* Q1 underlying profit $1.4 bln vs $1.08 bln consensus
* Bank says 2021 credit losses to be lower than expected
* Cash management business hit by low rates, wealth
* StanChart's Hong Kong shares up as much as 2.4%
LONDON, April 29 (Reuters) - Standard Chartered PLC
is to reduce its global branch network by half to around 400 to
cut long-term costs after the British bank reported a stronger
than expected first-quarter profit.
The Asia, Africa and Middle East-focused lender, which had
as many as 1,200 branches worldwide in 2014, said on Thursday it
will shrink the network to a third of that total as it also
gives up office space worldwide.
"Those markets that are higher on branch numbers we'll be
looking at more closely," StanChart's CFO Andy Halford told
reporters, without giving more details, beyond noting branch
numbers in the lenders most profitable market Hong Kong were
The cost-cutting drive came as StanChart posted an 18%
increase in first-quarter pre-tax profit, beginning a recovery
from the economic hit caused by the coronavirus pandemic.
Pre-tax profit for January-March was $1.4 billion, versus
$1.2 billion a year earlier, and compared with an average
analyst forecast of $1.08 billion compiled by the British bank.
The improvement was driven by StanChart setting aside less
cash to cover bad loans than it had done one year ago, as well
as strong performance in its wealth management business.
LONG TERM PROFITABILITY
The move to cut branches, as well as previously announced
plans to trim a third of the bank's office space worldwide, show
how StanChart is looking past short-term improvements in its
results to tackle long-standing profitability challenges.
Like those of bigger rival HSBC, StanChart's
results showed how rock-bottom interest rates globally are
squeezing banks' profits, with its cash management division -
usually a steady earner - seeing income fall 32%.
StanChart said it expected income to be similar this year to
2020, and to grow more the following year as fee-based
businesses offset those being crushed by low interest rates.
One bright spot for StanChart was its often underperforming
wealth management business, which had a record quarter with
income up 21% on strong sales of foreign exchange and
Halford also confirmed that StanChart would have a look at
the businesses rival Citi has put up for sale, since some
were in markets where the bank already had operations, though
said it was too early to decide which.
Citi said earlier this month it would withdraw from
consumer banking in 13, mostly Asian markets, and Reuters
reported, citing sources that StanChart as well as DBS
and Mitsubishi UFJ Financial Group are among the potential
Standard Chartered shares rose more than 2% in London, among
the strongest performers in the benchmark FTSE index and
echoing earlier gains in its Hong Kong shares.
Last year, the bank pushed back its long-standing
profitability goal of reaching a return on tangible equity of
10%, as it increased charges for bad loans due to the economic
damage following the COVID-19 pandemic.
Unlike other British-based lenders such as HSBC and Lloyds
that reported earlier this week, StanChart did not
release a hefty chunk of the cash it set aside to cover bad
loans, instead taking a further $20 million charge in the first
This, however, was down $354 million from the previous
quarter and $936 million from the year-ago period.
(Reporting by Lawrence White in London and Alun John in Hong
Kong, additional reporting by Donny Kwok in Hong Kong; Editing
by Muralikumar Anantharaman and Jane Merriman)