Standard Chartered beats estimates, mulls return to dividends
Standard Chartered posted a smaller-than-expected fall in third quarter profit and lowered bad loan guidance as it considered a return to dividends at the full year stage.
The bank on Thursday posted a 40% decline in underlying pre-tax profits to $745m, well above bank-compiled forecasts of $502m.
Credit impairment charges related to the impact of Covid-19 came in at $358m for the three months to September 30, up 27% year on year, but almost half the second quarter's $611m and forecast of $614m.
StanChart also said it may resume dividend payments when it releases full-year results next February subject to consultation with regulators. Banks globally have been hit by a double whammy of bad loan provisions and near-zero interest rates, hitting their net interest margins, and, in turn, profits.
“Our third quarter credit impairment outcome reinforces our previous view that our impairment costs should be lower in the second half of 2020 than in the first half,” StanChart said.
“The expected economic recovery next year would support asset quality improvement, although we anticipate some sectors and markets will face continuing challenges.”
StanChart said the results reinforced its view that credit impairments would be lower in the second half of the year than the first, as lenders worldwide report loan losses stabilising.
The key question now facing analysts and investors is whether various government support measures such as emergency loans and furlough schemes have genuinely mitigated losses, or merely pushed them back into next year.
"Given the extreme economic pressures relating to the persistence of Covid-19, partially addressed through the efficacy of government support measures, it is not possible to reliably predict the quantum or timing of future impairments," StanChart said.
Lower provisions helped it report an underlying pretax profit of $745 million, above the $502 million average of analysts' forecasts compiled by the bank.
"Lower interest rates continue to impact income but we remain well-positioned to meet our financial targets, albeit with some delay," said chief executive Bill Winters.