©Reuters. FILE PHOTO: The Standard Chartered bank logo is seen at its headquarters in London, Britain, July 26, 2022. REUTERS/Peter Nicholls/File Photo
By Selena Li and Lawrence White
HONG KONG/LONDON (Reuters) – Standard Chartered PLC rewarded shareholders on Friday with dividends and a fresh $1 billion buyback as profits rose 18%, but made disappointing growth forecasts that will worry investors amid worries on global banks’ exposure to China.
The bank reported that statutory profit before tax in 2023 rose to $5.09 billion, in line with forecasts, and announced a $1 billion share buyback and a dividend increase.
But the Asia-focused lender provided new moderate guidance, saying it expects income to grow in the top range of 5-7% in 2024, lower than the previous estimate of 8-10% provided last October. The lender reported revenue growth of 13% in 2023 in constant currency terms.
StanChart also said it will aim to “consistently” increase returns on tangible capital, a key measure of profitability, from the current 10% to 12% by 2026, abandoning its previous forecast of reaching 11% this year.
StanChart took an $850 million writedown mainly from its stake in Chinese lender Bohai Bank, the second time it has written down the unit’s value as the lender was hit by rising bad loans while growth in the world’s second largest economy has faltered.
The heavy loss in China, a key focus of StanChart’s strategy, underlines the challenge it faces expanding in the country as policymakers struggle to arrest a deepening housing crisis and revive flagging consumer confidence.
A fresh $150 million write-down of its stake in Bohai Bank, after a $700 million hit earlier this year, reduced its value to $700 million from $1.5 billion a year ago. beginning of the year.
As well as damaging the value of StanChart’s investment in Bohai Bank, China’s real estate problems have also directly affected the British bank which has requested a further provision of $282 million on expected losses on loans related to the sector.
This brought total provisions for its China real estate exposure to $1.2 billion over the past 3 years.
HSBC Holdings (NYSE:) on Wednesday reported a shock $3 billion charge on its stake in a Chinese bank, the largest so far by a foreign lender, amid rising bad loans in the country, sending down the shares of the British bank and taking away the luster of its business. record annual profits.
StanChart said banking sector challenges and uncertainty surrounding the real estate market are responsible for the decline in the current value of the holding.
The bank’s Chinese onshore income grew just 4% last year, compared to 42% growth in offshore income.
REWARDS FOR SHAREHOLDERS
StanChart’s Kong-listed shares had jumped more than 2 points in afternoon trade versus a flat benchmark.
The London-based lender also announced a final dividend of $560 million or 21 cents per share, resulting in a 50% increase in the full-year dividend paid to 27 cents, higher than a forecast of 23.7 cents.
StanChart’s notable investor gains, but modest performance outlook, followed a trend set by European peers including Barclays, Deutsche Bank and HSBC, which are choosing to return more cash to shareholders rather than investing in growth in a more robust operating environment. difficult.
CEO Bill Winters said in a statement that the bank aims to return at least $5 billion over the next three years.
The chief executive saw his total pay package rise to £7.8 million ($9.88 million) from £6.4 million the previous year, as long-term incentive bonuses earned good results, while the group bonus pool for staff shrank 1% to $1.6 billion.
“The last mile of inflation could prove stickier than expected and geopolitical risks abound,” group president José Vinals said in the statement.
“As 2024 begins, the war between Ukraine and Russia continues, increasing uncertainty for nations in Europe and elsewhere.”
($1 = 0.7898 pounds)