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Standard Chartered Reduced Staff to Cut Costs

Middle East : 05 May 2011

In response to increasing costs, Standard Chartered stated that it was forced to eliminate 800 jobs in 2011, even after reporting record high revenue and profit during Q1 thanks to robust Asian markets such as Hong Kong and India.

Standard Chartered stated this week that income in the opening quarter increased by over 10 percent, indicating that a ninth consecutive year of record high earnings is likely.

Costs increased as well as the firm hired a large amount of staff in 2010, pushing costs up at a faster rate and dampening the positive news regarding earnings.

Expected profits for the bank are around $7 billion for 2011, an increase of 14 percent over the $6.1 billion reported for 2010, according to average estimations in the Reuters poll of fifteen analysts.

There are no full quarter earnings issued by Standard Chartered. This trading statement noted a broadly spread out income that indicates a particularly good performance for the company’s wealth management business centered in Singapore and Hong Kong.

Asian banks have been involved in an intense struggle to locate and hang onto talented individuals, particularly in markets like China and India.

There is increasing pressure for Standard Chartered to exercise control over their costs. The rise reported for the opening quarter saw the shares drop by 2 percent.

London’s Seymour Pierce analyst Bruce Packard stated that the wholesale bank is continuing to experience rising levels of cost growth. Standard Chartered has promised to maintain control over growing costs, forcing them to keep pace with income growth for 2011.

Richard Meddings, the bank’s Finance Director, spoke to reporters by phone and stated the firm has a “good grip on expenses.” He noted that the staff cuts is related to the pace of recruiting and indicates that management is handling the growth of expenses carefully.

Expectations are that 1,000 staff will be added in 2011 (net amount), according to Meddings, even after the 800 staff were let go in the opening quarter. There were 7,000 staff members brought on in 2010, bringing the employee total to around 85,000.

Both competition and hiring were instrumental in increasing costs by 13 percent, which far outpaced the 6 percent increase in income. The opening quarter saw the “negative jaws” remain, although in a narrower fashion than was seen in 2010, according to the bank.

Standard Chartered is based out of London and generates over 80 percent of company profits from emerging markets, notably Asia. The bank stated that the consumer banking division saw income grow by rates in the low double-digits, while wholesale banking increased by about 10 percent. Standard Chartered does not make a practice of issuing full quarterly earnings.

India has grown into the largest market for the bank, generating $1.2 billion in profits for 2010. Meddings stated that growth will continue to strengthen, but at a lower rate based on the amount of business and supported by an economic growth rate of approximately 8 percent for 2011.

Other regions that performed well in terms of broad-based income included Malaysia, Sinagpore, China and Hong Kong, stated Meddings.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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