Standard Chartered, the emerging markets bank, said yesterday that its net profits jumped a fifth to US$3.41 billion last year, leaving it well-placed to tackle the Asia slowdown.
Despite the lift in profits after tax, Standard Chartered was not immune to rising bad debts linked to the credit crisis, as it wrote off US$1.79 billion last year, more than double the amount of US$818 million in 2007.
“To deliver record results in this exceptional environment is a great achievement,” the bank’s acting chairman John Peace said in the group’s earnings statement.
Chief executive Peter Sands said the best way to continue delivering shareholder value was through Standard Chartered’s “rigorous focus on Asia, Africa and the Middle East” in addition to a “prudent approach to liquidity and capital” and “continued discipline in cost and risk management.”
He said Asian banks were better placed to weather the financial crisis than their Western peers, which are losing billions of dollars because of the credit crisis and issuing new shares to boost capital.
“While Asian banks are feeling the stress, as dollar liquidity dries up and the credit environment deteriorates, they are on the whole in much better shape than many counterparts in the West,” Sands said in the statement.
“The ingredients of the banking crisis in the UK and the US, the over-leverage, overcomplexity and opacity, are not present to nearly the same extent,” he said.
A company is described as highly “leveraged” if it finances its activities by relying heavily on borrowed money.
Sands said it was “also unwise to draw too many analogies” to the Asian financial crisis of the 1990s.
“In fact, the resilience of Asia owes much to lessons learnt from that experience. This time most countries have substantial foreign currency reserves and strong fiscal positions. This time most businesses have relatively conservative balance sheets,” he said.
As for Standard Chartered, Sands said the second-biggest British banking group after HSBC “was focused on building balance sheet strength and on maintaining high levels of liquidity,” adding that it was “on a firm footing for the challenges and opportunities that will come during 2009.”
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