Shrinking spreads pull Standard Chartered Bank’s earnings down

Bank reports a 9.5% decline in profits to Rs1.452b in first quarter of 2013.

KARACHI: Lower banking spreads continue to plague the banking sector, as its latest victim Standard Chartered Bank announced a decrease in profits on the back of declining core income.

The biggest of the few foreign banks remaining in the country reported a decline of 9.5% in its bottom-line to Rs1.452 billion during the first quarter of 2013, amidst falling core income from the bank’s core operations as it earned lesser interest and paid out higher interest to depositors in the quarterly period compared to the corresponding quarter of last year.

Resultantly, net interest income fell by 5% to Rs4.789 billion in the three-month period from Rs5.027 billion in the comparable period of preceding year.

Keeping in view squeezing interest margins – the difference between at what rates the banks lends and borrows at – Standard Chartered focused on cutting its provisioning expenses – like much of the rest of the banking sector – and was very successful in doing so as its provision for bad loans came down by shifting more and more of its lending portfolio into government securities.



There were no major surprises at the non-core operations end, where non-interest income of the bank fell 5% to Rs1.605 billion during the quarter. On the other hand, expenses climbed Rs200 million mainly due to surging administrative expenses of the bank as Standard Chartered Bank continues to expand its operations in Pakistan.

As a result, Standard Chartered’s profitability took a blow in the quarterly period as core as well as non-core earnings subside.

Standard Chartered Bank Pakistan is listed on the Karachi Stock Exchange, though 99% of it is owned by the bank’s global parent. At 130 branches in 29 cities, its Pakistani retail branch network is the second largest for Standard Chartered Bank globally, second only to its network in South Korea. Part of this is the result of the successful merger with Union Bank in late 2006. Regardless, the large branch network is a huge advantage for the bank.

Published in The Express Tribune, April 30^th, 2013.

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