Standard Chartered Plc reaped the benefits of rising rates and market volatility as it reported third-quarter profits ahead of analysts’ estimates, even as it increased provisions to deal with the worsening economic outlook.
Retail banking gained from increasing interest rates as Standard Chartered reported an uplift in its net interest income, while its traders’ revenue were boosted by the volatile conditions that higher rates have brought to global markets. The results marked the bank’s fifth consecutive rise in quarterly income.
The London-headquartered bank reported underlying pretax profits up 32% to US$1.42 billion, beating a Bloomberg-compiled consensus estimate of US$1.1 billion, according to a statement. Earnings were held back by a jump in credit impairments to US$227 million in the quarter, linked to China’s commercial real estate sector and sovereign downgrades of Pakistan and Ghana.
“We remain confident in the delivery of our 2024 financial targets,” said Chief Executive Officer Bill Winters in the statement. The bank has targeted a return on equity of 10% by 2024.
The lender’s shares rose in early trading in London, before paring their gains. At 8:50am BST the stock was down 0.7%.
Standard Chartered joins other global banks in booking profits above market expectations largely due to a rise in net interest income, which has been somewhat curtailed by rising loan loss provisions. The lender said that credit impairments are now expected to be “slightly above” the annualized loan-loss rate of 18 basis points.
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Macro trading was one of the bank’s best businesses with income up 36% year-on-year boosted by volatile market conditions as well as higher customer demand for energy hedges. Cash management was also a strong performer and income more than doubled on the back of higher rates.
HSBC Holdings Plc shares dropped Tuesday after Europe’s largest bank posted higher-than-estimated charges for possible loan losses in its third-quarter results. Standard Chartered said in a presentation that the outlook for the commercial property sector in China “remains challenging” but that it has minimal exposure to mortgages on properties under construction.
Standard Chartered is based in the UK but makes almost all of its money in Asia, Africa and the Middle East. Its largest single market is Hong Kong, where the economy has been hit by the impact of pandemic restrictions that have curtailed business in the Chinese city.
