Standard Chartered shares as lender lines-up bumper investor rewards

Standard Chartered shares soared on Friday after the lender made almost $1.6 billion in payouts to shareholders thanks to strong profit growth.

The banking giant plans to buy back $1 billion of its own shares and give investors $560 million in final dividends, meaning full-year dividends were 50 percent higher than the previous year.

StanChart’s reported earnings grew 19 percent to $3.46 billion in 2023, thanks to higher interest rates and lower credit impairments.

Having surpassed its goal of announcing $5.5 billion in shareholder returns from 2022, the London-listed company plans to donate at least $5 billion more to investors by 2026.

The group has come under significant pressure to reward investors and boost its share price, which remains below pre-pandemic levels.

Standard Authorized Actions They rose 8.2 per cent to 655.4p in mid-morning on Friday, making them the biggest gainer on the FTSE 100 index.

Profits were boosted by continued interest rate increases and a rebound in its wealth management arm, which increased overall operating income by 10 percent to $17.4 billion.

Profitability also benefited from credit impairments that fell 36 percent to $508 million, mainly due to lower charges related to the Chinese commercial real estate sector.

Regionally, the company’s Africa and Middle East division saw a 90 percent profit increase amid growth in cash management and retail deposit revenue, while its Asian segment achieved a profit increase of 32 percent.

José Viñals, president of the group, said: “While the external outlook remains uncertain, we are confident that we are well positioned to face the challenges and take advantage of the opportunities that lie ahead. Our results in 2023 show that we are doing just that.”

But Standard recorded a new $150 million writedown on the value of its stake in Bohai Bank, a lender hit hard by the slowdown gripping China’s property market, following a separate $700 million charge in October.

This brings the group’s total provisions related to the Chinese real estate industry to $1.2 billion over the past three years.

Two days ago, HSBC suffered its biggest share sell-off since the pandemic began after taking a £2.4bn hit for its stake in China Bank of Communications.

This was despite the bank, Europe’s largest by market capitalisation, revealing its annual pre-tax profits had soared to £24bn.

HSBC and Standard make a significant proportion of their profits from Asia, especially China, where economic growth has slowed sharply amid high debt, lower foreign direct investment and the housing crisis.

However, both banks expect their respective interest income to rise further in 2024, even though analysts expect 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.

‘Pre-tax profit exceeded expectations largely due to the release of profit impairments from one of its divisions. Putting that aside, underlying performance was a little weaker than expected, but the focus will be on guidance.

«The outlook for 2024 is slightly lower than what analysts had predicted, but medium-term forecasts up to 2026 show promising signs.

‘Volume growth, cost cuts and the benefit of structural hedging are expected to help deliver a return on tangible equity of 12 percent in 2026 (up from 10 percent in 2023).

“If delivered, it should provide a significant tailwind to the current valuation.”