HONG KONG/LONDON (Reuters) - Standard Chartered Plc resumed paying dividends after posting a six-fold jump in annual pretax profit on Tuesday, but weaker-than-expected revenue figures dampened any celebration from investors.
A restructuring plan spearheaded by CEO Bill Winters, who arrived in 2015 and has since cut more than 5,000 jobs and dumped entire business lines including Asian equities, has helped the bank cope with hefty bad debts piled on its books.
Years of over-exuberant lending saw the emerging markets-focused bank, which makes the bulk of its income in Asia, cancel its dividend in 2015 after posting its first loss in a quarter of a century the previous year.
After reporting a $2.41 billion pretax profit for 2017, up from $409 million the year before, it proposed to restore a full-year dividend of 11 U.S. cents per ordinary share.
But profit was below the $2.7 billion average of 10 analysts’ estimates, according to Thomson Reuters data, and the bank also fell short of expectations on income after a weak performance in its financial markets business.
StanChart shares were up 2.1 percent to 847.2 pence at 0905 GMT, with the resumption of the dividend helping sentiment.
Winters said priorities for 2018 centred on fulfilling the potential the bank’s management believes is there but has not yet been fully realised, including by increasing efficiency and investing in innovation and people.
“The banks been through a lot over the last couple of years and it’s taken its toll on the psyche,” he told journalists on a media call.
Operating income, closely watched by investors who want StanChart to deliver profit from core business growth rather than lower provisions for bad loans, was up nearly 3 percent to $14.43 billion for the full year.
But Joseph Dickerson, equity analyst at Jefferies, said that underlying profit for the fourth quarter missed expectations by 34 percent.
“Q4 revenue performance was weak in our view,” he said in a note.
London-headquartered StanChart is looking to drive returns by boosting lending to key industrial sectors and top clients, sources told Reuters earlier this month.
CEO Winters said on Tuesday StanChart needed to establish income growth momentum across all its businesses, which will help it generate income at a new target compound annual growth rate of 5-7 percent in the medium term.
The results showed that some of its business lines are still struggling to deliver.
Underlying income in the corporate and institutional banking division fell 3 percent year-on-year, as its financial markets unit suffered from the low global market volatility in 2017 that dampened trading activity and dragged income down by $490 million.
StanChart’s private banking division reported a small $1 million loss for the year, as costs rose from investments. It, however, did see $2.2 billion of new money flow into the private bank, compared to the previous year when it saw $2 billion flow out.
The bank’s core capital ratio, another closely watched measure of lenders’ financial strength, remained unchanged at 13.6 percent last year compared to 2016, but above the lender’s targeted range of 12 percent to 13 percent.
“We’re encouraged by the progress that we’re making,” Winters told journalists.
“It’s a little bit of a bumpy road but we never expected anything else.”
Reporting by Sumeet Chatterjee, Emma Rumney and Lawrence White; Editing by Muralikumar Anantharaman and Keith Weir