Standard Chartered announces share buybacks as profits climb 8%

Standard Chartered announced $500mn of share buybacks on Friday after pre-tax profits climbed 8 per cent in the first half of the year as the bank benefited from rising interest rates and market volatility.

The UK-based lender said on Friday that statutory profits before tax were $2.77bn in the six months to the end of June. Performance was buoyed by growth in retail products, transaction banking and its financial markets business, including foreign exchange trading.

Profits in the second quarter surged 12 per cent compared with the same period last year to $1.3bn, exceeding analysts’ expectations of $989mn. A record first-half income for its onshore China business contributed to the bank’s strong results.

However, the Asia-focused bank was forced to take a $237mn credit impairment charge related to its exposure to commercial real estate in mainland China, as well as a $70mn charge for a sovereign rating downgrade in Sri Lanka.

Its share price rose 1 per cent in Hong Kong trading following the results announcement.

Chief executive Bill Winters called it a “strong set of results” in what continued to be “difficult conditions”.

He said the global economic environment would remain “challenging” because of the war in Ukraine, disruption caused by Beijing’s zero-Covid policy and global supply chain disruption.

“None of us are complacent about what the shifting economic sands mean for business down the road,” he added.

The bank’s new $500mn share buyback comes on top of a $750mn buyback announced in February. It said it would also pay a dividend of 4c a share, or $119mn, meaning total returns to shareholders of about $1.35bn. It is aiming to deliver more than $5bn to shareholders over the next three years.

Operating income in the second quarter surged almost 7 per cent compared with the same period last year to $3.9bn, in line with expectations.

This meant income for the first half of the year was up 10 per cent at a constant currency basis to $8.2bn. Return on tangible equity for the first half climbed to just above 10 per cent.

Although based in London, StanChart makes the vast majority of its income in Asia, which posted $1.8bn of pre-tax profits — almost 65 per cent of the total — in the first half of the year.

Hong Kong, its largest market, performed poorly in the first half of the year due to enhanced pandemic restrictions. Income was down 5 per cent year on year, making it the worst performer among its five main markets, which also include Singapore, India, Korea and China.

Covid-19 lockdowns in China have weighed on StanChart’s wealth management business this year due to closed bank branches and weaker sentiment from customers. The division was down $200mn, or 16 per cent, in the first half.

Winters said many of the markets in Asia where the bank operates were in the “early stages” of post-pandemic recovery, pointing to a policy stimulus in China that could help revive its economy.

He said the bank would benefit from China further opening its capital markets to foreign investors and liberalising its currency regime.

In 2021, full-year statutory profit rebounded to $3.3bn after falling sharply during the initial phase of the pandemic, but revenues shrank slightly to $14.7bn.

In February, Winters committed the bank to a more ambitious profitability target, a 10 per cent return on tangible equity by 2024 versus 6 per cent for 2021.