Daily Management Review

StanChart Reports Estimates Beating Profits And Makes Bullish Outlook Due To Rising Rates


StanChart Reports Estimates Beating Profits And Makes Bullish Outlook Due To Rising Rates
Standard Chartered reported a 6% increase in first-quarter profit, sending its shares up 10 per cent, as the emerging-markets lender benefited from rising interest rates targeted at managing inflation.
The London-based institution, which focuses on Asia, Africa, and the Middle East, now anticipates income growth this year to slightly surpass earlier forecast of 5-7 per cent, demonstrating how policy rate hikes are boosting banks' chances even as the global economic outlook dims.
Following the earnings announcement, StanChart's Hong Kong-listed shares rose 10% to their highest level since early March, compared to a 0.6 per cent advance in the broader market.
The bank's statutory pretax profit grew to $1.49 billion in January-March, up from $1.4 billion the previous year. This compares to the bank's $1 billion average forecast taken from 16 analysts.
"We are on track to deliver a 10% return on tangible equity by 2024, if not earlier," Group Chief Executive Bill Winters said in the results statement on Thursday.
While it was optimistic about its comeback prospects, StanCharthinte warned that the Ukraine crisis could jeopardise the recovery from the COVID-19 pandemic.
This continued to weigh on the bank's China division in particular, as branch closures due to ongoing viral restrictions resulted in an 18% drop in wealth management income compared to the same period last year.
StanChart had a $107 million charge as a result of Sri Lanka's rating downgrading, as well as a $160 million penalty as a result of its exposure to China's ailing real estate market.
The bank's trading department recorded a 32% increase in income, with its macro trading section reporting a record quarter as a result of energy price volatility.
Winters, who took over in mid-2015, has spent the previous few years attempting to revive growth while building a portfolio of digital assets, after fixing the bank's balance sheet and laying off thousands of employees in his early years.
However, the company's share price has been cut in half during his tenure.
The results come a day after larger rival HSBC postponed plans for fresh stock buybacks this year after reporting an unexpected damage to capital as a mix of increasing inflation, geopolitical worries, and economic downturn harmed its prospects.
StanChart's London-listed shares have fallen 2 per cent in the last year, compared to a 10.4 per cent rise for HSBC and a 24 per cent decrease for Barclays.