Standard Chartered Bank (StanChart) has raised its performance goals and unveiled a new US$1 billion share buyback and produced a 28% rise in annual profit as global interest rate rises bolstered its lending revenues.
According to StanChart, almost half of its 10% overall income growth came from interest, as central bank rate hikes aimed at combating inflation, enabled banks to charge borrowers more after a decade of near-zero rates.
The Asia, Africa and Middle East-focused bank, which have been the subject of takeover speculation linked with First Abu Dhabi Bank (FAB), said its latest share buyback would start imminently. The bank disclosed that its shares rose 3.5% in Hong Kong after the announcements, while its London-listed stock opened 2% higher.
In a statement, Chief Executive Officer, Bill Winters, said, “We are upgrading our expectations, and are now targeting a return on tangible equity approaching 10% in 2023, to exceed 11% in 2024, and to continue to grow thereafter,”
Meanwhile, the London-headquartered StanChart previously targeted 10 percent growth expectations for 2024. “Return on equity is a key profitability metric for banks,” he stressed.
StanChart’s Shares Energised
StanChart’s shares have been energised this year by renewed takeover speculation but Winters told said the bank has “had no engagement nor solicited any engagement from anyone” and was “happy to be accomplishing targets on its own”.
StanChart, which makes most of its profit in Asia, reported statutory pretax profit of US$4.3 billion for 2022, below the US$4.73 billion average of analyst forecasts compiled by the bank but its highest annual return since 2013.
The bank, however, reported a series of setbacks in its key market of China, where tough COVID-19 restrictions have strangled the economy.
It recorded a US$582 million impairment for expected bad debts in the country’s troubled real estate market, taking its overall impairment to a higher-than-expected $838 million.
StanChart also took a $308 million hit which it attributed to industry challenges on its investment in China Bohai Bank, a lender based in the northern coastal city of Tianjin.
The COVID-19 curbs, which China is now starting to lift, also restricted face-to face sales of wealth management products, contributing to a 17% drop in income at the unit as customers also became more risk averse.
StanChart’s financial markets business was one of the highlights of the bank’s overall results, reporting record income up 21% as volatile markets drove frenzied trading activity.
While StanChart’s results were better than some rivals, Winters, the longest-running chief of a major European bank, still has work to do.
StanChart shares are about 25% below the levels when Winters took charge in June 2015, whereas shares in rival HSBC Holdings are flat and the benchmark FTSE index has risen about 15%.
Winters, who has been trying to placate shareholders by focusing on growth after years of cost-cutting, said he has no plans to activate the bank’s succession process by putting a timeline on his departure.
However, Winters said investors should “not be concerned” about any exposure to India’s Adani Group, a conglomerate whose shares have lost some US$100 billion in market value following a U.S. short seller’s critical report on its finances.
Adani mentioned StanChart among other banks when it touted relationships with global financiers in a lengthy rebuttal of the short-seller’s claims.