Hong Kong/London: Standard Chartered notched up a ninth consecutive year of record earnings in 2011 on the back of strong economic growth in Asia, though rising competition for staff pushed up its wages bill.
London-based Standard Chartered, which makes more than three quarters of its profit in Asia, said on Wednesday strong growth in Hong Kong and Singapore helped offset a 15% rise in staff costs and a fall in profit in two of its biggest markets, India and Korea.
Underlying wage inflation was about 5% as the bank competed to hire and retain staff, notably in China and India, chief executive Peter Sands said.
Standard Chartered Bank at South Extension, New Delhi. Photo by Madhu Kapparath.
“Yes, we are facing acute competition for talent, but we are still managing to invest and keep a tight grip on costs,” Sands told reporters on a conference call.
He said the bank paid about £800 million ($1.3 billion) in bonuses to staff for last year, similar to 2010.
Total staff costs were $6.6 billion, up from $5.8 billion in 2010, but that was swelled by costs for a voluntary retirement plan in Korea, foreign exchange effects and the addition of 1,400 staff during the year.
Rival HSBC this week also noted rising wage inflation in Asia.
Sands said the bank was likely to add 2-3% to its 87,000 staff this year.
“Growth momentum will likely accelerate in 2012,” said Dominic Chan, an analyst at BNP Paribas in Hong Kong. “Key markets such as India are showing signs of improving, and the bank is well placed to gain market share in areas such as trade finance and wholesale banking.”
Its London-listed shares were up 1.1% at £16.40 at 0904 GMT, while the bank sector index was up 1.2%. The stock has risen about 14% this year, valuing it at more than $62 billion. Its Hong Kong-listed shares rose 0.4%.
StanChart reported a 2011 pretax profit of $6.8 billion, up 11% from $6.1 billion a year earlier and in line with the average forecast from analysts polled by Reuters.
Sands and analysts said the results beat forecasts after stripping out a far bigger than expected charge of $206 million for the Korean staff retirement plan.
Southeast Asian city-state Singapore became the third of its markets to deliver more than $1 billion in profit.
Revenues in Singapore rose 26%, while operating profit jumped 40%.
“We have started 2012 strongly, following a very strong finish to 2011,” Sands said. “In 2012, we are on track to deliver double-digit income, double-digit EPS and flat jaws (costs and income rising at the same rate).”
There was a danger of an “avalanche” of regulation from a number of fronts, he said.
Britain’s tax on bank balance sheets cost $165 million, but the bank has said it would like to keep London as its headquarters because of the expense of relocation.
John Peace, chairman, said the bank’s approach to pay had not changed. “We continue to reward our people for sustained high performance, and we do not reward failure or short-term risk taking.”
Profits in India slumped by a third, hit by the impact on the economy and business confidence of 13 interest rate increases over two years, and uncertain political and governance issues.
Korea profits were hit by industrial action last year and the retirement costs, though the bank said that plan would deliver savings of $95 million a year.