Standard Chartered takes $46 million profit hit

Market turmoil has dented Standard Chartered’s profits by $46 million, after the bank exchanged $140 million of capital notes for a vertical slice of the assets of its Whistlejacket structured investment vehicle (SIV).

The representative portfolio of the assets acquired amounted to $1.68 billion.

Whistlejacket’s value has fallen from $18.2 billion to $10.8 billion since the credit markets seized up in August. Standard Chartered, which manages the SIV, said it is highly likely to take a further vertical slice before the end of the year, but insisted Whistlejacket is funded into 2008 and is supported by $1.5 billion in third-party liquidity facilities. It also said it is confident in the underlying quality of the assets it has acquired, and expects the writedown in value to flow back through income over the next three and a half years. Ninety-five percent of the SIV’s assets are rated AA or higher by Moody’s.

A further hit on profits was caused by an accounting mismatch related to Standard Chartered’s mortgage securitisations in Korea, which reduced the firm's income by $133 million in 2007. A delay in the sale of its Indian asset-management business to UBS excluded another $120 million from its figures for this year.

Overall, however, the impact of the market turmoil has remained limited for Standard Chartered, and it expects to record profits of $3.96 billion for 2007, up from last year’s $3.18 billion.

SIVs in need of a service