Standard Chartered restarts shareholder payouts after returning to profit
The bank benefited from a smaller hit on bad loans and a recovery in global growth.
Standard Chartered returned to profit in 2017, prompting the lender to restart shareholder payouts as it flagged an “encouraging” start to 2018.
The Asia-focused lender swung into the black with net profits coming in at 774 million US dollars (£555 million) for the year to December 31, compared with a loss of 478 million US dollars (£342 million) a year earlier.
That was against a 2.5% rise in statutory operating income to 14.4 billion US dollars (£10.3 billion).
The bank benefited from a smaller hit on bad loans, at 1.4 billion US dollars (£ 1 billion) compared with 2.8 billion US dollars (£2 billion) in 2016, and said recovery in global growth also helped support the bank’s performance.
It also celebrated “well-controlled” operating costs which rose just 2% to 8.6 billion US dollars (£6.2 billion) , adding that 85% of its cost efficiency target of 2.9 billion US dollars (£2 billion) had already been achieved three years into the four-year programme under chief executive Bill Winters.
The transformation of the Group continued in 2017 with the significant improvement in underlying profits, a strong capital position and emerging clarity on regulatory capital requirements allowing us to resume paying dividends Standard Chartered chief executive Bill Winters
Standard Chartered’s board has now recommended restoring the dividend, which was cancelled in 2015 in reaction to its first reported loss in 25 years.
It proposes paying 11 US cents (8p) per ordinary share for 2017 and said it intended to increase the dividend per share over time as the group’s performance improved.
Mr Winters said: “The transformation of the group continued in 2017 with the significant improvement in underlying profits, a strong capital position and emerging clarity on regulatory capital requirements allowing us to resume paying dividends.
“We are encouraged by our start to 2018 and remain focused on realising the group’s full potential.”
The bank’s annual report, which was released alongside its full-year earnings, showed the chief executive’s total pay packet rising 38% to £4.7 million from £3.4 million a year earlier, thanks to a major increase in his annual incentive award and benefits in 2017.
Our CEO Bill Winters: “We significantly improved our financial performance in 2017, and are encouraged by the start to 2018”. See full-year results - https://t.co/6niOqUySWL pic.twitter.com/XruQTDYNH4— Standard Chartered (@StanChart) February 27, 2018
Gary Greenwood, a research analyst at Shore Capital Markets, said investors were likely to be encouraged by the decision to resume the dividends, which signalled management confidence not only over balance sheet strength but in the group’s ability to grow earnings.
However, he said profit performance was slightly weaker than expected primarily due to a shortfall in income.
It led to a muted share price reaction with Standard Chartered stock prices up just 0.6% in midday trading.
But Mr Greenwood said the bank appeared to be on firm footing going forward.
“We believe these results demonstrate that Standard Chartered is now firmly on the road to recovery and expect this trajectory to continue given the group’s exposure to relatively high growth emerging markets and its ability to benefit from rising interest rates.”