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 boosted by a strong second quarter, with profits surging 12 per cent compared with the same period last year to $1.3bn, exceeding analysts’ expectations of $989mn.

StanChart’s strong performance was due in part to rising interest rates, volatile market conditions that pushed up its financial markets business and a record first-half income for its onshore China business.

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.

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

He said the external environment would remain “challenging” because of the war in Ukraine, disruption caused by Beijing’s zero-Covid policy in the lender’s critical markets of China and Hong Kong and global supply chain disruption.

“Recession risks are rising in the US and Europe as central banks are compelled to raise interest rates to address the rapid and sizeable increases in inflation,” he added.

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.

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.

StanChart — which operates in 59 markets in Asia, Africa and the Middle East — has struggled for years with ultra-low interest rates and has been caught by rising geopolitical tension between the US and China. The bank has called China “one of its biggest strategic opportunities”.

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.

To get there, he has announced deeper cost cuts and plans to slash more assets at the investment bank while investing heavily in digitisation and wealth management in Asia, particularly in China.