MercoPress. South Atlantic News Agency

StanChart profits flat despite HK defaults

Standard Chartered, the emerging markets-focused UK bank, on Wednesday reported flat interim pre-tax profits of $634m and warned of a rise in bad debt provisions due to a rise in personal bankruptcies in Hong Kong.

The bank said bad debt provisions rose $138m to $407m, adding this was in line with expectations. Profits of between $490m-$642m against $628m last time had also been expected.

The market was reassured by the figures, and shares jumped 53¾p, over 8 per cent, to 663½p in early trading in London.

The bank blamed an increase in personal bankruptcies in Hong Kong, which accounted for $149m of the charges, and on Argentina, where it has exposure of around $116m.

The rise in provisions follows similar moves by other leading banks including Barclays, HVB Group, BNP Paribas and Lloyds TSB.

StanChart also said it was not ready to announce its chairman to replace Sir Patrick Gillam.

Mervyn Davies, chief executive, said StanChart still planned a listing in Hong Kong in the fourth quarter.

"Hong Kong has been disappointing, but it's not surprising considering the market conditions. Hong Kong is still profitable and has experienced growth of 19 per cent year on year," he said.

Bad debt dragged down the performance of Hong Kong, where trading profits fell 22 per cent. StanChart makes around a third of its profits in Hong Kong.

StanChart reported strong performances in India where profits rose 43 per cent and Singapore, which saw a 26 per cent increase.

Mr Davies said India and the Middle East were now becoming substantial profit centres for the bank.

Divisions in Thailand and Taiwan also returned to profitability. Nakornthon bank of Thailand, acquired in 1999, reported a trading profit of $3m in the first-half against a loss of $47m in the first 12 months.

StanChart's consumer banking division reported a 54 per cent increase in trading profit, though this was also held back by the rise in bankruptcies in Hong Kong.

The bank reported a 7 per cent increase in wealth management products despite a lower margin environment, helped by an increase in unit trust sales and by a rise in assets under management to $3.6bn from $2.6bn.

In wholesale banking, StanChart said it was reviewing under performing areas such as Latin America and recognised it needed to do better.

StanChart, which has a target of improving its return on equity to 20 per cent, said its ROE had improved to 12.8 per cent from 9.3 per cent.

Although the bank said it had not yet found a chairman to replace Sir Patrick it pointed out that he does not retire until next May.

Rana Talwar was ousted as chief executive last year after a boardroom clash over management style. He was replaced by Mervyn Davies.

Source: Financial Times By Jane Croft in London