Standard Chartered net profit declines 17pc
Standard Chartered, the British bank which is heavily exposed in emerging markets, posted its first decline in earnings in a decade due to volatile financial markets and tough conditions in South Korea, with analysts warning the bank still faces challenges in 2014.
Standard Chartered's profit before taxation dropped 7 per cent to US$6.96 billion last year. The statutory net profit for ordinary shareholders sank 17 per cent to US$3.99 billion. The bonus pool was cut 15 per cent to US$1.3 billion, with chief executive Peter Sands' bonus down 21 per cent.
The decline came after 10 consecutive years of growth in revenue and profit, with 90 per cent of its profit earned from Asia, the Middle East and Africa.
"Standard Chartered has experienced the worst scenario in its operating markets," said Maybank Kim Eng analyst Steven Chan, referring to asset quality deterioration in India and South Korea. "Whether it can rebound in this year hinges on the volume growth in trade, wealth management and small and medium-sized enterprise businesses."
Sands said 2013 was "not a great year" for Standard Chartered and warned that "performance in the first half of 2014 will remain challenged both at an income and profit level".
Non-core businesses were put up for sale, including the consumer finance business and Savings Bank in South Korea, the Swiss private bank business and the consumer banking business in Lebanon. It reported US$1 billion of impairment charges from the Korean business last year.
The bank is exploring the sale of the Hong Kong consumer finance business, Jaspal Bindra, chief executive for the bank in Asia, said yesterday. He said Standard Chartered is keen to reward shareholders by paying dividends, though observers worry if it has adequate capital.
The total dividend was set at 86 US cents per share. Hong Kong remained the largest contributor, with pre-tax profit up 16 per cent to US$1.9 billion, representing 27.5 per cent of the entire group.
The bank's Hong Kong chief executive, Benjamin Hung Pi-cheng, said he is confident growth in the city can be sustained in the medium term despite the fall in the group. The Hong Kong operation is hiring more than 300 people, he said.
Standard Chartered's shares fell 1.1 per cent in London trading after touching 4.35 per cent after the results announcement.
It has been the worst performer among major British banks in the last 12 months. Julian Chillingworth, chief investment officer at Rathbones, said: "The outlook is relatively cautious, but that's already been factored into the share price."