Shine coming off at Standard Chartered

The bank said in a trading update yesterday that worries about the sovereign debt crisis in Europe had dented client demand for some products in its key wholesale banking arm and wealth management in recent weeks and created a subdued trading environment.

Finance director Richard Meddings said: "In late May and in the first part of June we saw some impact on our income levels, washing over from the uncertainty in Europe. But this was off very strong underlying growth."

Standard Chartered has become one of the first banks to signal the impact of Europe's troubles on global markets, and its shares dipped 2.3 per cent as analysts said the comments were less upbeat than its previous statement in May, when it said it had a record first quarter.

"The statement in May was very positive and it looks like a little bit of momentum has been lost," said Bruce Packard, analyst at Seymour Pierce, who rated the shares as "hold."

Mr Meddings said he remained "very comfortable" with analysts' consensus forecasts for a 15 per cent rise in 2010 pretax profit to a record $5.9bn.

A big drop in bad debts will help, which analysts said was the main positive in the update. Impairments are expected to drop under $585m in the first half, from $1.1bn a year earlier, as wholesale bad debts more than halve.

The bank, which is based in London but derives over four-fifths of its profits from Asia, said its income and profit in the first five months of the year were ahead of the co mparable period of 2009.

Growth at Standard Chartered, 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 includes investment banking services and last year accounted for near 85 per cent of group earnings.