Standard Chartered restores dividend while yearly profit more than halved

Standard Chartered PLC (2888) reported on Thursday a 68% decrease in net profit in 2020, due to lower interest rates and higher credit impairments under the COVID-19 pandemic. 

The net profit of the London-based bank fell to $751 million (HK$ 5.8 billion) in 2020. But the company would pay a $0.09 (HK$ 0.7) per share dividend and restarted a $254 million (HK$ 1.97 billion) share buyback scheme.

Standard Chartered's Hong Kong shares fell more than 5% after trading opened on Friday, and closed at HK$51.05.

"The resumption of dividends was announced in December last year, which was good news at the time and made the company's stock rise," said Jacky Luo, partner and director of several companies. "After the release of the 2020 results, the decline in the bank income and the similar forecast of this year's income to last year, will make some investors feel not so positive, adjust their expectations, and make corresponding judgments on changes."

The bank, which does most business in Asia, reported a 57% pre-tax profit drop to $1.61 billion (HK$ 12.5 billion) in 2020 from $3.71 billion (HK$ 28.8 billion) in the previous year, due to a total charge of $895 million (HK$ 6.9 billion) related to restructuring, goodwill impairment, and other items.

The operating income slipped by 4% to $14.75 billion (HK$ 114 billion), with net interest income declining 11% to $6.88 billion (HK$ 53.4 billion). The credit impairments of the bank in 2020 surged more than double to $2.29 billion (HK$ 53.4 billion), with the majority booked in the first half of the year.

Despite profit decline, Chief Executive Officer Bill Winters was confident that the company would recover from the epidemic. "We are weathering the health crisis and geopolitical tensions very well," he said in a company statement. “Our strategic transformation continues to progress well, and our outlook is bright.”

Standard Chartered Bank announced in April last year that it would not pay dividends, causing its share price to suffer a heavy blow. The bank was allowed to pay dividends by the Bank of England in December last year, as the capital adequacy of the local banking industry makes it be able to further respond to the impact of the epidemic.  

However, the bank also said its overall income in 2021 would be similar to 2020, and that income in the first half of 2021 would likely be lower than in the same period last year.

Looking ahead, the bank forecasted that from 2022, the annual growth rate of income will return to 5-7%. "Our performance in the opening weeks of this year gives us the confidence that we are on the right track with strong performances in our less interest rate-sensitive Financial Markets and Wealth Management businesses," Andy Halford, Group Chief Financial Officer said in the statement.