Standard Chartered profit off 24%Standard Chartered, the U.K. bank that makes about three-quarters of its earnings from Asia, posted a 24 percent drop in first-half profit after writing down the value of its Korean business by $1 billion.
Net income fell to $2.18 billion in the first half from $2.86 billion in the year-earlier period after the writedown, the London-based lender said in a statement.
Both Standard Chartered and HSBC Holdings, the two British banks that make most of their profit in Asia, are being hurt by slowing growth in China. HSBC on Aug. 5 posted a decline in revenue and said expansion in its fastest-growing markets was slowing. Standard Chartered said revenue increased by 6.6 percent as growth in Hong Kong and India mitigated declines in Korea, Singapore and China. The lender, which dropped its target to increase income by 10 percent annually, said it has “good momentum” in the second half.
“We’re clearly not targeting double-digit income this year, but still expecting to grow our business at a good pace this year,” Finance Director Richard Meddings said on a conference call with journalists.
“The company is effectively saying it’s comfortable with full-year estimates,” said Gary Greenwood, an analyst at Shore Capital in Liverpool, England, who rates the bank a buy.
The stock closed at 1,567.50 pence in London, up 2.9 percent on the day. It has declined 0.4 percent this year.
Impairments on loan losses rose 27 percent to $730 million, less than the $756 million estimate by Deutsche Bank AG’s Jason Napier in a July 10 note to clients. He rates the stock a hold.
Corporate banking operating profit climbed to $3.23 billion from $3.03 billion, lifted by increases in Hong Kong, India, the Middle East, Americas, U.K. and Europe and Africa. The division, run by Michael Rees includes trade finance, payment processing and some investment-banking activities such as merger advisory and equities.
Operating profit in the consumer bank, led by Steve Bertamini, fell 5.5 percent to $858 million from $908 million as Singapore and Asia Pacific, which includes China, offset increases in Hong Kong, Africa, India and the Middle East.
Standard Chartered said Korea is the bank’s “most difficult market” and a source of bad debts after the country created a fund aimed at easing households’ debts by buying and rescheduling overdue loans.
The lender’s Korean consumer unit posted an operating loss of $6 million after a $100 million profit a year ago.
When it acquired Korea First Bank in 2005, the industry’s return on equity was 18 percent compared with about 4 percent now, Standard Chartered said. “It will not be a quick fix, but we are committed to doing what we have to do to make it work,” the bank said.
HSBC, Europe’s biggest bank, on Aug. 5 reported first-half earnings that missed analysts’ estimates.
China’s economy has slowed for two straight quarters, extending its longest period of expansion below 8 percent in at least two decades.