British financial firm Standard Chartered PLC on Wednesday saw higher profits and revenues for first-quarter, driven by strong loan demand and better asset quality.
The bank posted statutory profits of $1.19 billion for the first three months of the year ended March 31, slightly missing analysts’ forecast of $1.21 billion, though it added 20 percent on the same period. Excluding items, underlying pre-tax profit increased to $1.3 billion from $1.1 billion in 2017.
Growth in Greater China and North Asia raised revenue by 7 percent year on year to $3.87 billion, but also came in a bit short from expectations of $3.95 billion.
Transaction banking, mortgages, wealth management, and deposits mainly contributed to the gains, as they bring in an 18 percent combined increase in income.
StanChart’s financial markets unit generated a record of $724 million in operating income, the segment’s strongest performance since 2016.
The bank said impairments fell by 29 percent from the previous quarter to $191 million, lower than the first quarter last year.
Shares of StanChart declined 1.2 percent to £759.80 on Wednesday.
StanChart Gradually Recovering, Nearing 8 percent Target
StanChart chief executive Bill Winters said the current results would take them beyond an 8 percent return on equity in the medium term, a long-desired but hard-to-reach goal for the London-based firm in recent years. Timetable for achieving the target has not been determined.
Return on equity was up by 7.6 percent from 6.3 percent in 2017, putting the bank on track to achieve its 8 percent goal.
StanChart’s medium-term target, which was revealed in February, came as the company recovers from a restructuring that saw key profitability metric turn downbeat.
Even though the firm saw macro-economic conditions to be favorable, it decided to strengthen its capital position, with the common tier equity 1 ratio, adding 26 basis points to 13.9 percent compared to the end of 2017, so as to protect itself from the continued geopolitical risks.
StanChart stated that they are alert to the persisting geopolitical threats, but they are now more resilient, and remain focused on enhancing their service to their clients, while improving competitiveness.
The group returned to annual profit last year, after experiencing two years of huge losses and a long period of reorganization, which began in 2015, under the leadership of Winters. It also gave money back to shareholders, following the cancellation of its dividend for the past two years.
Losses from heavy debts had weighed on StanChart in the recent past, but it has since tightened restrictions with regards to who can decide on such large loans, and reduced internal limits for exposure to a single client.
Gradually growing back into markets and downsizing its loan book over the past four years, the firm’s net loans and advances was up by 3 percent in the first quarter to $295 billion from the start of the year.
Executives noted that this round of capital deployment will not put the bank in the same position with non-performing loans that it ran into years earlier in markets, such as India and Indonesia.
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