StanChart profit rebound lifts shares as loan losses slow

By Lawrence White and Andrew MacAskill

LONDON (Reuters) - Standard Chartered's (STAN.L) profit rebounded in the first quarter, lifting the bank's shares by 10 percent on Tuesday, as reduced loan losses offered signs of a turnaround following a loss-making 2015.

Loan losses of $471 million for the first three months of the year were below forecasts of a $805 million loss by some analysts, although Chief Executive Bill Winters was quick to sound a note of caution.

"We don't feel we have fully rounded the corner on this point, given that [bad loans] are still rising," Winters told reporters on a media call.

Smaller than expected loan impairments, together with a stronger capital ratio, allowed StanChart to report a pretax profit of $589 million, compared with a loss of $4.4 billion the preceding quarter.

The positive result marks a welcome rebound for Standard Chartered shareholders after the bank reported its first full-year annual loss in 26 years in 2015, hit by hefty restructuring costs and weak commodity prices.

Finance director Andy Halford said that the improved loan loss figure over the fourth quarter of 2015 was in line with the bank's own expectations and partly reflected seasonal factors.

"The key question...is the sustainability of low loan losses from a short quarter," analysts at UBS wrote in a research note immediately after the results' publication.

Standard Chartered is the first of the major UK-based banks to report first quarter earnings, with investors braced for one of the worst collective set of results since the financial crisis.

NOT DECLARING VICTORY

Former JPMorgan (JPM.N) investment banker Winters hailed the improved results, but said an uncertain trading environment made predicting the rest of the year's outlook difficult.

Winters announced plans to axe 15,000 jobs and raised $5.1 billion in capital in November in a bid to cut costs and bolster reserves.

"In no way are we declaring victory," he said.

The London-based bank said its first quarter income was down 24 percent to $3.3 billion on the first quarter of 2015, but it was broadly stable compared to the fourth quarter last year.

Its Common Equity Tier 1 ratio had risen 50 bps to 13.1 per cent since the end of the year-end, benefitting from a reduction in risk-weighted assets (RWA), rising profits and a gain on foreign currency moves, it added.

Total operating expenses were down 10 per cent year-on-year to $2.2 billion and the bank said it remained on budget with a sweeping restructuring plan across its Asian, African and European business.

(Editing by Sinead Cruise and Alexander Smith)