Standard Chartered PLC (LON:STAN) suspended its interim dividend, saying it was “mindful” of regulatory uncertainties in coming months.
The lender said while it was “encouraged” by an increase in first-half profits, it decided against a dividend as it waits for more clarity on the implications of Basel III capital requirements and the implementation of the IFRS 9 accounting policy change.
Shares in the bank fell 5.29% to 801.70p in morning trading following the announcement.
The Basel Committee of banking supervisors from the world's leading financial centres has been working on rules to help strengthen banks’ capital after the 2007-09 financial crisis. While the bulk of rules are being implemented, lenders are still awaiting the final elements due to disagreements between regulators.
Standard Chartered raises capital buffers
In anticipation of the regulations, Standard Chartered said it improved its capital position in the first half, with the common equity tier 1 ratio rising 20 basis points to 13.8% with an additional US$1bn issued in January.
It also said it would provide details on the impact of IFRS 9 once it has reliable estimates, which will be no later than the publication of its 2017 annual report. The lender will consider at the end of the year whether it is “appropriate to recommence” dividend payments.
IFRS 9, the new international accounting standard for financial instruments, will replace IAS 39 in January 2018 and requires banks to recognise expected losses on loans rather than actual losses already suffered.
First half profits jump as bank winds down private equity arm
Despite its caution, the company said it made good start to the year with underlying profit before tax up 36% to US$1.9bn, excluding losses incurred the same period a year ago related to its troubled private equity business, Principal Finance.
Restructuring charges came to US$165mln following its decision to exit Principal Finance last year.
The lender said restructuring costs since November 2015 have come to US$2.9bn and it continues to expect it will total about US$3bn once complete.
The restructuring is expected to deliver an extra US$700mln in gross costs efficiencies in 2017 and a further US$400mln in 2018.
Excluding Principal Finance losses in the prior year, underlying income rose 4% to US$7.2bn and loan impairments fell 41% to US$585mln.
“Our increased profitability and improved asset quality over the last year reflect the success of this approach: we are stronger, leaner and becoming more efficient,” said chief executive Bill Winters.
"We go into the second half of the year confident in our resilience and in our ability to generate better value for our clients and shareholders.”