StanChart Q1 profit beats forecasts on recovery from Covid-19

Hong Kong

STANDARD Chartered posted on Thursday a higher-than-expected 18 per cent rise in quarterly pre-tax profit, as the emerging-markets-focused bank began recovering from the economic hit caused by the coronavirus pandemic.

Pre-tax profit for January-March was US$1.4 billion, versus US$1.2 billion a year earlier, and compared with an average analyst forecast of US$1.08 billion compiled by the British bank.

The improvement was driven by StanChart setting aside less cash to cover bad loans than it had done one year ago, as well as strong performance in its wealth management business.

However, unlike other British-based lenders such as HSBC and Lloyds that reported results earlier this week, StanChart released only a small amount of the funds it holds against bad loans.

The lender took a US$20 million credit impairment, down a hefty US$354 million from the previous quarter.

StanChart's Hong Kong listed shares traded up as much as 2.4 per cent after the results were announced, extending earlier gains.

In common with HSBC, StanChart's results showed how rock-bottom interest rates globally are squeezing banks' profits, with its cash management division - usually a steady earner - seeing income fall 32 per cent.

And unlike US rivals such as JPMorgan that booked bumper trading profits in the first quarter, StanChart's financial markets division also saw revenues fall due to fading client demand.

One bright spot for StanChart was its often underperforming wealth management business, which saw a record quarter with income up 21 per cent on strong sales of foreign exchange and equities-related products.

StanChart said it expected income to be similar this year to 2020, and to grow more the following year.

Last year, the bank pushed back its long-standing profitability goal of reaching a return on tangible equity of 10 per cent, as it increased charges for bad loans due to the economic damage following the Covid-19 pandemic. REUTERS