Money & Banking

Standard Chartered gets boost where HSBC flagged setbacks

Bloomberg October 30 | Updated on October 30, 2019

A logo of Standard Chartered in Hong Kong   -  REUTERS

More revenue from Europe, Americas fuels surprise profit jump

Standard Chartered Plc is showing strength where HSBC Holdings Plc cited weakness.

The lender generated 19 per cent more revenue in Europe and the Americas in the third quarter — regions HSBC flagged as disappointing this week as it vowed an overhaul. Standard Chartered’s results there, combined with a two per cent increase in revenue from Greater China and North Asia, sent adjusted pre-tax profit up 16 per cent, defying analysts’ predictions for a slight decline.

The figures are a sign the London-based bank has put the worst behind it four years after Chief Executive Officer Bill Winters took over to tackle issues ranging from a bloated cost base to government probes. The company said it’s sticking to a target to boost return on tangible equity to 10 per cent by 2021, even as it faces “growing headwinds” from geopolitical tensions, slowing economic growth and lower interest rates.

“Our strategy of the last few years has progressively created a stronger and more resilient business,” Winters said in a statement announcing results Wednesday. “The continuing execution of that strategy remains our priority, enabling us to face the more challenging external environment confidently.”

In London the shares were up as much as 2.8 per cent in morning trading. The increase mirrored the rise on the Hong Kong market.

“Management are executing on cost control and financial markets revenues are providing a tailwind to slowing transaction banking,” wrote analysts at Jefferies International Ltd in London in a client note. “But, as with HSBC and others, the question remains whether or not investors wish to reward banks with a rising contribution from financial markets.”

Revenue rises 7%

Altogether, Standard Chartered said revenue climbed 7 per cent while costs were little changed from a year earlier. Adjusted pretax profit was $1.24 billion, beating the consensus analyst estimate compiled by the company for profit to slip to $1.06 billion.

In Europe and the Americas, the company pointed to growth across treasury, corporate finance and financial markets businesses. HSBC had flagged declines in revenue in Europe and North America, calling its performance there “not acceptable.”

The Asia-focussed firm said revenue also rose in Hong Kong. Prolonged protests in the city, Standard Chartered’s largest single market, have weighed on the local economy.

Like HSBC, Standard Chartered said it had seen wealthy clients in Hong Kong exploring opening accounts outside of the Chinese territory. Speaking in an interview with Bloomberg Television, the bank’s Chief Financial Officer Andy Halford said a “number of clients” were looking to set up additional accounts, but added the bank had yet to see significant outflows of money from Hong Kong.

“It’s not big time, but it is a number of clients that are looking to do that,” he said.

The bank also predicted costs will be higher in this year’s second half than in the first, as it plows money into growing business. Speaking on a call with reporters, Halford said that achieving the bank’s target of a 10 per cent return on tangible equity by 2021 was becoming harder as expectations grow for interest rate cuts, but insisted the aim was “not out of sight at this point in time.”

The firm has been investing billions of dollars in technology as part of a digital strategy unveiled earlier this year. The lender won one of Hong Kong’s first licenses to open a virtual bank and opened online-only banks across Africa to attract new customers. Client adoption of digital channels “continued to improve,” the company said.

Published on October 30, 2019

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