Standard Chartered Bank reported an 18% increase in its profits for the first quarter of the current year 2021, driven by positive economic forecasts that led to a reduction in provisions for bad debts. The bank's wealth management unit recorded a record quarter. Non-performing loans decreased by 98% year-on-year to $20 million, aiding the growth of core pre-tax profits to $1.4 billion, surpassing expectations that had pointed to $1.08 billion.
The bank, headquartered in London, stated that its operations in financial markets performed well in the first quarter. CEO Bill Winters mentioned in a statement, "The economic recovery in many of our markets has led to improved transaction volumes and profitability, particularly in our financial markets and wealth management, which experienced their best quarterly performance ever."
Shares of Standard Chartered rose by 3.1% at 9:02 AM London time, while shares increased by 4.6% in Hong Kong trading. The bank's shares, which focus on Asia, remained broadly flat for much of the year, lagging behind their peers. Some analysts pointed to slowing progress on cost-cutting plans and uncertain economic forecasts.
In February, Standard Chartered warned that its profits might not grow this year after global central banks lowered interest rates to support economies affected by the COVID-19 pandemic. The bank reiterated these forecasts on Thursday, stating that its income is expected to return to growth of 5 to 7% next year, adding that credit losses may be lower this time of year than previously expected.
### CFO Interview
In an interview with Bloomberg TV, CFO Andy Halford stated it is too early to think about the bank recovering provisions, noting that the surge in COVID-19 cases in India had "no clear impact" on its operations in the country. In a call with journalists on Thursday, Halford mentioned that the bank would provide more details about potential shareholder returns and its half-year results, adding that the bank was "very ready, willing, and able" to return funds to its investors.
The bank's larger competitor, HSBC Holdings PLC, recorded its best quarter since the pandemic began this week, thanks to increasing optimism about borrowers’ ability to repay loans. In its efforts to enhance profitability, Standard Chartered stated it expects to reduce its office footprint by a third and cut its branch network from 800 locations to half, or approximately 400, indicating it may offset most of the $500 million restructuring costs in 2021.
Standard Chartered is undertaking a comprehensive overhaul of its work arrangements after the pandemic forced most of its employees to stay home for over a year. The bank has formalized a hybrid work model across its major operations this month, providing employees with more flexibility regarding where and when they work.
As part of these changes, the bank is reviewing its global real estate portfolio, which is expected to provide annual cost savings of at least $100 million. Winters has already given up his office at the bank's headquarters in London, while the lender expects to eliminate all of its 881 private offices by the end of the year.
Like HSBC, which announced this week a 50% reduction in its travel budget, Standard Chartered anticipates a reduction in travel costs as well. Halford stated that the amount the bank spends on business travel "will decrease," adding that Standard Chartered might make a bid for the personal banking assets in Asia that Citigroup Inc. is looking to sell. He said, "We are awaiting detailed information. The banking sector is broadly expanding, and wherever there are opportunities, we will look for them and evaluate them."
