IMPORTANT NOTICE
The following SCB GROUP INTERIM RESULTS [and audio report] are provided solely for general information purposes only. They do not constitute any kind of professional advice and may not be used as a basis for making financial decisions. Under no circumstances do these results constitute an offer, solicitation, invitation, advice or recommendation to buy or sell any securities, financial investment or any other instrument or banking product of SCB Group or any other issuer.

• Net revenue up 1 per cent to £1,178 million from 31 December 1998 (£1,162 million); down 2 per cent from 30 June 1998 (£1,205 million).

• Profit before taxation down 6 per cent to £271 million from 31 December 1998 (£287 million) and down 35 per cent from 30 June 1998 (£416 million) after provisions of £240 million (31 December 1998: £247 million; 30 June 1998: £189 million).

• Headline earnings per share 17.7 pence (31 December 1998: 19.6 pence; 30 June 1998: 25.8 pence).

• Return on ordinary shareholders’ funds of 12.5 per cent based on headline earnings (31 December 1998: 15.1 per cent; 30 June 1998: 20.9 per cent).

• Interim dividend per share increased by 0.5 pence to 6.75 pence.

Commenting on these results, the Chairman of Standard Chartered PLC, Sir Patrick Gillam, said:

A PowerPoint 4.0 summary of the results is available for downloading as a self-extracting Zip file: Standard Chartered PLC 1999 PowerPoint (EXE, size143k)

Our planned intention is to emerge from the recent turmoil in our major markets in a stronger, more competitive position. We are doing this by investing to create a solid foundation for growth. We are also taking advantage of any appropriate opportunities for acquisition.

The results of Standard Chartered for the first half of 1999 reflect the tough economic environment in Asia and a very good performance from Consumer Banking.

The profit before provisions is £511 million. The debt charge is still substantial at £240 million giving a profit before taxation of £271 million.

The headline earnings per share is 17.7 pence.

In this period we have successfully purchased the non-Swiss global trade finance business of UBS and reached a conditional agreement on the recapitalisation and management of Bank Bali. We have also started a large number of other initiatives that will build the future strength of the Group.

To support all this expansionary activity we have raised capital, both equity and subordinated debt, totalling £1.1 billion. Our capital raising was well received by the market, with all offers oversubscribed. The Tier One capital ratio is currently 8.9 per cent but will reduce as acquisitions are completed.

We have a sound business with excellent future prospects. We are therefore continuing our policy of sharing the wealth we create with our shareholders. It is clearly right that our dividend should be influenced by current levels of profitability as well as our confidence in the underlying strength of the business. It is equally important to husband our resources to ensure proper investment in our business and adequate capital to pursue the acquisition opportunities I have described. We have therefore resolved to limit the growth of our dividend for the first half of 1999 to eight per cent giving a payment of 6.75 pence per share.

Although we remain cautious about the remainder of 1999, there are some encouraging signs. Thailand and Indonesia are two countries which have been through dramatic changes over the past two years. They are now beginning to show positive signs of recovery.

Singapore appears to have managed its exposure to the crisis particularly well. The recent banking reforms, corporate restructuring and further development of technology-based industries are expected to provide the basis for continuing growth.

Malaysia, which at one stage was criticised for introducing exchange controls, also looks as though it may be poised to return to positive growth in 1999 with an acceleration in economic development expected in 2000.

In many parts of South East Asia, there have been significant changes in economic, political and social infrastructure. We believe this will lead to the re-emergence of the region as one of the world’s economic growth areas.

In North East Asia, there are continuing concerns about the structural shifts in China which affect investor sentiment in the region. This could affect the speed of recovery in Hong Kong, which is rather slower than elsewhere in the Region.

Investment in the Group’s systems and processes continues and a great deal of work has been done to make sure that we are Year 2000 compliant. All our business critical systems have been successfully tested worldwide. Our efforts are now concentrated on contingency planning and on ensuring that customers and counterparties meet our rigorous Year 2000 compliance standards.

If we are to achieve the growth that we plan, we need the best people. It has been very pleasing to be able to make a number of new senior appointments from within the Group including two executive directors Chris Keljik and Kai Nargolwala. We are also continuing to augment our management strength by recruitment in the market.

We believe there is an opportunity now to build Standard Chartered for the future and, by doing so, to reaffirm our commitment to the countries in which we operate.

We know that we are making these moves at a difficult time, when although our Consumer Bank has produced excellent results our other businesses are subdued. We have also increased our costs to accommodate new investment. However, we also know that we have the support of our investors and are confident that the benefits of our actions will be evident in the Year 2000 and beyond.

In February I said that 1999 would be another tough year for Standard Chartered. We expected the exceptional foreign exchange earnings of 1998 to be replaced by higher revenues in the other major businesses; we would have a number of significant one-off expenses, and we would invest in growth opportunities, which would result in double digit growth in costs; and bad debts would mirror the second half of 1998.

Today’s results reflect these factors.

We expect that the forces that will shape our results in the second half will be broadly similar to those of the first half. However, we should begin to see the benefits of the recovery in some economies. We remain confident about our prospects in the Year 2000 and beyond.

The landscape in our markets is changing which presents us with a unique opportunity. At the beginning of the year we embarked on a strategy for growth which will make Standard Chartered stronger and more competitive and will enhance the value of our company.

Within the last six months a number of significant steps have been taken as part of this strategy.

We have raised over £1 billion of capital.

We have purchased the global trade finance business of UBS outside Switzerland. This move enhances our position in Latin America and provides additional critical mass for our US dollar clearing business in New York. We are now a leader in cash management services in Latin America. The integration process is proceeding well and the acquisition is expected to make a positive contribution in its first full year.

Last month, we announced that we had reached a conditional agreement with the Indonesian Bank Restructuring Agency to participate in the recapitalisation of Bank Bali and to take management control with immediate effect. On completion this acquisition will provide us with a unique opportunity to increase our presence in a market which we have identified as having excellent growth potential. With its branch network and established franchise, Bank Bali will provide us with a good platform on which to build our consumer banking business.

In Thailand, we are working closely with the authorities to acquire a local bank. Our expansion in Thailand has always been hampered by restrictions on foreign bank branches. A successful conclusion of our efforts would give us the distribution network to achieve a commercial banking operation of substantial scale.

In Malaysia, for the first time in many years, we are able to relocate three of our branches to higher growth areas. These are important moves for us as they will give us access to new target markets.

In Taiwan we are opening another two branches. Our growth is being led by Consumer Banking.

In Africa we are re-entering Nigeria with a subsidiary which will focus on trade finance and cash management with multi-national companies.

We are expanding our operations in Uganda and Ghana and planning to develop a business in the Ivory Coast.

In the Middle East we are pursuing an opportunity to purchase a bank in the Lebanon.

In India we are in the process of reducing staff by over 1,300 and have closed three unprofitable branches. At the same time we have secured permission to open a new branch in Bangalore. This restructuring has positioned us for profitable growth in the country.

These moves underline our commitment to position the Group for future, profitable growth. At the same time, we are undertaking a number of projects to ensure we have the appropriate cost performance, operational flexibility and product offering to underpin our growth aspirations. A study is also underway to build a more sophisticated management information system and we have launched a major restructuring of the Group’s finance function. Implementation of these projects has commenced and will be phased in over the next two years.

With the support and hard work of our people, we have accomplished a great deal in the first half of this year to build a stronger and more valuable bank, which will grow and prosper in the new millennium. There is a lot more to do, but we are off to a good start to position us for the economic recovery in the emerging markets of Asia and elsewhere.

A more detailed description of the performance of the company and our major businesses is included in the accompanying operating and financial review.

The Group’s profit before provisions in the first half of 1999 was £511 million, 16 per cent lower than the equivalent period last year but just four per cent lower than the second half of 1998.

Net revenue was £1,178 million, compared with £1,205 million in the first half of 1998. The decline in foreign exchange earnings, which began in the second half of 1998, continued as currency markets stabilised and the exceptional levels achieved in 1998 were, as expected, not repeated. However, net interest income increased by eight per cent to £818 million. Funding costs, particularly in Hong Kong and Singapore, were lower and the Group’s overall net interest margin was 3.5 per cent, compared with 3.4 per cent in the same period last year and the spread widened from 2.6 per cent to 2.9 per cent. Average earning assets increased by five per cent to £46.4 billion, driven mainly by growth in the mortgage book in Hong Kong.

Total costs in the first half of the year were £667 million, 11 per cent higher than the first half of last year and six per cent higher than the second half. This year we have moved into our new premises in Hong Kong, extended the voluntary retirement scheme in India and started work on our growth initiatives. Excluding these items and the effects of acquisitions in the second half of last year, the growth was five per cent compared to the first half of 1998 and three per cent against the second half.

The net charge for debts was £240 million, of which nearly 70 per cent arose in Corporate & Institutional Banking and the remainder in Consumer Banking. The net charge includes £284 million new provisions, of which nearly 50 per cent arose in Hong Kong and other North Asia countries. Recoveries at £44 million were £23 million higher than the first half of 1998 and arose mainly in South East Asia. At the end of June, non-performing loans were £1,893 million, against which provisions of £895 million were held. We are beginning to see signs of improvement in the economies of South East Asia but Hong Kong will be slower to recover.

While profit before provisions in Hong Kong increased by 14 per cent to £189 million, generating 37 per cent of total profit before provisions, the charge for debts of £108 million was significantly higher than last year. 75 per cent of the debt charge arose in Corporate and Institutional Banking. A large part of the non-performing book in Hong Kong relates to China, in particular the International Trust and Investment Companies and window companies. We do not expect to see significant improvement in the short term. However, investment in China remains very important to the Group in the long term.

Consumer Banking’s profit before debts was £269 million, an increase of £56 million or 26 per cent over the equivalent period last year. Net revenues were 23 per cent higher, led by strong performances in Hong Kong and Singapore. Revenue from mortgages more than doubled, reflecting the effects of wider margins combined with strong portfolio growth. At the end of the first half, total outstandings were 25 per cent higher than at the same point last year, with most of the growth arising in Hong Kong. Revenue from cards grew by 40 per cent. While Hong Kong was the main contributor to the growth, our newest market, Taiwan, performed very well, generating 20 per cent of the overall increase and increasing its own revenue by more than 70 per cent. In the UK, Chartered Trust’s market position in contract hire has been strengthened by the acquisition of Motorent and Autolease and its revenues were 12 per cent higher than last year. The credit quality of the whole Consumer Banking book continues to be strong. The charge for debts of £73 million comprises £98 million of new provisions, which primarily reflects the growth in the Consumer Banking portfolio and the continuing effects of recession in Asia. Recoveries at £25 million were more than double the first half 1998.

Corporate and Institutional Banking’s profit before debts was £158 million. Net revenues were five per cent lower than the first half of 1998 as most countries suffered from falling volumes. Revenue from lending grew by 24 per cent, primarily driven by wider interest margins. Revenue from trade finance was five per cent lower. Although margins improved, low trading activity in Asia affected business volumes with average balances in the first half of the year 30 per cent below the first half 1998 level. Cash management volumes increased significantly with average balances nearly 30 per cent higher but falling interest rates depressed revenue which was more than 20 per cent lower than in the first half of 1998. Custody revenues also suffered from the effects of falling interest rates and sluggish stock market activity although there was some improvement towards the end of the first half and, at the end of June, assets under administration were £47 billion, the highest level since July 1997. After a net charge for debts of £166 million, of which about half arose in Hong Kong, Corporate & Institutional Banking recorded a loss of £8 million in the first half of the year. In April we acquired UBS’ non-Swiss global trade finance and US dollar clearing businesses and they are being fully integrated into our network, strengthening our business for the future.

Treasury’s profit before debts was £114 million. Foreign exchange earnings were down £117 million compared with the exceptional levels achieved in the first half of last year. Lower economic activity and more stable currency markets in Asia led to reduced business volumes and narrower margins in 1999. These factors will continue to influence business in the region. However, we are developing new customer segments, particularly within the Institutional sector, and extending the range of emerging market currencies which we trade, with additional coverage for Latin America and Africa; and the product range that we offer to our customers continues to be widened.

During the first half of the year total assets increased by £6.8 billion to £54.7 billion. Excluding the effect of exchange rate movements, this represents a ten per cent growth in underlying local currency assets. Loans and advances to customers at constant exchange rates increased by five per cent, led by strong growth in the Hong Kong mortgage book. We have attracted £3.2 billion of new deposits, primarily from Consumer Banking customers.

In summary, while there are some signs of improvement in South East Asia, the recovery in North East Asia is expected to be slower and the environment in which we operate will continue to be demanding. However, the Group remains committed to its core markets in Asia and to growing the business in those markets.

Figures for the six months ended 30 June 1998 are as published. Those for the six months ended 31 December 1998 are arrived at by taking the full year 1998 figures and deducting the first half figures.

There is no material difference between the results as reported and the results that would have been reported on a historical cost basis. Accordingly, no note of historical cost profits and losses has been included.

1. Segmental information

a) Total interest receivable and total interest payable include intra-group interest of £538 million.

b) Group central expenses have been distributed between segments in proportion to their direct costs and the benefit of the Group’s capital has been distributed between segments in proportion to their risk weighted assets.

c) The resolution of Year 2000 related technology issues is being managed from the centre as a global project and all expenses are included in the UK & Group Head Office segment.

1. Segmental information

d) Total assets employed include intra-group items of £11,636 million and balances of £735 million which are netted in the Summarised Consolidated Balance Sheet. Total risk weighted assets and contingents include balances of £153 million which are netted in Note 14 on Capital ratios.

e) Specific provisions and interest in suspense (including provisions held against enhanced and other performing emerging markets debt (see Note 11)) together cover 52 per cent of total non-performing lending to customers. If lending and provisions are adjusted for the cumulative amounts written off, the effective cover is 61 per cent.

f) Assets held at the centre have been distributed between geographic segments in proportion to their total assets employed.

By geographic segment (continued)

g) Total interest receivable and total interest payable include intra-group interest of £627 million.

h) Group central expenses have been distributed between segments in proportion to their direct costs and the benefit of the Group’s capital has been distributed between segments in proportion to their risk weighted assets.

i) The resolution of Year 2000 related technology issues is being managed from the centre as a global project and all expenses are included in the UK & Group Head Office segment.

1. Segmental information

j) Total assets employed include intra-group items of £10,305 million and balances of £1,635 million which are netted in the Summarised Consolidated Balance Sheet. Total risk weighted assets and contingents include balances of £336 million which are netted in Note 14 on Capital ratios.

k) Specific provisions and interest in suspense (including provisions held against enhanced and other performing emerging markets debt (see Note 11)) together cover 52 per cent of total non-performing lending to customers. If lending and provisions are adjusted for the cumulative amounts written off, the effective cover is 66 per cent.

l) Assets held at the centre have been distributed between geographic segments in proportion to their total assets employed.

By geographic segment (continued)

m) Total interest receivable and total interest payable include intra-group interest of £539 million.

n) Group central expenses have been distributed between segments in proportion to their direct costs and the benefit of the Group’s capital has been distributed between segments in proportion to their risk weighted assets.

o) The resolution of Year 2000 related technology issues is being managed from the centre as a global project and all expenses are included in the UK & Group Head Office segment.

1. Segmental information

p) Total assets employed include intra-group items of £11,160 million and balances of £1,155 million which are netted in the Summarised Consolidated Balance Sheet. Total risk weighted assets and contingents include balances of £239 million which are netted in Note 14 on Capital ratios.

q) Specific provisions and interest in suspense (including provisions held against enhanced and other performing emerging markets debt (see Note 11)) together cover 56 per cent of total non-performing lending to customers. If lending and provisions are adjusted for the cumulative amounts written off, the effective cover is 69 per cent.

r) Assets held at the centre have been distributed between geographic segments in proportion to their total assets employed.

2. Segmental information

a) Operating expenses are attributed to classes of business on an appropriate basis. Group central expenses have been distributed between classes of business in proportion to their direct costs. The benefit of the Group’s capital has been distributed between classes of business in proportion to their risk weighted assets.

b) See Note c) on Year 2000 costs on page 13.

c) Total assets employed include intra-group items of £11,636 million (30 June 1998: £10,305 million; 31 December 1998: £11,160 million) and balances which are netted in the Summarised Consolidated Balance Sheet of £735 million (30 June 1998: £1,635 million; 31 December 1998: £1,155 million).

d) Assets held at the centre have been distributed between classes of business in proportion to their total assets employed.

The 1999 interim dividend of 6.75 pence per share will be paid on 15 October 1999 to shareholders on the register at close of business on 20 August 1999. Shareholders will be entitled, if they wish, to elect to receive shares credited as fully paid instead of the interim dividend (or part thereof). Details will be sent to shareholders on or around 2 September 1999.

Headline earnings per ordinary share

The Institute of Investment Management and Research Statement of Investment Practice No 1 provides a definition of headline earnings. As this differs from earnings defined in Financial Reporting Standard 14 the table below provides a reconciliation.

On 5 March 1999, £380 million, net of expenses, was raised by way of a placing for cash of 49 million new ordinary shares with institutional investors. The net proceeds of the placing have been used partly to finance the acquisition from UBS of their global trade finance business outside Switzerland, and the balance to provide additional capital to back customer assets.

Loans and advances are stated after deducting the following provisions for bad and doubtful debts:

Specific provisions for bad and doubtful debts include £84 million (30 June 1998: £60 million; 31 December 1998: £81 million) of provisions against enhanced and other performing emerging markets debt.

The following table shows the Group’s cross border assets, including acceptances, where they exceed 1 per cent of the Group’s total assets. Cross border assets exclude facilities provided within the Group. They comprise loans and advances, interest bearing deposits with other banks, trade and other bills, acceptances, amounts receivable under finance leases, certificates of deposit and other negotiable paper and investment securities where the counterparty is resident in a country other than that where the cross border asset is recorded. Cross border assets also include exposures to local residents denominated in currencies other than the local currency.

The restatement of 1998 results below has been made by translating them at the average exchange rates used in the translation of the results for the period ended 30 June 1999, and the restatement of the 1998 balance sheets has been made by translating them at the closing exchange rates as at 30 June 1999.

Accounting policies are unchanged from those set out in the 1998 Annual Report.

The following table includes the results of all the Group’s activities in Hong Kong. It has been prepared using the same principles as those used to prepare the geographical segmental information included in Note 1.

The information below is extracted from the financial information required by the Hong Kong Monetary Authority to be disclosed by authorised institutions incorporated outside Hong Kong. It excludes subsidiaries of Standard Chartered Bank in Hong Kong. It should be noted that definitions used by the Hong Kong Monetary Authority differ from those used by the Group.

The following table includes the results of all the Group’s activities in Singapore. It has been prepared using the same principles as those used to prepare the geographical segmental information included in Note 1.

The information below is provided in the same format as the financial information given for Hong Kong, but has been prepared using the same definitions as those used for the Group.

The information below is derived from the 1998 Half Year and 1998 Annual Reports of Standard Chartered Bank Malaysia Berhad which were filed with Bank Negara Malaysia and from the 1999 Half Year Report which will be filed with Bank Negara Malaysia.

We have been instructed by the company to review the financial information set out on pages 10 to 27 and we have read the other information contained in the press release and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

The press release, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts, in which case any changes and the reasons for them are to be disclosed.

We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.

On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 1999.

KPMG Audit Plc

Chartered Accountants 4 August 1999

The financial information included herein has been derived from the audited and unaudited information contained in the Group’s Report and Accounts for the year ended 31 December 1998. Statutory accounts for 1998 have been delivered to the Registrar of Companies. The auditors have reported on these accounts; their report was unqualified and did not contain a statement under Section 237(2) (accounting records or returns inadequate or accounts not agreeing with records and returns) or 237(3) (failure to obtain necessary information and explanation) of the Companies Act 1985.

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