Standard Chartered has warned that the weakness of Asian currencies, and the rupee in particular, will hit its income for the first half of 2012.
“Local currency weakness is expected to drag group income by over 2 per cent, with the Indian rupee being the major contributor,” Standard Chartered said on Wednesday, as it warned that group income for the six months to June would be below 10 per cent, against the same period a year ago.
India experienced ‘muted’ income in the first half of the year, due to the weakness of the rupee against the dollar. However, even on a constant currency basis income in India was expected to be in the “mid to single digit rate,” for the first half of the year. By contrast a number of markets, including China, Indonesia, Malaysia, Africa and the Americas, Britain and Europe were all expected to show double-digit income growth.
The outlook highlights the remarkable turnaround of Standard Chartered’s fortunes in India, a country, which accounted for 12 per cent of group profits before tax last year. In February, the company announced that pre tax profits in India fell 33 per cent for the full year 2011, as the country dropped from being the biggest contributor to Standard Chartered’s group profits to its third largest.
However, the performance of India presented on Wednesday was “better than expected,” said analysts at JP Morgan in a note.
Back in May, Standard Chartered had said that growth for the first quarter of the year in India had been flat, as business was impacted by ‘subdued’ domestic sentiment.
The performance of its Indian business will continue to be in the spotlight: in a note published following the results, Goldman Sachs argued that earnings delivery going forward would depend on three key factors, including its ability to “fare through the macro challenges in India.”
Shares of Standard Chartered were up over 1.5 per cent in London, on Wednesday early afternoon, having closed down 1 per cent in Hong Kong. It closed up 1.6 per cent at Rs92.30 in Mumbai.