Bloomberg News

Standard Chartered Profits May Rise on Cost Controls

August 01, 2011

(Updates with share movement in sixth paragraph.)

Aug. 2 (Bloomberg) -- Standard Chartered Plc, the British bank that makes most of its earnings in Asia, may say net income rose in the first half of the year, as the lender controls costs to chase its eighth successive year of record profit.

The London-based bank will post net income of $2.39 billion compared with $2.15 billion a year earlier, according to the median estimate of 10 analysts surveyed by Bloomberg. The bank is due to report earnings at 5.30 a.m. London time on Aug. 3.

“There’s been a slowing down on headcount replacement which has dragged costs down a bit,” said Mike Trippitt, an analyst at Oriel Securities Ltd. who rates the stock a “buy.” “It’s a bank that has a very good control over the revenue and cost trade-off, when to invest and when not to invest.”

Finance Director Richard Meddings in June said the bank has a “firm grip” on expenses, which will grow in line with revenue after the bank hired 7,000 people last year. Standard Chartered said it had “double digit” profit growth in the first five months of 2011 as consumer banking earnings in markets including Hong Kong, Singapore, Malaysia and Indonesia mitigated lower revenue in India.

HSBC Holdings Plc, another U.K.-based bank which earns more than half its profit in Asia, said yesterday it plans to cut 30,000 jobs by the end of 2013 to reduce costs inflated by hiring and wage inflation. Standard Chartered will add a net 1,000 people to its workforce this year, the bank said in June.

Standard Chartered fell 0.9 percent to HK$200.20 at 11:11 a.m. in Hong Kong. The Hang Seng Index declined 0.5 percent.

‘Different Story’

“Standard Chartered is a different story,” said Dominic Chan, a Hong Kong-based analyst at BNP Paribas SA. “Its scale is smaller than HSBC and it has limited operations in high cost areas like Europe and the U.S.”

Both HSBC and Standard Chartered are paying more to attract employees to their investment banks. HSBC “experienced quite significant wage inflation” in the first half, Finance Director Iain Mackay told analysts yesterday.

Standard Chartered raised more than $5 billion in October, partly to bolster capital.

The bank has declined 9.7 percent from Jan. 1 to July 29, the second-best performer in the five-member FTSE 350 Banks index after HSBC.

The table below shows analysts’ median estimates for the first half of 2011 in millions of dollars for Standard Chartered.

--With assistance from Stephanie Tong in Hong Kong. Editors: Francis Harris, Julie Alnwick

To contact the reporter responsible for this story: Jon Menon at jmenon1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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