StanChart posts first-half profit hit amid virus and Hong Kong unrest
The bank expects impairments in the second half to be lower unless economic conditions deteriorate significantly
Hong Kong — Standard Chartered (Stanchart) on Thursday posted a 33% fall in first-half profit after credit impairment charges jumped six-fold as a result of the coronavirus pandemic, and said it would continue to keep a tight lid on costs.
The lender, however, struck a more positive tone when it came to further provisions against bad debts, saying it expects impairments in the second half to be lower unless economic conditions deteriorate significantly.
StanChart's credit impairment in the first half rose to $1.58bn from $254m a year earlier, but expenses fell 10%. The bank said it aims to keep expenses below $10bn in 2020-2021..
Pretax profit, which focuses on Asia, Africa and the Middle East, dropped to $1.63bn in the January-June period from $2.41bn in the same period in 2019, the London-headquartered bank said in a stock exchange filing.
The latest profit compared with the $1.53bn average of analyst estimates compiled by Standard Chartered.
The bank also said it expects income, which grew 3% in the first-half, to be lower in the second half as trading activity slows in its financial markets division while interest rates remain low.
“Low interest rates and depressed oil prices continue to be headwinds and we expect new waves of Covid-19 related challenge in the coming quarters,” CEO Bill Winters said in the earnings statement.
StanChart is accelerating some elements of existing projects aimed at creating a leaner organisation as well as developing some new expense reduction initiatives, and Winters said this would involve “very small number of redundancies”.
It reiterated it would not pay dividends for the time being after a request from Britain's Prudential Regulation Authority, adding it hoped to resume payments “as soon as prudently possible”.
The Covid-19 pandemic, which has infected more than 16.5-million people across the world, is hitting businesses — from retail to aviation — globally as governments freeze economies to slow its spread.
StanChart's Hong Kong-listed shares gave up their gains after the results, falling 1.2% before midday, while the Hong Kong market index was off 0.8%.
Hong Kong impact
As with fellow British lender Barclays, which reported earnings on Wednesday, StanChart's overall performance was helped by its trading arm which held up much better than its corporate and retail banking businesses.
StanChart's retail, commercial and private banking business all saw profits nearly halve year on year, while its corporate and institutional banking division saw only a 13% decline as frenzied trading in stocks and bonds bolstered income.
The bank's earnings outlook has, however, also been clouded by political unrest in Hong Kong, whose economy contracted 9.0% in April-June, shrinking for the fourth quarter in a row and the second biggest drop on record.
Hong Kong is the single largest market for the bank.
The lender along with its London-headquartered peer HSBC Holdings in June broke from their usual policy of political neutrality to back Beijing's imposition of a controversial national security law on Hong Kong.
The banks, who have faced criticism from UK officials that their actions enabled Beijing to undermine the rule of law in the former British colony, have said they believed the law would restore stability in Hong Kong.
StanChart said on Thursday there was increasing risk due to “the escalation of tensions between the US and China in part due to the growing trade, security, social and political tensions in Hong Kong” and the imposition of the law.
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