‘We are in the right markets’

Standard Chartered Group has continued to deliver a resilient performance despite the impact of extraordinary monetary policies in the west and Japan on liquidity conditions across Asia and thus on margins.
This was stated by Peter Sands, Standard Chartered’s Group Chief Executive, which releasing the Group’s Interim Management Statement for 1Q2013.
“We are in the right markets and remain confident in the outlook for our business,” said the executive.
The Group had a very strong start to the year in January, but momentum slowed later in the quarter. The Group delivered income slightly ahead of the first quarter of 2012 with good growth in client volumes offset in part by continued tightening of margins and spreads as well as a fall in Own Account income, as indicated at the time of the full year results.
From a geographic perspective, double digit income growth in Hong Kong and Africa was offset by a weaker performance in Korea and Singapore. On a constant currency basis, income in India increased by a low single digit percentage, and we continued to increase our support for our Indian clients doing business in other regions.
Group expenses were up by a low single digit percentage. Within this figure, staff costs increased by a high single digit percentage reflecting an increase in headcount of around 560 staff and underlying wage inflation.
In the first quarter loan impairment was above the level in the comparable period of 2012, driven by an increase in Consumer Banking. However, the run rate in the first quarter was below the run rates seen in the first and second halves of last year by some tens of millions of dollars.
Overall the Group’s operating profit in the first quarter was slightly down on the first quarter of 2012.
Overall, the Group continues to demonstrate the underlying strength and diversity of the franchise. We have started the second quarter well with April income back at trend levels. We continue to exercise a firm grip on costs and whilst we still face external challenges, particularly with respect to Korea, we remain comfortable with consensus for profit before tax for the year.
The Group remains strongly capitalised, highly liquid and has a strong credit rating. The consumer banking delivered high single digit income growth on the comparable period of 2012.
Income growth continued to be broad based. The credit cards and personal loans and mortgages grew income at double digit rates and wealth management income was up by a high single digit percentage, ahead of the run rate seen in 2012 with improved investor sentiment.
Deposit income fell by a mid single digit rate reflecting ongoing margin pressure despite good growth in customer balances.
Expenses were up by a high single digit rate as we kept business as usual costs under tight control to create capacity for investment.
The increase in consumer banking loan impairment was broadly in line with expectations, reflecting overall growth in the book, the gradual shift in mix towards unsecured and the timing of loan sales, although in Korea we saw an increase in loan impairment over the level previously expected, including an acceleration in Personal Debt Rehabilitation Scheme (‘PDRS’) filings.
As a result, consumer banking loan impairment increased by a double digit percentage on the comparable period in 2012, or up by some tens of millions of dollars over the quarterly run rate in the second half of 2012. As a result, the consumer banking operating profit for the first quarter of the year was down by a mid single digit percentage. The wholesale banking continued to build on extremely good levels of client activity and strong volumes across our markets, although pressure on margins and spreads intensified as we progressed through the first quarter.
Client income increased by a mid single digit percentage, despite these margin pressures, as Wholesale Banking grew transaction volumes strongly, made market share gains and benefited from good levels of broad based client activity. This growth was offset by lower Own Account income, the result of lower realisations in principal finance and a weaker ALM outcome. As a result overall wholesale banking income fell by a mid single digit percentage.