StanChart eyes quick recovery as profit falls
Standard Chartered on Wednesday said that it expects virus-battered economies to recover later this year, striking an optimistic note after increased credit impairment and provisions for future loan losses pushed first-quarter profit down 12 percent.
The emerging markets-focused lender’s tone contrasts with other European lenders that have posted earnings so far, saying it saw encouraging signs in China that the recovery could come even sooner. “We expect a gradual recovery from the COVID-19 pandemic . . . before the global economy moves out of recession in the latter part of 2020, most likely led and driven by markets in our footprint,” it said. “The pace at which individual markets recover will be heavily dependent on the efficacy of government stimulus initiatives and policies to ease restrictions, as well as the resilience of the COVID-19 virus itself,” it said.
As a British-based lender focused on Asia, Africa and the Middle East, StanChart’s profit slump, however, showed how the pandemic is hitting businesses worldwide as governments freeze their economies to slow the new coronavirus’ spread.
Pretax profit for January-March was $1.22 billion, versus $1.38 billion in the same period a year earlier, the London-headquartered bank said in a stock exchange filing. The figure was boosted by a $358 million increase in debt valuation adjustment — an accounting measure related to changes in the value of issued debt and which often rises as perception of the lender’s strength falls.
The result comes a day after bigger cross-town rival HSBC said that its first-quarter profit nearly halved as bad loan provisions jumped to $3 billion.
But StanChart’s outlook cheered investors, with its Hong Konglisted shares rising as much as 8 percent in afternoon trade, while the broader market was only 0.1 percent higher.
The bank saw its credit impairment in the quarter rising to $956 million from $78 million a year earlier, while “high-risk assets” on the balance sheet rose by $6.2 billion from three months prior. A large portion of the quarter’s credit impairment was accounted for by two corporate and institutional banking clients — one in commodity trading and another in health care, it said, without identifying the clients.
The bank said that it is targeting costs of below $10 billion for the full year, which it will achieve by reducing staff bonuses, pausing new hiring and slashing discretionary spending.
FASTFACT
StanChart credit impairment in the quarter rose to $956 million from $78 million a year earlier.