StanChart announces $1 billion buyback after Q4 results beat market estimates

With fourth-quarter profits surpassing analyst predictions, the London-based institution announced plans to initiate a new $1 billion share buyback program. The “Fit for Growth” initiative is projected to yield approximately $1.5 billion in expense reductions over the forthcoming three years. However, it is expected to incur a corresponding sum in costs due to the implementation of permanent organizational adjustments.

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Bill Winters, the Chief Executive Officer who has been with the company for nearly nine years, has been actively seeking methods to enhance returns for shareholders and revitalize the stock, which has declined by over 15% in the last year. During a press conference on Friday, he candidly referred to the share price as “poor,” emphasizing his commitment to altering the market’s perception of the bank.

“We’re not happy with the share price at all,” Winters was quoted as saying by Bloomberg. He further said, “The market has a sense that it’s hard to get things done at Standard Chartered and this Fit for Growth program is going to tackle that head on.”

Standard Chartered reported a significant increase in its adjusted pretax profit, soaring by 63% to $1.06 billion for the three months ending in December, surpassing the estimated $989.6 million. 

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The bank announced a final dividend of 21 cents per share, marking a 50 percent increase in the full-year payout. Additionally, it revealed new strategic targets, aiming for a 12 percent return on tangible equity by 2026 and anticipating a growth in operating income between 5 percent to 7 percent for the years 2024 to 2026.

According to Bloomberg report, Standard Chartered shares have performed poorly in recent months and are almost 40% below the level they were when Winters joined the bank in June 2015, despite its exposure to some of the world’s fastest growing markets in Asia, Africa and the Middle East.

Standard Chartered reported a decrease in profits during the third quarter, attributed to charges linked to investments in China. Similarly, its larger competitor, HSBC Holdings Plc, experienced a profit setback earlier in the week due to impairments on investments in China. The country’s weak confidence and an enduring crisis in its real estate market have plagued these investments, affecting the financial performance of both banking giants.

“We’ve taken very material provisions there, well ahead of our peers who have investments in Chinese banks,” Winters told reporters on a media call.

StanChart saw heavy selloff in its shares when it announced its third-quarter earnings as investors reacted to news of fresh charges against Chinese real estate and a $700 million impairment on its stake in China Bohai Bank. The stock tumbled more than 12% on Oct. 26, its biggest loss since August 2012.

Standard Chartered’s plan to keep costs below $12 billion in 2026 and its revenue’s lowered sensitivity to rate cuts are critical to keeping operating jaws positive and delivering its new guidance of 12% return on tangible equity in two years, some 200-bps above consensus, says the Bloomberg report. A $1 billion buyback and $5 billion total return plan by 2026 is also incrementally positive.

(With inputs from Bloomberg)

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Published: 23 Feb 2024, 07:23 PM IST