Standard Chartered Plc has made strong progress so far this year with good revenue momentum and muted bad debts, the Asia-focused bank said on June 23. The bank has had a strong increase in customer income, with good asset growth in consumer and wholesale banking, Standard Chartered said in a trading statement, adding that performance was in line with guidance given in February.
"We are continuing to drive performance, and our momentum reflects the success of our business strategy and the disciplined way it is being implemented," Chief Executive Mervyn Davies said in the statement.
Most consumer markets have had revenue growth of 10 percent or more, but in Hong Kong, the bank's biggest market, consumer income is "broadly stable", the bank said. Margin pressure has hit consumer income in the bank's No. 2 market of Singapore and has caused revenue gains to lag asset growth in India.
"There have been some difficulties on the consumer side in Hong Kong and Singapore but that seems to have been offset by momentum in other areas," said BNP Paribas analyst Patrick Leclerc, who has an "outperform" rating on the stock. "All in all it looks neutral."
Banks in Hong Kong, where Standard Chartered makes about a quarter of its profit, have been competing fiercely for business by offering low mortgage rates that have squeezed profit margins as local interbank lending rates have crept up. Standard Chartered is based in London but its operations are in Asia, where it makes about two-thirds of profit, Africa and the Middle East, protecting it from rising UK retail bad debts that have caused investors concern in recent weeks. Consumer bad debts are tracking asset growth, and wholesale provisions are benefiting from a good credit environment, the bank said. Costs are rising in line with income, it added.
Standard Chartered is targeting expanding middle classes in growth markets for consumer lending and seeking better returns from corporate clients at its wholesale business. It paid $3.3 billion for Korea First Bank in April, its biggest acquisition, and integration is ahead of schedule, it said.
Standard Chartered reported 2004 pretax profit up 39 percent to $2.16 billion in February. Some analysts said the performance relied too much on falling bad debts rather than revenue growth at its core businesses. Standard Chartered shares rose 7.3 percent this year, making it the second-best performer of the UK's 10 listed banks. The bank is due to report first-half results on August 8.
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