Standard Chartered reassured investors about the strength of its balance sheet, raising its dividend despite reporting its first drop in annual profits for a decade and giving a weak outlook for the first half.
Once feted for its exposure to Asia, Africa and the Middle East, which helped it generate years of record earnings, StanChart is now under pressure to show how it can adapt to slowing growth and rising bad loans.
It said it had cut its bonus pool for last year by 15 per cent to £772 million ($1.3 billion), with chief executive Peter Sands’s own bonus down 21 per cent to $2.5 million.
It warned volatile trading conditions would hurt income and profits in the first half, but its shares were lifted by a 2 per cent increase in the dividend and a bigger-than-expected cushion against future losses which reinforced the bank’s message that it did not have to raise capital.
“Today’s results are showing that Standard Chartered is challenged . . . It’s not giving a particularly bright outlook, it is talking about modest growth markets and volatility and still having to deal with problems in Korea, but the one thing that has been put to bed for the time being is worries about capital and hence dividends,” said Christopher Wheeler, analyst at Mediobanca.
The bank estimated its common equity Tier 1 ratio, a key measure of financial strength, was 11.2 per cent under tough new global rules, above analyst estimates with Citibank forecasting a ratio of 10.4 per cent.
StanChart shares were up 2 per cent, having earlier climbed over 4 per cent. The stock tumbled 28 per cent in the last year, compared with a 19 per cent rally by European banks as a whole , and had fallen earlier this week to not far from its lowest point of the year so far. The bank, which makes 90 per cent of its profit in Asia, the Middle East and Africa, reported a 7 per cent fall in yearly pre-tax profit to $7 billion. – ( Reuters )
