Standard Chartered HK to maintain good loan quality, profitability
Hong Kong, 1st May 2022 - Moody's Investors Service has predicted that Standard Chartered Hong Kong will maintain a strong loan quality, profitability, solid capitalization, and sound liquidity over the next 12 to 18 months. Although the non-performing loan (NPL) ratio is expected to increase slightly, the bank's strong fundamentals should serve as a buffer against any potential challenges.
The modest economic recovery in Mainland China and Hong Kong is expected to play a significant role in supporting the soundness of Standard Chartered Hong Kong's asset quality. Moody's commented that the bank is well-positioned to weather the anticipated "mild" deterioration in its asset quality.
Moody's further detailed that the NPL ratio is expected to experience a slight rise over the next 12 to 18 months, primarily driven by the bank's China portfolio and the prolonged property market downturn. Despite this, Moody's remains confident in the bank's ability to resume loan growth at a low single-digit percentage while maintaining a CET1 ratio above 15%. The bank's modest internal capital generation will contribute to this stability, although the growth will be partially offset by the bank's annual dividend for the support of its parent, Standard Chartered PLC's, share buyback and capital return plan.
The bank's profitability is projected to improve, with a return on average assets expected to be approximately 0.6% over the next 12 to 18 months. Furthermore, net interest margin (NIM) is expected to widen, and non-interest income will record stronger growth.
Moody's highlighted that increased retail and wealth management activities, along with structural shifts in the region's supply chain, will support the growth of non-interest income. Standard Chartered Hong Kong's commitment to expanding these areas of its business will contribute to its profitability.
The bank's funding profile and liquidity position are expected to remain adequate. Standard Chartered Hong Kong benefits from a diversified deposit base and a strong deposit franchise in Hong Kong. These factors will contribute to maintaining a stable funding profile and ensuring good liquidity for the bank.
As Standard Chartered Hong Kong continues to navigate the economic landscape, Moody's positive outlook on the bank's loan quality, profitability, capitalization, and liquidity provides assurance to stakeholders. The bank's efforts to strengthen its retail and wealth management activities are expected to further bolster its position in the market and support its financial stability.
About Standard Chartered Hong Kong
Standard Chartered Hong Kong is a subsidiary of Standard Chartered PLC, a leading international banking group with a presence in over 60 markets worldwide. The bank offers a wide range of services, including retail banking, wealth management, commercial banking, and digital banking solutions. With a strong focus on customer-centricity and innovation, Standard Chartered Hong Kong aims to deliver exceptional financial services to its clients while maintaining strong financial performance.