Standard Chartered shares slid Thursday as the bank’s big bet on China hit a stumbling block, leading to significant losses in the country.
Shares of the Asia-focused bank tanked as much as 17% in early deals in London, sparking a temporary halt in trade. The London-listed stock later closed 12% lower.
The U.K.-headquartered bank reported pre-tax profit of $633 million for the third quarter — a 54% drop from the same period last year. The result was hit by the bank slashing the value of its investment in China Bohai Bank by $697 million.
Standard Chartered also announced a credit impairment charge of $294 million — up $62 million on the year — including a $186 million charge relating to the China commercial real estate sector.
Standard Chartered shares
Standard Bank Chief Financial Officer Andy Halford on Thursday told CNBC’s “Squawk Box Europe” that the “overall performance of the bank is very strong,” despite the China news.
Halford noted that China’s commercial real estate sector “clearly has been problematic,” but said that GDP in the country is forecast to bounce back around 5% within the next two to three years.
“What we’re seeing is probably a slower recovery post-Covid than in some countries. But it’s a huge population to mobilize after such a big event,” Halford said.
“Most countries would be more than happy to have that kind of growth level,” Halford said. “So we are very, very much of the view that this is a period that we need to go through. We’ll stick with it [and] as the economy gets going, then that should be good with us and should be good for others.”
China’s economic recovery has broadly disappointed since the end of the Covid-19 pandemic, although its third-quarter growth came in stronger than expected, boosting hopes that things could be about to turn around.
‘A blessing and a curse’
Richard Hunter, head of markets at online investment platform Interactive Investor, said Standard Chartered’s China issues were an “inevitable concern,” but said that the bank was adequately capitalized to withstand the challenges.
“China remains both a blessing and a curse for Standard, with the country’s faltering economic recovery weighing heavily on these results,” he said.
The impairment provisions have “driven a bus through earnings,” Hunter said, but added that excluding the provisions, the performance is “rather less harrowing” on an underlying basis.
“After some years in the doldrums after previously having been the darling of the UK banking sector, Standard has for the most part had something of a return to form,” he said in a note Thursday.
“Over the last year and prior to an opening decline which sharply compounded the Asian drop overnight, the shares had risen by 29% as compared to a gain of 5.1% for the wider FTSE 100 and in stark contrast to the struggles which most of its UK competitors have faced.”
