Standard Chartered buyback of $1 billion shares was announced as first-half profit jumps above 20%. Raising a key performance metric Standard Chartered share buyback program of $1 billion was unveiled on Thursday, as rising rates and record financial market business propelled margins at the emerging markets-focused lender.
StanChart Plc raised its forecasts for income growth for 2023 and doubled down on Standard Chartered buybacks as rising interest rates propelled earnings.
Standard Chartered share buyback
StanChart’s performance, like that of global peers, was aided by aggressive central bank interest rate hikes aimed at combating inflation, which in turn allowed lenders to charge more after a decade of near-zero rates.
The Asia, Africa and Middle East focused StanChart Plc, which has been the subject of takeover speculation linked with First Abu Dhabi Bank (FAB) FAB.AD, said latest standard chartered buyback exercise would start imminently. Stanchart shares rose 3.5% in Hong Kong after the announcements.
StanChart Plc, which earns most of its revenue in Asia, said statutory pretax profit for the first six months of this year reached $3.32 billion. That compared with $2.77 billion a year earlier and the $3.18 billion average of 16 analyst estimates compiled by the bank.
“We are mindful of the external macroeconomic headwinds and recent challenges in the banking sector; however, our balance sheet is robust, and we have the right strategy, business model and ambition to deliver our targets,” CEO Bill Winters said in a statement during Standard Chartered share buyback report.
“We are upgrading our expectations, and are now targeting a return on tangible equity approaching 10% in 2023, to exceed 11% in 2024, and to continue to grow thereafter,” Bill Winters said in a statement.
London-headquartered StanChart previously targeted 10% for 2024. Return on equity is a key profitability metric for banks.
Take over speculations
StanChart’s shares have got a boost on renewed takeover speculation, with FAB batting away media reports that it was currently eyeing a bid.
Still, StanChart shares are about 25% below the levels when Winters, took charge in June 2015, whereas shares of peer HSBC Holdings are flat and the benchmark FTSE index has risen about 15%.
FAB, United Arab Emirates’ biggest lender last week said it was not currently evaluating an offer for the bank, having previously acknowledged it had at one time worked on a potential bid.
Tough task ahead
StanChart, which makes most of its profit in Asia, reported statutory pretax profit of $4.3 billion for 2022. That came below the $4.73 billion average of analyst forecasts compiled by the bank but beat the $3.35 billion it made in 2021.
On Wednesday, Barclays reported a 14% fall in full year pretax profit as earnings were hit hard by surging costs and a collapse in deal fees, among other factors. HSBC posts results next week.
While StanChart’s results were better than some rivals, mixed performance from key business lines highlighted the work Winters has yet to do.
StanChart’s financial markets trading business reported record income, up 21%, as accelerating inflation and Russia’s invasion of Ukraine made for volatile markets, driving frenzied activity by institutional clients throughout 2022.
China’s economic slowdown also hit the bank’s loan books, as it recorded a $582 million impairment for expected bad debts in the country’s troubled real estate market, taking the lender’s overall impairment to a higher-than-expected $838 million.
StanChart also took a $308 million hit on its investment in China Bohai Bank, which it attributed to “industry challenges.”
