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* StanChart reports 2019 profit up 46% to $3.7 billion
* Announces $500 million share buyback
* Flags delay to 10% profitability goal
* London shares fall 5% after earlier Hong Kong gains
(Adds management comment, updates share price)
By Sumeet Chatterjee and Lawrence White
HONG KONG/LONDON, Feb 27 (Reuters) - Standard Chartered
on Thursday warned a major earnings target would take
longer to meet and asset quality would worsen in the near-term
as the coronavirus epidemic adds to the bank's woes in its main
markets of China and Hong Kong.
StanChart's warning about the coronavirus impact comes after
rival HSBC Holdings said last week it could face loan
losses of up to $600 million if the virus outbreak persists into
the second half of the year.
Without providing specific guidance on the potential impact,
StanChart said the epidemic could lead to a rise in bad loans.
"Had we not had lower interest rates, substantially slower
growth and the impact of the coronavirus... we would not have
had to push our targets back," Chief Executive Bill Winters
said.
The bank has already failed to hit its previous goals, even
after getting out of low-returning businesses such as ship
leasing and private equity and despite boosting income in
markets such as India and Korea as part of a wide-ranging
strategy overhaul.
Governments ramped up measures on Thursday to battle the
spread of coronavirus as the number of infections outside China,
the source of the outbreak, surpassed those appearing inside the
country for the first time.
Noting that lower interest rates were also putting pressure
on net interest income, StanChart said it would take longer to
achieve its goal of a 10% return on tangible equity (RoTE)
previously targeted for 2021.
The bank, which makes the bulk of its revenue in Asia, said
its pretax profit rose 46% to $3.7 billion in 2019. Although
that was below an average forecast of $3.9 billion, it marked
the strongest profit growth since 2017.
The group's profit benefited from a lower base in 2018 when
it had to take a $900 million provision for regulatory matters.
StanChart also said it had approved a share buyback of up to
$500 million and could do more on completion of the sale of a
stake in Indonesian lender Permata.
The bank's shares fell 5% in London, in line with a wider
selloff in bank stocks in response to fears about the
coronavirus outbreak.
MAJOR CHALLENGE
Winters has won plaudits from bank investors for his first
three years at the helm when he patched up the bank's battered
balance sheet and tackled an internal risk culture that had
grown reckless.
Winters' pay fell 6% last year to 5.93 million pounds, after
he and Chief Financial Officer Andy Halford agreed to a cut in
their pension allowance following pressure from investors who
criticised them for having greater pension benefits than the
wider workforce.
On Thursday, the former JPMorgan investment banking
boss said he planned to stay at StanChart amid ongoing and
expected changes at the top management in some European banks
including HSBC, Barclays, and Credit Suisse.
"My task now is to get us through a bumpy period in global
markets, I have no plans to do anything else," he said.
As an Asia, Africa and Middle-East focused bank that aims to
capitalise on trade between those regions, StanChart is more
exposed than most lenders to Sino-US trade tensions that have
hit businesses in recent months.
Analysts and bankers have warned that banks which derive a
large part of their earnings from Hong Kong face at least two
quarters of worsening asset quality and slowing loan growth as
the virus outbreak hits trade and consumer banking.
Hong Kong's economy has been hit hard, first by
anti-government protests and now by the virus as tourist
arrivals slump and residents steer clear of shops. Many
employees, including those at StanChart, are working from home.
The bank said its provisions for expected losses from bad
loans in Hong Kong, its largest market, rose by $46 million in
the second half of last year. Hong Kong CEO Mary Huen said the
first quarter would be "very challenging".
(Reporting by Sumeet Chatterjee in Hong Kong and Lawrence White
in London; Editing by Edwina Gibbs and Jane Merriman)
