Beast of the East

4 March 2010 By John Foley Follow @johnsfoley

Both banks fared well in the crisis. Yet results for 2009 suggest StanChart is the better bet. HSBC has greater scale, but is constrained by its huge U.S. and UK businesses. StanChart’s bigger focus on India may also pay off. It deserves a higher rating than its larger rival.

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HSBC reported $79 billion of operating income for 2009 on March 1, an 11 percent decline on 2008. The UK and Hong Konglisted bank's $13.6 billion pretax profit was below analysts' consensus forecast of $15.2 billion.

Standard Chartered's operating income increased 9 percent in 2009 to $15.2 billion, while its profit before tax rose 13 percent to $5.2 billion, in line with analysts' consensus forecasts. StanChart is also listed in both the UK and Hong Kong.

HSBC's core Tier 1 capital, a key measure of bank strength, was 9.4 percent at the end of 2009, while StanChart's was 8.9 percent. Both banks raised capital through rights issues in 2009, and both have loantodeposit ratios of a little under 80 percent.

HSBC and StanChart plan to issue shares in Shanghai when regulation permits. HSBC is likely to do so first, and has said it hopes to issue shares in 2010. StanChart also plans to issue depositary receipts in India, in the first half of 2010.

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