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Standard Chartered surpasses profit expectations with increase in interest rates

Standard Chartered PLC (StanChart) has reported a 21% increase in first-quarter profit, exceeding expectations due to rising interest rates. The bank’s cash management and retail banking businesses benefitted from increased income, and CEO Bill Winters now predicts a growth rate of around 10% for the year. This is the top end of the bank’s previous guidance range. StanChart, which primarily earns revenue in Asia, generated $1.81 billion in statutory pretax profit from January to March 2023. This is the bank’s highest single-quarter profit since the beginning of 2014.

The earnings update demonstrated how revenue has been boosted by central bank rate increases, as StanChart charged borrowers higher interest rates without passing all of the increase on to depositors. Retail banking income increased by 53%, with deposit income reaching $771 million, triple the amount generated the previous year. The corporate cash management business also performed well, with income tripling thanks to strong pricing discipline and rate management.

While StanChart’s largest income earner, financial markets trading, experienced weaker activity compared to the previous year, the bank’s overall earnings remained resilient. Analysts at Goldman Sachs have deemed the results solid, and anticipate a broadly neutral share price reaction.

Expenses for the bank rose by 5%, primarily due to inflation and hiring for strategic initiatives, including a push in China. However, credit impairment remained low at just $26 million, versus $198 million in the same period last year. StanChart also reported signs of stabilisation in China’s troubled commercial real estate market, with no increase in credit impairment from the previous quarter.

Overall, StanChart’s first-quarter earnings report highlights the benefits of rising interest rates on revenue. While the bank faces challenges such as inflation and expenses, its strong performance in cash management and retail banking indicates a positive outlook for the rest of the year.

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