LONDON (Reuters) - Standard Chartered (>> Standard Chartered PLC) Chief Executive Bill Winters told staff on his first day in the office that the Asia-focused bank must strengthen its finances and simplify operations to boost returns.

Winters' predecessor Peter Sands closed of much the bank's equities business and sacked 4,000 staff but that was not enough to reverse the company's underperformance and save his job.

"We need to reinforce our foundations; streamline our business; strengthen our financial position; and re-orient the bank for better returns on our capital," Winters said in a letter to staff seen by Reuters on Wednesday.

"Our capital strength is a key priority. Capital strength is a competitive advantage, especially in tough economic times. We are reviewing all aspects of our capital strength as part of our broader business review."

Early market reaction suggested investors approved of the approach with the bank's shares up 4.2 percent, outperforming both a 0.4 percent rise in FTSE 100 <.FTSE> and a 0.85 percent increase in the STOXX Europe 600 Banking index <.SX7P>.

StanChart shares slumped nearly 30 percent last year while European banks only lost 3 percent. But this year, the bank is up 11.5 percent, only 2 percent behind the pan-European index.

Addressing concerns about the bank's capital strength is Winters' top priority, and some investors and analysts have said he needs to raise at least $5 billion from a rights issue and cut the dividend.

Winters, 53, was previously co-CEO of JPMorgan's investment bank. He left in 2009 after falling out with CEO Jamie Dimon.

Winters, originally from New York but with dual U.S. and British citizenship, then became one of five members of a British government commission that analysed how banks could be made structurally safer and set up London-based hedge fund Renshaw Bay.

"BEYOND REPROACH"

Winters said in the letter he would announce the bank's leadership team after the summer and provide details of his broader plans by the end of the year.

"We need to be more resilient and learn to cope with the tough times ahead, but more importantly than that we need to rebuild confidence – in ourselves and with our stakeholders."

Hugh Young, head of equities at the bank's second biggest investor Aberdeen Asset Management (>> Aberdeen Asset Management plc), said he supported Winters' plan in broad terms but did not have a set "to-do" list for the new chief.

"I don't think we'd give him a specific list – totally agree with the principle of simplification, related to which is also communication (internally, between different teams/competencies)," he said in emailed comments.

Against the backdrop of a series of fines for banks for bad behaviour, including on Standard Chartered for lax U.S. anti-money laundering controls, Winters also laid down the law on ethics.

"Our ethical standards must be beyond reproach and we must play a robust role in the global fight against financial crime. That is a key role for any bank in the world today and is one that we will continue to embrace."

Winters said: "We will organise ourselves to simplify the way we work together, make decisions and be more efficient" and "must complete the process of making our control environment rock solid".

Standard Chartered is among many banks seeking to cut costs, axe underperforming businesses and streamline to try to increase profitability, which has been hurt in recent years by tougher regulations following the financial crisis.

Rival HSBC (>> HSBC Holdings plc) said this week it would shed 50,000 jobs, half from the sale of businesses, as it tries to improve returns.

Standard Chartered is in the process of seeking buyers for its Hong Kong pensions business, valued at about $350 million, sources told Reuters in May. It could also sell more private equity assets.

HSBC and Standard Chartered are also assessing whether they should move their headquarters from London to Asia to save money on what they pay under a bank levy in Britain.

Britain's government could announce later on Wednesday a change to the structure of the levy, however, after criticism it costs the two Asia-focused banks too much.

(Editing by David Clarke)

By Steve Slater and Simon Jessop