Standard Chartered played down the risks to its business of a slowing global economy as it unveiled first-half pre-tax profits that included a painful US$1 billion write-down against its South Korean operations. It admitted that plans for double-digit income growth were unrealistic.
"At a time when market sentiment towards emerging markets seems remarkably correlated, it is worth remembering that these economies don't all rise and fall simultaneously," group chief executive Peter Sands said in a statement revealing pre-tax profit of US$3.3 billion, after the Korean charge, for the six months to June.
The bank had made US$3.9 billion in the same period last year, but Sands said it was impossible to ignore the realities of business in Korea, where the return on equity in the banking sector had slumped to about 4 per cent from the roughly 18 per cent it was in 2005 when Standard Chartered bought Korea First Bank.
"This won't be a quick turnaround. Indeed we expect that the second half will also be very difficult," Sands said of Korea, adding that the bank as a whole was "clearly not tracking to a double-digit income performance for 2013".
Sands insisted he would not compromise standards to achieve an unrealistic growth target and pointed instead to figures showing income up across a range of business segments, despite a broad squeeze on margins, and an interim dividend up 6 per cent at 28.8 US cents.
Investors seemed willing to give him the benefit of any doubt, pushing the bank's London-listed shares up about 3 per cent in early trade yesterday.
The stock had gained about 11 per cent over the previous six weeks, lifting the price to a 10-month high. That was in marked contrast to the sharp sell-off of shares in arch-rival HSBC, which lost about 5 per cent after reporting pre-tax profits that just missed analysts' forecasts on the same broad combination of slowing economic growth and restructuring charges.
"A number of investors in London switched their investments to StanChart from HSBC," said a London-based analyst who declined to be named because of company policy.
However, some analysts remained concerned about second-half performance.
"The management said the margin could be better in the second half, but I am doubtful about its momentum in the second half, with muted economic growth," the analyst said.
"Relative to history, it is obvious that 2013 is a year of slower revenue growth for the bank, with the slowdown in the growth of its markets," said Ian Gordon, a London-based analyst at Investec. "But it is quite encouraging that the group is seeing improvement for the second quarter from the first."
Gordon maintained a "buy" rating and a target price of £90 (HK$1,073) for the stock, saying he expected it to perform better than HSBC.
The London-based but Asia-focused bank posted declines in income in Korea, Singapore and other Asia-Pacific markets.
The number of markets in which income grew 5 per cent or more fell to four in the first half from six for all of last year, with Hong Kong contributing a quarter of the group's pre-tax profit.