EM focus pays off again for Standard Chartered

Standard Chartered Bank, the emerging markets specialist, has again bucked the trend in the banking industry, reporting a double-digit rise in earnings for 2008 and a cautiously positive outlook for 2009 today.

The bank, which has very little exposure to home mortgage markets in Europe and the US, posted a 17% rise in profit attributable to shareholders of $3,298 million for 2008. The improvement was due in part to the growth in its wholesale banking division and to lending to global financial markets, such as financial institutions, commodity traders and global corporate, executives said. Total revenue in wholesale banking rose by 43% to $7,489 million. However, loan impairments for wholesale banking customers of $720 million were just slightly less than write-offs in the consumer banking sector.

At the same time, executives said the wholesale banking division had had a 'strong' January and February, but did not quantify the performance of the business.

Income from wealth management units of the group declined throughout the year. American Express Bank, which the group acquired in the first quarter of 2008, reported a loss after tax of $124 million after charging $155 million in integration expenses. The bank did not give comparable figures for the previous year. In 2006, it made a profit after tax of $31 million.

During the year, the bank reduced its exposure to asset-backed securities by selling or unwinding products with a notional value of $1.41 billion, a 24% reduction in the banking group's entire portfolio of securities. It had no exposure to US subprime residential mortgage-backed securities (RMBS) in 2007 or 2008, and during 2008 reduced its exposure to UK RMBS from $1,834 million (notional value) at the end of 2007 to a carrying value of $969 million at the end of 2008. Still on its balance sheet were "other ABS" with a notional value of $1.935 billion, marked down to a carrying value of $1.74 billion.

The bank reported a 10.1% rise in Tier 1 capital, achieved in large part with a rights issue that raised $1.3 billion in June last year. After adjusting for the increase in shares in issue, the bank's total dividend for the year was increased by 3.1% to $0.6162 a share.