Standard Chartered PLC announced a significant rise in profit on Friday, accompanied by shareholder rewards in the form of dividends and a new $1 billion share buyback program. However, the bank’s conservative growth forecasts and challenges in China raise concerns among investors amidst global economic uncertainties.
The bank reported a robust 18% increase in statutory pre-tax profit to $5.09 billion for 2023, aligning with market expectations. In response, Standard Chartered unveiled a $1 billion share buyback initiative along with an uptick in dividend payouts.
Despite the positive earnings, the Asia-focused lender provided cautious guidance for future growth, projecting income expansion at the higher end of 5-7% for 2024. This forecast falls short of the previous estimate of 8-10% issued last October. Additionally, the bank aims to steadily enhance returns on tangible equity from the current 10% to 12% by 2026, abandoning its earlier goal of reaching 11% this year.
Standard Chartered incurred a substantial $850 million impairment, primarily from its stake in Chinese lender Bohai Bank, reflecting challenges in the Chinese market. This impairment marks the second write-down for the unit, underscoring the difficulties in expanding amidst China’s economic slowdown and property market uncertainties.
The bank’s China onshore income grew modestly at 4% last year, contrasting with the robust 42% growth in offshore-related income. Challenges in the banking industry and uncertainties surrounding the Chinese property market contributed to the decline in the stake’s current value.
Despite these challenges, Standard Chartered remains committed to rewarding shareholders. The bank’s Kong-listed shares surged 2.3% at the opening of afternoon trade. Additionally, it announced a final dividend of $560 million, resulting in a significant increase in its full-year dividend payout to 27 cents per share.
CEO Bill Winters emphasized the bank’s commitment to returning at least $5 billion to shareholders over the next three years. However, Group Chairman José Vinals cautioned about ongoing geopolitical risks, including the conflict between Ukraine and Russia, which continue to impact global economic stability.
Standard Chartered’s robust profit performance and shareholder rewards reflect its resilience amidst challenging market conditions. However, uncertainties in China and geopolitical tensions underscore the importance of a cautious approach in navigating the evolving banking landscape.
