Standard Chartered’s first half profit rises 31%, beats estimates

Standard Chartered’s first half profit rises 31%, beats estimates
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First Published: Tue, Aug 05 2008. 09 56 PM IST
Updated: Tue, Aug 05 2008. 09 56 PM IST
London: Standard Chartered Plc., the UK bank that earns most of its money in Asia, said first-half profit rose 31%, helped by corporate lending in India and Hong Kong.
Standard Chartered said on Tuesday in a statement that its net income increased to $1.79 billion (Rs7,571 crore), or $1.25 a share, in the six months ended June, from $1.37 billion, or 97.1 cents, a year earlier. That beat the $1.68 billion average estimate of eight analysts surveyed by Bloomberg.
Chief executive officer Peter Sands said Standard Chartered, the first London-based bank to report higher first-half earnings, expects a moderation “rather than an interruption” of growth in Asia.
The results comes a day after HSBC Holdings Plc., which makes two-thirds of its money in Asia, posted lower profit amid subprime mortgage losses in the US.
“Their (Standard Chartered’s) earnings have beaten expectations and Asia was strong as anticipated,” said Simon Maughan, a London-based analyst at MF Global Securities Ltd, who has a “neutral” rating on the stock.
The bank forecast “double-digit” growth in per-share earnings this year despite “challenging market conditions.” Standard Chartered is ahead of schedule on plans to reduce costs by $100 million by 2009 at American Express Co.’s banking unit, which it acquired in March for $860 million to get banking licences in India and Taiwan and add wealthy customers.
Corporate banking profit rose 35%, exceeding the 7% gain in consumer banking unit, which cited “challenging market conditions. The bank got 25% of pre-tax profit in Hong Kong, it biggest market.
Operating profit in the consumer unit was $843 million, Standard Chartered said. Falling interest rates eroded margins and declining stock markets hurt investment product sales, the company said. The bank also has been investing in new products in China and a private bank for wealthy customers, said Sands.
Consumer banking profit in Korea declined 26% to $87 million. The bank will restructure its main office in Korea and branch network and will create a new securities unit with an initial focus on fixed income, Standard Chartered said.
Corporate banking profit in the first half was $1.62 billion, with Hong Kong gaining 48% to $343 million and India jumping 47% to $411 million.
Even after slowing as much as 2% this year, Asian economies will still grow at 5-7% this year, Sands said. “We cannot predict precisely how events will unfold and to what extent our markets and the bank itself will be affected.”
Standard Chartered, like HSBC, gets more than half its funding from customer deposits and doesn’t rely on capital markets to fuel lending. Banks and financial services companies worldwide have raised $353 billion in capital since the collapse of the US subprime market triggered a global credit crunch.
Standard Chartered took a $130 million charge against earnings on asset-backed securities. It marked down $186 million against reserves.
On Monday, HSBC reported a 29% decline in profit for the first half and its chairman Stephen Green said the outlook is “highly challenging” as emerging markets grow “with less momentum” than before.
Its net profit of $7.7 billion, or 65 cents a share, was however better than the $7.3 billion average estimate of 11 analysts.
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First Published: Tue, Aug 05 2008. 09 56 PM IST