Standard Chartered said it would consider resuming dividends after reporting a smaller-than-expected 40 per cent drop in third quarter profit as it lowered coronavirus loan loss expectations.
The UK-based, Asia-focused lender posted an underlying pre-tax profit of $745m (£572m) for the three months to September, significantly ahead of bank-compiled analyst forecasts of $502m,
Standard Chartered also lowered its loan loss provisions for the quarter to $353m – lower than the $614m forecasted, and below the $611m it set aside during the previous quarter.
The bank’s London-listed shares slipped over five per cent following the results. Its Hong Kong shares ended Thursday 3.14 per cent down.
Long term impact of government virus support measures unclear
Standard Chartered said the results reinforced its view that credit impairments would be lower in the second half of 2020 than in the first half, as lenders worldwide report loan losses stabilising following the initial economic shock caused by the coronavirus pandemic.
However the lender said it was unclear whether support schemes implemented by governments across the globe to mitigate the impact of the pandemic had actually reduced losses, or would simply push them back to next year.
“Given the extreme economic pressures relating to the persistence of Covid-19, partially addressed through the efficacy of government support measures, it is not possible to reliably predict the quantum or timing of future impairments,” the bank said.
The lender struck a positive note on client demand, forecasting an improvement next year following quicker-than-expected economic recovery in key markets such as China and India.
StanChart to consider resuming dividends
Standard Chartered became the latest lender to strike a bullish tone on dividends following its third-quarter results.
The bank said its board would consider resuming a dividend payment when its full-year results are published in February, “given our strong capital position”, but this would be subject to discussions with regulators.
All major UK lenders scrapped shareholder payouts earlier this year following pressure from the Bank of England, but HSBC said earlier this week it would consider paying a “conservative” dividend alongside its 2020 full-year results.
Barclays analysts led by Aman Rakkar said Standard Chartered was “well placed to start distributions in the new year”, pending regulatory approval.
Standard Chartered chief executive Bill Winters said the third quarter results showed the lender was able to “weather the macroeconomic storm in good shape”.
“Lower interest rates continue to impact income but we remain well-positioned to meet our financial targets, albeit with some delay,” he added.
Covid-19 has triggered a perfect storm for many global banks, propelling them to cut costs and restructure further in the face of mounting bad loans and squeezed margins as interest rates hit rock-bottom or even turn negative.
Standard Chartered announced last month it would merge several businesses and cut its number of senior executives.
“We are further streamlining our organisation to sharpen focus on our retail business, more effectively leverage our unique network, and drive efficiencies,” said Winters.