Standard Chartered in good shape after another record year

published 29 February 2012

Asia-focused banking colossus Standard Chartered notched up its ninth successive year of record income and profit in 2011 and reckons it is in good shape to face whatever 2012 throws at it.

Profit before tax was up 11% to $6,775m in 2011 from $6,122m in 2010. Operating income moved up by one-tenth to $17,637bn from $16,062m the year before; interest income rose to $16,584m from $13,500m the year before, while non-interest income slipped to $7,474m from $7,592m in 2010.

Broker Charles Stanley had forecast profit before tax of $6,842m, and earnings per share of $2.00; normalised earnings per share actually came in a bit shy of the broker's forecast, at $1.98, up from 2010's $1.97.

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Impairment losses on loans & advances and other credit risk provisions widened slightly to $908m from $883m the year before, while other impairment charges increased to $111m from $76m, predominantly due to a charge against an Indian bond exposure.

"Loan impairment is slightly up on 2010 but remains low, reflecting our diversified portfolio, the economic performance of the markets we serve and our continued disciplined approach to risk management," the group noted.

Profit attributable to ordinary shareholders of $4,748m was up 12% on 2010's $4,231m, in line with market expectations.

The return on ordinary shareholder's equity (RoE) on a normalised basis (which excludes certain items) slipped to 12.2% from 14.1% the year before, while the cost income ratio on a normalised basis is also heading in the wrong direction, rising to 56.5% from 2010's 55.9%, partly due to a charge in respect of an Early Retirement Programme in Korea of $206m as well as the full year charge of $165m for the UK bank levy.

"RoE will likely still be somewhat under our aspiration, partly as a result of ongoing regulatory drag and the lag before this gets fully reflected in margins, and partly because of the impact of a low interest rate environment on a deposit-rich institution," cautioned the group's Chief Executive, Peter Sands.

The Core Tier 1 capital ratio, a key measurement of balance sheet strength of banks, held steady at 11.8%.

Divisional break-down

Consumer Banking: Operating income increased by 12%, or 9% on a constancy currency (CC) basis, to $6,791m. Operating profit grew 26% (CC basis: 24%) to $1,650m.

The second half operating profit was hit by softening Wealth Management revenues across most geographies as investor sentiment was affected by weaker markets. Expenses also increased in the second half of the year over the first half.

Wholesale banking: Client income was up 10% year-on-year with broad-based growth across product lines. Client income continues to constitute over 80% of total Wholesale Banking income.

Operating income grew 9% to $10,846m. Net interest income was up 26% to $5,569m while non-interest income fell by 5% to $5,277m.

"Once again, our performance has shown that we are in the right markets, with the right strategy and have the right leadership in place to deliver consistent value for our shareholders. We have diversified sources of quality income growth throughout our Consumer and Wholesale Banking businesses and an obsessive focus on the basics of banking. We enter 2012 in great shape," said Sir John Peace, Chairman of Standard Chartered.

The full year dividend has been increased by 10% to 76 cents from 69.15 cents the year before.

The shares rose 18p to 1,640p in the first hour of trading following the announcement of the results.