Back to basics for Standard Chartered as profits rise 11%

The bank's high street equivalents might have had a tough few months, but for Standard Chartered, 2011 was a vintage year.

by Emma Haslett
Last Updated: 16 Mar 2012
We’ve heard tales of woe from almost all the UK’s biggest high street banks over the past few days, but it’s not all doom and gloom in the banking sector. Standard Chartered has just posted pre-tax profits of $6.7bn (£4.2bn) for 2011, 11% up on the year before and its ninth annual profit in a row. Revenues were up by a similar amount, jumping 10% to $17.6bn. Chairman Sir John Peace said it’s because the bank has ‘an obsessive focus on the basics of banking’.

The bank’s results make for very encouraging reading: one of its best-performing divisions, wholesale, made a profit of more than $5bn for the first time, with income leaping by 9% to $10.85bn. Its consumer banking division was similarly successful, recording a 12% increase in revenues to $6.79bn, while profits rose by 26% to $1.65bn. That was driven by a leap in customer deposits, which rose by 11% to $352bn. Even bad debt losses in 2011 were broadly flat – they rose by just 3% to $908m.

The bank added that it recruited another 1,600 staff in 2011, pushing its total up to 87,000 (that’s in marked contrast to the huge numbers of redundancies made by other banks last year). It also increased lending to customers by 9% to $269bn. Even lending to small businesses was up by 14%.

Compared with its high street peers, then, Standard Chartered has had a stonking year. What’s the difference? To begin with, the bank doesn’t have any exposure to sovereign debt from economically dodgy countries like Greece, Ireland, Italy and Spain. And it reckons it’s ‘responding well to evolving regulatory requirements’ – ie. its Core Tier 1 capital ratio, a key measure of the strength of its balance sheet, is 11.8%, way above the 9% required by law. So the bank can comfortably say it won’t be needing any of the €530bn of super-cheap loans offered up by the European Central Bank this morning…

The lender’s other strength lies in the markets it’s in: most of its business comes from high-growth countries like China, Hong Kong, India, Taiwan and Singapore, which it said ‘enables it to grow even when some markets (ie. the eurozone) have a difficult year’. Such is its success in developing economies, 19 of the 35 new branches it opened last year were in China, and it added that 24 of the markets it’s active in generated more than $100m last year.

All this will come as music to the ears of shareholders, who are in line for a 10% rise in their divi this year. Not surprising, then, that share prices rose by (a relatively modest, all things considered) 1% to £16.38 this morning.

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