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StanChart eyes 9th record year for profits

StanChart eyes 9th record year for profits
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First Published: Wed, Nov 02 2011. 03 06 PM IST

File Photo: Peter Sands, CEO of StanChart/ Bloomberg
File Photo: Peter Sands, CEO of StanChart/ Bloomberg
Updated: Wed, Nov 02 2011. 03 06 PM IST
Hong Kong/London: Standard Chartered Plc forecast income growth of at least 10% this year, helped by a strong showing in Hong Kong and other Asian markets and putting it on track for a ninth straight year of record earnings.
The bank did however see growth slow in the third quarter, led by a further slowdown in India where conditions are likely to stay difficult for the medium-term, it said on Wednesday.
But other markets are taking up any slack and the bank has added between 700 and 800 jobs this year as rivals cut staff, and said it is winning business from western rivals who are retreating.
File Photo: Peter Sands, CEO of StanChart/ Bloomberg
StanChart’s update came on the same day as lenders Westpac Banking Corp of Australia and DBS Group Holdings Ltd of Singapore posted strong earnings, signalling banks which are focused on Asia and which have refrained from overly risky bets were still able to post growth.
By 0815 GMT Standard Chartered’s London-listed shares were flat at £14.39 , valuing it at $55 billion.
StanChart said its income growth slowed to a “high single digit” percent in the first nine months of the year, marking a slowdown from over 10% in the first half, but expects full year growth to return to a “double digit” level.
Income growth exceeded its cost expansion, with expenses in the third quarter largely similar to the level recorded in the first half.
The London-headquartered bank, which makes more than 80 percent of its earnings in Asia and other emerging markets, did not give specific figures as it is only required to report those on a bi-annual basis.
“StanChart has a strong balance sheet and no exposure to the trouble European countries, which I think is very reassuring to investors,” said Dominic Chan, an analyst at BNP Paribas in Hong Kong. “Overall, I think it was a very reassuring set of earnings.”
India woes
Income in India, which overtook Hong Kong as Standard Chartered’s biggest profit contributor last year, fell by about 14% in the first nine months, compared with a 12% decline in the first half of the year. Indian earnings fell almost 40% in the first half.
“The slowdown is now more of a medium-term issue,” said Richard Meddings, finance director, saying it was due to government probes dampening investment appetite and interest rate rises.
“You’ve got politics inquiring into licensing in some big sectors that causes higher political risk in investment, and you’ve separately got an economy that is growing strongly but also has high inflation where the authorities are taking robust action,” Meddings told reporters on a conference call.
South Korea, which was hit by a labour dispute earlier this year, was also muted, but Singapore and Hong Kong continued to perform strongly as a more difficult macroeconomic backdrop had not had a major impact on its markets, Meddings said.
The bank is expected to report pretax profit of $6.7 billion for this year, up 12% on 2010, according to a poll of 26 analysts by Thomson Reuters.
Its Hong Kong-listed shares are down about 15% so far this year, versus a 16 percent decline in the benchmark Hang Seng Index . Its London shares are down 18 percent over the same period, versus a 32% fall by European banks .
Meddings said he expected the bank to add about a net 1,000 staff this year, in line with previous guidance and in contrast to other lenders that have recently said they are culling.
Credit Suisse Group AG for instance said on Tuesday it would cut 1,500 jobs and scale back on its capital-guzzling investment banking business, while rival HSBC
said in August it would remove 30,000 job roles by cutting out some middle management.
Japan’s top brokerage Nomura is cutting an additional 700 jobs, mostly in Europe, a source said.
Problems of high staff and overheads drove costs at Standard Chartered’s investment banking operations, which fall under its wholesale banking division, higher than income growth, known as a “negative jaws” effect.
“When you look at StanChart and compare it to the banks in Europe that are talking about trading income collapsing, I think it’s done a fantastic job,” said Chan at BNP Paribas. “‘Negative jaws´ in its wholesale banking department is a small issue compared to some of the problems its rivals are facing.”
The bank said it did not have any direct sovereign exposure to Portugal, Italy, Ireland, Greece or Spain and its exposure to Europe as a whole was immaterial.
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First Published: Wed, Nov 02 2011. 03 06 PM IST