Standard Chartered 17pc profits rise breaks records

The London-headquartered bank, which makes more than 80 per cent of its profits in Asia and other emerging markets, said it expected costs to rise in line with income this year.

This will remove an imbalance which has weighed on the lender over recent years of rapid growth.

“Costs are coming down, which is always encouraging,” said John Wadle, a Hong Kong-based analyst with Mirae Asset Management. “On balance, it was a set of encouraging results and I expect second half revenue to continue growing strongly.”

Profits in India fell 39 per cent from a year ago and the outlook looks tough due to interest rate rises, inflation and rising competition, the bank said. India had overtaken Hong Kong as the bank’s most profitable country last year, but a slowdown had been “faster and deeper” than the bank expected.

However, most other markets grew and Standard Chartered reported a pre-tax profit of $3.64bn, up from $3.12bn a year earlier and beating analysts’ expectations for $3.47bn.

“We’ve got a different story to other banks. We’re growing, we’re hiring and we’re delivering profit growth,” Peter Sands, the chief executive, told reporters on a conference call.

Mr Sands said the bank would add about 1,000 jobs this year after cutting 1,170 jobs in the first six months of the year as it attempted to keep costs under control.

The bank limited cost growth to eight per cent in the first half, below income growth of 11 per cent, and said it expected cost and income growth to be flat for the full year.

Banks in Asia are facing stiff wage price inflation. Standard Chartered said its staff costs rose 15 per cent on the year and rival HSBC on Tuesday called the environment a “war for talent”.

Cost growth has risen faster than income growth, a problem known as “negative jaws”.

This dilemma has dogged Standard Chartered in the past year as it battles local and international rivals to keep and retain staff in fast-growing Asian markets.

Lenders have cut jobs to restrain costs.

HSBC this week said it will axe 30,000 jobs by 2013 and Credit Suisse is cutting 2,000 jobs.

Problems in Western economies have had a negative impact on the performance of many banks.

The euro zone debt crisis and the United States debt ceiling were having a “profound” effect across the global economy, Mr Sands said, warning that it could add to asset inflation in Asia and create economic bumps. “Our markets are in much better shape than Europe and the US, but they’re not immune to the ripple effects of some of the problems in the West. Growth in our markets is not going to be even or smooth or linear, and India is a good example,” he said.

He declined to predict how long the slowdown in India would last, but said the country remained a “key engine” of future income and earnings growth.

Costs were too high in South Korea and its balance sheet there was inefficient, the bank said.

Mr Sands said he was hopeful a dispute with staff in Korea would soon be resolved, as a strike continues over proposed changes to the pay structure.

The bank’s profits in Hong Kong jumped 55 per cent to $790m as income rose 29 per cent, while earnings in China jumped 76 per cent to $137m and revenues from Indonesia rose by a fifth.

Return on equity (RoE), a key measure of profitability, was 13 per cent in the first half, down from 14.7 per cent a year ago as the cost of holding more capital hurt.

The bank’s core Tier 1 equity rose to 11.9 per cent from 9 per cent.

Mr Sands said the bank was aiming for an RoE of near 15 per cent, but said it was hard to be definitive on returns “when so much is in flux around capital and liquidity regulation”.

Its London-listed shares have fallen about 11 per cent so far this year, valuing the bank at about $60bn.

It is trading at about 11 times earnings, which is roughly in line with its rival HSBC.

BASE IN UK HAS BEEN HERE 150 YEARS

Standard Chartered has had a base in the UK for 150 years. It has been listed on the London Stock Exchange since 1969 and is a top 20 FTSE company.

It is among the top five largest banks by market capitalisation.

In September 2009, the bank signed a sponsorship deal with Liverpool Football Club.

The scale and breadth of Standard Chartered’s European business has grown significantly since 2007 through the acquisition of Pembroke, Harrison Lovegrove and American Express Bank. Standard Chartered has a presence in 14 European markets and employs more than 2,500 staff.

London is the main centre in Europe for wholesale bank origination and client coverage.