Impairment Provisions Hit Private Banking Operating Profits At Standard Chartered

Tom Burroughes

6 August 2015

Large impairment provisions hit operating profits at the private banking business of UK-listed in the first half of 2015. The bank earns the bulk of its revenues in regions such as Asia and Africa.

Private banking profit slumped by 96 per cent year-on-year to $3 million, the bank said yesterday in a statement. Loan impairment increased to $94 million following an impairment provision relating to a single client case.

Income from private banking declined 3 per cent compared to the same period last year, impacted by the exit of Standard Chartered’s Geneva business and client transfers to the retail client segment in Jersey. Excluding these items, income grew 4 per cent and assets under management rose 9 per cent driven by strong business momentum in Greater China, it said.

Standard Chartered said it was making “good progress against the refreshed strategy outlined in 2014" and will "continue to focus on growing this client segment”. It said frontline hiring continues according to plan and it has hired more than 40 relationship managers during the first half of this year.

“Our pilot inter-segment referral programme is progressing well with over 50 successful referrals since its launch at the end of 2014. One-bank collaboration is gaining traction with a number of successful co-investment and leveraged finance client deals,” it said.

“Deepening existing client relationships continues to be a focus, evidenced by the strong growth in recurring investment product revenues. Investment penetration has increased from 51 per cent at the end of 2014 to 56 per cent of assets under management,” it continued.

Across the whole of Standard Chartered, its operating income in the first half of the year was $8.495 billion, down 8 per cent from a year ago, which the firm said was mainly caused by the effect of currency translation, business divestments and mark-to-market valuations

The pre-tax profit of $1.824 billion, down 44 per cent, was affected by “adverse loan impairment trends”.

Shares in the bank were up around 4.4 per cent early yesterday afternoon, at 996.7 per share.

Normalised earnings per share declined 50 per cent to 48.7 cents, from 96.5 cents in H1 2014.

Standard Chartered had a common equity tier one ratio – a standard measure of financial strength under international Basel rules - of 11.5 per cent.