Standard Chartered Increases Profit Outlook Amid Banking Boom

Standard Chartered has raised its annual profit forecasts as it reported impressive financial results, in line with a broader trend among major British banks. The bank, which operates out of London, disclosed that its underlying pre-tax profits escalated by 37% to an impressive $1.81 billion for the three months ending in September. This figure surpassed analysts' expectations, who had predicted a profit of approximately $1.6 billion.

Similar to other banks like Barclays and Lloyds, Standard Chartered's earnings were significantly supported by structural hedging. This financial strategy helps stabilize bank revenues despite the challenges posed by varying interest rates.

The surge in profits can be attributed to several key factors, including the recent roll-off of short-term hedges and the repricing of structural hedges, which collectively increased treasury income by $281 million compared to the previous year. Additionally, the bank achieved a notable rise in total underlying operating income, which climbed by about $500 million to reach $4.9 billion, marking its best third-quarter performance since 2015.

In addition to hedging effects, the bank's wealth management sector performed remarkably well, alongside robust growth in its global markets division. Following these results, Standard Chartered has announced an expectation for a 10% increase in operating income for this fiscal year.

The bank is also looking to reward its shareholders more generously, planning to distribute at least $8 billion between 2024 and 2026, an increase from the previous estimate of around $5 billion. Moreover, Standard Chartered has raised its target for return on tangible equity from 12% to approaching 13% by 2026.

To achieve these ambitious goals, the bank intends to double its investment in its wealth management arm to $1.5 billion over the next five years, focusing on attracting more affluent clients and global institutions. Additionally, Standard Chartered is contemplating divesting certain businesses that do not have a compelling strategic rationale.

CEO Bill Winters remarked that these initiatives would streamline operations and generate higher quality growth for the organization. Even though the bank's headquarters are in London, a significant share of its operating income is derived from Asia, with more than $1.9 billion coming from Hong Kong and Singapore alone in the last quarter.

This positive trading update for Standard Chartered came shortly after HSBC announced a substantial $3 billion share buyback following a remarkable third-quarter pre-tax profit of £6.6 billion, surpassing analyst forecasts of £5.9 billion. Similarly, Barclays and Lloyds Banking Group recently revealed respective profits of £2.2 billion and £1.8 billion, bolstered by increased investment banking fees.

While analysts have noted that Standard Chartered's valuation appears attractive, there are concerns regarding its expansive reach and its ability to maintain loan and deposit growth in challenging market conditions. Some UK banking names might offer better growth potential and return profiles.

Following the financial results announcement, Standard Chartered's shares increased by 3.5% to 907.4 pence, reflecting a 46% rise in value over the preceding year.

banking, profits, guidance