StanChart flags flat annual income despite strong Q3 profit; shares drop
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[November 02, 2021] By
Anshuman Daga and Lawrence White
SINGAPORE/LONDON (Reuters) - Standard
Chartered forecast flat income for the full year amid "uneven" economic
recovery from the pandemic, even as it turned in a
stronger-than-expected quarterly pre-tax profit, sending its shares
lower on Tuesday.
CEO Bill Winters, who has won plaudits from investors for repairing the
balance sheet and slashing thousands of jobs since taking the top job in
2015, has been under pressure in recent years to boost growth and shore
up the bank's shares.
Under the former JPMorgan banker, the Asia-focussed StanChart has built
a portfolio of digital banking platforms and invested heavily in
technology, but its shares have still underperformed its peers.
Ahead of the results, shares of the emerging-markets lender had risen
just 8% this year in London, versus an 18% rise for larger rival HSBC
and a 37% surge for Barclays. On Tuesday, StanChart shares fell 5% in
early trade.
"The economic recovery from the COVID-19 pandemic has continued to be
uneven and punctuated by supply-chain disruption," London-headquartered
StanChart said in its results statement.
Q3 PRETAX PROFIT DOUBLES
Statutory pretax profit for the bank jumped to $996 million in
July-September, from $435 million a year earlier, aided by lower credit
charges. That beat an average estimate of $942 million of 16 analysts as
compiled by the bank.
It reported credit impairment charges of $107 million versus $353
million a year earlier and expects these to remain at low levels in the
fourth quarter.
Overall quarterly income for the lender rose 7% to $3.8 billion from a
year earlier. It reiterated its target to return to a 5-7% income growth
from next year.
Last month, HSBC beat quarterly estimates and announced a $2 billion
share buyback.
StanChart, which bases its business on capturing trade flows between its
key markets of Asia, Africa and the Middle East, said trade income rose
13% to the highest since early 2018.
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A logo of Standard Chartered is displayed at its main branch in Hong
Kong, China, Aug. 1, 2017. REUTERS/Bobby Yip
But analysts say that StanChart, which has a presence in 59 markets and employs
85,000 staff, lacks the heft of larger, more well-capitalised rivals in
commercial banking even as it remains a small player in the lucrative investment
banking business.
The bank's underwhelming performance over the past decade has made it a sore
investment for Singapore state investor Temasek Holdings, which has been
StanChart's largest shareholder since 2006 and currently has a nearly 17% stake.
CHINA REAL ESTATE EXPOSURE
The bank said it had $4.2 billion in exposure to China's real estate sector,
where China Evergrande Group is grappling with a $300 billion debt pile and
stoking worries of further defaults and contagion risks.
"We continue to monitor the potential second order impacts of recent
developments," StanChart said, stating an overall exposure of $18.5 billion to
commercial real estate, a fraction of its total group customers loans and
advances of $302 billion.
Like HSBC, StanChart has been betting on the world's second-largest economy to
help drive its growth amid sluggish prospects in western markets.
Winters faces a challenge to convince investors of StanChart's prospects as the
bank is trading at a lower multiple than peers. It trades at 0.44 times book
value for 2022 versus 0.62 times for HSBC and 0.55 for Barclays, Refinitiv data
shows.
Winters is by far the longest-serving CEO at a major British-based bank. The
shock departure of Barclays CEO Jes Staley on Monday means it along with HSBC,
Lloyds and NatWest have all seen change at the top in the past two years.
(Reporting by Anshuman Daga in Singapore and Lawrence White in London; Editing
by Himani Sarkar)
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