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Standard Chartered – Buyback Bellwether

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Standard Chartered PLC (LON:STAN)’s Full year underlying operating income was $14.7bn, down 1%, ignoring the effect of exchange rates. That reflects a fall in net interest income, which is earned largely from interest payments, and flat other income, which includes things like fees.

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Underlying pre-tax profit rose 61% to $3.9bn. This was largely thanks to much lower credit impairment charges as the economic backdrop improved.

The group plans to achieve a return on tangible equity of 10% by 2024. This will include generating higher income – helped by interest rate increases - capping Risk Weighted Assets, investing $300m in China and introducing cost savings.

A $750m share buyback and a final dividend of 9 cents per share were announced.

The shares fell 3.4% following the announcement.

Standard Chartered's Earnings

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown:

“Standard Chartered is the first out the gate for the UK’s major bank reporting season, and a lot can be learned. Despite a lacklustre response from the market, the group’s announcement of a new buyback should be taken well. It suggests a tangible effort to return excess un-investable capital to shareholders, which is far preferable to letting it languish. This is a trend we expect to see across other major institutions with imminent results, as they feel able to pass on the benefits of the economy stabilising and the helpful tailwind of rising rates. While a positive step from Standard, there was definitely scope for the buyback to be greater, which may well be causing some of the subdued sentiment.

The group set out an ambitious set of targets for the next couple of years, which will involve doubling down on shareholder returns as well as investing in higher growth areas of the business. China in particular is earmarked for special attention. Standard Chartered enjoys the benefits of having multiple extra revenue streams, in the form of substantial trading and corporate banking arms. That’s a luxury the likes of Lloyds simply don’t have, and makes the Asian specialist a leveraged play on wider markets. As the world starts to emerge properly from Covid, that may well be no bad place to be.”

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