Standard Chartered PLC said operating profit for the third quarter dropped 16 percent and earnings would fall in the second half as a whole, hurt by a jump in bad loans and higher regulation and compliance costs.
The Asia-focused bank also said yesterday it would target a further US$400 million in cost reductions for next year, as it moves to combat a downturn in the emerging markets which had previously been a tremendous engine of growth, driving it to 10 straight years of record profits before last year.
“Whilst some of these actions will impact near term performance, they are crucial to getting us back to a trajectory of sustainable, profitable growth,” Standard Chartered Bank chief executive Peter Sands said in a statement.
Operating profit for the July-to-September quarter fell to US$1.5 billion from US$1.8 billion posted in the same period a year ago.
Standard Chartered said it now expected underlying profits in the second half to be lower than the same period last year, partly due to a higher UK bank tax and regulatory and restructuring costs.
It had previously said it expected profits to fall this year for a second straight year, but that earnings in the second half would be higher than a year ago.
By 7:15am GMT, Standard Chartered’s Hong Kong listed shares were down 3.6 percent.
The lender has been hit by losses in South Korea and other challenges including a slowdown in growth in many of its core emerging markets and weak trading activity.
“Standard Chartered will struggle to drive returns above cost of capital in the next 12 to 18 months. Structural issues around competition and reliance on low RoA [return on assets] businesses are biting,” Bernstein analyst Chirantan Barua said.
The bank is also under heavy regulatory scrutiny, having warned on Aug. 6 that it faced its second fine in two years from New York’s financial regulator for problems in its controls to prevent money laundering.
Standard Chartered said impairments for the third quarter rose to US$539 million from US$250 million in the same period last year, as a small number of corporate and institutional clients were hammered by weak commodity markets.
“We remain watchful in India, in China and of commodity exposures more broadly, where we have continued to tighten our underwriting criteria and reduce our exposures,” it said.
In Asia, Standard Chartered’s results in the past two years have been weighed down by big losses in South Korea, where it took a US$1 billion hit last year amid rising bad debts, a long-running dispute with staff and tough domestic competition.
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