Yesterday, Standard Chartered Plc (OTC: SCBFF.PK, LSE: STAN.L) reported a decline in attributable net profit in fiscal 2018, compared to last year, but pre-tax profit was higher during the same period. Both net income and operating income recorded an increase from last year, and the financial institution also raised its dividend significantly.
Going forward, Standard Chartered stated that it has made an excellent start to FY19, and is cautiously bullish on the global economic scenario. More importantly, the bank revealed a new cost-cutting strategy to spur growth. The shares ended almost flat at $8.09, up 0.12% in the OTC market.
Standard Chartered announces a new growth strategy
London-based Standard Chartered posted a profit before tax of $2.55 billion in fiscal 2018, an increase of 5% from $2.42 billion published in fiscal 2017. However, the profit attributable to shareholders of the holding company was $1.05 billion in FY18, down from $1.22 billion in the prior-year period. On a per-share basis, earnings declined to 18.7 cents in the fiscal year ended December, from 23.5 cents in FY17.
Underlying profit before tax increased to $3.86 billion, compared with $3.01 billion in the previous fiscal year. Correspondingly, underlying earnings rose to 61.40 cents per share, an increase of 14.20 cents from last year.
Operating income for the year was $14.79 billion, a slight increase from $14.43 billion reported last year.
All the segments and regions performed well to boost the top and bottom line of the bank. The only notable exception was the Africa & Middle East region that did not perform well due to overall difficult economic conditions and devaluation of the local currency.
Standard Chartered has pointed out that a robust performance in Transaction Banking, the impressive performance of Retail Products division, and soft growth in Wealth Management and Financial Markets more than made up for the lower income from Corporate Finance division.
Net interest income grew 8%, while the net interest margin improved three basis points to 1.58%, from 1.55%.
In a separate announcement, Standard Chartered revealed its new plan to trim costs by $700 million. The updated policies and associated actions are anticipated to result in a return on tangible equity of at least 10% by 2021 and also deliver considerable surplus capital that is planned to be distributed to shareholders if not set aside for expansion activities. In addition, RWA efficiencies, earnings growth, and divestments are anticipated to generate surplus capital.
Commenting on the cost-cutting plan, Andy Halford, CFO of Standard Chartered said: “What we have talked about today is how we now take the bank forward over the next three years with the particular objective of how we get that return on tangible equity up from the 5 to the 10 percent.”
The company also stated that its Board had approved a final dividend of $0.15 per share, up 36% from $0.11 in 2017. Including that, the dividend for fiscal 2018 was $0.21 per share, almost double the dividend paid for FY17.
The company expects the fiscal 2021 dividend per share to double from the current level.
Commenting on the results, Bill Winters, Group Chief Executive, said, “We have made tremendous progress securing the foundations of the business since 2015, resulting in a third successive year of underlying profit growth.”
The impressive FY18 results, cost-cutting plan, and optimistic outlook is expected to keep the stock bullish.
Technically, the stock has found support at eight levels. The stochastic oscillator is in the bullish region. As a result, we are anticipating the stock to remain bullish in the short-term.
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