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Standard Chartered has become the latest lender to record an increase in profits and start paying a dividend again amid an improving economic outlook in the second year of the coronavirus pandemic.
The emerging-market-focused bank posted second-quarter pre-tax profits of $ 1.15 billion, up 55% from the same period last year and beating consensus analysts’ estimates of 1. $ 1 billion.
One of the main reasons for this was the release of $ 67 million in loan provisions that had been set aside to cover potential loan losses caused by the Covid-19 crisis, a marked change from the 611 million dollars provisioned a year ago.
The improved performance allowed StanChart to announce a $ 250 million share buyback and pay an interim dividend of 3 cents per share, for a total of $ 94 million. The Bank of England lifted its ban on payments to shareholders in July, deeming the sector resilient enough to withstand further economic shocks.
StanChart’s move follows its biggest rival HSBC earlier this week, which resumed paying an interim dividend of 7 cents a share after profits nearly quintupled to more than $ 5.1 billion. It also freed up $ 300 million in loan provisions reflecting better prospects.
StanChart shares rose 1% at the start of the London session, but have fallen 6% so far this year, one of the worst performers among European lenders.
Bill Winters, chief executive of the StanChart group, said he was “encouraged” by the latest results despite an “uneven” recovery of Covid in the company’s largest markets in Asia, the Middle East and Africa.
“We believe that we will soon be back on the same performance trajectory that we were on before the pandemic pushed us back,” he said.
“Our first half of 2021 was marked by a recovery, albeit uneven,” added Winters. “In the main markets of our footprint. . . the timeframe for full economic recovery and social openness will be longer as countries’ immunization programs vary, resulting in lower confidence in parts of Asia relative to the West for the moment. “
In addition to battling strict travel restrictions in Asia, StanChart and HSBC have been major international financial institutions caught up in geopolitical tensions between the US, UK and China over Beijing’s crackdown on freedoms. in Hong Kong.
The latest hurdle is Beijing’s plan to introduce legislation in Hong Kong that could bar foreign companies and individuals operating in the financial hub from complying with sanctions against China.
“We have been operating in these markets for quite some time with changing rules and regulations,” Winters said. “We always comply with the laws of the countries in which we operate, but manage to find a way around them without compromising” our business.
Winters, who currently works in Hong Kong, added that he was not aware of any incidents with staff regarding the controversial National Security Law and that “the atmosphere in the office and on the streets is good, people are happy with their ability to get on with their lives and get their jobs done ”.
Although based in London, StanChart makes the vast majority of its revenue in Asia, which recorded $ 2.2 billion in pre-tax profits – nearly 90% of the total – in the first half of the year.
The wealth management business, one of its main growth targets, was dynamic, with operating income up 26% in the second quarter.
Costs rose 8% to $ 5.1 billion in the first half of the year, mainly due to larger bonuses paid to retain essential staff when profits rebounded this year.
The lender also announced the creation of a new Southeast Asia hub in Singapore that would manage its operations in Thailand, Malaysia and Vietnam. Andy Halford, chief financial officer, said this would allow the bank to better manage its liquidity and was not intended to more formally divide the group into more distinct geographies.