StanChart restores dividend, buyback but income drop signals challenges ahead

HONG KONG (Reuters) -Standard Chartered PLC posted a higher than expected 57% jump in first-half pretax profit and announced a $250 million share buyback, with the bank also resuming dividend payments by unveiling a 3 cents per share interim payout.

FILE PHOTO: A logo of Standard Chartered is displayed at its main branch in Hong Kong, China, Aug. 1, 2017. REUTERS/Bobby Yip/File Photo

However, income fell 5%, indicating that StanChart, like larger rival HSBC, faces longer-term challenges once the unlocking of bad loan provisions stops boosting profits, as low interest rates and fierce competition squeeze revenues.

StanChart blamed the lower income on global interest rates which it said were now likely at their trough.

Statutory pretax profit for StanChart, which focuses on Asia, Africa and the Middle East, 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.

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

StanChart’s profit was 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 HSBC did 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, 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 1.69%.

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, lifting women and 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.

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