LONDON, April 26 (IFR) - Standard Chartered's financial markets revenues fell 10% last quarter from a year earlier as it suffered a sharp drop in FX income, lagging other investment banks and taking the shine off a rise in profits due to lower loan losses.
The Asia-focused bank said on Wednesday its financial markets revenues were US$626m in the first quarter, down from US$697m a year earlier.
That was mainly due to a 38% fall in its FX revenues to US$225m, which it blamed on lower market volatility. Revenues from rates trading dipped 4% to US$162m, but credit and capital markets income rose 59% to US$119m and commodities revenues were up 9% to US$48m.
The financial markets performance fell short of expectations - analysts at Deutsche Bank had predicted its revenues would come in at US$760m, and US banks showed decent growth in their corresponding businesses.
"I'm not worried about the trend on that, we're doing a lot of things to progressively improve the performance," finance director Andy Halford said, noting the bank had a different footprint to rivals.
Standard Chartered's corporate and institutional banking income (which includes financial markets) came in at US$1.62bn, up 4% from the first quarter of 2016. Within that, corporate finance revenues dipped 5% to US$447m.
"A lot of the actions that have been taken in that business (CIB) to improve it are now bedding down and hence the focus now is on developing client relationships and not looking back over the shoulder," Halford told reporters on a conference call.
The bank's overall results were solid, thanks to good cost control and a more than halving in losses from bad loans.
Underlying pretax profit for the first quarter, which excludes restructuring costs, came in at US$1.05bn, up 94% from a year ago. Operating income rose 8% to US$3.61bn.
Standard Chartered's London-listed shares rose 2.6% to 747p.
Halford said it showed decent progress in the bank's turnaround effort, but said it was too early to say when dividend payments will resume.
"We need to absolutely make sure the capital ratios are at a level that are sustainable and provide headroom over what final (regulatory) requirements are," Halford said. He said incoming IFRS9 accounting rules and final Basel III capital rules were the main issues to clarify.
"And when dividends do resume, shareholders want to be confident there is an enduring flow of dividends, so we want to be comfortable the profit trajectory is a sound and solid one," he added.
Standard Chartered issued US$1bn of additional Tier 1 securities in January as part of new global rules on loss-absorbing debt, and now has about US$4bn of the debt in issue. The latest issuance will increase its annual costs for its AT1 debt to US$300m-$400m. (Reporting by Steve Slater)
UPDATE 2-Mozambique debt audit says $500 million in loans unaccounted for
* IMF says to visit Mozambique in July (Adds more details, comments)