7th Aug 2007 09:15
Standard Chartered PLC07 August 2007 7 August 2007 TO CITY EDITORSFOR IMMEDIATE RELEASE STANDARD CHARTERED PLC RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Problem Credit Management and Provisioning Consumer Banking An account is considered to be in default when payment is not received on thedue date. Accounts that are overdue by more than 30 days are considereddelinquent. These accounts are closely monitored and subject to a collectionsprocess. An account is considered non-performing if it is 90 days past due or anindividual impairment provision ("IIP") is held against it. The process used for raising provisions is dependent on the product. Formortgages, IIPs are generally raised at 150 days past due based on thedifference between the outstanding amount of the loan and the present value ofthe estimated future cash flows. Loan impairment for other secured loansutilises the forced sale value of the collateral without discounting if thecollateral can be realised within 12 months. For unsecured products, IIP areraised for the entire outstanding amount at 150 days past due. For all productsthere are certain accounts, such as cases involving bankruptcy, fraud and death,where the loss recognition process is accelerated. A portfolio impairment provision ("PIP") is held to cover the inherent risk oflosses, which, although not identified, are known through experience to bepresent in the loan portfolio. PIP covers both performing loans and loans overdue for less than 150 days. Theprovision is set with reference to past experience using flow rate methodology,as well as taking account of judgemental factors such as the economic andbusiness environment in core markets, and the trends in a range of portfolioindicators. The cover ratio reflects the extent to which the gross non-performing loans arecovered by the individual and portfolio impairment provisions. The balance ofnon-performing loans uncovered by the individual impairment provisions reflectsthe level of collateral held and/or the estimated net value of any recoveries. The table below sets out the total non-performing portfolios in ConsumerBanking. The decrease in non-performing loans in Korea is primarily as a resultof the successful exiting of SME accounts and the realisation of collateral. The following tables set out the total non-performing portfolio in ConsumerBanking: 30.06.07 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Loans and advances 65 87 211 372 562 Gross non-performing Individual impairment (27) (32) (69) (171) (349) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans net 38 55 142 201 213 of individual impairment provision Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans and advances ------------------- --------- --------- --------- --------- --------- Cover ratio ------------------- --------- --------- --------- --------- --------- 30.06.07 ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- ---------Loans and advances 56 112 32 21 1,518 Gross non-performing Individual impairment (18) (81) (12) (2) (761) provision ------------------- --------- --------- --------- --------- --------- Non-performing loans net 38 31 20 19 757 of individual impairment provision Portfolio impairment (408) provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans 349 and advances ------------------- --------- --------- --------- --------- --------- Cover ratio 77% ------------------- --------- --------- --------- --------- --------- 30.06.06 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Loans and advances 102 113 186 683 157 Gross non-performing Individual impairment (27) (33) (67) (287) (94) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans net 75 80 119 396 63 of individual impairment provision Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans and advances ------------------- --------- --------- --------- --------- --------- Cover ratio ------------------- --------- --------- --------- --------- --------- 30.06.06 ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- ---------Loans and advances 48 26 17 20 1,352 Gross non-performing Individual impairment (14) (18) (11) - (551) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans net 34 8 6 20 801 of individual impairment provision Portfolio impairment (362) provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans 439 and advances ------------------- --------- --------- --------- --------- --------- Cover ratio 68% ------------------- --------- --------- --------- --------- --------- 31.12.06* ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Loans and advances 80 100 202 531 695 Gross non-performing Individual impairment (29) (38) (67) (239) (422) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans net 51 62 135 292 273 of individual impairment provision Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans and advances ------------------- --------- --------- --------- --------- --------- Cover ratio ------------------- --------- --------- --------- --------- --------- 31.12.06* ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- ---------Loans and advances 48 98 24 5 1,783 Gross non-performing Individual impairment (17) (64) (10) (3) (889) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans net 31 34 14 2 894 of individual impairment provision Portfolio impairment (428) provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans 466 and advances ------------------- --------- --------- --------- --------- --------- Cover ratio 74% ------------------- --------- --------- --------- --------- --------- * Amounts have been restated as explained in note 6 on page 41. Wholesale Banking In Wholesale Banking, accounts or portfolios are placed on Early Alert when theydisplay signs of weakness. Such accounts and portfolios are subject to adedicated process with oversight involving senior Risk Officers and GroupSpecial Asset Management ("GSAM"). Account plans are re-evaluated and remedialactions are agreed and monitored until complete. Remedial actions include, butare not limited to, exposure reduction, security enhancement, exit of theaccount or immediate movement of the account into the control of GSAM, thespecialist recovery unit. Loans are designated as impaired and considered non-performing where recognisedweakness indicates that full payment of either interest or principal becomesquestionable or as soon as payment of interest or principal is 90 days or moreoverdue. Impaired accounts are managed by GSAM, which is managed separately fromthe main businesses of the Group. Where any amount is considered uncollectable,an individual impairment provision is raised, being the difference between theloan carrying amount and the present value of estimated future cash flows. Inany decision relating to the raising of provisions, the Group attempts tobalance economic conditions, local knowledge and experience, and the results ofindependent asset reviews. Where it is considered that there is no realistic prospect of recovering anelement of an account against which an impairment provision has been raised,then that amount will be written off. A portfolio impairment provision is held to cover the inherent risk of losses,which, although not identified, are known through experience to be present inany loan portfolio. In Wholesale Banking, the portfolio impairment provision isset with reference to past experience using loss rates, and judgemental factorssuch as the economic environment and the trends in key portfolio indicators. The cover ratio reflects the extent to which gross non-performing loans arecovered by individual and portfolio impairment provisions. At 88 per cent, theWholesale Banking non-performing portfolio is well covered. The balanceuncovered by individual impairment provision represents the value of collateralheld and/or the Group's estimate of the net value of any work-out strategy. The following tables set out the total non-performing portfolio in WholesaleBanking: 30.06.07 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Loans and advances 112 33 28 38 372 Gross non-performing Individual Impairment (83) (26) (24) (32) (276) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans and 29 7 4 6 96 advances net of individual impairment provision Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans and advances ------------------- --------- --------- --------- --------- --------- Cover ratio ------------------- --------- --------- --------- --------- --------- 30.06.07 ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- ---------Loans and advances 27 114 102 128 954 Gross non-performing Individual Impairment (23) (108) (50) (116) (738) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans and 4 6 52 12 216 advances net of individual impairment provision Portfolio impairment (105) provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans 111 and advances ------------------- --------- --------- --------- --------- --------- Cover ratio 88% ------------------- --------- --------- --------- --------- --------- 30.06.06 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Loans and advances 295 113 32 125 117 Gross non-performing Individual Impairment (176) (85) (31) (45) (104) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans and 119 28 1 80 13 advances net of individual impairment provision Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans and advances ------------------- --------- --------- --------- --------- --------- Cover ratio ------------------- --------- --------- --------- --------- --------- 30.06.06 ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- --------- Loans and advances 28 45 97 219 1,071 Gross non-performing Individual Impairment (23) (30) (57) (204) (755) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans and 5 15 40 15 316 advances net of individual impairment provision Portfolio impairment (93) provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans 223 and advances ------------------- --------- --------- --------- --------- --------- Cover ratio 79% ------------------- --------- --------- --------- --------- --------- 31.12.06* ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Loans and advances 167 69 29 110 406 Gross non-performing Individual Impairment (130) (46) (25) (46) (215) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans and 37 23 4 64 191 advances net of individual impairment provision Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans and advances ------------------- --------- --------- --------- --------- --------- Cover ratio ------------------- --------- --------- --------- --------- --------- 31.12.06* ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- ---------Loans and advances 24 121 100 152 1,178 Gross non-performing Individual Impairment (22) (111) (58) (151) (804) provision ------------------- --------- --------- --------- --------- ---------Non-performing loans and 2 10 42 1 374 advances net of individual impairment provision Portfolio impairment (97) provision ------------------- --------- --------- --------- --------- --------- Net non-performing loans 277 and advances ------------------- --------- --------- --------- --------- --------- Cover ratio 76% ------------------- --------- --------- --------- --------- --------- * Amounts have been restated as explained in note 6 on page 41. 30.06.07 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million------------------- --------- --------- --------- --------- ---------Gross impairment charge 7 3 1 2 7 Recoveries/provisions no (21) (3) (1) (3) (1) longer required ------------------- --------- --------- --------- --------- ---------Net individual impairment (14) - - (1) 6 charge/(credit) Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net impairment credit ------------------- --------- --------- --------- --------- --------- 30.06.07 ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- --------- Gross impairment charge 7 5 4 2 38 Recoveries/provisions no (4) (4) (4) (14) (55) longer required ------------------- --------- --------- --------- --------- ---------Net individual impairment 3 1 - (12) (17) charge/(credit) Portfolio impairment 6 provision ------------------- --------- --------- --------- --------- --------- Net impairment credit (11) ------------------- --------- --------- --------- --------- --------- 30.06.06 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Kong Singapore Malaysia Korea Other Asia $million $million $million $million Pacific $million------------------- --------- --------- --------- --------- ---------Gross impairment charge 5 7 1 5 2 Recoveries/provisions no (29) (4) (4) - (3) longer required ------------------- --------- --------- --------- --------- ---------Net individual impairment (24) 3 (3) 5 (1) charge/(credit) Portfolio impairment provision ------------------- --------- --------- --------- --------- ---------Net impairment credit ------------------- --------- --------- --------- --------- --------- 30.06.06 ------------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million ------------------- --------- --------- --------- --------- --------- Gross impairment charge 1 - 13 2 36 Recoveries/provisions no (15) (6) (4) (30) (95) longer required ------------------- --------- --------- --------- --------- --------- Net individual impairment (14) (6) 9 (28) (59) charge/(credit) Portfolio impairment 3 provision ------------------- --------- --------- --------- --------- ---------Net impairment credit (56) ------------------- --------- --------- --------- --------- --------- 31.12.06 ------------------------------------------------------- Asia Pacific ------------------------------------------------------- Hong Kong Singapore Malaysia Korea Other Asia $million $million $million $million Pacific $million------------------- --------- --------- --------- --------- ---------Gross impairment charge 9 2 1 2 1 Recoveries/provisions no (21) (2) (4) (3) (8) longer required ------------------- --------- --------- --------- --------- ---------Net individual impairment (12) - (3) (1) (7) charge/(credit) Portfolio impairment provision ------------------- --------- --------- --------- --------- --------- Net impairment credit ------------------- --------- --------- --------- --------- --------- 31.12.06 ------------------------------------------------------- India Middle East Africa Americas UK Total $million & Other $million & Group $million S Asia Head Office $million $million ------------------- --------- --------- --------- --------- ---------Gross impairment charge 8 10 6 5 44 Recoveries/provisions no (4) (12) (2) (19) (75) longer required ------------------- --------- --------- --------- --------- ---------Net individual impairment 4 (2) 4 (14) (31) charge/(credit) Portfolio impairment (5) provision ------------------- --------- --------- --------- --------- --------- Net impairment credit (36) ------------------- --------- --------- --------- --------- --------- Movement in Group Individual Impairment Provision The following tables set out the movements in the Group's total individualimpairment provisions against loans and advances: 30.06.07 -------------------------------------------------------- Asia Pacific -------------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million-------------------- -------- --------- -------- -------- --------Provisions held at 159 84 92 285 637 1 January 2007 Exchange translation - - 2 1 1 differences Amounts written off (73) (36) (27) (60) (213) Recoveries of acquisition fair - - - (55) - values Recoveries of amounts 15 6 7 - 7 previously written off Discount unwind (2) (4) (2) (13) (12) Other - - - (2) (6) -------- --------- -------- -------- --------New provisions 52 30 48 58 251 Recoveries/provisions (41) (22) (27) (11) (40) no longer required -------- --------- -------- -------- --------Net charge against/(credit) to 11 8 21 47 211 profit -------------------- -------- --------- -------- -------- --------Provisions held at 110 58 93 203 625 30 June 2007 -------------------- -------- --------- -------- -------- -------- 30.06.07 ----------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million --------------------- -------- -------- -------- -------- --------Provisions held at 39 175 68 154 1,693 1 January 2007 Exchange translation 3 1 2 - 10 differences Amounts written off (36) (53) (12) (24) (534) Recoveries of acquisition fair - - - - (55) values Recoveries of amounts 9 10 - 1 55 previously written off Discount unwind (1) - - - (34) Other (2) 3 - - (7) -------- -------- -------- -------- --------New provisions 45 80 11 1 576 Recoveries/provisions (16) (27) (7) (14) (205) no longer required -------- -------- -------- -------- --------Net charge against/(credit) to 29 53 4 (13) 371 profit --------------------- -------- -------- -------- -------- --------Provisions held at 41 189 62 118 1,499 30 June 2007 --------------------- -------- -------- -------- -------- -------- 30.06.06 ----------------------------------------------------- Asia Pacific ----------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million-------------------- -------- --------- -------- -------- --------Provisions held at 279 140 96 361 179 1 January 2006 Exchange translation - 5 3 23 6 differences Amounts written off (37) (51) (24) (21) (185) Recoveries of acquisition fair - - - (42) - values Recoveries of amounts 30 4 6 - 9 previously written off Discount unwind (2) (1) (2) (18) - Other (63) - - - - -------- --------- -------- -------- -------- New provisions 59 36 49 48 203 Recoveries/provisions (63) (15) (30) (19) (14) no longer required -------- --------- -------- -------- --------Net charge against/(credit) to (4) 21 19 29 189 profit -------------------- -------- --------- -------- -------- --------Provisions held at 203 118 98 332 198 30 June 2006 -------------------- -------- --------- -------- -------- -------- 30.06.06 ----------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million --------------------- -------- -------- -------- -------- --------Provisions held at 40 64 60 167 1,386 1 January 2006 Exchange translation (1) (1) (1) 6 40 differences Amounts written off (33) (33) (6) (4) (394) Recoveries of acquisition fair - - - - (42) values Recoveries of amounts 9 6 - 1 65 previously written off Discount unwind - - (1) (1) (25) Other 1 - - 65 3 -------- -------- -------- -------- --------New provisions 37 27 25 2 486 Recoveries/provisions (16) (15) (9) (32) (213) no longer required -------- -------- -------- -------- --------Net charge against/(credit) to 21 12 16 (30) 273 profit --------------------- -------- -------- -------- -------- -------- Provisions held at 37 48 68 204 1,306 30 June 2006 --------------------- -------- -------- -------- -------- -------- 31.12.06* ----------------------------------------------------- Asia Pacific ----------------------------------------------------- Hong Singapore Malaysia Korea Other Kong $million $million $million Asia $million Pacific $million-------------------- -------- --------- -------- -------- --------Provisions held at 203 118 98 332 198 1 July 2006 Exchange translation - 2 3 6 2 differences Amounts written off (82) (57) (27) (43) (218) Recoveries of acquisition fair - - - (64) - values Recoveries of amounts 19 4 5 8 9 previously written off Acquisitions - - - - 475 Discount unwind - (1) (2) (14) (7) Other - - - 14 1 -------- --------- -------- ------- --------New provisions 67 35 45 83 200 Recoveries/provisions (48) (17) (30) (37) (23) no longer required -------- --------- -------- ------- --------Net charge against/(credit) to 19 18 15 46 177 profit -------------------- -------- --------- -------- ------- --------Provisions held at 159 84 92 285 637 31 December 2006 -------------------- -------- --------- -------- ------- -------- 31.12.06* ----------------------------------------------------- India Middle Africa Americas Total $million East & $million UK & Group $million Other Head S Asia Office $million $million --------------------- -------- -------- -------- -------- -------- Provisions held at 37 48 68 204 1,306 1 July 2006 Exchange translation 2 (1) - 3 17 differences Amounts written off (31) (55) (11) (44) (568) Recoveries of acquisition fair - - - - (64) values Recoveries of amounts 8 6 2 2 63 previously written off Acquisitions - 143 - - 618 Discount unwind (1) - (1) (1) (27) Other - - - 2 17 -------- --------- -------- --------- ---------New provisions 39 52 19 7 547 Recoveries/provisions (15) (18) (9) (19) (216) no longer required -------- --------- -------- --------- ---------Net charge against/(credit) to 24 34 10 (12) 331 profit --------------------- -------- --------- -------- --------- --------- Provisions held at 39 175 68 154 1,693 31 December 2006 --------------------- -------- --------- -------- --------- --------- * Amounts have been restated as explained in note 6 on page 41. Country Risk Country Risk is the risk that a counterparty is unable to meet its contractualobligations as a result of adverse economic conditions or actions taken bygovernments in the relevant country. The GRC approves country risk and delegates the setting and management ofcountry limits to the Deputy Group Chief Risk Officer. The business and Country Chief Executive Officers manage exposures within theselimits and policies. Countries designated as higher risk are subject toincreased central monitoring. Cross border assets comprise loans and advances, interest bearing deposits withother banks, trade and other bills, acceptances, amounts receivable underfinance leases, certificates of deposit, and other negotiable paper andinvestment securities, where the counterparty is resident in a country otherthan that where the cross border assets are recorded. Cross border assets alsoinclude exposures to local residents denominated in currencies other than thelocal currency. Cross border exposure to countries in which the Group does not have asignificant presence is predominantly in relation to money market and globalcorporate activity. The business is originated in the Group's key markets, butis conducted with counterparties domiciled in the country against which theexposure is reported. The following table, based on the Bank of England Cross Border Reporting ("CE")guidelines, shows the Group's cross border assets including acceptances wherethey exceed one per cent of the Group's total assets. 30.06.07 30.06.06 ---------------------------------- ---------------------------------- Public Banks Other Total Public Banks Other Total sector $million $million $million sector $million $million $million $million $million ------------------- ------ ------ ------ ------ ------ ------ ------ ------ Hong Kong 5 739 5,424 6,168 1 480 3,846 4,327 USA 1,839 1,496 2,770 6,105 881 540 2,673 4,094 India 5 1,570 3,596 5,171 2 1,028 1,652 2,682 Korea 6 1,209 4,020 5,235 14 1,500 2,854 4,368 Singapore - 1,012 2,923 3,935 - 716 2,132 2,848 Australia - - - - - 2,667 259 2,926 France - - - - 137 2,530 214 2,881 China - - - - 57 1,073 1,322 2,452 ------------------- ------ ------ ------ ------ ------ ------ ------ ------ 31.12.06 ------------------------------------ Public Banks Other Total sector $million $million $million $million ----------------------------------- ------ ------ ------ ------Hong Kong 4 576 4,531 5,111 USA 1,194 1,027 2,895 5,116 India 3 1,335 2,585 3,923 Korea 8 1,029 3,439 4,476 Singapore - 584 3,471 4,055 Australia - 2,794 258 3,052 France 62 3,591 167 3,820 China 94 1,055 1,571 2,720 Dubai - 1,504 1,413 2,917 ----------------------------------- ------ ------ ------ ------ Market Risk The Group recognises market risk as the exposure created by potential changes inmarket prices and rates. The Group is exposed to market risk arising principallyfrom customer driven transactions. Market risk is governed by the GRC, which agrees policies and levels of riskappetite in terms of Value at Risk ("VaR"). The Group Market Risk Committee("GMRC") provides market risk oversight and guidance on policy setting. Policiescover both trading and non-trading books of the Group. The trading book isdefined as per the FSA Handbook BIPRU. Limits by location and portfolio areproposed by the businesses within the terms of agreed policy. Group Market Risk ("GMR") approves the limits within delegated authorities andmonitors exposures against these limits. Additional limits are placed onspecific instruments and currency concentrations where appropriate. Sensitivitymeasures are used in addition to VaR as risk management tools. Option risks arecontrolled through revaluation limits on currency and volatility shifts, limitson volatility risk by currency pair and other variables that determine theoptions' value. VaR models are back tested against actual results to ensure pre-determinedlevels of accuracy are maintained. GMR complements the VaR measurement byregularly stress testing market risk exposures to highlight potential risk thatmay arise from extreme market events that are rare but plausible. Stress testing is an integral part of the market risk management framework andconsiders both historical market events and forward looking scenarios. Ad hocscenarios are also prepared reflecting specific market conditions. A consistentstress testing methodology is applied to trading and non-trading books. Stress scenarios are regularly updated to reflect changes in risk profile andeconomic events. GMRC has responsibility for reviewing stress exposures and,where necessary, enforcing reductions in overall market risk exposure. GRCconsiders stress testing results as part of its supervision of risk appetite. The stress test methodology assumes that management action would be limitedduring a stress event, reflecting the decrease in liquidity that often occurs. Value at Risk The Group uses historic simulation to measure VaR on all market risk relatedactivities. The total VaR for trading and non-trading books combined at 30 June 2007 was$10.0 million (30 June 2006: $9.7 million, 31 December 2006: $10.3 million),with a maximum exposure of $14.0 million. Interest rate related VaR was $9.5 million (30 June 2006: $9.2 million, 31December 2006: $9.3 million) and foreign exchange related VaR was $2.2 million(30 June 2006: $2.9 million, 31 December 2006: $1.5 million). The average total VaR for trading and non-trading books during the first half of2007 was $10.3 million (30 June 2006: $10.7 million, 31 December 2006: $10.6million). VaR for interest rate risk in the non-trading books of the Group totalled $7.9million at 30 June 2007 (30 June 2006: $8.4 million, 31 December 2006: $8.0million). The Group has no significant trading exposure to equity or commodity price risk. The average daily income earned from market risk related activities during thesix months to 30 June 2007 was $7.0 million, compared with $5.5 million duringthe six months to 30 June 2006. Foreign Exchange Exposure The Group's foreign exchange exposures comprise trading and non-trading foreigncurrency translation exposures and structural currency exposures in netinvestments in non-US dollar units. Foreign exchange trading exposures are principally derived from customer driventransactions. The average daily income from foreign exchange trading businessesduring the six months ended 30 June 2007 was $3.0 million (30 June 2006: $2.6million). Interest Rate Exposure The Group's interest rate exposures arise from trading and non-tradingactivities. Structural interest rate risk arises from the differing re-pricingcharacteristics of commercial banking assets and liabilities. The average daily income from interest rate trading businesses during the sixmonths to 30 June 2007 was $4.0 million (30 June 2006: $2.9 million). Derivatives Derivatives are contracts whose characteristics and value derive from underlyingfinancial instruments, interest and exchange rates or indices. They includefutures, forwards, swaps and options transactions in the foreign exchange,credit and interest rate markets. Derivatives are an important risk managementtool for banks and their customers because they can be used to manage the riskof price, interest rate and exchange rate movements. The Group's derivative transactions are principally in instruments where themark-to-market values are readily determinable by reference to independentprices and valuation quotes or by using standard industry pricing models. The Group enters into derivative contracts in the normal course of business tomeet customer requirements and to manage its own exposure to fluctuations ininterest, credit and exchange rates. Derivatives are carried at fair value and shown in the balance sheet as separatetotals of assets and liabilities. Recognition of fair value gains and lossesdepends on whether the derivatives are classified as trading or for hedgingpurposes. The Group applies a future exposure methodology to manage counterparty creditexposure associated with derivative transactions. Hedging In accounting terms, hedges are classified into three types: fair value hedges,where fixed rates of interest or foreign exchange are exchanged for floatingrates; cash flow hedges, where variable rates of interest or foreign exchangeare exchanged for fixed rates, and hedges of net investments in overseasoperations translated to the parent company's functional currency, US dollars. The Group uses futures, forwards, swaps and options transactions in the foreignexchange and interest rate markets to hedge risk. The Group occasionally hedges the value of its foreign currency denominatedinvestments in subsidiaries and branches. Hedges may be taken where there is arisk of a significant exchange rate movement but, in general, managementbelieves that the Group's reserves are sufficient to absorb any foreseeableadverse currency depreciation. The effect of exchange rate movements on the capital risk asset ratio ismitigated by the fact that both the net asset value of these investments and therisk weighted value of assets and contingent liabilities follow substantiallythe same exchange rate movements. Liquidity Risk The Group defines liquidity risk as the risk that the bank either does not havesufficient financial resources available to meet all its obligations andcommitments as they fall due, or can access them only at excessive cost. It is the policy of the Group to maintain adequate liquidity at all times, inall geographical locations and for all currencies. Hence the Group aims to be ina position to meet all obligations, to repay depositors, to fulfil commitmentsto lend and to meet any other commitments. Liquidity risk management is governed by GALCO, which is chaired by the GroupFinance Director. GALCO is responsible for both statutory and prudentialliquidity. These responsibilities are managed through the provision ofauthorities, policies and procedures that are co-ordinated by the LiquidityManagement Committee ("LMC") with country Asset and Liability Committees("ALCO"). Due to the diversified nature of the Group's business, the Group's policy isthat liquidity is more effectively managed locally, in-country. Each ALCO isresponsible for ensuring that the country is self-sufficient and is able to meetall its obligations to make payments as they fall due. The ALCO has primaryresponsibility for compliance with regulations and Group policy and maintaininga country liquidity crisis contingency plan. A substantial portion of the Group's assets are funded by customer deposits madeup of current and savings accounts and other deposits. These customer deposits,which are widely diversified by type and maturity, represent a stable source offunds. Lending is normally funded by liabilities in the same currency. The Group also maintains significant levels of marketable securities either forcompliance with local statutory requirements or as prudential investments ofsurplus funds. The GALCO also oversees the structural foreign exchange and interest rateexposures that arise within the Group. These responsibilities are managedthrough the provision of authorities, policies and procedures that areco-ordinated by the Capital Management Committee. Policies and guidelines forthe maintenance of capital ratio levels are approved by GALCO. Compliance withGroup ratios is monitored centrally by Group Corporate Treasury, while localrequirements are monitored by the local ALCO. Operational Risk Operational risk is the risk of direct or indirect loss due to an event oraction resulting from the failure of internal processes, people, and systems, orfrom external events. The Group seeks to ensure that key operational risks aremanaged in a timely and effective manner through a framework of policies,procedures and tools to identify, assess, monitor, control, and report suchrisks. The Group Operational Risk Committee ("GORC") has been established to superviseand direct the management of operational risks across the Group. GORC is alsoresponsible for ensuring adequate and appropriate policies and procedures are inplace for the identification, assessment, monitoring, control and reporting ofoperational risks. A Group operational risk function, independent from the businesses isresponsible for establishing and maintaining the overall operational riskframework, and for monitoring the Group's key operational risk exposures. Thisunit is supported by Wholesale Banking and Consumer Banking Operational Riskunits. These units are responsible for ensuring compliance with policies andprocedures in the business, monitoring key operational risk exposures, and theprovision of guidance to the respective business areas on operational risk. Compliance with operational risk policies and procedures is the responsibilityof all managers. Every country operates a Country Operational Risk Group("CORG"). The CORG has in-country governance responsibility for ensuring that anappropriate and robust risk management framework is in place to monitor andmanage operational risk. Compliance and Regulatory Risk Compliance and Regulatory risk includes the risk of non-compliance withregulatory requirements in a country in which the Group operates. The GroupCompliance and Regulatory Risk function is responsible for establishing andmaintaining an appropriate framework of Group compliance policies andprocedures. Compliance with such policies and procedures is the responsibilityof all managers. Legal Risk Legal risk is the risk of unexpected loss, including reputational loss, arisingfrom defective transactions or contracts, claims being made or some other eventresulting in a liability or other loss for the Group, failure to protect thetitle to and ability to control the rights to assets of the Group (includingintellectual property rights), changes in the law, or jurisdictional risk. TheGroup manages legal risk through the Group Legal Risk Committee, Legal Riskpolicies and procedures and effective use of its internal and external lawyers. Reputational Risk Reputational risk is any material adverse effect on the relations between theGroup and any one of its significant stakeholders. It is Group policy that theprotection of the Bank's reputation should take priority over all activitiesincluding revenue generation at all times. Reputational risk is not a primary risk, but will arise from the failure toeffectively mitigate one or more of country, credit, liquidity, market, legaland regulatory and operational risk It may also arise from the failure to comply with Social, Environmental andEthical standards. All staff are responsible for day to day identification andmanagement of reputational risk. From an organisational perspective the Group manages reputational risk throughthe Group Reputational Risk and Responsibility Committee ("GRRRC") and CountryManagement Committees. Wholesale Banking has a specialised Responsibility andReputational Risk Committee which reviews individual transactions. In ConsumerBanking, potential reputational risks resulting from transactions or productsare reviewed by the Product and Reputational Risk Committee. Issues are thenescalated to the GRRRC. A critical element of the role of the GRRRC is to act as a radar for the Groupin relation to the identification of emerging or thematic risks. The GRRRC alsoensures that effective risk monitoring is in place for Reputational Risk andreviews mitigation plans for significant risks. At a country level, the Country CEO is responsible for the Group's reputation intheir market. The Country CEO and their Management Committee must actively: • promote awareness and application of the Group's policy and procedures regarding reputational risk; • encourage business and functions to take account of the Group's reputation in all decision making, including dealings with customers and suppliers; • implement effective functioning of the in country reporting system to ensure their management committee is alerted of all potential issues; and • promote effective, proactive stakeholder management. Monitoring Group Internal Audit is a separate function that reports to the Group ChiefExecutive and the Audit and Risk Committee. Group Internal Audit providesindependent confirmation that Group and business standards, policies andprocedures are being complied with. Where necessary, corrective action isrecommended. STANDARD CHARTERED PLC - CAPITAL CAPITAL The GALCO targets Tier 1 and Total capital ratios within a range of 7-9 per centand 12-14 per cent respectively. The ratios at 30 June 2007 are higher than thisrange. This reflects the strong pace of organic growth and the deployment ofcapital across the Group. 30.06.07 30.06.06 31.12.06* $million $million $million ----------------------------------- -------- -------- --------Tier 1 capital Called up ordinary share capital and preference shares 8,544 6,067 7,771 Eligible reserves 10,367 7,510 8,937 Minority interests 227 165 211 Innovative Tier 1 securities 2,303 2,186 2,262 Less: Restriction on innovative Tier 1 securities - (492) (343) Goodwill and other intangible assets (6,217) (4,459) (6,179) Unconsolidated associated companies 253 226 229 Other regulatory adjustments (2) 90 (94) ----------------------------------- -------- -------- --------Total Tier 1 capital 15,475 11,293 12,794 ----------------------------------- -------- -------- --------Tier 2 capital Eligible revaluation reserves 522 191 509 Portfolio impairment provision 513 455 525 Qualifying subordinated liabilities: Perpetual subordinated debt 3,415 3,260 3,368 Other eligible subordinated debt 6,382 4,325 5,387 Less: Amortisation of qualifying subordinated (863) (496) (518) liabilities Restricted innovative Tier 1 securities - 492 343 ----------------------------------- -------- -------- --------Total Tier 2 capital 9,969 8,227 9,614 ----------------------------------- -------- -------- --------Investments in other banks (148) (149) (211) Other deductions (470) (207) (320) ----------------------------------- -------- -------- --------Total capital base 24,826 19,164 21,877 ----------------------------------- -------- -------- --------Banking book Risk weighted assets 123,007 104,466 120,028 Risk weighted contingents 22,003 21,477 21,106 ----------------------------------- -------- -------- -------- 145,010 125,943 141,134 Trading book Market risks 7,820 4,249 5,834 Counterparty/settlement risks 6,416 4,906 6,475 ----------------------------------- -------- -------- --------Total risk weighted assets and contingents 159,246 135,098 153,443 ----------------------------------- -------- -------- --------Capital ratios Tier 1 capital 9.7% 8.4% 8.3% ----------------------------------- -------- -------- --------Total capital 15.6% 14.2% 14.3% ----------------------------------- -------- -------- -------- * Amounts have been restated as explained in note 6 on page 41. Condensed Consolidated Interim Income Statement For the six months ended 30 June 2007 Notes 6 months 6 months 6 months ended ended ended 30.06.07 30.06.06 31.12.06 $million $million $million-------------------------- -------- -------- -------- --------Interest income 7,473 5,970 7,017 Interest expense (4,521) (3,460) (4,199) -------------------------- -------- -------- -------- --------Net interest income 2,952 2,510 2,818 -------- -------- --------Fees and commission income 1,478 1,103 1,172 Fees and commission expense (250) (209) (185) Net trading income 649 531 389 Other operating income 434 177 314 -------- -------- -------- 2,311 1,602 1,690 -------------------------- -------- -------- -------- --------Operating income 5,263 4,112 4,508 -------- -------- --------Staff costs (1,884) (1,381) (1,532) Premises costs (274) (206) (238) General administrative expenses (610) (519) (652) Depreciation and amortisation (150) (119) (149) -------- -------- --------Operating expenses (2,918) (2,225) (2,571) -------------------------- -------- -------- -------- --------Operating profit before impairment 2,345 1,887 1,937 losses and taxation Impairment losses on loans and advances (361) (349) (280) and other credit risk provisions Other impairment (3) (8) (7) (Loss)/profit from associates (1) (3) 1 -------------------------- -------- -------- -------- --------Profit before taxation 1,980 1,527 1,651 Taxation 2 (533) (395) (429) -------------------------- -------- -------- -------- --------Profit for the period 1,447 1,132 1,222 -------------------------- -------- -------- -------- -------- Profit attributable to: Minority interests 48 29 47 Parent company's shareholders 1,399 1,103 1,175 -------------------------- -------- -------- -------- --------Profit for the period 1,447 1,132 1,222 -------------------------- -------- -------- -------- -------- Earnings per share: Basic earnings per ordinary share 4 98.5c 82.8c 86.9c -------------------------- -------- -------- -------- --------Diluted earnings per ordinary share 4 97.1c 82.2c 86.0c -------------------------- -------- -------- -------- -------- Dividends per ordinary share: Interim dividend declared 3 23.12c - - Interim dividend paid 3 - 20.83c - Final dividend paid 3 - - 50.21c -------------------------- -------- -------- -------- --------Total interim dividend payable $324m - - Total interim dividend (paid 11 October - $277m - 2006) Total final dividend (paid 11 May 2007) - - $695m -------------------------- -------- -------- -------- -------- Condensed Consolidated Interim Balance Sheet As at 30 June 2007 30.06.07 30.06.06 31.12.06* $million $million $million ---------------------------- ------- ------- -------Assets Cash and balances at central banks 8,991 11,813 7,698 Financial assets held at fair value 19,344 13,082 15,715 through profit or loss Derivative financial instruments 18,441 12,721 13,154 Loans and advances to banks 21,108 16,750 19,724 Loans and advances to customers 151,953 119,550 139,307 Investment securities 52,230 46,037 49,497 Interests in associates 257 206 218 Goodwill and intangible assets 6,217 4,459 6,179 Property, plant and equipment 2,302 1,767 2,169 Deferred tax assets 522 492 519 Other assets 11,890 7,653 8,601 Prepayments and accrued income 3,571 3,618 3,268 ---------------------------- ------- ------- -------Total assets 296,826 238,148 266,049 ---------------------------- ------- ------- ------- Liabilities Deposits by banks 26,846 21,994 26,233 Customer accounts 160,242 130,176 147,382 Financial liabilities held at fair value 13,117 8,420 9,969 through profit or loss Derivative financial instruments 19,235 13,390 13,703 Debt securities in issue 27,254 24,953 23,514 Current tax liabilities 131 410 68 Other liabilities 13,733 11,198 11,357 Accruals and deferred income 3,008 2,430 3,210 Provisions for liabilities and charges 42 56 45 Retirement benefit obligations 356 466 472 Subordinated liabilities and other 13,279 10,805 12,699 borrowed funds ---------------------------- ------- ------- ------- Total liabilities 277,243 224,298 248,652 ---------------------------- ------- ------- ------- Equity Share capital 701 667 692 Reserves 18,324 12,683 16,161 ---------------------------- ------- ------- -------Total parent company shareholders' 19,025 13,350 16,853 equity Minority interests 558 500 544 ---------------------------- ------- ------- -------Total equity 19,583 13,850 17,397 ---------------------------- ------- ------- -------Total equity and liabilities 296,826 238,148 266,049 ---------------------------- ------- ------- ------- * Amounts have been restated as explained in note 6. Condensed Consolidated Interim Statement of Recognised Income and Expense For the six months ended 30 June 2007 6 months 6 months 6 months ended ended ended 30.06.07 30.06.06 31.12.06 $million $million $million--------------------------- ------- -------- ------- Exchange differences on translation of 257 364 306 foreign operations Actuarial gains on retirement benefits 149 68 36 Available-for-sale investments: Valuation gains taken to equity 197 134 548 Transferred to income on disposal/ (227) (52) (138) redemption Cash flow hedges: Gains taken to equity 6 45 34 (Gains)/losses transferred to income for (28) 6 14 the period Taxation on items recognised directly in (38) (56) (75) equity Other 7 3 4 --------------------------- ------- -------- -------Net income recognised in equity 323 512 729 Profit for the period 1,447 1,132 1,222 --------------------------- ------- -------- -------Total recognised income and expense for 1,770 1,644 1,951 the period --------------------------- ------- -------- ------- Attributable to: Parent company's shareholders 1,681 1,615 1,869 Minority interests 89 29 82 --------------------------- ------- -------- ------- 1,770 1,644 1,951 --------------------------- ------- -------- ------- Condensed Consolidated Interim Cash Flow Statement For the six months ended 30 June 2007 6 months 6 months 6 months ended ended ended 30.06.07 30.06.06 31.12.06 $million $million $million ----------------------------------- ------- ------- -------Cash flow from operating activities Profit before taxation 1,980 1,527 1,651 Adjustment for items not involving cash flow or shown separately: Depreciation and amortisation 150 119 149 Gain on disposal of property, plant and equipment (1) (2) (14) Gain on disposal of investment securities (229) (52) (138) Movement in fair value hedges on available-for-sale (18) (3) (2) assets Amortisation of discounts and premiums of investment (163) (21) (236) securities Impairment losses 361 349 280 Other impairment 3 8 7 Assets written off, net of recoveries (534) (371) (569) (Decrease)/increase in accruals and deferred income (228) 47 739 (Increase)/decrease in prepayments and accrued income (2,068) (1,282) 381 Net increase/(decrease) in derivatives mark-to-market 263 152 (107) adjustment Interest accrued on subordinated loan capital 375 285 358 UK and overseas taxes paid (521) (369) (534) Net increase in trading treasury bills and other (27) (460) (184) eligible bills Net increase in loans and advances to banks and (11,049) (4,328) (7,336) customers Net increase in deposits from banks, customer accounts 17,477 10,019 6,895 and debt securities in issue Net increase in trading debt securities and equity (2,179) (2,127) (1,488) shares Net increase/(decrease) in other accounts (17) (251) 5,330 ----------------------------------- ------- ------- -------Net cash from operating activities 3,575 3,240 5,182 ----------------------------------- ------- ------- -------Net cash flows from investing activities Purchase of property, plant and equipment (203) (112) (133) Acquisition of investment in subsidiaries, net of cash (24) - (937) acquired Acquisition of treasury bills and other eligible bills (10,175) (12,201) (11,175) Acquisition of debt securities (25,241) (24,471) (22,940) Acquisition of equity shares (215) (109) (219) Disposal of property, plant and equipment 14 1 39 Disposal and maturity of treasury bills and other 10,648 10,853 11,797 eligible bills Disposal and maturity of debt securities 22,708 18,872 22,037 Disposal of equity shares 281 46 291 ----------------------------------- ------- ------- -------Net cash used in investing activities (2,207) (7,121) (1,240) ----------------------------------- ------- ------- -------Net cash flows from financing activities Issue of ordinary share capital and preference shares 811 3 1,993 Purchase of own shares (10) (9) - Net inflow from exercise of share options 21 105 53 Interest paid on subordinated loan capital (475) (374) (188) Gross proceeds from issue of subordinated loan capital 904 550 1,041 Repayment of subordinated loan capital (149) (340) (50) Dividends and payments to minority interests and (61) (43) (37) preference shareholders Dividends paid to ordinary shareholders (344) (343) (153) ----------------------------------- ------- ------- -------Net cash from/(used in) financing activities 697 (451) 2,659 ----------------------------------- ------- ------- -------Net increase/(decrease) in cash and cash equivalents 2,065 (4,332) 6,601 Cash and cash equivalents at beginning of period 38,161 35,226 31,387 Effect of exchange rate changes on cash and cash 81 493 173 equivalents ------- ------- ------------------------------------------ Cash and cash equivalents at end of period (note 5) 40,307 31,387 38,161 ----------------------------------- ------- ------- ------- STANDARD CHARTERED PLC - NOTES 1. Basis of preparation The Group condensed interim financial statements consolidate those of theCompany and its subsidiaries (together referred to as the "Group"), equityaccount the Group's interest in associates and proportionately consolidateinterests in jointly controlled entities. These condensed consolidated interim financial statements have been prepared inaccordance with IAS 34 "Interim Financial Reporting" as adopted by the EU. Theydo not include all of the information required for full annual financialstatements, and should be read in conjunction with the consolidated financialstatements of the Group as at and for the year ended 31 December 2006. These condensed consolidated interim financial statements were approved by theBoard of Directors on 7 August 2007. Except as noted below, the accounting polices applied by the Group in thesecondensed consolidated interim financial statements are the same as thoseapplied by the Group in its consolidated financial statements as at and for theyear ended 31 December 2006. On 1 January 2007 the Group retrospectively adopted: • IFRIC 7 "Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies"; • IFRIC 8 "Scope of IFRS2"; • IFRIC 9 "Reassessment of Embedded Derivatives"; and • IFRIC 10 "Interim Financial Reporting and Impairment" none of which had a material impact on the Group's consolidated financial statements. The Group has also adopted IFRS 7 "Financial Instruments: Disclosure" andAmendment to IAS 1 "Presentation of Financial Statements - Capital Disclosures"from 1 January 2007 and will present the disclosures required therein in theconsolidated financial statements of the Group as at and for the year ended31 December 2007. The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense.Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accountingpolices and key sources of uncertainty were the same as those that applied tothe consolidated financial statements as at and for the year ended 31 December2006. The balance sheet as at 31 December 2006 has been restated as explained in note6 on page 41, to reflect the revised fair values of assets and liabilitiesacquired on the acquisitions of Union and HIB. 2. Taxation Analysis of taxation charge in the period: 6 months 6 months 6 months ended ended ended 30.06.07 30.06.06 31.12.06 $million $million $millionThe charge for taxation based upon the profits for the period comprises: United Kingdom corporation tax at 30 per cent (30 June 2006, 31 December 2006: 30 per cent): Current tax on income for the period 161 93 136 Adjustments in respect of prior periods 35 (114) (130) Double taxation relief (161) (88) (120) Foreign tax: Current tax on income for the period 549 505 363 Adjustments in respect of prior periods 28 41 (8) Total current tax 612 437 241 Deferred tax: Origination/reversal of temporary differences (79) (42) 188 Tax on profits on ordinary activities 533 395 429 Effective tax rate 26.9% 25.9% 25.9% Overseas taxation includes taxation on Hong Kong profits of $93 million (30 June2006: $115 million, 31 December 2006: $51 million) provided at a rate of 17.5per cent (30 June 2006: 17.5 per cent, 31 December 2006: 17.5 per cent) on theprofits assessable in Hong Kong. 3. Dividends Ordinary equity shares Dividends are recorded in the period in which they are declared and, in respectof the final dividend, have been approved by the shareholders. The 2006 interimdividend of 20.83 cents per ordinary share was paid to eligible shareholders on11 October 2006 and the final dividend of 50.21 cents per ordinary share waspaid to eligible shareholders on 11 May 2007. The 2007 interim dividend of 23.12 cents per ordinary share will be paid ineither sterling, Hong Kong dollars or US dollars on 10 October 2007 toshareholders on the UK register of members at the close of business on 17 August2007 and to shareholders on the Hong Kong branch register of members at theopening of business in Hong Kong (9:00am Hong Kong time) on 17 August 2007. It is intended that shareholders will be able to elect to receive ordinaryshares credited as fully paid instead of all or part of the interim cashdividend. Details of the dividend arrangements will be sent to shareholders onor around 3 September 2007. Preference Shares 6 months 6 months 6 months ended ended ended 30.06.07 30.06.06 31.12.06 $million $million $millionNon-cumulative irredeemable preference shares: 7 3/8 per cent preference shares of £1 each* 7 7 7 8 1/4 per cent preference shares of £1 each* 8 7 8 Non-cumulative redeemable preference shares: 8.9 per cent preference shares of $5 each - 15 7 6.409 per cent preference shares of $5 each 24 - 3 7.014 per cent preference shares of $5 each 5 - - * Instruments classified as liabilities with dividends recorded as interestexpense 4. Earnings per Ordinary Share 30.06.07 Profit* Weighted Per $million average share number of amount shares cents ('000) Basic earnings per ordinary share 1,370 1,391,128 98.5 Effect of dilutive potential ordinary shares: Options - 19,136 Diluted earnings per share 1,370 1,410,264 97.1 30.06.06 31.12.06 -------------------------------- ------------------------------- Profit* Weighted Per Profit* Weighted Per $million average share $million average share number of amount number of amount shares cents shares cents ('000) ('000) Basic earnings per 1,088 1,314,467 82.8 1,165 1,340,556 86.9 ordinary share Effect of dilutive potential ordinary shares: Options - 9,666 - 14,338 Diluted earnings 1,088 1,324,133 82.2 1,165 1,354,894 86.0 per share Normalised earnings per ordinary share The Group measures earnings per share on a normalised basis. This differs fromearnings defined in IAS 33 "Earnings per share". The table below provides areconciliation. 30.06.07 30.06.06 31.12.06 $million $million $millionProfit attributable to ordinary shareholders* 1,370 1,088 1,165 Amortisation of intangible assets arising on business 35 20 32 combinations Profit on sale of property, plant and equipment - - (16) Premium and costs paid on repurchase of subordinated debt - 4 -Gain on effective part disposal of Pakistan branches - - (17) Profit on sale of subsidiary (4) - -Incorporation costs in China 8 - 4 Tax on normalised items (8) (7) 2 Normalised earnings 1,401 1,105 1,170 Normalised earnings per ordinary share (cents) 100.7 84.1 87.3 * The profit amounts represent the profit attributable to ordinary shareholders,i.e. after the deduction of dividends payable to the holders of thenon-cumulative redeemable preference shares (see note 3). There were no ordinary shares issued after the balance sheet date that wouldhave significantly affected the number of ordinary shares used in the abovecalculations had they been issued prior to the end of the balance sheet period. 5. Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents comprisesof the following balances with less than three months maturity from the date ofacquisition. Restricted balances comprise minimum balances to be held at centralbanks. 30.06.07 30.06.06 31.12.06 $million $million $million Cash and balances with central banks 8,991 11,813 7,698 Less restricted balances (4,694) (7,194) (3,958) Treasury bills and other eligible bills 7,028 6,222 6,233 Loans and advances to banks 18,291 12,627 16,084 Debt securities 10,691 7,919 12,104 Total 40,307 31,387 38,161 6. Restatement of prior periods In the consolidated financial statements as at 31 December 2006, the fair valueamounts in relation to the acquisitions of Union and HIB contained someprovisional balances. During the period to 30 June 2007, certain of thesebalances have been revised. In accordance with IFRS 3 "Business Combinations",the adjustments to the provisional balances have been made as at the date ofacquisition and the 2006 balance sheet amounts restated, with a correspondingadjustment to goodwill, increasing goodwill on acquisition relating to Union andHIB respectively by $6 million to $412 million and by $27 million to $975million. The adjustments primarily relate to a reassessment of the value ofcertain loan assets and investment debt securities, together with a reduction indeferred tax assets following a reassessment of their recoverability. The incomestatement for 2006 has not been restated, because any effect is not material. As Adjustment Adjustment Restated reported to Union to HIB at at $million $million 31.12.06 31.12.06 $million $million Loans and advances to customers 139,330 (9) (14) 139,307 Investment securities 49,487 - 10 49,497 Goodwill and intangible assets 6,146 6 27 6,179 Property, plant and equipment 2,168 - 1 2,169 Deferred tax assets 538 3 (22) 519 Other liabilities 11,355 - 2 11,357 Union forms part of the Middle East and Other South Asia geographic segment andHIB forms part of the Other Asia Pacific geographic segment. 7. Interim Report and Statutory Accounts The information in this interim statement is unaudited and does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985.This document was approved by the Board on 7 August 2007. The comparativefigures for the financial year ended 31 December 2006 are not the company'sstatutory accounts for that financial year. Those accounts have been reported onby the company's auditors and delivered to the registrar of companies. Thereport of the auditors was (i) unqualified, (ii) did not include a reference toany matters to which the auditors drew attention by way of emphasis withoutqualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. This news release does not constitute the unaudited Interim financialinformation which is contained in the interim report. The unaudited Interimfinancial information has been reviewed by the Company's auditor, KPMG AuditPlc, in accordance with the guidance contained in Bulletin 1999/4: Review ofinterim financial information issued by the Auditing Practices Board. On thebasis of its review, KPMG Audit Plc is not aware of any material modificationsthat should be made to the unaudited interim financial information as presentedfor the six months ended 30 June 2007 in the interim report. The fullindependent review report is included in the interim report. 8. Corporate Governance The directors confirm that, throughout the period, the Company has complied withthe code provisions set out in Appendix 14 of the Listing Rules of the Hong KongStock Exchange. The directors also confirm that the announcement of theseresults has been reviewed by the Company's Audit and Risk Committee. The Company confirms that it has adopted a code of conduct regarding securitiestransactions by directors on terms no less exacting than required by Appendix 10of the Listing Rules of the Hong Kong Stock Exchange, and that the directors ofthe Company have complied with this code of conduct throughout the period. 9. Purchase of Listed Securities Bedell Cristin Trustees Limited is trustee of both the 1995 Employees' ShareOwnership Plan Trust ("the 1995 trust"), which is an employee benefit trust usedin conjunction with some of the Group's employee share schemes, and the StandardChartered 2004 Employee Benefit Trust ("the 2004 trust") which is an employeebenefit trust used in conjunction with the Group's deferred bonus plan. Thetrustee has agreed to satisfy a number of awards made under the employee shareschemes and the deferred bonus plan through the relevant employee benefit trust.As part of these arrangements Group companies fund, from time to time, thetrusts to enable the trustee to acquire shares to satisfy these awards. Allshares have been acquired through the London Stock Exchange. The 1995 trust has not acquired any shares in the period ended 30 June 2007 (30June 2006: nil, 31 December 2006: nil). At 30 June 2007, the 1995 trust held162,071 (30 June 2006: 5,104,262, 31 December 2006: 2,148,874) StandardChartered PLC shares, of which 162,071 (30 June 2006: 5,104,262, 31 December2006: 2,148,874) have vested unconditionally. The shares are held in a pool forthe benefit of participants under the Group's Restricted Share Scheme,Performance Share Plan and Executive Shares Option Schemes. These shares werefully funded by the Group. For the period ended 30 June 2007, the 2004 trust has acquired, at market value,351,340 (30 June 2006: 321,242, 31 December 2006: nil) Standard Chartered PLCshares for an aggregate price of $10 million (30 June 2006: $9 million,31 December 2006: $nil million). These shares are held in a pool for the benefitof participants under the Group's deferred bonus plan. The purchase of theseshares has been fully funded by the Group. At 30 June 2007, the 2004 trust held377,270 (30 June 2006: 311,575, 31 December 2006: 311,157) Standard CharteredPLC shares, of which none (30 June 2006: none, 31 December 2006: none) havevested unconditionally. Except as disclosed above, neither the Company nor any of its subsidiaries hasbought, sold or redeemed any security of the company listed on The StockExchange of Hong Kong Limited during the period ended 30 June 2007. STANDARD CHARTERED PLC - ADDITIONAL INFORMATION Financial Calendar Ex-dividend date 15 August 2007Record date 17 August 2007Expected posting to shareholders of 2007 Interim Report 3 September 2007Payment date - interim dividend on ordinary shares 10 October 2007 Copies of this statement are available from: Investor Relations, Standard Chartered PLC, 1 Aldermanbury Square, London, EC2V7SB or from our website on http://investors.standardchartered.com For further information please contact: Romy Murray, Group Head of Corporate Affairs+44 20 7280 6378 Steve Atkinson, Head of Investor Relations+44 20 7280 7245 Ruth Naderer, Head of Investor Relations, Asia Pacific+852 2820 3075 Tim Baxter, Acting Head of Media Relations+44 20 7457 5573 The following information will be available on our website • A live webcast of the interim results analyst presentation (available from 10.45 am UK time) • The archived webcast and Q/A session of analyst presentation in London (available 1.00 pm UK time) • Interviews with Peter Sands, Group Chief Executive and Richard Meddings, Group Finance Director (available from 9.15 am UK time) • Slides for the Group's presentations (available after 10.45 am UK time) Images of Standard Chartered are available for the media athttp://www.standardchartered.com/global/mc/plib/directors_p01.html Information regarding the Group's commitment to Sustainability is available athttp://www.standardchartered.com/sustainability The 2007 Interim Report will be made available on the website of the StockExchange of Hong Kong Limited and on our website:http://investors.standardchartered.com as soon as is practicable. Forward looking statements It is possible that this document could or may contain forward-lookingstatements that are based on current expectations or beliefs, as well asassumptions about future events. These forward-looking statements can beidentified by the fact that they do not relate only to historical or currentfacts. Forward-looking statements often use words such as anticipate, target,expect, estimate, intend, plan, goal, believe, will, may, should, would, couldor other words of similar meaning. Undue reliance should not be placed on anysuch statements because, by their very nature, they are subject to known andunknown risks and uncertainties and can be affected by other factors that couldcause actual results, and the Group's plans and objectives, to differ materiallyfrom those expressed or implied in the forward-looking statements. There are several factors which could cause actual results to differ materiallyfrom those expressed or implied in forward looking statements. Among the factorsthat could cause actual results to differ materially from those described in theforward looking statements are changes in the global, political, economic,business, competitive, market and regulatory forces, future exchange andinterest rates, changes in tax rates and future business combinations ordispositions. The Group undertakes no obligation to revise or update any forward lookingstatement contained within this document, regardless of whether those statementsare affected as a result of new information, future events or otherwise. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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