StanChart swings back to annual profit

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Chartered Plc swung to an annual profit as loan impairments dropped by almost half and the bank cut costs.

Pre-tax profit for 2016 was $409 million, compared with a loss of $1.52 billion a year earlier, the London-based company said in a statement yesterday. Operating profit excluding one-time items was $1.09 billion, missing the $1.42 billion average estimate of 13 analysts surveyed by Bloomberg.

Chief executive Bill Winters, more than a year and a half into the job, is looking to show he’s stemmed the bank’s losses and can restore a dividend, after a sharp drop in revenue and surging loan impairments in 2015 drove the Asia-focused lender to its first annual loss since 1989.

In August, the bank said it would probably miss a profitability target set only last year, blaming an uncertain regulatory and economic environment.

“We recognise the importance of re-energizing growth in income together with strong cost and risk management,” chairman Jose Vinals said in the statement. “We still have a substantial way to go. The journey will be long and difficult to navigate at times, and there are no short-cuts.”

Standard Chartered dropped 1.2% to 741.8 pence at 8.39 a.m. in London yesterday. The bank’s shares have jumped 85% over the past 12 months, the best performance among major European lenders. However, the stock still trades at a steep discount to book value.

Revenue declined 11% to $13.8 billion, surpassing the average $13.7 billion estimate in the Bloomberg survey. Loan impairments fell to $2.38 billion from $4.01 billion in 2015.

Standard Chartered said its common equity Tier 1 capital ratio, a measure of financial strength, rose to 13.6% from 13% at the end of September. That was higher than the 13.5% average estimate from five analysts.

In his first year in charge, Winters tapped investors for $5.1 billion of fresh cash, identified 15,000 job cuts and said he’d restructure or sell $100 billion of risky assets.

The new strategy was designed to repair the damage caused by his predecessor Peter Sands’ rapid expansion across emerging markets, which unraveled when those economies slowed and commodity markets crashed, resulting in billions of dollars of soured loans.

Winters has also vowed to clean up the culture of the firm, where senior staff flouted ethics rules and considered themselves “above the law.”

“We have sharpened our focus on all aspects of conduct,” he said in the statement. “The pace and scale of those changes — many of which were done in parallel and required intense periods of adjustment for employees — undoubtedly impacted some elements of the Group’s financial performance in the period. But they were the right things to do.”