Standard Chartered misses profit expectations amid China property crunch

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Standard Chartered reported lower than expected profits for the third quarter as trading revenues fell and the bank took a near-$300mn charge largely due to its exposure to commercial property in China.

The UK-based lender said pre-tax profits were $1.3bn in the three months to September, falling short of analysts’ expectations of $1.4bn and slightly below the figure a year earlier.

“We have continued to make strong progress,” said chief executive Bill Winters, adding that the bank was “highly liquid, and well capitalised” and was “confident in the delivery of our 2023 financial targets”.

The lender’s revenues were $4.4bn in the third quarter, up from $4.1bn during the same period last year but falling slightly short of analysts’ forecasts.

Shares fell 7 per cent in Hong Kong trading after the results were published. 

Standard Chartered is based in the UK but makes most of its profits in Asia, particularly Singapore and Hong Kong. Profits were flat in Asia in the third quarter and rose in Africa and the Middle East, but the bank made a loss in its business in Europe and the Americas, its results showed.

The results come as other European banks report better than expected earnings, in part because of interest rate increases by central banks that have boosted margins.

Deutsche Bank, Lloyds Banking Group and Santander have all reported better than expected profits this week, and third-quarter results from several of the biggest US banks were stronger than predicted.

StanChart’s return on tangible equity — a key measure of profitability — fell to 7 per cent, down 2 percentage points from a year earlier, a decline that the bank attributed to a higher tax charge.

The bank’s chief financial officer for the Americas, Shaun Taylor, wrote in May that investors commonly expected a figure of more than 10 per cent.

The bank took a credit impairment charge of $294mn, more than the $230mn that analysts expected. Of that, $186mn was linked to commercial property in China, it said.

Revenues rose in the bank’s wealth management business.

StanChart reported quarterly earnings for the first time since First Abu Dhabi Bank was freed in August from a UK takeover rule that had prevented it from making a bid for the bank. StanChart’s shares trade at a discount to the book value of its assets, and with a market value of £19.2bn it has become an affordable takeover target for some rivals.

During its previous earnings release in July, StanChart announced a $1bn share buyback scheme and boosted its dividend, helped by higher rates and strong trading performance.

StanChart said in August it had agreed to sell its aviation finance leasing business for $700mn to Saudi Arabia’s Public Investment Fund. The bank said on Thursday the cash would increase its CET1 ratio, a measure of a bank’s financial strength, by 19 basis points in the fourth quarter of the year.