Share placing offsets more strong banking results
Standard Chartered's interim results topped consensus forecasts, thanks to wholesale and emerging markets performances, but a £1 billion fund-raising hit the shares
Standard Chartered, the UK-listed bank that, like HSBC, has a strong presence in Asia, today reported pretax profits rose 10% year-on-year to US$2.88 billion in the six months to end-June, fuelled by a strong performance from its wholesale banking division, which reported pretax operating profit up 36% at $2.25 billion. However, consumer banking’s pretax operating profits fell back 57% over the year to $348 million. Overall, group net profit rose to $1.9 billion in the first half of 2009 from $1.8 billion in the year-ago period.
Group profit levels beat analyst expectations and wholesale banking was particularly celebrated by the market. “The share placing is obviously going to hit the shares in the immediate term but these are strong numbers overall and though consumer looks a touch weak, wholesale should really reassure,” a London-based trader said this morning. “Very good figures, strong in the Far East as always and as expected,” another trader commented.
Group earnings per share landed at 95 US cents on a normalised basis (post-rights), down 10% year-on-year, but the bank has opted to raise its interim dividend by 10% to 21.23 US cents.
Accompanying the figures, Standard Chartered also announced an open book-build today to raise £1 billion to take advantage of potential opportunities in Asia, Africa and the Middle East but chief executive Peter Sands assured the funds raised are not ear-marked for a “spending spree” and also underlined that the group is not raising equity because it needs to strengthen its capital position nor because it has been told to by any financial authority.
Following the results and fund-raising news, Panmure Gordon analyst Sandy Chen said: “We would have been happier if these results and the 10% dividend hike had not been accompanied by the £1billion share placement,” adding that, “the combination of a dividend hike on one hand and a share issuance on the other begs questions about what management is trying to signal.” Overall, however, Chen interprets this combination as a sign of management’s confidence in both the macro prospects in Standard Chartered’s emerging markets and their business model.
Panmure Gordon is now reviewing its earnings forecasts, target price and recommendation.
In early morning deals, shares in the bank had shed 47p to 1,389p—the main casualty in the FTSE 100 index. Noting that the stock has had a good run into the results, one trader commented: “it might be a case of better to have travelled than to have arrived” and added “they might come off with the market, seems profit taking is upon us…finally.”
Standard Chartered’s fall helped drag the FTSE 100 index down 27.6 points from its 2009 closing high to 4,654.9, down 0.6%, at last check.
