Standard Chartered PLC delivered a strong performance in the third quarter, with a 44% year-over-year increase in profit, and said its focus on sustainability is paying off after booking an improvement in sustainable finance income.
The U.K.-based banking group posted an underlying pretax profit of $1.08 billion in the third quarter, up from $745 million a year earlier, on the back of a strong performance in its financial markets and trade businesses as well as lower impairment charges. The group also saw ongoing positive momentum in wealth management, with the lender's Africa and Middle East region recording its highest wealth management quarterly income in five years this quarter.
"Overall, I think this is a strong quarter and strong first three quarters of the year, reflecting the ongoing progress on all the key elements of our strategy," CEO Bill Winters said during a Nov. 2 earnings call.
Credit impairment falls
Credit impairment fell 70% over the period to $107 million from $353 million. The lender expects credit impairment to remain at low levels in the fourth quarter, barring any unforeseeable events.
Credit risks remain elevated, but the bank's overall portfolio remains stable and resilient. The economic recovery from the COVID-19 pandemic also continued to be uneven and punctuated by supply chain disruption, but the group said it is encouraged by "robust" levels of export growth across many of its markets in Asia.
The lender's common equity Tier 1 ratio is expected to be around the top of the 13% to 14% range on a pro forma basis, excluding software relief, for full year 2021. As of Sept. 30, the bank's CET1 ratio stood at 14.6%.
An update on StanChart's capital management actions and shareholder return intentions will be provided when the group announces its full-year results in February 2022.
Road to sustainability
StanChart also achieved progress on its strategic priorities, including continued growth in digitally initiated transactions and an improvement in financial performance in sustainable finance. Winters said the lender's focus on sustainability is "paying off," with a good, steady increase in transition and sustainable finance, and that the bank is "very encouraged" by its positioning so far.
On Oct. 28, the bank set out new interim targets to reduce lending to the most carbon-intensive sectors, including thermal coal and oil and gas, and said it plans to mobilize $300 billion in green and transition finance by 2030 as part of a wider goal to reach net-zero carbon emissions from its financed activity by 2050.
"[We] believe that the transition finance proposition and opportunities for us given our strong starting position and our focus on this in the early stage should either entirely or close to entirely or maybe beyond entirely offset any drag that comes from the net-zero transition process," Winters said.
The group's sustainable finance year-to-date income was up 110% on a yearly basis. CFO Andy Halford did not disclose specific figures in terms of the sustainable finance income but said the lender will be publishing numbers on that from the start of 2022. Halford added that StanChart is currently going through some of the sustainability disclosures.