Standard Chartered yesterday said its net profit was flat in 2012, even after the British lender was hit by huge fines for violating US sanctions on Iran and other countries.
Net profit came in at US$4.79bn, compared to $4.75bn in 2011, the London-based, Asia-focused lender said in a filing to the Hong Kong stock exchange. Pre-tax profit rose one% to $6.9bn.
While income rose 8% to $19.07bn, profit was hit by the $667mn in fines it was forced to pay US authorities last year to settle charges it violated sanctions, the bank said.
The settlements “dented our profit growth and damaged our reputation,” group chief executive Peter Sands said in a statement.
Despite the hefty fine, the bank — which has a strong footprint in emerging markets that has helped shield it from the eurozone crisis and outshine competitors — clocked up a 10th consecutive year of income and profit growth.
Investors and analysts hailed the results and the bank’s share price rose 2.76% to 1,829.1 pence on London’s FTSE 100 index of leading companies.
The bank is paying a dividend of 84¢ per share, up 10.5% year-on-year.
Standard Chartered agreed to pay US authorities the huge fines last year to settle charges it violated American sanctions, principally on Iran but also on Myanmar, Libya and Sudan.
US authorities said the bank had stripped messages on financial transfers routed through US banks of information that would show the beneficiaries were businesses and entities that fell under American sanctions.
US authorities are pushing harder on the banking sector to fall in line with its sanctions, especially on Iran as it seeks to pressure Tehran to give up its controversial nuclear programme.
Chief executive Sands said the bank’s performance was also affected by slower growth in key markets such as India and China, which both suffered slowdowns last year.
“The macroeconomic environment — normally a tailwind for us, given the markets we are in — also proved quite challenging in 2012,” he said.
Business slowed in India with revenue falling 12% last year, Sands said, but added that the “mood in India has changed noticeably since last summer” and investor activity “undoubtedly picked up”.
“Given the headwinds we faced in 2012, it is no surprise that both income and profit growth for the group as a whole were somewhat slower,” Sands said.
Sands said he was positive on the bank’s outlook for this year, after seeing good momentum in its consumer and wholesale banking sectors so far this year.
Standard Chartered reported a 12% rise in its 2011 net profit to a record $4.75bn, thanks to strong performance in developing economies.
Glencore
Commodities trader Glencore , just over a month away from completing its takeover of miner Xstrata, posted a 25% drop in 2012 net income, with its trading division helping to cushion the impact of lower prices.
That drop was smaller than most of Glencore’s diversified mining peers, which have recorded some of the sharpest falls in profit in a decade.
Including an impairment related to a reclassification of its holding in Russian aluminium producer Rusal after losses in 2012, Glencore’s net income fell 75%.
Xstrata, reporting separately from Glencore for what should be the last time before the two complete a record tie-up, wrote down the value of nickel, zinc and platinum assets, dragging its net profit almost 80% lower. Excluding the writedown, its profit dropped a smaller-than-expected 37% drop.
Investors had hoped that Glencore, the world’s largest diversified commodities trader, would use the results announcement to give details of its post-takeover strategy — from target assets to additional synergies.
But the company, still awaiting Chinese regulatory approval for the long-planned deal, left investors guessing for now.
Chief executive Ivan Glasenberg signaled there could be news soon after the merger completes next month, when the company will announce its divisional heads and further indications of progress on its review of the combined portfolio.
Glasenberg, a fierce dealmaker even in turbulent times, said opportunistic acquisitions were not off the agenda, adding Glencore could stand to benefit as a new generation of bosses at major mining houses sold non-core assets.
“Those opportunities will be there — that is something new in the industry,” Glasenberg said.
Glencore posted a 25% drop in net income excluding significant items to $3.06bn, in line with a consensus forecast of $3bn.
Its adjusted operating profit, or earnings before interest and tax (EBIT), dropped 17%.
A 27% drop in the industrial division accounted for the bulk of the weakness as lower production added to industry-wide issues.
Its trading division saw operating profit rise 11%, despite weaker activity in its energy division, given low volatility across oil and coal markets.
Glencore also announced a new deadline for the completion of the merger with Xstrata of April 16.
G4S
G4S, the world’s biggest security firm, said it would sell its high-level US government business by the end of the year after budget cuts and delays hit revenues in the division.
The sale is expected to complete within six months, it said yesterday, explaining that as a non-US firm it had less access to important commercial data, which compounded the high-level security restrictions which made it harder to manage and grow the business.
The unit, which runs sensitive contracts such as fire protection and mine clearance services for US government departments like Energy and Homeland Security, as well as international organisations like Nato, had annual revenues of around £400mn ($602.84mn) in 2012.
The sale is being handled by investment bank Houlihan Lokey.
The US has represented a tricky market for outsourcing firms including G4S and British rival Serco, as the country’s budget delays and defence cuts have severely hampered work prospects and hit margins. G4S’ US government arm saw revenues fall 14% in the six months to June 30.
G4S, which is in over 125 countries, said it would retain its US commercial business, which provides security and technology to firms like Google and GE, and government departments where high level security clearances are not needed.
G4S said the revenues of this business, combined with the firm’s other ongoing US operations totalled around 1.2bn pounds in 2012.
The firm will announce its full-year results on March 13.
Bankia
The head of Spain’s bailed-out lender Bankia, which was nationalised last year as it sank under a pile of bad loans, said yesterday he hopes the bank will start to be privatised by 2015.
Born in 2010 from the merger of seven troubled savings banks, Bankia soon became a symbol of Spain’s banking crisis and the huge loans that turned sour after a 2008 property crash.
“I would like to see real value in Bankia from 2014, 2015 and for the privatisation process to begin,” Bankia chairman Jose Ignacio Goirigolzarri said at a conference organised by Spain’s Europa Press news agency.
In May 2012, the BFA-Bankia group said it needed €19bn ($25bn) to shore up its books, prompting Spain to seek a loan for the entire industry from Brussels.
Bankia has absorbed €18bn of a total €41bn in banking rescue loans that Brussels has extended to fix the Spanish financial industry.
Goirigolzarri conceded that “given the results” it was a mistake for Bankia to list on the Madrid stock exchange in mid-2011. Its shares have slumped more than 90% from the initial public offer price of 3.75 euros each.
Bankia reported a loss of €19.1bn in 2012 but said it hoped to start turning a profit in 2013, targeting a net profit of €1.2bn in 2015.
Severstal
Severstal, Russia’s second biggest steel producer, turned in a surprise $150mn loss in the fourth quarter as weak demand and prices hurt profit margins, but said it saw signs of a small recovery on the global steel market.
Steelmakers across the world have been struggling to cope with weak prices as a growth slowdown in China and Europe’s debt crisis hit construction and industrial production.
A cyclical downturn has hit the net worth of Severstal’s main shareholder, Alexei Mordashov, who slid to 11th place from third in the latest annual rich-list rankings by Forbes magazine with a reduced fortune of $12.8bn.
“We see some recovery ... and we expect growth of the overall global steel market, but it will be relatively modest at around 2-3%,” said Mordashov, who is also Severstal’s CEO, on a conference call with analysts yesterday.
Increased infrastructure spending in Russia, which is hosting the next Winter Olympics and the 2018 soccer World Cup, could buoy the local market — as could gas export monopoly Gazprom’s plans to expand its gas pipelines network.
On a conference call, executives said flagging prices were the main driver behind Severstal’s fourth quarter loss.
Beiersdorf
German cosmetics group Beiersdorf, maker of Nivea hand cream, said it was satisfied with business in 2012 when it met both its sales and earnings targets and expects to grow faster than the market this year.
“We are satisfied with our fiscal year 2012 performance. We have met our sales and earnings targets,” said chief executive Stefan Heidenreich.
“For 2013, Beiersdorf forecasts sales growth in excess of the market and a further improvement” in the operating margin, he added.
Beiersdorf, which also makes Tesa sticky tape and adhesives, said its net profit soared by 74% to €451mn ($589mn).
But the year-earlier figures were hit by heavy restructuring charges.
Adjusted for these, net profit rose by 9.9%.
Underlying or operating profit also rose by 13.8% to €735mn, excluding special factors and sales were up 7.2% at €6.04bn.
Rotork
Britain’s Rotork, which makes valves and other control systems for the oil, gas and water industries, reported a 13% rise in full-year adjusted profit on strong demand at its fluid systems business.
The company said adjusted pretax profit rose to £131.6mn ($197mn) in 2012 from £116.5mn a year earlier.
Revenue rose 14% to £512mn.
Order intake rose 17% in 2012. Order intake in its fluid systems division increased 22%.
Rotork’s fluid systems business designs and makes pneumatic and hydraulic actuators used in the oil, gas and mining industries.
Shares in the company, which has a market value of £2.5bn, closed at 2,903 pence on the London Stock Exchange on Monday.
Serco
British outsourcing firm Serco hiked its dividend by 20% and said it would pay out a bigger proportion of earnings to shareholders in the coming years, after it reported a pick-up in revenue growth in the second half of 2012.
Analysts had criticised Serco for not paying a high enough dividend, and some have also worried it could be hit by government spending cuts in Europe and the US.
However, Liberum Capital analyst Joe Brent said the dividend pledge was a sign of the company’s confidence, although it could also be seen as signalling fewer opportunities for expansion.
“If you were being cynical you’d say its a sign of lower growth, but the market will like it, definitely,” he said.
Serco raised its 2012 dividend to 10.1 pence a share and said it would pay out more to shareholders, at least for the coming years.
The group said earnings covered its dividend payout 4.2 times and it planned to reduce this ratio to 2.5-3.0 times over the next three years.
Serco reported a 6% rise in adjusted pretax profit for 2012 to £278.1mn. Organic revenue, which excludes acquisitions, rose 3.3%, while margins edged up to 6.4% from 6.2% the year before.
“The organic growth of 3% for the full year, if you dig into it, implies 8% for the second half so it enters 2013 with good momentum,” said Liberum Capital’s Brent. “It ticks all the boxes really.”
Serco presented a mixed picture across different geographies, returning to organic revenue growth in its core British market, but seeing a 14% plunge in the Americas, hit by concerns about budget cuts.
Chief executive Chris Hyman said he was targeting new opportunities to provide frontline services in India, where Serco already has a substantial business process outsourcing (BPO) operation employing 47,000 people.
“The frontrunners I believe will be transport, whether that’s aviation or light rail, and probably healthcare following that,” he told Reuters in a telephone interview.
He added he had a team on the ground scouting out BPO opportunities in Brazil and was also looking at running welfare-to-work and healthcare programmes in Saudi Arabia, as the firm does in Britain.
Hyman saw two opposing trends across Serco’s markets. In the west, where budgets are tightening, he said Serco was being asked to maintain service levels at cheaper cost, whereas in the east and Brazil, where growth has been too fast for some clients to keep up, it is being asked to improve productivity.
Banco Popolare
Shares in Italy’s Banco Popolare rose slightly yesterday as the market welcomed an increase in loan loss provisions as a clean-up of its balance sheet.
Banco Popolare, Italy’s fourth-largest bank by number of branches, warned late on Monday it expected a net loss for 2012 of around €330mn ($429mn) after it raised provisions on non-performing loans in the fourth quarter to €650mn.
That compared with provisions of €602mn in the first nine months of 2012.
Banco Popolare’s shares reversed an early 5% loss and were up 0.16% at €1.225 by 1040 GMT, underperforming a 2.5% rise in the European banking index.
Banco Popolare said the increase in loan loss provisions was driven by the Bank of Italy’s inspections of Italian lenders — a sign of the pressure on lenders to build adequate provisions for bad debt.
At its annual meeting with major lenders in November, the central bank discussed how a deteriorating economic situation was hurting credit quality, and it has called for higher coverage ratios of bad loans.
Traders and fund managers said Banco Popolare’s move would have a negligible impact on its capital base and that other lenders were likely to follow its example. Major lenders report their 2012 full-year results from next week to the end of the month.
The bank’s cash coverage ratio of bad debts — revised to 28% from 24% — still remained well below the 43% held by Italy’s two biggest banks, Intesa Sanpaolo and UniCredit.
A prolonged and painful recession in Italy has driven problematic loans higher, reaching €125bn at the end of 2012.
Banco Popolare said its 2012 net loss — more than seven times an estimated loss of 46mn euros in an analyst consensus posted on its website — was also due to a weak performance at its minority-owned consumer credit unit, Agos Ducato.
It said the unit would account for a hit of about 100mn euros to its fourth-quarter results. The bank’s board is due to meet on its full-year 2012 accounts on March 15.
Problems at Agos Ducato, which is majority owned by France’s Credit Agricole, were already flagged last December when the French bank took a shock €572mn quarterly goodwill provision for the unit.
Banco Popolare said that, despite the profit warning, its Core Tier 1 ratio — a key measure of financial strength — remained above the minimum 9% threshold set by the European Banking Authority.
Analysts polled by Reuters had expected the company to post fourth-quarter net profit of $50mn, down from $329mn in the previous quarter.
The company said its core earnings, or EBITDA, fell 36% to $347mn in the final quarter of 2012 partly due to higher costs after a change in the maintenance schedule at iron ore mines.
As a result, Severstal’s debt-to-EBITDA ratio, a gauge of its ability to service its debts, rose to 1.9 by the end of the fourth quarter, the company said.
Severstal said it would monitor debt levels with a view to return the ratio to its 1.5 debt-to-EBITDA target level.