StanChart lowers second half profit guidance - UPDATE

Asia-focused lender Standard Chartered (StanChart) saw operating income rise by 1% in the third quarter, despite a 21% drop in commercial client revenues to $294m.

However, a 4.1% increase in expenses pushed operating profits lower to $1.99bn.

Further weighing on the lender’s results, impairment losses on loans and other credit provisions increased 86% to $536m.

Third quarter profit before tax thus decreased by 16.4% to hit $1.53bn.

Year-to-date total impairments were running at $1.6bn at the end of the reporting period.

Significantly, today’s trading statement was not expected to include financials, as it did, although some analysts welcomed the enhanced disclosure.

Commodity markets leave hit some institutional clients

The increase in loan impairments related to a small number of accounts, primarily in the Corporate and Institutional Clients segment, some of which have been affected by weak commodity markets, the bank said.

Customer loans and advances slipped 3% in the three months ending in September “largely reflecting the high levels of liquidity, continued de-risking actions and continued optimisation of low returning relationships.”

Guidance cut

Critically, the bank now sees underlying profits in the second half coming in below those for the corresponding period of 2013.

In its first half pre-close trading update StanChart told investors that: "our expectation is that full year profits, excluding goodwill impairment and Own Credit Adjustment, but including the UK Bank Levy, will be down on 2013. However, profits in the second half are likely to be higher than in the same period last year."

Remedial actions taken

So as to create “more capacity” for investment in the many opportunities in our markets we are taking further action on costs, targeting more than $400m in productivity improvements for 2015, StanChart said in its statement.

Additionally, given the enhanced disclosure in its interim management statements, the group announced it will no longer issue trading updates prior to close periods.