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BW Businessworld

StanChart Earnings Up; India Profit Declines

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Standard Chartered Plc reported a market-matching 10.7 per cent rise in 2011 pretax profit on Wednesday, a ninth consecutive year of record earnings as it continued to ride on the back of strong Asian economic growth.

Asia-focused StanChart reported a 2011 pretax profit of $6.78 billion, up from the $6.12 billion it recorded a year earlier, it said in a filing to the Hong Kong bourse.

The result was in line with an expectation for $6.8 billion from a poll of 24 analysts surveyed by Thomson Reuters I/B/E/S.

"Growth momentum will likely accelerate in 2012," said Dominic Chan, an analyst at BNP Paribas in Hong Kong. "Key markets such as India are showing signs of improving and the bank is well placed to gain market share in areas such as trade finance and wholesale banking."

Helping boost earnings was strong performance in Greater China and Singapore, with the Southeast Asian city-state becoming the third of its markets to deliver more than $1 billion in profit.

Income in Singapore rose 26 per cent, while profits jumped 40 per cent, the bank said.

StanChart's Hong Kong-listed shares rose by more than 1 per cent after the earnings announcement, outpacing the 0.5 per cent advance on the benchmark Hang Seng Index.

The bank is one of the very few still hiring and it said it added about 1,400 staff in 2011, bringing the total number of employees to almost 87,000.

"We have started 2012 strongly, following a very strong finish to 2011," chief executive Peter Sands said in the statement. "In 2012, we are on track to deliver double-digit income, double-digit EPS and flat jaws, but it is very early days."

Like rival HSBC Holdings Plc, StanChart saw its cost-to-income ratio worsen to 56.5 per cent from 55.9 per cent a year ago, although it said that its expense and income growth were now largely in line.

StanChart said it had kept its bonus pool flat from a year earlier despite the profit growth, with bonus payouts less than the amount given to shareholders in dividends.

"Our approach to remuneration has not changed," the bank's chairman, John Peace, said in the statement. "We continue to reward our people for sustained high performance and we do not reward failure or short-term risk taking."

On the regulatory front, a British tax on bank balance sheets is expected to cost StanChart $165 million this year. The bank has said it would like to keep London as its headquarters because of the expense of relocation.

In South Korea, where StanChart was hit by industrial actions last year, it launched an early retirement programme that the bank said would deliver savings of $95 million a year.

India also saw a decline in profit, the bank said, hit by a total of 13 interest rate increases over two years.

StanChart's London-listed shares are up about 13 per cent so far this year, valuing the lender at about $62 billion. This makes it bigger than other Britain-based banks such as Barclays Plc and Lloyds Banking Group Plc.