Standard Chartered share price dives as slowing Chinese economy and real estate crisis drag on performance
China’s growing real estate crisis ensured that Standard Chartered performed worse than expected in the third quarter, with bank’s shares plunging 11.8 per cent in early London trading
Statutory pretax profit more than halved compared to last year, falling to $633m despite reporting an increase in income.
The bank booked impairment charges of $294m, of which $186m related to the Chinese commercial real estate sector. Impairment charges reflect falls in the value of a bank’s asset.
It also took a $700m impairment charge from its stake in China Bohai Bank reflecting “subdued” earnings in the second quarter and a “challenging macroeconomic outlook”.
Although based in London, Standard Chartered focuses primarily on Asia and emerging markets. It has set itself the task of ‘seizing the China opportunity’ as it bets on a speedy recovery in the world’s second largest economy.
Inflation also meant the bank faced rising costs, with expenses rising six per cent on the same period last year.
“We remain highly liquid, and well capitalised, with a CET1 ratio towards the top of our target range and confident in the delivery of our 2023 financial targets, including a return on tangible equity of 10 per cent,” boss Bill Winters said.
The bank’s net interest margin for the quarter was 1.63 per cent, which was a “transient reduction” from the previous quarter. It now hopes to “approach” 1.7 per cent across the year as a whole.
“Investors were expecting a clean set of Q3 numbers from STAN, and we do not have that today,” analysts at Jefferies commented. “The sliver lining is that the ROTE targets (10 per cent for ’23 and >11 per cent for ’24) have been reaffirmed”.
Standard Chartered is attempting to streamline its global operations. In recent months, the bank has exited markets in sub-Saharan Africa and Jordan. It also sold its jet leasing arm to a Saudi wealth fund for $3.6bn (£2.8bn).
The emerging markets focused lender is aiming to reduce costs by more than $1bn by 2024.
The bank has been a target of takeover talks in recent months with First Abu Dhabi Bank confirming in January it had been interested in acquiring the bank.