Standard Chartered PLC (LON:STAN) has unveiled a big hike to its dividend and extended its share buyback but warned that the combination of coronavirus with lower interest rates and a softer Hong Kong economy was likely to result in slower growth than expected in 2020.
Income growth for 2020 is likely to be below its medium-term 5-7% target range, the Asia-focused bank said.
And while it expects these negative trends to be “transitory”, management said they now believe “it will take longer” to achieve the return on tangible equity (ROTE) target of 10%, which had been pencilled in for 2021.
Chief executive Bill Winters said the 10% target "remains the minimum hurdle rate we use to run the business and is the least I expect" but stressed that the lender was not going to sacrifice achieving our medium-term objectives to satisfy shorter-term financial targets.
"We remain sensitive to external conditions generally and recognise that these could as easily recover as worsen. We are prepared for moves in either direction," he said.
For the calendar year just passed, the ROTE improved 130 basis points to 6.4% as underlying profit before tax rose 8% to US$4.2bn on income up 2% to US$15.3bn.
The board declared a final ordinary dividend of 20 cents per share to take the full-year payout to 27 cents per share, up 29% year on year.
A new share buyback of $0.5bn was also announced, following the purchase of US$1bn last year and as the CET1 capital ratio regained the top end of the bank’s 13-14% target range.
StanChart shares fell 4% to 569.8p on Thursday morning.
Richard Hunter, head of markets at Interactive Investor, noted that some of the bank's challenges are outside of the bank’s control and it has therefore been concentrating on moving the dial where it can, such as cost containment.
"In all, the very focus on Asia which may yet prove to be of long-term benefit is biting the bank in the nearer term. The group is likely to strengthen its focus on costs anew, particularly in light of the expected slowdown in income growth."
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