Standard Chartered increased its performance targets, announced a new $1 billion share repurchase programme, and generated a 28% increase in annual earnings as rising global interest rates boosted its lending income.After a decade of near-zero rates, StanChart reported that nearly half of its 10% increase in total income came from interest as central banks increased interest rates to fight inflation.
The bank with a concentration on Asia, Africa, and the Middle East, which has been mentioned in connection with First Abu Dhabi Bank (FAB) takeover rumours, said that its most recent share buyback would soon begin.Following the announcements, its shares increased 3.5% in Hong Kong, while its London-listed stock opened 2% higher.
"We are upgrading our expectations, and are now targeting a return on tangible equity approaching 10 per cent in 2023, to exceed 11 per cent in 2024, and to continue to grow thereafter," Chief Executive Bill Winters said in a statement.
StanChart, with its headquarters in London, has previously set a 10% goal by 2024. For banks, return on equity is a crucial indicator of profitability.
StanChart's shares have been energised this year by renewed takeover speculation but Winters told reporters the bank had "had no engagement nor solicited any engagement from anyone and was "happy to be accomplishing targets" on its own.
Despite reporting statutory pretax profit of $4.3 billion for 2022, below the $4.73 billion average expert prediction that the bank had gathered, StanChart, which generates the majority of its revenue in Asia, had its best year since 2013.The bank did, however, announce a number of losses in China, one of its most important markets, where the economy has been severely hampered by the COVID-19 regulations.
For anticipated bad debts in the nation's struggling real estate market, it recorded an impairment of $582 million, bringing the total to a higher-than-anticipated $838 million.StanChart also took a $308 million hit which it attributed to "industry challenges" on its investment in China Bohai Bank, a lender based in the northern coastal city of Tianjin.The face-to-face sales of wealth management products were also constrained by the COVID-19 limits, which China is now beginning to loosen. This resulted in a 17% decline in revenue at the unit as consumers also became more risk conservative.
One of the highlights of the bank's overall performance was StanChart's financial markets division, which reported record income up 21% as erratic markets spurred frenetic trading activity.StanChart outperformed some of its competitors, but Winters, the longest-serving CEO of a significant European bank, still has work to do.
StanChart shares are approximately 25% below where they were in June 2015, when Winters took over, while shares of rival HSBC Holdings are unchanged and the benchmark FTSE index has increased by about 15%.
Winters, who has been trying to placate shareholders by focusing on growth after years of cost-cutting, said he had "no plans" to activate the bank's succession process by putting a timeline on his departure.He also said investors should "not be concerned" about any exposure to India's Adani Group, a conglomerate whose shares have lost some $100 billion in market value following a U.S. short seller's critical report on its finances.
In a long refutation of the short-assertions, seller's Adani listed contacts with international lenders and cited StanChart among other institutions.