Standard Chartered (LON:STAB) Interim CFO Manus Costello said the bank’s business momentum has remained “decent” into the second quarter after a strong first quarter, while cautioning investors about tougher year-over-year comparisons and a volatile global backdrop.
Speaking at a Goldman Sachs event hosted by Melissa Goldman, partner and global head of technology engineering at Goldman Sachs, Costello said Standard Chartered’s first-quarter operating income rose 9%, supported by growth across markets, banking and wealth. He said many of those trends had continued into the second quarter.
Guidance Held Despite Strong Start
Costello said Standard Chartered was maintaining guidance for income growth at the low end of its 5% to 7% range, noting the bank was not yet halfway through the year and that the global environment remained “volatile and uncertain.”
He pointed to two factors that will weigh on second-quarter comparisons: a $240 million gain in the ventures business recorded in the second quarter of last year that is not expected to recur, and strong episodic income in the prior-year first half.
Costello also reiterated guidance that net interest income would be broadly flat. He said the interest rate environment remained broadly unchanged and that divestments and exits from some unsecured relationships in the wealth and retail banking business would create about a 2% headwind to net interest income over the full year, increasing in the second half.
Wealth Business Sees Continued Activity
Costello said Standard Chartered’s wealth business delivered a very strong first quarter, with high net new money and strong client activity. However, he cautioned that the absolute amount of net new money generated in the quarter should not be annualized as a run rate.
He described the business as benefiting from international client flows, relationship managers, open-architecture products and technology investment. Costello said about 60% of the bank’s net new money comes from international customers, with the remaining 40% generated domestically. About half of the international total, or roughly 30% overall, comes from “global Chinese” clients, he said.
Asked about recent regulatory attention from Chinese and Hong Kong authorities, Costello said the focus appeared to be more on brokerage activity than banking. He said Standard Chartered’s existing policies on account opening, documentation, source-of-funds checks, transaction monitoring and offshore marketing were “very much directionally aligned” with the circulars.
Costello said the bank had not seen an impact so far, though it would need to take some additional steps such as closing long-standing zero-balance accounts and obtaining some client attestations.
Transaction Banking Pressured by Margins
Costello said the bank’s transaction services business has faced pressure from net interest margin compression, particularly because net interest income on liabilities is the largest revenue source for the segment. He said the business was down in 2024 and 2025, and also in the first quarter, due to yield curve effects and margin pressure.
However, he said other parts of transaction services, including securities services fees and foreign exchange transaction fees, have been growing, though they represent a smaller portion of overall revenue. Core operating deposits have been growing at around a mid-single-digit rate, which Costello said the bank hopes to continue.
He also pushed back on the suggestion that Standard Chartered lacks scale in some of its markets, pointing to significant market shares in Hong Kong and Singapore and strength in the client segments the bank targets.
Credit Risk and Capital Efficiency
Costello reiterated Standard Chartered’s through-the-cycle credit loss guidance of 30 to 35 basis points of loans. He said the bank’s balance sheet has become lower risk over time, with the corporate book moving from 40% investment grade to 75% investment grade and the wealth and retail bank reducing unsecured balances as a proportion of its balance sheet.
In the first quarter, Standard Chartered took $190 million of incremental expected credit loss provisions, including model-related impacts, an overlay on the petrochemical sector and sovereign overlays. Costello said the actions were appropriate at the time.
He added that if the Strait of Hormuz remains closed for longer and energy market pressure builds, there could be greater macro risk and potential for further overlays or provisions. Still, he said the bank remained comfortable with the shape and performance of its book.
Costello also said Standard Chartered expects risk-weighted asset growth to remain below income growth. He said the bank is shifting toward higher-return areas, including affluent clients in wealth and retail banking, financial institutions and cross-border clients in corporate and investment banking.
ROTE Targets and Digital Banks
Standard Chartered is targeting return on tangible equity of more than 15% by 2028 and 18% by 2030. Costello said the key drivers include business mix shifts, better returns on risk-weighted assets, growth in higher-return customer segments and operating leverage from technology investments.
He cited the bank’s recent upgrade of its core banking system in Hong Kong and new data centers as examples of investments intended to improve scale, resilience and efficiency.
Costello also discussed Mox and Trust, Standard Chartered’s digital banks in Hong Kong and Singapore. He said they reached profitability or breakeven during the first quarter and can help the bank serve mass-market customers while creating a pathway to migrate younger or less affluent customers into wealth products over time.
Asked what investors misunderstand about Standard Chartered, Costello said the bank still needs to convince the market that its growth is organic rather than driven only by favorable market conditions. He also said investors may not fully recognize how far the bank has progressed in modernizing its operations and reducing balance sheet risk.
About Standard Chartered (LON:STAB)
Standard Chartered PLC is an international banking company. The Banks’s segments include Corporate & Institutional Banking, Retail Banking, Commercial Banking and Private Banking. Its Corporate & Institutional Banking segment allows companies and financial institutions to operate and trade globally, and its Private Banking segment supports high net worth individuals with their banking needs across borders and offers access to global investment opportunities. Its Retail Banking segment offers clients, as well as small businesses a range of banking support solutions, and its Commercial Banking segment provides mid-sized companies with financial solutions and services.
