Standard Chartered's chairman, Mervyn Davies, attacked the banking industry yesterday for rewarding excessive risk-taking as his bank announced a forecast-busting rise in first-half profit.
Mr Davies said the current turmoil was the worst he had seen in his career and that the sector had lost sight of the basic principles of banking.
"It is clear that there has been a mispricing of risk, that the market did not understand the value and importance of liquidity, and that some banks did not fully understand the instruments they were dealing in," he said. "The industry should not reward excessive risk-taking or reward failure. Boards and remuneration committees will have to reflect in future on whether the risks and rewards are appropriate."
Standard Chartered's first-half pre-tax profit rose 31 per cent to $2.59bn (£1.32bn) as it tapped into high-growth emerging markets. It will be the only listed British bank to increase profits in the first half of the year. The bank increased its interim dividend by 11 per cent to 25.67 cents.
Richard Meddings, the finance director, said the bank had partly been lucky because it was in high-growth markets with big savings pools. "We are in the right markets and we are doing the right thing," he said.
Standard Chartered said emerging markets such as China and India faced challenges from inflation and the knock-on effects of the economic slowdown in Western countries, but that growth would slow rather than stall. "We do see a slowdown coming but the point is the markets are going to slow down to levels of growth that are multiples of the levels of growth seen in Western econ-omies," Mr Meddings said. "Our market shares are not that significant in all markets so we can increase our share into markets where the economies are still growing."
The bank has not been entirely immune from the financial turmoil. It took a $116m write-down on its structured investment vehicle Whistlejacket last year and put it into receivership in February. In the first half it wrote down $130m for investments in asset-backed securities.
"We have made mistakes and we have learnt from those," Mr Meddings said. The bank's shares rose 8.4 per cent to 1,542p.Reuse content