Standard Chartered to double down on wealth management after tripling profit

Standard Chartered has announced plans to double its investment in its wealth management division, following a third-quarter profit that exceeded expectations and enhanced plans for shareholder returns.

The FTSE 100 lender, which primarily operates in emerging markets, posted a pretax profit of $1.72bn (£1.3bn) from July to September, surpassing analysts' predictions of $1.49bn (£1.1bn), as reported by City AM.

This profit is almost triple the $633m (£487m) reported during the same period last year when the bank incurred nearly $1bn (£800m) in impairment charges due to its exposure to China's sluggish economy. As it continues with a cost-cutting plan announced in February, Standard Chartered has increased key performance targets.

The bank anticipates its income will grow towards 10 per cent by 2024, up from a previous estimate of above seven per cent. It now aims to return at least $8bn (£6.1bn) to shareholders between 2024 and 2026, an increase from $5bn (£3.8bn).

Although headquartered in London, Standard Chartered generates almost all of its revenue in Asia, the Middle East, and Africa, with significant hubs in Hong Kong and Singapore. As part of its revised strategy, the bank intends to generate more fee income from wealth management.

It revealed on Wednesday that it would double investment in its wealth business and spend $1.5bn (£1.2bn) over five years on relationship managers and investment advisers.

Standard Chartered plans to fund its operations by reducing its mass retail business, mirroring the strategy of competitor HSBC, which has withdrawn from retail markets in the US and France to concentrate on more lucrative sectors. "We are exploring the opportunity to sell all or part of a small number of businesses where the strategic rationale is not sufficiently compelling," stated Standard Chartered, anticipating these actions to occur over the next 18 to 24 months.

Shares in Standard Chartered rose by 3.7 per cent in early London trading and by three per cent in Hong Kong. The bank's focus on wealth management proved successful in the third quarter, with income from wealth solutions surging 32 per cent year-on-year to $694m ($533m), making it the fastest-growing division among the bank's main businesses.

In February, the bank outlined plans to boost its return on tangible equity (RoTE), a crucial profitability metric for banks, from 10 per cent to 12 per cent by 2026. On Wednesday, it increased this 2026 RoTE target to "approaching 13 per cent".

The share price of Standard Chartered has struggled in recent years, with CEO Bill Winters labelling it as "crap" in February. His tenure has seen the bank eliminate thousands of jobs in an effort to enhance investor returns.

These turnaround efforts have resulted in a 37 per cent increase in the stock this year. It is currently trading just below its level when Winters took over as CEO in June 2015.