Standard Chartered in rude health with record earnings

The bank said yesterday it has had "a very strong start to the year" with record income as well, despite the margin headwinds from low interest rates and "increasing competitive pressures". Standard Chartered, based in London but deriving over four-fifths of its profits from Asia, does not report quarterly results.

Profits were a record $2.84bn in the first half of last year and income was $8bn, giving quarterly run rates of $1.4bn in profit and $4bn in revenue.

The shares are up 14 per cent this year and, unlike most rivals after the financial crisis, are just 3 per cent below their all-time high. "It's a positive statement," said Mike Trippitt, analyst at Oriel Securities in London. "There's more investment in the business but there's still income growth, so it shows this is a business that can invest and grow," he said, adding that much of the positive news was already factored into the share price.

Standard Chartered has been steered through the financial crisis relatively unscathed by chief executive Peter Sands, underpinned by its reliance on Asia and traditionally decent capital and liquidity positions. Mr Sands, a 48-year-old former McKinsey director, has been chief executive for three and a half years.

Wholesale banking's client income rose over 20 per cent on the first quarter of 2009 and contributed over 80 per cent of the unit's revenue, as the bank attempts to deepen relationships and win a greater share of spending from its key customers.

Growth at the bank, 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 last year accounted for near 85 per cent of group earnings.

The business includes typical investment banking activity such as debt and equity capital markets and other services to corporate clients, such as loans and trade finance.

The unit's expenses are ahead of the run rate seen in the first half of 2009 due to a rise in staff numbers and as a result cost growth

exceeded income growth in the quarter.

Wholesale own-account income was significantly below a year ago, as expected, but around the run rate of the second half of 2009. Its wholesale unit's cash business has seen volumes rise, offset by margin pressure, the bank said.

Standard Chartered's consumer banking has fared less well in recent years as bad debts rose and its Korea business struggled. The bank said the business turned a corner last year, however, and income momentum continued in the first quarter.

A recovery in consumer banking earnings would provide greater balance and was a positive trend, analysts said.