- Even after making a reservation for dividends, the common equity Tier 1 capital ratio is still higher than the upper limit of the target range of 13% to 14%.
- The decline in Standard Chartered's earnings was mainly due to a sharp increase in credit impairment by 1.56 times $36 million.
- Standard Chartered said that its performance in the first few weeks of this year has given it confidence that its business is on track.
Standard Chartered Group announced that as of the end of December last year, its statutory profit before tax was $2.51 billion, down 56.56% year-on-year. This fell short of analysts’ estimates of $2.55 billion. The group resumed its dividend and paid a final dividend of 9 cents per share.
Standard Chartered stated that even after making a reservation for dividends, the common equity Tier 1 capital ratio is still higher than the upper limit of the target range of 13% to 14%.
The decision to complete the share repurchase plan suspended in April last year means that it will soon start to purchase and follow the cancellation of ordinary shares with a value of up to $39 million, and expects to gradually increase the annual dividend per share.
“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,” Chief Executive Officer Bill Winters said in the statement.
During the period, the profit attributable to ordinary shareholders was $50 million, down 82.26% year-on-year. The basic profit before tax was $310 million, a year-on-year decrease of 39.88%.
The decline in Standard Chartered’s earnings was mainly due to a sharp increase in credit impairment by 1.56 times $36 million. Standard Chartered expects that credit impairment pressure will be reduced this year. The net interest margin decreased by 31 basis points to 1.31%.
Standard Chartered said that in view of the full-year impact of the decline in global interest rates in the first half of last year, on a fixed exchange rate basis, it is expected that overall revenue this year will be similar to last year’s revenue, while revenue in the first half of this year will likely be lower than the same period last year.
The net interest margin for the whole year of this year should remain slightly lower than the 1.24% level in the fourth quarter of last year.
Standard Chartered said that its performance in the first few weeks of this year has given it confidence that its business is on track. Financial markets and wealth management businesses that are less sensitive to interest rates have performed strongly. It is estimated that from 2022, the annual growth rate of revenue will return from 5% to 7%.
Expenditures for the whole year of this year may increase slightly due to its continued investment in digital capabilities, partly benefiting from the restructuring actions in the fourth quarter of last year and the entire year.
Standard Chartered will continue to prudently manage its balance sheet. The goal is to maintain the common equity Tier 1 capital ratio in the range of 13% to 14% in the course of operations.
Through a combination of dividend distribution and share repurchase, the capital cannot be deployed in the business to create profit returns to shareholders.
Standard Chartered expects to gradually increase its annual dividend per share in the process of implementing its strategy and moving towards a 10% return on tangible shareholders’ equity.
Chief Executive Winters stated that the Group has properly responded to public health crises and geopolitical tensions, with good progress in strategic transformation and a bright future. The new coronavirus has led to increased provisions, reduced economic activity, and low-interest rates.
Last year’s returns were affected as a result, but the group’s business remained stable and recorded profits. Through prudent operating leverage and prudent capital management, it is expected that the return on tangible shareholders’ equity will reach at least 7% or even higher by 2023.