Standard Chartered has said it will double investment in its wealth management business and shift its focus towards affluent individuals and global institutions after pre-tax profits rose in the third quarter.
The UK-based bank on Wednesday reported underlying profits before tax of $1.8bn, up from $1.3bn a year earlier and above analysts’ estimates of $1.6bn. A 32 per cent rise in revenue from the wealth business, which had a record quarter, boosted results.
The earnings came as the bank announced a shift in its operations to focus less on smaller domestic businesses and regular retail clients, and more on affluent individuals and larger international companies.
The changes would “further simplify our business and help us to generate higher-quality growth”, said chief executive Bill Winters in a statement.
StanChart raised its revenue guidance and targets for return on tangible equity, a key measure of profitability, as well as distributions to shareholders. It said it now aimed to return $8bn to shareholders between 2024 and 2026, up from a previous goal of at least $5bn.
The bank said it would reshape its retail banking business to focus on “building a strong pipeline” of affluent and international clients, and would focus on bigger international clients within its corporate and investment bank.
“We will reduce the number of clients whose needs do not play directly to our strengths,” it said, adding that it was considering the sale of “a small number of” businesses that are not core to its aims.
The emerging markets-focused bank said it would invest about $1.5bn over five years in its wealth business, including hiring more relationship managers and investment advisers to work for affluent clients — twice what it had previously planned to invest in the business.
“The first thing is that we are winning” in wealth management, chief financial officer Diego De Giorgi said on a call with reporters. “It’s very clear that we are gaining market share . . . we are gaining new clients and our existing clients are putting more money with us.”
Hong Kong, Singapore and Dubai “clearly will receive a lot of attention” in the investment push, he said, though there would be investment “across the network”.
The lender is under pressure to grow in areas less dependent on interest income, as rates start to fall after a series of rises boosted profitability in recent years.
The bank has not yet named a new chair to replace José Viñals, who is approaching a nine-year limit for independent directors. The FT reported this year it had sounded out UK political heavyweights Sir Charles Roxburgh and Sir Sajid Javid, though Roxburgh has since been named as chair of Lloyd’s of London. De Giorgi said in an FT interview on Wednesday that a chair would be named “in the months to come”.
Winters is by far the longest-serving chief executive of a major UK bank. But anyone who had seen how hard Winters works “probably wouldn’t be asking the question” of whether he would step down, De Giorgi said.
Its reported pre-tax profits were $1.7bn, up from $633mn a year ago when the figure accounted for a near-$700mn impairment charge on its stake in China Bohai Bank.
StanChart said its underlying revenues of $4.9bn were its best of any third quarter since 2015, the year Winters took the helm.
Income in the bank’s markets unit rose 16 per cent, partly because of higher foreign exchange and credit trading.
Net interest income rose 9 per cent, which the bank said was partly due to hedging. Its closely watched net interest margin, the difference between the interest received on loans and the rate paid for deposits, rose to 2 per cent, up from 1.6 per cent a year ago.
The bank’s return on tangible equity was 10.8 per cent in the quarter, more than the 7 per cent a year earlier and beating analysts’ expectations of 10.3 per cent.
But the bank took a $16mn impairment charge in its ventures unit, which invests in start-ups, mostly because of its digital bank Mox, though it said delinquency rates at the start-up had improved.
It also reported a $34mn provision related to the risk of clients’ exposure to Hong Kong commercial real estate, where it said an oversupply of office space was an “area of concern”.
The bank has more exposure to commercial property lending in Hong Kong than in any other market. Its rival HSBC has been hit by a sixfold surge in defaulted commercial property loans in the territory. But De Giorgi said in the interview that StanChart’s exposure was relatively small and “vastly skewed towards” Hong Kong’s most prominent developers.
StanChart shares are now just below the level when Winters took charge in June 2015, having risen 36 per cent since the start of this year. Its Hong Kong-listed shares closed 3 per cent higher on Wednesday.
The bank has been under pressure to boost its stock since it trades at a discount to book value. In February, Winters lamented the bank’s “crap” share price, saying it did not reflect its true value.
De Giorgi said “no one should ever be satisfied about a stock price” but that he was pleased about the rise in 2024.
StanChart this year said it planned to save about $1.5bn over the next three years by simplifying systems under a plan called “Fit for Growth”.
De Giorgi said 80 per cent of the programmes under that plan — which include standardising the use of technology platforms and making use of large language models — would each lead to savings of $10mn or less.
“It derisks the programme because no single part of it can create trouble to the delivery of the programme and the achievement of our objectives,” he said.
Costs rose 3 per cent year on year in the third quarter, which the bank said was due to inflation and business growth.
