Standard seeks acquisitions in China

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The Independent Online

The emerging markets bank Standard Chartered unveiled record profits yesterday, with strong performances from consumer and wholesale banking.

The emerging markets bank Standard Chartered unveiled record profits yesterday, with strong performances from consumer and wholesale banking.

But increasing margin pressure in Hong Kong is forcing the bank to seek acquisitions in China.

The London-listed bank's focus on high-growth markets in Asia and the Middle East makes it an attractive takeover target, but Mervyn Davies, the chief executive, said: "We want to stay independent and have got a very strong and exciting future."

The bank's shares have risen on speculation a big US player may buy a stake, which was triggered by the death last year of the Asian tycoon Khoo Teck Puat, Standard Chartered's biggest shareholder. He left the 13.4 per cent stake to his family. Mr Davies said the family had been long-term supportive shareholders but it was up to them to decide what to do with their shares.

The bank reported a 39 per cent rise in annual pre-tax profits to $2.2bn (£1.1bn), just ahead of analysts' forecasts of $2.1bn. Revenues were up 13 per cent to $5.4bn, and the consumer and the wholesale bank each reported operating profits of more than $1bn. The bank also achieved its return on equity goal of 20 per cent, up from 15.7 per cent in 2003.

The results benefited from a 60 per cent fall in bad debts to $214m and analysts warned that such a decline would not be repeated. Nic Clarke, an analyst at the stockbroker Charles Stanley said: "We must recognise that ongoing results are unlikely to get such a helping hand from a lower bad debts charge. This probably made the diversification of earnings into Korea all the more pressing."

Faced with increasing margin pressure in its largest market - Hong Kong - where consumer banking revenues were flat at $954m last year, Standard Chartered acquired Korea First Bank and opened more branches in India and China, where it sees the biggest long-term growth opportunities.

In India, it is the largest international bank with 75 branches and plans to grow organically. In China, where Standard Chartered bought a 20 per cent stake in the new Bohai Bank. It is looking for further acquisitions, Mr Davies said. There are worries in the City, however, that Standard Chartered overpaid for Korea First, its biggest acquisition at $3.3bn. Standard shares closed 11.5p lower yesterday at 995p.

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