Standard Chartered PLC (LON:STAN) shares rose on Wednesday after the emerging markets-focused bank saw its third-quarter profit beat expectations and its boss said the group was "cautiously optimistic" on the outlook, although the escalating China-US trade war impacted its revenues.
In an interim management statement, the FTSE 100-listed lender reported an underlying pre-tax profit of US$1.1bn for the three months to September 30, up 31% from the US$814mln posted a year earlier, and higher than the US$978mln consensus forecast.
READ: Credit Suisse takes red pencil to Standard Chartered estimates, cuts target price ahead of third-quarter results
The bank’s third-quarter income was up 4% year-on-year, but income fell by 1% quarter-on-quarter primarily due to weakness in the Asia and Middle East region.
Standard Chartered said the US/China trade tensions particularly impacted its wealth management business, with falling stock prices as a result of the economic uncertainty making retail customers more reluctant to invest.
The group saw its Wealth management income in the third quarter drop by 4.7% year-on-year to US$465mln.
Bill Winters, Standard Chartered’s group chief executive, commented: “Income growth year-on-year was slightly lower in the third quarter impacted by Africa and the Middle East and we remain alert to broader geopolitical uncertainties that have affected sentiment in some of our markets.
“But," he added, "growth fundamentals remain solid across our markets and we are cautiously optimistic on global economic growth."
In late morning trading, Standard Chartered shares were 3.6% higher at 551.70p.
Strategy update awaited
Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “In the short term these numbers are better than expected, with underlying profits beating market expectations. However the longer term concern is that Standard Chartered continues to shrink.”
He added: “Standard Chartered is lending more profitably, and with fewer defaults, but ultimately banks only make money on what they lend, and loans to customers are shrinking.
“That’s a touch surprising, since the bank’s emerging market customers are growing quickly and should be crying out for funding. With plenty of capital now on hand, Standard Chartered is more than capable of meeting demand for loans.”
Hyett concluded: “We’ll have to wait until the strategy update next year to find out exactly how Standard Chartered intends to get loan origination heading in the right direction again. But the bank’s big strategic advantage is its position in fast-growing emerging economies, and it needs to take advantage of that.”