Emerging Markets-focused StanChart Surprises With 40% Profit Jump, Ups Income Goal

Standard Chartered's third-quarter profit surged 40% as higher interest rates boosted the emerging markets-focused bank's income and gave it ammunition to upgrade its revenue outlook despite a weakening global economy.

StanChart raised its income growth forecast for this year to 13% from 10% previously and CEO Bill Winters said the bank was confident of delivering its 2024 financial targets, sending its Hong Kong-listed shares 5% higher in a firm market.

"Our performance this year has been strong, and the pace of economic recovery in many of our footprint markets is encouraging, notwithstanding increasing recessionary pressures in certain Western markets," Winters said.

The results came a day after larger peer HSBC reported a 42% drop in quarterly profit on Tuesday -- due to loan losses and charges from the sale of its French business -- and surprisingly named a new CFO, souring investor confidence.

StanChart's performance also contrasted with those of U.S. banks, which earlier this month reported weaker profits as they raised provisions against expected loan losses and saw market volatility choke off dealmaking.

The profit growth and improved guidance from the London-headquartered lender showed how rising interest rates are lifting some banks' profits, even as the global economy struggles amid volatile energy costs and the impact of the Russia-Ukraine war.

The bank, which earns most of its revenue in Asia, said statutory pre-tax profit rose to $1.39 billion in the three months to Sept. 30 from $996 million a year earlier and versus the $1.05 billion average estimate of 14 analysts, as compiled by the bank.

Analysts said the profit increase was helped by a strong performance from the lender's transaction banking unit, which manages cash for corporate clients and saw income up 47%. The bank's underperforming wealth management business had another weak quarter however, with income down 19% as weak stock markets left rich clients with little appetite to invest.

Winters, who took charge seven years ago, has tried to restore growth while building a portfolio of digital assets in recent years, after repairing the bank's balance sheet and slashing thousands of jobs early in his tenure.

StanChart, present in 59 markets with 85,000 staff, mainly relies on capturing trade flows between its key markets of Asia, Africa and the Middle East but it lacks the heft of larger rivals in commercial banking and investment banking.

Still, the company's London-listed shares have shed about 45% during his reign, though they have risen about 24% so far this year and outperformed peers.

In July, StanChart cheered investors with improved payouts to shareholders and a $500 million share buyback.

Central banks around the world have been tightening monetary policy this year to contain mounting inflation.

Rising rates traditionally buoy bank profits as they can make more from lending than the sums they pay to savers, but the current picture is clouded by the threat of an economic downturn that could cause hefty losses for lenders.

StanChart's statutory credit impairment charges more than doubled to $227 million in the latest quarter from a year earlier, reflecting weakness in key economies. The charges includes $130 million for exposure to China commercial real estates, among others.