Standard Chartered's pretax profit rose 27% to US$2.25 billion in the third quarter, more than double the gain analysts had expected, as record income from wealth clients and strong trading led the bank to raise its outlook for 2026.

At constant exchange rates, the basis the bank uses for its targets, profit grew 29%. Analysts had forecast a 12% increase, according to Reuters. The bank now expects 2026 income growth above its 5% to 7% target range and a return on tangible equity of around 14%, up from a previous forecast of more than 12%.

For investors in Asia, the quarter was largely a Hong Kong story. The city produced US$944 million of the quarter's pretax profit, about 42% of the group total and nearly double the US$494 million of a year earlier, the bank's results statement showed. Hong Kong, Singapore, mainland China, South Korea, Taiwan and India together supplied about 60% of operating income. The bank's Hong Kong-listed shares rose 8% on Wednesday, Reuters reported, a day after HSBC shares fell when its revenue missed estimates.

Wealth and trading drive Standard Chartered's income

Operating income rose 14% at constant currency, excluding notable items, to US$5.78 billion. Non-interest income climbed 19% to about US$2.8 billion, ahead of the US$2.68 billion average estimate cited by Reuters, and made up roughly half of group income.

Wealth Solutions posted its third record quarter in a row. Its income rose 26% to US$1.12 billion, with investment products up 28% and bancassurance up 18%, the latter helped partly by the timing of commissions from insurance partners. Market volatility after the Iran war pushed clients toward new products, Reuters reported.

Affluent clients brought in a record US$20 billion of net new money, about US$5 billion of it through India's Foreign Currency Non-Resident deposit scheme for Indians living abroad, the bank said. That took the year-to-date total to US$52 billion. The bank signed up 76,000 new-to-bank affluent clients in the quarter. Assets under management held at about US$472 billion, because some client mandates moved into custody accounts and offset the inflows.

Global Markets income rose 21% to US$1.01 billion. Flow business in currencies, commodities and credit grew 21%, and episodic income rose 13%. Transaction Services gained 9% to US$1.61 billion. Global Banking added 7%, although capital markets and advisory income slipped 4% on slower merger activity.

Adjusted net interest income increased 9% to US$2.97 billion. The net interest margin widened 9 basis points from a year earlier to 2.03%, because the rate the bank pays on deposits fell faster than its asset yields. Against the second quarter, asset yields rose 9 basis points as interest rates climbed in key markets, while the rate paid on liabilities rose 8 basis points, leaving the margin flat.

Hong Kong leads Standard Chartered's growth as mortgages lag

Operating income in Hong Kong rose 25% on a reported basis to US$1.53 billion. The Hong Kong business also booked a net credit impairment release of US$39 million, compared with a US$69 million charge a year earlier.

Not every Hong Kong line grew. Mortgage income was "materially lower," the bank said, because a cap tied to Hong Kong's best lending rate stopped it from repricing home loans even as higher interest rates pushed up funding costs. Group income from deposits and mortgages slipped 1%.

Mainland China barely moved. Pretax profit there was US$70 million, against US$74 million a year earlier, on income of US$311 million. Singapore's pretax profit rose to US$276 million from US$245 million.

Even after the upgrade, Standard Chartered's return target trails the 17% expected at HSBC, Reuters noted.

Guidance, credit and capital

Group Chief Executive Bill Winters said the quarter showed "broad-based growth across our businesses" and gave the bank confidence to lift its income guidance. Chief Financial Officer Manus Costello said the bank still had room to improve returns, adding that "we're going to keep on pushing for it," Reuters reported.

The bank now expects net interest income to rise about 4% this year, up from earlier guidance of low single-digit growth, and a cost-to-income ratio of about 60%, excluding notable items. Return on tangible equity was 15.7% in the quarter, up 5.2 percentage points, and 17% for the first nine months. The presentation restated medium-term targets of a return above 15% in 2028 and about 18% in 2030.

Credit costs fell. Impairments dropped to US$90 million from US$188 million, an annualized loan-loss rate of 9 basis points, against the 30 to 35 basis points the bank expects through the cycle. Corporate and investment banking booked a net release of US$24 million, while wealth and retail banking took a US$114 million charge. Overlays for the Middle East conflict added a net US$34 million, and the bank now puts a 60% weight on its two downside economic scenarios, up from 41% at the end of 2025.

The common equity Tier 1 ratio fell 31 basis points in the quarter to 13.8%, inside the bank's 13% to 14% operating range. The full US$1 billion buyback announced on July 29 was deducted at once, a 38-basis-point hit, though only US$484 million had been spent by Sept. 30. The results did not include a new buyback. The bank is accruing for a final 2026 dividend, which the board will propose with full-year results.

Two changes reshape the capital picture on Jan. 1, 2027. A lower Pillar 2A requirement cuts the bank's minimum CET1 requirement by 30 basis points, and Basel 3.1 rules take effect. Standard Chartered expects risk-weighted assets of about US$275 billion that day, up from US$263.3 billion at the end of September, including its annual operational risk update.