Standard Chartered has set aside $190million to hedge against potential losses from the Iran war.
The bank, which earns most of its revenue in Asia, Africa and the Middle East, said the ‘precautionary management overlays’ related to its exposure to the region, as well as to petrochemical firms and sovereign borrowers.
It said it had raised its forecast of the likelihood of a ‘sustained’ conflict from 41 per cent to 70 per cent, which could see Brent crude peak at $136 a barrel.
It came as StanChart reported record quarterly pre-tax profits of $2.5billion, up 17 per cent year-on-year.
Operating income rose 9 per cent to $5.9billion, driven by its wealth and capital markets businesses.
StanChart has booked a precautionary $190m charge from the Iran war
Income in its wealth division rose by 32 per cent to $1.04billion in the three months to March and is ‘fast becoming a jewel in the crown for Standard,’ said Richard Hunter, head of markets at Interactive Investor.
The bank reported affluent net new money inflows of $18billion.
StanChart’s global banking business saw income climb 19 per cent on increased capital markets activity.
Chief executive Bill Winters said: ‘Despite ongoing geopolitical tensions and global economic uncertainty, our advantaged market presence and disciplined risk management give us confidence in our ability to perform.’
Other European banks have booked similar charges amid the conflict in the Middle East, but StanChart is among the most exposed to the region, according to analysts. On Wednesday, Lloyds booked a £151million charge reflecting a worsening economic outlook due to the war.
Guidance was unchanged, with management reiterating its full-year targets for income growth at the bottom end of the 5 to 7 per cent range.
Shore Cap analysts say the forecast ‘feels cautious’ and expects the record quarterly figures ‘to put some modest upward pressure on consensus.’
Shares rose 3.6 per cent in afternoon trading in Hong Kong, and are up 1.27 per cent in London this morning.
Hunter said: ‘After such a stellar price run, the shares do not look obviously cheap and Standard will need to deliver on its projections for the next leg of growth, although in the meantime this update could prompt an upgrade to a market consensus which currently stands at a hold, albeit a strong one.’
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