Interim Results-Part 3
Standard Chartered PLC
2 August 2000
PART 3
12. Non-performing loans and advances
30.6.00 30.6.99
SCNB Other Total SCNB Other Total
£m £m £m £m £m £m
Loans and advances on
which interest is 579 2,004 2,583 - 1,893 1,893
suspended
Specific provisions
for bad and doubtful (69) (819) (888) - (698) (698)
debts
Interest in suspense - (227) (227) - (197) (197)
510 958 1,468 - 998 998
31.12.99
SCNB Other Total
£m £m £m
Loans and advances on
which interest is 596 2,002 2,598
suspended
Specific provisions
for bad and doubtful (63) (801) (864)
debts
Interest in suspense - (208) (208)
533 993 1,526
The Group acquired Standard Chartered Nakornthon Bank (SCNB) (formerly
Nakornthon Bank) in September 1999. At 30 June 2000, under the terms of
the acquisition, net non-performing loans (NPLs) of £510 million are
subject to a Loan Management Agreement (LMA) with the Financial
Institutions Development Fund (FIDF), a Thai Government agency. Under
the LMA, the FIDF has guaranteed the recovery of a principal amount of
the NPLs of £387 million. The LMA also provides, inter alia, for loss
sharing arrangements whereby the FIDF will bear up to 85 per cent of
losses in excess of the guaranteed amount. The carrying cost of the NPLs
is reimbursable by the FIDF to SCNB for a period of five years from the
date of acquisition.
Excluding the SCNB non-performing loan portfolio, specific provisions and
interest in suspense, including provisions held against enhanced and
other performing emerging markets debt (see note 11), together cover 56
per cent (30 June 1999: 52 per cent; 31 December 1999: 54 per cent) of
total non-performing lending to customers. If lending and provisions are
adjusted for the cumulative amounts written off, the effective cover is
63 per cent (30 June 1999: 57 per cent; 31 December 1999: 60 per cent).
13. Accounting policies
With the following exception, accounting policies are unchanged from
those set out in the 1999 Annual Report: the Group has implemented
Financial Reporting Standard 15 and, as a result, has revised its
accounting policy in relation to depreciation of premises. The effect of
the change is not material and, therefore, prior period results have not
been restated.
14. Consolidated cash flow statement
Reconciliation between operating profit before taxation and net cash
inflow from operating activities
6 months 6 months 6 months
ended ended ended
30.6.00 30.6.99 31.12.99
£m £m £m
Operating profit before taxation 356 271 236
Items not involving cash flow:
Depreciation and amortisation of premises 55 37 58
and equipment
Amortisation of goodwill 16 8 14
Amortisation of investments (19) (19) (11)
Charge for bad and doubtful debts and
contingent liabilities 164 240 255
Debts written off, net of recoveries (182) (117) (133)
(Decrease)/increase in accruals and (68) (296) 75
deferred income
Decrease/(increase) in prepayments and 85 251 (129)
accrued income
Adjustments for items shown separately:
Interest paid on subordinated loan capital 59 42 60
Net cash inflow from trading activities 466 417 425
Net (increase)/decrease in cheques in the
course of collection (15) (10) 13
Net (increase)/decrease in treasury bills
and other eligible bills (51) (14) (17)
Net increase in loans and advances to banks (2,819) (3,855) 510
and customers
Net increase in deposits from banks,
customer accounts and debt securities in 3,237 3,432 67
issue
Net (increase)/decrease in dealing (95) (189) (42)
securities
Net (increase)/decrease in mark-to-market (129) 149 (214)
adjustment
Net decrease/(increase) in other accounts 232 491 (182)
Net cash inflow from operating activities 826 421 560
Analysis of changes in cash
6 months 6 months 6 months
ended ended ended
30.6.00 30.6.99 31.12.99
£m £m £m
Balance at beginning of period 1,389 1,275 1,412
Exchange translation differences 50 30 5
Net cash inflow/(outflow) 902 107 (28)
Balance at end of period 2,341 1,412 1,389
15. Cross border assets
The following table shows the Group s cross border assets, including
acceptances, where they exceed 1 per cent of the Group s total assets.
Cross border assets exclude facilities provided within the Group. They
comprise loans and advances, interest bearing deposits with other banks,
trade and other bills, acceptances, amounts receivable under finance
leases, certificates of deposit and other negotiable paper and investment
securities where the counterparty is resident in a country other than
that where the cross border asset is recorded. Cross border assets also
include exposures to local residents denominated in currencies other than
the local currency.
30.6.00
Public
sector Banks Other Total
£m £m £m £m
USA 957 479 602 2,038
Germany 32 1,470 15 1,517
Hong Kong 13 64 1,310 1,387
Italy 91 921 29 1,041
Singapore 3 298 706 1,007
Korea - 750 198 948
Japan 7 728 42 777
France 26 674 21 721
Brazil 10 557 81 648
31.12.99
Public
sector Banks Other Total
£m £m £m £m
USA 764 282 424 1,470
Hong Kong 8 95 1,188 1,291
Germany 32 1,187 7 1,226
Singapore 18 364 523 905
Korea 3 684 101 788
France 53 676 32 761
Japan 2 637 19 658
Brazil 8 559 69 636
16. Net interest margin and interest spread
6 months 6 months 6 months
ended ended ended
30.6.00 30.6.99 31.12.99
% % %
Net interest margin 3.3 3.5 3.3
Interest spread 2.6 2.9 2.7
£m £m £m
Average interest earning assets 52,198 46,444 49,510
Average interest bearing liabilities 45,179 40,535 43,461
17. Capital ratios
30.6.00 30.6.99 31.12.99
£m £m £m
Tier 1 capital 3,623 3,174 3,026
Tier 2 capital 2,639 2,260 2,195
6,262 5,434 5,221
Less supervisory adjustments (30) (20) (24)
Adjusted capital base 6,232 5,414 5,197
Risk weighted assets 31,205 28,321 28,082
Risk weighted contingents 7,931 7,177 7,121
Total risk weighted assets and contingents 39,136 35,498 35,203
Capital ratios % % %
Tier 1 capital 9.3 8.9 8.6
Total capital 15.9 15.3 14.8
On 17 March 2000, the Group issued EUR 575 million of 4.5 per cent
Subordinated Guaranteed Convertible Bonds via a Jersey incorporated
subsidiary, Standard Chartered Finance (Jersey) Ltd. The bondholders
have the right to convert each bond (denominated in units of EUR 1,000
face value) into one fully paid EUR 1,000 preference share in Standard
Chartered Finance (Jersey) Ltd. These will be exchanged immediately for
ordinary shares in Standard Chartered PLC. The bonds will be redeemed on
30 March 2010, although they may be redeemed at Standard Chartered s
option after 15 April 2005. They may be redeemed earlier if 85 per cent
of the bonds have been converted.
17. Capital ratios (continued)
On 22 March 2000, the Group issued innovative tier 1 capital of EUR 500
million of 8.16 per cent Noncumulative Trust Preferred Securities in
Standard Chartered Capital Trust 1 LP, a Delaware statutory business
trust, representing a corresponding amount of 8.16 per cent Noncumulative
Partnership Preferred Securities of Standard Chartered Capital 1 LP, a
Delaware limited partnership in which Standard Chartered Bank ('the
Bank') is the general partner. The securities may be redeemed at the
option of the Bank in its capacity as general partner of the Partnership
in whole or (in certain circumstances) in part on 23 March 2010 or in
whole or in part on any dividend payment date thereafter. Dividends are
fixed at 8.16 per cent for 10 years and at Euribor plus 3.8 per cent
thereafter. The securities will be exchanged for preference shares in
Standard Chartered PLC in the event that they have not been redeemed by
2045, the Bank s or Group s total capital ratio is less than the
regulatory minimum or the Partnership is liquidated. The holders of the
securities will have the right, subject to the Partnership s right of
redemption, to exchange their securities for the cash proceeds of a sale
of ordinary shares of Standard Chartered PLC on the 23 March 2010.
18. Supplementary information on Hong Kong
The following table includes the results of all the Group s activities in
Hong Kong. It has been prepared using the same principles as those used
to prepare the geographical segmental information included in note 1 on
page 15.
6 months 6 months 6 months
ended ended ended
30.6.00 30.6.99 31.12.99
HKDm HKDm HKDm
Net revenue 4,416 4,394 4,267
Total operating expenses (2,029) (2,021) (1,945)
Profit before provisions 2,387 2,373 2,322
Provisions for bad and doubtful debts (403) (1,356) (884)
Profit before taxation 1,984 1,017 1,438
The information below is extracted from the financial information
required by the Hong Kong Monetary Authority to be disclosed by
authorised institutions incorporated outside Hong Kong. It excludes
subsidiaries of Standard Chartered Bank in Hong Kong. It should be noted
that definitions used by the Hong Kong Monetary Authority differ from
those used by the Group.
30.6.00 30.6.99 31.12.99
HKDm HKDm HKDm
Advances to customers (including trade 142,334 135,209 134,138
bills)
Other assets 102,602 91,133 105,335
Total assets 244,936 226,342 239,473
Analysis of advances to customers
Mortgages 79,776 74,892 76,139
Other consumer 11,773 10,905 11,181
Trade finance 10,962 13,024 10,728
Trade bills 2,533 2,364 2,100
Financial concerns 11,809 9,894 11,787
Other* 25,481 24,130 22,203
Provisions (2,868) (2,211) (2,853)
Net advances to customers 139,466 132,998 131,285
*Includes HKD4,830 million (30 June 1999: HKD4,071 million; 31 December
1999: HKD4,323 million) reported as mortgages in note 1
Gross non-performing advances to customers 7,140 5,717 7,397
Suspended interest (1,063) (485) (805)
Specific provisions (2,868) (2,211) (2,853)
3,209 3,021 3,739
Gross non-performing advances as a
percentage of gross advances to customers 5.0% 4.2% 5.5%
19. Supplementary information on Singapore
The following table includes the results of all the Group s activities in
Singapore. It has been prepared using the same principles as those used
to prepare the geographical segmental information included in note 1 on
page 15.
6 months 6 months 6 months
ended ended ended
30.6.00 30.6.99 31.12.99
SGDm SGDm SGDm
Net revenue 368 368 361
Total operating expenses (156) (129) (151)
Profit before provisions 212 239 210
Provisions for bad and doubtful debts (14) (86) (60)
Profit before taxation 198 153 150
The information below is provided in the same format as the financial
information given for Hong Kong, but has been prepared using the same
definitions as those used for the Group.
30.6.00 30.6.99 31.12.99
SGDm SGDm SGDm
Advances to customers (net) 11,504 10,493 10,089
Other assets 10,885 14,835 10,711
Total assets 22,389 25,328 20,800
Analysis of advances to customers
Mortgages 4,643 4,464 4,373
Other consumer 1,439 1,596 1,566
Trade finance 915 629 741
Other 4,811 4,032 3,709
Provisions (304) (228) (300)
Net advances to customers 11,504 10,493 10,089
Gross non-performing advances to customers 584 496 614
Suspended interest (75) (46) (63)
Specific provisions (229) (182) (237)
280 268 314
Gross non-performing advances as a
percentage of gross advances to customers 4.9% 4.6% 5.9%
20. Supplementary information on Malaysia
The information below is derived from the 1999 Half Year and 1999 Annual
Report of Standard Chartered Bank Malaysia Berhad which were filed with
Bank Negara Malaysia and from the 2000 Half Year Report which will be
filed with Bank Negara Malaysia.
6 months 6 months 6 months
ended ended ended
30.6.00 30.6.99 31.12.99
MYRm MYRm MYRm
Net revenue 478 448 452
Total operating expenses (171) (171) (198)
Profit before provisions 307 277 254
Provisions for bad and doubtful debts (12) (163) (30)
Profit before taxation 295 114 224
30.6.00 30.6.99 31.12.99
MYRm MYRm MYRm
Advances and financing (net) 11,757 11,780 11,975
Other assets 8,329 5,223 5,986
Total assets 20,086 17,003 17,961
Analysis of loans and advances and
financing
Mortgages (excluding MYR796 million of
loans sold to Cagamas (30 June 1999: MYR888
million; 31 December 1999: MYR834 million)) 5,104 4,743 4,952
Other consumer 1,104 885 995
Trade finance 1,604 1,443 1,503
Other 4,931 5,592 5,470
Provisions (986) (883) (945)
Net advances to customers 11,757 11,780 11,975
Gross non-performing advances to customers 1,549 1,554 1,513
Suspended interest (268) (198) (233)
Specific provisions (498) (471) (492)
783 885 788
Gross non-performing loans and advances as
a percentage of gross loans and advances 11.4% 11.5% 11.0%
Independent review report by KPMG Audit Plc to Standard Chartered PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 11 to 28 and we have read the other information contained in the
press release and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors responsibilities
The press release, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where they are
to be changed in the next annual accounts, in which case any changes and the
reasons for them are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquiries of Group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly, we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2000.
KPMG Audit Plc
Chartered Accountants 2 August 2000
The financial information included herein has been derived from the audited
and unaudited information contained in the Group s Report and Accounts for the
year ended 31 December 1999. Statutory accounts for 1999 have been delivered
to the Registrar of Companies. The auditors have reported on these accounts;
their report was unqualified and did not contain a statement under Section
237(2) (accounting records or returns inadequate or accounts not agreeing with
records and returns) or 237(3) (failure to obtain necessary information and
explanation) of the Companies Act 1985.
Copies of this statement are available from Investor Relations, Standard
Chartered PLC, 1 Aldermanbury Square, London, EC2V 7SB or from our website on
www.standardchartered.com.
For further information please contact:
Pamela McGann, Group Head of External Affairs
on (020) 7280 7245; or
Tim Halford, Director of Corporate Affairs
on (020) 7280 7159; or
Stephen Seagrove, Group Investor Relations Manager
on (020) 7280 7164