Wholesale Banking delivers another outstanding performance; Group customer deposits jump

Standard Chartered PLC today announced another exceptional performance for 2008 with income rising 26 per cent to US$13.97 billion and operating profit before tax (OPBT) 13 per cent to $4.57 billion, in what was a difficult operating environment particularly in the second half. Almost 80 per cent of the income growth came from organic businesses says a press release from Standard Chartered Bank.

The first half of 2008 saw strong economic growth across key markets driven by strong regional trade flows but performance in the second half was dampened as the financial crisis began to have an impact on the real economy across the world.

According to the release, the group managed to significantly build on its reputation as a flight to quality institution with customer deposits rising 31 per cent during 2008, most of it coming in the last quarter as confidence in financial institutions declined. Enhanced liquidity and an even stronger balance sheet, following Standard Chartered’s successful rights issue in December, places the Group in a strong position to support clients and capture market share.

Peter Sands, group chief executive Standard Chartered, said: “We remain open for business and are supporting our clients as they navigate this turmoil. We want to seize the opportunities arising from this turbulence. We have a clear and consistent strategy, and continue to invest for growth.”

Most of Standard Chartered’s key geographies delivered strong performances with seven of the nine geographic regions recording income of over $1 billion in 2008. Singapore saw OPBT rise 67 per cent, India by 37 per cent, Middle East and Other South Asia (MESA) by 25 per cent, Korea by 10 per cent and Africa by five per cent. Despite an excellent first half, Hong Kong reported an OPBT decline of 15 per cent as the macroeconomic environment worsened in the latter half.

Group performance was said to have driven by Wholesale Banking which had an outstanding year with income growing 43 per cent to $7.49 billion and OPBT by 28 per cent to $3 billion. Growth was broad-based across all product categories and geographies, with global markets reporting a 60 per cent jump in income and transaction banking 31 per cent. The strategy of deepening client relationships paid off with revenues from the top 50 clients rising 45 per cent, while the number of clients with revenues of over $10 million rose 88 per cent.

Consumer Banking delivered a three per cent growth in income but OPBT declined 33 per cent as the wealth management business slowed sharply in the second half following the slump in Asian equity markets. Overall, wealth management reported a six per cent income growth in 2008, while SME, another key focus for the business, saw income rising eight per cent. Consumer banking is repositioning its wealth management offerings and, across the business, improving productivity and customer service through a series of reengineering projects, including call centre consolidation, and by standardising system platforms, processes and products.

In the second half, the credit environment became increasingly challenging for both corporate and retail customers leading to an increase in delinquencies. As a result, from a very low base, loan impairment rose 74 per cent to $1.3 billion. The group has been taking proactive risk management initiatives which include tightening underwriting criteria, seeking more collateral on loans and improving collections activity.

Focus on balance sheet management has been a key priority for the year. Following the $2.7 billion rights issue in December 2008, tier I capital ratio improved to 10.1 per cent while total capital stood at 15.6 per cent, both above the group’s target ranges. Improved deposit gathering led to the asset-deposit ratio improving to 75 per cent from 84 per cent at half year.

Mr. Sands said: “Standard Chartered has made a good start to 2009. Wholesale banking has had a very strong January, above levels seen in the same period last year and continued to increase market share. The release pledges that consumer banking will continue to play an important role in gathering deposits and maintaining the Group’s liquidity.”