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Standard Chartered's Q1 Result Solid, Improving Profitability Drives Rerating in the Medium Term

Michael Wu, CAIA Senior Equity Analyst

Analyst Note

| Michael Wu, CAIA |

Standard Chartered’s solid first-quarter result was above consensus expectation, mainly on higher-than-expected net interest income and trading income. The higher net interest income was underpinned by a 7-basis-point improvement in net interest margin against the same period last year and a 10-basis-point increase on the fourth quarter. The increase in net interest margin more than offset a decline in average interest earning assets. The latter was attributable to an earlier announced optimization of risk weighted assets, which declined by USD 10 billion against 2021 to USD 261 billion. Further optimization is expected to see risk weighted assets flat for the full year despite overall lending growth of 3% annually over the three years. The bank’s outlook was positive with full-year net interest margin now expected to be 1.4%. A further increase in 2023 is expected, and management noted net interest margin could return to its pre-COVID-19 (2019) level. As such, total income is expected to be above earlier guidance of 5%-7%. The higher income does provide the bank additional headroom to invest as operating expense is also expected to track higher. Overall cost guidance is unchanged, and cost to income is expected to decline to 60% by 2024.

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Standard Chartered PLC's Company Profile

Business Description

Standard Chartered Bank was established in 1853 by Royal Charter in the United Kingdom, with the holding company Standard Chartered PLC incorporated in 1969. The bank is domiciled in the U.K. and provides banking services across 60 countries, primarily in Asia, Africa, the Middle East, and the United Kingdom. The bulk of the business is in corporate and transaction banking, financial markets, and corporate finance. The bank has strong retail franchises focusing on the affluent segment in Hong Kong, Singapore, and selective countries in Africa.

1 Basinghall Avenue
London, EC2V 5DD, United Kingdom
T +44 2078858888
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type
Employees 81,957

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