Standard Chartered, the emerging markets bank, yesterday rounded off the FTSE 100 banking reporting season with a flourish, unveiling a seventh successive year of record profits.
The bank also sought to reassure investors about its exposure to Dubai World – just $500m (£333m) of loans have been advanced to troubled companies in the emirate. Pre-tax profits grew by 13 per cent to $5.1bn, on income up 9 per cent at $15.2bn. Standard also increased its dividend, with the total for the year up 9 per cent at 66.03c, after the final payment of 44.8c.
Total pay and bonuses rose by 4 per cent to $4.91bn, but despite its strong performance, the bank confirmed that its chief executive, Peter Sands, planned to hand his £2.1m bonus to charity.
Total pay and bonuses as a proportion of revenue fell to 32 per cent from 34 per cent last year, but the chairman, John Peace, insisted that paying bonuses was important to the business.
Pointing to the bank's strong results, he added: "We pay for good performance and we do not reward failure. We have not used government liquidity, capital or asset protection support.
"On balance, the board has therefore concluded it is in the interests of the business and our shareholders to reward the management team for yet another successful year and to retain top talent in these fiercely competitive markets, but only when appropriate to do so."
The 50 per cent UK banking bonus "supertax" was spread across the firm's 77,000 employees. Standard Chartered has only 2,000 staff in the UK. Most of its profits come from Asia.
Mr Sands also said suggestions that deposit-taking banks should be banned from investment banking, as used to be the case under the US Glass-Steagal Act, were "a bad idea". "Variants of Glass-Steagall seem to us hugely distracting, costly and unlikely to make anyone or anything safer," he said. "Pre-funded resolution funds [to bail out banks] seem equally unattractive, since they institutionalise moral hazard. Contingent capital looks remarkably like some of the overly complex derivatives that helped cause the crisis in the first place and which did not work in practice in the way they were supposed to in theory. I would argue for action, but deliberate, somewhat cautious action."
Despite the generally well-received results, bad debts still rose sharply, coming in at $2bn, against $1.3bn.
In the Gulf, the bank has about $2bn of consumer loans, mainly in Dubai, of which 40 per cent are not secured.
Bonus tax: Darling's unexpected windfall
Britain's banks will pay the Treasury at least £728m to meet Alistair Darling's 50 per cent supertax on staff bonuses. The Chancellor had said the tax was aimed at discouraging banks from paying bonuses and would not generate much more than £550m.
However, foreign banks are expected to add hundreds of millions more to the cash pile Mr Darling will reap from the "one-off" levy, which has proved singularly ineffective in curbing bonus payments.
Standard Chartered will pay bonus tax of £39m on its total global pool of £750m, which is low because the vast majority of its workers are based outside Britain. Barclays will pay £225m and Royal Bank of Scotland £208m. HSBC is paying £256m, made up of £158m from cash bonuses and £98m from bonuses paid in deferred shares, which is more detail than most banks have given.
Lloyds Banking Group, despite the more than £20bn of state support it has received, has not given a final figure but has put its bill at £20m to £30m. It does not have an investment bank and it is these businesses that tend to pay sizeable bonuses.
Most of the plethora of foreign banks in London have not given figures for their contributions.
The bonus paid to the bank's boss Peter Sands, which he is giving to charity.Reuse content