Staff cuts coupled with growth in Hong Kong and other key Asian markets have put Standard Chartered PLC on track for record profits in the first half of this year.
The Asia-focused bank yesterday said income and profit rose more than 10 percent in the first five months of the year and cost growth would be broadly in line with income growth in the first half.
“It’s a very positive statement and an improvement on the Q1 stage, as they’ve clearly improved the situation on the cost to income line,” said Mike Trippitt, an analyst at Oriel Securities in London, keeping a “buy” stance on the stock.
Cost growth rising faster than income growth, known as “negative jaws,” has dogged Standard Chartered the past year as it battles rivals such as HSBC Holdings PLC to keep and retain talent in key, fast-growing Asian markets such as China and Hong Kong. Analysts had expected costs to outpace income again in the first half and be broadly flat for the full year.
Finance director Richard Meddings said the bank had cut 1,300 staff in the first five months of the year, after adding 7,000 staff last year to give it 85,000 employees.
Investment and hiring will pick up in the second half of the year, he said, resulting in a net increase in staff for the full year in line with previous guidance of a 1,000 rise or slightly fewer.
“We have a relatively high attrition rate consistent with the financial services industry, so when people leave us we are able to manage the pace at which we rehire,” Meddings told reporters on a conference call.
“We will accelerate investment in the second half,” he added, aiming to keep cost growth in line with income growth for the year.
Meddings said the London-headquartered bank would keep its capital level “above the fray” of minimum global standards and remain a net provider of liquidity to the interbank market.
However, it has withdrawn liquidity provided to eurozone banks in the last 18 months as the region’s problems have deepened, and directed the funds back to Asian clients.
A strong performance in Hong Kong, Singapore, Malaysia, China and Indonesia helped offset a weaker showing from India — which was its biggest market last year — and Africa, the bank said.
Standard Chartered is expected to make a profit of US$6.9 billion this year, up 13 percent from US$6.1 billion last year, according to the average of 22 analysts polled by Thomson Reuters. That would mark a ninth successive year of record profit.
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