HONG KONG - Standard Chartered on Feb 23 rewarded shareholders with dividends and a fresh US$1 billion (S$1.3 billion) buyback as profit rose 18 per cent, but it set out underwhelming growth forecasts that will concern investors amid worries about global banks’ exposure to China.
The bank reported 2023 statutory pre-tax profit rose to US$5.09 billion, in line with forecasts, and announced a US$1 billion share buyback and a jump in dividend.
But the Asia-focused lender set out restrained new guidance, saying it expected income to grow at the higher end of 5 per cent to 7 per cent in 2024, lower than the previous estimate of 8 per cent to 10 per cent given in October 2023. The lender booked 13 per cent income growth in 2023 in constant currency terms.
StanChart also said it would aim to increase returns “steadily” on tangible equity, a key profitability metric, from the current 10 per cent to 12 per cent by 2026, abandoning a previous forecast to hit 11 per cent in 2024.
StanChart took an US$850 million impairment mainly from its stake in Chinese lender Bohai Bank, its second time writing down the value of the unit as the lender was hit by increasing bad loans as growth in the world’s second-largest economy sputtered.
The hefty loss in China, a core target for StanChart’s strategy, underlines the challenge it faces to expand in the country as policymakers struggle to arrest a deepening property crisis and revive weak consumer confidence.
A fresh US$150 million writedown of its stake in Bohai Bank, following a US$700 million hit earlier in 2024, reduced its value to US$700 million from US$1.5 billion at the start of the year.
As well as hurting the value of StanChart’s investment in Bohai Bank, China’s real estate woes also hit the British bank directly as it took a further US$282 million provision on expected loan losses relating to the sector.
That brought total provisions for its China real estate exposure to US$1.2 billion in the last three years.
HSBC Holdings on Feb 21 reported a shock US$3 billion charge on its stake in a Chinese bank, the largest yet by an overseas lender, amid mounting bad loans in the country, sending the British bank’s shares plunging and taking the shine off its record annual profit.
StanChart said banking industry challenges and the uncertainty swirling around the property market were to blame for the decline in the stake’s current value.
The bank’s China onshore income grew only 4 per cent in 2023, compared with 42 per cent growth in offshore-related income.
StanChart’s Hong Kong-listed shares had jumped more than 3.6 per cent on Feb 23, compared with a flat benchmark Hang Seng Index.
The London-headquartered lender also announced a final dividend of US$560 million or 21 US cents per share, resulting in a 50 per cent increase of its full-year dividend payout to 27 US cents, greater than a consensus view of 23.7 US cents.
The bumper investor payouts but muted performance outlook from StanChart followed a trend set by European peers including Barclays, Deutsche Bank and HSBC as they opt to return more cash to shareholders rather than invest in growth in a tougher operating environment.
StanChart chief executive Bill Winters said in a release that the bank targets to return at least US$5 billion over the next three years.
Group chairman Jose Vinals said in the release: “The ‘last mile’ of inflation may prove stickier than expected and geopolitical risks abound.
“As we begin 2024, the war between Ukraine and Russia continues, increasing uncertainty for nations in Europe and elsewhere.” REUTERS
