Standard Chartered Plc reported its largest quarterly profit since the first quarter of 2014, as rising interest rates boosted its bottom line and Asian markets accelerated out of Covid lockdowns.
(Bloomberg) — Standard Chartered Plc reported its largest quarterly profit since the first quarter of 2014, as rising interest rates boosted its bottom line and Asian markets accelerated out of Covid lockdowns.
The London-headquartered bank reported adjusted pretax profits of $1.71 billion in a statement Wednesday, exceeding a Bloomberg-compiled analyst estimate of $1.5 billion for the first three months of the year. Net interest income, a key measure of profitability, increased 13% helped by markets such as Hong Kong and Singapore.
“Top line growth has been really strong for us,” Chief Financial Officer Andy Halford said in a Bloomberg Television interview. “Interest rates going up has clearly been a help in that but also we’ve seen a lot of client demand as particularly the Asian markets now pull through the Covid period.”
Income this year is expected to grow around 10%, the top end of the lender’s range, the bank said. US firms such as JPMorgan Chase & Co. and Wells Fargo & Co. this month also reported higher earnings off rising rates.
“Business performance continues to improve across our markets and products and has been achieved in what continues to be an uncertain environment,” Standard Chartered Chief Executive Officer Bill Winters said in the statement. The bank remains “confident in the delivery of all of our financial targets,” and also reiterated a plan to return more than $5 billion to shareholders by 2024.
Standard Chartered did shrink its previous guidance for full year average net interest margin, saying it would now be around 170 basis points in 2023. That’s down 5 basis points from a previous forecast in February.
Shares in Standard Chartered rose 0.5% at 8:18 a.m. in London.
Customer Deposits
After a tumultuous start to the year, which saw Credit Suisse Group AG and various US lenders upended by customers pulling deposits, investors are now closely tracking the flow of money into or out of banks. Standard Chartered said its customer deposits were stable throughout the quarter and Halford said the bank has benefited from clients moving assets in recent months from stricken firms.
There will be “a flight to safety,” Halford said on Bloomberg Television. “We will be the beneficiaries of this over a period of time.”
Still, the lender mostly missed out on a fixed income trading boom seen at some Wall Street firms like Bank of America Corp. The bank’s financial markets arm posted a 9% decline in the period, with income from commodities lower compared to its record performance a year ago.
Standard Chartered cited China’s reopening as aiding a rebound in its critical Hong Kong and China markets. The lender flagged a $26 million credit impairment in the period and noted there was a $2 million net release relating to China’s troubled commercial real estate sector, a reverse from charges taken in previous quarters.
Halford said on a media call that the lender was in talks with a number of parties about the sale of its aviation unit and the lender could announce a sale in the next quarter.
Bid Interest
Standard Chartered’s future was in focus earlier this year after First Abu Dhabi Bank PJSC said in January that it had explored a takeover of the emerging markets-focused lender but was no longer doing so. Winters has downplayed the chances of any deal, pointing to the regulatory challenges presented by any takeover, as well as the improvements in the business’s performance.
“The thing with Standard Chartered is we are doing very well all by ourselves,” Winters said in a January Bloomberg Television interview. “Everything is on track for us.”
The bank’s stock has slid in recent months as bid expectations have cooled and have lost about a fifth of their value from their early March high. The company is currently valued at around $22 billion. Under takeover rules, FAB’s statement precludes it from making an offer for another couple of months, except under certain circumstances.
Despite being based in the UK, Standard Chartered makes most of its money outside of the country from its operations in Asia, Africa and the Middle East. Its single biggest market is Hong Kong, though it also has major operations in Singapore where its largest investor, Temasek, is based.
Other highlights from Standard Chartered’s earnings in the first quarter include:
- Return on tangible equity of 11.9%, up 170 basis points year-on-year
- CET1 ratio of 13.7%
- Expenses increased 5% to $2.7 billion
–With assistance from Denise Wee.
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