StanChart lifts income target after wealth boom powers earnings beat; shares jump
HONG KONG/LONDON, July 29 : Standard Chartered's push for fee income powered a forecast-beating first-half profit, with the bank lifting its full-year income target after wealth and global banking revenue surged and credit charges tied to the Iran war held steady.
StanChart's Hong Kong-traded shares rose more than 5 per cent after the earnings release to hit an almost 19-year high on a fresh $1 billion share buyback and a 20.4 cents-per-share interim dividend.
The London-headquartered lender, which earns most of its revenue in Asia and Africa, said pretax profit for the first six months reached $4.78 billion, up 9 per cent from a year ago and ahead of a $4.52 billion analyst forecast.
It raised its guidance for the year, saying it would see income growth around the middle of a 5-7 per cent range instead of previous guidance for it to be closer to the bottom.
"Clients continue to turn to us to facilitate trade, investment and wealth flows across the world's most dynamic markets," Group Chief Executive Bill Winters said in a statement.
The strong set of results showed StanChart making continued progress on Winters' strategy to grow fee income, earning more from wealth products and cross-border banking despite concerns that geopolitical and regulatory uncertainty would dampen investments and dealmaking.
COSTS UNDER CONTROL, WEALTH INCOME SOARS
"Shareholders benefited from the revenue beat with a 2 per cent surprise on costs," analysts from Jefferies said in a research note, adding that wealth growth from higher-fee investment products rather than deposits bodes well for earnings quality.
Costs in the first half rose 2 per cent to $6.3 billion, less than the 6.4 per cent rise forecast by analysts.
Wealth management income soared 38 per cent, driven by double-digit growth in investment products as inflows and the number of new accounts increased amid strong demand for wealth advice during a period of market volatility.
The wealth boom comes despite Beijing's crackdown on cross-border investments, which is expected to weigh on the lucrative wealth businesses of banks such as StanChart and HSBC that serve mainland Chinese clients via Hong Kong.
StanChart's cross-border and corporate banking revenue rose 19 per cent in the first six months, as large corporate clients turned to the bank to borrow money, issue debt and strike deals.
StanChart said its Middle East portfolio, which represents 6 per cent of overall exposures, had remained broadly stable.
The lender took an additional impairment charge of $44 million in the second quarter, which it said partly reflected clients in the petrochemical sector showing early signs of distress.
It set aside $190 million as precautionary management overlays in April against expected future losses.
