26th Feb 2019 06:56
LONDON (Alliance News) - Standard Chartered PLC's annual profit came in below the market's expectations on Tuesday, while it has also announced further strategic plans for the next three years, including the sale of its Indonesia joint venture PT Bank Permata Tbk.
The FTSE 100 bank has also significantly increased its final dividend, by 36% on the prior year.
It is paying 15 US cents as a final payout, taking the total for 2018 to 21 cents compared to 11 cents in 2017. Consensus had been for a 19.7 cent total return.
To undergo its planned restructuring Standard Chartered is expecting a further USD500 million of restructuring charges in the next three years and, as a result, the lender has decided its Indonesian joint venture "is no longer core".
Currently the lender has to include all of Permata's assets on its balance sheet but it only benefits from 45% of profit. At current value, Standard Chartered is hoping to get USD1 billion for its stake and free up about USD9 billion in risk weighted assets.
As part of the new plan, Standard Chartered is also looking to restructure its operations in underperforming markets Korea, the United Arab Emirates and India.
Pretax profit on a statutory basis rose to USD2.55 billion in 2018 from USD2.42 billion, but this is short of consensus of USD2.98 billion.
On an underlying basis, pretax profit was USD3.88 billion from USD3.01 billion.
The rise in profit, StanChart said, was due to higher quality income alongside cost and asset origination discipline.
StanChart's operating income for 2018 was USD14.79 billion, higher from USD14.43 billion a year before but short of consensus of USD15.02 billion.
Operating expenses, StanChart said, were USD11.65 billion, from USD10.42 billion a year before and above consensus of USD10.24 billion.
StanChart's common equity tier 1 ratio was 14.2%, from 13.6% in 2017, while its net interest margin was 1.58% from 1.55%.
The cost to income ratio was 78.8% from 72.2%, while the return on tangible equity on an underlying basis was 5.1% from 3.9%.
StanChart recently made a USD900 million provision due to historic financial crime matters and foreign exchange trading issues.
Other charges for the fourth quarter include USD159 million for its Principal Finance divestment and USD169 million related to new strategic priorities.
These priorities, StanChart said, are a return on tangible equity of at least 10% by 2021. It has also reaffirmed its target of income compound annual growth rate between 5% and 7%.
It wants to reduce costs by USD700 million, with the resulting operating leverage "significantly" improving profitability.
StanChart will return surplus capital to shareholders not needed to fund additional growth, and its dividend could double by 2021.
It is targeting a CET1 ratio of between 13% and 14%.
StanChart has begun 2019 solidly, it said, but behind a year prior due to a stronger US dollar as well as a stronger comparable.
StanChart said increased interest rates in the US and the US-China trade dispute weighed on market confidence, but it still expects "reasonably" strong global growth in 2019.
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