(Alliance News) - Standard Chartered PLC on Thursday said it is feeling the "acute impact" of the coronavirus pandemic, forcing the lender to increase its impairments and resulting in a fall in profit in the first half.
In the six months to June 30, the Asia-focused lender recorded pretax profit of USD1.63 billion, down 33% on the USD2.41 billion reported a year before.
Greater China & North Asia saw underlying pretax profit slip 15% year-on-year to USD1.13 billion. ASEAN & South Asia profit plunged 40% to USD456 million. In Europe & Americas, however, StanChart saw profit jump to USD356 million from just USD13 million a year before.
StanChart's credit impairments were raised dramatically, curtailing profit. The lender upped its impairments to USD1.58 billion from USD254 million a year before.
Operating income rose 3% year-on-year to USD8.10 billion from USD7.83 billion. Financial Markets income improved 35% to USD2.25 billion, offsetting a 14% drop in Transaction Banking and a 4% fall in Retail Products.
The lender's operating expenses fell to USD4.75 billion from USD5.30 billion, resulting in its cost-to-income ratio improving to 58.6% versus 67.7%.
StanChart's CET1 ratio ended the half at 14.3%, up from 13.5% at the same point the year before. The lender cancelled its interim dividend following a request from the UK Prudential Regulation Authority for big UK banks to preserve additional capital.
Chair Jose Vinals stressed StanChart will strive to reinstate shareholder payouts "as soon as prudently possible".
Chief Executive Bill Winters added: "I am pleased we have come through the extremely challenging early stage of the Covid-19 crisis with a clean bill of operational health, higher income and lower costs. Despite having taken significantly higher impairment charges we remained profitable and enter the next phase of the crisis with our CET1 capital ratio at one of the highest levels for many years.
"Low interest rates and depressed oil prices continue to be headwinds and we expect new waves of Covid-19 related challenge in the coming quarters but I am confident that our resilience and client franchise will see us through."
The lender's net interest margin slipped to 1.40% in the first half, compared to 1.66% the year before.
"I am encouraged by how well my colleagues are coping and that many clients in some of our larger markets are recovering strongly and already operating at close to their pre-pandemic capacity," Winters added.
Looking ahead, StanChart said it believes that some of its larger markets "will start to drive the global economy out of recession over the coming quarters", but still fears economic activity will be "volatile and uneven".
"Income is likely to be lower both half-on-half and year-on-year in the second half of 2020. The benefits of the early stage recovery in some of our markets and our geographic and product diversity are unlikely to be enough to offset the impact of low interest rates and the probability of less buoyant conditions for our Financial Markets business," the lender added.
StanChart is also hopeful its credit impairments in the second half will be lower than in the first half, assuming the economic conditions in its markets "do not materially deteriorate in the coming months".
By Paul McGowan; paulmcgowan@alliancenews.com
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Standard Chartered (STAN)