STANDARD Chartered (StanChart) beat forecasts on Thursday (May 2) with a 5.5 per cent rise in its first-quarter pre-tax profit, as the income boost from higher interest rates and a robust performance from its markets trading business offset a surge in credit losses.
The bank, which makes the bulk of its revenue and profits in Asia, saw profit at its investment banking unit climb 13 per cent in the quarter.
Crucially, the bank grew fee-based revenues from markets and wealth management in particular, a key target for it and rivals as interest rates worldwide peak and cap the boost they have recently received from lending-based income.
StanChart’s shares, a focus for chief executive officer Bill Winters, jumped more than 6 per cent in Hong Kong on Thursday after the results to their highest level in nearly seven months, while the main local index was trading 2.5 per cent higher.
The strong performance across its business lines while keeping costs under control should help StanChart shares burst out of their longstanding malaise, said Joe Dickerson, analyst at Jefferies in London.
StanChart posted a pre-tax profit of US$1.91 billion in the January-to-March quarter, compared with US$1.81 billion a year earlier and the US$1.39 billion average of 13 analyst estimates compiled by the bank.
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“We delivered a strong set of results in the first quarter of 2024, with double-digit growth in income and positive operational leverage,” noted Winters in an earnings statement. “We remain confident in the delivery of our financial targets and are maintaining our full-year 2024 guidance.”
But the lender’s credit impairments worsened in 2024, with a US$165 million write-down in the first three months, compared with US$20 million a year earlier.
The bulk of the credit impairment was accounted for by the bank’s wealth and retail banking division, as the unit was hit by “mortgage headwinds” in Hong Kong and South Korea, StanChart said.
The British bank has made provisions worth US$1.2 billion in total in relation to the China commercial real estate sector, it said. Its total credit exposure to the sector was now at US$2.4 billion, down US$200 million from the preceding quarter.
StanChart had taken a total of US$850 million in write-downs in the previous quarters on its stake in China’s Bohai Bank, which like its peers suffered from a slowing Chinese economy and the deepening crisis in the property sector.
Chinese authorities have been ramping up measures over the last few months to prop up the troubled sector, but analysts say that many of the policies are piecemeal in nature or have only limited, short-term impact.
StanChart said that it remained cautious on the sector as residential sales volumes continue to decline this year.
The lender said that its profit from joint ventures in the first quarter slipped to US$6 million from US$18 million as profit at Bohai Bank fell.
StanChart also noted that it booked a US$100 million provision for expected compensation fees for customers in South Korea who bought certain equity-linked securities which ended up causing them a loss. Regulators in the country have advised that banks in the country who sold such products should reimburse customers.
StanChart’s results come just days after its bigger, crosstown rival HSBC, which also makes the bulk of its profits in Asia, announced the stepping down of its CEO Noel Quinn and quarterly profit that was slightly ahead of forecasts.
StanChart’s Winters has held the top job since 2015 and is one of the longest-serving chief executives in UK banking. In March, the bank unveiled a management reshuffle that saw the departure of its corporate and investment banking head, Simon Cooper, who had been seen by some investors as a potential successor to Winters.
“We have taken action to create a simpler and more efficient organisation with changes to our group management structure,” Winters said. REUTERS
