LONDON (REUTERS) - Standard Chartered reported a better-than-expected profit for the first quarter and said it will slash its global branch network by half to around 400, as the British bank looks to cut long-term expenses.
The Asia, Africa and Middle East-focused lender, which had as many as 1,200 branches worldwide in 2014, said in a quarterly results presentation to investors on Thursday (April 29) it will shrink the network to a third of that total as it also gives up office space worldwide.
The cost-cutting drive came as StanChart posted an 18 per cent increase in first-quarter pre-tax profit, beginning a recovery from the economic hit caused by the coronavirus pandemic.
Pre-tax profit for January-March was US$1.4 billion (S$1.85 billion), versus US$1.2 billion a year earlier, and compared with an average analyst forecast of US$1.08 billion compiled by the British bank.
The improvement was driven by StanChart setting aside less cash to cover bad loans than it had done one year ago, as well as strong performance in its wealth management business.
The move to cut branches, as well as previously announced plans to trim a third of the bank’s office space worldwide, show how StanChart is looking past short-term improvements in its results to tackle longstanding profitability challenges.
Like those of bigger rival HSBC, StanChart’s results showed how rock-bottom interest rates globally are squeezing banks’ profits, with its cash management division - usually a steady earner - seeing income fall 32 per cent.
StanChart said it expected income to be similar this year to 2020, and to grow more the following year as fee-based businesses offset those being crushed by low interest rates.
One bright spot for StanChart was its often underperforming wealth management business, which saw a record quarter with income up 21 per cent on strong sales of foreign exchange and equities-related products.
StanChart’s Hong Kong listed shares traded up as much as 2.4 per cent after the results were announced, extending earlier gains.
Last year, the bank pushed back its longstanding profitability goal of reaching a return on tangible equity of 10 per cent, as it increased charges for bad loans due to the economic damage following the Covid-19 pandemic.
Unlike other British-based lenders such as HSBC and Lloyds that reported earlier this week, StanChart did not release a hefty chunk of the cash it held aside to cover bad loans, instead taking a further US$20 million credit impairment charge in the first quarter.
This, however, was down US$354 million from the previous quarter and US$936 million from the year-ago period.