Standard Chartered Profits Jump, Eyes More M&A
Asia-focused bank Standard Chartered beat expectations with a 30% jump in half-year profit on Tuesday and said it would consider more acquisitions to accelerate growth, including in South Africa.
Standard Chartered , which makes three-quarters of its profits in Asia, said pretax profit in the six months to the end of June was $1.98 billion, up from $1.53 billion a year before and ahead of the average forecast of $1.85 billion in a Reuters Estimates poll of six analysts.
"South Africa is a country where we'd like to grow our business because we see it fitting well with the rest of our Africa franchise," Chief Executive Peter Sands told reporters on a conference call.
"As in every market our primary inclination is to drive growth through organic means, but we wouldn't rule out acquisitions either," he said. Sands declined to comment on speculation the bank was interested in buying Nedbank, South Africa's fourth-biggest bank. A report last month said it had been in talks with Nedbank, which is majority owned by insurer Old Mutual.
Analysts said strong wholesale banking growth was supported by encouraging momentum in consumer banking, although a disappointing performance in South Korea -- where the bank made its biggest ever acquisition in 2005 -- dampened the tone.
"Standard's emerging markets positioning provides attractive growth drivers and execution has been strong. We see upside from growth and bid speculation," analysts at JP Morgan said.
Speculation the bank could be a takeover target for Barclays or someone else continues to linger. Standard Chartered itself has made a string of purchases in recent years and will not shy away from more deals, Sands said.
"We look at acquisitions all around our footprint and fundamentally we are always on the lookout for opportunities to build scale and capability. But we have to be convinced these acquisitions will drive shareholder value in a compelling way," he said.
Costs grew faster than income in the first half, as it had predicted, as it invested in China, private banking and staff.
Expenses for underlying businesses -- stripping out the impact of recent acquisitions -- rose 23% in the first half, faster than underlying revenue growth of 21%, and is likely to be balanced for the full year.
Sands said cost growth was likely to be "broadly in line" with income growth again in 2008, but he said it was too early for an accurate prediction.
The bank had strong income momentum in both wholesale and consumer banking, but it said its Korean business posted a "disappointing" performance.
South Korea consumer banking profits fell 2% to $117 million in the first half, as a tough mortgage market there hit volumes and margins, and Sands said he did not expect the mortgage market to return to growth this year.
The group's first-half charge for bad debts was $361 million, up 3% from a year ago, but underlying bad debts fell 27% due to improvements in Taiwan impairments. It had not seen any significant credit deterioration in its markets following recent credit market turbulence, it said.