STANDARD CHARTERED yesterday said it was benefiting from the withdrawal from emerging markets by other western banks as it revealed it had shrugged off the crisis to report record profits.
Peter Sands, Standard’s chief executive, said the British bank had increased its market share among corporate customers from rivals who are under pressure from governments to concentrate on their home markets.
Large international banks such as Royal Bank of Scotland and Citigroup are scaling back their operations in international markets after receiving large government bailouts.
“Many of our competitors are distracted by problems and withdrawing to focus on their home markets,” Mr Sands said, adding that such a move was impossible for Standard Chartered, which has its headquarters in the United Kingdom but does almost no business there. “As we have nowhere to withdraw to, our commitment not to go home is quite believable.”
He was speaking as Standard bucked the trend in the banking sector by reporting 2008 pre-tax profits of $4.8 billion (€6 billion), up from $4 billion in 2007 and a new record for the bank.
However, the figures masked contrasting performances as StanChart’s consumer banking operations reported operating profits of $1.1 billion, down 33 per cent, while profits in wholesale banking jumped by 28 per cent to $3 billion, helped by sharp increases in trading foreign exchange.
Mr Sands acknowledged the global downturn had begun to hit StanChart’s markets in Asia, the Middle East and Africa in the second half of 2008, and that these regions were likely to experience further strains in the coming year.
However, he said there were important differences between emerging markets and the developed economies of the West. “Our markets are experiencing a sharp cyclical slowdown, but they don’t face the structural deleveraging facing western markets. As a result, the Asian slowdown should be much shorter.”
Analysts said they were surprised by the figures, and particularly by the strength of StanChart’s capital base. Though the bank topped up its capital reserves with a $3 billion rights issue late last year, the results show that its tier-one ratio – a key measure of balance-sheet strength – improved in the second half even without the benefit of the cash injection.
At the end of December, StanChart’s tier-one capital was 10.1 per cent of risk-weighted assets, while its core tier-one ratio – which excludes preference shares and other hybrid instruments – was 7.6 per cent.
Bad debt provisions jumped sharply to $1.32 billion, from $761 million in 2007, as the slowdown took effect.
In the consumer division, the increase in provisions was most marked in the fourth quarter of the year.
In the wholesale division bad debts jumped to $384 million from just $25 million.
Mr Sands said the consumer division this year would concentrate on selling more products to its existing customers, while controlling costs. Though the division’s cost base rose during the year, costs in the second half were 6 per cent lower than in the first half.
