Daily Times

London/Karachi: Standard Chartered PLC posted an operating profit of $13.8 billion, down 11 per cent, for the year ended 31 December 2016. The bank expects the operating conditions to remain challenging in 2017 although some headwinds are easing.

The basic earnings per share of the bank were 3.4 cents while the underlying return on ordinary shareholders’ equity of 0.3 per cent. No Ordinary Share dividend was declared for 2016.

The bank announced profit before tax of $1.1 billion, up from $0.8 billion in 2015. Operating expenses of $10 billion were down 5 per cent and lower for the second year running. Gross cost efficiencies of over $1.2 billion created capacity to increase investment in the second half. Loan impairment in the ongoing business of $2.4 billion was flat the bank announced.

The restructuring charges of $855 million were related primarily to the liquidation portfolio and redundancy costs. Statutory profit before tax of $409 million compared to a loss of $1.5 billion in 2015.

“We made good progress in 2016, cleaning up our balance sheet and fortifying our capital position. We are attacking our cost base, reinvesting significantly to strengthen our competitive advantages and continuing to enhance our financial crime controls. Our financial returns are not yet where they need to be and do not reflect the Group’s earnings potential. Having worked hard to secure our foundations we are now focused on realising that potential.” Bill Winters, Group Chief Executive, Standard Chartered PLC.

Advances to the deposit ratio of 67.6 per cent reflects a high level of funding from customer deposits. Cash investment increased by 50 per cent year-on-year, particularly in the second half, the banks reported.

According to the bank overall credit quality has improved in 2016 although stresses remain in some sectors. Risk-weighted assets in the liquidation portfolio reduced by over 80 per cent.

Total gross non-performing loans of 24 percent were lower year-on-year, with the cover ratio up from 53 to 67 per cent. The Group’s balance sheet is now more diverse and its capital and liquidity position is strong.

The bank is optimistic about the future outlook because of encouraging early progress against the strategy ending the year with income stability, lower costs and a more liquid, higher quality balance sheet.

The eventual outcome of regulatory reforms to finalise banks’ capital requirements remains unclear. Significant further improvement in financial performance is required.