10th May 2005 09:52
Standard Chartered PLC10 May 2005 Announcement by Korea First Bank of its Q1 2005 Results On 15 April 2005, Standard Chartered PLC ("the company") announced that it hadcompleted the acquisition of Korea First Bank. The following is a copy of an announcement released today by Korea First Bank,reporting their results for the first quarter ended 31 March 2005. The Company is issuing this announcement for information purposes only. "Korea First Bank reports 1Q net income of KRW42 billion compared with KRW28 billion in 1Q 2004 • Income before tax increases 33.2% to KRW53.4 billion in 1Q 2005 from KRW40.1 billion in 1Q 2004 • Following acquisition by Standard Chartered long term credit rating improves three notches to A- by S&P and two notches to A by Fitch • NPL ratio of 1.37% at March 31, 2005 • Strong BIS capital ratio of 11.73% • Record pricing for EUR500 million MBS issuance Korea First Bank today announced net income of W42.0 billion for 1Q 2005, animprovement of W14.0 billion, or 50%, from 1Q 2004. The 1Q 2005 results reflectcontinued improvement in the credit environment in Korea with the totalprovision for credit losses improving W35.2 billion, driving an increase in netoperating income of KRW22.3 billion or 55.3%. Average interest earning assets grew KRW3.7 trillion to KRW39.2 trillion in 1Q2005 from KRW35.5 trillion in 1Q 2004 driven by continued growth in mortgagelending which grew KRW4.2 trillion, or 35% to KRW16.0 trillion (growth analysisexcludes the average balance of securitized assets of KRW1.7 trillion which wereoriginated and are managed by the Bank). Net interest margin decreased to 2.11%,from 2.38% in 1Q 2004, due to the decreasing interest rate environment coupledwith growth of lower risk mortgage lending. Total revenue of KRW252.7 billion in1Q 2005 decreased compared with KRW261.7 billion in 1Q 2004 as a 10.3% increasein average interest earning assets was offset by a 27 basis point decrease inthe net interest margin. Net fee income decreased KRW2.5 billion, or 4.9%, to KRW48.7 billion in 1Q 2005as a result of a provision for potential claims which are netted against feeincome. There were increases in servicing fees, foreign exchange income andguarantee fees; however, card fees decreased due to a reduction in card spendingbrought about by the Bank's prudent approach to unsecured lending in a marketwhich is still recuperating from the credit card crisis. Operating expensesincreased by a modest KRW4.0 billion, or 2.6%, to KRW 156.1 billion in 1Q 2005and provisions for credit losses more than halved to KRW34.1 billion primarilyfrom improvements in card receivables and unsecured consumer loans. Incomebefore tax increased by KRW13.3 billion, or 33.2%, to KRW53.4 billion in 1Q 2005after the effect of non operating expenses which included losses on the sales ofNPLs of KRW7.9 billion. The Bank's NPL sales program facilitates the sale ofunsecured consumer NPLs maintaining the Bank's clean balance sheet. The first quarter saw Standard Chartered Bank acquire KFB after its successfulturnaround and return to profitability. Standard Chartered has demonstrated itscommitment to Korea with the investment in KFB being both the largest foreigndirect investment into the Korean financial services industry as well as thebiggest acquisition in the history of Standard Chartered Bank. "We will buildour growth with consumers and corporations on strong relationships, productinnovation and service excellence. Korean companies will be able to use ournetwork in 56 countries around the world benefiting from our long presence andin depth knowledge of the environments. Standard Chartered's success is based onbalanced wholesale and consumer banking growth. We will bring our business modelto our Korean operations as well," said John Filmeridis, the Bank's newPresident and Chief Executive Officer. Since the acquisition, KFB's long termcredit rating has improved three notches to A- by Standard & Poor's and twonotches to A by Fitch. KFB remains one of the best capitalized financial institutions in Korea with atier 1 capital ratio of 7.22% and a total capital adequacy ratio of 11.73% atMarch 31, 2005. These levels are appreciably higher than the regulatoryrequirements for well-capitalized institutions, notwithstanding the strong assetgrowth during the year. The maintenance of appropriate levels of capital is amanagement priority as capital provides a solid foundation for the futureanticipated asset growth and promotes depositor and investor confidence. During the past year KFB has continued its focus on mortgage lendingconcentrating on product innovation with a view of meeting customer needs. Thiscontinued focus and innovation has resulted in further growth in total mortgageloans which increased by 45% to KRW18.1 trillion as of March 31, 2005 (includingloans securitized in the Bank's four mortgage-backed securities issuances). Thisgrowth has built a strong foundation for growth in profitability into the futureand has also provided the basis of the Bank's mortgage backed securities ("MBS")issuance program. In its MBS issuance program the Bank utilizes its mortgageassets to generate funding at competitive rates while at the same timecontributing to effective asset liability management. During the past quarterthe Bank completed its fourth mortgage backed securities issuance pricing EUR500million of AAA rated, MBIA wrapped securities at Euribor+13bps comparing veryfavourably to European, UK and Australian issues. Korea First Bank is the nation's 7th largest bank with total assets of KRW44.1trillion at March 31, 2005. It has over 3.5 million customers served through itsnationwide network of 406 branches and 3 overseas units. Key financial indicators: Banking A/C Better / (Worse)Won in Billions / % 1Q 2005 1Q 2004 * Amt % Net interest income 204.0 210.4 (6.4) (3.0)Net fees and commissions 48.7 51.2 (2.5) (4.9)Total revenue 252.7 261.7 (9.0) (3.4)Operating expense 156.1 152.1 (4.0) (2.6)Operating margin 96.6 109.6 (13.0) (11.9)Provision for credit losses 34.1 69.3 35.2 50.8Net operating income 62.6 40.3 22.3 55.3Net non-operating income/(expense) (9.1) (0.2) (8.9) N/MIncome before income tax 53.4 40.1 13.3 33.2Current income tax expense 19.5 0.2 (19.3) N/MDeferred income tax expense/(benefit) (8.0) 11.9 19.9 167.2Income tax expense/(benefit) 11.5 12.1 0.6 5.0Net income 42.0 28.0 14.0 50.0 * Certain reclassifications and changes in statement format have been made tothe 1Q 2004 financial statements to conform with Korean GAAP and internal policychanges as detailed in the 2004 annual report and accounts." For further information please contact: Cindy Tang, Head of Media Relations +44 20 7280 6170 Romy Murray, Head of Investor Relations +44 20 7280 7245 Betty Ku, Head of Corporate Affairs, Hong Kong Tel +852 2821 1310 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Standard Chartered