Standard Chartered points to increase in bank levy as profits drop

The Last Drop

Standard Chartered has warned shareholders it will face a $540m (£485m) bill to pay George Osborne’s bank levy this year as it reported a sharp downturn in profits in the first three months of 2015.

The bank, which is based in London but does the majority of its business outside the UK, will pay $170m (£111m) more for the bank levy than it did last year because of the increase announced in the Chancellor’s last budget before the general election.

The cost of the levy, which is calculated on the basis of a bank’s balance sheet, has been facing increased scrutiny following the announcement by HSBC last week that it is to consider whether to move its headquarters out of London, where it has been based since 1992.

Andy Halford, Standard Chartered’s finance director, repeatedly side-stepped questions about whether the board was considering moving its head office from the UK or which locations might be regarded as alternatives.

The bank levy, he said, was just one of the factors that might be considered in determining where to be headquartered. He cited skilled workforces and stable governments as other factors. “I think it is just one of those evolving things,” said Halford. Referring to the bank levy – introduced by Osborne when the coalition took office in 2010 – Halford said: “The increase in the number this time is pretty significant.”

HSBC caused a political storm when it announced a review of where its headquarters is located on the day of its annual general meeting. Standard Chartered’s agm is the day before the general election and the board is thought to be keen to avoid a row before the election.

However, speculation is growing that when the company’s new chief executive, Bill Winters, takes the helm in June a formal review could be undertaken for the first time in three years or so. Singapore is expected to be among the alternative locations, given that Temasek, which owns 17% of Standard Chartered’s shares, is based there.

Winters, a former investment banker who sat on the Vickers commission which drew up the ringfencing rules, arrives on Friday and replaces Peter Sands on a yet-to-be-determined date in June.

The first quarter figures published on Tuesday reflect the problems Sands – one of the few top bankers to survive the 2008 financial crisis – has faced in the later months of his tenure. Profits fell 22% to $1.4bn and bad debts rose 80% to $467m.

“Trading conditions remain challenging and the actions we are taking to de-risk, cut costs and build capital are having an impact on near-term performance. However, underlying business volumes generally remain strong. We remain confident in the strength of our franchise, the opportunities in our markets and in our ability to build returns to an attractive level in the medium term,” said Sands.

His departure was announced in February after he had presided over three profit warnings in 12 months and a share price at five-year lows.

The bank is still facing questions over its capital position and did not disclose its ratios for the first quarter. Analysts at Jefferies said: “No mention of [capital ratios] which is disappointing given capital is the critical dimension for the shares in 2015 now that earnings expectations have rebased and December’s UK stress test will be particularly harsh on Standard Chartered’s Asian exposures.”

Powered by Guardian.co.ukThis article was written by Jill Treanor, for theguardian.com on Tuesday 28th April 2015 12.03 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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