Standard Chartered posted a stronger-than-expected quarterly pre-tax profit on Thursday, as gains in its wealth and capital markets operations outpaced anticipated figures even as the bank set aside a charge related to the conflict in Iran.
For the quarter, the bank reported pre-tax profit of $2.45 billion, above the $2.14 billion consensus figure compiled by the bank itself. The rise represented a 17% increase compared with the prior period and was fuelled by robust demand for investment products and heightened corporate capital markets activity.
Income from the bank's wealth business climbed 32% in January-March, a jump the company attributed to strong customer appetite for investment offerings. Meanwhile, revenue in global banking rose 19%, driven in part by increased bond issuance from corporate clients that lifted capital markets activity.
Chief Executive Bill Winters said the bank's positioning and risk discipline underpin confidence in its ability to continue performing despite global economic uncertainty and geopolitical tensions. "Despite ongoing geopolitical tensions and global economic uncertainty, our advantaged market presence and disciplined risk management give us confidence in our ability to perform," he said.
Standard Chartered also recorded total credit costs of $290 million for the quarter. Within that figure the bank took a $190 million charge tied to expected losses stemming from the Iran war. The institution characterised the rising quarterly charge as a cautious outcome of its scenario planning rather than evidence of any significant underlying deterioration in credit, a view expressed by Manus Costello, the bank's global head of investor relations, who noted the provision reflected prudence following contingency analysis and not an observable jump in default risk.
The $190 million Iran-related charge is in line with similar one-off provisions announced by other large European banks this week, including a $204 million charge from Lloyds Banking Group and a $90 million hit taken by Deutsche Bank.
Standard Chartered and HSBC have both positioned themselves to benefit from the Middle East's growing trade flows with Asia and other regions; company disclosures and analyst commentary identify those banks among the most exposed to developments in the Iran conflict. That exposure helps explain the discrete charges and additional scenario testing undertaken by banks with heavier Middle East footprints.
Regional banks have shown mixed responses to the evolving situation in the Middle East. Singapore-based DBS reported on Thursday that its stress testing continued to show its credit portfolio remained sound. By contrast, National Australia Bank warned earlier in the month that it expects impairment charges to roughly double to A$706 million ($503 million) in the first half as a result of the Iran war.
Investors pushed Standard Chartered's Hong Kong-listed shares about 4% higher on the results, reflecting relief that the bank beat its internal consensus and that the earnings strength in wealth and capital markets offset parts of the provisioning charge.
Looking ahead, the bank's performance underscores the ways in which regional revenue diversification - particularly exposure to Asia, Africa and the Middle East - can both bolster results through sustained client activity and create pockets of risk that require scenario-driven provisioning when geopolitical shocks occur.