Standard Chartered on the ball as Asia business brings a big jump in profits

The bank, which is based in London but makes about four-fifths of its profit in Asia, said yesterday that pre-tax profit rose 10 per cent from last year.

Impairment losses on loans dropped to $437m from $1.09bn a year earlier as charges shrunk in the Middle East and elsewhere, to extend a trend shown by rivals including HSBC.

Standard Chartered has become more prominent in Britain after signing a shirt sponsorship deal with Liverpool football club, which starts this season, and will be worth 80m over four years.

Its former chairman and chief executive, Mervyn Davies, was Trade Minister in the final 16 months of Gordon Brown's government.

The bank had a record first quarter but said that economic uncertainty had hurt demand for some wholesale banking products in May and June.

The bank said it had seen more positive sentiment in markets more recently and an improvement in some businesses.

"There is fragility in the global economy and nervousness in financial markets.

"While there is economic improvement in our markets of Asia, Africa and the Middle East, they are still dependent on a recovery in the West, which is much less certain," said John Peace, the chairman.

He said he was also concerned about uneven regulations and tax policies.

"It is a matter of great concern to us... that regulations and taxes are not being introduced equivalently on an international basis and that UK banks could be put at a disadvantage to those elsewhere."

Standard Chartered's history of financing trade between Europe, Asia and Africa goes back more than 150 years and it said it had stepped up investment over the last 12 months to take advantage of growing Asian capital markets.

That resulted in costs rising faster than income – by 8 per centage points in the first half. It said this so-called "jaws" would narrow for the full year, but cost growth would be greater than income growth.

Its wholesale business, which includes investment banking and trade finance, posted an operating profit of $2.47bn, up 10 per cent on the year. Its consumer banking operating profit rose 85 per cent, to $643m.

Analysts hailed Standard's "good" results but sounded a note of caution over its asset quality and lending.

Ted Huang, manager at Pinebridge Asia high-yield fund in Taipei, said: "StanChart's result is another solid one by global banks after HSBC's.

"The results tell you that emerging markets, like China, India and Brazil, are the markets to be in for generating good businesses.

"Their outlook remains promising into the second half, since these emerging economies will continue to grow. Still, some areas to keep an eye on are StanChart's asset quality and the US consumer lending and mortgage lending markets."

Daniel Tabbush, analyst at CLSA in Bangkok, said: "The numbers are looking good and are at the high end of the range. What is really good about the earnings this time is that it's not just lower loan provisions that are driving profit, but consumer banking is also seeing some good growth.

"Its Korean operations are showing some very good numbers, with impairments down. This is different from what we're seeing from some of the Korean banks, and shows the strength of the operations there."

Making the most of Torres effect

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.

The bank largely escaped the worst excesses of the credit crunch and its decision to sponsor debt-laden Liverpool FC was seen as part of a strategy to boost visibility in its core Asian market.

The number nine shirt of striker Fernando Torres was the highest selling in the Premier League last season, and global television deals mean Standard Chartered's name will be displayed widely on the chest of the Spaniard, club captain Steven Gerrard and the rest of the club staff.

The bank will also gain publicity from sales of replica shirts, with Liverpool's former manger, Rafael Benitez, having described Asian women as "crazy" for Torres.