5th Mar 2014 10:45
LONDON (Alliance News) - Standard Chartered PLC Wednesday reported its first annual decline in pretax profit after a decade of growth, as it was hit by emerging market fears and a writedown in its Korean business, but warned that its 2014 first-half performance faces challenges.
Standard Chartered shares were Wednesday quoted at 1,295.50 pence, up 21.00 pence or 1.7%.
The emerging markets-focused bank reported a USD6.06 billion pretax profit for 2013, compared with USD6.85 billion in 2012, as operating income was slightly lower at USD18.78 billion. Operating expenses fell to USD10.19 billion from USD10.72 billion.
Profits suffered as a result of lower transaction banking income in wholesale banking and higher impairments in the unsecured book in consumer banking.
Impairment losses on loans and advances and other credit risk provisions increased to USD1.62 billion from USD1.20 billion in 2012, while the bank also booked a previously announced USD1.00 billion goodwill writedown in Korea, where its operating profit fell by USD530 million.
Without those impairments, Standard Chartered's operating profit rose to USD8.58 billion from USD8.06 billion.
Chief Executive Peter Sands said the bank is taking action in Korea, but noted that 2014 will still prove challenging for operations in Korea. He said the business will be shrunk, with the consumer finance and savings bank subsidiaries to be sold. Cost reduction is also a priority, with staff numbers down by nearly 400 year on year and the branch network down by 24.
Sands said 2013 was not a great year for Standard Chartered overall, adding that 2014 would have its own challenges.
"Our outlook for 2014 is one of modest growth. Market and trading conditions are more volatile and difficult than a year ago. While current performance momentum is ahead of the second half of last year, performance in the first half of 2014 will remain challenged both at an income and profit level," Sands said.
Setting out Standard Chartered's priorities for 2014, Sands said he wants to deliver profitable and capital accretive growth, to optimise the way capital is deployed, and to digitise and simplify in order to improve productivity and effectiveness.
As previously announced Standard Chartered is reorganising its business as part of its plans, with Finance Director Richard Meddings set to depart and Mike Rees to become Deputy Group Chief Executive, with its wholesale and consumer banking divisions merging, as the bank tries to build its relationships with its smaller corporate, private banking and retail clients. The changes will be reflected when the bank reports its 2014 interim results.
Sands reiterated guidance given in November that Standard Chartered doesn't expect double-digit income growth over the next couple of years but was more optimistic in the long-term.
"We haven't abandoned double-digit growth as a longer-term aspiration. Given the scale of the opportunities in our markets, and the pace at which the demand for banking services is growing, we still believe this is a stretching, but realistic, aspiration," he said.
The FTSE 100 bank reiterated that it is well capitalised, indicating that it will not go to the market to raise equity. Its Basel II Core Tier 1 ratio was up to 11.8% from 11.7% in 2012. On a Basel III basis, its CET 1 ratio was 10.9%.
Standard Chartered's capital ratios place it ahead of minimum requirements set out by its UK regulator, the Prudential Regulation Authority. Investors had been looking for reassurance on capital, with some City analysts calling for the bank to raise capital on emerging market fears.
In response the lower profit, Standard Chartered decreased its bonus pool by 15% but raised its dividend 2.4% to 86.0 pence from 84.0 pence.
By Samuel Agini; [email protected]; @samuelagini
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