ROUNDUP Standard Chartered FY profit up 19 pct, shares slip on cost concerns

ROUNDUP Standard Chartered FY profit up 19 pct, shares slip on cost concerns

	Published : Tue, 27 Feb 2007 16:02 By : Agencies Print this Story

LONDON (AFX) - Banking group Standard Chartered PLC met market expectations with a 19 pct increase in full-year profit, helped by strong economic growth in its key Asian markets, but shares in the company fell sharply on concerns over rising costs.

Standard Chartered, which is based in London but generates more than two thirds of its revenues in Asia, said pretax profit for the year to Dec 31 2006 came in at 3.178 bln usd, up from 2.681 bln usd the previous year.

That was broadly in line with a company-collected consensus analyst forecast of 3.168 bln usd.

Standard Chartered said the profits improvement was driven by robust economic growth in Asia, fuelled by the gradual liberalisation of China and India. That helped boost income excluding acquisitions by 18 pct to 6.951 bln usd, just outpacing growth in expenses, which rose 17 pct to 3.733 bln usd.

However, the group warned cost growth will outstrip income growth in the first half of this year, blaming a programme of heavy investment in its Chinese consumer banking operation and in its private banking division. Over 2007 as a whole, costs will grow 'broadly in line' with income, it said.

By 2.15 pm, Standard Chartered shares were down 3.2 pct at 1,456 pence, valuing the bank at about 20.1 bln stg, while the FTSE 100 share index was off 2.2 pct. Until today, the stock had risen about 12 pct in the last 6 months, supported in part by takeover speculation.

'The numbers are just in line, but not great, and the outlook was disappointing. Costs in the first half of 2007 will be ahead of income growth because of investment spend,' said Dresdner Kleinwort analyst Ian Gordon, who maintained his are duce' stance on the stock.

'The concern around the shares is the cost growth, which seems to have overshot due to the company's aggressive investment,' said Richard Hunter, head of UK equities at stockbroker Hargreaves Landsdown.

Standard Chartered's 2007 investment plans continue a trend towards heavy spending on the bank's operations in fast-growing emerging markets.

In a conference call with reporters, Standard Chartered's chief executive, Peter Sands, defended the group's investment programme and stressed that income growth will overtake cost growth once again in the second half of the year.

'The balance we are looking at is the balance between delivering enhanced profit and investing for the future. We believe it's the right thing to do to invest in our markets,' he said.

Sands also dampened recent speculation that Standard Chartered is planning a 2 bln usd bid for Oyak Bank, Turkey's eighth-biggest bank, while hinting that the historically acquisitive group may make fewer takeovers this year.

'We like Turkey, but haven't found anything we want to do. If we had anything to say on a particular opportunity, we'd say it,' he said.

'I would re-emphasise that our spreadsheet is led by organic growth. We will look at opportunities but we will walk away from many more than we end up doing.'

Last year, Standard Chartered bought Hsinchu International, Taiwan's seventh-biggest bank, for 1.2 bln usd, and took a majority stake in Pakistan's Union Bank Ltd for 413 mln usd. Its biggest acquisition to date is the 3.3 bln usd takeover of South Korean lender Korea First Bank in Jan 2005.

Standard Chartered also unveiled higher bad debts, with the total loan impairment charge for 2006 climbing 25 pct compared with the previous year to 3.824 bln usd, driven primarily by a sharp rise in consumer lending arrears in Taiwan during the first half.

The group today said the consumer bad debt situation in Taiwan had improved, with the impairment charge falling to 45 mln usd in the second half of 2006 from 203 mln usd in the first six months.

Standard Chartered is paying a full-year dividend of 71.04 cents per share, up from 64 cents in 2005.

myles.neligan@thomson.com

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