29th Apr 2020 06:14
(Alliance News) - Standard Chartered PLC on Wednesday reported a sharp drop in first quarter profit - due to rising credit impairments - but has vowed to come through the Covid-19 pandemic "with strength".
In the three months to March 31, the Asia-focused bank's pretax profit plunged 29% to USD886 million from USD1.24 billion in the same period a year before.
The lender's credit impairments in the first quarter jumped to USD956 million from just USD78 million in the first quarter of 2019.
Standard Chartered's underlying pretax profit fell 12% to USD1.22 billion. In Greater China & North Asia, StanChart's underlying profit was down only 1% to USD650 million, despite being the region most impacted by the effect of Covid-19 in the first quarter.
Association of Southeast Asian Nations & South Asia underlying profit narrowed 6% to USD367 million. In Europe & Americas the bank improved to a USD101 million profit versus a USD32 million loss a year before, but Africa & Middle East suffered a 83% drop to USD47 million.
"The unique characteristics of the Standard Chartered franchise are coming through strongly as the impact of Covid-19 evolves. Our teams around the network are responding very well, staying close to our clients. While pressure on credit quality has increased recently, we delivered good underlying income growth of 6% in the first quarter and maintained strong cost discipline," Chief Executive Bill Winters said.
Within operating verticals, the lender's Corporate & Institutional Banking unit saw underlying profit slip just 4% to USD656 million. But StanChart's Retail Banking suffered a 20% drop in underlying profit to USD233 million, and Commercial Banking was down 45% to USD102 million, as both units suffered from the sharp increase in credit impairments. Private Banking profit fell 49% to USD37 million.
StanChart's operating income rose 11% in the first quarter to USD4.34 billion from USD3.92 billion - as income from its Financial Markets business grew 41% year on year to USD1.97 billion.
The lender said: "Strong business momentum in the opening weeks of the year continued well into the first quarter, with almost all of the group's products generating positive income growth overall despite the rapid spread of Covid-19 that impacted the group's results mainly in March."
The lender's net interest income saw a 4% decrease, however, falling to USD1.84 billion from USD1.92 billion.
This was a result of StanChart's net interest margin worsening to 1.52% from 1.66%.
The bank's customer loan book rose 2% year on year to USD271.23 billion with customer accounts growing 12% to USD422.19 billion.
StanChart's preferred performance measure, return on tangible equity, saw a 100 basis point year-on-year drop to 8.6%.
The bank's cost-to-income ratio improved to 54.6% compared to 67.8% in the first quarter last year.
StanChart ended the quarter with a CET1 ratio of 13.4% compared to 13.9% a year before. Risk-weighted assets crept 2% higher year on year to USD272.65 billion.
Winters added: "While sentiment globally is extremely depressed now, the uniqueness of this franchise and the work we have done since 2015 to secure its foundations gives me confidence that we can come through the crisis with strength."
StanChart expects a "gradual recovery" from Covid-19 - with "major" contraction in economic growth rates across most of the world in the second quarter, before the global economy moves out of recession in the latter part of 2020.
The lender continued: "We said in February that if income grows more slowly due to exogenous factors then so must our costs. We are acting to manage our costs prudently while doing everything we can to protect jobs. And while the decision to cancel last year's final dividend and not consider an interim dividend this year was difficult, it was taken in the light of extraordinary circumstances and will ensure that we have more capital to support individuals, businesses and the communities in which we operate through these difficult times."
By Paul McGowan; [email protected]
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