Standard Chartered Announces $1B Buyback As Profit Beats Estimates

In a bid to boost shareholder returns, Standard Chartered Plc SCBFF has declared a $1 billion buyback after reporting fourth-quarter profits that surpassed analyst projections.

What Happened: The London-based bank, which focuses on emerging markets, has unveiled a new program, “Fit for Growth,” that is expected to save approximately $1.5 billion in expenses over the next three years. However, it will also add a similar amount to costs for permanent organizational changes, as per a Bloomberg report.

The bank’s CEO, Bill Winters, who has been with the group for nearly nine years, is striving to enhance returns for investors and revitalize the stock, which has dipped by over 20% in the past year.

The bank reported a 63% increase in fourth-quarter adjusted pretax profit to $1.06 billion, surpassing the estimated $989.6 million. It also announced a final dividend of 21 cents a share, marking a 50% increase in the full-year payout. The bank has set new targets, aiming for a 12% return on tangible equity in 2026 and a 5% to 7% rise in operating income from 2024 to 2026.

"I am acutely aware of the underperformance of our share price in recent months, which I believe does not reflect the progress we are making," Chairman Jose Vinals said in the statement. "Both the Board and the Management Team are absolutely focused on delivering sustained, long-term value for our shareholders."

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Despite its exposure to some of the world’s fastest-growing markets in Asia, Africa, and the Middle East, Standard Chartered’s shares have underperformed in recent months, currently standing 40% below the level when Winters took over in June 2015.

The bank’s decision to initiate a buyback and implement a cost-saving program comes in the wake of its poor stock performance. The move is part of a broader strategy to improve shareholder returns and revitalize the bank’s stock, which has been struggling despite its strong presence in high-growth markets.

Standard Chartered’s recent financial performance has been impacted by its investments in China, a market that has been facing challenges due to weak confidence and an ongoing crisis in its real estate sector. The bank’s move to restructure its institutional banking arm, which includes its investment bankers and traders, could potentially lead to job cuts and is one of several options being considered.

Standard Chartered experienced a significant drop in its stock value after revealing its third-quarter earnings. Investors reacted strongly to reports of new charges against Chinese real estate and a $700 million impairment on its investment in China Bohai Bank. On Oct. 26, the stock plummeted by over 12%, marking its largest decline since August 2012.

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