed to the NBAD board and shareholders."