- Standard Chartered plans to give at least $5bn more to shareholders by 2026
- The firm recorded a fresh $150m writedown on the value of its Bohai Bank stake
Standard Chartered shares soared on Friday after the lender lined-up almost $1.6billion in shareholder payouts on the back of strong profit growht.
The banking giant plans to repurchase $1billion of its own shares and hand investors $560million in final dividends, meaning full-year dividends were 50 per cent higher on the previous year.
StanChart’s reported profits grew by 19 per cent to $3.46billion in 2023, thanks to higher interest rates and lower credit impairments.
Having exceeded its target to announce $5.5billion in shareholder returns since 2022, the London-listed business plans to give at least $5billion more to investors by 2026.
Good result: Standard Chartered’s profits grew by 19 per cent to $3.46billion in 2023
The group has come under significant pressure to reward investors and boost its share price, which remains below pre-pandemic levels.
Standard Chartered shares were up 8.2 per cent to 655.4p by mid-Friday morning, making them the FTSE 100 Index’s top riser.
Earnings were bolstered by continued interest rate hikes and a rebound in its wealth management arm increasing overall operating income by 10 per cent to $17.4billion.
Profitability additionally benefited from credit impairments plunging by 36 per cent to $508million, primarily due to lower charges related to the Chinese commercial real estate sector.
On a regional basis, the company’s African and Middle East division saw profits jump by 90 per cent amid growth in cash management and retail deposit income, while its Asian segment achieved a 32 per cent increase in profits.
José Viñals, the group’s chairman, said: ‘While the external landscape remains uncertain, we are confident that we are well positioned to navigate the challenges and seize the opportunities ahead. Our results in 2023 show we are doing just that.’
But Standard recorded a fresh $150million writedown on the value of its holding in Bohai Bank, a lender badly hit by the slowdown affecting China’s property market, which follows a separate $700million charge in October.
It takes the group’s total provisions related to the Chinese real estate industry to $1.2billion over the past three years.
Two days ago, HSBC suffered its biggest share sell-off since the pandemic started after taking a £2.4billion hit from its stake in China’s Bank of Communications.
This was despite the bank – Europe’s largest by market cap – revealing annual pre-tax profits skyrocketed to £24billion.
HSBC and Standard derive a major proportion of their earnings from Asia, especially China, where economic growth has slowed massively amid high debts, lower foreign direct investment, and the property crisis.
Nonetheless, both banks expect their respective interest income to rise further in 2024 despite analysts expecting central banks to cut interest rates.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: ‘Standard Chartered’s fourth quarter results benefited from lower impairments like many of its peers.
‘Profit before tax beat expectations largely due to a release of impairments back to profit from one of its divisions. Strip that out and underlying performance was a little weaker than expected, but the focus will be on guidance.
‘The outlook for 2024 is a smidge lower than analysts had priced in but the medium-term guidance out to 2026 shows promising signs.
‘Volume growth, cost cuts and a benefit from the structural hedge are expected to help deliver a return on tangible equity of 12 per cent in 2026 [up from 10 per cent in 2023].
‘If delivered, that should provide a material tailwind to the current valuation.’
