Standard Chartered resumed paying dividends after posting a six-fold jump in annual pretax profit, indicating the bank was making progress in its return to revenue growth following a painful two-year restructuring.
Under chief executive Bill Winters, who arrived in 2015, the emerging markets-focused lender has slashed more than 5,000 jobs and dumped business lines such as Asian equities to cope with the impact from the slump in global commodity prices and rising bad debts caused by over-exuberant lending.
StanChart, which makes the bulk of its revenue in Asia, had also skipped paying a dividend since the second half of 2015, the year it posted its first loss in over a quarter-century.
But on Tuesday, the lender said pretax profit for 2017 jumped to $2.41bn (£1.73bn) from $409m in the previous year and proposed a full-year dividend of 11 US cents per ordinary share. The profit was below the $2.7bn average of 10 analysts’ estimates, according to Thomson Reuters data.
StanChart’s Hong Kong shares rose more than 2 per cent in afternoon trading following the results and the dividend announcement, erasing their losses earlier in the day.
“The Board understands the importance of the ordinary dividend to shareholders and intends to increase the full year dividend per share over time,” StanChart’s Chairman Jose Vinals said in the bank’s earnings statement on Tuesday.
Operating income, closely watched by investors who want StanChart to deliver profit from core business growth rather than lower provisions for bad loans, was up nearly 3 per cent to $14.43bn, according to the bank’s statement.
Its core capital ratio, another closely watched measure of lenders’ financial strength, remained unchanged at 13.6 per cent last year compared to 2016, but above the lender’s targeted range of 12 per cent to 13 per cent.
GROWTH MOMENTUM
London-headquartered StanChart is looking to drive returns by boosting lending to key industrial sectors and top clients, in a move that could cut about a dozen investment banking jobs as it dials back in areas like private equity, sources told Reuters earlier this month.
Some of those jobs will likely be redeployed in other parts of the main corporate banking unit it is trying to strengthen, given its aim to increase lending to top companies in its main markets of Asia, Africa and the Middle East.
Despite the jump in 2017 profit, Mr Winters said on Tuesday StanChart needed to establish income growth momentum across all its businesses, which will help it generate income at a compound annual growth rate of 5-7 per cent in the medium term.
The results showed that some of its business lines are still struggling to deliver.
Underlying income in the corporate and institutional banking division fell 3 per cent year-on-year, as its financial markets unit suffered from the low global market volatility in 2017 that dampened trading activity.
StanChart’s private banking division reported a $1m loss for the year, as costs rose from investments. It, however, did see $2.2bn of new money flow into the private bank, compared to the previous year when it saw $2bn flow out.
“It is encouraging to see the improvement in profitability and the increased balance sheet momentum but there is still a long way to go before returns are at acceptable levels,” said StanChart chief financial officer Andy Halford.
Reuters
