Bank sees shorter and shallower economic downturn in key Asia region
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(LONDON) Standard Chartered yesterday said that it made a strong start to 2009 after posting a 19 per cent profit rise, and predicted an economic downturn in its key Asia region would be 'shorter and shallower' than in the West.
The bank, which gets two thirds of its revenue from Asia, said that it had made a strong start to 2009, especially in its wholesale banking division. That sent its shares as much as 13 per cent higher, before concerns about consumer banking pared gains.
'Asia will obviously see a sharp correction in economic performance. But I think it will be shorter and shallower than what you will see in the West,' chief executive Peter Sands told reporters on a conference call.
'The ingredients of the deleveraging spiral and financial crisis in the West aren't present in most countries in Asia to anything like the same extent,' he said.
Standard Chartered posted a 2008 pre-tax profit of US$4.8 billion. Profits were aided by a US$233 million gain on an option related to its rights issue in December, leaving underlying profits up 13 per cent, in line with the average forecast of US$4.6 billion on Reuters Estimates.
'These results appear the best we have seen this results season,' said Alex Potter, analyst at Collins Stewart.
'However, trends into 2009, especially in consumer banking and corporate asset quality are weakening.'
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By 1100 GMT, Standard Chartered's London shares were up 3.2 per cent at 606 pence (S$13.20), outperforming a 2 per cent fall for the European bank index.
Standard Chartered said that 2009 had started well, with wholesale banking having a 'very strong' January and also a 'strong' February.
Its consumer bank's income was 'slightly below' the average run rate in the second half of last year and faces a more difficult outlook, however. Standard Chartered said that it had 'embarked on a radical reshaping of the business', aiming to cross-sell more products to customers.
The consumer bank's operating profit fell by one third last year, compared with a 28 per cent jump in wholesale.
Mr Sands said that he was 'very comfortable' with the bank's capital position, which he said improved in the second half even without the benefit of a rights issue.
Standard Chartered raised US$2.7 billion from the cashcall, helping lift its core Tier 1 capital ratio to 7.6 per cent at the end of December, from 6.6 per cent, above most European rivals.
Rival HSBC launched an US$18 billion rights issue on Monday, reflecting concern that all banks need extra capital in the face of deteriorating global economies and rising bad debts.
Standard Chartered's bad debts jumped 74 per cent last year to US$1.3 billion, as more corporate and retail customers ran into trouble in the second half of the year.
It tightened both its risk and cost control in the face of the worsening outlook, Mr Sands said.
He predicted that cost growth would be broadly in line or slightly lower than income growth this year.
The bank said that its rights issue had provided flexibility to pursue acquisitions, but Mr Sands said that there was a greater risk to any deal in the current environment. 'We will look at opportunities, but will do so with a fairly cautious perspective.' - Reuters
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