Standard Chartered raised a key performance metric and unveiled a new $1 billion share buyback program on Thursday, after reporting a 28% rise in annual pretax profit as global interest rate hikes boosted its lending revenue.
StanChart's performance, like that of global peers, was aided by aggressive central bank interest rate hikes aimed at combating inflation, which in turn allowed lenders to charge more after a decade of near-zero rates.
The Asia, Africa and Middle East-focused bank, which has been the subject of takeover speculation linked with First Abu Dhabi Bank (FAB) FAB.AD, said its latest share buyback exercise would start imminently. Its shares rose 3.5% in Hong Kong after the announcements.
"We are upgrading our expectations, and are now targeting a return on tangible equity approaching 10% in 2023, to exceed 11% in 2024, and to continue to grow thereafter," Chief Executive Bill Winters said in a statement.
London-headquartered StanChart previously targeted 10% for 2024. Return on equity is a key profitability metric for banks.
StanChart's shares have got a boost on renewed takeover speculation, with FAB batting away media reports that it was currently eyeing a bid.
Still, StanChart shares are about 25% below the levels when Winters took charge in June 2015, whereas shares of peer HSBC Holdings are flat and the benchmark FTSE index has risen about 15%.
FAB, United Arab Emirates' biggest lender last week said it was not currently evaluating an offer for the bank, having previously acknowledged it had at one time worked on a potential bid.
Tough task ahead
StanChart, which makes most of its profit in Asia, reported statutory pretax profit of $4.3 billion for 2022. That came below the $4.73 billion average of analyst forecasts compiled by the bank but beat the $3.35 billion it made in 2021.
On Wednesday, Barclays reported a 14% fall in full-year pretax profit as earnings were pole-axed by surging costs and a collapse in deal fees, among other factors. HSBC posts results next week.
While StanChart's results were better than some rivals, mixed performance from key business lines highlighted the work Winters, the longest-running chief of a major European bank, has yet to do to.
StanChart's financial markets trading business reported record income, up 21%, as accelerating inflation and Russia's invasion of Ukraine made for volatile markets, driving frenzied activity by institutional clients throughout 2022.
The wealth management business however reported a 17% drop in income as wealthy individual customers became more risk averse and Covid-19 restrictions curbed face-to-face sales of investment products in China and other markets.
China's economic slowdown also hit the bank's loan books, as it recorded a $582 million impairment for expected bad debts in the country's troubled real estate market, taking the lender's overall impairment to a higher-than-expected $838 million.
StanChart also took a $308 million hit on its investment in China Bohai Bank, which it attributed to "industry challenges."