Kitomari Banking & Finance Blog: STANDARD CHARTERED AND HSBC

Monday, 4 August 2014

STANDARD CHARTERED AND HSBC - ITS THAT INTERNATIONAL TWOSOME AGAIN

For many in the City, the international banks HSBC andStandard Chartered will forever be linked.

They are both based in the UK, but do much of their business overseas, and just over 18 months ago they memorably teamed up to provide one of the most sensational 24 hours in banking(from a strong field).

First, Standard Chartered admitted paying £415m in penalties to US regulators in relation to allegations that it broke sanctions on Iran; and then HSBC was swiftly found to have operated a "pervasively polluted" culture that lasted for years, allowing it to move billions for Mexican drug lords, terrorists and governments on sanctions lists.

That all emerged in December 2012 – so is admittedly a little fresh for this page – but the banks will be thrown together again this week when both unveil interim results.

Analysts have pencilled in a profits drop at HSBC, while Standard Chartered has already admitted that its profits will be around 20% lower – perhaps the result of emerging markets emerging rather less rapidly. Standard's boss Peter Sands has been under pressure, too. The bank said: "Robust and considered succession plans are in place for all of the senior leaders. We will ensure orderly succession takes place at the appropriate times."

It's that bad, then.

Governor ready to spring into inaction

In a couple of weeks' time, Mark Carney will be free to escape the Bank of England, go on holiday and ease that rock-star frame into his Speedos.

But before the moment of that dreamy image arrives, the governor and his top lackeys have a couple of appearances to make: delivering the inflation report on 13 August, as well as showing up for the Bank's monetary policy committee meeting this week.

The most pressing fixture will, in all likelihood, result in the announcement that the MPC has decided to do sweet Fanny Adams (in the jargon, "leave interest rates unchanged"). Meanwhile, the City's economists are betting on a similar outcome at Thursday's corresponding meeting of the European Central Bank's governing council, which sets euro interest rates.

All of which suggests that the modern central banker has become somewhat analogous with Europe's arable farmers of the 1990s. The latter had the set-aside policy, a glorious situation where they were subsidised not to farm portions of their land. Meanwhile, the bankers are still searching for a fancy name to describe how they get paid for doing nothing. Just don't say they can't have a holiday.

Hester, bomb disposal expert

Stephen Hester is the City's version of William James, the veteran bomb disposal expert played by Jeremy Renner in the film The Hurt Locker.

He dons a large suit, scans around to see if anybody else fancies the task in hand and – realising he's the only person daft enough to do it – waddles towards a ticking bomb. None of them has blown up, so far.

He's performed that task at British Land and then, of course, as boss of Royal Bank of Scotland, the Fred Goodwin-designed device that threatened to blow the UK economy to smithereens. Presently he's defusing the precarious situation at insurer RSA, which, while it doesn't have the firepower to harm us all, has the potential to inflict some rather nasty flesh wounds on its own shareholders.

After problems at its Irish arm and a £200m writedown, Hester arrived in February, tied up a £775m rights issue and announced more than £600m of disposals. We will get an update this week on what's next, with the City expecting job cuts and another writedown. Meanwhile, trading will be hit by flood losses in the UK, weak results in Canada after a harsh winter, and losses from the 2010 Chilean earthquake. Still, Hester's given himself three years to make this one safe. The clock's barely started ticking.