Standard Chartered Says Profit Grows by Less Than 10%

Standard Chartered Plc (STAN), which paid $340 million to settle a regulator’s claim it broke Iranian sanctions rules, said operating profit in the first nine months rose by a “mid-single digit” rate as growth in Asia slows.

Revenue grew at a “high single-digit rate, maintaining the trajectory” of the first half, the London-based bank said in a statement today. The lender forecast full-year revenue growth of at least 10 percent in August.

“Management reference signs of slower growth in Asia, suggesting potential downside risk to revenue growth in 2013,” Cormac Leech, a banking analyst at Liberum Capital in London, wrote in a note to clients today. Leech has a buy rating on the stock.

Standard Chartered (2888), which gets most of its revenue in Asia, is seeking a ninth consecutive year of record net income, opening branches and hiring in Africa, India and China, where economies are outpacing Europe and the U.S. The bank plans to double revenue at its African business within five years and add 950 people to its consumer-banking unit, it said Oct. 9.

‘More Expenses’

Standard Chartered is still our top pick if we are to invest in international banks,” said Lewis Wan, Hong Kong-based chief investment officer at Pride Investment Group Ltd., which manages $300 million. “I don’t have doubts on the expansion strategy or the management quality of the bank. My biggest concern is the bank’s anti-money laundering issue as that may incur more expenses.”

Standard Chartered fell or 0.9 percent, to 1,483.5 pence in London, valuing the lender at 35.6 billion pounds ($57.2 billion).

Standard Chartered in August was accused by Benjamin Lawsky, head of the New York Department of Financial Services, of helping Iran launder about $250 billion in violation of federal laws, keeping false records and handling lucrative wire transfers for Iranian clients. The bank sent them through its New York unit in so-called U-turn transactions with client names omitted to hide their provenance, Lawsky said. The bank settled the probe on Aug. 14, a day before it was due to defend itself to the regulator.

‘Constructive Dialog’

“At this stage all we can say is we are in active and constructive dialog with all the other agencies,” said Finance Director Richard Meddings. “We would hope to get that finished and completed by the year end, but it’s not wholly in our power to do that.”

The bank is in discussions with the U.S. Federal Reserve, Office of Foreign Assets Control, the Department of Justice and the New York District Attorney’s Office, said Meddings.

Revenue growth in the first nine months “continued to be impacted by the strength of the U.S. dollar against Asian currencies,” according to the statement today. The wholesale banking business in Singapore has slowed and consumer banking operations in Korea were “muted,” the bank said.

“It’s quite likely we will not be double-digit” revenue growth for the year, said Meddings. “If you look at that on a constant currency basis, we are traveling at good double-digit growth rates.”

The company’s operating profit will be reduced by the fine, said the bank. Operating profit for the year to date grew at “mid single digit, or at a double-digit rate excluding the N.Y. DFS settlement,” the bank said.

Worst Performer

The bank has gained 5.7 percent in London trading this year, making it the worst performer among Britain’s five biggest banks. The company is the first of the banks to report results for the third quarter, with Barclays Plc, the U.K.’s second- largest, scheduled to follow tomorrow.

Standard Chartered said in August first-half net income rose 11 percent to $2.86 billion. The bank is set to meet its full-year target for “double-digit” growth in revenue and earnings per share, Chief Executive Officer Peter Sands said at the time.

Standard Chartered reported in February its eighth annual record earnings as 2011 net income rose 12 percent to $4.85 billion. About three-quarters of its profit comes from corporate banking led by Michael Rees, which includes trade finance, payment processing and some investment-banking activities such as merger advisory and equities. Its consumer banking unit is overseen by Steve Bertamini.

To contact the reporters on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net; Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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