“We expect a gradual recovery from the Covid-19 pandemic, with major contraction in economic growth rates across most of the world in the second quarter, 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 bank said in a stock exchange filing.

The emerging markets focused lender said it is “well prepared” for an extended period of “severe dislocation” globally, but was seeing encouraging signs in northern Asia, particularly in China.

Standard Chartered reported an underlying pre-tax profit of US$1.2 billion in the first quarter, ahead of a consensus estimate of US$828 million by nine analysts compiled by the bank.

On a net basis, profit declined 37 per cent to US$517 million in the first three months of the year, compared with US$818 million in the first quarter of 2019. This year’s quarterly results included US$249 million goodwill impairment in India due to a lower gross domestic product growth outlook.

Shares of Standard Chartered rose 6.4 per cent to close at HK$39.70 on Wednesday, outpacing gains on Asian indicies as investors reacted positively to the earnings surprise and the bank’s upbeat outlook.

Morgan Stanley analyst Nick Lord said in a research note that the bank’s solid underlying performance in the quarter was “helped by good revenue growth and cost control”.

The coronavirus, which causes the disease Covid-19, has infected more than 3 million people since late last year and weighed heavily on economies around the world. Organisations from the Swiss bank Credit Suisse to the International Monetary Fund predicted the economic downturn could be the worst since the Great Depression.

The worsening economic outlook prompted banks from HSBC to JPMorgan Chase to add tens of billions of dollars in reserves for bad loans and impaired assets. America’s six biggest lenders set aside US$25 billion collectively in the first quarter, while big European banks, including Barclays, Credit Suisse and Banco Santander, also took hefty provisions in the quarter.

Like its European rivals, Standard Chartered adopted new accounting standards in 2018 that require the bank to recognise potential credit losses over the life of a loan and more aggressively write down loans if they have experienced a significant increase in credit risk.

Two clients, which Standard Chartered did not name, accounted for about half of US$480 million in so-called stage three impairments taken during the quarter. Stage three is when an asset is considered credit impaired under the new rules.

The economic stress hit Standard Chartered’s biggest market, Hong Kong, particularly hard in the first quarter, where the economy was already weakened by an 18-month trade war between the United States and China and months of street protests.

The city’s jobless rate rose to 4.2 per cent in March – its highest rate since November 2010 – and the economy is expected to contract further after falling into a technical recession last year.

Underlying pre-tax profit in Standard Chartered’s Hong Kong business fell 17 per cent to US$378 million in the first quarter.

Since joining the bank in 2015, chief executive Bill Winters has flattened its management and cut thousands of jobs to restructure its business. The lender returned to a profit in 2017 after two years of losses amid its restructuring, but is facing a particularly challenging environment.

The bank warned in February that it expected income growth in 2020 below its medium-term target range of 5 per cent to 7 per cent because of “lower interest rates, slower global economic growth, a softer Hong Kong economy and the impact of the recent novel coronavirus outbreak”.

Standard Chartered, however, said it reduced its exposures to more vulnerable sectors to the downturn in recent years, saying its overall exposure to the oil and gas industry, for example, declined 18 per cent since the first half of 2015.

“Operationally, we feel very good about where we are and how we’ve performed,” Winters said on a conference call with analysts. “[We are] extremely cautious about the environment and the outlook. We’ll continue to be very focused on both.”

Overall, operating income, which is similar to revenue in the US, increased 11 per cent to US$4.4 billion. Net interest income fell by 4 per cent to US$1.8 billion.

The investment banking unit reported a 4 per cent loss in underlying pre-tax profit to US$656 million in the first quarter, while underlying pre-tax profit in the commercial bank fell 45 per cent to US$102 million.

Standard Chartered also has seen a backlash recently among Hong Kong investors after the Prudential Regulation Authority, its chief regulator located in the United Kingdom, asked the bank and HSBC to suspend investor payouts this year.

Standard Chartered, which internally announced a hiring freeze in March, said on Wednesday it was working to manage its costs “prudently while doing everything we can to protect jobs”.

“If we are wrong about the pace of recovery and the global economy gets back on its feet rapidly – and we are seeing encouraging early signs of that happening in China – then the actions we are taking now will make us leaner and fitter to take advantage of the opportunities that will bring,” the bank said.