31st Oct 2018 10:01
LONDON (Alliance News) - Standard Chartered PLC on Wednesday reported a significant rise in third quarter profit due to a reduction in credit impairment and growth in its major businesses, as the bank remains "cautiously optimistic" on global economic growth despite greater uncertainty.
Shares in the FTSE 100-listed emerging-markets focused bank were up 4.6% at 557.20 pence each.
For the three months ended September, Standard Chartered reported a pretax profit of USD1.06 billion, up 37% from USD774 million the year before.
The bank's operating income in the third quarter increased 3.6% year-on-year to USD3.72 billion from USD3.59 billion, with net interest income increasing 7.9% to USD2.19 billion from USD2.03 billion.
"Income growth year-on-year was slightly lower in the third quarter impacted by Africa and the Middle East and we remain alert to broader geopolitical uncertainties that have affected sentiment in some of our markets. But growth fundamentals remain solid across our markets and we are cautiously optimistic on global economic growth," said Chief Executive Bill Winters.
Standard Chartered's operating expenses increased to USD2.51 billion from USD2.48 billion the year prior.
Within divisions during the quarter, Standard Chartered's Corporate & Institutional Banking increased its income by 1.2% to USD1.65 billion from USD1.63 billion.
The division's growth reflected "continued momentum" in transaction banking, but this was offset by lower income from corporate finance due to "margin compression".
Lower client activity in the period resulted in the division's flat Financial Markets performance.
The Retail Banking division increased its income by 1.6% to USD1.27 billion from USD1.25 billion.
Strong growth in Hong Kong and Singapore, particularly deposit income was the main driver of Retail's growth.
The "escalating" trade tensions impacted equity markets, which affected retail investor sentiment, which, in turn, slowed the rate of growth for the division's Wealth Management, Standard Chartered.
The Wealth Management segment did, however, benefit from a USD40 million early achievement of a full year bancassurance performance bonus.
Commercial Banking's income increased 2.4% in the quarter to USD346 million from USD338 million.
Strong growth from the division's Cash Management area offset the impact of "margin compression" on income from the Lending area.
The group's third-quarter loan impairment charges were reduced by 67% year-on-year to USD115 million from USD348 million on the back of improved credit quality.
The bank said it has taken "significant actions" since 2015 to improve its credit quality.
Standard Chartered's net interest margin at the end of September was 1.58%, up from 1.53% a year ago but down from 1.59% at the end of June.
The bank's common equity tier 1 ratio amounted to 14.5% at the end of the period, compared to 13.6% at the end of the same period the year before and 14.2% in the previous quarter.
Standard Chartered said the 28 basis points improvement was mainly due to the bank's increased profit in the quarter and lower risk-weighted assets.
The bank's net loans and advances to customers at September 30 was down to USD251.20 billion from USD255.10 billion at June 30.
The reduction was due to a reduction in corporate overdraft balances in Hong Kong and lower IPO activity.
The bank's income from customer accounts at September 30 decreased to USD371 billion from USD382.12 billion at June 30.
Standard Chartered said the reduction was driven by lower corporate non-operating account balances, including in Financial Markets.
The bank's return of tangible equity in the quarter was 7.0%, up from 5.1% a year ago and 5.9% in the second quarter.
For the nine months ended September, Standard Chartered's pretax profit rose by 35% to USD3.41 billion from USD2.53 billion, with operating income increasing 5.2% to USD11.37 billion from USD10.81 billion.
Winters added: "The results for the first nine months of the year reflect our focus on significantly improving profitability, balance sheet quality, conduct and financial returns."
Standard Chartered said it will set out the areas which it will focus on to develop the bank over the next three years with its full-year results in February.
The bank remains confident it can generate returns in excess of 10%.
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