Third quarter underlying operating income rose 8% at constant exchange rates, to $4bn, underpinned by an increase in loans to customers. With operating expenses up 1%, profits rose 16% to $1.2bn.
The shares rose 2.2% in early trading.
Standard Chartered's showing promising signs of progress. Cost control's been a hallmark of the bank for some time, but the addition of income growth means profits are taking off.
A not insignificant chunk of revenue is being driven by the volatile Financial Markets business. But with good progress on loan growth and in the Private Bank, there's a solid underpinning of more sustainable income growth too. That should help Standard Chartered achieve the ambitious targets it has set itself for the three years to the end of 2021. Most eye catching is a target of 5% - 7% a year income growth - which the bank now looks on course to achieve in 2019.
Unfortunately the group's still lagging rival HSBC, when it comes to profitability, and 2021 return on equity targets aren't as ambitious either. It's not quite the gung-ho, high-growth bank investors were sold in the early part of this decade.
But a more cautious approach might be no bad thing. Investment banking is volatile, and so are the emerging markets where Standard Chartered gets most of its customers. Volatility squared isn't a good look for a bank. As a result, high finance is set to take a back seat, as the focus shifts to high value private banking, affluent retail banking clients and trade finance
It's not all plain sailing though. Increased exposure to trade finance means Standard Chartered would be among the hardest hit if geopolitical tensions boil over into an all-out trade war. It doesn't help that Greater China & North Asia accounted for 61.4% of underlying profits in 2018 - and signs are that economic growth in the region is slowing. The bank has warned that could make achieving future targets more difficult.
In the long run though, Standard Chartered's emerging market bias should prove a major positive. Their growing and increasingly wealthy populations can drive the income growth the bank is aiming for. An increasingly strong capital position is underpinning loan growth and should help weather market turmoil.
If the bank can hit, then build on, its return on equity targets, the recently completed $1bn buyback and prospective yield of 3.5% could be just the start. Management reckon dividends could double by 2021 - although as ever there are no guarantees.
Standard Chartered shares currently trade on around 0.6 times book value, below its longer term average of 1 times.
Third Quarter Results
Quarterly net interest income of $2.4bn was up 9% compared to last year. That reflects a 5.8% increase in loans to customers, with net interest margin (the difference between what the bank pays on deposits and earns on loans) flat year-on-year, and increased trading book assets. Non-interest income rose 4% to $1.6bn.
Operating expenses are expected to increase next quarter from the $2.5bn reported in Q3 - although are expected to grow slower than inflation for the year as a whole. Bad loans increased 143% to $279m, mainly due to a small number of large Corporate & Institutional Banking clients.
The group finished the quarter with a CET1 ratio (a key measure of banking capitalisation) of 13.5%, a light improvement on the end of the first half thanks to higher profits.
Standard Chartered reported an underlying return on tangible equity, banks' preferred measure of profitability, during the quarter of 8.9%. That compares to 7.3% this time last year.
The bank continues to target a 10% return on tangible equity by 2021 - although notes growing geopolitical and economic headwinds.
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