Standard Chartered Bank posted an 18% increase in first-quarter pre-tax profit at $1.4 billion, topping the analyst forecast of $1.08 billion.
The banks also said it will slash its global branch network by half to around 400 to cut expenses. The bank has a huge presence in Asia, Africa and Middle East.
Chief financial officer Andy Halford said the emerging markets-focused lender would slash its network to 400 from 776 branches following the changes in work mode during the Pandemic and the worldwide lockdowns in 2020. It will take a $500m charge this year to do so. It had 1,200 branches worldwide in 2014, and it will shrink the network to nearly one-third. StanChart had already announced a cut in its real estate earlier. The restructuring of the branches and cutting down on the real estate shows that StanChart is looking at long-term savings.
The bank will also reduce its city center office by a third. Last year, it signed an agreement allowing many of its 95,000 employees to work from “near-home” locations rather than commuting into cities.
StanChart’s better than forecast performance was mainly driven by a strong performance in its wealth management business and lesser expenditure on servicing bad loans.
The Pandemic has forced central banks worldwide to drive down interest rates, which are detrimental to the health of banks. StanChart saw its cash management division see a 32 percent fall this quarter.
StanChart said that it did not see any great change in its income for this year compared to 2020 as it expects its fee-based services to bring in extra income to compensate for the low-interest hit divisions.
The wealth management business saw a record quarter with income up 21% on strong sales of foreign exchange and equities-related products.
StanChart released only a small amount of the funds it holds against bad loans as opposed to what other banks such as HSBC and Lloyds are doing. I did not release any big cash money to cover bad loans. Instead, it took a $20 million credit impairment.
StanChart chief executive Bill Winters said the economic recovery from Covid-19 had led to improved transaction volumes and profitability. “This was particularly the case in our financial markets and in wealth management, which had its best-ever quarter,” he said. “Despite low-interest rates, we expect our underlying momentum to lead to income growth in the second half of 2021.”
Halford said that “having weathered the pandemic”, the bank intends to use its excess capital to boost dividends and start share buybacks. “To the extent that we don’t need it in the business, we are ready, willing and able to return it to shareholders,” he said.
“A solid first quarter that can be built upon,” said Jefferies analyst Joseph Dickerson. “We had expected a strong quarter in wealth and the company delivered.” The stock rose 2.6 percent in London.
StanChart is also planning to buy some parts of Citigroup’s Asian consumer operations, which the US bank had put up for sale earlier in the year.
