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By Sumeet Chatterjee and Lawrence White
HONG KONG/LONDON (Reuters) - Standard Chartered PLC <STAN.L> on Wednesday said it expects its main markets to lead global economic recovery from the COVID-19 crisis as early as later this year, striking an optimistic note after increased bad loan provisions squashed quarterly profit.
The emerging markets-focused lender's tone contrasts with other European lenders that have posted their first earnings since the new coronavirus depressed economic activity worldwide, saying it saw signs of possibly rapid recovery in China.
"We expect a gradual recovery from the COVID-19 pandemic ... before the global economy moves out of recession in the latter part of 2020, most likely led and driven by markets in our footprint," the British-based lender said.
With StanChart's focus on Asia, Africa and the Middle East, however, its profit slump showed how the pandemic is hitting businesses globally as governments freeze economies to slow the spread of a coronavirus which has led to over 200,000 deaths.
Increased credit impairment and provisions for an expected increase in loan losses pushed pretax profit for January-March down 12% from the same period a year earlier to $1.22 billion, the London-headquartered bank said in a stock exchange filing.
The figure nevertheless received a boost from a $358 million increase in debt valuation adjustment - an accounting measure related to change in the value of issued debt and which often rises as perception of a lender's strength falls.
The result came a day after bigger cross-town rival HSBC Holdings PLC <HSBA.L> said its first-quarter profit nearly halved as bad loan provisions jumped to $3 billion, while Barclays PLC <BARC.L> on Wednesday set aside $2.6 billion for the same.
StanChart's outlook cheered investors, with its London-listed shares rising nearly 7% in early trade after its Hong Kong-listed shares <2888.HK> gained as much as 8%.
The earnings results were "reassuring in context of a challenging quarter", and loan losses, though much higher than expected, were not a huge surprise in the context of what peers have reported, Citigroup said in a research note.
Its credit impairment in the quarter soared to $956 million from $78 million a year earlier, while "high risk assets" on the balance sheet rose by a hefty $6.2 billion from three months prior.
A large portion of the credit impairment was accounted for by two clients - in commodity trading and healthcare - the bank said, without identifying the clients.