StanChart shares slide on lack of dividend, revenue recovery

[LONDON] Standard Chartered reported a 93 per cent rise in half-year underlying pretax profit to US$1.8 billion, but the bank's shares fell as it failed to resume dividends, highlighting the scale of the challenge it faces to increase revenues.

The profits jumped partly because the bank avoided the hefty losses from its private equity business and bad loans that blighted its results in the same period a year ago.

StanChart's underlying loan impairments of US$583 million for the first half, were down from US$1.1 billion in the same period a year ago. These are closely watched by investors in the Asia-focused bank, which has had a glut of bad debts in the past few years following over-exuberant lending.

"We are positioned to resume growth, and we have shown early encouraging signs we can do that," Chief Executive Bill Winters told reporters on a conference call.

The bank said it would not resume paying dividends, as some investors had hoped for following its stronger profits and capital position. StanChart said it would revisit the issue at the end of the year.

Standard Chartered shares fell as much as 5 per cent in London by 0915 GMT following the results announcement.

Having slashed costs and stamped out riskier behaviour at the bank, Winters' biggest problem now is growing revenues to boost profits.

In the two years since he took up his job at StanChart, former JPMorgan banker Winters has announced over 15,000 job cuts, raised more than US$5 billion in capital and overhauled how the bank makes loan decisions in an effort to make it sturdier.

StanChart delivered an underlying return on equity of just 0.3 per cent in 2016, far below even the 8 per cent target that it last year abandoned in a sign of the challenges it faces to grow income.

Low global interest rates, lost income from axed businesses and rising competition from regional players in its main markets have combined to temper hopes of an income recovery at the bank.

StanChart rival HSBC on Monday reported rising profits and the return of a further US$2 billion to shareholders via a stock buy-back, in a sign that StanChart's bigger rival is much further ahead in its turnaround plan.

HSBC has paid out around US$10 billion a year in dividends in the last four years, while StanChart cut payouts since November 2015 to focus on restructuring.

The bank said its core capital ratio, a key measure of financial strength, rose to 13.8 per cent at the end of June on improving profits.

REUTERS