Standard Chartered Unveils $1.5 Billion Buyback and Upgraded Outlook Amidst Strong Asian Market Performance

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Standard Chartered (StanChart) (STAN.L) has announced its largest-ever share buyback program, valued at $1.5 billion, alongside an upgraded income forecast for 2024. The London-based bank’s optimistic outlook is driven by robust economic growth in its primary Asian markets and an aggressive cost-cutting strategy.

The bank has revised its revenue growth forecast upward, now anticipating an increase of more than 7% on a constant currency basis, compared to the previous estimate of 5% to 7%. This adjustment follows a 5% rise in pretax profit to $3.49 billion for the first half of the year, surpassing analysts’ consensus estimates.

StanChart’s substantial buyback initiative, along with its enhanced guidance and a detailed cost-saving plan, highlights CEO Bill Winters’ commitment to boosting the bank’s share value. Despite these efforts, StanChart’s shares have underperformed relative to its peers this year.

“We believe our share price does not fully reflect the optimism we have for the bank,” Winters stated during a media call on Tuesday.

The announcement led to a 5.9% increase in StanChart’s share price in London trading, marking an 18% gain since Winters expressed concerns about the stock’s performance on February 23. However, the bank’s stock still lags behind the 23% rise of the STOXX 600 Banks Index (.SX7P).

Asian financial institutions, including StanChart and its competitor HSBC (HSBA.L), have benefited from higher interest rates and robust economic growth in the region. However, the slowdown in China’s economy and ongoing issues in the property sector have posed challenges. StanChart has set aside $1.2 billion for potential bad loans linked to China’s commercial real estate market. Despite policy support measures from Beijing, recovery signs remain limited, particularly outside of major cities.

“We observe some recovery in tier-one cities, but the property market has yet to stabilize,” said Chief Financial Officer Diego De Giorgi.

Winters indicated that the outcome of the U.S. presidential election on November 5 is unlikely to significantly alter the bank’s approach to China. He anticipates that both potential candidates, Donald Trump or Kamala Harris, will maintain a hawkish stance towards China, which could, in turn, benefit StanChart by pressuring China to open its market further.

StanChart is also advancing its “Fit for Growth” cost-cutting initiative, aiming to save $1.5 billion over the next three years amid rising expenses from inflation and business expansion. The bank has identified over 200 cost-saving projects, including the elimination of approximately 100 internal apps and the removal of its region-based reporting system.

In the first half of the year, StanChart experienced significant growth in its non-net interest income streams, with the wealth solutions unit seeing a 25% increase in income to $1.2 billion. This unit’s net new sales more than doubled to $13 billion, and assets under management rose 12% to $135 billion.

Despite these gains, StanChart missed out on the trading boom seen by Wall Street counterparts. The bank’s lack of an equities trading division contributed to a 1% decline in investment banking income during the second quarter, contrasting with the substantial revenue growth reported by rivals like JPMorgan (JPM.N) and Morgan Stanley (MS.N).