StanChart to keep domicile issue under review as profits slump

Standard Chartered is keeping the option of moving its headquarters out of Britain under review after a "pretty significant" rise in the UK bank levy, its finance director has said.

Andy Halford said StanChart's UK domicile was "something we continue to keep under review, but there's no change to our overall position" as the bank reported a drop of more than one-fifth in quarterly pre-tax profits.

His comments come after StanChart's bigger rival HSBC stirred political controversy last week by saying it had started a review of whether to move its headquarters out of the UK.

StanChart last reviewed its domicile two or three years ago, Mr Halford said, adding that "as new information comes up it is something the board reviews from time to time and clearly the increase in the levy is quite significant".

"It is not a simple thing to do," he said. "Most businesses tend to remain domiciled where they are for a very long time and there is a reason for that."

He said the bank would also consider other factors apart from the levy - including the skilled labour pool, capital gains tax implications, regulatory environment and political stability - in a review of its domicile.

StanChart wants to avoid saying publicly that it is launching a formal review of its domicile. But the issue has shot up the agenda of senior executives after top shareholders called for it to reassess the costs and benefits of being based in the UK.

Mr Halford said the cost of the levy, which is charged on the global balance sheet liabilities of UK banks, would increase by $170m to $540m this year.

Chirantan Barua, analyst at Bernstein, said: "The potential for HQ relocation (to Singapore) is gaining greater traction too, given the material damage from a permanent and rising UK bank levy."

The bank, which is based in London but has most of its operations in Asia, the Middle East and Africa, was hit by lower revenues and slightly higher costs in the three months to March. But it also recorded an 80 per cent rise in provisions for bad loans.

"Trading conditions remain challenging and the actions we are taking to de-risk, cut costs and build capital are having an impact on near-term performance," Mr Sands said in a statement. "However, underlying business volumes generally remain strong."

Pre-tax profits were down 22 per cent at $1.47bn, after revenues fell 4 per cent and costs rose 1 per cent. The bank said its loan impairments of $476m were lower than the previous two quarters, but still rose sharply from the year-ago period.

The bank said it was on track to cut more than $400m of costs this year and to achieve a common equity tier one ratio - a vital measure of financial strength - of 11 to 12 per cent.

Lower commodity prices and the impact of pulling back from lending to some riskier and less profitable clients caused a 10 per cent drop in corporate finance revenues and a 9 per cent fall in trade finance revenues.

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Earlier this year StanChart bowed to investor pressure by announcing a boardroom clear-out and hiring veteran investment banker Bill Winters to replace Mr Sands in June.

Sir John Peace is to step down as chairman next year and three non-executive directors are leaving along with Jaspal Bindra, its head of Asia, and Viswanathan Shankar, the bank's head of Europe, Middle East, Africa and the Americas.

StanChart shares, which have rallied since it announced a management shake-up in February, were down almost 3 per cent in late morning trading.

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