India’s bad assets drag Standard Chartered into losses

Thursday, 6 August, Mumbai: British lender Standard Chartered has reported a pre-tax loss of $276 million for the January-June period as against a profit of $395 million a year ago due to a spike in bad assets, which has also dented its profits globally.

From being one of the top performing geographies for Standard Chartered globally, India has now slipped to the bottom on the basis of profitability among the seven regions it operates in.

“The impact of macro-economic reforms has been slower than the Group’s earlier expectation,” it said in a statement, adding that this is evident in corporate earnings for March which came in at 10-quarter worst and slowest credit growth in two decades.

Domestic lenders have been grappling with a high incidence of asset quality stress for the last three years, and the same being reported by a foreign bank may surprise some quarters.

At the group level, the bank’s pre-tax profit fell to $2.10 billion from the $3.25 billion in the year-ago period, due to a surge in loan impairment losses at $1.65 billion as against the $864 million in the year-ago period.

The bank identified the reverses in India, where its impairment losses surged to $483 million from the $56 million in year-ago period, as one of the prime reasons along with pressure on the commodities front due to a decline in prices, as the major reasons for the setback at group level.

“Continued adverse loan impairment trends in India and commodities more than offset improvement in Retail Clients’ loan impairment,” its newly appointed group chief executive Bill Winters said.

He added that the increase in non-performing loans is a continuation of adverse trends, and there are “no signs of these reversing.”

Its group chief financial officer Andy Halford said the bank saw a number of changes in regulation early in the year and also in the attitude of local banks to refinancing that has “reduced the likelihood for success of certain of our corporate debt recoveries.”

“India has faced a slowdown in economic growth since 2012, relative to the higher rates of previous years, combined with high indebtedness in some corporate sectors and lower appetite for refinancing, reducing the success of corporate debt restructurings and distribution efforts,” the statement said.