Via Financial Times

Standard Chartered reported better than expected profit and operating income for the third quarter, despite tougher conditions in Asia and in particular its key market of Hong Kong.

Underlying profit before tax at the emerging markets-focused bank was $1.2bn for the three months to the end of September, up 16 per cent from the same period last year and ahead of consensus estimates of $1.1bn. Operating income rose 7 per cent to $3.98bn, better than the $3.8bn expected.

The results, which came despite what Bill Winters, StanChart’s chief executive, described as a “more challenging” external environment, helped push the bank’s Hong Kong-listed shares up by 3 per cent.

Underlying return on tangible equity, a key measure of profitability, was 8.6 per cent for the nine months to the end of September. The bank reaffirmed its target of a return on tangible equity of at least 10 per cent in 2021 despite noting “growing headwinds”.

As well as improved profits, StanChart’s return on tangible equity was boosted by a $1bn share buyback programme, launched in April and completed last month. On Monday, rival HSBC scrapped its target of generating an 11 per cent return on tangible equity next year, blaming a “challenging” environment. 

Andrew Sullivan, director of Pearl Bridge Partners, a Hong Kong-based investment firm, said the lender was beginning to see the pay-off for simplifying its business. “Standard Chartered has gone through a lot of the hard work over the last couple of years,” he said.

The better than expected results are a bright spot for Mr Winters, who has been locked in a dispute over pay with shareholders, more than 40 per cent of whom declined to back the bank’s remuneration policy in May.

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Mr Winters, who had dismissed as “immature and unhelpful” some investors who had protested his pension allowance, plans to take a voluntary pay cut in order to draw a line under the dispute, according to people briefed on the matter.

More than four months of increasingly violent anti-government protests in Hong Kong and the US-China trade war failed to damp income growth in Asia, a region from which StanChart derives around two-thirds of its total operating income.

While the unrest in Hong Kong was an issue, Mr Sullivan said StanChart was less vulnerable than HSBC, which was more exposed to the territory’s residential and retail market.

“Standard Chartered is far more into bonds than equities, and the bond market is still going great guns,” he said.

Operating income in Greater China and North Asia grew 2 per cent year on year in the third quarter. However, with Hong Kong now in a technical recession, according to its finance secretary Paul Chan, growth is expected to slow.

Income from Europe and the Americans increased 19 per cent.

Operating income at the bank’s financial markets division rose 25 per cent to $789m in the third quarter, compared to $631m in the same period a year ago. The lender’s net interest margin for the year to date was flat at 1.58 per cent.