Standard Chartered Plc bank branch in Hong Kong
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Standard Chartered (StanChart) on Tuesday announced its largest-ever share buyback worth $1.5 billion and lifted its earnings outlook for this year, betting on strong economic growth in its core Asian markets and plans to rein in costs.
The bank’s Hong Kong-listed shares were up 4% after the results.
StanChart’s statutory pre-tax profit for the first half climbed 5% to $3.49 billion, just ahead of a consensus estimate compiled by the bank.
The London-headquartered lender, which earns most of its revenue in Asia, now expects operating income to grow more than 7% on a constant currency basis compared with its previous projection of between 5% and 7%.
Asia-focused global banks including StanChart and rival HSBC have benefited in recent years from higher interest rates and relatively stronger economic growth and wealth generation in the region.
“We are uniquely positioned to take advantage of significant growth opportunities that will continue to come from the markets in our footprint, generating value for our clients,” StanChart CEO Bill Winters said in a statement.
“Global trade and investment will continue to grow and is expected to be anchored in Asia, Africa and the Middle East, and in Asia wealth creation is also expected to outpace that in the rest of world.”
But in China, slowing economic growth and the country’s property sector crisis have been a concern for Western banks. StanChart has made provisions totaling $1.2 billion for potential bad loans in China’s commercial real estate sector so far this year.
The property market recovery in China “remained slower than expected amidst government support measures”, and the bank continues to monitor its portfolios, Stanchart’s Chief Risk Officer Sadia Ricke said.
StanChart said the $1.5 billion buyback was expected to shave 60 basis points off its core capital buffer ratio, which rose to 14.6% at the end of June from 13.6% in the first quarter and was above the bank’s 13%-14% target range.
Cost cuts, wealth jump
The lender said it will press ahead with a cost-cutting initiative dubbed “fit for growth”, which will see it save around $1.5 billion over three years amid rising expenses due to inflationary pressures and business expansion.
The bank said it had identified more than 200 projects where it can make savings, with 80% of them expected to reduce costs by up to $10 million.
The areas identified for cost-cutting include removing regional reporting structures, automating some processes and simplifying technology.
StanChart saw strong growth from its non-net interest income streams as major economies brace for rate policies to take a turn.
Income from StanChart’s wealth solutions unit surged 25% in the first six months to $1.2 billion, logging the most growth among the lender’s main businesses.
The unit’s net new sales in the period more than doubled to $13 billion with wealth assets under management rising 12% to $135 billion.
StanChart, however, missed out on the second-quarter trading bonanza reported by Wall Street peers this month.
The British bank’s lack of an equities trading business hurt it in a period where rivals such as JPMorgan <JPM.N> and Morgan Stanley saw 21% and 18% revenue growth respectively in the business, driving overall investment bank income higher.
Instead, income from StanChart’s investment bank fell 1% in the second quarter.
