Standard procedure

StanChart risks remain economic, not regulatory

Standard Chartered is unique among its Western peers: the London-listed bank's main concerns are economic rather than regulatory. The emerging-market lender shrugged off a $667-million money-laundering fine to record its tenth consecutive year of pre-tax profit growth. Though UK rules and taxes are a drag, StanChart's fortunes remain firmly hitched to emerging markets.

It's only seven months since New York banking regulators sent the bank into a tailspin with allegations of sanctions-busting transactions, yet the saga now seems a distant bad dream. StanChart paid through the nose to settle the charges: even after the recent rash of Libor-rigging penalties, its overall fine still ranks as the fourth-largest ever paid by a bank. But it barely registered in the results.

That's because StanChart had plenty of bright spots to offset the pain. Its consumer banking division generated an eight per cent increase in operating profit, while the larger wholesale banking business - which now accounts for two-thirds of the bank's income - was up 11 per cent, before fines. Though bad loan charges jumped by a third, the bank kept a tight grip on expenses.

StanChart has thrived largely by investing in the right parts of the world. China, a tough market for foreign banks, generated more than $1 billion of income in 2012, up from just $44 million in 2003. And, StanChart's Asian business ought to carry on expanding as long as China continues to power economic growth in the region. In that sense, the bank remains an almost pure play on the opportunities - and risks - in emerging markets.

Of course, StanChart cannot ignore regulators entirely. UK demands that it hold buffers of spare liquidity were a drag on earnings in 2012, though the rules are due to be loosened. The UK's bank balance sheet levy, recently increased again, is another irritant.

Investors can clearly live with these worries. StanChart shares, which rose almost three per cent in early trading on the results, are up almost 50 per cent from their low point last August. Absent a slowdown in the East, it's hard to see what would trigger a reversal.