StanChart Profit Rises 18% as Loan Loss Provisions Tumble

(Bloomberg) -- Standard Chartered Plc reported an 18% rise in first-quarter profits as an improving economic outlook saw it slash provisions against bad debts and its wealth unit posted a record quarter.

Credit impairments fell 98% year-on-year to $20 million, helping push underlying pretax profit to $1.4 billion, exceeding a company-compiled consensus forecast of $1.08 billion. The London-headquartered bank also said its financial markets business performed well.

“Economic recovery advanced in many of our markets leading to improved transaction volumes and profitability,” Chief Executive Officer Bill Winters said in a statement. “This was particularly the case in our financial markets and in wealth management, which had its best ever quarter.”

Standard Chartered shares rose 3.1% at 9:02 a.m. in London. The shares were up as much as 4.6% in Hong Kong trading.

Shares in the Asia-focused bank are broadly flat so far this year, trailing peers, with some analysts pointing to slow progress on cost-cutting plans and an uncertain economic outlook. Standard Chartered warned in February that earnings this year were unlikely to grow after central banks around the world cut interest rates to keep Covid-stricken economies moving.

Standard Chartered stuck to that outlook on Thursday and said that it will return to income growth of 5% to 7% next year. Credit losses may now be lower this year than earlier expected, it said.

CFO Interview

Speaking in an interview with Bloomberg Television, Chief Financial Officer Andy Halford said it was too early to consider writing back its impairments. A surge in Covid-19 infections in India had yet to have a “visible impact” on its business in the country.

Halford said on a call Thursday with journalists that the bank would give more detail on the scale of potential shareholder returns alongside its half-year results, but added that the lender was “very ready, willing and able” to return money to its investors.

The bank’s much larger rival, HSBC Holdings Plc, this week posted its best quarter since the pandemic began as optimism grows about the ability of borrowers to repay loans.

To help boost profitability, Standard Chartered said it expects to cut its office space by a third and halve its branch network from 800 sites to around 400. It expects a $500 million restructuring charge, with most coming in 2021.

Hybrid Work

Standard Chartered is in the midst of a major overhaul of its working arrangements after the pandemic kept most of its employees home for over a year. This month the lender formalized hybrid working across all of its major businesses, with staff given more flexibility on where and when they work.

As part of these changes, the bank is reviewing its global property portfolio, which is expected to lead to annual cost savings of at least $100 million. Winters has already given up his own office in the bank’s London headquarters and by the end of the year the lender expects to have scrapped all 881 private offices.

Like HSBC, which said this week that it would halve its travel budget, Standard Chartered is expecting a fall in travel costs with Halford saying the amount the bank spent on business travel would “reduce.” He also said that Standard Chartered may bid on the retail banking assets in Asia that Citigroup Inc. is looking to sell.

“We are awaiting detailed information,” he said. “Banking is a scale game so where there are opportunities to bulk up on a scale we will have a look at it.”

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