Standard Chartered profit up 29 pct in 2010

AP News
Posted: Mar 02, 2011 6:43 AM
Standard Chartered profit up 29 pct in 2010

Standard Chartered bank reported a record profit for the eighth straight year on Wednesday, largely on the back of the bank's operations in Hong Kong and India.

Net profit rose 29 percent to $4.23 billion in 2010, the bank said, helping the company to raise its dividend by 9 percent to 69.15 pence a share.

Pretax profit of $6.1 billion was 1 percent below analysts' consensus.

Standard Chartered shares were up 3.7 percent at 1,677 pence in late morning trading on the London Stock Exchange.

"Standard Chartered is a remarkable success story, with very significant momentum, delivering outstanding results notwithstanding the adverse ... impact from low interest rates," said Ian Gordon, analyst at Exane BNP Paribas.

He noted that the bank's share price has fallen by 17 percent since November, which "affords a compelling entry price."

The bank reduced its provisions for bad loans from $2.1 billion in 2009 to $959 million last year.

India became the bank's leading profit center, reporting a pretax profit of $1.2 billion and nudging ahead of Hong Kong at $1.1 billion.

"We can't expect India to continue to grow at quite the pace it has in recent years, given the sheer scale of the business, but it will still be one of the Group's big growth engines," said Peter Sands, the bank's chief executive.

Arturo de Frias, analyst at Evolution Securities, said costs had risen sharply in the second half _ 43 percent in India and 37 percent in Singapore, for instance _ but he remained a buyer of shares. "The medium term growth story is very good, and absolutely intact," he said.

During the year, Standard Chartered raised $5 billion from a rights issue, raising its core tier 1 capital ratio from 8.9 percent to 11.5 percent.

Sands said that regulatory changes were the biggest challenge facing the bank, and he complained particularly about Britain's new tax on bank balance sheets.

"Whilst we are broadly supportive of much of the regulatory reform agenda, the sheer scale of actual and potential changes, when applied across all the markets we operate in, represents a very considerable challenge and there is the real risk of unintended consequences," Sands said.

"Rather than seeing increasingly global coordination and consistency of regulation, we are seeing increased fragmentation and unilateral action. For example, the U.K.'s recent announcement that the bank levy will be implemented in full during 2011 means that the levy will cost us around $180 million post-tax this year."

Analysts at Investec said "the drag of higher equity and the lack of tax deductibility on the (U.K.) levy means return on equity will be lower" this year. They estimated it could drop from 14.1 percent this year to 12.3 percent.

"Over the last seven years, Standard Chartered has raised $11.6 billion in equity, 1.5 times more than the stock has paid out in dividends," said Bruce Packard, analyst at Seymour Pierce.

"Given the growth opportunities, management should be given the benefit of the doubt over this dilution and the double digit cost growth _ though we are nervous about how well management might be able to call the cycle," Packard said.

Wednesday's news closed the reporting season for U.K. banks. HSBC Holdings more than doubled its net profit from $5.8 billion to $13.2 billion and Barclays PLC raised its profit from 2.63 billion pounds ($4.3 billion) to 3.56 billion pounds. RBS, Britain's largest government-owned bank, missed analysts expectations with a 1.1 billion pound full-year loss and Lloyds Banking Group, which is 41 percent government owned, reported a full year loss of 258 million pounds after a 2.9 billion pounds profit in 2009.