Standard Chartered sees sharpest single-day drop since 2012 amid losses in China

Standard Chartered (OTC: SCBFF )'s shares experienced a significant fall, marking the steepest single-day drop since 2012, following the announcement of their Q3 results on Thursday. The bank's shares plummeted by up to 17% due to substantial losses in China, prompting a temporary trading halt. By mid-morning London time, the stock was trading about 10% lower.

The bank reported a Q3 pre-tax profit of $633 million, reflecting a 54% decrease from the previous year. This dip is largely attributed to a $697 million devaluation of its investment in China Bohai Bank and a credit impairment charge of $294 million. The latter included a $186 million charge related to China's commercial real estate sector amidst the slow post-COVID-19 recovery.

Despite these figures, the bank also revealed a 2% dip in underlying pre-tax profit year-on-year, which included a $186m hit from the property market and a $700m impairment charge on China Bohai Bank. This reflects Standard Chartered's higher exposure to China compared to rivals such as Barclays (LON: BARC ) and Lloyds (LON: LLOY ).

However, not all news was negative for Standard Chartered. Their Q3 report also highlighted positive aspects including a 6% income growth compared to Q3 2022, with the Wealth Management division standing out for its strong performance. A rise in interest rates over the past year resulted in a 20% boost in net interest income. In anticipation of future market fluctuations, Standard Chartered has hedged its interest rate exposure, providing protection against potential rate decreases but also capping gains from further rate increases.

Despite the challenges faced, CFO Andy Halford expressed confidence in the bank's overall strength on "Squawk Box Europe," and anticipated a 5% recovery in China's GDP over the next two to three years. Richard Hunter from Interactive Investor recognized Standard Chartered's "blessing and curse" situation with China but confirmed the bank's adequate capitalization to weather these difficulties. He also noted that before the Asian drop overnight, the bank's shares had risen by 29% compared to a 5.1% gain for the wider FTSE 100 , marking a "return to form" in stark contrast to the struggles of most UK competitors.

In spite of current uncertainties, Standard Chartered's management maintains an optimistic stance, upholding their full-year outlook of 8-10% income growth.

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