StanChart lifts income target after wealth boom powers earnings beat

By Selena Li and Lawrence White

HONG KONG/LONDON, July 29 (Reuters) - Standard Chartered's push for fee income powered a forecast-beating first-half profit, with the bank lifting its full-year income target after wealth and global banking revenue surged and credit charges tied to the Iran war held steady.

StanChart's Hong Kong-traded shares rose more than 5% to hit an almost 19-year high on a $1 billion share buyback and a 20.4 cent-per-share interim dividend. Its London shares rose 3.4%.

The London-headquartered lender, which earns most of its revenue in Asia and Africa, said pretax profit for the first six months reached $4.78 billion, up 9% from a year ago and ahead of a $4.52 billion analyst forecast.

It raised its guidance for the year, saying it expected income growth around the middle of a 5-7% range instead of previous guidance for it to be closer to the bottom.

"Clients continue to turn to us to facilitate trade, investment and wealth flows across the world's most dynamic markets," Group Chief Executive Bill Winters said in a statement.

The results showed StanChart making continued progress on Winters' strategy to grow fee income, earning more from wealth products and cross-border banking despite concerns that geopolitical and regulatory uncertainty would discourage investments and dealmaking.

COSTS UNDER CONTROL, WEALTH INCOME SOARS

"Shareholders benefited from the revenue beat with a 2% surprise on costs," analysts from Jefferies said in a research note, adding that wealth growth from higher-fee products rather than deposits was likely to boost earnings.

Costs in the first half rose 2% to $6.3 billion, less than the 6.4% rise forecast by analysts.

Wealth income soared 38%, driven by double-digit growth in investment products as inflows and the number of new accounts increased as market volatility drove up demand for wealth advice.

Beijing's crackdown on cross-border investments is expected to weigh on the lucrative wealth businesses of banks such as StanChart and that serve mainland Chinese clients via Hong Kong, but StanChart said it did not expect to be unduly affected.

"There are some non-compliant flows which they want to tighten up on, and that's natural," the bank's Chief Financial Officer Manus Costello told Reuters, adding new client onboarding had remained steady since and into the third quarter.

RISE IN INTRA-ASIA, MIDDLE EAST BUSINESS

StanChart's cross-border and corporate banking revenue rose 19% in the first six months, as large corporate clients turned to the bank to borrow money, issue debt and strike deals.

Its intra-Asia income surged in the first half, including a 20% increase in China-to-Hong Kong and 45% in China-to-ASEAN activities, backed by demand for transaction and markets business, according to Costello.

StanChart said its Middle East portfolio, which represents 6% of overall exposures, had remained broadly stable.

The lender took an additional impairment charge of $44 million in the second quarter, which it said partly reflected clients in the petrochemical sector showing early signs of distress.

It set aside $190 million as precautionary management overlays in April against expected future losses.

(Reporting by Selena Li in Hong Kong and Lawrence White in London; Editing by Kevin Buckland and Barbara Lewis)