Interim Results
Standard Chartered PLC
04 August 2004
TO CITY EDITORS 4 August 2004
FOR IMMEDIATE RELEASE
STANDARD CHARTERED PLC RESULTS FOR the six months ended 30 june 2004
HIGHLIGHTS
STANDARD CHARTERED PLC RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
Results
• Profit before tax up 52 per cent to $1,106 million, compared with $730
million* in H1 2003 (H2 2003: $829 million*).
• Net revenue up 16 per cent to $2,722 million from $2,340 million* (H2
2003: $2,400 million*).
• Costs (including goodwill) up 14 per cent to $1,475 million (H1 2003:
$1,296 million*; H2 2003: $1,338 million*).
• Debt charge down 55 per cent to $139 million (H1 2003: $308 million; H2
2003: $228 million).
• Normalised earnings per share up 41 per cent at 57.9 cents (H1 2003: 41.0
cents; H2 2003: 49.6 cents).
• Normalised return on equity reaches 19.0 per cent (H1 2003: 14.3 per cent;
H2 2003: 16.7 per cent).
• Interim dividend per share increased by 10 per cent to 17.06 cents.
Significant achievements
• Record first half profits
• Consumer Banking operating profit up 47 per cent
• Wholesale Banking operating profit up 31 per cent
• Incorporated local business in Hong Kong, ahead of schedule
• Acquisition of PrimeCredit
Commenting on these results, the Chairman of Standard Chartered PLC, Bryan
Sanderson, said:
'The Group has achieved another strong half-year performance and we see good
growth across most of our markets. We are an increasingly confident bank with a
growing track record for performance, strongly positioned in a number of vibrant
and growing economies. We intend to take full advantage of these positive
conditions.'
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - TABLE OF CONTENTS
Page
Summary of Results 3
Chairman's Statement 4
Group Chief Executive's Review 6
Financial Review
Group Summary 9
Consumer Banking 10
Wholesale Banking 12
Risk 15
Capital 30
Financial Statements
Consolidated Profit and Loss Account 33
Summarised Consolidated Balance Sheet 34
Other Statements 35
Consolidated Cash Flow Statement 36
Notes on the Financial Statements 37
Unless another currency is specified, the word 'dollar' or symbol '$' in this
document means United States dollar.
STANDARD CHARTERED PLC - SUMMARY OF RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2004
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
$m $m $m
RESULTS
Net revenue 2,722 2,340 2,400
Provisions for bad and doubtful debts and contingent liabilities (139) (308) (228)
Profit before taxation 1,106 730 829
Profit attributable to shareholders 746 481 549
BALANCE SHEET
Total assets 129,135 119,846 120,224
Shareholders' funds:
Equity 7,367 6,829 6,897
Non-equity 655 625 649
Capital resources 14,571 13,343 14,127
INFORMATION PER ORDINARY SHARE Cents Cents Cents
Earnings per share - normalised basis 57.9 41.0 49.6
basic 61.2 38.7 43.8
Dividend per share 17.06 15.51 36.49
Net asset value per share 628.4 585.0 588.9
RATIOS % % %
Post-tax return on equity - normalised basis 19.0 14.3 16.7
Cost income ratio - normalised basis 53.2 53.6 53.2
Capital ratios:
Tier 1 capital 9.2 8.5 8.7
Total capital 15.6 14.3 14.6
* Comparative restated (see note 6 on page 41).
Results on a normalised basis reflect the Group's results excluding amortisation
of goodwill, profits/losses of a capital nature, profits/losses on repurchase of
share capital and subordinated debt.
STANDARD CHARTERED PLC - CHAIRMAN'S STATEMENT
I am pleased to report that the Group has achieved there to provide support and encouragement but not
another strong half-year performance. comfort.
While we have certainly had the advantage of a 'fair I am confident that we have the right Board with the
wind' in some of our markets, we have delivered real right expertise to take our Company forward.
growth and productivity improvement, extending our
track record of consistent performance.
Community
First Half Results
Many things help define the culture of a company, and
our work in the area of Corporate Social
Revenue is up 16 per cent on the first half of 2003, Responsibility sets us apart.
pre-tax profit is up 52 per cent. The Board has
approved an interim dividend of 17.06 cents. In
addition we have achieved strong earnings per share
growth with EPS up 41 per cent. Nothing has quite gripped the imagination and hearts
and minds of our staff like 'Seeing is Believing',
which has already restored sight to 68,000 people.
That's why we are expanding our 'Seeing is Believing'
Creating the Right Governance Structure programme with the target of restoring sight to one
million people over the next three years.
It is important that we have the right governance
platform to ensure we sustain our strong performance. We will continue with our AIDS programme, 'Living with
Good governance not only underpins shareholder HIV', and extend this to include the provision of
confidence that we are a well-run institution, but it anti-retroviral drugs for employees and their
also adds value to our business. immediate dependents. We aim to break down the myths
surrounding HIV, a pandemic that is not only present
in our markets but across the globe.
We have made a number of changes to the Board
structure to bring us in line with the new Combined
Code. These include: the creation of a new We are also launching a new initiative around our
Nomination Committee, the establishment of a separate marathon sponsorships in Hong Kong, Singapore, Mumbai
Remuneration Committee and the appointment of a and Nairobi. This is another demonstration of the
Senior Independent Director, Hugh Norton. strength of our brand.
In addition we have appointed four new high-calibre Positioning for Growth
Non-Executive Directors; Paul Skinner, Ruth Markland,
Jamie Dundas and Oliver Stocken. Each brings a
wealth of experience in our key markets.
Our strategy is threefold:
These changes have strengthened the Board and
increased its diversity and breadth of international We will pursue organic growth across our markets with
and financial experience. small add-ons to fill gaps in our coverage and extend
our product range. Second, we will build on our long
history in China: in the Pearl River Delta by using
and enhancing our Hong Kong base; and by seeking
It is essential that the Board is there to question alliances with one or more local banks to cover the
and challenge the management of the Company. The key economic areas. The incorporation last month of
Non-Executive Directors are our local
STANDARD CHARTERED PLC - CHAIRMAN'S STATEMENT (continued)
business in Hong Kong will help us take advantage of Growth in Our Markets
closer economic integration with mainland China.
As one of the world's most international banks we are
Third, we will examine acquisitions in a few selected operating under economic conditions that are
markets where we would like to be much bigger, considerably different from our OECD counterparts.
faster. However, financial discipline will be at the Right now, we see good growth across most of our
top of our agenda, as demonstrated earlier this year markets. Despite uncertainties, such as rising
in South Korea. We reached a point where we were interest rates, the upward trend in oil prices and the
unwilling to proceed with discussions on KorAm and threat of terrorist shocks, we expect this growth to
opted to take a profit of $95 million on our stake. continue.
We are successfully building a broader base with a What distinguishes us is that we are an increasingly
growing proportion of our revenue coming from India, confident bank with a growing track record for
Africa and the Middle East. This diversity of performance, strongly positioned in a number of
earnings opens up opportunities which we are well vibrant and growing economies. We intend to take full
positioned to capitalise on. advantage of these positive conditions. However, we
will be disciplined and consistent performance remains
our top priority.
Bryan Sanderson CBE
Chairman
4 August 2004
STANDARD CHARTERED PLC - GROUP CHIEF EXECUTIVE'S REVIEW
In the first half of 2004 we have continued to Consumer Banking
deliver strong financial performance, achieving a
record profit of $1,106 million, an increase of 52
per cent half year on half year. Revenue has
increased 16 per cent and the momentum in our Consumer Banking is a high growth, high return on
businesses is strong. equity business. In the first half of 2004 revenues
increased by ten per cent.
Our aspiration is to become the world's best
international bank, leading the way in Asia, Africa Our good performance last year allowed us to
and the Middle East. accelerate the pace of investment to capture growth
opportunities. Costs therefore increased by 13 per
cent. This investment is already paying off and we
have seen strong double-digit revenue growth in
Over the last two years our management team has been countries like Thailand, UAE, Bangladesh and Malaysia.
committed to improving performance and taking returns
to a higher level. We have achieved this and will
continue to deliver for our shareholders, while
sustaining the growth and investment in our Costs remain in line with the second half of 2003, up
businesses. two per cent, as investment in distribution and
product capabilities is maintained to capitalise on
the opportunities in our markets.
We have made a number of one-off gains in the first
half, which have contributed to our strong results,
including the disposal of our stake in Bank of China Overall, bad debts have fallen by 47 per cent. Bad
(BOC Hong Kong (Holdings) Limited) for a profit of debts in Hong Kong have fallen more quickly than
$36 million, and our holding in KorAm for a profit of expected and outside Hong Kong, bad debt levels have
$95 million. improved as a result of the investments in our risk
discipline and a benign credit environment.
Offsetting these gains we took the opportunity to
repurchase some surplus subordinated debt in India, We have seen excellent customer acquisition in wealth
where we paid a premium of $21 million. We also management through innovative products such as retail
incurred one-off costs of $18 million for bonds and investment products, the beginnings of what
incorporating our business in Hong Kong. is a strong international banking proposition, solid
progress in cards and we are continuing to gain market
share in mortgages.
Progress on our Management Agenda
Consumer Banking is now becoming a broader, more
customer-centric business with a growing product set.
At our annual results in February 2004 we outlined However, the market is changing and there are a number
six key priorities for 2004: of businesses where we are currently a small player -
for example, we have a small market share in the SME
(Small and Medium sized Enterprises) business. This
is a very profitable segment and we have now developed
• Accelerate Consumer Banking revenue and new SME product propositions that we are rolling out,
growth initially in Hong Kong, Singapore and Thailand.
• Drive returns in Wholesale Banking
• Step up growth in India We have not been present in the consumer finance
business in Asia. Consequently, we acquired
• Build China options PrimeCredit in Hong Kong - this acquisition is small
but is important for our entry
• Deliver technology benefits
• Begin out-serve journey
We continue to make excellent progress on our near
term management agenda. We have a very clear and
ambitious strategy and we are making the right
strategic moves to deliver against it.
STANDARD CHARTERED PLC - GROUP CHIEF EXECUTIVE'S REVIEW (continued)
to the consumer finance market. We will learn from opportunity to further capitalise on the business
this acquisition as we look to expand this business in advantages created as a result of the closer economic
the region. integration between Hong Kong and China.
Demographic changes in our markets and increasing We have seen a significant improvement in economic
demand for banking products gives us many growth conditions in Hong Kong from last year and the
opportunities in Consumer Banking. We intend to seize bankruptcy problem has improved considerably on the
these opportunities. back of reduced unemployment levels. However
consumer spending remains sluggish. We are changing
our business model, expanding our branch footprint,
refurbishing branches and launching a marketing
Wholesale Banking campaign to win market share.
The transformation of our Wholesale Banking business China remains a key priority for us. We are applying
continues apace and it is now beginning to deliver on for new licences, driving forward our branch
its potential - with positive jaws (the gap between expansion plans and extending our Hong Kong business
revenue and cost increases), a broader product into the Pearl River Delta. We are developing the
capability with a significant expansion of the global right growth options and have the scale to be a big
markets business, a good trade-off of revenue and risk player.
and, as a result of all these, improved returns on
tightly controlled economic capital.
India
Revenues have increased by 13 per cent with
particularly good growth in global markets and
commercial banking products. India is a country where we have huge ambitions. It
is also a market in which we have seen strong growth
in favourable economic conditions.
Costs have increased in the first half due to the
increased investment in product capabilities,
including debt capital markets, derivatives, We have grown our sales force dramatically over the
investment in infrastructure and also an increase in last 12 months. We have already added 2,200 new
performance-driven variable compensation. We believe sales agents, expanded our ATM network and we will
all of these measures will prove to be good open 11 new branches in the second half, extending
investments and will deliver strong returns. our coverage to 40 cities next year.
Bad debts remained at a very low level in the first Technology and Operations
half, due to good risk management and a benign credit
environment.
In Technology and Operations we are now a leader in
our industry in hubbing of operational and analytical
We believe that we have much more potential as we roles. Our Shared Service Centres in Chennai and
widen our product array. Our constant focus is on Kuala Lumpur give us operating scale, allowing us to
balancing risk with reward and delivering good control our costs.
returns.
We are also at the forefront in terms of developing
Hong Kong and Greater China systems and software offshore. This has allowed us
to build innovative systems to support our customers,
particularly in Consumer Banking.
Hong Kong is our largest market and China is at the
heart of our growth strategy. On 1 July 2004, we
incorporated our Hong Kong business, which will
provide the Group with an
STANDARD CHARTERED PLC - GROUP CHIEF EXECUTIVE'S REVIEW (continued)
Focus on Service Our growth strategy is focused on Nigeria and South
Africa, but we are also doing well in markets like
Tanzania, Uganda and Botswana.
Although we are one of the leading banks in service in
the markets we operate in, our goal is to provide
excellent service. In some areas, for example, Disciplined Growth
Priority Banking globally and 20twenty in South Africa
we already do this. We want to make every customer
experience as good as the best ones that we offer
today. We are absolutely committed to making this As we position the Company for accelerated growth, we
happen because we believe stronger customer will ensure that the engine of the Bank is fuelled
satisfaction and loyalty will ultimately lead to with effective processes and controls, good risk
improved returns. discipline and the right systems and infrastructure.
Growth in Other Markets Strong processes and controls will make us more
nimble and forward-looking in a changing world. And
it makes us more confident as we step up the pace of
growth.
Middle East South Asia
The Outlook - Delivering Today, Investing for
We are growing rapidly in the Middle East South Asia Tomorrow
region, taking advantage not only of the size and
sophistication of the banking population in this
region - approximately 470 million people - but also
the fragmented competition. Our performance in the first half has been strong.
However, there is no room for complacency. The
external environment is still prone to shocks and
there are a number of uncertainties. We have to stay
Our growth is broad-based across a number of countries focused and keep on delivering, just as we have done
- UAE, Qatar, Pakistan, Bangladesh and Bahrain are in the last few years.
performing well.
We have a clear and ambitious strategy, a confident
Africa management team and there are plenty of opportunities
in our markets.
Africa has had a good first half - particularly in
Wholesale Banking. Strong commodity prices and US We are confident we will continue to deliver improved
investment in the oil and infrastructure sectors have performance.
accelerated growth across the region.
Mervyn Davies CBE
Group Chief Executive
4 August 2004
STANDARD CHARTERED PLC - FINANCIAL REVIEW
GROUP SUMMARY Net interest income grew by six per cent to $1,546
million. A fall in interest margins from 2.8 per
cent to 2.7 per cent has been offset by 11 per cent
growth in average earning assets. Interest spread
The Group delivered another strong performance in the fell from 2.6 per cent to 2.4 per cent.
six months ended 30 June 2004 with a record profit
before tax of $1,106 million, up 52 per cent on the
equivalent period last year. Normalised earnings per
share has grown by 41 per cent to 57.9 cents. (Refer Net fees and commissions increased by 24 per cent
to note 4 on page 39 for the details of basic and from $536 million to $665 million. Growth was seen
diluted earnings per share). in every region, driven by wealth management,
mortgages and corporate advisory services.
The first half performance was driven by broad-based
growth across geographies and products and an Revenue from dealing profits grew by 21 per cent from
excellent debt performance. The results have also $274 million to $332 million, largely driven by
benefited from two one-off gains reported within other customer led foreign exchange dealing. In
operating income. In January 2004 the Group sold its particular, retail foreign exchange performed well.
investment in BOC Hong Kong (Holdings) Limited
realising a net profit of $36 million and in May 2004,
it disposed of its investment in KorAm realising a net
profit of $95 million. These gains were partially Other operating income at $176 million compares to
offset by a $21 million premium paid on the repurchase $79 million for the same period last year. The
of surplus subordinated debt in India. One-off costs increase reflects the profit on disposal of
of $18 million were incurred on incorporating the investments in KorAm and BOC Hong Kong (Holdings)
Group's business in Hong Kong. The effect of these Limited. This was partly offset by a fall in profits
gains and charges, all of which arose from corporate on investment securities as a result of a programme
decisions taken at the centre and are non-recurring in to reduce the risk in the book in 2003 and the
nature, have not been attributed to the Consumer premium on the repurchase of subordinated debt in
Banking and Wholesale Banking businesses in the India.
business segmental results. Profit before tax
adjusted for these one-off gains and charges increased
by 39 per cent compared to the first half of 2003.
Total operating expenses increased from $1,296
million to $1,475 million. Of this increase $18
million resulted from incorporating the business in
The Group has adopted fully the provisions of FRS 17 Hong Kong and $21 million from accelerated goodwill
'Retirement Benefits' for the first time and prior amortisation. The adjusted cost increase, excluding
period figures have been restated. See note 6 on page goodwill, was 11 per cent, broadly in line with
41. adjusted revenue growth. The normalised cost income
ratio has fallen from 53.6 per cent in the first half
of 2003 to 53.2 per cent in the current period.
With strong revenue growth, the Group continued to
Net revenue has grown by 16 per cent in total to invest for growth and increased spend on its
$2,722 million compared to the first half of last regulatory and control infrastructure.
year. The increase is 12 per cent when adjusted for
the one-off items above. Both Consumer Banking and
Wholesale Banking achieved double digit revenue
growth. Business momentum is strong. Provisions for bad and doubtful debts fell by 55 per
cent to $139 million. This excellent performance is a
direct result of significantly strengthened risk
management discipline, as well as a favourable credit
environment.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
CONSUMER BANKING which increased by 29 per cent to $112 million as the
Group took advantage of growth opportunities,
particularly in South Korea and China. There was
good profit growth in Taiwan fuelled by investment
Consumer Banking showed strong momentum with operating services sales and retail deposits. Revenue in
profit up 47 per cent over the first half of 2003 to Thailand grew by 35 per cent driven by credit cards
$524 million. The accelerated investment in growth and personal loans. Wealth management and personal
opportunities in the second half of 2003 is delivering loans contributed to revenue growth of 21 per cent in
results. Revenue increased by ten per cent to $1,335 Indonesia.
million, driven by strong asset growth of 15 per cent
outside Hong Kong and an increased contribution across
all product segments. Investing for growth has led to
a 13 per cent increase in costs when compared to the In India, strong asset growth and a lower debt charge
first half of 2003, but only two per cent when drove operating profit up by 72 per cent to $43
compared to the second half of 2003. The bad debt million, despite contracting margins. Costs
charge fell by 47 per cent. The debt charge in Hong increased by $11 million to $70 million as a result
Kong fell significantly and charges elsewhere also of continued investment to support the rapid business
improved. growth and enhanced risk management.
Hong Kong delivered an excellent increase in operating Operating profit in the UAE increased by $6 million
profit of 117 per cent to $234 million. This was to $30 million with revenue up by 18 per cent, driven
largely driven by a lower debt charge and tight cost by credit cards and personal loans. Costs were
control. Revenue grew by five per cent to $489 higher than the equivalent period in 2003, reflecting
million. Strong margin growth in mortgages and a good the continued investment from the second half of
performance in wealth management was offset by subdued 2003. Elsewhere in MESA operating profit grew by 14
asset levels across the market. per cent to $32 million with strong performances in
Bangladesh, and Bahrain.
In Singapore, operating profit was broadly flat at $90
million in an intensely competitive environment. In Africa, operating profit has increased by ten per
Despite contracting margins, revenue growth was four cent, with revenue up by 24 per cent to $107 million.
per cent, fuelled by wealth management and asset This was largely driven by asset growth in
growth in Business Financial Services. Botswana, Nigeria and Uganda and improved margins in
Zimbabwe. Costs have grown by 26 per cent. This was
driven by continued investment in Nigeria and South
Africa and inflationary pressures.
Operating profit in Malaysia was up 21 per cent to $35
million with strong performance across all products.
Revenue grew by 13 per cent. Continued margin
pressure in the mortgage portfolio was offset by The Americas, UK and Group Head Office has seen an
higher volume. Wealth management revenue increased increase in operating profit from $5 million to $12
significantly, driven by unit trust sales. million, largely driven by tight cost control. The
business has been refocused on a new international
banking offering which has delivered promising growth
in the first half of 2004 through five international
In Other Asia Pacific, operating profit at $37 million booking centres.
was constrained by growth in costs
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The following tables provide an analysis of operating profit by geographic
segment for Consumer Banking:
6 months ended 30.06.04
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Net revenue 489 168 88 180 124
Costs (200) (58) (45) (112) (70)
Charge for debts (55) (20) (8) (31) (11)
Operating profit 234 90 35 37 43
6 months ended 30.06.04
Other Americas
Middle UK &
East & Group Consumer
Other Head Banking
UAE S Asia Africa Office Total
$m $m $m $m $m
Net revenue 59 81 107 39 1,335
Costs (25) (44) (93) (27) (674)
Charge for debts (4) (5) (3) - (137)
Operating profit 30 32 11 12 524
6 months ended 30.06.03*
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Net revenue 464 161 78 157 107
Costs (192) (53) (40) (87) (59)
Charge for debts (164) (19) (9) (32) (23)
Operating profit 108 89 29 38 25
6 months ended 30.06.03*
Other Americas
Middle UK &
East & Group Consumer
Other Head Banking
UAE S Asia Africa Office Total
$m $m $m $m $m
Net revenue 50 66 86 40 1,209
Costs (20) (36) (74) (34) (595)
Charge for debts (6) (2) (2) (1) (258)
Operating profit 24 28 10 5 356
6 months ended 31.12.03*
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Net revenue 490 167 84 176 116
Costs (218) (57) (38) (100) (67)
Charge for debts (118) (21) (10) (26) (36)
Operating profit 154 89 36 50 13
6 months ended 31.12.03*
Other Americas
Middle UK &
East & Group Consumer
Other Head Banking
UAE S Asia Africa Office Total
$m $m $m $m $m
Net revenue 52 72 84 38 1,279
Costs (26) (46) (84) (24) (660)
Charge for debts (5) (3) (2) 1 (220)
Operating profit 21 23 (2) 15 399
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
An analysis of Consumer Banking revenue by product is set out below:
6 months 6 months 6 months
ended ended ended
Revenue by product 30.06.04 30.06.03* 31.12.03*
$m $m $m
Cards and Personal Loans 538 506 537
Wealth Management / Deposits 425 403 402
Mortgages and Auto Finance 351 283 320
Other 21 17 20
1,335 1,209 1,279
*Comparative restated (see note 6 on page 41).
Cards and personal loans have delivered a stable fallen significantly from $104 million in first half
performance with six per cent growth in a very of 2003 to $40 million in the current period. This
competitive price environment. Hong Kong has reduction was better than the industry average over
returned to profitability despite eight per cent the period. Outside of Hong Kong, the debt charge
decline in cards outstandings, as bankruptcy losses also improved despite 15 per cent asset growth,
continued to fall sharply. Outside of Hong Kong, the testimony to the success in reinforcing risk
portfolio grew by over ten per cent. management across all geographies.
Wealth management revenue has increased by five per WHOLESALE BANKING
cent to $425 million with strong demand for
investment products, partially offset by compression
in deposit margins.
Wholesale Banking had a very successful first half of
2004 with operating profit up 31 per cent at $578
million. This has been achieved on tightly controlled
Mortgages and Auto Finance revenue has grown by 24 economic capital. Revenue has increased by 13 per
per cent to $351 million driven by new product cent to $1,277 million, with good growth across all
successes, increased fee income and, in Hong Kong, product segments in global markets and commercial
improved margins. banking. Customer revenues were up by more than 20
per cent. Costs have increased by ten per cent due to
increased investment in product capabilities such as
debt capital markets and derivatives, increased spend
Costs in Consumer Banking have increased by $79 on infrastructure and controls, and an increase in
million to $674 million, 13 per cent. This was a performance driven compensation. The net debt charge
direct result of the continued pace of investment in remained at a very low level. This reflected success
distribution and products which began in the second in changing the risk profile of the business and also
half of 2003. Cost growth over the second half of a benign credit environment.
2003 was two per cent.
The net charge for debts in Consumer Banking has
fallen by 47 per cent to $137 million. Bankruptcy
charges in Hong Kong have
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The following tables provide an analysis of operating profit by geographic
segment for Wholesale Banking:
6 months ended 30.06.04
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Net revenue 201 97 51 222 136
Costs (112) (58) (29) (133) (46)
Charge for debts (37) 3 7 17 -
Amounts written off fixed - - - - -
asset investments
Operating profit 52 42 29 106 90
6 months ended 30.06.04
Other Americas
Middle UK &
East & Group Wholesale
Other Head Banking
UAE S Asia Africa Office Total
$m $m $m $m $m
Net revenue 75 95 163 237 1,277
Costs (25) (36) (73) (183) (695)
Charge for debts 4 7 4 (7) (2)
Amounts written off fixed - - - (2) (2)
asset investments
Operating profit 54 66 94 45 578
6 months ended 30.06.03 *
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Net revenue 185 89 42 162 142
Costs (107) (52) (31) (129) (40)
Charge for debts (17) - 5 (31) 1
Amounts written off fixed - - - - (1)
asset investments
Operating profit 61 37 16 2 102
6 months ended 30.06.03 *
Other Americas
Middle UK &
East & Group Wholesale
Other Head Banking
UAE S Asia Africa Office Total
$m $m $m $m $m
Net revenue 67 88 125 231 1,131
Costs (22) (28) (60) (165) (634)
Charge for debts 8 10 (8) (18) (50)
Amounts written off fixed - - - (5) (6)
asset investments
Operating profit 53 70 57 43 441
6 months ended 31.12.03 *
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Net revenue 216 69 31 186 101
Costs (99) (48) (26) (111) (46)
Charge for debts (6) 7 16 (10) (2)
Amounts written off fixed - - - - (3)
asset investments
Operating profit 111 28 21 65 50
6 months ended 31.12.03 *
Other Americas
Middle UK &
East & Group Wholesale
Other Head Banking
UAE S Asia Africa Office Total
$m $m $m $m $m
Net revenue 65 89 148 216 1,121
Costs (23) (33) (63) (162) (611)
Charge for debts 1 (1) 3 (16) (8)
Amounts written off fixed - - - (2) (5)
asset investments
Operating profit 43 55 88 36 497
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
In Hong Kong, net revenue grew by nine per cent from revenue grew by around 30 per cent to $136 million.
$185 million to $201 million. The growth was driven This reflected broad based product growth with
by foreign exchange and derivatives on the back of positive contribution from all customer segments. The
strong trade flows. Costs were $5 million higher at increase in costs of 15 per cent to $46 million has
$112 million with continued investment in the front been driven by investment in new businesses, people
office partially offset by reduction in technology and infrastructure to capture further growth
costs. opportunities.
Revenue in Singapore grew by nine per cent. Strong In the UAE revenue increased by 12 per cent to $75
customer revenue more than offset a decline in million, driven largely by foreign exchange, cash
revenue from asset and liability management. The management and structured global markets products.
increase in costs from $52 million to $58 million was Elsewhere in the region revenue grew from $88 million
mainly due to investment in risk and governance to $95 million, led by strong cross-sell opportunities
infrastructure. for global markets products. The increase in costs in
the region was due to expansion into Iraq and
Afghanistan, investment in infrastructure and
continued strengthening of risk and governance
In Malaysia, revenue increased from $42 million to functions.
$51 million with good growth in global markets
products facilitated by a wider product mix and
advisory services. Costs have been tightly
controlled. In Africa, revenue at $163 million was 30 per cent
higher than the first half of 2003. Strong commodity
prices and relative economic stability in a number of
key markets have contributed to this result. Costs
The Other Asia Pacific region had an exceptional grew by 22 per cent, mainly due to inflationary
performance with strong growth in the Philippines, pressure and expansion in Nigeria and South Africa.
Taiwan, Thailand and Indonesia. Revenue grew by 37
per cent to $222 million. This increase was broadly
spread across the commercial banking and global
markets product range. Costs were well managed. The Americas, UK and Group Head Office has seen
revenue increase of three per cent to $237 million.
Strong fees and commissions were partially offset by
reduced yield on asset and liability management.
In India, profit on the sale of investment securities
arising as a result of a programme, to reduce the
risk in the book, was significantly lower. Excluding
the effect of this,
An analysis of Wholesale Banking revenue by product is set out below:
6 months 6 months 6 months
ended ended ended
Revenue by product 30.06.04 30.06.03* 31.12.03*
$m $m $m
Trade and Lending 433 393 422
Global Markets 615 553 501
Cash Management and Custody 229 185 198
1,277 1,131 1,121
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Trade and lending revenue has increased by ten per risk arise directly through the Group's commercial
cent to $433 million. Strong growth was seen in Hong activities whilst business, regulatory, operational
Kong and Singapore underpinned by strong intra-Asian and reputational risk are a normal consequence of any
trade flows, and in Africa. business undertaking. The key element of our risk
management philosophy is for the risk functions to
operate as an independent control working in
partnership with the business units to provide a
Global markets revenue has grown strongly at 11 per competitive advantage to the Group.
cent. Investment in new product capability in debt
capital markets, structured trade and derivatives has
started to deliver good returns. The decline in
revenue from asset and liability management in 2003 Ultimate responsibility for the effective management
has stabilised with changes in interest rate of risk rests with the Company's Board of Directors
direction and the shape of the yield curve. who control and manage risk through the Audit and Risk
Committee. The Audit and Risk Committee reviews
specific areas of risk, and guides and monitors the
activities of the Group Asset and Liability Committee
Cash management and custody was up by 24 per cent and the Group Risk Committee.
reflecting both strong volume growth, particularly in
India and Africa, and stabilising margins.
All the Executive Directors of Standard Chartered PLC
are members of the Group Risk Committee which is
Costs in Wholesale Banking have increased by ten per chaired by the Group Executive Director, Risk (GED
cent. This was due to further investment for growth, Risk). This Committee has responsibility for
increased spending on infrastructure and controls, determining the Group standards and policies for risk
and higher performance driven costs, largely due to measurement and management, and also delegating
variable compensation. authorities and responsibilities to various sub
committees.
The Wholesale Banking debt charge was $2 million
compared to $50 million in the previous period. Gross The GED Risk, together with Group Internal Audit,
provisions were down by over 40 per cent with provides independent assurance that risk is being
recoveries lower by 15 per cent. This has been measured and managed in accordance with the Group's
achieved through continued enhancement of risk standards and policies.
management processes and improvement in the risk
profile, together with a favourable credit
environment.
Credit Risk
RISK
Credit risk is the risk that a counterparty will not
settle its obligations in accordance with agreed
terms.
Risk is inherent in the Group's business and the
effective management of that risk is seen as a core
competency within Standard Chartered. Through its
risk management structure the Group seeks to manage Credit exposures include individual borrowers,
efficiently the eight core risks: credit, market, connected groups of counterparties and portfolios, on
country and liquidity the banking and trading books.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Loan Portfolio
The following tables set out by maturity the amount of customer loans net of
provisions:
30.06.04
One One to Over
year five five
or less years years Total
$m $m $m $m
Consumer Banking
Mortgages 1,998 4,289 14,927 21,214
Other 5,107 3,431 1,757 10,295
Total 7,105 7,720 16,684 31,509
Wholesale Banking 26,161 4,355 2,032 32,548
General provisions (386)
Net loans and advances to customers 33,266 12,075 18,716 63,671
30.06.03
One One to Over
year five five
or less years years Total
$m $m $m $m
Consumer Banking
Mortgages 2,144 4,372 14,055 20,571
Other 4,832 3,175 1,512 9,519
Total 6,976 7,547 15,567 30,090
Wholesale Banking 21,565 4,234 2,582 28,381
General provisions (458)
Net loans and advances to customers 28,541 11,781 18,149 58,013
31.12.03
One One to Over
year five five
or less years years Total
$m $m $m $m
Consumer Banking
Mortgages 2,072 4,333 14,320 20,725
Other 4,963 3,551 1,903 10,417
Total 7,035 7,884 16,223 31,142
Wholesale Banking 22,561 4,545 1,921 29,027
General provisions (425)
Net loans and advances to customers 29,596 12,429 18,144 59,744
The Group's loans and advances to customers are The longer term portfolio, with a maturity of over
predominantly short term with over half the portfolio five years, mainly relates to Consumer Banking
having a maturity of one year or less. personal residential mortgages and term lending
products.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The following tables set out an analysis of the Group's net loans and advances
as at 30 June 2004, 30 June 2003 and 31 December 2003 by the principal category
of borrowers, business or industry and/or geographical distribution:
30.06.04
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans to individuals
Mortgages 12,342 4,233 2,563 773 903
Other 1,995 2,016 418 2,306 1,166
Consumer Banking 14,337 6,249 2,981 3,079 2,069
Agriculture, forestry - 40 54 62 22
and fishing
Construction 56 39 19 63 63
Commerce 1,460 970 154 791 160
Electricity, gas and 421 53 23 227 111
water
Financing, insurance and 1,714 947 375 718 335
business services
Loans to governments - 1,045 1,155 53 -
Mining and quarrying - 1 66 40 -
Manufacturing 1,514 640 258 2,537 902
Commercial real estate 906 689 176 344 -
Transport, storage and 385 231 230 126 99
communication
Other 49 96 137 124 30
Wholesale Banking 6,505 4,751 2,647 5,085 1,722
General provision
Total loans and advances 20,842 11,000 5,628 8,164 3,791
to customers
Total loans and advances 4,608 945 160 4,357 249
to banks
30.06.04
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans to individuals
Mortgages - 78 40 282 21,214
Other 718 1,193 375 108 10,295
Consumer Banking 718 1,271 415 390 31,509
Agriculture, forestry and - 40 143 325 686
fishing
Construction 91 100 21 5 457
Commerce 712 384 343 737 5,711
Electricity, gas and 1 117 166 98 1,217
water
Financing, insurance and 720 292 41 1,032 6,174
business services
Loans to governments - 13 11 232 2,509
Mining and quarrying 98 79 40 345 669
Manufacturing 204 1,119 391 1,646 9,211
Commercial real estate - 1 11 18 2,145
Transport, storage and 33 248 139 1,539 3,030
communication
Other 36 184 19 64 739
Wholesale Banking 1,895 2,577 1,325 6,041 32,548
General provision (386) (386)
Total loans and advances 2,613 3,848 1,740 6,045 63,671
to customers
Total loans and advances 687 899 341 6,341 18,587
to banks
Under 'Loans to individuals - Other', $1,250 million to the Consumer Banking portfolio, predominantly
(30 June 2003: $1,360 million; 31 December 2003: personal residential mortgages.
$1,371 million) relates to the cards portfolio in
Hong Kong. The total cards portfolio is $3,289
million (30 June 2003: $3,249 million; 31 December
2003: $3,329 million). The Wholesale Banking portfolio is well diversified
across both geography and industry. The Group does
not have any significant concentrations in special
interest industries such as Aviation, Telecoms and
Approximately 49 per cent (30 June 2003: 52 per cent; Tourism. Exposure to each of these industries is less
31 December 2003: 52 per cent) of total Loans and than five per cent of Wholesale Banking Loans and
Advances to Customers relates Advances to Customers.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
30.06.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans to individuals
Mortgages 12,833 3,925 2,153 818 418
Other 2,285 1,726 598 1,781 980
Consumer Banking 15,118 5,651 2,751 2,599 1,398
Agriculture, forestry 4 6 74 36 20
and fishing
Construction 60 33 28 32 6
Commerce 1,513 879 167 599 58
Electricity, gas and 118 66 10 157 102
water
Financing, insurance and 1,578 773 365 643 112
business services
Loans to governments - 162 414 8 -
Mining and quarrying - 8 37 26 5
Manufacturing 1,231 595 251 2,111 1,102
Commercial real estate 896 712 15 151 -
Transport, storage and 406 149 146 159 188
communication
Other 17 35 59 181 -
Wholesale Banking 5,823 3,418 1,566 4,103 1,593
General provision
Total loans and advances 20,941 9,069 4,317 6,702 2,991
to customers
Total loans and advances 4,145 2,015 414 2,796 224
to banks
30.06.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans to individuals
Mortgages - 62 24 338 20,571
Other 631 1,076 282 160 9,519
Consumer Banking 631 1,138 306 498 30,090
Agriculture, forestry and - 25 81 267 513
fishing
Construction 86 17 30 4 296
Commerce 601 359 312 949 5,437
Electricity, gas and 4 122 29 114 722
water
Financing, insurance and 383 262 167 1,268 5,551
business services
Loans to governments - 13 - 352 949
Mining and quarrying 34 57 43 569 779
Manufacturing 205 893 227 1,731 8,346
Commercial real estate - - 3 5 1,782
Transport, storage and 25 220 115 1,647 3,055
communication
Other 25 179 37 418 951
Wholesale Banking 1,363 2,147 1,044 7,324 28,381
General provision (458) (458)
Total loans and advances 1,994 3,285 1,350 7,364 58,013
to customers
Total loans and advances 903 789 228 6,452 17,966
to banks
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
31.12.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans to individuals
Mortgages 12,536 4,029 2,246 831 640
Other 2,234 2,018 660 1,990 1,125
Consumer Banking 14,770 6,047 2,906 2,821 1,765
Agriculture, forestry 6 3 77 49 12
and fishing
Construction 104 15 38 43 34
Commerce 1,350 1,001 190 717 30
Electricity, gas and 327 36 32 240 56
water
Financing, insurance and 1,575 887 432 657 194
business services
Loans to governments - 61 748 8 -
Mining and quarrying - 15 86 35 -
Manufacturing 1,326 780 214 2,016 943
Commercial real estate 873 716 7 250 -
Transport, storage and 491 150 222 118 71
communication
Other 23 70 57 170 1
Wholesale Banking 6,075 3,734 2,103 4,303 1,341
General provision
Total loans and advances 20,845 9,781 5,009 7,124 3,106
to customers
Total loans and advances 2,113 1,045 204 2,784 239
to banks
31.12.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans to individuals
Mortgages - 67 30 346 20,725
Other 677 1,127 430 156 10,417
Consumer Banking 677 1,194 460 502 31,142
Agriculture, forestry and - 24 144 387 702
fishing
Construction 83 91 19 13 440
Commerce 619 394 398 725 5,424
Electricity, gas and 3 69 127 84 974
water
Financing, insurance and 434 320 116 1,184 5,799
business services
Loans to governments - 13 - 281 1,111
Mining and quarrying 59 59 16 470 740
Manufacturing 179 916 283 1,738 8,395
Commercial real estate - 1 18 3 1,868
Transport, storage and 30 237 114 1,513 2,946
communication
Other 26 166 44 71 628
Wholesale Banking 1,433 2,290 1,279 6,469 29,027
General provision (425) (425)
Total loans and advances 2,110 3,484 1,739 6,546 59,744
to customers
Total loans and advances 605 889 308 5,167 13,354
to banks
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Problem Credits Consumer Banking
The Group employs a variety of tools to monitor the Provisions are derived on a formulaic basis depending
portfolio and to ensure the timely recognition of on the product:
problem credits.
Mortgages: a provision is raised where accounts are
In Wholesale Banking, accounts are placed on Early 150 days past due based on the difference between the
Alert when they display signs of weakness. Such outstanding value of the loan and the forced sale
accounts are subject to a dedicated process involving value of the underlying asset.
senior risk officers and representatives from a
specialist recovery unit, which is independent of the
business units. Account plans are re-evaluated and
remedial actions are agreed and monitored until Credit cards: a charge-off is made for all balances
complete. Remedial actions include, but are not which are 150 days past due or earlier as
limited to, exposure reduction, security enhancement, circumstances dictate. In Hong Kong charge-off is
exit of the account or immediate movement of the currently at 120 days.
account into the control of the specialist recovery
unit.
Other unsecured Consumer Banking products are charged
off at 150 days past due.
In Consumer Banking, an account is considered to be in
default when payment is not received on the due date.
Accounts that are overdue by more than 30 days (60
days for mortgages) are considered delinquent. These For other secured Consumer Banking products a
are closely monitored and subject to a special provision is raised at 90 days past due for the
collections process. difference between the outstanding value and the
forced sale value of the underlying asset. The
underlying asset is then re-valued periodically until
disposal.
In general, loans are treated as non-performing when
interest or principal is 90 days or more past due.
It is current practice to provision and write-off
exposure in respect of Hong Kong bankruptcies at the
time the customer petitions for bankruptcy.
The Small and Medium Enterprises (SME) portfolio is
provisioned on a case by case basis.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The following tables set out the non-performing portfolio in Consumer Banking:
30.06.04
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans and advances Gross 101 125 170 61 42
non- performing
Specific provisions for (38) (19) (26) (15) (10)
bad and doubtful debts
Interest in suspense (1) (3) (22) (8) (9)
Net non-performing loans 62 103 122 38 23
and advances
Cover ratio
30.06.04
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans and advances Gross 13 24 20 27 583
non- performing
Specific provisions for (11) (8) (6) (5) (138)
bad and doubtful debts
Interest in suspense (2) (8) (8) (2) (63)
Net non-performing loans - 8 6 20 382
and advances
Cover ratio 34%
30.06.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans and advances Gross 144 109 192 72 46
non- performing
Specific provisions for (55) (16) (25) (17) (6)
bad and doubtful debts
Interest in suspense (1) (3) (23) (10) (8)
Net non-performing loans 88 90 144 45 32
and advances
Cover ratio
30.06.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans and advances Gross 14 26 15 26 644
non- performing
Specific provisions for (11) (7) (5) (5) (147)
bad and doubtful debts
Interest in suspense (3) (7) (7) (2) (64)
Net non-performing loans - 12 3 19 433
and advances
Cover ratio 33%
31.12.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans and advances Gross 138 115 192 63 43
non- performing
Specific provisions for (48) (17) (26) (15) (11)
bad and doubtful debts
Interest in suspense (1) (3) (23) (9) (9)
Net non-performing loans 89 95 143 39 23
and advances
Cover ratio
31.12.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans and advances Gross 16 23 18 10 618
non- performing
Specific provisions for (11) (8) (7) (5) (148)
bad and doubtful debts
Interest in suspense (5) (8) (7) (2) (67)
Net non-performing loans - 7 4 3 403
and advances
Cover ratio 35%
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The relatively low Consumer Banking cover ratio independent of the main businesses of the Group.
reflects the fact that Standard Chartered classifies
all exposure which is more than 90 days past due as
non-performing, whilst provisions on unsecured lending
are only raised at the time of charge-off. For For loans and advances designated non-performing,
secured products, provisions reflect the difference interest continues to accrue on the customer's
between the underlying assets and the outstanding loan account but is not included in income.
(see details relating to the raising of provisions
above).
Where the principal, or a portion thereof, is
considered uncollectable and of such little
Wholesale Banking realisable value that it can no longer be included at
its full nominal amount on the balance sheet, a
specific provision is raised. In any decision
relating to the raising of provisions, the Group
Loans are designated as non-performing as soon as attempts to balance economic conditions, local
payment of interest or principal is 90 days or more knowledge and experience and the results of
overdue or where sufficient weakness is recognised independent asset reviews.
that full payment of either interest or principal
becomes questionable. Where customer accounts are
recognised as non-performing or display weakness that
may result in non-performing status being assigned, Where it is considered that there is no realistic
they are passed to the management of a specialist unit prospect of recovering the principal of an account
which is against which a specific provision has been raised,
then that amount will be written off.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The following tables set out the total non-performing portfolio in Wholesale
Banking including the portfolio covered by the Loan Management Agreement with a
Thai Government Agency:
30.06.04
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans and advances Gross 404 183 170 957 69
non- performing
Specific provisions for (247) (86) (98) (333) (24)
bad and doubtful debts
Interest in suspense (92) (53) (46) (55) (28)
Net non-performing loans 65 44 26 569 17
and advances
30.06.04
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans and advances Gross 52 166 90 826 2,917
non- performing
Specific provisions for (35) (83) (40) (449) (1,395)
bad and doubtful debts
Interest in suspense (13) (62) (40) (132) (521)
Net non-performing loans 4 21 10 245 1,001
and advances
30.06.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans and advances Gross 379 274 261 1,195 79
non- performing
Specific provisions for (202) (127) (152) (426) (50)
bad and doubtful debts
Interest in suspense (95) (69) (73) (89) (29)
Net non-performing loans 82 78 36 680 -
and advances
30.06.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans and advances Gross 58 193 125 818 3,382
non- performing
Specific provisions for (39) (106) (55) (420) (1,577)
bad and doubtful debts
Interest in suspense (12) (66) (43) (105) (581)
Net non-performing loans 7 21 27 293 1,224
and advances
31.12.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Loans and advances Gross 357 236 194 1,077 86
non- performing
Specific provisions for (220) (106) (118) (375) (44)
bad and doubtful debts
Interest in suspense (91) (64) (55) (68) (30)
Net non-performing loans 46 66 21 634 12
and advances
31.12.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Loans and advances Gross 52 180 116 887 3,185
non- performing
Specific provisions for (40) (99) (51) (460) (1,513)
bad and doubtful debts
Interest in suspense (12) (66) (43) (126) (555)
Net non-performing loans - 15 22 301 1,117
and advances
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Wholesale Banking Cover Ratio
The following tables show the Wholesale Banking cover ratio. The non-performing
loans recorded below under Standard Chartered Nakornthon Bank (SCNB) are
excluded from the cover ratio calculation as they are the subject of a Loan
Management Agreement (LMA) with a Thai Government Agency.
30.06.04
Total
SCNB excl
Total (LMA) LMA
$m $m $m
Loans and advances - Gross non-performing 2,917 711 2,206
Specific provisions for bad and doubtful debts (1,395) (108) (1,287)
Interest in suspense (521) - (521)
Net non-performing loans and advances 1,001 603 398
Cover ratio 82%
30.06.03
Total
SCNB excl
Total (LMA) LMA
$m $m $m
Loans and advances - Gross non-performing 3,382 757 2,625
Specific provisions for bad and doubtful debts (1,577) (94) (1,483)
Interest in suspense (581) - (581)
Net non-performing loans and advances 1,224 663 561
Cover ratio 79%
31.12.03
Total
SCNB excl
Total (LMA) LMA
$m $m $m
Loans and advances - Gross non-performing 3,185 772 2,413
Specific provisions for bad and doubtful debts (1,513) (112) (1,401)
Interest in suspense (555) - (555)
Net non-performing loans and advances 1,117 660 457
Cover ratio 81%
The Wholesale Banking non-performing portfolio is well covered. The balance
uncovered by specific provision represents the value of collateral held and/or
the Group's estimate of the net value of any work-out strategy.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Group
The following tables set out the movements in the Group's total specific
provisions against loans and advances.
6 months ended 30.06.04
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Provisions held at 1 268 123 144 390 55
January 2004
Exchange translation (1) (1) - (4) -
differences
Amounts written off (87) (37) (25) (58) (39)
Recoveries of amounts 13 3 4 6 12
previously written off
Other - - - - (5)
New provisions 128 26 14 46 54
Recoveries/provisions no (36) (9) (13) (32) (43)
longer required
Net charge against/ 92 17 1 14 11
(credit to) profit
Provisions held at 30 285 105 124 348 34
June 2004
6 months ended 30.06.04
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Provisions held at 1 51 107 58 465 1,661
January 2004
Exchange translation - (1) - 2 (5)
differences
Amounts written off (5) (12) (12) (13) (288)
Recoveries of amounts 3 2 1 - 44
previously written off
Other (3) (3) - (7) (18)
New provisions 6 10 9 11 304
Recoveries/provisions no (6) (12) (10) (4) (165)
longer required
Net charge against/ - (2) (1) 7 139
(credit to) profit
Provisions held at 30 46 91 46 454 1,533
June 2004
6 months ended 30.06.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Provisions held at 1 255 159 235 358 60
January 2003
Exchange translation - (1) - 2 2
differences
Amounts written off (188) (37) (66) (47) (37)
Recoveries of amounts 9 3 5 8 8
previously written off
Other - - (1) 59 1
New provisions 207 30 17 85 62
Recoveries/provisions no (26) (11) (13) (22) (40)
longer required
Net charge against/ 181 19 4 63 22
(credit to) profit
Provisions held at 30 257 143 177 443 56
June 2003
6 months ended 30.06.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Provisions held at 1 108 144 53 452 1,824
January 2003
Exchange translation - 2 (1) 1 5
differences
Amounts written off (57) (27) (3) (69) (531)
Recoveries of amounts - 1 1 2 37
previously written off
Other 1 1 - 10 71
New provisions 8 10 17 38 474
Recoveries/provisions no (10) (18) (7) (9) (156)
longer required
Net charge against/ (2) (8) 10 29 318
(credit to) profit
Provisions held at 30 50 113 60 425 1,724
June 2003
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Group (continued)
6 months ended 31.12.03
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific India
$m $m $m $m $m
Provisions held at 1 257 143 177 443 56
July 2003
Exchange translation 2 3 - 11 1
differences
Amounts written off (165) (48) (33) (73) (50)
Recoveries of amounts 14 11 5 5 10
previously written off
Other 36 - 1 (32) -
New provisions 157 42 17 57 80
Recoveries/provisions no (33) (28) (23) (21) (42)
longer required
Net charge against/ 124 14 (6) 36 38
(credit to) profit
Provisions held at 31 268 123 144 390 55
December 2003
6 months ended 31.12.03
Other Americas
Middle UK &
East & Group
Other Head
UAE S Asia Africa Office Total
$m $m $m $m $m
Provisions held at 1 July 50 113 60 425 1,724
2003
Exchange translation - - 2 9 28
differences
Amounts written off (7) (5) (3) 5 (379)
Recoveries of amounts 1 - - 1 47
previously written off
Other 3 (5) - 10 13
New provisions 6 12 7 52 430
Recoveries/provisions no (2) (8) (8) (37) (202)
longer required
Net charge against/ 4 4 (1) 15 228
(credit to) profit
Provisions held at 31 51 107 58 465 1,661
December 2003
General Provision Country Risk
The general provision is held to cover the inherent Country Risk is the risk that a counterparty is unable
risk of losses, which, although not identified, are to meet its contractual obligations as a result of
known by experience to be present in a loan portfolio adverse economic conditions or actions taken by
and to other material uncertainties where specific governments in the relevant country.
provisioning is not appropriate. It is not held to
cover losses arising from future events.
The following table based on the Bank of England Cross
Border Reporting (C1) guidelines, shows the Group's
The Group sets the general provision with reference cross border assets including acceptances, where they
to past experience by using both Flow Rate and exceed one per cent of the Group's total assets.
Expected Loss methodology, as well as taking
judgemental factors into account. These factors
include, but are not confined to, the economic
environment in our core markets, the shape of the Cross border assets exclude facilities provided within
portfolio with reference to a range of indicators, the Group. They comprise loans and advances, interest
and management actions taken to pro-actively manage bearing deposits with other banks, trade and other
the portfolio. bills, acceptances, amounts receivable under finance
leases, certificates of deposit and other negotiable
paper and investment securities where the counterparty
is resident in a country other than that where the
During the first half of 2004, $39 million of the cross border asset is recorded. Cross border assets
general provision was applied to cover litigation in also include exposures to local residents denominated
India dating back to 1992. At 30 June 2004, the in currencies other than the local currency.
balance of general provision stood at $386 million,
0.6 per cent of Loans and Advances to Customers (30
June 2003: $458 million, 0.8 per cent; 31 December
2003: $425 million, 0.7 per cent).
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
30.06.04
Public
sector Banks Other Total
$m $m $m $m
USA 1,558 891 2,170 4,619
Hong Kong 38 150 2,537 2,725
Netherlands** - 2,091 308 2,399
Korea 19 1,534 632 2,185
India 37 1,146 917 2,100
Singapore 1 853 937 1,791
Germany - 1,372 300 1,672
France 4 1,331 182 1,517
China*** 62 652 692 1,406
Italy* - - - -
30.06.03
Public
sector Banks Other Total
$m $m $m $m
USA 1,071 1,503 2,680 5,254
Hong Kong 22 111 2,146 2,279
Netherlands** - - - -
Korea 20 1,596 606 2,222
India 103 869 592 1,564
Singapore - 169 1,334 1,503
Germany - 2,965 295 3,260
France 4 1,537 313 1,854
China*** - - - -
Italy* 502 788 386 1,676
31.12.03
Public
sector Banks Other Total
$m $m $m $m
USA 1,436 902 2,149 4,487
Hong Kong 14 112 2,301 2,427
Netherlands - 1,729 275 2,004
Korea 3 1,393 475 1,871
India 60 641 1,052 1,753
Singapore - 160 1,509 1,669
Germany - 1,292 315 1,607
France 4 1,529 253 1,786
China*** - - - -
Italy* - - - -
* Less than one per cent of total assets at 30 June 2004 and 31 December
2003
** Less than one per cent of total assets at 30 June 2003
*** Less than one per cent of total assets at 30 June 2003 and 31 December 2003
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Market Risk Value at Risk
The Group recognises market risk as the exposure The Group measures the potential impact of changes in
created by potential changes in market prices and market prices and rates using Value at Risk (VaR)
rates. Market risk arises on financial instruments, models.
which are either valued at current market prices
(mark-to-market) or at cost plus any accrued interest
(non-trading basis). The Group is exposed to market
risk arising principally from customer driven The total VaR for trading and non-trading books
transactions. combined at 30 June 2004 was $13.6 million (30 June
2003: $14.9 million; 31 December 2003: $12.2
million). Interest rate related VaR was $13.5
million (30 June 2003: $14.6 million; 31 December
Market Risk is supervised by the Group Risk Committee, 2003: $12.2 million) and foreign exchange related VaR
which agrees policies and levels of risk appetite in was $2.5 million (30 June 2003: $1.3 million; 31
terms of Value at Risk (VaR). The Group uses historic December 2003: $1.3 million). The total VaR of $13.6
simulation to measure VaR on all market risk related million recognises offsets between interest rate and
activities. A Group Market Risk Committee sits as a foreign exchange risks.
specialist body to provide business level management,
guidance and policy setting. Policies cover the
trading book of the Group and also market risks within
the non-trading books. Limits by location and The average total VaR for trading and non-trading
portfolio are proposed by the business within the books during the six months to 30 June 2004 was $15.1
terms of agreed policy. Group Market Risk agrees the million (30 June 2003: $14.0 million; 31 December
limits and monitors exposures against these limits. 2003: $13.3 million) with a maximum exposure of $18.7
million.
Group Market Risk augments the VaR measurement by
regularly stress testing aggregate market risk The total VaR for market risks in the Group's trading
exposures to highlight potential risk that may arise book was $4.5 million at 30 June 2004 (30 June 2003:
from extreme market events that are rare but $4.6 million; 31 December 2003: $3.2 million).
plausible. In addition, VaR models are back tested Interest rate related VaR was $3.1 million (30 June
against actual results to ensure pre-determined levels 2003: $4.0 million; 31 December 2003: $2.9 million)
of accuracy are maintained. and foreign exchange-related VaR was $2.5 million (30
June 2003: $1.3 million; 31 December 2003: $1.3
million). The total VaR of $4.5 million recognises
offsets between interest rate and foreign exchange
Additional limits are placed on specific instrument risks.
and currency concentrations where appropriate. Factor
sensitivity measures are used in addition to VaR as
additional risk management tools. Option risks are
controlled through revaluation limits on currency and VaR for interest rate risk in the non-trading books
volatility shifts, limits on volatility risk by of the Group totalled $13.2 million at 30 June 2004
currency pair and other underlying variables that (30 June 2003: $11.5 million; 31 December 2003: $9.5
determine the options' value. million).
The Group has no significant trading exposure to
equity or commodity price risk.
The average daily revenue earned from market
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
risk related activities was $4.3 million, compared determinable by reference to independent prices and
with $3.5 million during 2003. valuation quotes or by using standard industry pricing
models.
Foreign Exchange Exposure
The Group enters into derivative contracts in the
normal course of business to meet customer
requirements and to manage its own exposure to
The Group's foreign exchange exposures comprise fluctuations in interest and exchange rates. Only
trading, non-trading and structural foreign currency offices with sufficient product expertise and
translation exposures. appropriate control systems are authorised to
undertake transactions in derivative products.
Foreign exchange trading exposures are principally
derived from customer driven transactions. The The credit risk arising from a derivative contract is
average daily revenue from foreign exchange trading calculated by taking the cost of replacing the
businesses during the six months ended 30 June 2004 contract, where its mark-to-market value is positive
was $1.9 million. together with an estimate for the potential change in
the future value of the contract, reflecting the
volatilities that affect it. The credit risk on
contracts with a negative mark-to-market value is
Interest Rate Exposure restricted to the potential future change in their
market value. The credit risk on derivatives is
therefore usually small relative to their notional
principal values.
The Group's interest rate exposures comprise trading
exposures and structural interest rate exposures.
Interest rate risk arises on both trading positions
and non-trading books. The Group applies a potential future exposure
methodology to manage counterparty credit exposure
associated with derivative transactions.
Structural interest rate risk arises from the
differing re-pricing characteristics of commercial
banking assets and liabilities, including Liquidity Risk
non-interest bearing liabilities such as
shareholders' funds and some current accounts.
The Group defines liquidity risk as the risk that
funds will not be available to meet liabilities as
The average daily revenue from interest rate trading they fall due. At the local level, in line with
businesses during the six months ended 30 June 2004 policy, the day to day monitoring of future cash flows
was $2.4 million. takes place and suitable levels of easily marketable
assets are maintained by the businesses.
Derivatives
A substantial portion of the Group's assets are funded
by customer deposits made up of current and savings
accounts and other short-term deposits. These
Derivatives are contracts whose characteristics and customer deposits, which are widely diversified by
value derive from underlying financial instruments, type and maturity, represent a stable source of funds.
interest and exchange rates or indices. They include Lending is normally funded by liabilities in the
futures, forwards, swaps and options transactions in same
the foreign exchange and interest rate markets.
Derivatives are an important risk management tool for
banks and their customers because they can be used to
manage the risk of price, interest rate and exchange
rate movements.
The Group's derivative transactions are principally
in plain vanilla instruments, where the
mark-to-market values are readily
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
currency and if other currencies are used the foreign Hedging Policies
exchange risk is usually hedged.
Standard Chartered does not generally hedge the value
Operational and Other Risks of its foreign currency denominated investments in
subsidiaries and branches. Hedges may be taken where
there is a risk of a significant exchange rate
movement but, in general, the management believes
Operational Risk is the risk of direct or indirect that the Group's reserves are sufficient to absorb
loss due to an event or action causing failure of any foreseeable adverse currency depreciation.
technology, processes, infrastructure, personnel, and
other risks having an operational impact. Standard
Chartered seeks to minimise actual or potential losses
from Operational Risk failures through a framework of Standard Chartered also seeks to match closely its
policies and procedures to identify, assess, control, foreign currency-denominated assets with
manage and report risks. corresponding liabilities in the same currencies.
The effect of exchange rate movements on the capital
risk asset ratio is mitigated by the fact that both
the value of these investments and the risk weighted
An independent Group Operational Risk function is value of assets and contingent liabilities follow
responsible for establishing and maintaining the substantially the same exchange rate movements.
overall Operational Risk framework. They are
supported by Wholesale Banking and Consumer Banking
Operational Risk units. The Group Operational Risk
function reports to the Group Head of Compliance and CAPITAL
Regulatory Risk and provides reports to the Group Risk
Committee.
The Group Asset and Liability Committee targets Tier
1 and Total capital ratios of 7 - 9 per cent and 12 -
Compliance with Operational Risk policy is the 14 per cent respectively. The Group believes that
responsibility of all managers. Every country being well capitalised is important.
operates a Country Operational Risk Group (CORG). The
CORG has in-country governance responsibility for
ensuring that an appropriate and robust risk
management framework is in place to monitor and manage The Group identified improving the efficiency of
operational risk, including social, ethical and capital management as a strategic priority in 2002.
environmental risk. Significant issues and exceptions A capital plan to achieve this has been developed.
must be reported to the CORG. Where appropriate, This includes several key elements; in particular, to
issues must also be reported to Business Risk reduce the amount of Tier 2 capital and to improve
Committees. Other risks recognised by the Group the overall capital mix within the broad target
include Compliance, Business, Regulatory and ratios.
Reputational risks.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
CAPITAL (continued)
30.06.04 30.06.03* 31.12.03*
$m $m $m
Tier 1 capital:
Shareholders' funds 8,022 7,454 7,546
Minority interests - equity 93 83 83
Innovative Tier 1 securities 1,142 1,058 1,155
Less: restriction on innovative Tier 1 securities (42) (88) (157)
Unconsolidated associated companies 9 12 13
Less: premises revaluation reserves - (1) -
goodwill capitalised (1,895) (2,049) (1,986)
Add: provision for retirement benefits after tax 81 146 111
Total Tier 1 capital 7,410 6,615 6,765
Tier 2 capital:
Premises revaluation reserves - 1 -
Qualifying general provision 386 458 387
Undated subordinated loan capital 1,572 1,547 1,568
Dated subordinated loan capital 3,209 3,049 3,244
Restricted innovative Tier 1 securities 42 88 157
Total Tier 2 capital 5,209 5,143 5,356
Investments in other banks (20) (635) (742)
Other deductions (4) (4) (4)
Total capital 12,595 11,119 11,375
Risk weighted assets 61,978 57,682 58,371
Risk weighted contingents 18,999 20,160 19,791
Total risk weighted assets and contingents 80,977 77,842 78,162
Capital ratios:
Tier 1 capital 9.2% 8.5% 8.7%
Total capital 15.6% 14.3% 14.6%
30.06.04 30.06.03 31.12.03
$m $m $m
Shareholders' funds:
Equity 7,367 6,829 6,897
Non-equity 655 625 649
8,022 7,454 7,546
Post-tax return on equity (normalised) 19.0% 14.3% 16.7%
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
International Financial Reporting Standards
All companies listed in the European Union will be The transition to IFRS represents a significant change
required to report their consolidated financial in the accounting framework underlying the Group's
statements under International Financial Reporting financial reporting, particularly in respect of IAS 39
Standards (IFRS) from 1 January 2005. The first 'Financial Instruments: recognition and measurement'.
public reporting date will be as at the end of the In March 2004, the International Accounting Standards
six months ended 30 June 2005, with 2004 Board (IASB) completed its review of International
comparatives. Accounting Standards that will be effective for 2005
reporting. However, IAS 39 has not as yet been
adopted by the European Commission.
An IFRS Transition Programme involving all businesses
and locations Group-wide has been underway since
2002, and is supervised by a Project Steering The Group continues to prepare for the implementation
Committee chaired by a Group Executive Director. of IFRS.
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2004
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
Notes $m $m $m
Interest receivable 2,543 2,330 2,460
Interest payable (997) (872) (950)
Net interest income 1,546 1,458 1,510
Other finance income 3 (7) (6)
Fees and commissions receivable, net 665 536 620
Dealing profits and exchange 332 274 251
Other operating income 176 79 25
1,173 889 896
Net revenue 2,722 2,340 2,400
Administrative expenses:
Staff (774) (668) (655)
Premises (158) (145) (145)
Other (332) (308) (332)
Depreciation and amortisation, of which: (211) (175) (206)
Amortisation of goodwill (88) (67) (67)
Other (123) (108) (139)
Total operating expenses (1,475) (1,296) (1,338)
Operating profit before provisions 1,247 1,044 1,062
Provisions for bad and doubtful debts (139) (308) (228)
Amounts written off fixed asset investments (2) (6) (5)
Operating profit before taxation 1,106 730 829
Taxation 1 (340) (235) (265)
Operating profit after taxation 766 495 564
Minority interests (20) (14) (15)
Profit for the period attributable to shareholders 746 481 549
Dividends on non-equity preference shares 2 (29) (28) (27)
Dividends on ordinary equity shares 3 (201) (182) (429)
Retained profit 516 271 93
Normalised earnings per ordinary share 4 57.9c 41.0c 49.6c
Basic earnings per ordinary share 4 61.2c 38.7c 43.8c
Diluted earnings per ordinary share 4 60.3c 38.4c 43.0c
Dividend per ordinary share 3 17.06c 15.51c 36.49c
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS
SUMMARISED CONSOLIDATED BALANCE SHEET
As at 30 June 2004
30.06.04 30.06.03* 31.12.03*
$m $m $m
Assets
Cash, balances at central banks and cheques in course of 2,243 1,736 1,982
collection
Treasury bills and other eligible bills 5,978 4,873 5,689
Loans and advances to banks 18,587 17,966 13,354
Loans and advances to customers 63,671 58,013 59,744
Debt securities and other fixed income securities 25,515 22,620 23,141
Equity shares and other variable yield securities 179 192 359
Intangible fixed assets 1,895 2,049 1,986
Tangible fixed assets 794 888 884
Prepayments, accrued income and other assets 10,273 11,509 13,085
Total assets 129,135 119,846 120,224
Liabilities
Deposits by banks 16,999 14,785 10,924
Customer accounts 78,219 71,782 73,767
Debt securities in issue 6,579 6,433 6,062
Accruals, deferred income and other liabilities 12,767 13,503 15,344
Subordinated liabilities:
Undated loan capital 1,572 1,547 1,568
Dated loan capital 4,351 4,107 4,399
Minority interests:
Equity 93 83 83
Non-equity 533 152 531
Shareholders' funds 8,022 7,454 7,546
Total liabilities and shareholders' funds 129,135 119,846 120,224
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 30 June 2004
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
$m $m $m
Profit attributable to shareholders 746 481 549
Exchange translation differences (72) 36 31
Actuarial gain/(loss) on retirement benefits 15
Deferred tax on actuarial gain/(loss) on retirement benefits (5)
Total recognised gains and losses for the period 684 517 580
Prior year adjustment** (169)
Total recognised gains and losses since the last annual report 515 517 580
*Comparative restated (see note 6 on page 41).
**Including cumulative actuarial gains/losses arising in prior periods.
NOTE OF CONSOLIDATED HISTORICAL COST PROFITS AND LOSSES
For the six months ended 30 June 2004
There is no material difference between the results as reported and the results
that would have been reported on a historical cost basis. Accordingly, no note
of the historical cost profits and losses has been included.
Accounting Convention
The accounts of the Group have been prepared under the historical cost
convention, modified by the revaluation of certain fixed assets and dealing
positions. The accounting policies, as listed in the Annual Report 2003,
continue to be consistently applied, apart from the adoption of FRS17 for
Retirement Benefits which has resulted in a restatement of comparative figures.
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS
Consolidated cash flow statement
For the six months ended 30 June 2004
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
$m $m $m
Net cash inflow from operating activities (see note 5) 2,769 1,672 2,076
Returns on investment and servicing of finance
Interest paid on subordinated loan capital (253) (239) (59)
Premium and costs on repayment of subordinated loan capital (21) - -
Dividends paid to minority shareholders of subsidiary undertakings (3) (6) (16)
Dividends paid on preference shares (29) (27) (28)
Net cash outflow from returns on investment and servicing of finance (306) (272) (103)
Taxation
UK taxes paid (26) (52) (109)
Overseas taxes paid (245) (225) (128)
Total taxes paid (271) (277) (237)
Capital expenditure and financial investment
Purchases of tangible fixed assets (95) (68) (88)
Acquisitions of treasury bills held for investment purposes (5,813) (6,073) (6,531)
Acquisitions of debt securities held for investment purposes (33,931) (22,232) (27,015)
Acquisitions of equity shares held for investment purposes (42) (63) (131)
Disposals of tangible fixed assets 53 7 7
Disposals and maturities of treasury bills held for investment purposes 5,363 6,398 6,234
Disposals and maturities of debt securities held for investment purposes 31,788 21,394 28,104
Disposals of equity shares held for investment purposes 352 53 (40)
Net cash (outflow)/inflow from capital expenditure and financial (2,325) (584) 540
investment
Net cash (outflow)/inflow before equity dividends paid and financing (133) 539 2,276
Net cash outflow from disposal of interests in subsidiary and associated 6 - (95)
undertakings and the business of a branch**
Equity dividends paid to members of the Company (396) (364) (167)
Financing
Gross proceeds from issue of ordinary share capital 4 2 1
Repurchase of preference share capital - (17) (3)
Net cash inflow/(outflow) from financing 4 (15) (2)
(Decrease)/increase in cash in the period (519) 160 2,012
* Comparative restated (see note 6 on page 41).
** In 2003 a net figure of $17 million was paid to counterparties for the net
sale/purchase of the business of a branch. $112 million worth of cash and
cash equivalents were included in balances transferred on sale of the
business of a branch, which was included in the $95 million net outflow.
STANDARD CHARTERED PLC - NOTES (continued)
1. Taxation
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
$m $m $m
Analysis of taxation charge in the period
The charge for taxation based upon the profits for the period comprises:
United Kingdom corporation tax at 30% (30 June 2003: 30%; 31 December
2003: 30%):
Current tax on income for the period 190 158 193
Adjustments in respect of prior periods - 2 (36)
Double taxation relief (182) (139) (147)
Foreign tax:
Current tax on income for the period 288 223 268
Adjustments in respect of prior periods 8 (1) (25)
Total current tax 304 243 253
Deferred tax:
Origination/reversal of timing differences 36 (8) 12
Tax on profits on ordinary activities 340 235 265
Effective tax rate 30.7% 32.2% 32.0%
*Comparative restated (see note 6 on page 41).
Overseas taxation includes taxation on Hong Kong profits of $45 million (30 June
2003: $25 million; 31 December 2003: $109 million) provided at a rate of 17.5
per cent (30 June 2003: 17.5 per cent; 31 December 2003: 17.5 per cent) on the
profits assessable in Hong Kong. The Group's net deferred tax asset is $295
million at 30 June 2004, (30 June 2003: $258 million; 31 December 2003: $271
million). $256 million (30 June 2003: $195 million; 31 December 2003: 222
million) is included in other assets. The balance of $39 million in June 2004
(30 June 2003: $63 million; 31 December 2003: $49 million) represents the
deferred tax on the pension liabilities, so offsets this amount in other
liabilities.
STANDARD CHARTERED PLC - NOTES (continued)
2. Dividends on Preference Shares
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03 31.12.03
$m $m $m
Non-cumulative irredeemable preference shares:
7 3/8% preference shares of £1 each 7 6 6
81/4% preference shares of £1 each 7 7 6
Non-cumulative redeemable preference shares:
8.9% preference shares of $5 each 15 15 15
29 28 27
3. Dividends on Ordinary Equity Shares
6 months ended 6 months ended 6 months ended
30.06.04 30.06.03 31.12.03
Cents per $m Cents per $m Cents per $m
share share share
Interim 17.06 201 15.51 182 - -
Final - - - - 36.49 429
17.06 201 15.51 182 36.49 429
The 2004 interim dividend of 17.06 cents per share will be paid in either
sterling, Hong Kong dollars or US dollars on 8 October 2004, to shareholders on
the UK register of members at the close of business on 13 August 2004 and to
shareholders on the Hong Kong branch register of members at the opening of
business in Hong Kong (9:00am Hong Kong time) on 13 August 2004. It is intended
that shareholders will be able to elect to receive shares credited as fully paid
instead of all or part of the interim cash dividend. Details of the dividend
will be sent to shareholders on or around 20 August 2004.
STANDARD CHARTERED PLC - NOTES (continued)
4. Earnings per Ordinary Share
6 months ended 30.06.04
Average Per
number of share
Profit shares amount
$m ('000) cents
Basic EPS
Profit attributable to ordinary shareholders 717 1,170,699
Premium and costs paid on repurchase of preference shares -
Basic earnings per ordinary share 717 1,170,699 61.2c
Effect of dilutive potential ordinary shares:
Convertible bonds 11 34,488
Options - 2,252
Diluted EPS 728 1,207,439 60.3c
6 months ended 30.06.03* 6 months ended 31.12.03*
Average Per Average Per
number of share number of share
Profit shares amount Profit shares amount
$m ('000) cents $m ('000) cents
Basic EPS
Profit attributable to ordinary 453 1,165,676 522 1,168,990
shareholders
Premium and costs paid on (2) (10)
repurchase of preference shares
Basic earnings per ordinary 451 1,165,676 38.7c 512 1,168,990 43.8c
share
Effect of dilutive potential
ordinary shares:
Convertible bonds 10 34,488 11 34,488
Options - 231 - 12,091
Diluted EPS 461 1,200,395 38.4c 523 1,215,569 43.0c
The Group measures earnings per share on a normalised basis. This differs from
earnings defined in Financial Reporting Standard 14. The table below provides a
reconciliation.
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
$m $m $m
Basic earnings per ordinary share, as above 717 451 512
Premium and costs paid on repurchase of preference shares - 2 10
Premium and costs paid on repurchase of subordinated debt 21 - -
Amortisation of goodwill 88 67 67
Profits less losses on disposal of investment securities (159) (48) (14)
Costs re Hong Kong incorporation 18 - -
Amounts written off fixed asset investments 2 6 5
Profit on sale of tangible fixed assets (4) - -
Profit on disposal of subsidiary undertakings (4) - -
Normalised earnings 679 478 580
Normalised earnings per ordinary share 57.9c 41.0c 49.6c
*Comparative restated (see note 6 on page 41).
STANDARD CHARTERED PLC - NOTES (continued)
5. Consolidated Cash Flow Statement
Reconciliation between operating profit before taxation and net cash inflow from
operating activities:
6 months 6 months 6 months
ended ended ended
30.06.04 30.06.03* 31.12.03*
$m $m $m
Operating profit 1,106 730 829
Adjustments for items not involving cash flow or shown separately:
Amortisation of goodwill 88 67 67
Depreciation and amortisation of premises and equipment 123 108 139
Gain on disposal of tangible fixed assets (4) - (14)
Gain on disposal of investment securities (159) (48) (14)
Amortisation of investments 18 12 (119)
Gain on disposal of subsidiary undertakings (4) - -
Charge for bad and doubtful debts and contingent liabilities 139 308 228
Amounts written off fixed asset investments 2 6 5
Debts written off, net of recoveries (74) (494) (313)
(Decrease)/increase in accruals and deferred income (199) 49 167
(Increase)/decrease in prepayments and accrued income (197) (452) 540
Net decrease/(increase) in mark-to-market adjustment*** 473 (104) (299)
Interest paid on subordinated loan capital 253 239 59
Net cash inflow from trading activities 1,565 421 1,275
Net (increase)/decrease in cheques in the course of collection (83) (73) 46
Net decrease/(increase) in treasury bills and other eligible bills 52 (14) (62)
Net (increase)/decrease in loans and advances to banks and customers (10,357) (2,856) 5,254
Net increase/(decrease) in deposits from banks, customer accounts and debt 12,098 5,320 (3,192)
securities in issue
Net increase in dealing securities (488) (972) (578)
Net increase/(decrease) in other accounts** (18) (154) (667)
Net cash inflow from operating activities 2,769 1,672 2,076
Analysis of changes in cash
Balance at beginning of period 5,661 3,496 3,663
Exchange translation differences (40) 7 (14)
Net cash (outflow)/inflow (519) 160 2,012
Balance at end of period 5,102 3,663 5,661
* Comparative restated (see note 6 on page 41).
** This includes the effect of foreign exchange translation in the local
books of subsidiaries and branches.
*** Mark to market adjustments are being reclassified from the reconciliation
to 'Net cash inflow from operating activities', to the reconciliation to
'Net cash inflow from trading activities', as this better reflects their
impact on cash flows.
STANDARD CHARTERED PLC - NOTES (continued)
6. Restatement of Comparative Figures
a) The Urgent Issues Task Forces issued abstract Under SSAP24 the profit and loss account included a
38 (UITF 38) - Accounting for ESOP Trusts in December charge in respect of the cost of accruing surplus
2003. This abstract required that when a company benefits for the current employees offset by a credit
reacquires its own equity instruments it should respecting the amortisation of the surplus in the
present this as a deduction in arriving at Group's defined benefit schemes. A net pension
shareholders' funds rather than as assets. For the prepayment was included in the Group's balance sheet.
Group's consolidated accounts the amount reported in
Equity shares and other variable yield securities at
June 2003 has been reduced by $58 million and
shareholders' funds has been reduced by $58 million to A prior year adjustment has been made reducing
reflect this change in disclosure. shareholders' funds at 30 June 2003 by $136 million
and at 31 December 2003 by $169 million to reflect
the revised policy.
b) Minority Interests at 30 June 2003 have been
restated to reflect non-equity minority interests.
These include third party investments in the Group's The effect of this change on the profit and loss
Global Liquidity fund. account for the six months ended 30 June 2004has been
to introduce other finance income of $3 million (30
June 2003: $7 million charge; 31 December 2003: $6
million charge), and to decrease administrative
c) The Group has fully adopted the accounting expenses by $5 million (30 June 2003: $4 million
requirements of FRS17 - Retirement Benefits. FRS17 increase; 31 December 2003: $34 million decrease).
replaces Statement of Standard Accounting Practice Profit before tax has been increased by $8 million
(SSAP) 24 and Urgent Issue Task Force (UITF) Abstract (30 June 2003: $11 million decrease; 31 December
6 as the accounting standard dealing with 2003: $28 million increase).
post-retirement benefits. The standard is being
introduced in the UK in stages, starting with
disclosures in the notes to the accounts. The full
requirements of the standard are not mandatory until The effect on the Group's balance sheet at 30 June
reporting periods starting on or after 1 January 2005, 2004 has been to reflect a net post retirement
however early adoption is encouraged. The Group has benefit liability of $81 million (30 June 2003: $146
adopted the standard one year early as there is now million; 31 December 2003: $111 million), to reduce
more certainty that similar requirements will be prepayments and accrued income by $78 million (30
incorporated within IFRS, under which the Group will June 2003: $7 million; 31 December 2003: $81
report from 2005. million), and reduce shareholders' funds by $154
million (30 June 2003: $136 million; 31 December
2003: $169 million).
The new standard requires the Group to include the
assets of its defined benefit schemes on its balance
sheet together with the related liability to make d) d) The Group's £200 million Step-Up Notes
benefit payments net of deferred tax. The profit and 2022 (30 June 2003: $320million) have been
loss account includes a charge in respect of the cost reclassified from undated to dated subordinated loan
of accruing benefits for current employees and any capital to incorporate callable options in place.
benefit improvements. The expected return of the
schemes' assets is included within other income less a
charge in respect of unwinding of the discount applied
to the scheme's liabilities.
7. Corporate Governance
The directors confirm that, throughout the period, the The 2004 Interim Results have been reviewed by the
Company has complied with the provisions of Appendix Company's Audit and Risk Committee.
14 of the Listing Rules of the Hong Kong Stock
Exchange.
STANDARD CHARTERED PLC - NOTES (continued)
8. Interim Report and Statutory Accounts
The information in this news release is unaudited and This news release does not constitute the unaudited
does not constitute statutory accounts within the interim financial information which is contained in
meaning of Section 240 of the Companies Act 1985 (the the interim report. The unaudited interim financial
Act). The 2004 interim report was approved by the information has been reviewed by the Company's
Board of Directors on 4 August 2004. The statutory auditor, KPMG Audit Plc, in accordance with the
accounts for the year ended 31 December 2003 have guidance contained in Bulletin 1999-4: Review of
been delivered to the Registrar of Companies in interim financial information issued by the Auditing
England and Wales in accordance with Section 242 of Practices Board. On the basis of its review, KPMG
the Act. The auditor has reported on those accounts; Audit Plc was not aware of any material modifications
the report was unqualified and did not contain a that should be made to the unaudited interim financial
statement under Section 237 (2) or (3) of the Act. information as presented for the six months ended 30
June 2004 in the interim report. The full report of
its review is included in the interim report.
Financial Calendar
Ex-dividend date 11 August 2004
Record date 13 August 2004
Posting to shareholders of 2004 Interim Report 20 August 2004
Payment date - interim dividend on ordinary shares 8 October 2004
Copies of this statement are available from:
Investor Relations, Standard Chartered PLC, 1 Aldermanbury Square, London, EC2V
7SB or from our website on http://investors.standardchartered.com
For further information please contact:
Tracy Clarke, Group Head of Corporate Affairs
(020) 7280 7708
Paul Marriage, Head of Corporate Communications
(020) 7280 7163
Benjamin Hung, Head of Investor Relations
(020) 7280 7245
The following information is available on our website
• A live webcast of the final results analyst presentation (available from
9:45am GMT)
• A pre-recorded webcast and Q/A session of analyst presentation in London
(available 1:00pm GMT)
• Interviews with Mervyn Davies, Group Chief Executive and Peter Sands,
Group Finance Director (available from 9:00am GMT).
• Slides for the Group's presentations (available after 11:00am GMT)
Images of Standard Chartered are available for the media at www.newscast.co.uk
Information regarding the Group's commitment to corporate social responsibility
is available at www.standardchartered.com/ourbeliefs
The 2004 Interim Report will be made available on the website of the Stock
Exchange of Hong Kong and on our website www.standardchartered.com as soon as is
practicable.
This information is provided by RNS
The company news service from the London Stock Exchange