StanChart unveils US$1.5b share buyback, boosts income guidance

HONG KONG/LONDON (July 30): Standard Chartered (StanChart) announced a US$1.5 billion (RM6.94 billion) share buyback, its biggest ever, and lifted its income outlook for 2024, betting on strong economic growth in its core Asian markets and on plans to rein in costs.

The London-headquartered lender, which earns most of its revenue in Asia, now expects operating income to grow more than 7% on a constant currency basis, up from its previous projection of between 5% and 7%.

That comes after pretax profit climbed 5% to US$3.49 billion for the first half, just ahead of a consensus estimate compiled by the bank.

StanChart's bumper buyback, the rosier guidance and a fleshed-out cost-cutting plan that seeks to save US$1.5 billion underscore chief executive officer Bill Winters' determination to bolster the bank's shares which have yet to match peers' gains this year.

"I don't think our share price reflects the optimism that we and I have for our bank," Winters told a media call on Tuesday.

StanChart shares jumped 5.9% in London trade. That brings the stock's gains to 18% since Winters bemoaned the bank's share price on Feb 23. It, however, still lags a 23% increase for Europe's benchmark STOXX banks index of 600 lenders.

Asia-focused global banks including StanChart and rival HSBC have benefited in recent years from higher interest rates and relatively stronger economic growth and wealth generation in the region.

But in China, slowing growth and a property sector crisis have troubled Western banks. StanChart has made provisions totalling US$1.2 billion for potential bad loans in China's commercial real estate sector so far this year.

Beijing has put together a range of policy support measures for the property market but signs of recovery have been limited.

"We are seeing the signs more in tier-one cities than elsewhere, but the [property] market clearly has not found the floor yet," chief financial officer Diego De Giorgi said.

Winters said the bank's approach to China is unlikely to be too affected by the Nov 5 US election.

"Whoever wins the US election is likely to be hawkish on China," he said, noting the administrations of former president Donald Trump and incumbent Joe Biden had followed that path, and Trump or Kamala Harris would likely continue those policies.

That stance could benefit StanChart, Winters said, as external pressures on China's economy and trade could encourage it to open up more.

Cost cuts, wealth jump

StanChart said it will press ahead with a cost-cutting initiative dubbed "fit for growth", which will see it save around US$1.5 billion over three years amid rising expenses due to inflationary pressures and business expansion.

The bank said it had identified more than 200 projects where it can make savings, with 80% of them expected to reduce costs by up to US$10 million.

That will include removing the lender's region-based reporting system and doing away with around 100 apps used internally as part of a technology simplification drive, De Giorgi said.

During the first half, StanChart saw strong growth from its non-net interest income streams as major economies brace for rate policies to take a turn.

Income from StanChart's wealth solutions unit surged 25% to US$1.2 billion, logging the most growth among the lender's main businesses.

The unit's net new sales in the period more than doubled to US$13 billion with wealth assets under management rising 12% to US$135 billion.

The bank, however, missed out on the second-quarter trading bonanza reported by Wall Street peers this month.

The British bank's lack of an equities trading business hurt it in a period where rivals such as JPMorgan and Morgan Stanley saw 21% and 18% revenue growth respectively in the business, driving overall investment bank income higher.

Instead, income from StanChart's investment bank fell 1% in the second quarter.

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