Standard Chartered announces $1bn buyback despite weaker-than-expected profits

Standard Chartered announced a $1bn share buyback on Thursday, after its pre-tax profits rose less than analysts expected in the fourth quarter of last year.

The UK-based bank said profits before tax were $123mn in the final three months of 2022, an improvement after making a loss a year ago but far below analysts’ estimates of $571mn.

The bank suffered setbacks to its wealth management business, whose growth has been a priority for chief executive Bill Winters. Income from the division fell 19 per cent in the last quarter of 2022, which the bank blamed on “risk-averse customer sentiment and the impact of Covid-19 restrictions”.

Still, Standard Chartered said China’s reopening should help its performance and it was optimistic because of rising rates and growth in Asian economies, where the bank makes most of its money.

Return on tangible equity, a measure of profitability, would approach 10 per cent in 2023 and exceed 11 per cent next year, it estimated.

“We have delivered a strong set of results in the fourth quarter and for the full year 2022,” Winters said. The bank is making “significant progress against the five strategic actions outlined last year, and we remain confident in the delivery of our financial targets”, he added.

Winters received a 16 per cent rise in total remuneration, taking his pay package to £5.5mn. The bank said this reflected the “improved performance achieved”.

The share buyback would start imminently, the bank said as it published its full-year earnings. Shares rose as much as 4 per cent in afternoon trading in Hong Kong after the buyback was announced.

The latest share buyback from the bank comes as Winters, a former JPMorgan executive who is in his eighth year at the helm, is under pressure to show that he has turned around Standard Chartered during his tenure.

The bank must reassure shareholders that it can successfully increase revenues as an independent business if it is to rebuff any future takeover bids following recent interest from First Abu Dhabi Bank, which has now backed away from a bid.

Standard Chartered reported total credit impairment charges of $838mn in 2022, up $575mn year on year, and said exposure to China’s real estate sector accounted for the majority of this. Real estate in the world’s second-largest economy has faced a protracted liquidity crisis as authorities crack down on excess leverage.

The emerging markets-focused lender has taken a $283mn charge related to sovereign downgrades in Pakistan, Ghana and Sri Lanka.

Like other lenders, Standard Chartered has bet on cost cutting and a shift to wealth management as it seeks to recover from the pandemic and catch up with rivals. It has struggled to grow as fast as local peers in Asia, the Middle East and Africa.

Expenses rose 14 per cent in the fourth quarter because of inflation and higher investment spending, the bank said.

First Abu Dhabi Bank said last month that it had considered a bid for Standard Chartered but was no longer pursuing it. Under UK merger rules, FAB cannot bid for the bank until July unless another bidder emerges, but several people close to the Abu Dhabi lender have told the Financial Times that the deal could be revived once the deadline passes.

Standard Chartered said the buyback and a final dividend of 14 cents per share would take shareholder distributions since the start of 2022 to more than half of the $5bn target it set to reach by 2024.