StanChart profit beats forecasts on boon from rising rates

By Selena Li and Lawrence White

HONG KONG/London (Reuters) - Standard Chartered PLC (StanChart) on Wednesday said first-quarter profit jumped 21%, beating expectations, as rising interest rates buoyed income from its cash management and retail banking businesses.

Chief Executive Bill Winters said he now expects income for the emerging markets-focused lender to grow around 10% this year, the top of a previously guided range.

The earnings update showed how rising central bank rates have boosted revenue, as StanChart charged borrowers more interest while not passing all of the increase to depositors.

It also followed resilience at U.S. banks which reported results earlier this month, as the sector weathers a global confidence crisis following the collapse of Silicon Valley Bank and Credit Suisse Group AG.

StanChart, which earns most of its revenue in Asia, said January-March pretax profit reached $1.81 billion, above $1.49 billion a year earlier and beating the $1.43 billion average of 14 analyst estimates compiled by the bank.

It was StanChart's largest first-quarter profit in nine years despite its biggest income earner - financial markets trading - seeing weaker activity compared with last year when markets experienced record volatility.

Graphic: StanChart profit jumps on rising rates - https://www.reuters.com/graphics/STANCHART-RESULTS/klpygbmzjpg/chart.png

The bank's shares edged up 0.3% in London, outperforming a sagging STOXX European banks index, which fell nearly 1%.

"All-in, we see this as a solid set of results, and would expect a broadly neutral share price reaction," analysts at Goldman Sachs said.

Standard Chartered said income in its corporate cash management business tripled due to "strong pricing discipline and passthrough rate management".

Retail banking income rose 53%, propelled by deposit income which tripled to $771 million.

HALFORD STAYS

StanChart has had "no contact" recently from First Abu Dhabi Bank PJSC, Chief Financial Officer Andy Halford told reporters, after the United Arab Emirates-based lender re-ignited StanChart takeover speculation in January by confirming it had considered making a bid.

The lender could complete the disposal of its aviation finance business, which has a fleet worth some $3.7 billion and has been earmarked for sale since January, as soon as the next financial quarter, Halford said.

Halford himself has no immediate plans to leave the bank, he told Reuters, after media reports last year that the lender has begun a search for a replacement and that he would depart this year.

Not all of StanChart's update was positive, with expenses rising 5% due to inflation as well as hiring for strategic initiatives, such as a push in China.

Credit impairment, a source of worry for bank investors in recent years as the global economy cools and runaway inflation pressures businesses, however remained low at just $26 million versus $198 million in the same period a year earlier.

The bank also said it saw signs of stabilisation in China's troubled commercial real estate market, with no increase in credit impairment from the previous quarter.

China's policy direction has turned positive on real estate, "but the underlying economic activity and sales activity of the real estate projects is not yet back to where it was", Deputy Chief Financial Officer Peter Burrill said at an industry conference last month.

($1 = 0.8906 Swiss francs)

(Reporting by Selena Li and Lawrence White in London; Editing by Muralikumar Anantharaman, Christopher Cushing and Sharon Singleton)