StanChart posts US$7.1b in core profits

But revenue slightly disappointed analysts.

According to CCB International Securities report, Standard Chartered (StanChart) reported core PBT of US$7.0b largely in line with consensus of US$7.1b resulting in core diluted EPS of US$2.02/share.

Here's more:

Weaker-than-expected margins were offset by lower-than-expected costs as management continues to manage the current low interest environment. While revenues were a little light relative to our expectations, the bank’s stronger-than-expected capital position assuaged fears in the marketplace of a dividend cut.

Highlights: (1) Capital was stronger than expected with Basel II CET-1 of 10.9% well ahead of consensus. The strength of the capital base was reinforced by the dividend being raised two cents to US$0.84/share;

(2) Given the tough revenue environment, operating costs were very tightly managed (-3% YoY) as the efficiency ratio ticked upwards (+70bp YoY) to 54.3%;

(3) Excluding Korea, Consumer Banking PBT of US$1.7b (+8% YoY) was ahead of our expectations; and (4) Management added another metric to their short-term financial framework. Priority will be given to earnings growth over RwA growth by improving return efficiency.

Lowlights: (1) The outlook for 2014 provided by management wasn’t very inspiring as only modest growth is expected given the challenging operating environment. This could be a case of setting the bar low after a difficult 2013;

(2) 2H13 Wholesale Banking PBT of US$2.4b was below our forecast after a weak showing in Principal Finance and Financial Markets; (3) Loan provisioning spiked in Africa (+160% HoH) driven by two large commodity-related accounts; and (4) 2H13 margins in Hong Kong were a little disappointing as we didn’t see the increase experienced by competitors as funding costs rose.