Standard Chartered announced a $1bn share buyback on Thursday, after pre-tax profits rose less than analysts expected in the fourth quarter last year.
The UK-based bank said pre-tax profit was $123 million in the last three months of 2022, an improvement after a loss a year ago but lower than analysts’ estimates of $571 million.
The bank has suffered a setback in its wealth management business, whose growth is a priority for chief executive Bill Winters. Revenue from the division fell 19 percent in the last quarter of 2022, which the bank blamed on “risk-averse customer sentiment and the impact of Covid-19 restrictions”.
Still, Standard Chartered said China’s reopening should help performance and was optimistic about rising rates and growth in Asian economies, where the bank makes money.
Return on real equity, a measure of profit, will approach 10 percent in 2023 and exceed 11 percent next year, roughly.
“We have delivered strong results in the fourth quarter and for the full year 2022,” Winters said. The bank made “significant progress against the five strategic actions outlined last year, and we remain confident in the delivery of our financial targets”, he added.
Winters received a 16 percent rise in total remuneration, taking his pay package to £5.5 million. The bank said this reflected “good performance achieved”.
Share buybacks will begin soon, the bank said when it released full-year earnings. Shares rose as much as 4 percent in afternoon trade in Hong Kong after the buyback was announced.
The bank’s latest stock purchase comes as Winters, a former JPMorgan executive in his eighth year at the helm, is under pressure to show he has turned Standard Chartered around during his tenure.
The bank will have to convince shareholders that it can increase profitability as an independent business if it is to reject future takeover bids following renewed interest from First Abu Dhabi Bank, which has now withdrawn from its bid.
Standard Chartered reported total credit impairment charges of $838 million by 2022, up $575 million year-on-year, and said exposure to China’s real estate sector would be the majority. Real estate in the world’s second-largest economy has faced an ongoing liquidity crisis as authorities cut back on excessive leverage.
The emerging-market-focused lender has paid $283 million in charges related to country downgrades in Pakistan, Ghana and Sri Lanka.
Like other lenders, Standard Chartered is betting on cost-cutting and a shift to wealth management as it seeks to recover from the pandemic and catch up with rivals. It has struggled to grow as fast as its local peers in Asia, the Middle East and Africa.
Expenses rose 14 percent in the fourth quarter due to inflation and higher investment spending, the bank said.
Abu Dhabi’s first bank said last month that it had considered an offer for Standard Chartered but was no longer pursuing it. Under UK merger rules, FAB cannot bid for the bank until July unless another bidder emerges, but several people close to the Abu Dhabi lender have told the Financial Times that the deal could be revived if the deadline passes.
Standard Chartered said buybacks and a final dividend of 14 cents per share would take its shareholder distribution from the start of 2022 to more than half of its target of $5bn set for 2024.