UPDATE 2-StanChart says record income, profits Jan-May

* StanChart says "very strong" performance in wholesale

* Consumer bank H1 income seen down on year, bad debts rise

* Bank "cautious" on the outlook, but tone more positive

* Shares dip 0.5 percent

(Adds analyst comments, details, shares)

By Steve Slater

LONDON, June 25 (Reuters) - Asia-focused bank Standard Chartered (STAN.L) reported record levels of income and profit in the first five months of this year, though it said it remained cautious on the economic outlook.

The bank, which gets two thirds of its revenue from Asia, said income growth had been driven by "a very strong performance" in wholesale banking, partly offset by lower income in consumer banking, where bad debts have risen.

"Although there are tentative signs of improving economic conditions in some of our markets, equally there are signs of continuing stress ... We therefore remain cautious on the outlook," said Chief Executive Peter Sands.

That tone was an improvement from its last statement seven weeks ago, however.

"The outlook rhetoric has changed a bit since May. Back then they were talking about difficult and challenging markets, now they are talking about what you could characterise as almost 'green shoots' in some markets; it's slightly more positive," said Alex Potter, analyst at Collins Stewart.

Standard Chartered (2888.HK) has weathered the financial crisis better than most rivals thanks to its focus on Asia, and delivered record profits of $4.8 billion last year, up 19 percent on 2007. [ID:nL3873522]

By 0920 GMT its shares were down 0.5 percent at 1,189 pence, valuing the bank at 22 billion pounds ($36.45 billion). The shares have jumped 37 percent this year, outpacing a 19 percent rise by the European bank sector .SX7P.

Wholesale banking is benefiting from winning market share and increased asset margins, with business in Singapore, the Middle East, Hong Kong and Korea particularly good, the bank said. "Following a record first quarter, April was good and May even stronger," it said.

Credit quality in wholesale had deteriorated in the second quarter, however, and the unit's first-half loan impairment was likely to be higher than in the second half of 2008, it said.

Standard Chartered's consumer bank is faring less well and faces a more difficult outlook as Asian economies weaken. Bad debts have risen sharply, and the bank is reshaping the business to cross-sell more products to customers.

Consumer banking income for the first half is expected to be lower than in the previous six months, it said.

There had been a "moderate" deterioration in loan impairment "of some tens of millions of dollars" in the second quarter relative to the first quarter, it said, citing worsening conditions in India, Pakistan and the UAE.

Standard Chartered, which raised $2.7 billion from a rights issue last year, said its capital ratios were above its targeted range. Its core tier 1 capital ratio was 7.6 percent at the end of 2008. (Editing by Will Waterman)