LONDON (Alliance News) - Standard Chartered PLC Thursday said it expects its first-half operating profit to be down by about 20% when it reports its interim results in August, hit by a poor performance in its financial markets business.
Standard Chartered, which is UK-based but makes the vast bulk of its earnings in emerging markets, said that it also expects its first-half income to be down by a mid single-digit percentage from a year before, hit by an increase in loan impairments and a tough time in India, Korea and Singapore offsetting income growth in China and Africa. Its comparisons for operating profit and income include exclude the UK bank levy, own credit adjustments, and goodwill impairment in Korea.
"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," Chief Executive Peter Sands said in a statement.
Standard Chartered singled out its financial markets business for falling short of its expectations, blaming a number of regulatory and structural changes, combined with cyclical factors, that have hit the industry as a whole. It said those factors had damped volatility, put pressure on spreads, and led to lower volumes, particularly in the rates and foreign exchange segments of the financial markets business. In addition, income related to its market-making activities saw a "strong reduction", while client income fell at about half the rate of the business as a whole.
In a separate statement, Standard Chartered said that the head of its financial markets business, Lenny Feder has decided to take a sabbatical from the bank, beginning on July 19. Mark Dowie, the head of its corporate finance business, will replace Feder on a temporary basis. Standard Chartered said it has begun looking for a permanent replacement for Feder. Speaking to journalists, Sands said that Feder's sabbatical is "unrelated to performance around the financial markets business."
"Lenny's sabbatical is a personal decision which the bank supports. It's related to his family and has nothing to do with issues of performance or bank-related issues at all," the CEO said, adding that the bank will assess which role Feder steps back into upon his return, but indicated that it won't be the role he is leaving.
Excluding goodwill impairment and own credit adjustment, but including the UK bank levy, Standard Chartered said it expects its full-year profits to be down on 2013, but said that second-half profits are likely to be higher than in the same period last year. The operating profit and income expectations exclude the UK bank levy, adjustments on its own credit, and goodwill impairment in Korea.
Standard Chartered has had a difficult past few months. In January, it announced the departures of Finance Director Richard Meddings and the chief executive of its then consumer banking business, Steve Bertami, amid a broader restructuring that resulted in the integration of its wholesale and consumer banking divisions. In March, Standard Chartered reported a USD6.06 billion pretax profit for 2013, compared with USD6.85 billion in 2012, in the wake of a writedown in its Korean business and investors' cooling sentiment towards emerging markets.
Standard Chartered shares were Thursday morning quoted at 1,202.50 pence, down 4.4%.