Shares in Asia-focused lender Standard Chartered (STAN) rose 3.1% to 450p following better than expected first half results. The group posted pre-tax profits of $2.55 billion against consensus forecasts of $2.23 billion. It also announced a $250m share buy-back and resumed the dividend, proposing an interim payment of 3 cents a share.
Like its UK counterparts, Standard Chartered faces a challenging environment given the low level of interest rates. This is evident in the group’s income line with declined by 5% to $7.6 billion.
The group’s earnings were boosted by a net provision release of $67 million, a feature that has been common throughout the sector. This is potentially an area of concern given their exceptional and one-off nature.
The considerable investment that the group has made in wealth management is proving to be distinctly prescient, with the division posting a 26% increase in operating income for the quarter.
Assets under management are at record levels and the group has been ranked in the top three wealth managers in Asia. Moreover, the division is experiencing robust growth in several markets including Hong King, China, Korea and Singapore.
It is interesting to note that UK rival Lloyds (LLOY) recently announced a strategic move into the wealth management segment with the acquisition of Embark, adding 410,00 customers and £35 billion of assets under management.
According to Shore Capital banks analyst Gary Greenwood, Standard Chartered shares 'have scope for a significant re-rating given potential to steadily improve returns through a combination of good top line growth and efficient capital management'.
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