Standard Chartered Bank Hong Kong Branch
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StanChart on Tuesday announced its largest-ever share buyback worth $1.5 billion and raised its profit forecast for this year, betting on strong economic growth in its core Asian markets and planning to rein in costs.
The bank’s Hong Kong-listed shares rose 4% after the results were announced.
Standard Chartered’s first-half statutory pre-tax profit rose 5% to US$3.49 billion, slightly higher than the consensus estimate prepared by the bank.
The London-based bank, which generates most of its revenue in Asia, now expects operating income to grow more than 7% in constant currency terms, compared with a previous forecast of 5% to 7%.
In recent years, Asia-focused global banks including Standard Chartered and rival HSBC have benefited from the region’s higher interest rates and relatively strong economic growth and wealth creation.
“We are uniquely positioned to create value for our clients by taking advantage of the significant growth opportunities that the markets across our footprint continue to offer,” Bill Winters, Standard Chartered’s chief executive, said in a statement.
“Global trade and investment will continue to grow and are expected to be concentrated in Asia, Africa and the Middle East, with wealth creation in Asia outpacing the rest of the world.”
But in China, slowing economic growth and a real estate crisis have been concerns for Western banks. So far this year, Standard Chartered has made provisions for potential bad loans in China’s commercial real estate sector totaling US$1.2 billion.
Sadia Ricke, Chief Risk Officer of Standard Chartered Bank, said that the recovery of China’s real estate market “remains slower than expected despite government support measures” and that Standard Chartered Bank will continue to monitor its investment portfolio.
Standard Chartered said the $1.5 billion buyback is expected to slash 60 basis points from its core capital buffer ratio, which rose to 14.6% at the end of June from 13.6% in the first quarter, up from the bank’s 13%-14 % target range.
Costs cut, wealth jumps
The bank said it would continue a cost-cutting program called “Fit for Growth” that will save about $1.5 billion over three years to combat inflationary pressures and increased spending as its business expands.
The bank said it has identified more than 200 cost-saving projects, 80% of which are expected to reduce costs by up to $10 million.
Areas of cost reduction identified include eliminating regional reporting structures, automating certain processes and streamlining technology.
Standard Chartered’s non-net interest income stream grew strongly as major economies braced for a shift in interest rate policy.
Revenue at Standard Chartered’s wealth solutions unit surged 25% in the first six months of this year to $1.2 billion, the fastest growth among the bank’s main businesses.
During that period, the unit’s net new sales more than doubled to $13 billion, and wealth assets under management grew 12% to $135 billion.
However, Standard Chartered missed out on the boom in second-quarter trading reported by Wall Street peers this month.
The British bank’s lack of stock-trading business hurt it at a time when rivals such as JPMorgan Chase & Co. and Morgan Stanley were seeing revenue growth of 21% and 18%, respectively, pushing up overall investment banking revenue.
In contrast, Standard Chartered’s investment banking revenue fell 1% in the second quarter.
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