Standard Chartered has reported a 58 per cent fall in first-quarter profits and warned of a tough environment, while cheering investors with early signs of progress in the turnround strategy of the emerging markets bank.
Having slumped to its first annual loss for more than a quarter of a century last year, StanChart said trading conditions remained “challenging”, citing depressed commodity prices, volatile Chinese markets and weak emerging market sentiment.
“These are difficult and volatile times but we are well prepared for them from a capital and a liquidity perspective,” said Bill Winters, who took over as chief executive last year. “We are in a good, strong position and are very focused on improving profitability which we can see from the first quarter continues to be very poor.”
Shares in the bank rose more than 7 per cent after its results came out on Tuesday. The shares have rallied 40 per cent from recent lows but they are still down 50 per cent in the past year.
Starting the quarterly earnings season for UK banks, StanChart reported statutory pre-tax profits of $589m in the three months to March, down from $1.44bn in the year-ago period.
Chirantan Barua, analyst at Bernstein, said: “The bank’s earnings power has come under a lot of debate of late – we see a significant part of the headwinds as cyclical rather than structural at this point of the cycle . . . which will turn as the bank starts repricing export-import customers along with the other two major trade banks.”
The London-listed bank, which specialises in Asia, the Middle East and Africa, came through the financial crisis relatively unscathed. But in the past two years it has been hit by slowing growth in its key Asian markets and by the downturn in the commodities sector.
The results come five months after StanChart announced a £3.3bn rights issue that helped it to scrape through the Bank of England’s latest stress tests.
The bank’s core equity tier one ratio, a key measure of capital strength, rose from 12.6 per cent to 13.1 per cent in the last quarter, slightly above its target range.
As well as boosting the bank’s capital, Mr Winters has also shaken up its top management and overhauled its strategy. He aims to shed 15,000 jobs, to cut 30 per cent of its $10bn cost base and to restructure almost a third of its risk-weighted assets.
“We don’t feel we are out of the woods yet,” said Mr Winters. “But things are looking a bit better than in January.”
Total operating costs were down 10 per cent in the first three months of the year. The bank booked $125m of restructuring charges in the first quarter out of a total $1.2bn expected over the year. Provisions for bad loans were flat at $471m.
Revenues were down a quarter year-on-year at $3.35bn. But Andy Halford, finance director, hailed the fact that they had stabilised when compared with the previous quarter.
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