Stanchart reports first annual loss in 26 years as India NPAs swell

24 Feb 2016


British banking group Standard Chartered Plc has registered its first yearly loss in 26 years, reporting a full-year pre-tax loss of $1.5 billion, hit by heavy losses in India and low commodity prices.

Standard Chartered said a 'deterioration of financial markets in India,' left its India operations with an annual loss of $891 million (Rs6,728-crore) - the biggest ever loss posted by a bank in India.

The bank's loan impairments, including restructured loans, across its India portfolio surged almost eightfold to $1.3 billion (Rs 9,781-crore) in 2015 from $171 million in 2014.

Overall, the UK-based lender's loan impairments surged to $4 billion in 2015 from $2.14 billion in 2014.

Standard Chartered had reported a profit of $4.2 billion in 2014 and the 2015 loss of $1.5 billion is the first annual loss for the bank since 1989.

StanChart, which is a lender to large corporate groups with exposure to commodities (like Essar), had reported a profit of $561 million in 2014. The impairment losses on loans in India are also the highest at $1.3 billion for StanChart - more than double of the $611-million hit it took due to credit losses in the UK.

The bank, which has its loans predominantly in Asia, said the pre-tax loss of $1.5 billion in 2015 is after taking into account restructuring charges of $1.8 billion, which includes redundancy costs, impairments and a goodwill write down.

''While 2015 performance was poor, the actions we took on capital throughout last year and particular in December, have positioned us strongly for the current macro environment,'' Bill Winters, group chief executive said. ''The challenging external environment is not an excuse for our performance. We are not unwitting victims,'' he added.

Standard Chartered has also written down the value of its business in Thailand after placing Indonesia operations under review. It has cut down exposure in the commodities sector and has stopped executive bonuses.

The bank said it has reduced its target India exposure by 28 per cent to $30.2 billion from $42 billion. "India and commodities represent a large proportion of the liquidation portfolio," the bank said. In a presentation to investors, the bank said India represented a high level of weak credit throughout the banking system despite high growth in GDP. It added that credit growth was the slowest in two decades and there was no appetite from local lenders to refinance the loans it wanted to offload.

The losses are part of the efforts of Bill Winters, the new CEO, to clean up the bank. "Our 2015 performance was poor, and in many ways unacceptable," said Winters, speaking to newspersons, forecasting another difficult year in 2016.

India was the largest contributor to StanChart's profits until 2010. The bank had bet big on India and was the only multinational entity to list here under the Indian Depository Receipts route in 2010.

On corporate and institution clients, the bank said that loan impairment increased significantly to $3.2 billion. "We have reviewed the portfolio extensively through 2015 and have increased provisioning, largely to reflect lower commodity prices as well as further deterioration in India," the bank said in its annual report.

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