Stan­dard Char­tered re­gional in­come hit

Op­er­at­ing in­come falls by 3 per cent af­ter African cur­rency de­val­u­a­tions

The National - News - Business - - Front Page - Mah­moud Kassem [email protected]­ational.ae

Stan­dard Char­tered, the spe­cial­ist emerg­ing-mar­ket lender, said op­er­at­ing in­come in the Mid­dle East and Africa fell by 3 per cent in the first quar­ter amid cur­rency de­val­u­a­tions in Africa and lower fi­nan­cial mar­ket in­come from the Mid­dle East. Op­er­at­ing in­come fell to US$686 mil­lion in the first three months of 2017 com­pared with $709m the same quar­ter last year, the bank said with­out pro­vid­ing any other fi­nan­cial de­tails about the two re­gions’ fi­nan­cial per­for­mance in the quar­ter.

“In­come from Africa and the Mid­dle East of $686m was 3 per cent lower year-on-year, im­pacted by lo­cal cur­rency de­pre­ci­a­tion in Africa and lower fi­nan­cial mar­kets in­come in the Mid­dle East, which was only partly off­set by im­proved mar­gins and higher bal­ances in cash man­age­ment,” the bank said.

“In­come im­proved 5 per cent com­pared to the fourth quar­ter of 2016 due to bet­ter per­for­mance in wealth man­age­ment and fi­nan­cial mar­kets.”

The bank, which has been fac­ing pres­sure from de­clin­ing oil prices, said in Novem­ber that it cut 150 jobs in the UAE with more ex­pected to be shed amid a lend­ing slow­down across the bank­ing sec­tor. The bank had re­vealed in 2015 plans to axe 15,000 jobs world­wide af­ter years of losses, but it did not say at the time how many po­si­tions would be lost across its lo­cal op­er­a­tions. The lender has been badly hit as the value of most com­modi­ties, which un­der­pin the economies of many emerg­ing mar­kets in­clud­ing that of the Ara­bian Gulf, have fallen sharply.

More than 90 per cent of the bank’s busi­ness comes from emerg­ing mar­kets, and growth in these com­mod­ity-rich re­gions has slowed in re­cent years as the price of ev­ery­thing from oil, steel and palm oil col­lapses amid a drop-off in de­mand from heavy con­sumers such as China. At the same time, emerg­ing-mar­ket cur­ren­cies have weak­ened against the dol­lar and deficits have widened. While the UAE has made strides in di­ver­si­fy­ing its econ­omy, the weak oil price still rep­re­sents a drag.

As a re­sult, de­posits at banks have fallen as gov­ern­ments tap funds to plug deficits and en­sure spend­ing on key projects goes ahead as planned.

That has made it more dif­fi­cult for them to lend, es­pe­cially as the num­ber of busi­nesses un­der stress have risen, which has in­creased risk.

As a group, the bank said its profit be­fore tax­a­tion from all its op­er­a­tions rose 98 per cent to $990m in the first three months of the year from $500m in the same pe­riod last year as money set aside for bad debt fell nearly 58 per cent to $198m from $471m in the same pe­riod the pre­vi­ous year.

“We are mak­ing good progress im­prov­ing the per­for­mance of the group,” said Bill Win­ters, the group chief ex­ec­u­tive.

“The sig­nif­i­cantly in­creased profit be­fore tax re­sults from par­tic­u­larly low loan im­pair­ment and our fo­cus on cost con­trol. Com­pe­ti­tion in our mar­kets re­mains in­tense but our in­vest­ments in the busi­ness and fo­cus on our clients is mak­ing us more com­pet­i­tive and will en­able us to de­liver sus­tain­able in­come growth over time.”

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