17th Feb 2022 14:28
(Alliance News) - Standard Chartered PLC shares fell on Thursday after kicking off the London-listed banking sector's reporting season, as results fell short of expectations.
Standard Chartered shares were 2.9% lower at 532.80 pence each in London on Thursday afternoon.
Although the emerging markets-focused lender disappointed the market, analysts noted there are still reasons to be cheerful.
Despite doubled annual profit and a bolstered payout, StanChart fell short of expectations for both.
Pretax profit for 2021 surged to USD3.35 billion from USD1.61 billion a year prior. It fell short of consensus of USD3.84 billion, however.
StanChart completely missed forecasts for dividends, having proposed a final dividend of 9 cents per share, compared to the 16.8 cents chalked in by analysts. This matched 2020's final dividend, when 9 cents was the maximum allowed under regulatory guidance at the time.
This brought StanChart's total annual payout to 12 cents, up 33% on the prior year's 9 cents.
Interactive Investor analyst Richard Hunter commented: "Standard has kicked off the reporting season with generally improved figures, but the results are for the most part disappointingly light of expectations. The reduction in credit impairments and the amount of the final dividend were the most notable misses as compared to market expectations, partly offset by very slight beats in terms of underlying pretax profit and the expected reduction to net Interest margin.
"The company is optimistic on prospects for the coming year, particularly in the fast-growing Asian region where the company has particular focus. It sees the results of decades of investment and presence in the area coming home to roost, with particular emphasis on Affluent and Mass Retail customers, and where the adoption of digital banking – a low-cost expansionary route for the bank – is in the ascendancy."
Hunter added: "Coupled with additional investment aimed principally at China and an overall focus on costs, such as a planned USD1.3 billion of gross cost efficiencies, this should enable a freedom of capital both to boost investment and contribute to the aim of returning USD5 billion to shareholders over the next three years."
StanChart said its ambition of "delivering 10% return on tangible equity remains as resolute as ever". It is working towards achieving this aim by 2024.
"There is some momentum coming out of a better second half to the year, but overall Standard is not the finished article. The numbers may prompt some concerns over the pace of growth which has been achieved, notwithstanding the exceptionally difficult environment of the last two years. While the benefits of a rising interest rate environment are yet to wash through, share prices in the sector have nonetheless anticipated a more productive backdrop for the banks," ii's Hunter said.
Standard Chartered also announced plans for a USD750 million buyback. The programme will reduce is CET1 ratio by around 30 basis points.
StanChart ended 2021 with a CET 1 ratio of 14.1%, edging down closer to the company's minimum target of around 14.0% for 2021. Its CET 1 ratio eased from 14.6% at the end of September, and was down from 14.4% at the end of 2020. Analysts had forecast a CET 1 ratio of 14.3%.
Hargreaves Lansdown analyst Sophie Lund-Yates said: "Standard Chartered is the first out the gate for the UK's major bank reporting season, and a lot can be learned. Despite a lacklustre response from the market, the group's announcement of a new buyback should be taken well. It suggests a tangible effort to return excess un-investable capital to shareholders, which is far preferable to letting it languish.
"While a positive step from Standard, there was definitely scope for the buyback to be greater, which may well be causing some of the subdued sentiment.
"Standard Chartered enjoys the benefits of having multiple extra revenue streams, in the form of substantial trading and corporate banking arms. That's a luxury the likes of Lloyds simply don't have, and makes the Asian specialist a leveraged play on wider markets. As the world starts to emerge properly from Covid, that may well be no bad place to be."
Next up, NatWest Group PLC reports annual results on Friday. It is HSBC Holdings PLC's turn on Tuesday next week, before Barclays PLC on Wednesday and Lloyds Banking Group PLC on Thursday.
By Eric Cunha; [email protected]
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