28th Oct 2014 06:42
LONDON (Alliance News) - Standard Chartered PLC Tuesday reported a 16% drop in third-quarter pretax profit, citing higher losses on loans gone bad and increased expenses.
The Asia-focused bank also expects underlying profit in the second half to be lower than the same period last year, partly due to a higher UK bank levy, regulatory and restructuring costs.
In a statement, Standard Chartered, which conducts the vast majority of its business in Asia, Africa and the Middle East, said it made a USD1.53 billion pretax profit in the three months ended September 30, compared with a USD1.83 billion pretax profit in the corresponding quarter last year.
Although third-quarter operating income grew to USD4.51 billion from USD4.47 billion, operating expenses increased to USD2.52 billion from USD2.42 billion and impairment losses on loans and advances and other credit risk provisions swelled to USD536 million from USD288 million. The bank said it remains "watchful" in India, in China and towards commodity exposures more broadly.
Standard Chartered said the increase in loan impairment was due to a small number of accounts, primarily in its corporate and institutional clients segment, some of which have been hit by weak commodity markets.
"Whilst trading conditions remained subdued, we did see a modest return to year on year income growth during the quarter. We are executing our refreshed strategy, including reprioritising investments, exiting non-core businesses, de-risking certain portfolios and reallocating capital. To create more capacity for investment in the many opportunities in our markets, we are taking further action on costs, targeting more than USD400 million in productivity improvements for 2015," Chief Executive Peter Sands said in a statement.
"We also continue to make progress in reshaping Korea. Whilst some of these actions will impact near term performance, they are crucial to getting us back to a trajectory of sustainable, profitable growth," the CEO added.
Sands and management have been under pressure in what has been a tough year for Standard Chartered, which in August agreed to a USD300 million civil monetary penalty from the New York State Department of Financial Services over deficiencies in the anti-money laundering transaction surveillance system at its New York branch.
The penalty was just one of a series of events to have propelled Standard Chartered into the headlines in the past months, and it has had to publicly back Sands and Peace in order to dismiss media reports that it was planning for succession due to investor pressure, ahead of interim results showing a weakened operating performance due to difficulties in its financial markets division.
That followed the resignation of former Finance Director Richard Meddings in January, amid a broader business restructuring that saw the integration of its wholesale and consumer banking divisions. Meddings has since been replaced by Andy Halford, the former chief financial officer of Vodafone Group PLC.
"We are taking action on multiple fronts, both to respond to near term challenges and to deliver against our refreshed strategy. We will provide further details of these actions during our investor presentations in November," Standard Chartered said.
By Samuel Agini; [email protected]; @samuelagini
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