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StanChart lowers 2020 income growth target due to coronavirus

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Via Financial Times

Standard Chartered’s operating income growth is set to be lower than expected this year due to the impact of the coronavirus in some of its biggest markets.

The London-based bank, which focuses on emerging markets, warned on Thursday that the outbreak, as well as an economic slowdown and months of protests in Hong Kong, meant it was likely to undershoot its previous target of 5-7 per cent growth in 2020.

Progress towards a return on tangible equity — a measure of banking profitability — of 10 per cent would also be delayed, the bank said as it announced financial results for 2019. 

Underlying pre-tax profits at the lender grew 8 per cent to $4.17bn during the year, short of analysts’ estimates of $4.45bn. Operating income for the year was in line with analyst forecasts, rising 4 per cent to $15.42bn

“Our largest market, Hong Kong, tipped into recession, driven by a combination of the extended US-China trade dispute, slower economic growth in China and local social unrest,” Bill Winters, StanChart’s chief executive, said in a statement.

“And more recently, the outbreak of the novel coronavirus comes with unpredictable human and economic consequences,” he added.

But Mr Winters said the economic challenges the bank was facing, including the coronavirus, “will turn out to be transitory”.

The challenging conditions at the end to 2019 were underscored by pre-tax profits that fell 25 per cent in the fourth quarter to $325m compared to the same period a year earlier.

Standard Chartered said it would buy back a further $500m in shares, having completed a $1bn buyback in 2019. More share repurchases are likely to follow StanChart’s $1.3bn sale of its stake in PermataBank, its Indonesian joint venture, announced in December.

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StanChart will also increase its dividend per share to $0.27, from $0.21. Shares in the bank rose 2.4 per cent in afternoon trading in Hong Kong following the announcement.

One of Hong Kong’s largest retail banks, StanChart announced relief measures on February 12 to soften the impact of the coronavirus on its customers in the city, including trade finance loan extensions and fee waivers.

StanChart on Thursday increased its sustainability targets. It aims to fund $35bn of renewable energy projects between 2020 and 2024.

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