(Sharecast News) - Standard Chartered posted a 31% jump in underlying third-quarter pre-tax profit on Wednesday, driven by lower-than-expected impairments and costs, but warned on risks from current trade tensions.
Underlying pre-tax profit rose to $1.07bn in the three months to 30 September from $814m in the same period a year ago, which was around 3% above consensus forecasts.
In terms of divisions, the bank said its wealth management unit saw income drop 5% on the year in the third quarter to $465m, as escalating trade tensions and other macroeconomic factors affecting equity markets hit investor sentiment in some of its markets, slowing the rate of growth.
Income from the corporate and institutional banking business was up just over 5%, reflecting continued momentum in transaction banking and lower income from corporate finance as margin compression offset improving deal activity.
Meanwhile, the retail banking arm saw income grow 7%, driven by strong growth in Hong Kong and Singapore, while income at the commercial banking unit was 5% higher, with strong growth in cash management.
The bank's common equity tier 1 ratio remained strong, rising 28 basis in the quarter from 30 June to 14.5%, while return on equity came in at 6.6% compared to the company's medium-term guidance of more than 8%.
Group chief executive Bill Winters said: "Income growth year-on-year was slightly lower in the third quarter impacted by Africa and the Middle East and we remain alert to broader geopolitical uncertainties that have affected sentiment in some of our markets.
But growth fundamentals remain solid across our markets and we are cautiously optimistic on global economic growth." Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "In the short term these numbers are better than expected, with underlying profits beating market expectations.
However the longer term concern is that Standard Chartered continues to shrink. "Standard Chartered is lending more profitably, and with fewer defaults, but ultimately banks only make money on what they lend, and loans to customers are shrinking.
That's a touch surprising, since the bank's emerging market customers are growing quickly and should be crying out for funding.
With plenty of capital now on hand, Standard Chartered is more than capable of meeting demand for loans. "We'll have to wait until the strategy update next year to find out exactly how Standard Chartered intends to get loan origination heading in the right direction again.
But the bank's big strategic advantage is its position in fast growing emerging economies, and its needs to take advantage of that." At 1130 GMT, the shares were up 4.1% to 554.40p.
Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.
Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.