Standard Chartered Lifts 2026 Return on Tangible Equity Guidance to Around 14% but Pushes Back on Cost Questions and Flags a Basel 3.1 RWA Hit
Third-quarter earnings call, October 28, 2026: record quarter, guidance raised, and investors press on cost discipline and 2027
Standard Chartered reported record third-quarter results and raised its full-year targets. Income rose 14% to $5.8 billion at constant currency and profit before tax grew 29%. Year-to-date earnings per share are up 27%. The bank now expects 2026 return on tangible equity of around 14%, up from "over 12%" previously and against 11.9% in 2025. It also guides to income growth above its 5% to 7% range and net interest income growth of around 4%. The 2028 targets were reiterated: a return above 15%, a cost/income ratio of around 57% and a high-teens EPS compound annual growth rate. The call was dominated by questions on cost, which management handled with some defensiveness, and on net interest income into 2027, where it declined to commit.
Cost Guidance Reframed, and the Market Is Not Fully Convinced
The most contentious change was the move from absolute cost guidance to a cost/income ratio. The bank now expects around 60% for 2026, 300 basis points better than 2025. CFO Manus Costello said the figure is unchanged from what the second-quarter guidance implied, noting that "the mathematical outcome ends up being the same." Third-quarter expenses were $3.4 billion, up 9% against a comparator flattered by the phasing of costs in the second half of 2025. Several analysts pointed out that this implies a sizeable fourth-quarter cost number. Jason Napier of UBS suggested that, once the $600 million of remaining Fit for Growth savings is stripped out, consensus appears to embed high single-digit underlying cost inflation into 2027. Aman Rakkar of Barclays called the discussion "a bit frustrating" and asked for a clearer view of the payback on reinvestment.
Management gave no 2027 cost or cost/income number. It committed only to positive jaws in every year of the plan, with 2026 jaws of around 500 basis points. CEO Bill Winters framed the Fit for Growth program, which cost $1.3 billion against a planned $1.5 billion and generated a similar amount of structural savings, as a template rather than a finished chapter. He said the bank is "not done with our productivity investment" and cited new AI tools as a further lever. Winters offered an unusually blunt answer on windfalls. Revenue upside driven by interest rates would "drop virtually entirely to the bottom line" rather than be spent on projects outside the plan. He acknowledged that much of the remaining investment, including core banking, data centers, cybersecurity, financial crime compliance and payments, is "hygiene" for which a specific economic return is hard to identify. That is a candid admission that part of the cost base does not come with a visible payback.
Basel 3.1 Now Expected to Add to Risk-Weighted Assets
Costello said Basel 3.1 will now increase risk-weighted assets on January 1, 2027, net of management actions already underway. He attributed the change to the shape of the balance sheet and finalized rule interpretations. The bank expects opening 2027 RWAs of around $275 billion, including the usual fourth-quarter operational risk increase. That compares with $263 billion at the end of September, which was up $1.8 billion on the quarter. The impact will be spread across both the corporate and investment bank and the wealth and retail bank.
The offset is a further 30 basis point cut in the Pillar 2A CET1 requirement from January 2027. Together with the 20 basis point reduction in 2025, this brings the cumulative cut to about 50 basis points and the CET1 requirement to around 10%. The CET1 ratio was 13.8%, or broadly flat quarter on quarter excluding a 38 basis point drag from the $1 billion buyback. Winters said the two requirement cuts "substantially offset" the Basel 3.1 effect. Asked by Joseph Dickerson of Jefferies whether a 300 to 400 basis point buffer over the maximum distributable amount (MDA) threshold is still appropriate, management would not be drawn. Costello repeated that the bank will "operate across the range" and does not manage to a specific buffer. Winters said capital will be revisited with full-year results, citing the lower MDA and improving asset quality and profitability. The capital return outlook therefore remains an open question until February.
Net Interest Income: Rates Help Less Than the Headline Suggests
Net interest income rose 9% year on year and 3% quarter on quarter to just under $3 billion, driven by volumes. Rate benefits were offset by margin pressure on term deposits. The upgrade to around 4% growth for the year implies fourth-quarter NII that is flat to slightly down, as Napier noted. Costello said the benefit from higher rates "is not actually that significant for us in the quarter." The offsets are term deposit spread and mix, plus continuing run-off and sales of unsecured portfolios in the wealth and retail bank. Volume growth is also expected to moderate after a strong third quarter, when roughly half of wealth and retail loan growth came from the FCNR scheme for nonresident Indians. That scheme has now closed.
Management acknowledged deposit competition, citing Hong Kong and Singapore in particular, but said it is not intensifying and is already built into guidance. CASA mix declined in both businesses. In the corporate bank, some outflows at the end of the quarter have already partly reversed. Underlying loans grew 4% on the quarter while deposits were flat, and the advances-to-deposits ratio ticked up after many quarters of decline. Costello described that ratio as "an output, not an input." On 2027, the bank's weighted-average rate curve is about 25 basis points higher than at the last update. Costello said guidance on rates, volumes and margins will come in February.
Wealth and Markets Carry the Growth, While Unsecured Lending Shrinks by Design
Wealth Solutions income grew 26% to $1.1 billion, its third consecutive quarter above $1 billion. Investment products rose 28% and bancassurance 18%. Net new money was a record $20 billion, including about $5 billion of FCNR deposits, taking the year-to-date total to $52 billion. Assets under management were flat at $472 billion because client mandate shifts from managed assets to custody offset the inflows. The bank added 76,000 new-to-bank affluent clients. Winters said clients are drifting toward less risk, with more fixed income and high-grade credit and less equity and high yield, but not enough to create a material margin effect. He added that the larger margin differential is driven by liquidity rather than defensiveness.
Investors should not extrapolate the wealth return on assets. Costello said it is seasonally lower in the fourth quarter and that the first half ran above the 1.1% to 1.3% range, calling this year "unusual." The bancassurance bonus was fully accrued in the third quarter, so it will not recur in the fourth. Wealth and retail jaws were weaker than in the corporate bank, though management said not to over-read one quarter.
Global Markets income rose 21%, with flow income also up 21%. Winters said growth is almost entirely transaction-related, such as hedging, payments and trade flows, rather than speculative activity. He said China-related business and emerging markets are the strongest contributors. The bank also said investment in electronic and algorithmic trading has brought it "squarely on the curve." Costello said all of the top 100 markets clients are expected to pay more than $5 million this year, against 14 in 2019. Transaction Services grew 9% and Global Banking 7%. Corporate and investment bank profit before tax rose 38% to $1.6 billion. Credit cards, personal loans and other unsecured lending income fell 13% as the bank continues to exit portfolios, which Winters confirmed is purely exits and sales rather than a rates effect.
Credit Quality Is Benign, but the Bank Declines to Move Its Through-the-Cycle Assumption
Credit impairment was only $90 million. This included a net $34 million charge from Middle East overlays, made up of a new $63 million overlay and $29 million of releases. The corporate bank booked a net recovery of $24 million, and wealth and retail impairment was $114 million. The year-to-date loan loss rate is 20 basis points, well below the 30 to 35 basis point through-the-cycle assumption behind the return targets. High-risk assets fell $1.2 billion, and investment-grade corporate exposure rose to 77% from 75%. Total overlays stand at about $0.5 billion, of which around $270 million relates to the Middle East.
Guy Stebbings of BNP Paribas asked whether the bank would revisit the 30 to 35 basis point assumption. Winters said doing so would be "a little bit premature," noting that the bank has not yet seen a true credit downturn. Costello added that the sub-guidance run rate will flow into 2027 and 2028 only as normalization. Winters also noted rising strain in some financing markets and "elements of indigestion in the system." He said this has not affected the bank but could eventually affect volumes. The bank also guided to a tax rate of around 26% for 2026, helped by a second-quarter Korea write-back, and expects the fourth quarter to be higher.
Management said the fourth quarter is tracking in line with underlying trends, subject to normal seasonality and weaker Asian equity sentiment. A webinar on the Singapore and ASEAN businesses is planned for early December. Full 2027 guidance and capital thinking are due with full-year results in February.