Standard Chartered PLC has registered losses in the third quarter of the year 2020. The losses are alluded to the challenging situation caused by Covid-19 pandemic.
According to the third quarter of 2020 results, income declined 12% impacted by lower interest rates and expenses including continued investment were one per cent lower compared to third quarter of 2019. Credit impairment increased 27% but reduced for the second consecutive quarter despite the extraordinary external environment. Underlying profit declined 40% reflecting higher impairments and a 38 basis point decline in net interest margin.
The Operating income declined 12% and was down 10% on a constant currency basis and excluding a $36 million negative movement in the debit valuation adjustment (DVA). The impact of lower interest rates was partially offset by strong performances in Wealth Management and Financial Markets.
“Customer accounts of $418 billion decreased one per cent since 30 June 2020 with an increase in operating account balances within Retail Banking current accounts more than offset by a reduction in Corporate and Retail Banking time deposits,” reports indicated.
It shows that the net interest income decreased 16% with increased volumes more than offset by a 24 % decline in net interest margin. Other income decreased seven per cent, or five per cent excluding the negative impact of movements in DVA, with a strong performance in Wealth Management and Financial Markets offset by a $157 million reduction in Treasury. On a statutory basis, fees and commissions have increased three per cent.
Bill Winters, Group Chief Executive, said: “Our transformation is allowing us to weather the macroeconomic storm in good shape. Our Wealth Management and Financial Markets businesses have good momentum, we are controlling costs to fund innovation, and we believe we are well provided against credit impairment. Lower interest rates continue to impact income but we remain well-positioned to meet our financial targets, albeit with some delay. We are further streamlining our organisations to sharpen focus on our retail business, more effectively leverage our unique network, and drive efficiencies.”
The Group delivered a resilient performance in challenging conditions in the third quarter of 2020, with lower interest rates partially offset by strong underlying performances in several products and markets, good cost control and an encouraging sequential improvement in credit impairment.
The report indicates that Loans and advances to customers increased two per cent since 30 June 2020 to $281 billion driven mainly by growth in Retail Mortgages within Greater China and North Asia and Corporate Lending which in part benefited from a temporary increase in balances relating to upcoming initial public offerings in Hong Kong
Other assets increased two per cent since 30 June 2020 driven by increased balances at central banks and reverse repurchase agreements. Other liabilities increased 7 per cent from increased repurchase agreements and issued debt securities
Group Chief Financial Officer Andy Halford said; “In this protracted low interest rate environment, we will continue to optimise the drivers of our net interest income and are increasingly focusing on generating more fee-based income, particularly from our Financial Markets and Wealth Management businesses that have good momentum. We will continue to reduce operating expenses wherever possible so that we can maximise our investment in digital capabilities; as previously guided we expect expenses to be below $10 billion in both 2020 and 2021.”
“Our third quarter credit impairment outcome reinforces our previous view that our impairment costs should be lower in the second half of 2020 than in the first half. The expected economic recovery next year would support asset quality improvement, although we anticipate some sectors and markets will face continuing challenges,” he said.
