StanChart unveils US$500m share buyback as rising rates boost H1 profit

STANDARD Chartered reported first-half pre-tax profit rose 19 per cent, above market expectations, as the emerging markets-focused lender benefited from rising interest rates and gave an upbeat outlook, pushing its Hong Kong shares 2 per cent higher.

The strong performance unveiled on Friday (Jul 29) showed how some banks with an eastern focus are shrugging off the impact of a weakening macro environment in the United States and Europe that is emerging as a key risk for others.

Statutory pre-tax profit for StanChart, which earns most of its revenue in Asia, grew to US$2.8 billion in the first half. That was above US$2.35 billion in the same period a year earlier, as well as the US$2.48 billion average of analysts’ forecasts compiled by the bank.

The London-headquartered lender increased payouts to shareholders, with an increased interim dividend of US$119 million equal to US$0.04 per share, and announce a US$500 million share buyback.

It said earnings were boosted by its focus on eastern markets, rather than the United States and Europe where interest rate hikes to combat spiralling inflation are threatening economic growth.

“Looking forward, whilst recession risks are rising in the West, we are seeing the early stages of a post-pandemic recovery in many of the markets in which we operate, underpinning our prospects for growth,” chief executive Bill Winters said in the results statement.

By 0525 GMT, with trading in London yet to begin, its Hong Kong shares were up 2 per cent, while the market benchmark was down 2.2 per cent.

Winters, who took charge 7 years ago has attempted to restore growth while creating a portfolio of digital assets in the last few years, after repairing the bank’s balance sheet and slashing thousands of jobs early in his tenure.

Still, the company’s share price has shed about 40 per cent during his time, though it has risen about a quarter so far this year, outperforming the sector.

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The bank, which is focused on Asia, Africa and the Middle East, said it was on track to deliver a 10 per cent return on tangible equity, a key earnings metric, by 2024 if not earlier.

StanChart said its financial markets trading division reported record income in the first half - up US$500 million - as market volatility drove increased client demand for foreign exchange and macro-economic related products in particular.

Analysts have warned that asset impairment charges and higher costs are likely to be a big drag on the performance of London-listed StanChart and its larger peer HSBC.

StanChart said its profits in Asia were dented by a US$351 million credit impairment, mainly due to losses in China’s troubled commercial real estate sector and the turmoil in Sri Lanka. REUTERS