Standard Chartered set to end decade of record earnings
London: Standard Chartered Plc,
the UK lender that makes about three-quarters of its earnings in Asia,
may end 11 years of record profits as a loss at the Korean unit
undermines revenue at the consumer-banking division.
Consumer-banking operating profit will drop at least 10% this year,
while revenue is seen increasing “at a low single digit rate” in 2013,
the London-based bank said in a statement on Wednesday, without giving
details. At the wholesale banking division, the largest, as well as on a
group level, full-year revenue will probably remain broadly flat in
2013.
“We’re signalling that Korea’s income will be down by
about 15% this year and that in consumer banking in Korea, we’ll make a
loss approaching $200 million,” Chief financial officer Richard Meddings
told reporters on a call on Wednesday. “We’ve got income now flat,
we’ve got costs slightly up, we’ve given a clear guidance on
impairments. The maths are fairly evident,” he said, when asked about
the bank’s 2013 earnings.
The shares closed at 1,338.50 pence in London, down 6.5%
on the day. That’s the biggest drop since August 2012. The stock has
declined about 15% this year, making it the worst performer among
Britain’s five largest lenders.
Korean Business
Standard Chartered last reported a drop in pretax profit
in 2001. The bank, which doesn’t provide a quarterly earnings breakdown,
earlier this year scrapped its target of at least 10% revenue growth
for the full year and wrote down the value of its Korean unit by $1
billion in the first six months.
The lender said it made a $50 million provision to sell
its Korean consumer-finance businesses. Still, Meddings, 55, reiterated
that the bank remains committed to Korea.
“If you looked at consumer banking without Korea, it’s
income and profit both up by single digits,” he said. “It’s really a
consequence of the reshaping stance we’re taking.”
Standard Chartered in August posted a 24% drop in
first-half profit to $2.18 billion. It said at the time that Korea’s
personal debt rehabilitation programme had spurred a jump in loan
impairments. The lender’s net interest margin “is slightly down” from
2012, while a depreciation in currencies such as the Indian rupee
against the dollar may reduce revenue and profit growth by about 1%, it
said.
‘Annus Horribilis’
In Hong Kong and Africa, the bank reported revenue increasing “at a double digit rate” from a year earlier.
“2013 has been Standard Chartered’s annus horribilis,” Ian Gordon, an analyst at Investec Plc
in London with a buy recommendation on the shares, wrote in a note on
Wednesday. “Strength in Hong Kong and Africa has offset weakness in
Korea and India, exacerbated by adverse foreign exchange.”
Costs will rise by a “low single digit percentage”
following “significant increases” in regulatory and compliance expenses
and a one-time tax related to costs in Korea of about $60 million, the
bank said. In the second half, the level of impairments is seen
exceeding the first six months.
Standard Chartered was fined $667 million by the US regulators last year for breaches of the US sanctions on Iran.
“We are responding to near-term challenges to ensure we
strike the right balance between growth and returns, and have
successfully managed costs tightly in light of the pressures on income,”
chief executive officer Peter Sands said in the statement. We remain “confident in the potential of our markets,” he said.
Sands said on 11 November that the lender will review its
businesses to cut back or withdraw from less-profitable markets. The
bank left consumer banking in Japan last year and is selling a similar
business in Lebanon, according to the CEO.
Other UK banks are also selling businesses and reducing costs. Stuart Gulliver, CEO of Asia-focused HSBC Holdings Plc,
plans to cut an additional $3 billion of expenses after beating an
earlier cost target. He has closed or sold 60 businesses and eliminated
46,000 jobs since the start of 2011. Bloomberg
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