Standard Chartered on track for £1.97bn profit despite SIV writedown
by Gill Montia
Standard Chartered, the bank with a strong presence in emerging economies, has written-down £839 million of assets held in Whistlejacket, its special investment vehicle.
The bank is one of many to have rescued structured investment vehicles (SIVs) in recent weeks and has warned shareholders that it may take similar action in the very near future.
It is, however, confident of recovering the losses in connection with the Whistlejacket transaction over the next three-and-a-half years.
SIVs are funded by the short-term commercial paper market and the ramifications of the US sub-prime mortgage crisis and the credit squeeze mean that the market has dried up.
In addition, Standard Chartered has taken a $133 million book loss on a transaction involving South Korean mortgages but this an accounting deficit and will be covered by additional income over the next three years.
It has also experienced a delay in getting approval for the sale of an Indian asset management company to UBS, and is now expecting the $120 million sale proceeds in 2008.
However, Standard Chartered has confirmed that it expects profit to meet market expectations of £1.97 billion, in 2007.
The bank described its overall trading performance for the year as “very strong” and its finance director, Richard Meddings, pointed out a strong contrast in the levels of economic confidence in Asia, where the bank is experiencing strong growth, and the West.