Bad Credit Loans See Standard Chartered Bank Report a 57% Fall in 2020 Profit

By Luigi Wewege Thursday, February 25, 2021

Standard Chartered Bank building in Shanghai, China.

Standard Chartered, also known as StanChart, reported its full-year profit tumbled by 57% on the back of higher bad loan charges amid the COVID-19 pandemic.

Dividend Payout Resumed

British banking business Standard Chartered reported lower-than-expected financial results for 2020. The company said its pretax profit was $1.61 billion, which is significantly lower than the $3.71 billion reported a year ago and worse than the $1.85 billion analysts expected.

The investing business reported a surge in income in its financial markets business division by 18% amid strong performance in trading interest rate-related products. However, the company reported credit impairments of $2.3 billion, up from $1.4 billion year-over-year (YoY).

“We are weathering the health crisis and geopolitical tensions very well, our strategic transformation continues to progress and our outlook is bright. We remain strong and profitable, although returns in 2020 were clearly impacted by higher provisions, reduced economic activity and low interest rates, in each case the result of COVID-19,” said CEO of Standard Chartered Bill Winters.

The banking and investing business said it will pay a dividend of $0.09 per share and also announced a $254 million buyback plan.

“Having now resumed it, we expect to be able to increase the full-year dividend per share over time as we execute our strategy and progress towards a 10% return on tangible equity,” Jose Vinals, a chairman of the company, said.

Furthermore, Standard Chartered said it aims to achieve a return on tangible equity (ROTE), a business metric that measures the return generated on money shareholders have invested in a company, of 7% by 2023 (up from 3% now).

In an interview with CNBC, Winters was asked to comment on whether financial markets trade in a bubble. He said that certain parts of financial markets, especially the tech sector, look “toppish.” Overall, there are indications that the broader stock market is “frothy,” said Winters.

“We all remember the dotcom bubble very well and when the bubble bursts, of course it hit the technology sector, the dotcoms, very hard. But it spilled over to the broader economy and some would say it even led to — with the benefit of hindsight — a very mild recession, even though it felt pretty acute at the time,” he stressed.

Standard Chartered share price trades about 5% lower in London today after the company missed on profit estimates.

Summary

Major banking business Standard Chartered witnessed its full-year profit tumble 57% after the business reported credit impairments of $2.3 billion.

About the Author


Headshot of Luigi Wewege

Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."

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