Standard Chartered group reports $1.1bn FY‘16 profit

Standard Chartered Plc (the Group) Monday releases its results for the year ended December 31, 2016. 

A summary of the bank’s financial performance in the period under review shows that its operating income of $13.8bn was down 11 percent, but stable through each quarter of 2016.

The group’s profit before tax (PBT) of $1.1bn went up from $0.8bn in 2015 and operating expenses of $10bn went down 5 per cent and lower for the second year running.

Gross cost efficiencies of over $1.2bn created capacity to increase investment in the second half, whilst Loan impairment in the ongoing business of $2.4bn was flat like-for-like but remains elevated.

Also achieved was, restructuring charges of $855m, related primarily to the liquidation portfolio and redundancy costs; whilst the bank’s statutory profit before tax of $409m compared to a loss of $1.5bn in 2015.

In all, underlying basic earnings was per share of 3.4 cents (2015: negative 6.6 cents) and Underlying return on Ordinary shareholders’ equity of 0.3 per cent (2015: negative 0.4 per cent).

Bill Winters, Group Chief Executive of Standard Chartered Plc said: “We made good progress in 2016, cleaning up our balance sheet and fortifying our capital position. We are attacking our cost base, reinvesting significantly to strengthen our competitive advantages and continuing to enhance our financial crime controls. Our financial returns are not yet where they need to be and do not reflect the Group’s earnings potential. Having worked hard to secure our foundations we are now focused on realising that potential.”

The bank summarized its strengthened capital and improved liquidity position, stating that; Common Equity Tier 1 ratio of 13.6 per cent went up 100bps mainly due to reduced risk-weighted assets, $2bn Additional Tier 1 capital was issued in August 2016 and a further $1bn in January 2017. Advances to deposits ratio of 67.6 per cent also reflects a high level of funding from customer deposits and no Ordinary Share dividend was declared for 2016 period.

In analyzing strategic progress made, Quarterly income became stable through the year yielding Gross cost efficiencies of $1.2bn delivered thus targeting further efficiencies in 2017 and 2018.

Cash investment increased by 50 per cent year-on-year, particularly in the second half and overall, credit quality has also improved in 2016 although stresses remain in some sectors. Strategic progress was also made in the area of Risk-weighted assets in the liquidation portfolio which was reduced by over 80 per cent and Total gross on non-performing loans were 24 per cent lower year-on-year, with cover ratio up from 53 to 67 per cent. Thus, the Group’s balance sheet is now more diverse and its capital and liquidity position is strong.

In analyzing the bank’s performance in Africa and the Middle East, SCB’s conscious decision to invest through the cycle in sub-Saharan Africa, while continuing to consolidate and build on its differentiated position in the Middle East has made an important contribution to the Bank’s overall performance.

Despite good growth in Africa impacted by foreign exchange fluctuations, Standard Chartered’s Africa and Middle East business recorded underlying profit before taxation of $431 million in 2016 compared to $188 million in 2015 due to lower impairments and reduced expenses.

Speaking about the bank’s performance in this region, Sunil Kaushal, Regional CEO, Africa & Middle East expressed that “Our results demonstrate the progress made in the execution of our strategy. We will continue to make investments through the cycle in controls, people and infrastructure to grow safely and capture the medium-term opportunity within the AME region. The environment remains challenging but we are getting on with our plan to improve our performance by putting our clients’ needs back at the heart of everything we do.”