Daily Management Review

StanChart Surfaces With A Pleasing Performance


The drop in loan impairments has given confidence to StanChart for arriving at its targets.

Amid the fifty nine percent losses, Standard Chartered finds its investors pleased as the bank began to turn things around as loan impairments dropped”. The interim management statement of SC states its “statutory pre-tax profit of $589m (£405m) versus $1.4bn in the same quarter a year ago”.
Moreover, the “core core equity tier one ratio” of SC went up by basics fifty points to “13.1%”, which primarily benefitted the three percent reduction in “risk-weighted assets”, along with “profits in the period and a small currency translation gain”.
In the year of 2015, the first quarter’s revenue was twenty four percent lower to “£3.3bn” underscoring the “consensus estimates”, yet it was “broadly stable” in comparison to “the fourth quarter”.
The “Impairment losses on bad loans” showed slight signs of recovery in last year’s respective quarter, while the “pre-tax profit” was at “$539m”, while in last year’s respective quarter the company witnessed “a loss of $876m”.
In the mean time, the total cost of operation came down by ten percent on “year-on-year” chart. However, the said ten percent does not include the “currency translation” which were six percent low as a reflection of the “restructuring actions taken towards the end of 2015 and business disposals”.
Nevertheless, after reporting an entire year of loss after twenty six years, StanChart is now back on track to “deliver the planned $1bn in gross cost efficiencies in 2016”. The said step will inflate SC’s “investment spend in the remainder of the year in line with its strategic agenda”. The chief executive of StanChart, Bill Winters stated:
“Although trading conditions in the first quarter remained challenging, we continue to make good progress on our strategic objectives. The management team is in place, we are taking action to improve recent income trends, managing costs tightly, progressing on key investments, making early progress on the exit of the liquidation portfolio, and maintaining strong levels of capital and liquidity."
While, the Hargreaves Lansdown’s Equity Research Head, Steve Clayton informed:
“Things aren’t great at Standard Chartered so far in 2016, but they’re a lot better than they were at the end of last year.
“If the bank can hit the 10% return on equity target, and pay out half of earnings as a dividend, then an attractive yield may one day be possible, given the shares are trading far below book value. However, getting there will be easier said than done.”
On the other hand, the Trading Director at Guardian Stockbrokers, Atif Latif commented:
“Overall, the numbers have been taken well by the market, which was expecting a weak update. The EM banks have had a tough time over the last few quarters with the downturn in the commodity sector, market volatility and a decrease in client activity/revenues.
“The question the market is now addressing is the ability of Bill Winters to deliver on the strategy update. We see today as a step in the right direction with the potential for continual disposal of non-core assets, continual cost savings and group restructuring that will enhance and counteract low revenue trends in retail. With credit risks now starting to ease we should see material improvement in the investment case for STAN and are encouraged by the update but mindful that there is still much work to be done.”