EAST ASIA SECURITIES COMPANY LIMITED 9/F, 10 Des Voeux Road Central, Hong Kong. Dealing: Research: Facsimile:

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1 9/F, 10 Des Voeux Road Central, Hong Kong. Dealing: Research: Facsimile: HONG KONG RESEARCH Analyst: Vincent Leung 8 th August STANDARD CHARTERED PLC ( 渣打集團 ) Sector : Banking Non-executive Chairman : Mervyn Davies CBE HKSE Code : 2888 Market Price : HK$ (07/08/2007) Group Chief Executive : Peter Sands Shares Issued : 1, million Group Finance Director : Richard Meddings Mkt. Cap. : HK$355,177.3 million 52 weeks Hi/ Lo : HK$ / HK$ HSI : 21, (07/08/2007) Main Business : Banking and related financial services SUMMARY OF THE INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 TH JUNE 2007 Interim Results Highlights US$ million Vs 1H2006 (%) Vs 31/12/2006 (%) Net interest income 2, % Non-interest income 2, % Total operating income 5, % Operating expenses (2,918) +31.1% Operating profit before impairment losses 2, % Impairment losses on loans and advances (361) +3.4% Profit before taxation 1, % Taxation (533) +34.9% Attributable profit to ordinary shareholders^ 1, % Total loans 153, % +8.7% Total deposits 162, % +0.5% Total assets 296, % +11.6% Basic EPS (US ) US % Interim DPS (US ) US % Selected Ratios 1H2007 1H2006 FY2006 Net interest margin 2.5% 2.5% 2.5% Cost-income ratio basic 55.4% 54.1% 55.6% Cost-income ratio normalised* 54.7% 53.6% 55.2% Return on average equity normalised* 16.7% 17.9% 16.9% NPL ratio 1.61% 2.01% 2.10% Impairment provisions as a % of NPLs 81.4% 72.6% 74.9% Loan-deposit ratio 94.5% 83.3% 87.4% Total capital ratio 15.6% 14.2% 14.3% Tier 1 ratio 9.7% 8.4% 8.3% Remark: (^) Profit attributable to shareholders before the deduction of dividends payable to the holders of the non-cumulative, redeemable preference shares was US$1,399 million for 1H2007 (1H2006: US$1,103 million); (*) Results on a normalised basis reflect Standard Chartered PLC s results excluding profits on disposal of subsidiary undertakings, charges for restructuring and amortisation of goodwill. Continued to deliver strong earnings Standard Chartered PLC ( StanChart ) reported a 25.9% y-o-y rise in net profit to US$1,370 million for 1H2007, driven by higher revenue growth partially offset by higher expense growth and a slightly higher effective tax rate of 26.9% (1H2006: 25.9%). StanChart s 1H2007 bottom line topped market forecasts (US$1,296 million-us$1,375 million). Higher net interest income despite flat NIM Net interest income increased 17.6% y-o-y, thanks to a 17.4% y-o-y growth in average interest earning assets. Net interest margin was 2.5% in 1H2007, in line with 1H2006. This report has been prepared solely for information purposes and we are not soliciting any action based upon it. Neither this document nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. The information is based upon information which we consider reliable, but accuracy or completeness is not guaranteed. Opinions expressed herein are subject to change without notice. At time of this report, East Asia Securities Company Limited has no position in securities of the company or companies mentioned herein.

2 Solid growth in non-interest income Non-interest income surged 44.3% y-o-y in 1H2007. Net fees & commissions rose by 37.4% y-o-y, driven by higher volumes in wealth management, cash management and global markets products (i.e. loan syndications, debt capital markets and corporate advisory). Net trading income increased 22.2% y-o-y on increased interest rates and FX dealing that was partially offset by lower proprietary trading income. Meanwhile, other operating income surged 145.2% y-o-y, reflecting income on structured finance transactions and realised private equity gains. Negative jaws as earlier guided Operating expenses increased 31.1% y-o-y in 1H2007. Excluding acquisitions made in 2H2006 (including Union Bank of Pakistan, Hsinchu International Bank in Taiwan and increased stake in PT Permata Bank in Indonesia), underlying operating expenses rose by a tamer 23.0% in 1H2007, still outpacing the underlying operating income growth of 20.7%. The increase in underlying costs was mainly attributable to continued investments in infrastructure and technology, launching of private banking in 6 new markets as well as higher incentive compensation and personnel costs. On the back of the negative jaws, normalised cost-to-income ratio rose to 54.7% for 1H2007 from 53.6% for 1H2006. Slight increase in loan impairment losses Loan impairment losses edged up 3.4% y-o-y, as improving situation in Taiwan where loan impairment fell by US$179 million offset by the recent acquisitions as well as increase in charge in Thailand and the UAE due to change in portfolio mix and maturity. As of 30/06/2007, NPL ratio was 1.61% (31/12/2006: 2.10%) with a coverage ratio of 81.4% (31/12/2006: 74.9%). Solid financial position As of 30/06/2007, the Group s total capital ratio was 15.6% (31/12/2006: 14.3%) and the tier 1 capital ratio was 9.7% (31/12/2006: 8.3%). ROAE (on normalised basis) was 16.7% for 1H2007, in line with management s target of mid-to-high teens. Business Review by Businesses Pre-tax profit by businesses Breakdown (US$ million) 1H2007 1H2006 y-o-y (%) 1H2007 1H2006 Consumer Banking % 39.8% 38.0% Wholesale Banking 1, % 60.5% 62.2% Corporate items not allocated (5) (3) +66.7% (0.3%) (0.2%) Total 1,980 1, % 100.0% 100.0% Robust growth for both Consumer Banking and Wholesale Banking Pre-tax profit rose 29.7% y-oy to US$1,980 million in 1H2007. Underlying pre-tax profit would have risen 29.1% to US$1,918 million, thanks to strong performance of both Consumer Banking and Wholesale Consumer. Consumer Banking Pre-tax profit for Consumer Banking jumped 35.9% y-o-y to US$788 million while underlying pre-tax profit increased 33.2% to US$743 million. Underlying operating income grew 13.7% y-o-y, driven by the SME and wealth management segments, especially in MESA, India, Hong Kong Singapore and Malaysia. Underlying loan impairment charges reduced significantly by 32.8% y-o-y on improved consumer credit environment in Taiwan. However, growth in underlying pre-tax profit was tamed by accelerated investment spend that resulted in a 20.2% underlying expense growth. Launch of private-banking business in new markets, expansion of sales & distribution platforms and new product launches were the main drivers for the expense growth and management attributed these as investments for future growth. In addition, China network expansion (+8 outlets to 30) and incorporation costs were also behind the scene. Wholesale Banking Pre-tax profit for Wholesale Banking rose 26.0% y-o-y to US$1,197 million while underlying pre-tax profit jumped 26.7% to US$1,180 million. The underlying growth was fuelled by strong momentum in operating income (+28.5%) on improved cross-selling and increased sales of higher-margin products. Underlying loan impairment releases reduced to US$17 million from US$55 million a year ago, reflecting a declining stock of distressed assets. Wholesale Banking was strong in all geographies except Malaysia and Korea that recorded negative pre-tax profit growth for the six-month period. 2

3 Business Review by Geographies Pre-tax profit by geographies Breakdown (US$ million) 1H2007 1H2006 y-o-y (%) 1H2007 1H2006 Hong Kong % 26.0% 30.0% Singapore % 10.4% 8.8% Malaysia unchanged 4.9% 6.4% Korea % 9.8% 15.3% Other Asia Pacific 281 (34) N/A 14.2% (2.2%) India % 16.2% 13.9% Middle East & Other South Asia % 14.6% 15.9% Africa % 5.6% 6.0% Americas, UK & Group Head Office (32) 91 N/A (1.6%) 6.0% Total 1,980 1, % 100.0% 100.0% Hong Kong (26.0% pre-tax profit) The HK operations posted a 12.2% y-o-y rise in pre-tax profit. US$ million Vs 1H2007 (%) Net interest income % Non-interest income % Total operating income % Operating expenses (398) +15.7% Operating profit before provisions % Impairment losses on loans & advances (16) N/A Pre-tax profit % Total loans 24, % Total deposits 41, % Total assets employed 55, % Selected Ratios 1H2007 1H2006 Net interest margin 2.2% 2.3% Cost-income ratio 42.9% 43.3% Average liquidity ratio * 43.2% 42.0% 30/06/ /12/2006 NPL ratio 0.72% 1.12% Impairment provisions as a % of NPLs 89.3% 84.2% Loan-deposit ratio 59.7% 57.4% * For Standard Chartered Bank (Hong Kong) Total operating income grew 16.9% Net interest income rose 11.1% y-o-y for 1H2007 on a net interest margin of 2.2% (1H2006: 2.3%) and a 10.6% y-o-y loan growth. Non-interest income jumped by 29.4% y-o-y, thanks to strong net fees and commissions (US$241m, +21.7%) driven by buoyant sales of investment and insurance products, coupled with substantially higher trading income (US$97m, +70.2%). Cost-to-income ratio improved slightly Operating expenses increased by 15.7% y-o-y, reflecting additional investments in the private-banking business, new branches and expanded sales force. Cost-to-income ratio edged down to 42.9% for 1H2007 from 43.3% for 1H2006. Solid loan growth continued to be dragged by decline in mortgage lending Total loans were up 11.4% h-o-h during the six-month period, driven by the strong growth for the Wholesale Banking book (+32.1% h-o-h). With total deposits grown at a slower pace of 7.1% h-o-h, loan-to-deposit ratio rose to 59.7% as of 30/06/2007 from 57.4% as of 31/12/2006. Increase in loan impairment charges Hong Kong operations recorded loan impairment losses of US$16m in 1H2007 (1H2006: releases of US$8m), attributable to lower recoveries despite stable asset quality. Wholesale Banking saw lower net recoveries of US$14m in 1H2007 (1H2006: net recoveries of US$30m), while Consumer banking recorded a 36.4% y-o-y increase in loan impairment losses to US$30m on decreased recoveries. NPL ratio was 0.72% as of 30/06/2007 with a coverage ratio of 89.3%. 3

4 Singapore (10.4% pre-tax profit) Pre-tax profit in Singapore was up 53.0% y-o-y. Consumer Banking income rose 25.0% y-o-y, driven by higher investment services fees and treasury products while mortgage margin improved as a result of active repricing. Meanwhile, Wholesale Banking s performance was eye-catching, with segment pre-tax profit up 106.5% y-o-y on strong growth in FX & derivative products as well as debt capital markets and corporate finance. Malaysia (4.9% pre-tax profit) Pre-tax profit in Malaysia was flat y-o-y, as a 10.6% rise in profit for Consumer Banking driven by volume growth was fully offset by a 10.0% decline for Wholesale banking due to negative jaws. Korea (9.8% pre-tax profit) Korea pre-tax profit contribution dropped 16.7% y-o-y, owing to negative jaws. The operating income growth of 9.1% y-o-y was driven by wealth management products (+10%) and SME segment (+40%) that offset weaker income mortgage income. Regulatory constraints and competitive pressure on the mortgage market the largest business segment for SC First Bank compressed both the volumes and margins. Expenses jumped 21.7% y-o-y on the back of central cost allocation, fair-value adjustment of the employee retirement plans as well as a charge for of a voluntary retirement programme. Excluding these factors, expenses would have grown by 8% only on branch addition/upgrade and ATM upgrade. Other Asia Pacific operations (14.2% pre-tax profit) Other Asia Pacific region turned around in 1H2007, recording a pre-tax profit of US$281m (1H2006: pre-tax loss of US$34m), attributable to the significant reduction of consumer credit costs in Taiwan that was partly offset by the integration costs of Hsinchu International Bank. Taiwan operations recovered on lower bad-debt charges on its unsecured portfolio, which dropped sequentially to US$24m in 1H2007 from US$45m in 2H2006 and US$203m in 1H2006. For Hsinchu International Bank acquired in October 2006, integration was completed 3 months ahead of schedule, and management remained confident that the acquisition will be EPS accretive and deliver double-digit return in India operations (16.2% pre-tax profit) StanChart s pre-tax profit in India soared 50.2% y-o-y, primarily driven by the stellar performance of Wholesale Banking. Wholesale Banking in India registered a 69.7% surge in pre-tax profit, thanks to strong FX income and cash management revenues on increased volume as well as solid fee income from global markets activities (i.e. corporate finance, debt capital markets and private equity gains). Despite a 16.5% growth in operating income driven by wealth management and SME businesses, performance of Consumer Banking in India was lacklustre. Faster pace in cost growth (+27.8%) and loan impairment charges (+45.0%) were the main culprits for the 16.7% y-o-y decline in pre-tax profit for Consumer Banking in India. Middle East & Other South Asia (MESA) (14.6% pre-tax profit) In the MESA region, pre-tax profit rose 18.9% y-o-y, attributable to a 32.8% rise in pre-tax profit for Wholesale Banking on the back of strong top-line growth. Integration of Union Bank of Pakistan has been completed. Africa (5.6% pre-tax profit) African operation posted strong results, with pre-tax profit up 22.0% y-o-y, primarily due to lower loan impairment losses (-35.3%) while operating income growth (+8.3%) was in line with expense growth (+8.5%). The Americas, UK and Group Head Office The geography saw a pre-tax loss of US$32m in 1H2007 (1H2006: pre-tax profit of US$91m) as a result of lower own account trading income, absence of private equity gains and continued investment in products and sales staff. 4

5 Outlook & Prospects Cost/income growth gap to narrow in 2H2007 As already indicated by the management during the FY2006 results announcement, expenses were to outpace income in 1H2007on accelerated investment spend on new business launches and infrastructure. Cost and income growth will be more or less in line for the full year with the growth gap expected to narrow in 2H2007. M&A StanChart has always been popped up in M&A issues, being either an acquirer or a takeover target. Robust top-line growth supplemented by stream of acquisition has been the investment thesis for the bank. For instance, management of the bank indicated interests in follow-on acquisition in Taiwan with a focus in Taipei, as well as stake purchase in China following the Bohai Bank deal in In addition, the bank s heavy exposure to emerging markets makes itself an attractive M&A candidate. Maintain our positive stance We maintain our positive view on StanChart given its significant exposure to those fast growing and profitable banking markets in Asia, Middle East & Africa, consistent business strategy and successful delivery on acquisitions. We see current valuations of 2.5x FY2007 P/B and 16.6x FY2007E P/E should have reflected these pleasant factors. However, speculation of being a takeover target should serve as a share-price swinger. As such, we re-rate the counter as Long-term Buy. Recommendation: Long-term BUY 5

6 Appendix I I. Impairment provisions of Standard Chartered As % of total customer Individual Portfolio Non-performing advances allowance allowance loans As of 30/06/ % 0.33% 1.61% As of 31/12/ % 0.37% 2.10% As of 30/06/ % 0.38% 2.01% II. Comparison of Standard Chartered s loan book: 30/06/2007 vs 31/12/2006 Loans-by economies 30 th Jun, 2007 Up/(down) 31 st Dec, 2006 US$ million US$ million Hong Kong 24, % 22,086 Singapore 15, % 14,654 Malaysia 9, % 9,225 Korea 41, % 40,115 Other Asia Pacific 24, % 23,086 India 7, % 6,275 Middle East & Other South Asia 11, % 10,574 Africa 2, % 2,546 Americas, UK & Group Head Office 16, % 12, , % 141,025 III. Comparison of Standard Chartered s loan book: 30/06/2007 vs 30/06/2006 Loans-by economies 30 th Jun, 2007 Up/(down) 31 st Dec, 2006 US$ million US$ million Hong Kong 24, % 22,242 Singapore 15, % 13,195 Malaysia 9, % 9,030 Korea 41, % 38,798 Other Asia Pacific 24, % 11,805 India 7, % 5,725 Middle East & Other South Asia 11, % 8,175 Africa 2, % 2,266 Americas, UK & Group Head Office 16, % 9, , % 120,599 6

7 Appendix II Breakdown of loan book of Standard Chartered Breakdown of Loan Book as of 30/06/2007 Total customer advances: US$153,271 million Middle East & Other South Asia 7.6% Americas, UK & Africa 1.8% Group Head Office 10.8% Hong Kong 16.1% Singapore 9.8% India 4.8% Malaysia 6.3% Other Asia Pacific 16.0% Korea 26.9% Breakdown of Loan Book as of 31/12/2006 Total customer advances: US$141,025 million Middle East & Other South Asia 7.5% India 4.4% Africa 1.8% Americas, UK & Group Head Office 8.8% Hong Kong 15.7% Singapore 10.4% Malaysia 6.5% Other Asia Pacific 16.4% Korea 28.4% 7

8 Important Disclosure / Analyst Certification / Disclaimer This document is published by East Asia Securities Company Limited, a wholly-owned subsidiary of The Bank of East Asia, Limited (BEA). The research analyst primarily responsible for the content of this report, in part or in whole certifies that the views on the companies and their securities mentioned in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. This report has been prepared solely for information purposes and has no intention whatsoever to solicit any action based upon it. Neither this report nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. The information is based upon information, which East Asia Securities Company Limited considers reliable, but accuracy or completeness is not guaranteed. Information and opinions expressed herein reflect a judgment as of the date of this document and are subject to change without notice. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is not to be taken in substitution for the exercise of judgment by respective readers of this report, who should obtain separate legal or financial advice. East Asia Securities Company Limited and / or The BEA Group accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or further communication given in relation to this report. At time of this report, East Asia Securities Company Limited has no position in securities of the company or companies mentioned herein the report, while BEA along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this report. BEA and its associates, its directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. BEA and/or any of its affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company or companies mentioned in this report and may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company or companies mentioned in the report. This document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or other jurisdiction, publication, availability or use would be contrary to law and regulation. 8