By Margot Patrick and Max Colchester
LONDON-- Standard Chartered PLC said a sharp rise in the levy it
pays to the British government on its global balance sheet could
prompt it to leave the U.K., but that it hasn't started a formal
review yet.
Finance Director Andy Halford said the "big change in the
numbers" on the annual charge it pays, to around $540 million this
year from $370 million in 2014, has put the issue into focus for
shareholders.
"We've said that it's something that we keep under review and
that continues to be the case," Mr. Halford said." The bank last
took a formal review of its headquarters two or three years ago, he
said.
The issue of where big banks base themselves has simmered in the
U.K. since the Conservative-Liberal Democrat coalition government
introduced an annual levy on bank balance sheets in 2011. The rate
of the levy jumped this year, after Chancellor George Osborne in
his March Budget speech said banks will pay an extra GBP900 million
($1.4 billion) this year to "make a bigger contribution to the
repair of our public finances."
The Labour Party that is running neck and neck with the
Conservatives to form a new government after the U.K.'s May 7
general election has said that it would raise the levy further.
Britain's largest bank, HSBC Holdings PLC, told shareholders
last week that it has started work to see whether the bank should
move its headquarters. HSBC has been widely tipped to choose Hong
Kong if it does decide to move, while Standard Chartered could move
to Singapore, analysts say. Mr. Halford declined to comment Tuesday
on where the bank might end up.
Standard Chartered, while based in London, makes most of its
revenue in Asia, the Middle East and Africa.
"The potential for HQ relocation [to Singapore] is gaining
greater traction too given the material damage from a permanent and
rising U.K. bank levy," Sanford C. Bernstein analyst Chirantan
Barua wrote in a note Tuesday.
Mr. Halford's comments came as the bank reported a 22% fall in
first-quarter pretax profit, to $1.47 billion from $1.88 billion.
The bank didn't report net figures.
Bad loans rose 80%, to $476 million from $265 million in
first-quarter 2014, underscoring the challenge for incoming Chief
Executive Officer Bill Winters to restructure the bank and improve
returns.
After strong growth for a decade in key markets such as Hong
Kong, Singapore and India, Standard Chartered has faltered in the
past two years as tougher regulation and a weakened global economy
hit its earnings. Many of the bank's senior executives departed,
and Mr. Winters was hired in February to replace long-serving CEO
Peter Sands when he steps down in June.
Mr. Sands on Tuesday said the bank is on track to meet earlier
pledges to raise its regulatory capital ratio, a key measure of
financial strength, to between 11% and 12% this year, and to trim
more than $400 million from its costs.
Write to Margot Patrick at margot.patrick@wsj.com
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