Standard Chartered warns of first profit fall in ten years

Shares of Standard Chartered plummeted in early trading after the bank warned 2013 could see its first profit fall in a decade.

The shock to shareholders was even greater because today’s warning came less than a month after Standard Chartered held an analyst and investor day guiding income and profits lower.

Shares in the bank, led by chief executive Peter Sands, plunged more than 6 per cent, falling 91.5p to 1339.5p. They have since lost 11 per cent of their value.

Today the bank blamed its consumer banking operations in Korea, which it said would lose around $200 million (£122 million) this year and a sudden downturn in trading in its interest rates business in wholesale banking. It said overall total income would be “broadly flat” on 2012’s $19 billion.

Sands said: “We are responding to near-term challenges to ensure we strike the right balance between growth and returns, and have successfully managed costs tightly in light of the pressures on income.

“We retain a highly diversified and strong balance sheet and remain confident in the potential of our markets.”

But finance director Richard Meddings said that the bank had seen “significant softening” in the final quarter.

StanChart said consumer banking profits would be down by “a double-digit rate”, largely due to Korea and rising bad debt provisions. In wholesale banking income for the year is expected to be at best flat and profits margins will be “materially lower”.

Meddings said that the bank’s financial markets division was having a disappointing fourth quarter. Expenses have risen faster than income. He said: ““It is the rates business which is down as clients remain uncertain about the direction in which rates are likely to move in the future and so sit on their hands.”

He added that falls in the value of the Indian rupee and Indonesian rupiah would cut income and profits growth by around 1 per cent.