According to the Zhongtong Financial News App, CICC issued a research report stating that it maintains a "neutral" rating on Standard Chartered (02888). Although the company's pre-tax profit after adjustment was better than expected, it generated a forex reserve loss of USD 0.174 billion related to the sale of Zimbabwean business (which does not affect core tier one capital), and raised the forecast for its 2024E 'Fit for Growth' expenditure. Therefore, it lowered its 2024E profit forecast by 4.5% to USD 3.827 billion and set a target price of HKD 82.8. Standard Chartered announced its 2Q24 results, slightly higher than the bank's and the market's expectations.

CICC's main points are as follows:

Net interest income was better than the bank's and the market's expectations, benefiting from the expiration of hedging tools and optimizing the asset side structure.

In 2Q24, the company's net interest income after adjustment was USD 2.56 billion, an increase of 5.8% QoQ, with a net interest margin of 1.93%, up 17bp QoQ. The main factors affecting this include: 1) as the company previously indicated, the short-term expiration of hedging tools contributed to a QoQ increase of USD 0.084 billion; 2) optimizing the asset side structure boosted the net interest margin; 3) the decline in interest rates, repricing of deposits, and reduction in loans had a slight negative impact on net interest income in the quarter. In addition, the company stated that although the appreciation of the US dollar will drag net interest income down by about USD 0.1 billion, the guidance for the full-year net interest income in 2024E of USD 10-10.25 billion remains unchanged.

Loan growth was lower than the bank's and the market's expectations, and loan demand remained weak in a high-interest-rate environment.

Excluding the impact of forex and other factors, the company's customer loans at the end of 2Q24 increased slightly QoQ, with the incremental mainly coming from the CIB segment. The WRB segment continued to be dragged down by mortgage loans. Customer deposits at the end of 2Q24 increased by 2% QoQ, mainly from the CIB segment's CASA deposits and the WRB segment's time deposits. Standard Chartered's average interest-bearing assets in 2Q24 fell by 4% QoQ, mainly due to further pressure on the asset side structure and a decrease in low-yield government bonds.

Non-interest income was slightly lower than the bank's and the market's expectations, with financial markets and wealth management remaining the two main drivers of strong performance.

As the company provided a more positive guidance for financial market, wealth management, and banking revenue in June, the market has already fully taken this into account for this quarter's non-interest income. Nevertheless, Standard Chartered continued to maintain strong growth in non-interest income in 2Q24. The financial markets, wealth management, and banking segments of the company increased by -9%, +25%, and 9% YoY respectively. 2Q24 financial market business fell due to a high base in 2Q23, with episodic revenue down 45% YoY, but flow revenue, which can better reflect the company's endogenous growth, increased by 8% YoY. The company's wealth management business continues to grow strongly, with 0.065 million new affluent customers (Affluent NTB) and net inflows of affluent customer assets (Affluent NNM) of USD 13 billion. AUM of affluent customers increased by 5% QoQ to USD 294 billion.

Operating expenses were better than the bank's and the market's expectations. The company expects expenses to increase slightly in the second half of the year.

The company's operating expenses increased by 2.1% YoY and 3.6% QoQ in 2Q24, mainly due to the annual staff salary adjustment in April and the company's business expansion due to strong customer demand. The company stated at the earnings conference that due to the increased investment, the level of expenses in the second half of the year may slightly increase compared with 2Q24, but the magnitude is not significant, only about several tens of millions of US dollars.

Credit impairment was significantly better than the bank's and the market's expectations.

The company's credit impairment in 2Q24 was USD 0.073 billion, and the bank estimated the credit cost to be about 10bp, a decrease of 14bp QoQ. Looking at the business segments, the credit impairment of the CIB segment remained low, and benefited from the upward rating adjustment of some sovereign exposures this quarter (partially accounted for in the Enterprise Center); the WRB segment was the main source of the bank's credit impairment, but remained relatively stable QoQ; the Ventures segment fell QoQ and was mainly due to the company's tight credit standards for the Mox virtual bank and improvement in asset quality. At the end of 2Q24, the company's non-performing loans decreased by USD 0.1 billion QoQ to USD 2.5 billion, and the exposure to CG12 and early alerts increased by USD 0.1 billion QoQ to USD 1 billion and USD 5 billion respectively.

The CET1 capital adequacy ratio was better than the bank's and market's expectations and announced a USD 1.5 billion share buyback.

At the end of 2Q24, the company's core tier one capital (CET1) adequacy ratio was 14.6%, up 1.0ppt QoQ, mainly due to the company's continued good profitability and a decrease in RWA. The company's RWA fell by 4% QoQ at the end of 2Q24, mainly due to the upward rating adjustment of some sovereign exposures and a decrease in market risk RWA. The company announced a mid-term dividend of USD 0.09 per share and announced the largest share buyback in its history of USD 1.5 billion.

It raised its 2024E revenue guidance and reiterated its goal of achieving a minimum of 12% adjusted ROTE by 2026E.

This quarter, the company raised its 2024E full-year adjusted operating revenue growth rate guidance from 'close to the upper limit of the 5-7% range' to 'above 7%' and reiterated its target of having less than USD 12 billion in adjusted operating expenses and achieving an adjusted ROTE of 12% by 2026E.