Shares in Standard Chartered took a sharp dive on Thursday following the release of their financial results, which revealed a significant drop in pretax profits. The British bank recorded a 54% decline, mainly attributed to a substantial depreciation of its Chinese real estate and banking divisions.
Disappointing Results
Standard Chartered’s statutory pretax profits were reported at $633 million, missing analysts’ expectations by a wide margin. A survey conducted by the bank itself had estimated pretax profits to be around $1.41 billion, as projected by 16 analysts. The news sent ripples through the market, causing the bank’s shares (STAN, -10.20%) to plummet by 11%. Despite this setback, Standard Chartered shares have managed to gain 21% over the past year.
Impairment Charges and Losses
The bank suffered losses amounting to nearly $1 billion, largely due to impairment charges. Among the significant hits, their China Bohai Bank business incurred a loss of $697 million, while the value of their Chinese commercial property portfolio depreciated by $186 million.
Challenging Economic Climate
Standard Chartered attributed the $697 million impairment charge to their Tianjin-based Bohai banking division to a “challenging macroeconomic outlook.” The bank also cited “subdued” earnings from the business in the previous quarter, as it predicted a slowdown in China’s GDP growth.
As a result of these developments, Standard Chartered faces an uphill battle to regain stability and profitability in its Chinese operations. Nonetheless, the bank remains determined to adapt and overcome the challenges it encounters in this vital market.
Standard Chartered Reports Credit Impairments Amidst Chinese Property Market Slump
London, November 4th, 2022 – Standard Chartered, a leading global bank, has reported credit impairments amounting to $294 million in its recent financial statement. This includes a substantial write-down of $186 million in the value of its Chinese commercial real estate division. The bank attributes this decline to the current slump experienced in the Chinese property market.
Despite the Chinese government’s efforts to stimulate the property market, buyer confidence remains “subdued.” This sentiment aligns with Standard Chartered’s observation, indicating that the measures have not had the desired effect.
In addition to the credit impairments, Standard Chartered’s underlying profits have fallen by 2% in the third quarter. This decline is primarily driven by a 5% drop in non-interest income divisions, representing 45% of the bank’s total revenues. Unfortunately, the bank’s performance has fallen short of analysts’ expectations. Sixteen analysts polled by the bank predicted underlying pre-tax profits of $1.44 billion, higher than the $1.31 billion reported by Standard Chartered.
Despite the disappointing results, Standard Chartered remains steadfast in its guidance and confident in its ability to achieve a 12-14% increase in full-year income by 2023.
Financial analysts at Shore Capital Markets maintain their buy rating on Standard Chartered shares. Despite the anticipated negative market reaction to the bank’s current results, they believe there is still potential for share value appreciation in the near future.
Conclusion
Standard Chartered faces challenges amidst a declining Chinese property market, evident in the significant credit impairments recorded in its financial statement. However, the bank remains optimistic about its future prospects, reiterating its guidance for increased income in the coming years. Despite short-term market fluctuations, financial experts believe that Standard Chartered shares hold potential for long-term value growth.
