Finance

Three things you need to know about Standard Chartered’s first quarter

Standard Chartered’s profits jumped by 18% in the first quarter as the emerging markets-focused UK lender slashed provisions for bad loans related to the Covid-19 pandemic.

The bank followed its rivals by cutting the money it put aside to cover the impact of the pandemic, which helped bolster its profits, as its sales and trading and wealth management units surged to a record quarter.

The UK lender’s pre-tax profits of $1.4bn were 34% ahead of consensus, with many of its rivals also beating the market in the first quarter as Covid-19 provisions have slumped. Lenders were forced to put billions aside to cover potential loan losses as the pandemic swept across the globe in the first quarter of 2020, but the dramatic reduction during the first three months of this year is seen as a clear signal the worst of the crisis has passed.

StanChart is offering the majority of its employees flexible working, which together with a reduction in retail branches has helped cut its real estate footprint.

Here are three key things you need to know about how the Asia-focused bank performed in the first three months of the year.

1. Profit rose as Covid provisions reversed

StanChart’s underlying profit before tax rose 18% to $1.4bn in the first three months of 2021, up from $1.2bn a year earlier. 

This was largely due to the bank following in the footsteps of others in the sector such as HSBC and Lloyds in setting aside less cash for bad loans during the quarter, as the pandemic appeared to improve in most geographies.

The lender took a $20m credit impairment during the period, much less than the $345m it took in the previous three-month period and a decline of $936m compared to a year earlier.

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2. Wealth management and financial markets had record quarters

StanChart chief executive Bill Winters said the bank’s first-quarter performance was “strong”, with economic recovery in many of its markets leading to “improved transaction volumes” and a best-ever quarter for its financial markets and wealth management divisions.

Its wealth management business saw income rise 21%, as fee-based divisions offset the impact of low interest rates on other parts of StanChart’s business such as cash management, where income fell 32%.

“Our areas of strategic focus including efforts to lead with a differentiated sustainability offering are growing well,” Winters added. “Despite low interest rates, we expect our underlying momentum to lead to income growth in the second half of 2021.”

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3. Physical footprint continues to decrease

The bank told analysts that it plans to slash its branch network by half to around 400 locations this year, Reuters reported. That’s down from the roughly 1,200 branches it had worldwide in 2014.

StanChart had also previously announced its intention to trim its office space by a third, in a bid to reduce costs while also taking advantage of the shift to flexible working.

To contact the author of this story with feedback or news, email Emily Nicolle

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