Financial Results
StanChart CEO Says Private Bank To Be Bigger Driver Of Results; AuM Rises

The private banking arm of Standard Chartered will become a bigger driver of results for its parent group, the group CEO said today.
The private banking arm of Standard
Chartered, the UK-listed bank that earns the bulk of its
revenue in regions such as Asia, will become a bigger driver of
results for its parent group, performance of which has been
“disappointing”, it said today.
StanChart’s private banking arm announced a total operating
profit of $71 million in the six months to 30 June, down from $81
million a year earlier. Operating expenses in the period were
$227 million, up from $213 a year earlier. Income from private
banking clients primarily relates to wealth management and retail
products, including lending, generated from clients across Asia,
Africa and the Middle East.
Commenting on this segment, Peter Sands, chief executive, said:
“Our commercial clients are largely family-owned businesses, and
the families are a perfect fit for private banking. However,
many, perhaps most, are not aware that it exists. So we are
making introductions, doing joint meetings, showing clients how
we can support them. To put this in context, we believe the
private banking wallet of our existing commercial client base is
about four times the size of our current private banking
business.”
“While relatively small in the scheme of the group as a whole,
private banking will become an increasingly important source of
growth. With assets under management up 13 per cent year-on-year,
net new money up 15 per cent, and income up 4 per cent, despite
exiting subscale presences in Miami, Geneva, and Korea, private
banking has good momentum,” he said.
Operating income from private banking clients increased by $13
million, or 4 per cent, to $314 million. Excluding income from
Korea, a market from which this segment existed in the second
half of last year, income rose 8 per cent. This reflected strong
growth across the Hong Kong and the advising centres, led by
wealth management, lending and mortgage products and “good
traction” in sales of structured notes, equities and funds
leveraging on improved market sentiment, it said. These effects
were partly offset by lower income from deposits due to margin
compression.
Client assets under management (AuM) grew 13 per cent compared to
H1 2013, now standing at $61 billion, driven by higher investment
balances.
Group performance
Operating income for the whole of StanChart dropped 5 per cent
year-on-year to $9.269 billion. Pre-tax profit fell 20 per cent
to $3.268 billion down.
Statutory profit attributable to ordinary shareholders was $2.310
billion, up 8 per cent year-on-year.
Peter Sands, whose own tenure as chief executive has been
speculated upon since the bank flagged up a difficult period of
results recently, said the results were “disappointing” but
pointed to a number of structural changes the bank had made.
“Our performance in the first half of 2014 is clearly
disappointing. It is not what we strive for and not what our
investors expect. In March, we made clear that this first half
would be tough, and we were even more specific in our pre-close
trading statement in June,” Sands said.
“The reasons for our weaker performance should be equally clear:
continued financial markets weakness, challenges in Korea as we
reshape our business there, and an uptick in impairment, largely
due to a commodity fraud exposure in China and write-offs
relating to pre-crisis strategic investments. Evolving
regulatory requirements continue to add upward pressure - and
uncertainty - to costs, while structurally impacting the income
and return profile of some products,” Sands said.
We are taking action to get us back on the track of sustainable,
profitable growth, because that is how we have driven value
creation for our shareholders in the past, and how we will do so
in future. It is worth noting that, despite the disappointing
first half of 2014, we delivered more profit for our shareholders
during these six months than we did in the whole of 2006 at the
peak of the pre-crisis banking boom. Not many banks can make that
claim,” he said.
“We have refreshed and sharpened our strategy, and are executing
it at pace. Over the past six months, we have completely
reorganised the group to make us fitter, more flexible and better
aligned to our strategic aspirations. We have shifted our
resource allocation, disposing of several non-strategic
businesses, managing costs and capital deployment very tightly,
and stepping up investment in priority areas. We have reset our
client segment strategies, revised our product priorities and
rethought the way we are approaching critical infrastructure and
platform decisions,” Sands said.