Standard Chartered shares plunge as bank misses analysts' forecasts following $900 million China hit

By Louis Goss

Shares in Standard Chartered plunged on Thursday after the British bank posted a 54% drop in its pretax profits, due to a nearly $900 million hit to the value of its Chinese real estate and banking divisions.

The London-listed bank completely missed analysts' forecasts in posting statutory pretax profits of $633 million, compared to the $1.41 billion worth of pretax profits estimated by 16 analysts polled by Standard Chartered itself.

The disastrous third-quarter update saw shares in the British bank (UK:STAN) drop 11%. Shares in Standard Chartered are up 21% over the past 12 months.

The losses came as the Asia-focused bank recorded nearly $1 billion worth of impairment charges, including a $697 million hit to its China Bohai Bank business and a $186 million drop in the value of its Chinese commercial property portfolio.

The bank said its $697 million impairment charge to the value of its Tianjin-based Bohai banking division reflected a "challenging macroeconomic outlook" and "subdued" earnings from the business in the second quarter, as it forecast China's GDP growth to slow.

The London lender also recorded $294 million worth of credit impairments, including a $186 million write-down to the value of its Chinese commercial real estate division, amid a slump in the country's property market.

Standard Chartered noted that buyer confidence remains "subdued" despite Chinese government efforts to stimulate the country's property market.

Aside from the impairments, Standard Chartered saw its underlying profits fall 2%, on the back of a 5% drop in its non-interest income divisions which accounted for 45% of the bank's third quarter revenues.

The drop in underlying income, in turn, saw Standard Chartered miss analysts expectations, with 16 analysts polled by the bank forecasting underlying pre-tax profits of $1.44 billion, compared to the $1.31 billion posted by the company itself.

Standard Chartered, however, reiterated its current guidance, as the bank said it remains confident in its ability to increase its full-year income for 2023 by 12-14%.

Analysts at Shore Capital Markets retained their buy rating as they suggested Standard Chartered shares still have potential to gain value, even in the face of a "short-term negative market reaction on today's results."

-Louis Goss

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10-26-23 0543ET

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