Standard Chartered chief sees no easy way out of trade dispute

Emerging markets lender posts 3 per cent rise in half-year profit

Signage is illuminated atop a Standard Chartered Plc bank branch at night in Hong Kong, China, on Thursday, July 25, 2019. Standard Chartered is scheduled to release interim earnings results on Aug. 1. Photographer: Paul Yeung/Bloomberg
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Standard Chartered’s chief executive warned that investor sentiment in the markets in which it operates is “delicately balanced” as it reported a 3 per cent year-on-year increase in profit for the first six months of 2019.

The lender, which specialises in emerging markets, reported a half-year profit of $2.41 billion (Dh8.85bn) as operating income climbed 4 per cent higher on a constant currency basis to $4.64 billion.

“The dispute between China and the US has moved beyond trade into areas of security and technology, which will likely prove more difficult to resolve,” said chief executive Bill Winters in a statement accompanying its results.

Standard Chartered earned about 51 per cent of its underlying profit during the first six months from Greater China and North Asia, while 29 per cent came from South East Asia and the ASEAN region, its interim results showed. A further 17 per cent came from Africa and the Middle East.

Income from Africa and the Middle East fell 3 per cent overall, but was 3 per cent higher after adjusting for currency movements. The bank reported lower income in the UAE and Zimbabwe, but this was partially offset by higher income from Nigeria.

“Future global growth is expected to be driven increasingly from the markets in our footprint. We remain alert to both the opportunities and the risks created by this eastward shift in the global economic centre of gravity,” Mr Winters said.

Loans to customers and customer deposits both increased by 3 per cent, to $263.6 billion and $401.6 billion respectively.

“Income growth was driven by an increase in loans to clients. Lower operating expenses and a fall in bad loans meant underlying profit before tax rose 13 per cent to $2.6bn,” Nicholas Hyett, an equity analyst at Hargreaves Lansdown said in a note.

The bank reported a return on equity of 8.4 per cent for the period.

“Management remain confident that the bank can achieve a greater than 10 per cent return on equity in 2021,” he added.

During the half-year period, the bank received fines of $1.1bn from US and UK regulators relating to poor money laundering controls and breaches of sanctions against a number of countries, including Iran.

Mr Winters said in the results announcement that the violations identified by authorities predated 2012 and that there had been no violations since 2014.

He said the bank had "undergone a comprehensive and positive transformation as an institution" since the incidents had occurred.