HONG KONG: Asia-focused bank Standard Chartered reported a 22 percent drop in profits in the first quarter here the other day as losses from bad loans jumped 80 percent from a year ago and trading conditions remained challenging.
StanChart’s loan impairments rose to US$476 million (HK$3.71 billion) from US$265 million a year ago. Pretax profit during January to March fell to US$1.5 billion, down from US$1.9 billion a year earlier.
The London-based bank said it was on schedule to get its common equity Tier 1 capital ratio above 11 percent this year. It sees cost savings of more than US$400 million in 2015.
Its core capital, a measure of financial strength, was 10.7 percent at the end of 2014, but it did not say what its core capital was at the end of March.
The lender has said it will cut costs and shrink its loan book in an effort to deal with the market’s concerns about its capital strength.
Yesterday, it said it was well advanced with a plan to reduce its risk weighted assets by between US$25 billion and US$30 billion in the next two years. The bank also said the location of its headquarters was under constant review and a sharp increase in a tax on banks in Britain meant it was watching the situation closely.
“At the moment it’s something we’re watching, we’re looking at, we’re thinking about, but at this point in time there’s no change in our position,” said Andy Halford, StanChart’s finance director.
“Clearly the increase in the [bank levy] number this time is pretty significant,” Halford said. The levy has risen eight times since being introduced in 2010 to ensure banks make a “fair contribution” after the financial crisis.
Halford estimated StanChart would pay about US$540 million (HK$4.2 billion) under the levy this year, or about 11 percent of expected pretax profits and up from US$366 million in 2014.
Singapore, the hub for most of Standard Chartered’s businesses, would be the most likely destination if it chose to move, industry sources have said.
