Standard Chartered (OTC:SCBFF) has reported its third quarter 2023 results, showing progress in strategic actions and expressing confidence in achieving its 2023 financial targets, including a return on tangible equity (RoTE) of 10%. The bank's business in China continues to thrive despite a challenging macroeconomic picture and the ongoing impact of weak property sales in the Chinese commercial real estate sector.
Key takeaways from the call include:
- The bank reported $1.3 billion of underlying profit before tax.
- Income is up 15% year-to-date, driven by strong performance in the bank's digital banking and sustainable finance strategies.
- Net interest income increased by 20%, driven by cash management and retail deposits.
- As per InvestingPro Tips, the bank has been aggressively buying back shares. This is evident as the bank has completed a $1 billion buyback announced in February and has executed around $800 million of the $1 billion buyback announced in July.
- Standard Chartered's Common Equity Tier 1 (CET1) ratio may be affected by several factors, including risk-weighted assets (RWA), credit migration, and business growth.
- The bank is monitoring the situation in the Middle East, where it has a limited presence.
- The bank's guidance for 2023 remains unchanged, with expected income growth in the 12% to 14% range and a RoTE of 10%. This aligns with InvestingPro's data showing a 12.08% revenue growth and a positive 1.07% year-to-date price total return.
- The bank is comfortable with the quality of its overall book and has the capacity to increase risk if desired.
Standard Chartered's CFO, Andy Halford, stated that the bank's balance sheet is of good quality and that they have reduced exposures to challenged countries and China. He also noted that the bank has executed nearly $4 billion of a $5 billion plan and is mindful of returns.
On the topic of loan growth, the bank reported a start-of-quarter loan balance of $281 billion, with a 2% growth excluding treasury positions, optimization, and foreign exchange. The bank anticipates seeing more demand for credit from clients in the next 15 months.
In terms of business performance, financial markets trading momentum improved in October, while new deal financing and primary issuance levels remained subdued. Despite the challenging market sentiment, wealth management performance in October was in line with September.
Standard Chartered remains optimistic about market growth, with strong income growth in Singapore and Hong Kong and the expectation that Asia's GDP will exceed 5% this year and next, making it the highest-growth region globally.
The bank continues to progress in its strategic actions, focusing on its cross-border network business and affluent business. It also expressed comfort with the quality of its overall book while acknowledging the need to continue monitoring the Chinese commercial real estate situation. The bank reiterated its target of 8-10% top-line growth next year and 12-14% this year, with a RoTE of 10% this year and 11% next year.
In conclusion, Standard Chartered is operating within its risk appetite but has the capacity to increase risk if desired, with a focus on managing higher-yielding assets and maintaining a strong capital position. This aligns with InvestingPro Tips that note the company's strong earnings, which should allow management to continue dividend payments and the consistently increasing earnings per share. For more in-depth insights, you can check out InvestingPro's additional 9 tips on InvestingPro.
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