StanChart cheers investors with $500 million share buyback, 19% profit jump

By Anshuman Daga and Lawrence White

SINGAPORE/LONDON (Reuters) -Standard Chartered's first-half pre-tax profit rose 19% and beat market expectations, as the emerging markets-focused lender benefitted from rising interest rates and issued an upbeat post-COVID outlook, pushing its shares 3.7% higher.

The strong performance unveiled on Friday showed how some banks with a focus on Asia are shrugging off the impact of a weakening macro environment in the United States and Europe that is emerging as a key risk for others.

"There may be some tougher times ahead from an economic perspective, but our markets are recovering quite nicely from what had been a really horrific pandemic," Chief Executive Bill Winters told reporters on a conference call.

Statutory pretax profit for StanChart, which earns most of its revenue in Asia, grew to $2.8 billion in the first half from $2.35 billion a year earlier, beating the $2.48 billion average of analysts' forecasts compiled by the bank.

The London-headquartered bank also improved payouts to shareholders, with an increased interim dividend of $119 million equal to 4 cents per share, and announced a $500 million share buyback.

StanChart's London-listed shares rose 3.7% in early trade while its Hong Kong shares were up 1% in a weak market.

Jefferies analysts said StanChart's forecast-beating pretax performance and share buyback programme should be well received.

"Credit performance was materially better," they said in a note. However, they added, "We do not view second-quarter results as driving consensus earnings estimates higher."

EASTERN PROMISE

CEO Winters, who took charge seven years ago has attempted to restore growth while creating a portfolio of digital assets in the last few years, after repairing the bank's balance sheet and slashing thousands of jobs early in his tenure.

Still, the company's share price has shed about 40% during his time, though it has risen about a quarter so far this year, outperforming the sector.

StanChart said earnings were boosted by its focus on eastern markets, rather than the United States and Europe where interest rate hikes to combat spiralling inflation are threatening economic growth.

"Looking forward, whilst recession risks are rising in the West, we are seeing the early stages of a post-pandemic recovery in many of the markets in which we operate, underpinning our prospects for growth," Winters said in the results statement.

The bank, which is focused on Asia, Africa and the Middle East, said it was on track to deliver a 10% return on tangible equity, a key earnings metric, by 2024 if not earlier.

RECORD TRADING PERFORMANCE

StanChart said its financial markets trading division reported record income in the first half - up $500 million - as market volatility drove increased client demand for foreign exchange and macro-economic related products in particular.

Analysts have warned that asset impairment charges and higher costs are likely to be a big drag on the performance of London-listed StanChart and its larger peer HSBC.

HSBC reports results on Monday.

StanChart said its profits in Asia were dented by a $351 million credit impairment, mainly due to losses in China's troubled commercial real estate sector and the turmoil in Sri Lanka.

It said its performance in Hong Kong, its biggest market, which is suffering from some of the strictest coronavirus regulations in the world outside mainland China, showed resilience in the first half.

But Winters said he sees healthy signs of a recovery in Hong Kong.

StanChart's total income fell 5% in Hong Kong in the first half compared with a 10% rise in Singapore and a 14% increase in India.

(Reporting by Anshuman Daga and Lawrence White; Editing by Kenneth Maxwell)