By Lawrence White and Selena Li
HONG KONG/LONDON (Reuters) -Standard Chartered (StanChart) on Thursday said third-quarter pre-tax profit fell by a third, much worse than analysts had expected, as it took a nearly $1 billion hit from its exposure to China’s real estate and banking sectors.
StanChart, which earns most of its revenue in Asia, said statutory pretax profit for the third quarter of this year fell to $633 million.
That compared with $996 million a year earlier and the $1.41 billion average of 16 analyst estimates compiled by the bank.
Credit impairment charges rose by $62 million from the same period a year prior to $294 million, as the bank took a $186 million charge related to China’s troubled commercial real estate market.
The bank also took a $700 million hit from its stake in China Bohai Bank, which it said reflected subdued earnings at the lender and the challenging economic backdrop.
Its total China real estate exposure stood at $2.7 billion, down $200 million from the previous quarter.
The Chinese economy, despite a raft of government easing measures, remains fragile as crisis in its property market deepens with high-profile debt-repayment defaults and the absence of state support.
Domestic banking peers have reported margin squeeze amid downward pressure while foreign banks, with smaller exposure, now have started to take the fuller blow as sentiment worsens.
StanChart said it remains confident of hitting its returns on tangible equity targets of 10% this year and 11% in 2024, but downgraded some of its other performance forecasts for the year.
Net interest margin, a measure of return on lending, will now “approach” 1.7 percentage points rather than be “around” that level, it said.
Income in the bank’s Financial Markets trading division fell 8% in the third quarter compared to the same period a year earlier, as falling market volatility reduced clients’ appetite for trading in products related to interest rates, commodities and foreign exchange in particular.
(Reporting by Selena Li and Lawrence White; Editing by Christopher Cushing)
