Standard Chartered Earnings Beat, Downplays Risks from China Property

By Elaine Yu

HONG KONG-Standard Chartered PLC reported better-than-expected profit for the second quarter while unveiling a new share buyback plan aimed at boosting shareholder returns.

The London-headquartered lender on Friday reported an underlying pretax profit of $1.3 billion, up 7% year-on-year and beating an estimate of $1.06 billion compiled by the bank.

The results were helped by its Asia-focused position as the bank benefited from both the Federal Reserve's interest rate increases and its core markets being more insulated from volatile macroeconomic conditions in the West. The bank generated 72.5% of its underlying pretax profit from Asia in the three months-ended June 30.

Buoyed by a rising interest rates environment, the bank's net-interest income rose 8% to $3.64 billion for the first six months of this year and net-interest margin is up 10 basis points year-on-year during that period.

The bank also said on Friday it will buy back $500 million worth of shares, on the back of a $750 million buyback program completed earlier this year. It plans to return more than $5 billion to shareholders over the next three years.

The results were partly offset by $267 million in credit impairment over the last two quarters owing to the bank's exposure to China's real-estate sector and the downgrade of Sri Lanka's long-term foreign currency sovereign rating. By comparison, the same period last year saw a net release of $47 million in credit impairment.

China's property downturn has amplified the asset risks for Hong Kong's banks that have exposure to the mainland's real-estate sector, including Standard Chartered's subsidiary in Hong Kong, Moody's Investors Service said in a report this month. Authorities in China have moved to quash a revolt among homeowners who have threatened to renege on mortgages on unfinished properties as the country faces growing pressure to address its property crisis.

Benjamin Hung, Standard Chartered's Asia Chief Executive Officer, said in a press conference on Friday the bank hadn't been affected by the mortgage boycott because its main focus is on China's large and comparatively wealthy first-tier and second-tier cities. The bank's $3.7 billion net exposure to the country's real-estate sector is only a small part of its $64 billion exposure in China overall, Mr. Hung said.

He said the bank's strategy hinges on China's continued opening up of its financial and capital markets, rather than its overall economic growth. "That to me is the far more important driver of our strategy," he said.

Write to Elaine Yu at elaine.yu@wsj.com

(END) Dow Jones Newswires

July 29, 2022 10:50 ET (14:50 GMT)

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