Standard Chartered raises income outlook amid trading boon

Underlying pretax profit rose 4% to $1.5 billion in the period.
Image: Bloomberg

Standard Chartered Plc expects income to climb more this year than previously predicted after beating estimates in the first quarter as trading income jumped.

Underlying pretax profit rose 4% to $1.5 billion in the period, topping a company-compiled analyst estimates of $1.09 billion, the London-based bank said in a statement Thursday. Income growth for all of 2022 is expected to “slightly exceed” the previously guided 5% to 7% range, it said.

“Our first quarter performance was strong despite the volatile macro environment,” said Chief Executive Officer Bill Winters in the statement. “We are on track to deliver 10% return on tangible equity by 2024, if not earlier.”

The bank is exiting seven countries across Africa and the Middle East to focus on more fast growing markets in those regions. The lender is also betting on China, where it will spend $300 million to expand, particularly in wealth management. However, the country’s recent lockdowns have made doing business more difficult. In Hong Kong, a spike in Covid cases forced it to close branches hurting sales of wealth management products.

The lender flagged a $200 milion credit impairment in the period, including $160 million related to Chinese commercial real estate. Wealth management income slid 17%, with Hong Kong slumping 26%.

On the other hand, rising interest rates are expected to boost revenues as major economies enter a tightening cycle to contain inflation. The bank has previously said that low rates cost it about $1.5 billion in lost profits.

Financial markets income rose 32%, boosted by its commodity business. The increase from commodities, foreign exchange and rates largely mimics that of its larger rivals on Wall Street. Goldman Sachs Group Inc. and Morgan Stanley posted unexpected increases in trading revenue recently while Citigroup Inc. and JPMorgan Chase & Co. also surpassed analysts’ expectations. The banks’ top executives cited the turbulent geopolitical and macroeconomic picture as they outlined their hauls.

Costs have remained under the spotlight at Standard Chartered, with Winters warning last year that he would be looking for savings across the company to help cope with escalating staff costs.

The bank said operating expenses are expected to be slightly higher than the previously guided $10.7 billion “as a consequence of the impact of the higher income growth expectations on performance related pay.”

Winters will celebrate his seventh anniversary as CEO in June and shows no sign of ending his tenure at the bank having led a radical restructuring of its operations. Despite these efforts, Standard Chartered’s share price remains at about half the level it was when he joined in mid-2015.

© 2022 Bloomberg

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