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Standard Chartered shrugs off competition for record Q1

Standard Chartered shrugs off competition for record Q1
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First Published: Tue, May 04 2010. 10 46 PM IST

Photo: Jean-Claude Coutausse/Bloomberg
Photo: Jean-Claude Coutausse/Bloomberg
Updated: Tue, May 04 2010. 10 46 PM IST
London: Standard Chartered Plc said it made record first-quarter earnings, thanks to buoyant commercial and investment banking business and improving consumer banking in its key Asian markets, despite increasing competition.
The bank said on Tuesday it has had “a very strong start to the year” with record income as well, despite the margin headwinds from low interest rates and “increasing competitive pressures”.
Photo: Jean-Claude Coutausse/Bloomberg
Standard Chartered, based in London but deriving at least four-fifths of its profits from Asia, does not report quarterly results.
Profits were a record $2.84 billion (Rs12,666 crore) in the first half of last year and income was $8 billion, giving quarterly run rates of $1.4 billion in profit and $4 billion in revenue.
By 07.50 GMT, Standard Chartered shares were up 1.8% at ­£17.84 (Rs1,211.33). The shares are up 14% this year and, unlike most rivals after the financial crisis, are just 3% below their all-time high.
“It’s a positive statement,” said Mike Trippitt, analyst at Oriel Securities Ltd in London. “There’s more investment in the business, but there’s still income growth, so it shows this is a business that can invest and grow,” he said, adding that much of the positive news was already factored into the share price.
Standard Chartered has been steered through the financial crisis relatively unscathed by chief executive Peter Sands, underpinned by its reliance on Asia and traditionally decent capital and liquidity positions. Sands, a 48-year-old former McKinsey and Co. director, has been chief executive for three-and-a-half years.
Wholesale banking’s client income rose over 20% on the first quarter of 2009 and contributed in excess of 80% of the unit’s revenue, as the bank attempts to deepen relationships and win a greater share of spending from its key customers.
Growth at the bank, whose history of financing trade between Europe, Asia and Africa dates back to 1853, has been driven in recent years by its wholesale arm, which last year accounted for nearly 85% of group earnings.
The business includes typical investment banking activity such as debt and equity capital markets and other services to corporate clients, such as loans and trade finance.
The unit’s expenses are ahead of the run rate seen in the first half of 2009 due to a rise in staff numbers and as a result cost growth exceeded income growth in the quarter.
Wholesale own-account income was significantly below a year ago, as expected, but around the run rate of the second half of 2009. Its wholesale unit’s cash business has seen volumes rise, offset by margin pressure, the bank said.
Standard Chartered’s consumer banking has fared less well in recent years as bad debts rose and its Korea business struggled.
The bank said the business turned a corner last year, however, and income momentum continued in the first quarter and was up in excess of 10% from a year ago.
A recovery in consumer banking earnings would provide greater balance and was a positive trend, analysts said.
Good volume growth in mortgages had been more than offset by pressure on margins as competition increases, however.
Bad debts in wholesale remains good, with no material new impairments, and has improved in consumer banking. That means there have been no major hits from its West Asia exposure.
Standard Chartered had record annual profits of $5.15 billion last year, up 13%. Profits are expected to rise to $6.1 billion this year, according to the average of 19 analysts polled by Thomson Reuters.
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First Published: Tue, May 04 2010. 10 46 PM IST