Diverse income and product streams drive double-digit income growth
• Group income climbs 11%, with strong momentum across products and markets.
• Expenses tightly managed; with income growing faster than costs.
• Capital position strengthened further with Core Tier 1 ratio of 11.9%.
• Highly liquid balance sheet; deposits grow 19% to US$343bn; strong A/D ratio of 78.1%.
• Consumer Banking delivers 58% profit growth, as repositioning progresses.
• Wholesale Banking profit up 5% to record $2.59bn.
• Continued performance for shareholders, with RoE of 13%, dividend up 10%
Standard Chartered PLC today announced a ninth successive record first half of profit with income growing by 11 per cent* to US$8.76 billion as profit climbed 17 per cent to US$3.64 billion. The Group produced diverse and resilient income growth across a number of products and geographies, driven by recent investment in new product capabilities and income streams. Income growth is underpinned by a highly liquid, well funded and growing balance sheet, while we maintain strong cost control. With rapidly developing trade and investment flows across our footprint, allied to a fast-growing middle class, Standard Chartered sees strong opportunities for further organic growth across Asia, Africa and the Middle East.
The Group continues to focus on the strength of the balance sheet in order to support organic growth and support our customers, whilst ensuring we are well insulated from macro-economic and regulatory uncertainty. We have grown customer deposits and lending, as we take market share across as wide range of products despite increasing competition in a number of our markets. Customer deposits grew by 19 per cent or US$55 billion to US$343 billion, with the advances to deposits ratio remaining strong at 78.1 per cent. The Group continues to be highly liquid, with US$150 billion of cash or near cash assets, while we have no sovereign debt exposure to Portugal, Ireland, Italy, Greece or Spain.
Standard Chartered continues to support economic growth and development across our markets, with total lending climbing by 22 per cent and lending to SMEs up 38 per cent. We are supporting homeowners, with mortgage lending up by 19 per cent. The quality of the bank’s customer lending continues to improve, with 67 per cent of the Wholesale lending book having a maturity of under 12 months while the average loan-to-value on the mortgage book remains low at 49 per cent. At a Group level, loan impairments fell by six per cent to US$412 million, driven by further significant falls in Consumer Banking loan impairments of 29 per cent year on year. Wholesale Banking loan impairments rose 46 per cent to $201 million in the same period. We remain disciplined and proactive in our approach to risk management.
Geographic performance has been broad and well spread. With the exception of India, all regions have shown good increases in income, with Hong Kong up 29 per cent, and Singapore 20 per cent higher. Operating profit and income in India fell by 39 per cent and 12 per cent respectively, driven by rising interest rates and increasing competition resulting in falling net interest margins. Project and deal flow has slowed as business sentiment is impacted on the back of governance concerns in the market. We reiterate our view that India will be the third largest economy in the world by 2030, and given our strength and competitive position, we are well-positioned for the upturn.
Wholesale Banking and Consumer Banking saw increased business activity across a number of products and services, as the Group captured market share from our competitors.
Consumer Banking performed strongly in the first half with income and profit growing 15 per cent and 58 per cent respectively, as the transformation programme progresses well. Income growth was broad-based, with strong volume increases in mortgages, credit cards and personal loans, as the business also continued to attract strong deposit growth. With a strong bias towards deposits, the bank is also well placed to benefit from an uptick in liability margins across several of our core markets. As Asia’s emerging middle class continues to expand, the high value segments of private banking, priority banking and SME banking all grew at more than 10 per cent.
Wholesale Banking saw client income grow by nine per cent to a record level of US$4.44 billion, while overall first half income and profit levels grew by eight per cent and five per cent respectively, also to record levels. Client income now accounts for 82 per cent of Wholesale income. We continue to support trade and investment flows to and from our markets, investing in new product and service sets to meet client demand, whilst further broadening the income base. Trade finance income grew 11 per cent, foreign exchange by 19 per cent, with commodities and equities growing by 93 per cent, while the capital markets business grew income by 16 per cent. Cash management volumes continued to build, up 26 per cent, with income up 33 per cent. Wholesale Banking continues to grow income and profit, whilst maintaining strong cost and risk controls, and with robust transaction pipelines for the second half of 2011.
Peter Sands, Group Chief Executive, Standard Chartered said:
“This is a very strong set of results – we have delivered record income and profit, grown our balance sheet, and raised our capital levels and dividend. Our growth is resilient and diverse. With a unique position at the heart of growing trade and investment flows between Asia, Africa and the Middle East, with their fast-expanding middle classes, we continue to see significant opportunities for profitable growth across our network.”
ECB stays put but warns about surge in infections
By Balazs Koranyi and Francesco Canepa
FRANKFURT (Reuters) – The European Central Bank warned on Thursday that a new surge in COVID-19 infections poses risks to the euro zone’s recovery and reaffirmed its pledge to keep borrowing costs low to help the economy through the pandemic.
Having extended stimulus well into next year with a massive support package in December, ECB policymakers kept policy unchanged on Thursday, keen to let governments take over the task of keeping the euro zone economy afloat until normal business activity can resume.
But they warned about a new rise in infections and the ensuing restrictions to economic activity, saying they were prepared to provide even more support to the economy if needed.
“The renewed surge in coronavirus (COVID-19) infections and the restrictive and prolonged containment measures imposed in many euro area countries are disrupting economic activity,” ECB President Christine Lagarde said in her opening statement.
Fresh lockdowns, a slow start to vaccinations across the 19 countries that use the euro, and the currency’s strength will increase headwinds for exporters, challenging the ECB’s forecasts of a robust recovery starting in the second quarter.
Lagarde saluted the start of vaccinations as “an important milestone” despite “some difficulty” and said the latest data was still in line with the ECB’s forecasts.
She conceded that the strong euro, which hit a 2-1/2 year high against the dollar earlier this month, was putting a dampener on inflation and reaffirmed that the ECB would continue to monitor the exchange rate.
The euro has dropped 1% on a trade-weighted basis since the start of the year, but is up nearly 7% over the last 12 months. Against the U.S. dollar, that number rises to over 10%.
Opening the door for more stimulus if needed, Lagarde confirmed the ECB would continue buying bonds until “it judges that the coronavirus crisis phase is over”.
Lagarde also kept a closely watched reference to “downside” risks facing the euro zone economy, which has been a reliable indicator that the ECB saw policy easing as more likely than tightening.
But she signalled those risks were less acute, in part thanks to the recent Brexit deal.
“The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging,” Lagarde said. “But the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk.”
Lagarde conceded that the immediate future was challenging but argued that should not impact the longer term.
“Once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term,” Lagarde said.
Benign market indicators support Lagarde’s argument. Stocks are rising, interest rates are steady and government borrowing costs are trending lower, despite some political drama in Italy.
There is also around 1 trillion euros of untapped funds in the Pandemic Emergency Purchase Programme (PEPP) to back up her pledge to keep borrowing costs at record lows.
The ECB has indicated it may not even need it to use it all.
“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said.
Recent economic history also favours the ECB. When most of the economy reopened last summer, activity rebounded more quickly than expected, indicating that firms were more resilient than had been feared.
Uncomfortably low inflation is set to remain a thorn in the ECB’s side for years to come, however, even if surging oil demand helps put upward pressure on prices in 2021.
With Thursday’s decision, the ECB’s benchmark deposit rate remained at minus 0.5% while the overall quota for bond purchases under PEPP was maintained at 1.85 trillion euros.
(Editing by Catherine Evans)
Bank of Japan lifts next year’s growth forecast, saves ammunition as virus risks linger
By Leika Kihara and Tetsushi Kajimoto
TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and upgraded its economic forecast for next fiscal year, but warned of escalating risks to the outlook as new coronavirus emergency measures threatened to derail a fragile recovery.
BOJ Governor Haruhiko Kuroda said the board also discussed the bank’s review of its policy tools due in March, though dropped few hints on what the outcome could be.
“Our review won’t focus just on addressing the side-effects of our policy. We need to make it more effective and agile,” Kuroda told a news conference.
As widely expected, the BOJ maintained its targets under yield curve control (YCC) at -0.1% for short-term interest rates and around 0% for 10-year bond yields.
In fresh quarterly projections, the BOJ upgraded next fiscal year’s growth forecast to a 3.9% expansion from a 3.6% gain seen three months ago based on hopes the government’s huge spending package will soften the blow from the pandemic.
But it offered a bleaker view on consumption, warning that services spending will remain under “strong downward pressure” due to fresh state of emergency measures taken this month.
“Japan’s economy is picking up as a trend,” the BOJ said in the report, offering a slightly more nuanced view than last month when it said growth was “picking up.”
While Kuroda reiterated the BOJ’s readiness to ramp up stimulus further, he voiced hope robust exports and expected roll-outs of vaccines will brighten prospects for a recovery.
“I don’t think the risk of Japan sliding back into deflation is high,” he said, signalling the BOJ has offered sufficient stimulus for now to ease the blow from COVID-19.
NO EXIT EYED
Many analysts had expected the BOJ to hold fire ahead of a policy review in March, which aims to make its tools sustainable as Japan braces for a prolonged battle with COVID-19.
Sources have told Reuters the BOJ will discuss ways to scale back its massive purchases of exchange-traded funds (ETF) and loosen its grip on YCC to breathe life back into markets numbed by years of heavy-handed intervention.
Kuroda said the BOJ may look at such options at the review, but stressed a decision will depend on the findings of its scrutiny into the effects and costs of YCC.
He also made clear any steps the BOJ would take will not lead to a withdrawal of stimulus.
“It’s too early to exit from our massive monetary easing programme at this point,” Kuroda said. “Western economies have been deploying monetary easing steps for a decade, and none of them are mulling an exit now.”
(Reporting by Leika Kihara and Tetsushi Kajimoto; additional reporting by Kaori Kaneko; Editing by Simon Cameron-Moore & Shri Navaratnam)
World Bank, IMF agree to hold April meetings online due to COVID-19 risks
WASHINGTON (Reuters) – The International Monetary Fund and the World Bank have agreed to hold their spring meetings, planned for April 5-11, online instead of in person due to continued concerns about the coronavirus pandemic, they said in joint statement.
The meetings usually bring some 10,000 government officials, journalists, business people and civil society representatives from across the world to a tightly-packed two-block area of Washington that houses their headquarters.
This will be the third of the institutions’ semiannual meetings to be held virtually due to the pandemic.
(Reporting by Andrea Shalal; Editing by Chris Rees
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