Standard Chartered avoids turmoil

by Dave Nixon

Story link: Standard Chartered avoids turmoil

Standard Chartered hailed the finest year in its recent history as the emerging markets lender said it was in “great shape” to plot a course in an tentative future for the banking sector.

Peter Sands, chief executive, recognized that he did not know how market chaos and an economic hold up in the United States would affect Stanchart’s operations in emerging markets, which have hitherto been unaffected by the crisis.

But he added that they have weathered many difficult periods in their long history as a bank and assured that they have never been in better shape.

Mr Sands was speaking as Stanchart reported a 23 per cent increase in underlying income for 2007, buoyed by strong growth in Hong Kong, India and China. The increase, the greatest in recent years and greater than predicted by most analysts, helped push Stanchart’s shares up 124p, or almost 8 per cent, to £17.04.

Including the impact of recent acquisitions, pre-tax profits jumped 27 per cent, rising above $4bn (€2.7bn) for the first time.

Total losses from the US subprime-related turmoil were $300m, with Stanchart’s interest in Whistlejacket, the structured investment vehicle which went into receivership this month, accounting for $133m.

Stanchart’s whole balance sheet exposure to asset-backed securities, including collateralised debt obligations, is under $6bn, or about 1.8 per cent of its balance sheet.

Analysts noted that operating expenses, which were up by 30 per cent year-on-year, grew more rapidly than income. But Mr Sands defended the increase, arguing that the bank had a unique prospect to establish a strong position in fast-expanding economies such as China and India.

But he recognized that Stanchart had to display it could progress performance in its South Korean operations, which it acquired in 2005, where profits fell last year and the management team has been replaced.

Mr Sands stressed that the bank’s role as an issuer of bank notes in Hong Kong was “enormously important” to the bank. The Hong Kong Monetary Authority has warned it could remove Stanchart’s authority to issue notes if Temasek, the Singaporean state-backed investor which is the bank’s largest shareholder, increases its holding above 20 per cent.