Standard Chartered PLC (LON:STAN) has announced plans to cut US$700mln in costs and exit smaller businesses, as part of a new three-year strategy overhaul to boost growth as it posted in-line full-year 2018 profits excluding hefty charges.
The FTSE 100-listed bank posted a 5.5% rise in pre-tax profit for the year ended December 31 to US$2.55bn, up from US$2.42bn a year earlier, weighed down by US$900mln in provisions, unveiled last week, to cover any impact from regulatory investigations in the United States and Britain.
READ: Standard Chartered to take US$900mln charge in fourth-quarter to cover potential UK, US investigation penalties
Before provision for regulatory matters, restructuring and other items, StanChart underlying pre-tax profit increased by 28% to US$3.9bn, in line with analysts’ consensus estimate.
The emerging markets-focused lender saw its net interest income increased by 8% and the net interest margin improved 3 basis points to 1.58%.
The group hiked its final dividend by 36% to 15 US cents per share, up from 11 US cents in 2017.
Announcing the strategic overhaul, StanChart said it plans to achieve a return on tangible equity of at least 10% by 2021, up from 5.1% last year, and intends to distribute to shareholders surplus capital not deployed to fund additional growth.
Bill Winters, StanChart’s group chief executive said: “We will achieve this through relentlessly focusing on where we have a distinct competitive advantage, attacking the residual causes of lower returns and ramping-up innovation and productivity.”
He added: “We view the profound technology-driven changes in banking as an opportunity: we are big enough to be relevant to our most complex clients and partners, yet nimble enough to be a profitable disrupter."
In early morning trading, StanChart shares were 1% lower at 612.40p.
Investors get a mixed bag
Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “This morning’s announcement has presented investors with a bit of a mixed bag. On the one hand, 2018’s numbers are below what many analysts had hoped for, on the other the bank has set out some ambitious targets for 2021 which could see dividends double.”
He added: “Those new targets do feel like a stretch though. 5-7% income growth a year is ambitious given profit to date has largely been fuelled by cost savings, and the bank has acknowledged that the outlook is uncertain, to say the least.
“Standard Chartered’s exposure to emerging markets may be a long term tailwind, supporting rapid growth, but in the short-term, it creates potential to trip up. These economies are volatile and given the growing threats to global trade, have the potential to go pop pretty quickly.”
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