Asia-focused Standard Chartered Bank Plc reported a market-beating 17 percent rise in first-half pretax profit on Wednesday, helped by strong growth in some key markets such as Hong Kong, keeping it on track for another year of record profits.
StanChart also said it expects costs to rise largely in line with income this year, removing a blotch that had weighed on the lender over the past few years of its rapid growth.
Costs are coming down, which is always encouraging, said John Wadle, a Hong Kong-based analyst with Mirae Asset Management. On balance, it was a set of encouraging results and I expect second half revenue to continue growing strongly.
The London-headquartered bank reported a pretax profit of $3.64 billion, up from $3.12 billion a year earlier and beating expectations for $3.47 billion based on a poll of nine analysts by Thomson Reuters I/B/E/S.
We are maintaining our tight grip on expenses in both businesses while beginning to accelerate investment to underpin growth in 2012, Chief Executive Peter Sands said in a statement posted on the Hong Kong stock exchange. He was referring to the bank's consumer and wholesale banking businesses.
Cost growth rising faster than income growth, known as negative jaws, has dogged the bank in the past year as it battles rivals such as HSBC Holdings Plc to keep and retain staff in fast-growing Asian markets.
This year, StanChart said it expected to keep costs and income growth roughly in line, known as neutral jaws. Cost-to-income ratio fell to 54 percent from 54.3 percent at the end of 2010.
That is lower than HSBC's 57.5 percent.
INDIA PROFIT SLIDES
To keep costs under control, lenders have been looking to eliminate jobs, with HSBC saying it will eliminate a total of 30,000 jobs by 2013 and Credit Suisse saying it will cut 2,000 jobs.
StanChart said it cut about 1,200 staff in the first half of this year, as part of its plans to keep costs under control. Its
staff costs rose about 9 percent to over $3.2 billion, in a wider environment in Asia that HSBC called a war for talent on Tuesday.
Profit from India, its biggest market, fell 39 percent and the bank said the immediate outlook for the country remained challenging as the slowdown there was faster and deeper than expected.
Costs were too high in South Korea and its balance sheet there inefficient, StanChart said, where it has had to grapple with strikes over changes to its pay structure.
Its London-listed shares are down about 11 percent so far this year, valuing the bank at about $60 billion. It is trading at about 11 times earnings, roughly in line with crosstown rival HSBC.
(Editing by Muralikumar Anantharaman)