Standard Chartered PLC (LSE:STAN) shares tumbled 12% in early exchanges after it reported a sharp drop in profit in the third quarter, taking a hit from its exposure to Chinese banking and real estate.
The Asia-focused lender said operating income rose 4.5% to US$4.52 billion from US$4.33 billion a year before.
However, pre-tax profit dropped 54% to US$633 million from US$1.39 billion, well below the US$1.41 billion pencilled in by analysts, according to the company-compiled consensus.
The hit came as credit impairments rose to US$292 million from US$227 million, which included further charges related to the Chinese commercial real estate sector.
The firm also booked an impairment of around US$700 million related to the reduction in the carrying value of its holding in China Bohai Bank.
This reflected "subdued earnings and a challenging macroeconomic outlook" at Bohai, StanChart said.
On an underlying basis, pre-tax profit eased to US$1.32 billion from US$1.35 billion, below the US$1.44 billion figure expected by company-compiled analyst consensus.
At the end of September, StanChart's CET1 ratio was 13.9%, up compared to 13.7% a year before, but down from 14.0% at the end of June.
In the third quarter, the cost-to-income ratio rose to 63.5% from 62.3% a year prior.
The bank reiterated that it expects income to increase by 12% to 14% at constant currency.
It also still expects net interest margin to average about 170 basis points over the full year, and to achieve a return on tangible equity of 10%.
Bill Winters, chief executive, said: “We have continued to make strong progress in the third quarter against the five strategic actions outlined last year, delivering a solid set of results. Wealth Management has continued its recovery with double digit income growth and the Financial Markets performance has been resilient against a strong comparator period.
“We remain highly liquid, and well capitalised, with a CET1 ratio towards the top of our target range and confident in the delivery of our 2023 financial targets, including a return on tangible equity of 10%."
Analysts at UBS said the 9bps miss to NIM in a rising rate environment is "unhelpful" despite the retained NIM guide for 2024 and expectations for an increase in 4Q23, while a 3% decline in deposits was also "disappointing".