Decline of income threatens to rock Standard Chartered despite regaining dividends and buybacks

People passing the office of Standard Chartered in Hong Kong on January 8, 2015

Image source: Reuters/Bobby Yip

Standard Chartered saw its pretax profit rise higher than expected by 57 per cent during the first half, sought to buy back shares worth USD 250 million, and resume paying dividends by unveiling an interim payout by 3 cents per share, but its income fell by 5 per cent, suggesting challenges for the bank as well as its competitor HSBC if unlocking provisions for bad loans stunts profits, as low rates of interest and fierce competition squeeze revenues, according to a recent report by Reuters.

Standard Chartered ascribed the lower income on global rates of interest now likely at their trough according to the bank, and it said that its statutory pretax profit rose from USD 1.63 billion to USD 2.55 billion in January to June in the same period last year, focusing on Asia, Africa, and the Middle East versus the USD 2.23 billion average of analyst estimates compiled by Standard Chartered.

Bill Winters, chief executive officer of Standard Chartered, told Reuters, “We believe that we will soon be back on the same performance trajectory that we were on before the pandemic set us back”.

Releasing USD 67 million set aside by the bank to offset the prospect of increasing bad loans because of the outbreak boosted its profit, after charging USD 20 million further the first three months of the year, but HSBC released more yesterday than Standard Chartered did today, being more present in recovering markets that suffered the most from COVID-19 such as the United Kingdom.

The profit of Standard Chartered rebounded less than those of its peers in Wall Street and its British competitors HSBC and Barclays did, as its income in its core cash management and trading businesses dropped, with costs soaring by 8 per cent, mainly due to higher pay for bankers as the bank and its competitors sought to keep essential staff with high bonuses as profits of banks rebound, and its listed shares in Hong Kong fell after the results, being last down by 1.69 per cent.

Standard Chartered also resolved to address climate change, lifting women, and small businesses, and “giving more people the chance to participate in the world economy” with its influence in three areas, saying that it will set goals for long and near terms and that this would be but commercial investment instead of ‘philanthropy’.