StanChart resumes dividend payout as 2017 profit soars

European Stock Markets

Standard Chartered Plc resumed paying dividends after posting a six-fold jump in annual pretax profit on Tuesday, but weaker-than-expected revenue figures dampened any celebration from investors. 

A restructuring plan spearheaded by CEO Bill Winters, who arrived in 2015 and has since cut more than 5,000 jobs and dumped entire business lines including Asian equities, has helped the bank cope with hefty bad debts piled on its books. 

Years of over-exuberant lending saw the emerging markets-focused bank, which makes the bulk of its income in Asia, cancel its dividend in 2015 after posting its first loss in a quarter of a century the previous year. 

After reporting a $2.41 billion (1.7 billion pounds) pretax profit for 2017, up from $409 million the year before, it proposed to restore a full-year dividend of 11 U.S. cents per ordinary share. 

But profit was below the $2.7 billion average of 10 analysts’ estimates, and the bank also fell short of expectations on income after a weak performance in its financial markets business. 

StanChart shares were up 2.1 percent to 847.2 pence at 0905 GMT, with the resumption of the dividend helping sentiment.  

Winters said priorities for 2018 centred on fulfilling the potential the bank’s management believes is there but has not yet been fully realised, including by increasing efficiency and investing in innovation and people. 

Operating income, closely watched by investors who want StanChart to deliver profit from core business growth rather than lower provisions for bad loans, was up nearly 3 percent to $14.43 billion for the full year.

London-headquartered StanChart is looking to drive returns by boosting lending to key industrial sectors and top clients, sources told Reuters earlier this month.

CEO Winters said on Tuesday StanChart needed to establish income growth momentum across all its businesses, which will help it generate income at a new target compound annual growth rate of 5-7 percent in the medium term.

The results showed that some of its business lines are still struggling to deliver.

Underlying income in the corporate and institutional banking division fell 3 percent year-on-year, as its financial markets unit suffered from the low global market volatility in 2017 that dampened trading activity and dragged income down by $490 million.

StanChart’s private banking division reported a small $1 million loss for the year, as costs rose from investments. It, however, did see $2.2 billion of new money flow into the private bank, compared to the previous year when it saw $2 billion flow out.

The bank’s core capital ratio, another closely watched measure of lenders’ financial strength, remained unchanged at 13.6 percent last year compared to 2016, but above the lender’s targeted range of 12 percent to 13 percent. 

FTSE dips on Korean worries as financials, housebuilders take a hit

UK shares opened lower on Wednesday along with other European bourses, following the path set by Asia and Wall Street where market sentiment was hit by simmering geopolitical tensions in the Korean peninsula.

At 0810 GMT, Britain's blue-chip FTSE 100 .FTSE was down 0.36 percent at 7,346.74 points, with financials taking the most points off. 

Standard Chartered (STAN.L) was the second biggest loser on the index with a 2.2 percent fall, while HSBC (HSBA.L), Barclays (BARC.L), Lloyds (LLOY.L) all fell between 0.4 and 0,7 percent. 

Life insurers Prudential (PRU.L) and Old Mutual (OML.L) were both down about 1.2 percent and Provident PFG.L, which was the biggest FTSE faller on Tuesday, was down 1.4 percent. 

Britain’s biggest housebuilder, Barratt Developments (BDEV.L), sustained the most losses, with a 4.3 percent fall, as it said during its results it would continue to monitor “carefully” the impact of Brexit on its business.

Peer Berkeley (BKGH.L), whose shares took a 3.4 percent hit, said the London property market continued to be impacted by uncertainty surrounding Brexit and a property tax hike. Other companies in the sector were also retreating, with Taylor Wimpey (TW.L) down 1.1 percent. 

Royal Mail (RMG.L) was down 0.8 percent after Britain’s Communications Workers Union (CWU) said it would ballot more than 100,000 of its members over industrial action. 

Easyjet (EZJ.L) was down 0.5 percent at 1150p after HSBC cut its target price to 1550p from 1600p.

Glaxosmithkline (GSK.L) was down 0.7 percent after Credit Suisse cut its target price to 1725p from 1775p. 

Micro Focus (MCRO.L) shares surged 8.1 percent and were by far the best performing stock on the British blue chip index after its third quarter results.