StanChart flags growth, interest rate headwinds after Q3 profit beat

HONG KONG/LONDON: Standard Chartered posted a forecast-beating 16% rise in quarterly profit, helped by rising income from corporate and private banking clients, but the bank flagged headwinds from a likely drop in global growth and lower interest rates.

The third-quarter results underscored StanChart's steady progress in its second three-year turnaround plan, where it has a goal to double returns and dividends in three years by cutting $700 million in costs and boosting income.

The first of those in 2015-2018 under Chief Executive Bill Winters focused on repairing a balance sheet ravaged by ill-advised lending in Asia, improving the bank's internal controls, reducing costs, and shedding unwanted businesses.

Winters said on Wednesday the execution of the new strategy remained a priority to drive profitability.

StanChart's pretax profit for the three months ended Sept. 30 rose to $1.24 billion from $1.07 billion in the same period a year ago, it said in a statement, above the $1 billion average of analysts' forecasts compiled by the bank.

The bank's corporate and institutional banking income grew 13% during the quarter, while private banking rose 14%, it said, adding its core capital ratio remained within the 13-14% target range at 13.5%.

The near-term outlook for the bank, however, is clouded by a Sino-U.S. trade war, Britain's protracted withdrawal from the European Union, an easing monetary policy cycle, and unrest in its core market of Hong Kong.

Five months of political turmoil in Hong Kong are set to weigh on HSBC and StanChart credit growth and asset quality in the near to medium term, people with knowledge of the matter said last week.

The Chinese-ruled city brought in a third of StanChart's income in the first half of this year, as per the banks' financial filings. The bank said on Wednesday its income grew in Hong Kong in the third quarter, without giving details.

StanChart's bigger rival HSBC abandoned on Monday its own return target of greater than 11% by 2020, blaming a worsening revenue outlook and tougher than expected market conditions.

"We continue to focus on executing our strategy ... but there are growing headwinds from the combination of continuing geopolitical tensions and expectations of declining near-term global growth and interest rates," StanChart said.

The London-headquartered bank reported a jump of 160 basis points in return on tangible equity to 8.9% in the third quarter, bringing it closer to its more than 10% goal it has set itself by 2021.

The Hong Kong-listed shares of the bank, which makes bulk of its revenues in Asia, rose as much as 3.3% after the results, in a weaker Hong Kong market.

The London-listed shares of StanChart are up 14% so far this year, compared to a 9% drop in rival HSBC's shares.

source https://www.thesundaily.my/business/stanchart-flags-growth-interest-rate-headwinds-after-q3-profit-beat-KG1549639