HONG KONG/LONDON (Reuters) - Profit at Standard Chartered (STAN.L) (2888.HK) jumped 19 percent in 2010 and the Asia-focused bank said it was off to a record start this year as China, India and other Asian markets boomed.
The London-based bank, which generates more than four fifths of its profit in Asia and other emerging markets, said it had its best ever January and expects revenue to grow by at least 10 percent this year and beyond.
It made a pretax profit of $6.12 billion last year, a new high for the eighth year in a row and in line with forecasts, as a sharp drop in bad debts more than offset a rise in wage costs.
But the bank warned banking regulations were becoming more fragmented than coordinated and said it was “relatively cautious” on the outlook for the world economy.
“The bank is very well positioned, and while we won’t see the kind of jump we saw last year, it is still going to be fairly good growth,” said Daniel Tabbush, analyst at CLSA in Bangkok.
A UK fund manager at one of its top 20 investors, who asked not to be named, said the bank was the best in Britain in terms of its geographical focus and management skills and he was relaxed about the cost inflation.
“We have been here before and the company is well managed enough ... this is a business that has the underlying growth to stand a bit of expansion and rise in costs,” the investor said.
By 1230 GMT (7:30 a.m. EST) its London-listed shares were up 4.1 percent at 16.85 pounds, the top performer in a weak Stoxx 600 Europe banking sector index .SX7P.
Chief Executive Peter Sands said the bank started the year with good momentum but faces a battle to attract and retain staff in its hot Asian markets, as local banks become more capable and with international banks “returning to the fray.”
“We are seeing the war for talent across most of our markets in Asia, Africa and the Middle East, and it is very acute in India and China where a quarter of our staff are based,” Sands told reporters on a conference call.
Costs rose 13 percent last year, outpacing a 6 percent rise in income, as higher wage costs were added to by more investment after the bank slowed spending in 2009. Costs rose to 55.9 percent of 2010 revenue from 51.3 percent.
It said its bonus pool for staff rose to $1.19 billion from $1.1 billion and total staff costs increased 17 percent as it paid top dollar to snag several high-profile hires.
The bank last year added about 7,000 staff, or 9 percent more, but Sands said it will only add about 1,000 this year to its 85,000 employees.
It said it plans to keep cost growth at the same rate as income growth this year after the step up in spending in 2010.
Meeting tougher regulatory requirements cost about $150 million extra last year. “That contains a bundle of things but is a good indicator of the direct costs of the changes in the regulatory environment,” Sands said.
A UK tax on banks’ balance sheets is expected to cost about $180 million this year.
The bank said it expects to maintain its return on equity in the “mid-teens” percent. Rival HSBC (HSBA.L) (0005.HK) this week cut its profitability targets because of the cost of tougher regulations and plans to cut costs.
Standard Chartered’s history of financing trade between Europe, Asia and Africa dates back to 1853 and its wholesale business, which includes investment banking and trade finance operations, accounted for over three-quarters of profit, even after a recovery in consumer banking.
India surpassed Hong Kong as its top profit contributor last year with earnings of $1.2 billion.
The bank expects the majority of its markets to grow at 5-8 percent annually in the next 20 years, and reckons the five largest economies in 2030 will be China, the United States, India, Brazil and Indonesia.
Losses from bad debts more than halved to $883 million, which Sands said was back to “more or less” normal levels after a spike to $2 billion in 2009.
The bank’s second-half net profit attributable to ordinary shareholders rose 52 percent.
Its London shares are down 2 percent this year, lagging a 9 percent rise in the European bank index, and valuing the bank at 38 billion pounds. The shares have eased from an all-time high of 19.75 pounds in November due to worries about rising costs and their lofty premium to peers.
Additional reporting by Sarah White and Sinead Cruise; Editing by David Cowell