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
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