Asian revival helps international banks

Asian revival helps international banks

LONDON (Reuters): International banking groups HSBC Holdings Plc and Standard Chartered Plc, reporting 1999 results in the next two weeks, are expected to show some benefit from a burgeoning recovery in Asian economies.

Standard Chartered, publishing results on Wednesday, is expected to see profits fall by nearly a third to about 504 million pounds ($808.6 million) from 703 million in the previous year. The range of forecasts is between 485 million and 520 million pounds.

Analysts said the past year had been a tough one for the bank but there might be signs of an upturn in 2000.

Standard, with operations in Hong Kong, the Philippines, India and elsewhere in Asia and the Middle East, has seen its shares underperform the wider UK market by 17 percent this year, as earnings forecasts have spiraled downwards.

Analysts' attributed the profit downturn in part to higher investment spending and higher than expected bad debts.

"Although few new problems are emerging, we expect the charge in Hong Kong to continue to run at a high level," Deutsche Bank said in a research note.

The bad debt provision is expected to rise to between 470 to 480 million pounds from 436 million last year, according to analysts' estimates.

Some see a recovery going forward as the Asian economies revive and the bank's investment program starts to bring in higher income and lower costs. HSBC, one of the world's top international banks, reports on February 28 and is forecast to produce pre-tax profits of between $7.67 and $8.37 billion, against $6.57 billion in the previous year.

The bank, whose operations span the UK, the U.S. and Asia, has just completed the acquisition of U.S. bank Republic New York Corporation and Safra Republic Holdings, which analysts expect to deliver income and cost benefits in the current year.

Bad debt provisions are expected to be around $2.2 billion, down from $2.6 billion in the previous year.

"Although it's still tough going in Hong Kong, other APR (Asian Pacific Rim) economies are picking up," said Williams de Broe in a research note.

The bank's exposure to conglomerate Daewoo in South Korea could also lead to a provision of some $100 to $200 million, according to Salomon Smith Barney in their research note on the UK bank results season.

HSBC, as a diversified player, has seen its shares do better than its UK peers, whose shares have been savaged by worries about fierce competition in UK financial services.

HSBC's stock has outperformed the UK banking sector by some 23 percent since the beginning of November last year.