StanChart restores payouts but income drop signals challenges ahead

Standard Chartered PLC reported a higher than expected 57% jump in first-half profit and $350 million worth of shareholder payouts, but a fall in revenue showed the longer-term struggle ahead for the bank.

StanChart announced a $250 million share buyback and resumption of interim dividend payments worth 3 cents per share, or $94 million in total.

However, income fell 5% thanks to low interest rates, which the bank said it hopes are bottoming out, and declining revenue in its cash cow transaction banking business.

Having spent the early years since his appointment in 2015 fixing StanChart’s battered balance sheet and slashing costs, Chief Executive Bill Winters in recent years has tried to restore its growth momentum. The results of those efforts have been mixed, as affirmed by the bank’s latest report.

The Asia, Africa and the Middle East-focused bank is looking to capitalise on rising trade between those regions, as well as grow fee-based businesses such as wealth management to compensate for rock-bottom policy rates worldwide.

The bank’s net interest income fell 4% as low rates squeezed its margins.

Statutory pretax profit for StanChart rose to $2.55 billion in January-June from $1.63 billion in the same period last year, the London-headquartered bank said.

That compares with the $2.23 billion average of analyst estimates compiled by Standard Chartered (LON:STAN).

“We believe that we will soon be back on the same performance trajectory that we were on before the pandemic set us back,” Winters said.

FUTURE PAYOUTS

StanChart posted a record performance in its wealth division, with income up 23% to $1.2 billion, thanks to strong product sales through its new digital channels.

Its profit was also boosted by a release of $67 million it had set aside to cover a potential increase in bad loans due to the pandemic, after taking a further $20 million charge in the first three months of the year.

However, StanChart released less than what larger rival HSBC announced a day earlier. HSBC has a much larger presence in markets such as Britain that were initially hit hard by COVID-19 last year but have since begun to recover, helped by high vaccination rates.

StanChart’s profit rebound was also less than those of Wall Street peers and British rivals HSBC and Barclays (LON:BARC), as income in its core cash management and trading businesses slumped.

Costs rose 8%, mainly due to higher pay for bankers as StanChart, in common with its rivals, boosted bonuses to try and retain key staff as banks’ profits rebound.

StanChart’s Hong Kong listed shares fell after the results and were last down 0.84%.

Asked about the potential for future payouts, Winters told Bloomberg TV that the bank had plenty of capital to invest in organic growth or interesting acquisition opportunities, but “if it turns out that there is nothing out there for us to invest in, which would be a bit disappointing, we could resume buybacks or raise the dividend.”

The bank also set out three areas in which it said it will use its clout to help tackle global societal issues, namely climate change, women’s rights and access to credit for small businesses, and “giving more people the chance to participate in the world economy”.

StanChart said it will set long and near-term goals and that this would not be “philanthropy” but commercial investment.