Standard Chartered expects slower growth

Standard Chartered Bank expects slower economic growth in the Middle East this year and next year.

Standard Chartered Bank expects slower economic growth in the Middle East this year and next, but attributed record profits in the first half of this year to its focus on emerging markets outside turbulent western economies. The bank's UAE profits in the first half of this year rose 65 per cent from the same period last year, Standard Chartered's regional office said. In the Middle East and South East Asia, all of the bank's loan categories grew at double-digit - and in some cases triple-digit - rates.

The bank's global profits ­before tax rose 31 per cent from the first half of last year to US$2.6bn (Dh9.5bn). Standard Chartered's results stood in sharp contrast to HSBC's, Europe largest bank, which a day earlier reported more write-offs from the US mortgage subprime crisis as well as a decline in income growth - proof that financial institutions with less ties to western markets have reaped enormous opportunities in the Middle East and South Asian markets.

In the Middle East, banks are benefiting from strong consumer confidence and robust economic expansion, which have led to healthy borrowing by consumers, corporations and governments. Regional economists have said they expected economic growth to remain robust in the near term, but that it could slow into next year. "Oil prices have gone up and the increase will be felt in all sectors of the economy," said Fabio Scacciavillani, an economist at the Dubai International Financial Centre. "We don't expect any slowdown in the economy, at least not until 2009."

Raj Madha, a banking analyst at EFG-Hermes, said he expected demand for loans this year to be as strong as last year, but may slow in 2009. Despite strong consumer loan growth in the Middle East and South Asia during the first half of the year, especially in mortgages, Standard Chartered's profits in consumer banking declined by about 40 per cent when compared with the first half of last year. Since the second half of last year, consumer banking profits have declined 17 per cent, which Standard Chartered attributed to a 14 per cent increase in costs, an adverse interest environment and losses from offering insurance in the UAE.

In commercial banking, however, Standard Chartered saw a 78 per cent growth in income from a year ago, on the back of robust economic expansion activities in the region. The Middle East, especially the UAE, is a hot market for the financing of infrastructure projects. Standard Chartered loans to governments of the region in the first half of the year were 13 times higher than the first half of last year.

Overall, loans in the region to other banks jumped 186 per cent from the first half of last year, to $2.84 billion. Commercial loans increased about 40 per cent to $11bn and consumer loans grew to $15bn, a 31 per cent increase from the first half of last year. Shares were up about seven per cent in afternoon London ­trading. @Email:[e-mail]