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Standard Chartered has announced plans to double its investment in its wealth management business and shift its focus towards affluent individuals and global institutions following a rise in pre-tax profits in the third quarter.
The UK-based bank reported underlying profits before tax of $1.8bn, up from $1.3bn a year earlier, surpassing analysts’ estimates of $1.6bn. The wealth business saw a 32 per cent increase in revenue, leading to record quarterly results.
These earnings coincide with the bank’s decision to refocus its operations, moving away from smaller domestic businesses and regular retail clients towards affluent individuals and larger international companies.
CEO Bill Winters stated that these changes will simplify the business and drive higher-quality growth.
Standard Chartered has raised its revenue guidance and set new targets for return on tangible equity, aiming to return $8bn to shareholders between 2024 and 2026, up from the previous goal of at least $5bn.
The bank will reshape its retail banking business to concentrate on attracting affluent and international clients, while focusing on larger international clients within its corporate and investment bank.
It plans to reduce the number of clients that do not align with its strengths and is considering selling a small number of businesses that are not core to its objectives.
Investing approximately $1.5bn over five years in its wealth business, Standard Chartered will hire more relationship managers and investment advisers to serve affluent clients, doubling its initial investment plans.
The bank’s reported pre-tax profits were $1.7bn, up from $633mn a year ago, when it included a near-$700mn impairment charge on its stake in China Bohai Bank.
The bank’s underlying revenues of $4.9bn in the third quarter were the highest since 2015, the year Winters assumed leadership.
Income in the bank’s markets unit increased by 16 per cent, driven in part by higher foreign exchange and credit trading.
Net interest income rose by 9 per cent, attributed partly to hedging. The net interest margin rose to 2 per cent from 1.6 per cent a year ago.
Standard Chartered’s return on tangible equity in the quarter was 10.8 per cent, exceeding analysts’ expectations of 10.3 per cent and higher than the 7 per cent from a year earlier.
However, the bank incurred a $16mn impairment charge in its ventures unit, primarily related to its digital bank Mox, although delinquency rates at the start-up have improved.
The bank also set aside a $34mn provision due to the risk of clients’ exposure to Hong Kong commercial real estate, citing concerns over an oversupply of office space in the region.
StanChart’s shares are approaching the level when Winters assumed leadership in June 2015, having risen by 36 per cent since the beginning of the year. Its Hong Kong-listed shares climbed up to 3 per cent on Wednesday.
The bank has faced pressure to increase its stock value as it currently trades at a discount to book value. Winters previously expressed dissatisfaction with the bank’s share price, stating that it did not reflect its true value.
This year, Standard Chartered announced plans to save around $1.5bn over the next three years by streamlining systems. Third-quarter costs rose by 3 per cent year-on-year, attributed to inflation and business growth.