Standard Chartered announces $1bn buyback scheme and lifts guidance despite weak profit
Standard Chartered announced a $1bn (£831m) buyback scheme and raised its guidance for the next couple of years despite its results failing to meet market expectations.
Results for the bank, which has been subject to takeover speculation in recent months, were much weaker than expected. Profit in the final quarter of 2022 was significantly below expectations at £123m, a far-cry from the £571m expected by analysts.
Profit was lower as the bank set aside more capital than anticipated to cope with its exposure to the Chinese commercial real estate sector and sovereign downgrades.
Credit impairments in the period were £344m, more than the £257m expected by experts. Impairments are reductions in the value of an asset. The bank booked a further $308m impairment on its investment in China Bohai Bank.
Despite the disappointing results, the emerging markets lender announced a buyback programme of $1bn as its CET1 ratio stood at 14 per cent. The CET1 ratio measures the strength of a bank’s balance sheet.
CEO Bill Winters said the bank had delivered a “strong performance” in 2022 and looking forward he was optimistic for the markets in our footprint as they finally emerge from the challenges brought by the pandemic and as economic activity rebounds.”
Investors were also impressed as the bank lifted its forecasts for the next few years.
It said its return on tangible equity, a key figure of bank profitability, will likely hit 10 per cent in 2023 before exceeding 11 per cent in 2024. It previously guided for a 10 per cent return in 2024.
Standard Chartered also raised its forecast for its net interest margin over the next couple of years. Net interest margin measures the difference between what banks pay out and receive in interest payments.
Despite fears of a global recession, Standard Chartered said most of the markets in which it operates will “continue their recent momentum with GDP growth in the Asian economies at above 5 per cent over the next two years…The recent opening-up of China and the generally receding impacts of Covid-19 should help in that regard.”
Bill Winters said he continued to be “very optimistic about our growth in China”, saying the company had “good momentum coming out of 2022”.
Standard Chartered has been in the news in the past few months as a potential takeover target, but Winters confirmed the bank had “had no engagement nor solicited any engagement from anyone.”
He said the bank was “happy to be accomplishing our targets all by ourselves”.
In early January, First Abu Dhabi Bank announced it had been considering an offer, although it ultimately decided against. However in early February, Bloomberg reported that the middle eastern lender was in fact still interested.
Although it is headquartered in London, Standard Chartered operates in 59 markets across the world, with a focus on Asia. Its sprawling footprint makes it an attractive target due to its ready access to fast growing markets, particularly China.