StanChart profit beats estimates; charges US $ 107mn due to Sri Lanka rating downgrades

Standard Chartered posted a forecast-beating 6 percent rise in first-quarter profit, sending its shares sharply higher, as the emerging-markets-focused lender benefited from rising interest rates aimed at controlling inflation.

However, the bank took a US $ 107 million charge due to the ratings downgrade of Sri Lanka and a further US $ 160 million charge on its exposures to China’s troubled real estate sector.
The London-headquartered lender, which is focused on Asia, Africa and the Middle East, now expects income growth this year to slightly exceed earlier guidance of 5-7 percent, underlining how banks’ prospects are being lifted by policy rate hikes even as the global economic outlook dims.

“Given the very strong capital position, it is highly likely that StanChart can announce (a) further buyback along with second quarter earnings,” Citi analysts said in a note, adding that StanChart had reported solid results.

Statutory pre-tax profit for the bank increased to US $ 1.49 billion in January-March, from US $ 1.4 billion a year earlier. 

This is compared with the US $ 1 billion average estimate of 16 analysts as compiled by the bank.

“We are on track to deliver a 10 percent return on tangible equity by 2024, if not earlier,” Group Chief Executive Bill Winters said in the results statement yesterday.
While it was bullish on its return prospects, StanChart hinted that tougher times may lie ahead, as the Ukraine war threatens to puncture a recovery from the COVID-19 pandemic.