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Hong Kong still fragile as it tries to get over Sars, says Standard

Katherine Griffiths,Banking Correspondent
Thursday 07 August 2003 00:00 BST
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Standard Chartered, the bank focused on developing countries, sounded a cautious note yesterday about the health of the Hong Kong economy, which is still struggling to recover from the outbreak of the Sars virus earlier this year.

Mervyn Davies, chief executive of the London-listed bank, said the situation in Hong Kong was still "fragile". "The mood has improved in the last few weeks, but we have got to be cautious so that people don't think everything is fine now," Mr Davies said.

Against a tough six months in Hong Kong and other parts of the world, Standard reported better-than-expected interim profits, up by 17 per cent to $741m (£460m) in the six months to the end of June. The shares slipped 25.5p to 774.5p on Mr Davies' move to keep a lid on expectations of a dramatic bounce back in Hong Kong in the next six months.

The bank showed its focus is moving away from its historic home in Hong Kong, saying more than 50 per cent of profits in the first half had came from the Middle East, India and Africa.

"We are showing the bank's business is very much in better shape. We are more diversified and in areas of huge growth," Mr Davies said.

While Hong Kong and east Asia until a few years ago contributed 75 per cent of Standard's profits, Standard is now focusing on less developed economies, such as India and Africa and parts of the Middle East.

India, which was pinpointed by the bank as a major area of interest, contributed 15 per cent of the bank's profits. "The challenge is not just to be the biggest foreign bank in India, which we are, but the largest bank overall," Mr Davies said.

At the moment, Standard has 26 per cent of profits made by foreign banks in India, but only 2 per cent of the share of the country's entire banking market.

Standard Chartered also said it had acquired a 9.8 per cent stake in KorAm Bank in South Korea for $154m to help build up its business there.

Standard, which was hit by rising bankruptcies in Hong Kong last year, said its bad debt charges fell to $308m from $407m. Losses due to credit card debts in Hong Kong improved to $104m against $138m in the second half of 2002.

South Asia, the Middle East and United Arab Emirates were highlighted as areas of further strong growth. "At the moment we have a market share of about 7 per cent on those areas. I won't be satisfied until that is 10 or 15 per cent, though it will take a few years," Mr Davies said.

In the past six months Standard has gained a banking licence in South Africa and is setting up an operation in Afghanistan, which will at first be aimed at providing a limited deposit-taking operation for aid workers.

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