View from City Road: Standard becomes more long-sighted

The most convincing explanation for why Standard Chartered's share price fell so sharply yesterday was the simplest - it had already gone up too far and people are getting nervous, so sell on the news.

There was certainly no reason to take fright at the chairman's warning that the high cost base demanded 'urgent management action' to get it down. This is plain common sense, because a double- figure increase in costs is too much. When profits are going up faster there is clearly a temptation to ignore rising costs, which the board is promising to resist.

Equally, it makes sense for the bank to sell subsidiaries that do not help to develop its businesses in newly industrialised and emerging markets.

This is confirmation that Standard now has a much better idea of what it wants to do and where; investors were sensibly buying its shares because of the bank's involvement in Hong Kong and the Asia Pacific region in particular, but the market has been carried away with enthusiasm and bid the share price up to unsustainable levels.

Dramatic growth in profits this year is unlikely, given that dealing profits will be harder to come by, growth in the newly industrialising countries will not be so great and bad debt provisions in the Far East are probably approaching their low point.

UK bad debts will fall, and there is no sign of any of the clangers the bank used to be famous for dropping. Rod Barrett of Goldman Sachs thinks pounds 460m (against pounds 401m in 1993) is an achievable target but not a certainty this year. It is time to regard Standard as a long-term growth stock, not a quick punt on the Far East.