By Anshuman Daga and Lawrence White
SINGAPORE/LONDON (Reuters) -Standard Chartered raised its performance goals, unveiled a new $1 billion share buyback and produced a 28% rise in annual profit as global interest rate rises bolstered its lending revenues.
StanChart said almost half its 10% overall income growth came from interest, as central bank rate hikes aimed at combating inflation enabled banks to charge borrowers more after a decade of near-zero rates.
The Asia, Africa and Middle East-focused bank, which has been the subject of takeover speculation linked with First Abu Dhabi Bank (FAB), said its latest share buyback would start imminently.
Its shares rose 3.5% in Hong Kong after the announcements, while its London-listed stock opened 2% higher.
"We are upgrading our expectations, and are now targeting a return on tangible equity approaching 10% in 2023, to exceed 11% in 2024, and to continue to grow thereafter," Chief Executive Bill Winters said in a statement.
London-headquartered StanChart previously targeted 10% for 2024. Return on equity is a key profitability metric for banks.
StanChart's shares have been energised this year by renewed takeover speculation but Winters told reporters the bank had "had no engagement nor solicited any engagement from anyone and was "happy to be accomplishing targets" on its own.
StanChart, which makes most of its profit in Asia, reported statutory pretax profit of $4.3 billion for 2022, below the $4.73 billion average of analyst forecasts compiled by the bank but its highest annual return since 2013.
The bank however reported a series of setbacks in its key market of China, where tough COVID-19 restrictions have strangled the economy.
It recorded a $582 million impairment for expected bad debts in the country's troubled real estate market, taking its overall impairment to a higher-than-expected $838 million.
StanChart also took a $308 million hit which it attributed to "industry challenges" on its investment in China Bohai Bank, a lender based in the northern coastal city of Tianjin.
The COVID-19 curbs, which China is now starting to lift, also restricted face-to face sales of wealth management products, contributing to a 17% drop in income at the unit as customers also became more risk averse.
StanChart's financial markets business was one of the highlights of the bank's overall results, reporting record income up 21% as volatile markets drove frenzied trading activity.
WINTERS' WORK
While StanChart's results were better than some rivals, Winters, the longest-running chief of a major European bank, still has work to do.
StanChart shares are about 25% below the levels when Winters took charge in June 2015, whereas shares in rival HSBC Holdings (NYSE:HSBC) are flat and the benchmark FTSE index has risen about 15%.
Winters, who has been trying to placate shareholders by focusing on growth after years of cost-cutting, said he had "no plans" to activate the bank's succession process by putting a timeline on his departure.
He also said investors should "not be concerned" about any exposure to India's Adani Group, a conglomerate whose shares have lost some $100 billion in market value following a U.S. short seller's critical report on its finances.
Adani mentioned StanChart among other banks when it touted relationships with global financiers in a lengthy rebuttal of the short-seller's claims.