StanChart in $750m buyback, China investment as profits miss estimates
Standard Chartered on Thursday unveiled a $750m share buyback, lifted profit targets and pledged higher investment in China, despite annual results missing estimates.
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The Asia-focused bank said pre-tax profit doubled to $3.3bn in 2021, but missed the $3.8bn forecast by its own compiled average of 16 analysts.
In the three months to December 31, the lender reported a pre-tax loss of $208m, missing a consensus estimate of a $288m profit, but it narrower than a $449m loss in 2020.
The London-based bank said it expected revenue to grow by an extra 3% a year and targeted a return on equity of 10% by 2024.
StanChart said it would invest a further $300m in China as it eyes a larger share of the banking business there. It also took a $300m writedown on the value of its investment in China's Bohai Bank, and a $95m 'management overlay' against further expected charges in the real estate sector.
Credit impairment charges fell to $263m from $2.3bn a year earlier. The bank's capital cushion, or CET1 ratio, fell to 14.1% from the 14.6% reported at the end of September and the net interest margin - the difference between lending and savings rate, declined to 1.21% from 1.31%.
The bank declared a final dividend of 9 cents a share, making a full-year payment of 12 cents, up from nine cents a year ago.
"Confidence in our overall asset quality and earnings trajectory allows us to return significant capital to shareholders," said chief executive Bill Winters.
“We saw a return to income growth, which we believe signals the start of a sustainable recovery, and we finished the year with good business momentum in financial markets, trade and wealth management.”
StanChart took a more upbeat view on higher global interest rates as central banks tighten monetary policy to fight surging inflation. Banking shares have surged in recent weeks as investors bet on a raft of rate rises.
Winters said tumbling interest rates over the past two years, as central banks tried to jump-start economies hit hard by the coronavirus pandemic, had cut its net interest income by more than $2bn.
“With the interest-rate cycle showing signs of turning, and given our positive gearing to US-dollar rates, we should recover this lost income,” he said.
Interactive Investor head of markets Richard Hunter said key metrics at the bank were mixed.
"The dividend yield of 1.6% is not especially punchy and is there is some light between this and the pre-pandemic level of around 4.4%. Even so, the announcement of a share buyback programme ... and the increased longer term aspirations should offer some support to the share price," he said.
"There is some momentum coming out of a better second half to the year, but overall Standard is not the finished article. The numbers may prompt some concerns over the pace of growth which has been achieved, notwithstanding the exceptionally difficult environment of the last two years."
"While the benefits of a rising interest rate environment are yet to wash through, share prices in the sector have nonetheless anticipated a more productive backdrop for the banks. Standard shares have risen by 12% over the last year, largely in line with the gain of 13% for the wider FTSE100 and, despite some gaps in these numbers, the market consensus of the shares as a 'buy' is likely to remain intact.”