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Wholesale banking boosts Standard Chartered

Created:

4 August 2009

Written by:

John Adams

At a time when most lenders' earnings are going backwards, Asian-focused bank Standard Chartered’s double-digit pre-tax profit hike certainly stands out. That reflects an impressive wholesale banking performance, even though the bank's consumer operations continue to struggle.

Indeed, the global downturn hit all of Standard's consumer markets and, overall, the bank's consumer operating profit fell 57 per cent year-on-year to $348m (£206m). Standard's core Asian markets were especially hard hit. The Korean consumer business, for instance, turned last year's $87m operating profit into an $11m loss, while the other Asia-Pacific division made a $65m loss, compared to last year's $77m profit. And the Hong Kong consumer business saw profits fall 30 per cent to $227m. The consumer division's loan impairment charge grew 37 per cent from $412m to $563m, partly reflecting the effects of rising unemployment and delinquencies in key markets in the unsecured loan book.

But it's a different picture at the wholesale division. Buoyed by factors such as market volatility, improved trading income and one-off fees from big transactions, the wholesale unit grew operating profit 36 per cent year-on-year to a record $2.25bn. In fact, profits for the first half of 2009 almost equalled that for the whole of 2008 and that's after wholesale loan impairment charges soared from just $53m last year to $525m. The Singaporean and African wholesale businesses performed especially well - operating profits there grew 85 per cent and 98 per cent, respectively. And last year’s $243m loss in the Americas, UK and Europe unit was turned into a healthy $105m profit.

Standard looks fairly well capitalised, too, boasting a core tier 1 capital (regulatory) ratio of 7.6 per cent. After announcing a $1bn placing alongside these results, the bank will bolster its capital strength further still - add in the new funds and that core tier one ratio rises to 8.4 per cent. Furthermore, the $230bn retail deposit book more than covers the $183bn loan book.

Prior to these figures, Charles Stanley was expecting full-year EPS of 153c (202c: 2008).