Standard Chartered’s concerns about the outlook for the global economy have resulted in the Asia-focused lender saying that it would not resume dividend payments despite reporting an 82 per cent rise in pre-tax profits.
Shares in the bank fell 6 per cent, making it the biggest faller in the FTSE 100, as investors questioned when it would make its first payout under the leadership of Bill Winters.
It made a statutory pre-tax profit of $1.8 billion for the first half of the year as the cost of bad debts fell and underlying income rose 6 per cent to $7.2 billion.
Although Mr Winters said that it had been an “encouraging start” to the year, the bank did not reinstate the interim payout despite speculation that it might.
The chief executive said that the world economy was facing “pretty clear uncertainties” and added that there were “extraordinary uncertainties” surrounding the outlook for the global banking industry’s regulation as central banks argue over capital requirements.
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“[This] led to the decision not to pay a dividend at this point. We will reconsider the dividend as we come to the year end,” said Mr Winters, who has not paid a dividend since taking over as chief executive two years ago.
Mr Winters has led a widescale restructuring, culling senior staff and disposing of bad debt portfolios. The American banker said this work was now “substantially done”.
Underlying loan impairment charges in the first six months nearly halved to $583 million, which the bank said reflected the reduction in group-wide risk. Restructuring costs also fell and the lender recorded a charge of $165 million in the first six months, taking the total cost of the programme since Mr Winters joined the bank to $2.9 billion.
Analysts at Jefferies, the American investment bank, said that Standard Chartered’s results were reasonable but added that the financial performance had not been enough to justify a bullish case for the shares as they maintained an “underperfom” rating on the bank.
“We suspect investors will be disappointed with a lack of quarter-on-quarter loan growth and lukewarm commentary on capital return. We continue to view risk-reward as unfavourable at current levels,” it told clients.
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Credit Suisse warned that while the results were in line with City expectations they were “not good enough”.
Standard Chartered shares had risen in recent days after HSBC, its main rival, announced a $2 billion share buyback programme, raising hopes of more money being returned to shareholders. At the end of yesterday’s trading session the stock was down 51¼p at 796¾p, valuing the bank at about £26 billion.
Weighing on the results was a rise in staff costs, which increased 10 per cent to $2.92 billion as total employee numbers rose by 2,624 to 87,101. However, the cost cuts have not come to an end and the bank said it would find “gross cost efficiencies” of $700 million this year and a further $400 million in 2018 to “fund further investments”.