LONDON/SINGAPORE: Standard Chartered Plc is bracing for the impact of the coronavirus outbreak and a weakened Hong Kong economy on the Asia-focused lender’s business.
The slump in Asia, which accounts for the majority of the bank’s earnings, will contribute to 2020 revenue growth falling short of its target, according to a statement on Thursday. Standard Chartered, which also announced a buy back of shares, will also no longer meet a key profitability goal for next year, the London-based bank said.
The virus has led to a shutdown of factories in China and wide-ranging travel disruption that has interrupted global trade. Standard Chartered’s warning mirrors that from rival HSBC Holdings Plc, which said last week that the outbreak could lead to as much as $600 million in additional loan losses if it continues into the second-half of the year.
"We remain sensitive to external conditions generally and recognize that these could as easily recover as worsen, ” said Chief Executive Officer Bill Winters. "We are prepared for moves in either direction.”
The bank’s chief financial officer Andy Halford said in a Bloomberg Television interview the impact of the virus on its business will be felt by the lender from March.
Standard Chartered is heavily dependent on Asia and particularly Greater China. It derived about 68% of its 2019 revenues from Asia, an even higher proportion than HSBC, which generated roughly half its 2019 revenue from the region.
The London-based lender’s 2019 underlying pretax profit of $4.2 billion rose 8%, but was slightly behind analysts’ forecast of $4.3 billion.
The bank’s core markets have been roiled in the last year by the fallout from the U.S.-China trade war and prolonged political protests in Hong Kong, the bank’s largest market.
"We view the results as mixed with weaker than consensus revenues, offset by better than expected capital levels and another buyback, ” said analysts at Goldman Sachs Group Inc. in a note where they maintained a ‘buy’ rating on the bank’s shares.
Standard Chartered said it plans to buy back up to $500 million of shares and will review the potential for a further buyback when it completes the sale of its stake in Indonesia’s PT Bank Permata. That’s a contrast to HSBC, which said last week it won’t buy back more shares until 2022 at the earliest.
Last year, Standard Chartered completed a $1 billion share buyback, the first in more than two decades.
The bank’s shares were as much as 3% higher in early afternoon trading in Hong Kong.
The virus outbreak has touched the lender in other ways: earlier this month, an employee in its Singapore office tested positive, though the bank has said it had no impact on the business.
This June, CEO Winters will celebrate his fifth anniversary as CEO. After initial concerns about the effectiveness of his turnaround strategy, a recent run of strong results have somewhat calmed fears the former investment banker was failing to get to grips with the bank’s bloated cost base.
Winters isn’t without his critics. He spent several months of 2019 enmeshed in a war of words with shareholders who complained about his pension arrangements. The lender eventually relented under the pressure and cut his retirement allowance. - Bloomberg
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