News Column

Standard Chartered links financial markets dip to new profits warning

June 27, 2014

Sean Farrell



Standard Chartered bank yesterday issued a profit warning as a result of a big downturn in its financial markets business and said it was looking for a new head of the ailing markets operation. The current head of the unit is taking a year's break from the Asia-focused bank.

It was the bank's second warning on its financial performance in just over six months. The bank said operating profit for the first half of this year would fall about 20%, reducing profits for all of 2014.

Analysts now expect profit to fall by about 10% for the full year after previously forecasting a small rise based on the bank's earlier guidance.

Standard Chartered's shares dropped 4.2% to pounds 12, down 25% since last August. They were the second-biggest FTSE 100 fallers behind Barclays, whose shares were hit after the New York attorney general accused it of fraud.

Peter Sands, Standard Chartered's chief executive, said he was disappointed with the bank's performance and blamed tough trading at the financial markets business.

Lenny Feder, head of financial markets and one of the bank's most senior executives, is on a year's unpaid "sabbatical" and the bank is looking for a permanent replacement.

In a trading update, he said: "This has been a disappointing first half, with difficult trading conditions, particularly in financial markets. We are making good progress against our refreshed strategy and are taking the right actions in response to a challenging environment - managing costs very tightly, disposing of non-core businesses and optimising the deployment of capital."

In March, Sands said the bank expected modest growth in revenue and profit this year after profit for 2013 dropped 7% to $7bn (pounds 4bn), the first fall for a decade. He has reorganised the business, parted company with his consumer banking chief and finance director and pledged to get to grips with the bank's troubled Korean business, which forced a $1bn writedown last year.

After withstanding the financial crisis and being feted as the star of British banking, things have turned rocky for Standard Chartered. A fine of pounds 415m in late 2012 for breaching US sanctions against Iran was followed by a downturn in financial performance that prompted the bank to abandon its revenue target in November and publish a profit warning the following month.

Standard Chartered said financial markets income was the biggest problem for the group. Banks including Barclays have been hit by low volatility in markets, reducing client trading and regulators' demands that they hold more capital against trading activities.

Writedowns on problem loans will rise by a "high-teens percentage" in the first half, an increase the bank said was in line with expectations. It was also hit by a $75m loss on "certain strategic investments".



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Source: Guardian (UK)


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