Although global financial giant Standard Chartered Group does not issue formal quarterly reports, it did divulge Tuesday that both its revenue and profits for the first quarter of this year reached record highs, based on a year-on-year (YoY) comparison. However, the Group warned that its businesses are facing profit margin compression and increasing market competition.

Standard Chartered released its "Interim Management Statement" (IMS) Tuesday to help the public gauge the performance of the Group for the first quarter of this year. However, the Group did not hold any press conference to present or explain the figures.

In the IMS, the Group detailed its business segments' performances in consumer banking, wholesale banking and corporate finance.

The consumer banking segment's revenues achieved double-digit growth in the most recent quarter on a YoY basis, and this figure is higher than the average level of the second half of 2009. The Group remains highly liquid and well capitalized, as more deposits are coming into the bank and the Group remains a significant net lender to the inter-bank money market.

As the global economy improves, the Group has adopted disciplined risk management and has increased loan payment collection activities; moreover, the asset quality of the consumer banking business has improved on a YoY basis. The Group emphasized that there were no significant new impairments charged in the last quarter.

"Concerning the mortgage business in the whole consumer banking segment, the Group achieved good business volume growth; however, it had been more than offset by profit margins compression as keen market competition is evident in this line of business," Standard Chartered said.

Within the wholesale banking segment, client income in wholesale banking registered an increase of over 20 percent on a YoY basis, which contributed nearly 80 percent of the total revenues in this segment, Standard Chartered said. However the Group cautioned that the cost-control capability of its wholesale business is relatively weaker than the consumer banking sector in the first quarter of 2010.

For the corporate finance segment, as the global economy rebounds, more initial public offerings (IPOs) and refinancing deals will emerge and this can foster future income growth in this segment, the Group predicted.

One financial analyst argues that the Group's first quarter performance of this year may be inflated because the comparison base is too low.

"Given the fragile status of the global economy in March 2009, it is expected that the Group performance at that time would be poor; therefore, we should take account of the low comparison base factor in assessing its strong recovery in income and profit in the first quarter of this year," Patrick Shum, director of Millennium Asset Management told China Daily.

"Standard Chartered retail business growth potential might be hindered by several factors: profit margins squeeze, decrease in non-fee based incomes, the imposition of global financial regulations upon the Group, and whether the European debt crises will be contagious and spread to other financial systems," said Shum.

"Hence, Standard Chartered should leverage its traditional strengths on the business banking segment so that it can maintain its record growth in income and profit for the rest of the year," Shum suggested.

"Standard and Chartered has established strong operation bases in emerging markets like India, Middle East and Africa. As these economies have exhibited strong recovery, these economies may increase interest rates and improve the Group's profitability in these markets," Shum added.

China Daily

(HK Edition 05/05/2010 page2)