StanChart beats forecasts with 31% third-quarter profit jump

Hong Kong/London (Reuters): Standard Chartered reported on Wednesday a better than expected 31.3% rise in quarterly profit before tax, as the British lender attempts to bring down stubbornly high costs and boost flatlining revenues.

The bank posted a profit before tax of $1.1 billion in the three months ended Sept. 30, above the $814 million profit in the same period a year ago and higher than the $978 million average of analysts’ forecasts.

StanChart Chief Financial Officer Andy Halford earlier this month warned staff in an internal email seen by Reuters that it faces a “significant challenge” to meet its 2018 cost reduction targets.

The message said the bank had made ‘virtually no progress’ in meeting cost targets and urged senior managers to consider cutting jobs, paring back travel expenses and freezing new hiring.StanChart posted operating expenses of $2.51 billion for the third quarter, roughly in-line with analysts’ average forecast of $2.55 billion, but 1.2% higher than the year-earlier period, it said in its earnings statement.

The bank’s total operating income during the quarter rose 3.8% from the year-ago period, but fell 1.4% from the preceding three months.

StanChart CEO Bill Winters said in the statement that income growth was impacted by sluggish business in Africa and the Middle East, and that the bank remains “alert to broader geopolitical uncertainties that have affected sentiment” in some markets.

“But growth fundamentals remain solid across our markets and we are cautiously optimistic on global economic growth,” he said.

StanChart’s results come after bigger British rival HSBC earlier this week posted a surprise 28% increase in third quarter earnings as it tightened its grip on costs.

Asia, Africa and Middle-East focused StanChart has struggled in recent years to grow income, after Winters in 2015 embarked on a sweeping restructuring aimed at weeding out a persistent bad loan problem and improving senior bankers’ accountability.

The bank has since poured money into its retail banking business and wealth management technology platform, but has yet to see that translate into significant increases in profit.

The leaked internal email said managers could consider cutting investment plans, which Winters has hailed as the solution for the bank hitting its modest near-term return on equity target of 8%.