StanChart shares hit by prospects and disappointed buyback hopes

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A Standard Chartered logo will be displayed at its headquarters in Hong Kong, China on August 1, 2017. REUTERS / Bobby Yip

  • Third quarter profit before tax increased from $ 435 million to $ 996 million
  • Posts lower loan loss allowances
  • Shares down 8%
  • Bank could keep power dry for acquisitions, analyst says

SINGAPORE / LONDON, Nov. 2 (Reuters) – Standard Chartered (STAN.L) forecast flat annual earnings on Tuesday, disappointing investor hopes for buybacks, causing stocks to fall 8% despite better-than-expected quarterly earnings.

CEO Bill Winters, who has been praised for restructuring the balance sheet and cutting thousands of jobs since taking office in 2015, has come under increasing pressure in recent years to increase revenue and lift the bank’s troubled stocks.

The strong quarterly results and $ 2 billion share buyback reported by Asia-focused rival HSBC (HSBA.L) last week had raised hopes among some investors that StanChart would follow suit, but analysts said that instead it saves capital. Continue reading

“We were hoping that another $ 250 million share buyback would be announced today)

The UK bank also saw the global recovery from the COVID-19 pandemic a little more uncertain than its rivals, who have released cash to cover bad loans that never materialized.

“The economic recovery from the COVID-19 pandemic has continued to be uneven and disrupted by supply chain disruptions,” said StanChart in his statement of results.

PROFIT JUMP

StanChart’s legal pre-tax profit for the third quarter more than doubled year over year to $ 996 million, aided by lower borrowing costs. The average estimate of 16 analyst forecasts made by the bank was $ 942 million in profit.

Loan loss provisions fell from $ 353 million to $ 107 million, with the bank expecting these to remain low in the fourth quarter.

Total revenue rose 7% to $ 3.8 billion, with the bank reiterating its goal of income growth of 5% to 7% from next year.

StanChart, which bases its business on tracking trade flows between its key markets of Asia, Africa and the Middle East, said trade revenue rose 13% to its highest level since early 2018.

CHINA EXPOSURE

The bank said it had $ 4.2 billion exposure to China’s real estate sector, where China Evergrande Group (3333.HK) is grappling with a mountain of debt of $ 300 billion and fears of further defaults and Stoke contagion risks. Continue reading

“We continue to monitor the potential second-order impact of recent developments,” said StanChart, citing the total exposure of $ 18.5 billion in commercial real estate is a fraction of the group’s total customer loans and advances of $ 302 billion. Dollar is.

Like HSBC, StanChart is relying on the world’s second largest economy to drive growth, but Winters faces the challenge of convincing investors of his bank’s prospects

StanChart, whose largest shareholder is Singapore state investor Temasek Holdings with almost 17%, trades at a lower multiple than its competitors. It is trading at 0.44 times book value for 2022, compared to 0.62 times for HSBC and 0.55 times for Barclays (BARC.L), according to refinitive data.

Winters is by far the longest-serving CEO of a major British bank. The shocking departure of Barclays CEO Jes Staley on Monday means that Barclays, HSBC, Lloyds (LLOY.L) and NatWest have made a change at the top over the past two years.

Reporting by Anshuman Daga in Singapore and Lawrence White in London Editing by Himani Sarkar and David Goodman

Our standards: The Thomson Reuters Trust Principles.


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