Standard Chartered’s first-half UAE profit declines

Dubai: Standard Chartered on Wednesday reported a $35 million (Dh128.6 million) decline in it UAE operating profits to $289 million as the bank posted a flat operating profit of $442 million for the Middle East North Africa and Pakistan (MENAP) region.

Loan impairment in MENAP region fell by $7 million to $27 million, largely within the UAE.

Globally, the bank’s income fell 5 per cent to $9.26 billion and profit before tax fell 20 per cent to $3.26 billion. Standard Chartered, which makes about three-quarters of its earnings in Asia, attributed the decline in first half profits to losses it incurred in Korea and declining revenue from financial markets.

“Our performance this first half is clearly disappointing. We’re taking action on multiple fronts, both in response to near term pressures and to execute our refreshed strategy, with the objective of getting back to a trajectory of sustainable, profitable growth.” said Peter Sands Group Chief Executive of Standard Chartered said in a statement.

In the MENAP region the bank’s total income fell $20 million, or 2 per cent, to $951 million, reflecting a challenging business environment, margin compression and heightened competition.

Income in the UAE, which generates over half of the income in this region, was down $35 million, or 6 per cent, to $596 million.

For the region as a whole client income was down 5 per cent. Income from financial market products fell primarily due to lower income from foreign exchange as spreads compressed and from rates reflecting reduced client flows.

While Transaction Banking income was down, as margin compression in cash management offset higher average balances, income from Corporate Finance was lower, as deal flow slowed, and lending income was impacted by repayments and continued balance sheet optimisation.

Volumes in credit card and personal loans and mortgages in the region increased as market conditions improved, offsetting margin compression from competitive pricing and surplus liquidity.

Operating expenses in the region were $11 million, or 2 per cent, lower at $482 million, reflecting headcount rationalisation in the UAE and cost discipline across the region.

Despite the challenging environment in some of the key markets it operates, 20 markets delivered more than $100 million in income, with eight returning more than $100 million in profits.

Africa income was up 3 per cent, Hong Kong up 3 per cent and China up 15 per cent. Income from Greater China was up 5 per cent, benefiting from the increasing inter-connectivity within the region, particularly between Hong Kong and mainland China.

The bank is going through a reorganisation focused on revenues and cost management. In the first half of the year costs were up just 1 per cent despite significant increases in regulatory and compliance costs.

Total impairment was just over $1 billion. Most of the increase was due to the write-down of some commodity exposures in China as well as a one-off impairment of certain strategic and associate investments.

“There are immense opportunities in our markets and we are confident we can translate the strength of our balance sheet and the depth and quality of our client franchise into sustained shareholder value creation,” Sands said.