Standard Chartered plans US$750m buyback as optimism grows

[LONDON] Standard Chartered will hand back US$750 million through a share buyback as the bank becomes more upbeat that earnings growth will return this year amid rising interest rates.

Adjusted pretax profits for 2021 rose 55 per cent to US$3.9 billion, below a company-compiled estimate of US$4.3 billion, the London-based bank said in a statement Thursday (Feb 17). The lender gave an optimistic outlook as it pointed to further hikes in rates by major central banks.

"We have committed today to a set of far-reaching actions, to deliver a return on tangible equity of 10 per cent by 2024," chief executive Bill Winters said in the statement. "Our refreshed strategy has proved resilient and delivered our return to growth in the second half of 2021."

The lender's stock has been on a roll since the start of the year, hitting a 2-year high last week with the shares boosted by hikes in interest rates by the Bank of England and expectations that the Federal Reserve will lift US rates this year.

Low rates have hit the industry's margins for years, with an internal StanChart calculation concluding that the low-rate environment had cost the company about US$1.5 billion in lost profits.

Still, the bank has faced rising expenses. StanChart warned last year of increasing staff costs on the back of higher performance-related pay, exacerbated by intense competition among banks. Speaking last month, Winters said the lender was having to look for savings across its business to keep a lid on expenses as the lender is forced to pay up for "pricey talent".

Last year, StanChart announced a US$250 million buyback and a US$0.09 dividend that underwhelmed investors. Expectations had been building the bank would rectify this at its full-year results, with analysts at Jefferies International going so far as predicting a US$1.7 billion buyback based on the amount of excess capital they said the lender would have on hand. BLOOMBERG