Financial Results

Standard Chartered Reports Strong H1 Pre-Tax Profit

Editorial Staff 31 July 2023

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Income and profits rose at the UK-listed bank, including its wealth management business.

UK-listed Standard Chartered said last Friday that its underlying pre-tax profit for the six months to end-June rose 25 per cent year-on-year to $3.306 billion, on operating income of $8.951 billion – up 14 per cent. 

Credit impairment fell 35 per cent to $172 million; operating costs rose 8 per cent to $5.504 billion, the bank, which earns the bulk of its revenues in Asia, the Indian sub-continent, and Africa, said in a statement. 

The bank’s Common Equity Tier 1 ratio, a measure of its buffer capital, was 14 per cent on 30 June, unchanged from a year earlier. Its liquidity coverage ratio was 165 per cent, up from 147 per cent. (The liquidity coverage ratio is the requirement whereby banks must hold an amount of high-quality liquid assets sufficient to fund cash outflows for 30 days.)

Investors appeared to like the results, with earnings ahead of forecasts. Shares in StanChart were up 3.96 per cent at the close on Friday. Since January, the stock price has risen more than 15 per cent.

"Income growth was strong across a number of segments of the business. Underlying credit quality remains good. The guidance for 2023 was increased, with management remaining confident about medium-term targets," Nic Ziegelasch, head of equity research at Killik & Co, said in a note.

However, China is problematic for the lender, he said. 

"We do remain concerned about its exposure to China and Hong Kong as well as the potential risk of deglobalisation for its Asian trade focus and remain neutral on the stock. The bank is currently trading on 6.3x consensus 2024 earnings and offers a 3.0 per cent prospective yield," he said. 

Wealth, private banking
Within the consumer, private and business banking arm, pre-tax profit was $1.373 billion in the H1 2023 period, rising from $714 million a year before. Income in this area benefited from higher interest rates.

In StanChart’s wealth business, operating income for the first half of 2023 was $266 million, rising 6 per cent year-on-year and 5 per cent on a constant currency basis. It rose 10 per cent year-on-year in the second quarter, on a constant currency basis. 

The firm said there was double-digit growth in foreign exchange, fixed income and structured products, partly offset by lower managed investment income as turnover was hit by subdued markets. 

"We have delivered a very strong set of results for the first six months of 2023. Income was up 18 per cent year-on-year and underlying profit before tax was up 29 per cent to $3.3 billion,” Bill Winters, group chief executive, said. “We remain strongly profitable, highly liquid, and well capitalised. These attributes enable us to return a further $1 billion to our shareholders through a new share buy-back announced today. Also reflecting our confidence in the business, we are upgrading our 2023 guidance for income, jaws and RoTE [return on tangible equity] which we now expect to be 10 per cent for the full year." (The term "jaws" is designed to compare income (a banking institution's gross income or core revenues) and operating expenses growth trends.)

Asia accounted for the lion’s share of pre-tax profit, at $2.749 billion out of a total of $3.306 billion for the half-year period, on an underlying basis.

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