Hong Kong/London: Standard Chartered Plc suffered a drop in first-quarter operating profit after the Asia-focused bank hit trouble in Korea, while bad debts rose and higher staffing and wages pushed up costs.
London-based Standard Chartered, which earns about four-fifths of its income from Asia and the Middle East, said operating profit for both its consumer bank and investment bank fell by about 5% on the year after a weak March.
It said revenue had bounced back in April, however, and it was comfortable with analysts’ forecasts for another rise in profits in 2013, which would be an 11th consecutive year of record earnings.
Costs rose by a “low single-digit” percentage, while the additional 560 employees it hired in the quarter, and wage inflation, had pushed staff costs up by a “high single-digit” percentage, the bank said in a trading statement.
The bank does not issue full quarterly numbers and releases its earnings twice a year.
“The Q1 trading statement is the first one in a long time in which Standard Chartered is down in operating profit comparisons on a year-on-year basis, both in the wholesale bank and the consumer bank,” said Chirantan Barua, analyst at brokerage Bernstein.
Its Hong Kong-listed shares were down 2.8%.
Income in the first quarter was slightly higher than the same year-ago period, the bank said, thanks to client volume growth. But it said low interest rates in the west and Japan had hurt margins.
Standard Chartered has notched up 10 years of consecutive record profits thanks to strong Asian markets.
Hong Kong was once again its standout market in the first quarter, with income growing more than 10%, mirroring a strong performance there reported by rival HSBC on Tuesday.
Income in Africa also rose more than 10%.
But Standard Chartered said there was a weaker performance in Korea and in Singapore.
Korea has overhauled its personal debt restructuring processes as part of a wider social welfare programme, which includes more forgiveness on troubled long-term loans, and Standard Chartered said its consumer bad debts there had increased by more than 10%, higher than expected.
The bank holds its annual shareholders’ meeting in London later on Wednesday, when a disagreement over corporate governance could again flare up with Singapore investor Temasek, its biggest shareholder.
Temasek, which owns 18% of Standard Chartered, last year abstained from voting to re-elect some directors in a signal it disagreed with how the bank constructed its board.
The AGM will also be the first since Standard Chartered was hit last year by a $667 million settlement on charges it violated US sanctions against Iran, Sudan, and other countries.
It was a rare blip for the bank, which agreed to a deferred prosecution agreement as part of the settlement, meaning its US operations are monitored.
The bank is expected to grow earnings and revenue by about 10% this year, lifting pretax profit to more than $7.5 billion. It aims to increase costs broadly in line with revenue growth and has said it could add about 2,000 jobs this year.