STANDARD Chartered shares fell as much as 17 per cent in London on Thursday (Oct 26) before trading was halted, following the bank’s reporting of a slump in profit and much larger than expected impairments relating to its China business.

The bank on Thursday said pre-tax profit dropped 33 per cent in the third quarter of the year, far beyond analyst estimates, after taking a nearly US$1 billion hit from exposure to China’s banking and troubled real estate sectors.

By 0713 GMT, Standard Chartered shares were down 9 per cent, set for their largest one-day fall since Feb. 24 last year, when Russia invaded Ukraine.

The UK-headquartered bank, which earns most of its revenue in Asia, booked July-September statutory pre-tax profit of US$633 million. That compared with US$996 million a year earlier and the US$1.41 billion average of 16 analyst estimates compiled by the bank.

Credit impairment charges rose US$62 million from a year prior to US$294 million after taking a US$186 million charge related to Chinese commercial real estate.

Standard Chartered also took a US$700 million hit from its stake in China Bohai Bank, which it said reflected subdued earnings at the lender and challenging economic backdrop.

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The hefty loss in China, where the bank has based much of its expansion effort, underlines the challenge the lender faces to improve returns via exposure to the world’s second-largest economy at a time of slowing growth and widening loss on loans.

Its Chinese real estate exposure totalled US$2.7 billion, down US$200 million from the previous quarter.

Standard Chartered said the hit on its investment in China Bohai, a lender in the eastern coastal city Tianjin, was due to lower forecast interest rates and decreased lending margins reported in the Chinese bank’s half-year results.

China Bohai booked a 17.8 per cent fall in January-June net interest income, leading to a nearly 7 per cent decline in its overall profit.

Standard Chartered said it is confident of hitting its return-on-tangible-equity targets of 10 per cent this year and 11 per cent in 2024, but downgraded some other performance forecasts for the year.

The “silver lining” for investors was the bank’s underlying business performance – excluding impairment charges – remained solid, Dickerson said in a note to clients.

Net interest margin, a measure of return on lending, will now “approach” 1.7 percentage points rather than be “around” that level, Standard Chartered said.

Rate-sensitive businesses received a boost, with income from transaction banking – the bulk in cash management services – increasing 42 per cent.

Retail products saw 17 per cent income growth, supported by a 50 per cent rise in deposit product income.

In the financial markets trading division, income fell 8 per cent as reduced market volatility curbed client appetite for trading in products related to interest rates, commodities and foreign exchange. REUTERS