Q4 performance review

According to Standard Chartered Group's report on business conditions before settlement, the Group chief executive Peter Sands said full-year results of a further strong growth, including commercial banks` income and personal banking can be recorded about double-digit growth. We estimate that the group's revenue in Asia is still more than half of the group, but due to Asian currencies continued to depreciate in this year, so that the Group recorded a revenue growth of only single digit.

In addition, the Group does not directly from the “PIIGS” (Portugal, Ireland, Italy, Greece, Spain) sovereign debt risk, coupled with the Group's business around the world, Europe and the Americas business only contributed a small portion of total group's revenue, so that the effect of European sovereign debt crisis will be minimize.

However, we also worry about the consultative mechanisms among euro zone leaders, leading to a low rescue efficiency, so that European sovereign debt crisis spread to the global banking system, the global financial systemic risks rise, the world's financial institutions will no one be spared. With the recent abnormal volatility in market, investors are more conservative to valuation of the global banking industry, which lowered its target raised to $ 195. However, the Group's fundamentals are good, strong growth in real terms, so we maintain its ”buy” rating. The price to book ratios close to the level of the financial tsunami, attractive valuation at current prices, investors are suggested to phased absorb and hold for long-term.

Regional business performance

Europe sovereign debt crisis continued, there is not yet fully resolved signs. If both European sovereign debt default has occurred, it will certainly make the global financial systemic risks rise.

However, Standard Chartered Bank's business spread, the group's business away from the center of Europe and the U.S. debt crisis. The figure shows that the income of the bank more than 80% from Asia, including Hong Kong, Singapore, South Korea and China accounted for revenues of more than 50%.

European and American business income accounted for only about 2%, the nature of business in the region is only private bank, an operating loss of $ 15 million, if the region's market downturn will not have much impact on overall income.

South Korea's business remained stagnant: Group introduced a pay for performance plan in Korea and improve operational efficiency, but this decision led to a two-month strike, then the group made voluntary retirement to the employee who worked more than 10 years, and over 35 years old. Political unknown in the North and South Korea, the capital outflows intensified, tough business environment.

We expect that cross-border business between Hong Kong and China will be strong growth, increased loan growth. In addition, the Group, as debt issuers in Hong Kong dim sum debt, those offshore RMB business profits will also increase.

All financial institution will also be affected by global financial systemic risk, but Standard Chartered's market positioning is good, thus we believe the bank will recover as soon as possible after the crisis.

Net interest income continued to rise

Group's loan portfolio is diversified, personal banking loans amounted to 125.8 billion, an increase of 22%yoy or 22.9 billion. Asia-Pacific region of which nearly 88.7% of total loans, the loans focus on the Asia-Pacific region, reduce the direct effects of European sovereign debt crisis. In addition, , mortgage loans accounted for about 58% of personal banking, due to increased competition in the mortgage market and the interest rate differential pressures will make the business slowdown or even single digit decline may be recorded.

Commercial banking business loans up to 142.7 billion, an increase of 22% or 25.5 billion. The distribution of commercial bank loans is diversified in different industries, loan portfolios in the industry and region diversified, help in t credit quality. Control during the economic outlook is uncertain,

Dividend Policy

The Group maintain a conservative dividend policy the payout ratio is only around 30-40%, given the Group's positioning in emerging markets, it is necessary to retain sufficient funds for further development, we expect the dividend policy will continue in 2011, we expect the dividend payout ratio will be 33%, and bank's revenue rose to 207 US cents in 2011.

Industry Comparison

Distribution of Standard Chartered's business in emerging markets such as Africa and the Middle East. The proportion of Europe and America is relative low, the Group does not has any directly obligation from “PIIGS” (Portugal, Ireland, Italy, Greece, Spain), the sovereign debt risk and the European debt crisis effect is also low. Coupled with its cost-income ratio for the industry, the second lowest, just above the BOC only, which reflect a good cost control. Furthermore, the loan-deposit ratio in the forefront of the industry reflects the Group's ability to use the funds well.

Valuation

At present, Price to book ratio is two standard deviations lower than mean, only about 1.22 times, close to the level of the financial tsunami, cheap valuation. However, recent market conditions, unusual fluctuations, investors become more conservative valuation of the global banking industry, which lowered its target raised to $ 195 Hong Kong dollars, nearly one standard deviation lower than average.

Major Risk

Market conditions deteriorate due to local government's austerity measures.

Europe and the U.S. sovereign debt crisis continued and spread to emerging markets.

The Competition in the industry is more intense than our expectation.

Financial Status

Click Here for PDF format...