StanChart Announces Record $1.5 Billion Buyback, Raises Income Outlook – Reuters

By Selena Li and Lawrence White

HONG KONG/LONDON – Standard Chartered has announced a $1.5 billion share buyback, its largest to date, and has also improved its income projections for 2024. The bank is optimistic about strong economic growth in its key Asian markets and is implementing measures to control costs.

The London-based lender, primarily generating revenue in Asia, now anticipates that its operating income will increase by more than 7% on a constant currency basis, an upgrade from its previous estimate of 5% to 7%.

This update follows a 5% rise in pretax profit to $3.49 billion for the first half of the year, slightly surpassing analysts’ expectations.

The substantial share buyback, brighter income outlook, and a detailed cost-cutting initiative aiming to save $1.5 billion highlight CEO Bill Winters’ commitment to enhancing the bank’s stock performance, which has not kept pace with its rivals this year.

“I don’t believe our share price reflects the optimism that we have for our bank,” Winters stated during a media call.

Following the announcement, shares of Standard Chartered rose by 5.9% in London, marking an 18% increase since Winters expressed concerns about the bank’s stock price in February. However, this still trails behind the 23% gain recorded by Europe’s benchmark banks index.

Banks with a focus on Asia, including Standard Chartered and HSBC, have benefitted in recent years from rising interest rates and relatively robust economic growth in the region. However, challenges remain, particularly in China, where slowing growth and a crisis in the property sector have posed difficulties for Western banks. This year, Standard Chartered has set aside $1.2 billion for potential bad loans related to China’s commercial real estate market.

While the Chinese government has introduced various support measures for its property market, signs of recovery have been slow. “We see more positive signs in tier-one cities than in others, but the property market clearly has not hit its lowest point yet,” said Chief Financial Officer Diego De Giorgi.

Winters noted that the bank’s stance on China is unlikely to shift significantly in response to the upcoming U.S. election. “Regardless of who wins, it’s likely that the U.S. will maintain a tough stance on China,” he remarked, continuing to point out that both the previous and current U.S. administrations have adopted this approach.

Standard Chartered intends to proceed with its “fit for growth” cost-saving strategy, which aims to save approximately $1.5 billion over three years amid rising costs from inflation and expansion efforts. The bank has already identified over 200 projects that can generate savings, with about 80% expected to decrease costs by up to $10 million each.

This will involve eliminating the bank’s regional reporting structure and discontinuing around 100 internal applications as part of a technology streamlining effort, according to De Giorgi.

Additionally, Standard Chartered experienced notable growth in its non-interest income streams during the first half, capitalizing on the current economic climate. Income from its wealth solutions division surged by 25% to $1.2 billion, leading growth among its primary business segments. The unit’s net new sales increased more than double to $13 billion, while assets under management rose by 12% to $135 billion.

However, the bank missed out on the strong second-quarter trading performance recorded by its competitors in the investment banking sector.

The absence of an equities trading operation has hindered Standard Chartered as rivals such as JPMorgan and Morgan Stanley reported revenue growth of 21% and 18%, respectively, in this area, boosting their overall investment banking revenues. In contrast, income from Standard Chartered’s investment banking division fell by 1% in the second quarter.