Standard Chartered profits surge as loan-loss provisions fall sharply

Standard Chartered posted a better-than-expected 57 per cent jump in first-half pre-tax profits as it followed fellow banking giants in releasing a wave of capital set aside in anticipation of a surge in Covid-related customer defaults.

Pre-tax profit for Standard Chartered, which has a strong presence in Asia, Africa and the Middle East, rose to $2.55bn in the first six months of this year, up sharply from $1.63bn in the same period last year.

Read more: Lloyds banking group lifts forecasts as UK economic outlook brightens

Analysts expected profits to reach $2.23bn.

The bank announced a three cents per share interim payout on dividend payments and kicked off a $250m share buyback.

The London-based bank’s loan-loss provisions fell sharply by $841m over the last year as the stronger than expected UK economic rebound helped avert a mass of household and business defaults.

Russ Mould, investment director at AJ Bell, said: “Standard Chartered’s profits were up sharply – thanks in the main to lower loan impairments or even their reversal – while net interest margins showed signs of stabilisation and loan growth showed some encouraging signs of momentum.”

However, he was coy on whether the bumper crop of UK banks’ earnings of late will trigger inflows into the banking sector.

“Either the markets are unsure whether the banks can genuinely make sustainable double-digit returns on equity (owing to regulatory pressure, competition from fintech rivals or the unpromising backdrop presented by a heavily indebted world), or they think the net asset value figures are too optimistic, or the banks are simply screamingly cheap.”

Standard Chartered released £51m in loan-loss provisions over the last six months.

Read more: Barclays UK assets hit £219bn as easing lockdown sees fewer loan costs

Rival Lloyds, Barclays and HSBC have also released enormous amounts of capital ring fenced in order to offset an expected increase in non-performing loans driven by the Covid-induced reduction in economic activity putting households and businesses under severe financial strain.

Chief Executive Bill Winters said: “We believe that we will soon be back on the same performance trajectory that we were on before the pandemic set us back.”

Income dipped five per cent, partly attributed to the bank’s net-interest margin being broadly flat in the second quarter of this year compared to the same period a year ago at 1.22 per cent.

The bank’s common equity tier one ratio – a measure of a bank’s strength – narrowed over the last year, down to 14.1 per cent from 14.4 per cent.

Standard Chartered shares were up 2.2 per cent in morning trading.

Global banks are struggling to generate profits from traditional business lines amid the record-low interest rate environment globally.

Standard Chartered’s profits rose less than its rivals HSBC and Barclays, driven by poor performances in its cash core management and trading businesses fell.

Profits were held back by an eight per cent increase in costs, largely in line with other banks, driven by wage increases and the resumption of bonuses for senior staff.

In a move aimed to tackle global societal issues, the bank set out three areas in which it will seek to help others. Those included: climate change, lifting women and small businesses and “giving more people the chance to participate in the world economy”.

Read more: First-half profits double at HSBC as bank reinstates dividend