HISTORICALLY, it has always been tricky to dig up anything bad in Standard Chartered’s results. Yesterday’s record profit – the 10th year in a row, as if the crisis never happened – brought shareholders a return on equity up 0.6 percentage points to 12.8 per cent and dividend growth of 10.5 per cent, even in the face of the £440m fine it booked last year for breaking US sanctions against trading with Iran.
The bank even shone a light on the shrinking financial services job market, vowing to up headcount by around 2,200 – predominantly in emerging markets – in the coming year, similar to the number it added over 2012. But hiring costs money, and chief executive Peter Sands’ admission yesterday that the bank has a staff turnover rate of around 20 per cent means the fruits of his recruitment drive won’t always be around long enough to make the time and money invested worth it. Sands was keen to highlight how StanChart’s emphasis on training – and prominence in high-growth markets – makes its staff very appealing to competitors, but he can’t have failed to notice that from 2010 to 2011 staff costs excluding pay and pensions already rose by more than 37 per cent, adding £228m to its operating expenses. With its regulatory bills in the UK predicted to top $500m this year, the numbers soon start adding up. We’ve watched every other major UK bank post a decline in revenues over the past couple of weeks, but now investors may start to question how wise continued hiring is, especially when Sands faces having to hike base salaries of his top staff to keep them once the bonus cap kicks in.
StanChart is doing well to create jobs where others are cutting back. It is a shame that regulators are going to make it harder for the bank to spend money where it wants.