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Standard Chartered Plc (STAN) said operating profit in the first quarter declined “slightly” as wholesale banking revenue fell, pushing down shares in the U.K.’s second- largest bank by market value.
Revenue grew from a year earlier as an increase in consumer banking income offset a “mid single digit” decrease in wholesale operations, the London-based company said in a statement today, without giving specific figures. The shares fell 2 percent to HK$197 at 2:14 p.m. in Hong Kong, after advancing as much as 2.4 percent before the announcement.
Chief Executive Officer Peter Sands, 51, is trying to increase revenue by at least 10 percent a year while keeping cost growth at a similar pace, as he hires and opens branches in China and Africa. Standard Chartered, which gets most of its profit from Asia, last year reached a $667 million settlement with U.S. regulators who said it violated sanctions with Iran.
“Stanchart will surely grow this year, but it remains to be seen whether they can achieve their double-digit targets,” said Sandy Mehta, chief executive officer of Value Investment Principals Ltd. in Hong Kong, which doesn’t own shares in the lender. “The year is off to a slow start so some catch-up will be required.”
Today’s decline in Standard Chartered shares compared with a 0.6 percent gain in Hong Kong’s benchmark Hang Seng Index. (HSI) The lender is alone among Britain’s five biggest banks in not disclosing detailed quarterly earnings.
‘Very Liquid’
“The issue facing all of the strong global banks, such as Standard Chartered, is how to make more money in poor-to- middling economic times,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., who has a buy recommendation on the shares. The lender “is a very liquid bank, and this gives Standard Chartered limited ways to invest that excess liquidity and earn a decent return.”
In August, Standard Chartered was accused by Benjamin Lawsky, head of the New York Department of Financial Services, of helping Iran launder about $250 billion in violation of federal laws, keeping false records and handling lucrative wire transfers for Iranian clients.
Chairman John Peace was forced by U.S. regulators to apologize for claiming breaches of sanctions on Iran that led to the fine were unintentional. Peace, who told reporters at a March 5 press conference that the firm had no “willful” intention to dodge U.S. rules, said in a statement on March 21 that the earlier claim was “wrong.”
Consensus Estimate
“We have started the second quarter well with April income back at trend levels” and the bank is “comfortable” with the consensus estimate of pretax profit, it said in the statement. By region, revenue increases of 10 percent or more in Africa and Hong Kong were “offset by a weaker performance in Korea and Singapore,” the bank said.
HSBC Holdings Plc (HSBA), the other U.K. bank that gets most of its earnings in Asia, yesterday posted a bigger-than-estimated increase in first-quarter profit after provisions for bad loans shrank. Pretax profit increased to $8.43 billion from $4.32 billion a year earlier.
“Standard Chartered has a more coherent franchise worldwide” and “has been more effectively managed in recent years,” Antos at Mizuho said. “But this year if you want to make money on bank stocks, you have to look at HSBC first. The market loves a recovery story.”
Revenue grew from a year earlier as an increase in consumer banking income offset a “mid single digit” decrease in wholesale operations, the London-based company said in a statement today, without giving specific figures. The shares fell 2 percent to HK$197 at 2:14 p.m. in Hong Kong, after advancing as much as 2.4 percent before the announcement.
Chief Executive Officer Peter Sands, 51, is trying to increase revenue by at least 10 percent a year while keeping cost growth at a similar pace, as he hires and opens branches in China and Africa. Standard Chartered, which gets most of its profit from Asia, last year reached a $667 million settlement with U.S. regulators who said it violated sanctions with Iran.
“Stanchart will surely grow this year, but it remains to be seen whether they can achieve their double-digit targets,” said Sandy Mehta, chief executive officer of Value Investment Principals Ltd. in Hong Kong, which doesn’t own shares in the lender. “The year is off to a slow start so some catch-up will be required.”
Today’s decline in Standard Chartered shares compared with a 0.6 percent gain in Hong Kong’s benchmark Hang Seng Index. (HSI) The lender is alone among Britain’s five biggest banks in not disclosing detailed quarterly earnings.
‘Very Liquid’
“The issue facing all of the strong global banks, such as Standard Chartered, is how to make more money in poor-to- middling economic times,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., who has a buy recommendation on the shares. The lender “is a very liquid bank, and this gives Standard Chartered limited ways to invest that excess liquidity and earn a decent return.”
In August, Standard Chartered was accused by Benjamin Lawsky, head of the New York Department of Financial Services, of helping Iran launder about $250 billion in violation of federal laws, keeping false records and handling lucrative wire transfers for Iranian clients.
Chairman John Peace was forced by U.S. regulators to apologize for claiming breaches of sanctions on Iran that led to the fine were unintentional. Peace, who told reporters at a March 5 press conference that the firm had no “willful” intention to dodge U.S. rules, said in a statement on March 21 that the earlier claim was “wrong.”
Consensus Estimate
“We have started the second quarter well with April income back at trend levels” and the bank is “comfortable” with the consensus estimate of pretax profit, it said in the statement. By region, revenue increases of 10 percent or more in Africa and Hong Kong were “offset by a weaker performance in Korea and Singapore,” the bank said.
HSBC Holdings Plc (HSBA), the other U.K. bank that gets most of its earnings in Asia, yesterday posted a bigger-than-estimated increase in first-quarter profit after provisions for bad loans shrank. Pretax profit increased to $8.43 billion from $4.32 billion a year earlier.
“Standard Chartered has a more coherent franchise worldwide” and “has been more effectively managed in recent years,” Antos at Mizuho said. “But this year if you want to make money on bank stocks, you have to look at HSBC first. The market loves a recovery story.”
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