Asia-focused bank Standard Chartered Plc said its operating profit grew by a mid-single digit rate in the first nine months of the year, keeping it on track for a 10th straight year of record earnings.
Earnings, though, would have risen by at least 10 percent but for a $340 million settlement paid to New York regulators who threatened to strip the bank of its state licence over allegations it hid some $250 billion worth of transactions with Iran.
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"Although the environment remains turbulent, we are in the right markets and continue to see good momentum across our businesses and geographies," CEO Peter Sands wrote in a third-quarter trading update on Tuesday.
The bank's forecast is roughly in line with full-year expectations for a 6 percent rise in pretax profit to about $7.2 billion, according to Thomson Reuters I/B/E/S. It does not release specific numbers in its quarterly updates. First-half pretax profit and income both increased by around 9 percent, the bank said in August.
Hong Kong, China, Indonesia and Europe delivered a strong performance, the bank said, without elaborating. It also managed to keep costs under control, with expenses rising roughly in line with revenue - a trend known as "neutral jaws". Standard Chartered was bogged down by rising costs in much of 2010 and 2011 as it expanded across Asia.
The bank is one of few still expanding its headcount, which totaled about 85,000 at end-June. In August, the bank said it planned to add 1,500 staff in the second half.
Major European peers, in contrast, are pruning staff numbers.
Swiss bank UBS announced on Tuesday it was winding down its fixed income business and axing 10,000 bankers, one of the biggest industry lay-offs since Lehman Brothers imploded in 2008. And Germany's flagship lender Deutsche Bank , reporting third-quarter pretax profit of 1.1 billion euros ($1.42 billion), has said it expects to axe more than the 1,900 positions already announced, mainly in investment banking.
RISK OF BAD LOANS
Weighing on Standard Chartered's earnings was weakness in India, Singapore's wholesale banking and South Korea's consumer banking, it said.
Rising household debt in South Korea - which now exceeds that of the United States before the subprime mortgage crisis - has prompted worries the country may soon see a spike in bad loans. In Singapore, the city-state narrowly escaped a recession in the third quarter.
"You can't fight gravity," said Jim Antos, an analyst at Mizuho Securities in Hong Kong. "Let's face it. The global economy isn't getting better, so that's going to have an impact on earnings."
Antos said he expects analysts to revise down Standard Chartered's full-year earnings forecast by another 5-10 percent, given the external headwinds.
Despite the slowdown, Standard Chartered said it reduced how much money it put aside in case of bad loans - its impairment charge - by tens of millions of dollars. In the first half year, the bank set aside $583 million for impairment charges.
The bank said portfolio quality in its wholesale bank - which includes its investment and commercial banking operations - was good, though it was watchful in India and the Middle East.
A $1 billion loan Standard Chartered made to the Indonesian chairman of London-listed coal miner Bumi Plc - which is probing alleged financial irregularities at its Indonesian units - triggered some concern over the bank's asset quality and lending practices.
Standard Chartered shares in Hong Kong, valued at around US$58 billion, have risen about 9 percent this year, lagging the benchmark Hang Seng Index's 20 percent gain. The stock last traded up 0.1 percent in a market off 0.7 percent.
(Reporting by Kelvin Soh; Editing by Ian Geoghegan)