Korea move hurts first-quarter profits at Standard Chartered

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STANDARD Chartered suffered a drop in first-quarter operating profit after the bank experienced problems in Korea.

The bank also suffered from rising bad debts, while higher staffing and wages pushed up costs.

London-based Standard Chartered, which earns about four-fifths of its income from Asia and the Middle East, said operating profit for both its consumer bank and investment bank fell by about five per cent on the year after a weak March.

It said revenue had bounced back in April, however, and it was comfortable with analysts’ forecasts for another rise in profits in 2013, which would be an 11th consecutive year of record earnings.

Costs rose by a “low single-digit” percentage, while the additional 560 employees it hired in the quarter, and wage inflation, had pushed staff costs up by a “high single-digit” percentage, the bank said in a trading statement.

The bank does not issue full quarterly numbers and releases its earnings twice a year.

“The Q1 trading statement is the first one in a long time in which Standard Chartered is down in operating profit comparisons on a year-on-year basis, both in the wholesale bank and the consumer bank,” said Chirantan Barua, analyst at brokerage Bernstein.

Income in the first quarter was slightly higher than the same year-ago period, the bank said, thanks to client volume growth. But it said low interest rates in the west and Japan had hurt margins.

Standard Chartered has notched up 10 years of consecutive record profits thanks to strong Asian markets.

Hong Kong was again its standout market in the first quarter, with income growing more than 10 per cent, mirroring a strong performance in Hong Kong reported by rival HSBC on Tuesday.

Income in Africa also rose more than 10 per cent.

However, Standard Chartered said there was a weaker performance in Korea and in Singapore.

Korea has overhauled its personal debt restructuring processes as part of a wider social welfare programme and Standard Chartered said its consumer bad debts there had increased by more than 10 per cent, higher than expected.

The bank held its annual shareholders’ meeting in London yesterday.

The AGM was the first since Standard Chartered was hit last year by a $667m (£431m) settlement on charges it violated US sanctions against Iran, Sudan, and other countries.

It was a rare blip for the bank, which agreed to a deferred prosecution agreement as part of the settlement, which means its US operations are monitored.

The bank is expected to grow earnings and revenue by about 10 per cent this year, lifting pre-tax profit to more than $7.5bn.

It aims to increase costs broadly in line with revenue growth and has said it could add about 2,000 jobs this year.

Peter Sands, group chief executive, said, “Standard Chartered has continued to deliver a resilient performance despite the impact of extraordinary monetary policies in the West and Japan on liquidity conditions across Asia and thus on margins. We remain focused on continuing to grow the business, building on our long-standing relationships with our clients and customers, on maintaining our strong balance sheet, and on keeping a firm grip on costs and risks. We are in the right markets and remain confident in the outlook for our business.”

A merger of two equals

Standard Chartered Bank was formed in 1969 through the merger of two banks, the Standard Bank of British South Africa and the Chartered Bank of India, Australia and China.

These banks had capitalised on the expansion of trade between Europe, Asia and Africa.

The Chartered Bank was founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853.

The bank opened in Mumbai (Bombay), Kolkata and Shanghai in 1858, followed by Hong Kong and Singapore in 1859.

The traditional trade was in cotton from Mumbai, indigo and tea from Kolkata, rice from Burma, sugar from Java, and tobacco from Sumatra.