StanChart: Standard Chartered's shareholders could be forgiven for dancing in the streets of Singapore. At a time when most big Western banks are firing employees and tearing up earnings targets, the emerging markets lender is doing the opposite.
Operating income in the first half of the year was up 11 per cent on the same period in 2010, and 2,000 more staff will be hired by January. But such growth is seldom linear.
StanChart's purple patch is partly explained by its exposure to expanding Asian markets. At the end of June, its customer loan book was 22 per cent larger than 12 months before. Consumer and wholesale operating income in Hong Kong, for example, leapt 23 per cent and 33 per cent, respectively.
But StanChart is also helping itself by avoiding the usual pratfall of spiralling costs.
Operating costs fell to 54 per cent of income in the first half, compared to 58 per cent in the second half of 2010, even though the cost of staff salaries rose by 9 per cent over the same period. The bank reckons income growth will continue to outstrip costs in the second half.
The catch is that this good news is already reflected in StanChart's share price, which has fallen just 7 per cent since February, a period when shares in most European banks are down almost 30 per cent.
The bank now trades at almost 1.9 times its current tangible book value per share. As long as StanChart can keep putting together stellar performances, the euphoria is justified.
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But a focus on emerging markets also means bigger risks. India, which generates about a tenth of StanChart's overall business, fell off a cliff in the first half: operating income sank by 12 per cent year-on-year, while operating profit fell 39 per cent. The bank blames interest rate rises which dampened demand, greater competition, and regulatory curveballs.
Outperformance elsewhere hid this hiccup. But it's a timely reminder that fast-expanding emerging markets remain capable of delivering nasty surprises. Add in faltering global economic growth and the still-uncertain direction of regulatory reforms, and investors preparing to join the party should bear in mind that StanChart's qualities are already well-appreciated.