Standard Chartered First-Half Net Income Drops 24 PercentHoward Mustoe
Standard Chartered Plc, the U.K. bank that makes about three-quarters of its earnings from Asia, posted a 24 percent drop in first-half profit after writing down the value of its Korean business by $1 billion.
Net income fell to $2.18 billion from $2.86 billion a year earlier, the London-based lender said in a statement yesterday. Revenue rose 6.6 percent as growth in Hong Kong and India mitigated declines in Korea, Singapore and China.
Standard Chartered and HSBC Holdings Plc, which also makes most of its profit in Asia, are being hurt by China’s economic slowdown. London-based HSBC on Aug. 5 posted a revenue decline and said expansion in its fastest-growing markets was slowing. Standard Chartered, which dropped its target to increase income by 10 percent annually, said it has “good momentum” in the second half.
“We’re clearly not targeting double-digit income this year, but still expecting to grow our business at a good pace this year,” Finance Director Richard Meddings said on a conference call with journalists yesterday.
The stock rose 0.9 percent to HK$184.40 as of 9:41 a.m. in Hong Kong trading. Standard Chartered climbed 2.9 percent in London yesterday to 1,567.50 pence, narrowing its year-to-date decline to 0.4 percent.
“Both the first-half results and the outlook were reassuring relative to market concerns on credit quality and the revenue environment,” Sharnie Wong, a Hong Kong-based analyst at Barclays Plc, wrote in a research note yesterday.
Impairments on loan losses rose 27 percent to $730 million, less than the $756 million estimate by Deutsche Bank AG’s Jason Napier in a July 10 note to clients. He rates the stock a hold.
Corporate banking operating profit climbed to $3.23 billion from $3.03 billion, lifted by increases in Hong Kong, India, the Middle East, Americas, U.K. and Europe and Africa. The division, run by Michael Rees includes trade finance, payment processing and some investment-banking activities such as merger advisory and equities.
Operating profit in the consumer bank, led by Steve Bertamini, fell 5.5 percent to $858 million from $908 million as Singapore and the Asia Pacific region, which includes China, offset increases in Hong Kong, Africa, India, and Mid East.
China’s economy has slowed for two straight quarters, extending its longest period of expansion below 8 percent in at least two decades.
Standard Chartered said South Korea is the bank’s “most difficult market” and a source of bad debts as the country’s personal debt rehabilitation scheme spurred a jump in loan impairments.
The lender’s Korean consumer unit posted an operating loss of $6 million after a $100 million profit a year ago. Impairments climbed to $176 million for the first half from $96 million in the year-earlier period.
When it acquired Korea First Bank in 2005, the industry’s return on equity was 18 percent compared with about 4 percent now, Standard Chartered said.
“It will not be a quick fix, but we are committed to doing what we have to do to make it work,” the bank said.
HSBC, Europe’s biggest bank, on Aug. 5 reported first-half earnings that missed analysts’ estimates.
HSBC said pretax profit in Hong Kong rose 12 percent to $4.21 billion. Earnings at its Asia-Pacific unit, which includes China, India, Singapore and Malaysia, increased 16 percent to $5.06 billion. Pretax profit rose 18 percent in the Middle East and North Africa and fell 80 percent and 59 percent in North America and Latin America respectively.