logo-loader

Standard Chartered resumes dividend but swing to full year profit still disappoints

Last updated: 14:55 27 Feb 2018 GMT, First published: 07:39 27 Feb 2018 GMT

Standard Chartered
Standard Chartered's CEO Bill Winters says there is still work to do

Standard Chartered PLC (LON:STAN) resumed its dividend after two years as the bank returned to a full year profit.

The emerging markets lender said it would pay a dividend of 11p each for 2017 after cancelling payouts in 2016 to rebuild capital.

The bank reported net profits of US$774mln, compared to a loss of US$478mln the previous year on the back of a major restructuring under chief executive Bill Winters, who took over the reins in 2015.

The restructuring included cutting more than 5,000 jobs and shedding businesses, such as Asian equities, which were hit by weaker global commodity prices.

Income rises, impairments fall 

Operating income rose by 2.6% to US$14.4bn in 2017, ending four years of declines, while the loan book grew by 11.6%.

Impairments for bad loans dropped by more than 50% to US$1.2bn.

Underlying pre-tax profit jumped to US$3.0bn from US$1.1bn, beating analysts’ expectations or US$2.9bn. Statutory profit before tax rose to US$2.4bn from US$409mln but missed forecasts of US$2.7bn.

The core capital ratio remained unchanged at 13.6% last year but was above the company’s target range of 12% to 13%.

“The trebling of underlying profits, a strong capital position and emerging regulatory clarity allows us to resume paying dividends,” Winters said.

StanChart still has a 'long way to go', says CEO

However, the results showed that some divisions struggled last year, with the corporate and institutional banking unit posting a 3% fall in operating income and the private banking arm reporting a US$1mln loss.

Winters said return on equity continued to fall short of the bank's cost of capital despite rising to 3.5% last year from 0.3% in 2016. 

“Of course, we have a long way to go," he said.

"At the time of writing we are just under halfway to our initial milestone of 8% underlying return on equity.

"Our key investment areas are growing well and we are encouraged by our start to 2018. But we are well aware that this franchise is capable of much more."

Muted response from shares

In a note to clients, analysts at Shore Capital said Standard Chartered’s results “show profit performance that is slightly weaker than expected, primarily due to a shortfall in income. 

They added: “New guidance for a medium term RoE of >8% does not appear particularly stretching, in our view, and may be seen as a little disappointing.

“That said, we expect the market to be encouraged by the resumption of dividend payments, which we believe are a sign of management confidence in the strength of the balance sheet and the group’s ability to grow earnings. On balance, we expect a muted response from the shares.”

Which is exactly what the market saw, with Standard Chartered shares down 0.2% at 827.5p in late afternoon trading.

 -- Adds analyst comment, share price --

FTSE rises ahead of Easter weekend, JD Sport gains on upbeat outlook -...

The FTSE 100 gained on the final morning of this shortened Easter trading week. Festive cheer was limited though, as Thames Water confirmed shareholders would not provide it with a £500 million rescue package, prompting speculation over the London supplier’s future. On a more positive...

1 hour, 50 minutes ago