Stan­dard Char­tered profit rises

The Pak Banker - - Front Page -

HONG KONG

Asia-fo­cused bank Stan­dard Char­tered Plc said its oper­at­ing profit grew by a mid-sin­gle digit rate in the first nine months of the year, keep­ing it on track for a 10th straight year of record earn­ings.

Earn­ings, though, would have risen by at least 10 per cent but for a $340 mil­lion set­tle­ment paid to New York reg­u­la­tors who threat­ened to strip the bank of its state li­cence over al­le­ga­tions it hid some $250 bil­lion worth of transactions with Iran. “Al­though the en­vi­ron­ment re­mains tur­bu­lent, we are in the right mar­kets and continue to see good mo­men­tum across our busi­nesses and ge­ogra­phies,” CEO Peter Sands wrote in a third-quar­ter trad­ing up­date on Wed­nes­day.

The bank’s fore­cast is roughly in line with full-year ex­pec­ta­tions for a 6 per cent rise in pre­tax profit to about $7.2 bil­lion, ac­cord­ing to Thomson Reuters I/B/E/S. It does not re­lease spe­cific num­bers in its quar­terly up­dates. First-half pre­tax profit and in­come both in­creased by around 9 per cent, the bank said in Au­gust.

Hong Kong, China, In­done­sia and Europe de­liv­ered a strong per­for­mance, the bank said, with­out elab­o­rat­ing. It also man­aged to keep costs un­der con­trol, with ex­penses ris­ing roughly in line with rev­enue — a trend known as “neu­tral jaws”. Stan­dard Char­tered was bogged down by ris­ing costs in much of 2010 and 2011 as it ex­panded across Asia.

The bank is one of few still ex­pand­ing its head­count, which to­talled about 85,000 at endJune. In Au­gust, the bank said it planned to add 1,500 staff in the sec­ond half.

Ma­jor Euro­pean peers, in con­trast, are prun­ing staff num­bers. Swiss bank UBS an­nounced on Tues­day it was wind­ing down its fixed in­come busi­ness and ax­ing 10,000 bankers, one of the big­gest in­dus­try lay-offs since Lehman Broth­ers im­ploded in 2008. And Ger­many’s flag­ship lender Deutsche Bank, re­port­ing thirdquar­ter pre­tax profit of €1.1 bil­lion ($1.42 bil­lion), has said it ex­pects to axe more than the 1,900 po­si­tions al­ready an­nounced, mainly in in­vest­ment bank­ing.

Weigh­ing on Stan­dard Char­tered’s earn­ings was weak­ness in In­dia, Sin­ga­pore’s whole­sale bank­ing and South Korea’s con­sumer bank­ing, it said.

Ris­ing house­hold debt in South Korea — which now ex­ceeds that of the United States be­fore the subprime mort­gage cri­sis — has prompted wor­ries the coun­try may soon see a spike in bad loans. In Sin­ga­pore, the citys­tate nar­rowly es­caped a re­ces­sion in the third quar­ter.

“You can’t fight grav­ity,” said Jim An­tos, an an­a­lyst at Mizuho Se­cu­ri­ties in Hong Kong. “Let’s face it. The global econ­omy isn’t get­ting bet­ter, so that’s go­ing to have an im­pact on earn­ings.”

An­tos said he ex­pects an­a­lysts to re­vise down Stan­dard Char­tered’s full-year earn­ings fore­cast by an­other 5-10 per cent, given the ex­ter­nal head­winds.

De­spite the slow­down, Stan­dard Char­tered said it re­duced how much money it put aside in case of bad loans — its im­pair­ment charge — by tens of mil­lions of dol­lars. In the first half year, the bank set aside $583 mil­lion for im­pair­ment charges.

The bank said port­fo­lio qual­ity in its whole­sale bank — which in­cludes its in­vest­ment and com­mer­cial bank­ing op­er­a­tions — was good, though it was watch­ful in In­dia and the Mid­dle East.

A $1 bil­lion loan Stan­dard Char­tered made to the Indonesian chair­man of Lon­don-listed coal miner Bumi Plc — which is prob­ing al­leged fi­nan­cial ir­reg­u­lar­i­ties at its Indonesian units — trig­gered some con­cern over the bank’s as­set qual­ity and lend­ing prac­tices. Stan­dard Char­tered shares in Hong Kong, val­ued at around $58 bil­lion, have risen about 9 per cent this year, lag­ging the bench­mark Hang Seng In­dex’s 20 per cent gain. The stock last traded up 0.1 per cent in a mar­ket off 0.7 per cent.

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