Asian-focused bank Standard Chartered said yesterday its full-year pre-tax profit was on course to beat analysts' forecasts as bad debts fell and its Hong Kong business revived.

The London-based bank's bad debt charge for this year will be "materially better" than the average analyst estimate of US$640 million, Finance Director Peter Sands said. That compares with provisions of US$705 million last year.

"In Hong Kong, we had a much more positive business environment and we're seeing that coming through pretty much in all lines of our business," Sands said. "We are confident about the momentum and shape of the business as we end the year."

Standard Chartered, which makes about two-thirds of its profit in Asia, is the latest British bank to update investors on its performance this year. Domestic-focused UK lenders Royal Bank of Scotland and Alliance & Leicester said this week that profit would meet expectations.

Analysts' consensus was for a 15 per cent rise in pre-tax profit to US$1.45 billion in 2003 from US$1.26 billion in 2002. The range of estimates was US$1.38 billion to US$1.55 billion.

"The biggest positive surprise is from a material improvement in bad debts," said Euan Stirling, investment director at Standard Life Investments, which manages about 87 billion pounds (US$151 billion). "The management's positive comments on Hong Kong are particularly encouraging."

Recoveries of corporate loans were strong in the second half and corporate customers are "in pretty good shape", Sands said.

Standard Chartered's first-half profit beat analysts' forecasts but the bank unnerved investors with a cautious outlook for Hong Kong, where it makes a quarter of its profit.

The bank's first-half lending income dropped as it curbed lending in Hong Kong after credit-card bankruptcies surged.

Standard Chartered said yesterday that Hong Kong revenue rose in the second half after the bank resumed marketing of unsecured lending, encouraged by the city's introduction of a credit-information bureau.

Also Hong Kong pulled out of recession in the third quarter of this year. HSBC Holdings, Standard Chartered's rival in Asia and other markets, said on Tuesday that Hong Kong's recovery helped boost its business in the third quarter.

Standard Chartered shares were up 0.1 per cent to 906 pence at 12:45 GMT, compared with a 0.4 per cent rise by the DJ Stoxx European banks index. The shares have already jumped 31 per cent this year, making it the biggest gainer among UK banks.

First-half profit was boosted by financial markets income that analysts were concerned might not be sustained. Sands said the first-half increase was from customer business and not the bank's trading and that the trend continued in the second half.

Standard Chartered Chief Executive Mervyn Davies took over in November 2001 and is trying to boost returns from consumer banking in markets with growing middle classes.

Consumer banking had good revenue growth outside Hong Kong and was particularly strong in Thailand, Indonesia, the Middle East and Africa, the bank said.

Sands said investment in consumer banking would mean the bank's cost-income ratio would not improve this year.

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