Standard Chartered posts record profits for 2011, ninth year in a row

Standard Chartered PLC has announced a ninth consecutive year of record profits and income in 2011. Its continued performance is underpinned by strong capital and liquidity and multiple sources of income across the faster-growing markets of Asia, Africa and the Middle East. Income was up 10% to US$ 17.64 billion and operating profit increased 11% to US$ 6.78 billion.

The Group now has 24 markets generating income and 14 producing profits of more than $100 million. The diversity of different businesses and geographic markets gives the bank resilient income momentum and enables it to grow even when some markets have a difficult year.

In each of the last five years, it has increased capital levels, staff numbers, earnings per share and dividends, as well and income and profits. Over the same period total lending has increased by 91%.

The Group has a policy of maintaining a strong capital and liquidity position, which enables it to stay open for business and take market share through the economic cycle in core areas of business such as trade finance.

At the end of 2011, the Core Tier 1 ratio was 11.8% and advances to deposits ratio was 76.4%. The Group has no direct sovereign exposure to Greece, Ireland, Italy, Portugal or Spain.

During the year, customer deposits grew by 11% to US$ 352 billion and lending to customers by 9% to US$ 269. Cost growth was in line with income growth, at 10%, despite the UK Bank Levy of US$165 million. Staff numbers were up by some 1,600 over the year to nearly 87,000.

Consumer Banking income climbed 12% to US$6.79 billion and profit 26% to US$ 1.65 billion as the transformation programme continued. The business benefited from selective growth in unsecured assets, improving deposit margins and the impact of the investments made in 2010. Good income growth was seen in all the High Value Segments of Private Banking, up 21%, SME, up 14%, and Priority Banking up, 10%.

The focus on the strong fundamentals continues, with a low average loan-to-value of around 49% on mortgages, and a well-diversified and strongly-secured loan book.  The business has continued to standardise processes and improve cost efficiency to increase investment capacity. Staff numbers in Consumer Banking were up by over 1,200, mainly in China, Singapore, Hong Kong and Africa. The bank opened 35 new branches in 2011, including 19 in China. In addition the bank has updated more than 400 ATMs, enhanced mobile and internet banking capabilities and increased marketing spend year on year.   Wholesale Banking income and profit were both up 9%, to US$ 10.85 billion and US$ 5.22 billion respectively. Client income, 82% of the total, grew by 10% as the bank continued to do more business with its existing clients and invest in products and services to meet their needs.

Income remains well diversified, with double-digit growth in the three largest businesses, Transaction Banking, Financial Markets and Corporate Finance. Within Transaction Banking, trade income was up 9% to US$1,595 million as volume growth more than compensated for year-on-year margin falls, and cash management income grew 27% to US$1,652 million. Financial Markets, which includes foreign exchange, rates, commodities and equities, capital markets and credit, is linked to the Transaction Banking services provided to clients, which gives it resilience despite difficult market conditions. Income was up 12% to US$ 3,688 million. Corporate Finance income was up 10% to US$ 1,873, having closed 15% more transactions compared to the previous year, and after a very strong finish to 2011.

Wholesale Banking benefits from the Group’s strong international network and franchise, with 48% of income generated from clients doing business outside their home markets. Overall loan impairment was up 3%. In Consumer Banking loan impairment decreased by 9% to US$ 524 million, but increased in the second half of the year reflecting the changing size and the mix of the loan book. The bank remains comfortable with overall exposures.

Wholesale Banking Loan impairment in 2011 was US$ 384 million, up 26% on 2010, with the vast majority of this loan impairment charge relating to increased provisioning on previously impaired accounts. Credit quality across the book remains strong and the Group continues to be disciplined and proactive in its approach to risk management.

Standard Chartered Group Chief Executive Peter Sands said: “Our ninth consecutive year of record income and profits demonstrates the power of our strategy and the resilience of our businesses. Our capital and funding strength allows us to remain open for business and win more market share. We see huge opportunities in our core markets of Asia, Africa and the Middle East, both within individual markets, and in facilitating the explosive growth of trade and investment flows within the emerging world. “It is by doing exactly this kind of thing – lending to clients, facilitating their trade, helping them manage foreign exchange and commodity price risk, identifying and supporting new partnerships and investments, helping them access capital markets – that we are fulfilling our social purpose, helping  drive economic growth, and helping to create jobs.”