Emerging market-focused bank Standard Chartered (STAN) has surprised the market with a decline in its first quarter operating profit, sending its shares down 4.8% to £16.19.

The London-based bank, which focuses on Asia, Africa and the Middle East, blamed lower interest rates for a decline in wholesale banking revenues. Other negative factors included a rise in bad debts, which were higher than those recorded in the first three months of 2012 and a result of an increase in consumer banking. Rises in costs were also blamed, which management put down to hiring 560 new staff and wage inflation.

Standard Chartered did not provide detailed figures for the period but said operating profit fell despite group revenues increasing year-on-year. It conceded that double digit income growth in Hong Kong and Africa was offset by a weaker performance in Korea and Singapore. This troubled investors and put Shares' own trade on Standard Chartered off to a bad start (click here for our Plays of the Week story from 4 April).


STANDARD CHARTERED - Comparison Line Chart (Rebased to first)


In 2012, the bank made a US$6.8 billion pre-tax profit from a US$19 billion turnover. Its loan impairments totalled US$1.2 billion, while its expenses were US$10.8 billion. This was the tenth successive year Standard Chartered had reported record growth but this run is in danger of ending.

However, management said activity picked up in April and making them confident that the bank will meet its consensus forecasts for the year where it is expected to make US$8.2 billion pre-tax profit. Espirito Santo suggested the bank must therefore be confident it can make up the 'sluggish' first-quarter revenue outcome over the remaining course of the year.

Royal Bank of Scotland (RBS) last week announced a £826 million first quarter pre-tax profit, setting it up for its first annual profit in five years. This followed first quarter pre-tax profits to the tune of £2 billion from Lloyds Banking (LLOY) and $8.4 billion by HSBC (HSBA). However, growth at some banks was generated by falling bad debts and one-off asset sales. The banking market is recovering but a return to the profits they recorded before the crisis is a long way off.

Issue Date: 08 May 2013