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StanChart lowers income target as China weighs, launches $1 billion buyback

Standard Chartered CEO reports 'very good growth' in China despite slowing growth

Standard Chartered on Friday rewarded shareholders with dividends and a fresh $1 billion buyback as profit rose 18%, but set out modest growth forecasts that will concern investors amid worries about global banks’ exposure to China.

The bank reported 2023 statutory pre-tax profit rose to $5.09 billion, in line with forecasts, and announced a jump in dividends alongside the buyback.

But the Asia-focused lender set out restrained new guidance, saying it expected income to grow at the higher end of 5-7% in 2024, lower than the previous estimate of 8-10% given last October. The lender booked 13% income growth in 2023 in constant currency terms.

StanChart also said it would aim to increase returns on tangible equity, a key profitability metric, “steadily” from the current 10% to 12% by 2026, abandoning a previous forecast to hit 11% this year.

StanChart took a $850 million impairment mainly from its stake in Chinese lender Bohai Bank, its second time writing down the value of the unit as the lender was hit by increasing bad loans as growth in the world’s second-largest economy sputtered.

The hefty loss in China, a core target for StanChart’s strategy, underlines the challenge it faces to expand in the country as policymakers struggle to arrest a deepening property crisis and revive weak consumer confidence.

A fresh $150 million writedown of its stake in Bohai Bank, following a $700 million hit earlier this year, reduced its value to $700 million from $1.5 billion at the start of the year.

As well as hurting the value of StanChart’s investment in Bohai Bank, China’s real estate woes also hit the British bank directly as it took a further $282 million provision on expected loan losses relating to the sector.

That brought total provisions for its China real estate exposure to $1.2 billion in the last 3 years.

HSBC on Wednesday reported a shock $3 billion charge on its stake in a Chinese bank, the largest yet by an overseas lender, amid mounting bad loans in the country, sending the British bank’s shares plunging and taking the shine off its record annual profit.

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