Standard Chartered Reports Profit Rise but Issues Underwhelming Growth Forecasts

In a recent update from Hong Kong and London, Standard Chartered PLC pleased shareholders with increased dividends and a fresh $1 billion buyback as their profit surged by 18%. However, the bank’s cautious growth forecasts for the future have sparked concerns among investors, especially regarding global banks’ ties to China.

The bank disclosed a pre-tax profit of $5.09 billion for 2023, meeting expectations, and declared a significant boost in dividends along with a $1 billion share buyback. Despite these positive indicators, the bank’s outlook for growth in 2024 fell short, with anticipated income growth ranging between 5-7%, down from the previous estimate of 8-10%.

Standard Chartered aims to gradually elevate returns on tangible equity from 10% to 12% by 2026, abandoning its earlier projection of reaching 11% by this year. The bank attributed an $850 million impairment, primarily from its stake in Chinese lender Bohai Bank, to the increasing number of bad loans amidst China’s economic slowdown.

With a fresh $150 million writedown of its Bohai Bank stake, the bank’s investment value plummeted to $700 million from $1.5 billion. Additionally, Standard Chartered incurred a $282 million provision for expected loan losses related to China’s troubled real estate sector, totaling $1.2 billion in provisions over the last three years.

Standard Chartered’s challenges in China mirror the broader concerns in the banking industry, exemplified by HSBC Holdings’ recent $3 billion charge on its Chinese bank stake. The stagnant growth in China’s onshore income compared to substantial offshore-related income growth further underscores the hurdles faced by the bank in the region.

These developments highlight the complexities and risks associated with banking operations in China amidst economic uncertainties and challenges in the real estate sector, impacting the performance and outlook of global financial institutions like Standard Chartered.