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SCMP Reporter

Standard Chartered almost tripled its provisions against bad and doubtful debts last year as the financial crisis in Asia and worsening conditions in Hong Kong sent trading profits down sharply.

 Chief executive Rana Talwar yesterday warned the performance outlook for this year also looked bleak, but said the group was actively seeking new acquisitions.

 Provisions for bad and doubtful debts and contingent liabilities soared 179 per cent to GBP436 million (about HK$5.43 billion), pushing trading profit down 22 per cent to GBP703 million.

 Profit before provisions was up 7 per cent at GBP1.13 billion, fuelled largely by a huge jump in profits from treasury operations.

 Mr Talwar said the rise in the bad-debt charge was due largely to the crisis in Asia, where the group last year derived 60 per cent of its pre-tax profit, with Hong Kong generating more than 30 per cent.

 The jump in bad-debt provisions was largely accounted for by a net specific charge of GBP386 million for Hong Kong and Asia-Pacific, and a GBP50 million increase in the general provision.

 Specific provisions in Hong Kong were up 250 per cent at GBP86 million. For the region, they leapt to GBP300 million from GBP74 million in 1997.

 Mr Talwar said this year also would prove challenging and there were no expectations of an improvement in any market where the bank had a presence.

 'There will be continuing uncertainty and I do not expect significant growth to resume this year,' he said.

 However, the group said it felt the crisis had yielded opportunities in Hong Kong, Singapore and Malaysia, where several domestic banks were consolidating and repositioning, while international banks were reducing their presence.

 'We view this as an opportunity to increase market share in our core products with our target customers,' Mr Talwar said.

 He added that there also were possibilities for strengthening Chartered's retail operations in other countries.

 'This growth will be led by consumer banking through retail deposits and credit cards and will also entail upgrading our corporate and institutional banking and treasury capabilities,' Mr Talwar said.

 The group was eyeing three opportunities which would further expand its presence in Asia and other emerging markets.

 These included Bank of America's Taiwan and Indian consumer banking business, the trade finance business of Europe's largest bank, UBS, and potential acquisitions in Asian countries such as Thailand.

 He said he had no intention of trying to offset the group's emerging market franchise with acquisitions in member nations of the Organisation for Economic Co-operation and Development.

 'Our OECD activities are restricted to supporting our emerging-market activities. I have no ambition to buy a high-street bank in Britain or an investment bank in Germany or acquire a bank in the United States,' Mr Talwar said.

 'We are committed to emerging markets and we are committed to Asia.'  The group, which concentrates on consumer banking, corporate and institutional banking and treasury, said treasury operations were among the best performing, producing a 19 per cent jump in dealing profits.

 Profit before provisions was up GBP79 million at GBP352 million and net revenue was up 22 per cent.

 'A combination of wide spreads and trading opportunities provided by currency volatility in Southeast Asia resulted in exceptional dealing profits, particularly in the first half,' Mr Talwar said.

 Corporate and institutional banking profits were flat at GBP383 million as business in much of Asia performed poorly - except in Singapore, where revenues were up 12 per cent, and Indonesia where revenues were up 23 per cent.

 Revenues outside Asia produced strong gains, amounting to 30 per cent, with 20 per cent rises from operations in Britain and the US.

 Chartered's consumer banking profits rose 15 per cent before bad debts to GBP480 million as revenues grew 8 per cent, of which almost half was generated in Hong Kong and the remainder in Singapore and Britain.

 Mr Talwar said costs were likely to grow about 10 per cent this year.



Standard Chartered profit slumps as provisions triple