StanChart shrugs off Sars setback

BANKING group Standard Chartered has beaten City profit forecasts, defying the impact of Sars on its key Asian markets.

Chief executive Mervyn Davies also told investors that it was on course to meet full-year forecasts. 'We have stayed on track and continued to deliver good growth,' he added. It raised the interim dividend by 10%.

But the shares tumbled 4%, wiping nearly £400m from the bank's market value after it warned conditions in its mainstay market, Hong Kong, would remain tough in the short term.

'Standard Chartered's pre-tax result was better than expected and dealing revenues were strong,' said one senior trader. 'But the bank was cautious on the Hong Kong business environment in the second half and the quality of earnings looks poor.'

Profits before tax rose 17% to $741m (£458m) for the six months ended June, about $40m more than analysts had expected.

StanChart credited a 24% drop to $308m in the money it has set aside for bad debts, a strong performance in wholesale banking, and growth in consumer banking outside Hong Kong.

Profits in the former colony fell 32% to around £65m, hurt by the effect of Sars on consumer spending.

StanChart said recovery had started to take hold in Hong Kong but that challenges remained, particularly for consumer banking.

StanChart also revealed it had paid $154m for a 9.8% stake in KorAm Bank, which has six and a half million customers and 224 branches.

It planned to launch its own consumer banking business in Korea this quarter. Davies said Korea was a huge economy with a very advanced credit card culture.

The shares were down 31 1/2p at 768 1/2p.