Tuesday, February 26, 2008

Standard Chartered Gains as Asian Loans Resist Slump

Standard Chartered Plc rose the most since August in London trading
after saying second-half profit increased 23 percent as lending in
Hong Kong and India resisted a U.S. slowdown.
Standard Chartered gained 6.8 percent after it said net income rose 23
percent to $1.44 billion, or $1.02 a share, in the six months ended
Dec. 31 from $1.18 billion, or $0.86, a year earlier. Profit beat
analysts' estimates as Standard Chartered wrote down $300 million in
assets for the year, less than larger U.K. competitors.
The bank will ``deliver another strong performance in 2008'' even as a
slowing U.S. curbs growth in the global economy, Chairman Mervyn
Davies said in a statement today. London-based Standard Chartered,
which spent $2.7 billion on acquisitions since 2006, including Hsinchu
International Bank in Taiwan and Union Bank Ltd. in Pakistan, won't
stop ``investing for growth,'' the bank said.
``The bank provides an exposure to faster-growth markets, and I don't
think there are any shocks in there,'' said Colin Morton, an analyst
at Rensburg Fund Management in Leeds, England. ``The underlying
performance is stronger than people expected,'' said Morton, who helps
manage 1.5 billion pounds, including Standard Chartered stock.
Standard Chartered gained 107 pence, the most in six months, to 1,687
pence at 11:15 a.m., valuing it at 23.5 billion pounds ($46.8
billion). The stock is up 12 percent from a year ago, making it the
sole gainer in the nine-member FTSE 350 Banks Index, down 29 percent.
Temasek Holdings Pte, Singapore's sovereign wealth fund, has raised
its holding in Standard Chartered over the last year to 19 percent
from 11 percent.
Standard Chartered's second-half profit exceeded the $1.36 billion
median estimate of 10 analysts surveyed by Bloomberg. For the full
year, net income rose 25 percent to $2.84 billion, with operating
profit rising 71 percent in India, 34 percent in Hong Kong and 15
percent in the Middle East.
Standard Chartered took 2007 writedowns of $116 million on
Whistlejacket Capital Ltd., its structured investment vehicle.
Investors shunned securities that can't be valued since the collapse
of the U.S. subprime mortgage market, forcing Standard Chartered to
buy back and mark down the SIV's assets.
The bank also wrote down $87 million on asset backed securities and
$98 million on assets in Korea, bringing total writedowns for the year
to $300 million.
`Further Shocks'
``We do expect further shocks'' related to credit market turmoil, said
Sands. ``We haven't been unscathed and we do not expect to be
Standard Chartered did a better job of avoid writedowns than Barclays
Plc and Royal Bank of Scotland Group Plc, said Alex Potter, a
London-based analyst at Collins Stewart Plc. ``This is the smallest
number reported from the larger U.K. banks so far this season and a
strong result,'' said Potter, who has a ``buy'' rating on the stock.
Barclays, the U.K.'s third-largest bank, had 1.64 billion pounds of
writedowns on its securities last year. Royal Bank of Scotland Group
Plc, Britain's second-biggest bank, said in December it would record
1.25 billion pounds in net writedowns on securities linked to the U.S.
subprime-mortgage market collapse.
Standard Chartered's biggest unit, the consumer bank in Hong Kong,
increased operating profit by 22 percent in 2007. ``This is the first
time in six years that this business has achieved double-digit income
growth,'' the company said.
Wholesale profit in Hong Kong rose 50 percent to $526 million in 2007.
The bank's overall profit in Hong Kong was $1.2 billion, up 34 percent
from 2006.
`Exceptional' in India
Standard Chartered's 2007 operating profit was $503 million in the
Middle East and $689 million in India, driven by lending to
businesses. India was ``truly exceptional,'' Davies said in a
television interview with Bloomberg.
The bank has changed management in South Korea, where profit fell 30
percent to $320 million. South Korea had a $155 million mark to market
loss related to mortgages. ``We are not satisfied with our performance
in Korea,'' Sands said.
Overall costs will move ``broadly in line'' with revenue, Sands said.
``It is difficult to forecast how acquisitions will unfold,'' said
Sands. ``There may be more to come.''

Gaurav Shukla

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