Standard Chartered swings to profit

Pretax profit for 2016 was $409m, compared with a loss of $1.52b a year earlier, the lender said

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

Pretax profit for 2016 was $409 million (Dh1.5 billion), 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 Officer 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 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-energising 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 shortcuts.”

Standard Chartered dropped 1.2 per cent to 741.8 pence at 8.39am in London. The bank’s shares have jumped 85 per cent 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 per cent 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 per cent from 13 per cent at the end of September.

That was higher than the 13.5 per cent average estimate from five analysts. In his first year in charge, Standard Chartered Chief Executive Officer Bill Winters, tapped investors for $5.1 billion (Dh18.7 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 unravelled when those economies slowed and commodity markets crashed, resulting in billions of dollars of soured loans.