Bottom Line: Banking on emerging markets is no longer such a sure-fire bet

Marc Sidwell
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AHEAD of today’s Autumn Statement, George Osborne got an implicit rebuke over his repeated enthusiasm for raising the banking levy in Standard Chartered’s profit warning yesterday. The bank noted “a significant increase in the UK bank levy”. It anticipates a cost of $250m (£153m) this year, up from $174m in 2012. The levy has been raised six times and by more than 80 per cent in the two years since it was introduced, due to its continued failure to pass the Treasury as much revenue as mandarins had hoped.

But with $19bn operating income in 2012 and a profit before tax of $6.9bn, Standard Chartered can hardly lay all its troubles at the chancellor’s door. Its troubles in Korea are anticipated to bring operating profit in consumer banking down by a rate of at least 10 per cent over the full year – the first drop in a decade. Its best hope now appears to be to more-or-less match last year’s income for the group, with flat year-on-year operating profit in wholesale banking, where its own account income from financial markets is down by over 15 per cent year-on-year, compared with 12 per cent growth the year before.

Standard Chartered has had a fantastic run, thanks in part to its heavy exposure to emerging markets. But with the Brics’ potential under increasing scrutiny, partly thanks to the Fed, life has suddenly got a lot more difficult. It’s unfortunate then that chief executive Peter Sands was away in China with the PM as the bank announced its first profits warning in years. He also went on David Cameron’s recent trip to India, leading one rival bank chairman to comment: “I’m not too sure Peter should be doing the rubber chicken circuit while Standard Chartered is encountering so many issues.”

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