StanChart surprises with 40% jump in earnings, raises revenue target on rate hike

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  • Posts third-quarter pretax profit of $1.39 billion vs. estimated $1.05 billion
  • Raises revenue growth forecast for this year to 13% from 10%
  • The outlook for China’s real estate sector remains challenging
  • Hong Kong-listed shares rise 2.7%
  • The results come after arch-rival HSBC disappointed markets

SINGAPORE, Oct 26 (Reuters) – Standard Chartered’s (STAN.L) third-quarter profits jumped 40% as higher interest rates boosted the emerging markets-focused bank’s earnings, giving it the ways to improve their income prospects despite the weakening global economy.

StanChart, which derives most of its revenue from Asia, raised its revenue growth forecast for this year to 13% from 10% previously and CEO Bill Winters said the bank was confident in achieving its financial targets. for 2024.

Its Hong Kong-listed shares rose 2.7% while its London-listed shares were flat in early trading.

“Our performance this year has been strong and the pace of economic recovery in many of our footprint markets is encouraging, despite mounting recessionary pressures in some Western markets,” Winters said.

The results came a day after its larger counterpart HSBC (HSBA.L) reported a 42% drop in quarterly profit on Tuesday – due to loan losses and charges related to the sale of its French business – and surprisingly appointed a new CFO, soured investors’ confidence.

StanChart’s performance also contrasted with that of U.S. banks, which earlier this month reported weaker earnings as they increased provisions for expected loan losses and saw market volatility stifle trading. Read more

Earnings growth and an improved forecast for the London-based lender showed how rising interest rates were boosting profits for some banks, even as the global economy struggled amid cost volatility energy and impact of the Russian-Ukrainian war.

The bank said pre-tax statutory profit rose to $1.39 billion in the three months to September 30 from $996 million a year earlier and from the average estimate of 1.05 billion from 14 analysts, as compiled by the bank.

Analysts said the profit increase was helped by a strong performance from the lender’s transaction banking unit, which handles cash for corporate clients and saw revenue rise 47%. The bank’s underperforming wealth management business suffered another weak quarter, however, with revenue down 19% as weak stock markets left wealthy clients reluctant to invest.

GROWTH RESTORED

Winters, who took office seven years ago, has tried to restore growth while building a portfolio of digital assets in recent years, after fixing the bank’s balance sheet and cutting thousands of jobs at the start of its mandate.

StanChart, present in 59 markets with 85,000 employees, relies primarily on capturing trade flows between its key markets in Asia, Africa and the Middle East, but lacks the weight of larger competitors in the commercial banking and investment banking.

Still, the company’s London-listed shares have lost around 45% during his reign, although they have risen around 24% so far this year and outperformed their peers.

In July, StanChart encouraged investors with improved payouts to shareholders and a $500 million stock buyback.

Central banks around the world have tightened monetary policy this year to contain rising inflation.

Rising rates traditionally support banks’ profits as they can draw more from loans than they pay out to savers, but the current situation is clouded by the threat of an economic slowdown that could lead to heavy losses for investors. lenders.

StanChart said the outlook for China’s real estate sector remains “challenging” and expects a “prolonged recovery.” He said he has minimal exposure to mortgages on buildings under construction.

The bank has a $3.5 billion exposure to China’s property sector, which has been beset by multiple headwinds after regulators clamped down on excessive borrowing since mid-2020.

StanChart’s statutory credit impairment charges more than doubled to $227 million last quarter from a year earlier. The charges include $130 million for real estate exposure in China, among other things.

Reporting by Anshuman Daga and Lawrence White; Editing by Ana Nicolaci da Costa

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