StanChart shares dive as tapering fears hit profits

Tim Wallace
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STANDARD Chartered issued a profit warning yesterday as its 10-year long run of record profits looks set to come to a sudden finish, as chaos in emerging markets and losses in Korea hit the lender.

Shares in the UK-based bank plunged 6.46 per cent as the lender said profits are expected to fall in the second half of the year compared with the same period of last year.

The dip leaves its full-year earnings broadly flat, ending a decade-long positive trend.

Just last month the bank cut its growth outlook warning that although its long-term aim was to continue double-digit percentage growth, single digit growth was more likely for the coming years.

But even that slower forecast has proven too optimistic.

Fears over the impact of tapering by the Federal Reserve have caused market volatility in Asia and other emerging markets.

Combined with a slowdown in the continent, earnings are slowing for the bank.

In particular Standard Chartered is suffering in South Korea where profits are set to fall by a double-digit percentage.

The group is also being knocked by the strength of the dollar relative to Asian currencies, as it reports in US dollars.

Chief executive Peter Sands maintained the group has a strong future.

“We are responding to near term challenges to ensure we strike the right balance between growth and returns, and have successfully managed costs tightly in light of the pressures on income,” Sands said.

“We retain a highly diversified and strong balance sheet and remain confident in the potential of our markets.”

And analysts agreed, recommending investors buy the stock.

“We expect emerging market growth to recover in 2014, supported by China’s continued emergence as a global economic force and it is likely that Standard Chartered will be growing its asset base when the other UK banks are still de-leveraging,” said Nic Clarke from Charles Stanley.

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