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Standard Chartered disappoints investors with no dividend

Standard Chartered disappoints investors with no dividend

Emerging markets bank reports 82% rise in first-half net profits

Standard Chartered has reported an 82 per cent rise in first-half net profits but shares in the emerging markets bank fell amid investor frustration at how long its turnround is taking.

Investors were disappointed that StanChart decided not to restart its dividend despite its improved profitability and stronger capital position. Andy Halford, finance director, said it would examine the dividend question again at the end of the year when it hopes uncertainty about regulatory capital requirements will have cleared.

Shares in the London-listed bank, which have gained 40 per cent in the past year but still lag behind rivals such as HSBC, fell almost 5 per cent to 805.7p after the results were published on Wednesday morning.

Having fallen to its second heavy annual loss last year, StanChart reported a statutory pre-tax profit of $1.8bn for the first six months of this year, compared with $963m in the same period last year.

The bank, which operates across Asia, the Middle East and Africa, said it achieved a 5 per cent rise in its loan book, driven by growth in corporate finance, trade finance and mortgages.

Revenues were up 3 per cent at $7.2bn. Operating expenses rose 7 per cent to $4.9bn, and loan impairments almost halved to $655m.

Revenues and profits were in line with analysts’ expectations.

“We have set the foundations for growth and are now executing at pace,” said Bill Winters, chief executive. “On our decision not to pay a dividend, I think that was a cautious thing to do given the stage of our own development,”, he said, citing “uncertainties in the environment”.

Profits attributable to ordinary shareholders were $971m, up from $465m in the same period of last year. That meant the bank’s return on equity rose from 2.1 per cent to 4.5 per cent — well below its long-term target of 10 per cent.

It has strengthened its capital position significantly, increasing its common equity tier one ratio from 13.1 per cent to 13.9 per cent in the first six months of the year — above its 13 per cent minimum target.

Joseph Dickerson, analyst at Jefferies, said: “We suspect investors will be disappointed with a lack of quarter-on-quarter loan growth and lukewarm commentary on capital return.”

StanChart suffered a tough few years after being fined by US regulators for sanctions breaches in 2012 and incurring heavy losses on risky loans to some large Asian clients that turned bad.

It is rebuilding under Mr Winters, who took over as chief executive in 2015 and set about restructuring a third of its loan book, stripping out 30 per cent of its annual cost base, suspending its dividend and slashing thousands of jobs.

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