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Standard Chartered Bank Limited, Hong Kong Branch
Bloomberg | Bloomberg | Getty Images
StanChart on Tuesday announced the largest share buyback in its history, worth $1.5 billion, and raised its profit forecast for this year, betting on strong economic growth in its core Asian markets and plans to control costs.
The bank’s Hong Kong-listed shares rose 4% after the results were released.
Standard Chartered’s first-half statutory pre-tax profit rose 5% to $3.49 billion, slightly ahead of consensus expectations for the bank.
The London-based bank, which gets most of its revenue from Asia, now expects operating income to grow by more than 7% at constant exchange rates, compared with a previous forecast of 5% to 7%.
Asia-focused global banks such as Standard Chartered and rival HSBC have benefited in recent years from higher interest rates and relatively strong economic growth and wealth creation in the region.
“We are uniquely positioned to capitalize on the significant growth opportunities that continue to emerge in the markets across our operations and to create value for our clients,” Bill Winters, Standard Chartered’s chief executive, said in a statement.
“Global trade and investment will continue to grow, with growth expected to be centered in Asia, Africa, and the Middle East, with wealth creation in Asia also expected to outpace the rest of the world.”
But in China, where slowing economic growth and a property crisis have been a concern for Western banks, Standard Chartered has set aside a total of $1.2 billion so far this year for potential bad loans in China’s commercial real estate sector.
Sadia Ricke, Standard Chartered’s chief risk officer, said the recovery in China’s property market “remains slower than expected amid government support measures” and the bank would continue to monitor its portfolio.
Standard Chartered said the $1.5 billion buybacks are expected to reduce its core capital buffer ratio by 60 basis points, which rose to 14.6% at the end of June from 13.6% in the first quarter, above the bank’s target range of 13%-14%.
Cost reduction, wealth growth
The bank said it would press ahead with a cost-cutting program called “Fit for Growth” that will allow it to save about $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 potential cost-saving projects, 80% of which were expected to generate savings of up to $10 million.
Areas identified for cost cutting include eliminating regional reporting structures, automating some processes and simplifying technology.
Standard Chartered PLC has seen strong growth in its non-net interest income stream as major economies brace for a shift in interest rate policy.
Revenue at Standard Chartered’s wealth solutions unit surged 25 percent in the first half to $1.2 billion, the fastest growth among the bank’s main businesses.
The division’s net new sales more than doubled to $13 billion in the period, while wealth assets under management rose 12% to $135 billion.
However, Standard Chartered missed out on the second-quarter deal boom reported by its Wall Street peers this month.
The British bank’s lack of a stock trading business hurt it at a time when rivals such as JPMorgan and Morgan Stanley saw their stock trading revenue rise 21% and 18% respectively, boosting overall investment banking revenue.
In contrast, revenue at Standard Chartered’s investment bank fell 1% in the second quarter.
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