StanChart unveils share buybacks, raises outlook despite Q4 profit miss

By Scott Kanowsky

Investing.com -- Standard Chartered PLC (LON:STAN) has unveiled a new round of share buybacks and raised its financial guidance, citing the benefits from rising interest rates and the reopening of China's economy from long-standing COVID-19 restrictions.

The U.K.-based lender said it now expects full-year average net interest margin to be "around 175 basis points" this year, up from its prior outlook of approximately 165 bps. Return on tangible equity is also seen approaching 10% in 2023, ahead of the emerging markets-focused bank's previous estimate that it would hit that target in 2024.

Growth in "most of the markets" StanChart operates in is anticipated to continue in the next two years, it said, adding that activity in Asia will be pivotal to a broader global recovery.

"The recent opening-up of China and the generally receding impacts of COVID-19 should help in that regard albeit we will continue to monitor closely the sovereign risks in markets that are most exposed to tightening liquidity," the company said in a statement.

"Overall, the markets in which we operate, the further benefits of rising interest rates and the evidential improvement in many of our operating metrics cause us to be optimistic about the period ahead."

StanChart announced a fresh plan to return $1 billion to shareholders, along with a final dividend of 14 cents per share. The increase brings total stakeholder distributions to $2.8B since the start of 2022, group chief executive Bill Winters said, and more than halfway towards its goal of delivering $5B over the three years to 2024.

Undergirding these buybacks was a 12% year-on-year jump in total underlying operating income to $3.7B in the fourth quarter that stemmed partially from the boost provided by elevated borrowing costs. However, StanChart booked a $344 million credit impairment charge linked in part to its exposure to turbulence in China's commercial real estate market.

Meanwhile, quarterly income at its wealth management unit, an increasing priority for the bank's leadership, dropped by 23% to $359M due to "risk-averse" client sentiment and the impact of COVID rules.

Adjusted pretax profit for the three months to the end of December subsequently grew by over a fifth to $529M, but was well below the Bloomberg consensus forecast of $769.6M.

Analysts at JPMorgan described the results as mixed, with the buybacks, in particular, offsetting the hit from provisions in the final quarter of 2022.

Shares in StanChart rose in London on Thursday, mirroring earlier gains made by its Hong Kong listing (HK:2888).