Standard Chartered reported a better-than-expected profit for the first quarter and said it will slash its
global branch network by half to around 400, as the British bank looks to cut long-term expenses.
The Asia, Africa and Middle East-focused lender, which had as many as 1,200 branches worldwide in 2014, said in a quarterly results presentation to investors on Thursday it will shrink the network to a third of that total as it also gives up office space worldwide.
The cost-cutting drive came as StanChart posted an 18% increase in first-quarter pre-tax profit, beginning a recovery from the economic hit caused by the coronavirus pandemic.
Pre-tax profit for January-March was $1.4 billion, versus $1.2 billion a year earlier, and compared with an average analyst forecast of $1.08 billion compiled by the British bank.
The improvement was driven by StanChart setting aside less cash to cover bad loans than it had done one year ago, as well as strong performance in its wealth management business.
The move to cut branches, as well as previously announced plans to trim a third of the bank's office space worldwide, show how StanChart is looking past short-term improvements in its results to tackle long-standing profitability challenges.
Like those of bigger rival HSBC, StanChart's results showed how rock-bottom interest rates globally are squeezing banks' profits, with its cash management division — usually a steady earner — seeing income fall 32%.
StanChart said it expected income to be similar this year to 2020, and to grow more the following year as fee-based businesses offset those being crushed by low interest rates. One bright spot for StanChart was its often underperforming wealth management business, which saw a record quarter with income up 21% on strong sales of foreign exchange and equities-related products.
StanChart's Hong Kong-listed shares traded up as much as 2.4% after the results were announced, extending earlier gains.
Last year the bank pushed back its long-standing profitability goal of reaching a return on tangible equity of 10%, as it increased charges for bad loans due to the economic damage following the Covid-19 pandemic.
Unlike other British-based lenders such as HSBC and Lloyds that reported earlier this week, StanChart released only a small amount of the funds it holds against bad loans.
The lender took a $20 million credit impairment, down a hefty $354 million from the previous quarter.
Unlike other British-based lenders such as HSBC and Lloyds that reported earlier this week, StanChart did not release a hefty chunk of the cash it held aside to cover bad loans, instead of taking a further $20 million charge in the first quarter.
This, however, was down $354 million from the previous quarter and $936 million from the year-ago period.