Earnings

Standard Chartered reports a 12% fall in net profit, but strikes optimistic tone on China recovery

Key Points
  • Profit attributable to shareholders for the London-headquartered bank came in at $810 million for the first three months of the year, down from $917 million over the same period in 2019.
  • The British-based lender said credit impairment rose to $956 million for the quarter, up from $78 million a year earlier, driven primarily by the economic impact of the spread of Covid-19.
  • Shares of Standard Chartered rose more than 6% during early morning deals. 
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Standard Chartered first-quarter profit falls 12% amid the coronavirus crisis

Standard Chartered on Wednesday reported a 12% fall in profit attributable to shareholders, as the emerging-markets focused bank cited encouraging early signs of economic recovery in China.

Profit attributable to ordinary shareholders for the London-headquartered bank came in at $810 million for the first three months of the year, down from $917 million over the same period in 2019.

The British-based lender said credit impairment rose to $956 million for the quarter, up from $78 million a year earlier, driven primarily by the economic impact of the spread of Covid-19.

It also raised its expected credit loss provisions to $6.2 billion in the quarter, up from $5.8 billion at the end of December last year.

Shares of Standard Chartered rose more than 6% during early morning deals. 

The London-headquartered bank, which focuses on Asia, Africa and the Middle East, warned investors of a "protracted period of severe dislocation" as a result of the coronavirus pandemic.

But, in contrast to other European lenders, the bank struck a relatively positive tone about a potential economic recovery.

"The bigger markets, the bigger profit pools for us, are in northern Asia, and those are the markets that obviously went into this first," Andy Halford, chief financial officer at Standard Chartered, told CNBC's "Squawk Box Europe" on Wednesday, referring to government-led lockdowns as a result of the coronavirus outbreak.

"If they can come out of it quickly, that is incredibly good news for us as a group overall," he said.

An illuminated Standard Chartered Plc logo is displayed on the Standard Chartered Bank building.
Jerome Favre | Bloomberg | Getty Images

To date, more than 3.1 million people have contracted the coronavirus infection worldwide, with 217,207 deaths, according to data compiled by Johns Hopkins University.

On Sunday, China said all of the Covid-19 patients in Wuhan — where the coronavirus was first reported — had been discharged, according to Reuters. The central Chinese city was put into lockdown near the end of January, but has since started to ease restrictions.

Gradual recovery

"I do think where we are positioned geographically in the world is actually giving us some support here. Undoubtedly, this is going to be a year when it will very painful to start with. It will hopefully ease as we get through the year," Halford said. "When it gets back to normality? Who knows."

Standard Chartered's results come a day after HSBC reported first-quarter earnings that missed expectations after the bank set aside more money for potentially larger loan losses due to the coronavirus pandemic and weakening oil prices.

Standard Chartered's common equity tier one ratio — a key measure of financial health — stood at 13.4%, down from 13.9% a year ago.

"We expect a gradual recovery from the COVID-19 pandemic, with major contraction in economic growth rates across most of the world in the second quarter, before the global economy moves out of recession in the latter part of 2020, most likely led and driven by markets in our footprint," the bank said.

"If we are wrong about the pace of recovery and the global economy gets back on its feet rapidly - and we are seeing encouraging early signs of that happening in China - then the actions we are taking now will make us leaner and fitter to take advantage of the opportunities that will bring."