Standard Chartered Suffers From Bankruptcies In Hong Kong

by Mary Swire, Tax-News.com, Hong Kong

09 August 2002

A few days after HSBC surprised markets with better-than-expected profits, Standard Chartered unveiled unexpected profit growth yesterday, although unlike HSBC its Hong Kong performance was poor.

The profits increase came despite a 51% boost in bad debt charges to US$407 million, the bulk of which was to provide for bad loans in the group's credit card portfolio in Hong Kong. The charges left Hong Kong's profit contribution down 22% at HK$1.61 billion.

Hong Kong chief executive Peter Wong said that 65% of the charge was related to bankruptcy petitions filed by cardholders as the Hong Kong economy faltered and unemployment rose. Hong Kong relaxed its bankruptcy rules last year, leading to a surge in personal bankruptcies as people took advantage of the easier regime to escape their debts.

Mr Wong hopes the trend may be stabilising: "Although we cannot come to a conclusion on whether the numbers have peaked, the figures from the Official Receiver show that the petition numbers have stabilised in the last quarter," he said.

He also confirmed that the bank intended to have a parallel listing in Hong Kong before the end of the year, saying that the listing might be accompanied by a small issue of new shares: "As [finance director] Peter Sands in London has mentioned, a modest equity offering could enhance the impact of a Hong Kong listing by ensuring we get a local investor base and local liquidity," Mr Wong said. "Any decision on whether to make such an equity offering will be taken in light of circumstances nearer the time and, moreover, in the context of our objective of improving return on equity."

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