Bloomberg News

Standard Chartered Keeps 10% Profit Rise Forecast for Full Year

June 27, 2012

Standard Chartered Plc (STAN), the U.K.’s second-largest bank by market value, reiterated its forecast for profit in 2012, even as revenue growth slowed in the first half of the year.

The bank is “comfortable” with analyst estimates for 2012 pretax profit of $7.46 billion, Finance Director Richard Meddings said on a conference call with analysts today. That’s a 10 percent increase on the $6.78 billion year-earlier figure.

The bank may record “high single-digit” profit and revenue growth in the first half, hindered by the weakness of Asian currencies against the U.S. dollar, London-based Standard Chartered said today in a statement. Margins widened, revenue from markets including China, Indonesia and Malaysia is expected to grow by 10 percent or more, and the bank will “step up” the pace of investment, Meddings said.

“The second quarter is a challenging quarter,” said Dominic Chan, an analyst at BNP Paribas SA in Hong Kong, who has a buy rating on the stock. “Revenue growth in some of the businesses is under pressure, but asset quality and expenses are better than expected.”

Unsecured Lending

Standard Chartered, which focuses on Asia, the Middle East and Africa, said its net interest margin, a measure of lending profitability, “improved” from 2.3 percent a year earlier, partly because of an increase unsecured lending in its consumer unit.

The bank will invest “ahead of budget” in Hong Kong and China and add branches in Africa, Finance Director Richard Meddings said last month.

The company’s plans to hire more than 1,000 people, mainly in front office roles, Meddings said today, even as U.K. lenders including HSBC Holdings Plc and Royal Bank of Scotland Group Plc are cutting jobs. Employment at Standard Chartered (2888) increased to almost 87,000 last year from about 44,000 in 2005.

Standard Chartered gained 3.1 percent to 1,375 pence in London today. The stock has declined 2.4 percent this year, compared with a 2.1 percent fall in the 43-member Bloomberg European Banks and Financial Services index. The bank has a market value of about 33 billion pounds ($51 billion), while HSBC’s is 104 billion pounds.

European Crisis

The bank’s wealth management unit was “impacted by continued uncertainty arising from the European debt crisis,” Standard Chartered said. The bank has no “direct sovereign exposure” to Greece, Ireland, Italy, Portugal or Spain, and total direct exposure is “significantly less than 0.5 percent” of assets, the bank said.

The lender in February posted its eighth annual record earnings as 2011 net income rose to $4.85 billion from $4.33 billion a year earlier. The bank earns about three quarters of profit from its corporate banking unit, led by Michael Rees, which includes trade finance and payment processing in addition to some investment banking such as equities and merger-advisory activities.

Standard Chartered is 18 percent-owned by Temasek Holdings Pte, Singapore’s state investment company, according to data compiled by Bloomberg.

Wage increases across the company have been at “about 3 percent” so “there has not been significant inflationary pressure,’ said Meddings. ‘‘That’s about 1 percent below what we budgeted at.”

The bank is gaining market share in trade finance in Asia, Meddings said today in an interview on Bloomberg Television with Maryam Nemazee.

“We are seeing some emerging slowdown in trade flows although intra-Asian trade is much more resilient than global trade,” Meddings said. “The important thing is Standard Chartered continues to take market share and gain market share in these key business activities.”

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

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


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