Standard Chartered has had a “very good start to the year”, shareholders heard at the bank’s annual meeting on Wednesday, with both its consumer and wholesale businesses showing “good momentum”.
However, Peter Sands, chief executive, said in in a trading update that there had been a charge to profits in the first quarter of $97m against the bank’s asset backed securitisation portfolio, caused by a combination of impairment and widening credit spreads.
Further, there had been a $156m charge on available-for-sale assets, which is taken against reserves rather than profits.
The shares’ immediate response was to weaken, leaving the price down 11p at £18.73 in lunchtime trading. Earlier in the day the shares had been trading up from its opening price.
Mr Sands reminded shareholders that the bank, which is heavily focused on emerging markets, had “no direct subprime exposure and very limited indirect exposure to US subprime assets.”
Despite market turbulence, the group had “enjoyed consistent access to debt capital markets” and since the start of 2008 had issued around $4bn of senior and subordinated debt. He said the bank “remains well capitalised”, hinting that it did not need to tap the equity markets for capital, and had a strong liquidity position.
Consumer banking had achieved a double-digit increase in income in the year to date, although the interest rate environment had put some pressure on liability income. Asset quality remained good, but there were continuing challenges in Pakistan and Thailand.
In preliminary results in February the group had noted that political uncertainties in Pakistan had caused loan impairment to rise, while in Thailand a deterioration in the unsecured loan book had resulted in higher loss rates.
Mr Sands said wholesale banking had seen “a particularly strong start to the year” across its regions and products. The bank remained “extremely vigilant given the external environment” about asset quality but had seen “no material deterioration” in the corporate loan book.
Mervyn Davies, chairman, told shareholders: “I do not believe the crisis is over.” But he said the bank was “well placed in a world of turmoil”.
He said the lessons to be learnt from the past year were that banking was a cyclical industry, and liquidity and credit evaluation were key. Mispricing risk “can have fatal consequences,” he said, and “if not controlled compensation [paid to staff] can negatively affect behaviour and risk management.”