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Standard Chartered makes steady progress in recovery strategy

Third quarter numbers point to gain in profits and decline in impairments

Gulf News

Dubai: Standard Chartered is making steady progress in its turnaround strategy it adopted two years ago, José Viñals, Chairman of the Group told Gulf News in an interview.

The bank’s pre-tax profit rose 78 per cent in the third quarter of this year compared with the third quarter a year ago to $814 million, higher than the $809 million (Dh2.9 billion) average of analysts’ estimates, according to Thomson Reuters data.

The increase was largely because loan impairment charges that fell 42 per cent year-on-year as the bank avoided heavy losses from private equity and bad loans that hit earnings a year ago. Total income for the period was $3.6 billion, 4 per cent higher than last year. Meanwhile net lending has risen by 3 per cent to $277 billion since the end of June.

The bank swung to an annual profit in 2016 as loan impairments dropped by almost half and the bank cut costs. Pretax profit for 2016 was $409 million, compared with a loss of $1.52 billion a year earlier.

“We have continued to make progress throughout the current year. We continue to build up the income of the bank and kept our expenditures contained. We have also kept our loan impairments contained below previous years. More things are moving in the right direction,” said Viñals.

Standard Chartered, with its strong presence in emerging markets and developing economies across Asia, Africa and the Middle East, improving growth outlook in these markets point to improving business prospects for the bank.

The bank is in 70 countries around the world and bulk of its revenues come from emerging markets and developing economies. These are the economies that have significantly high growth rates even after the global financial crisis. These economies are contributing 70 per cent, nearly three quarters of global growth since the crisis and they continue to be the backbone of the global economic recovery. Even though advanced economies are gathering speed in growth, the emerging economies are likely to continue to be very important component in global growth and particularly as countries in Asia continue to grow faster.

“We recognise there are a number of risks along the way, but risks are to be mitigated. But the opportunities continue to be huge. For us growing means, growing in a safer and sustainable manner. Now we are not looking at any short cut to faster growth. We want to build our foundations strong before gathering pace in growth,” he said.

Policy impact

Despite the normalisation of monetary policies underway in advance economies, this shouldn’t be major cause of worry for emerging economies’ growth prospects as this [normalisation of interest rates] is happening at a time when world still has extraordinary levels of monetary accommodation.

“We are talking about rates going up from very low levels in the advanced economies and this is going to be a gradual process according to most likely scenario. That being the case it is going to be good news for the world, because the normalisation of rates are happening in the advanced economies because they are doing better. Faster growth in these economies are going to help further growth in emerging economies as the imports by advanced economies increase,” said Viñals.