StanChart announces $500 million buyback as rising rates boost H1 profit

Standard Chartered on Friday reported first-half pre-tax profit rose 19%, above market expectations, as the emerging markets-focused lender benefited from rising interest rates and gave an upbeat outlook.

Statutory pretax profit for the lender, which earns most of its revenue in Asia, increased to $2.8 billion in the first half of the year. That was above $2.35 billion in the same period a year earlier, as well as the $2.48 billion average of analysts' forecasts compiled by the bank.

The strong performance underlined how some banks are benefiting from sharply higher interest rates, though a weakening macro environment in the United States and Europe is emerging as a key risk.

The London-headquartered lender also increased payouts to shareholders, with an increased interim dividend of $119 million equal to 4 cents per share, and announce a $500 million share buyback.

It said earnings were boosted by its focus on eastern markets, rather than the United States and Europe where interest rate hikes to combat spiralling inflation are threatening economic growth.

"Looking forward, whilst recession risks are rising in the West, we are seeing the early stages of a post-pandemic recovery in many of the markets in which we operate, underpinning our prospects for growth," Chief Executive Bill Winters said in the results statement.

StanChart, which is focused on Asia, Africa and the Middle East, said it was on track to deliver a 10% return on tangible equity, a key earnings metric, by 2024 if not earlier.

Analysts have warned that asset impairment charges and higher costs are likely to be a big drag on the performance of London-listed StanChart and its larger peer HSBC.

StanChart said its profits in Asia were dented by a $351 million credit impairment, mainly due to losses in China's troubled commercial real estate sector and the turmoil in Sri Lanka.