Standard Chartered Provisions $175 Million in China Fraud

Standard Chartered Plc said it made provisions of about $175 million related to a fraud in China, where the government is investigating a lending scandal involving metal stockpiles in the port city of Qingdao.

The bank’s so-called other impairments jumped by $174 million to $185 million in the first six months of the year, compared with just $11 million in the same period in 2013, the London-based lender said today as it reported earnings. The amount of that total related to the Qingdao scandal was about $175 million, according to Shaun Gamble, a bank spokesman.

Standard Chartered had previously sued Chen Jihong, the Singaporean owner of a metal-trading company that’s under investigation in China for allegedly pledging metals multiple times as collateral for loans. Standard Chartered says it’s owed $35.6 million under a loan agreement with Decheng Mining, one of Chen’s companies, according to a Hong Kong lawsuit last month.

“Our exposure in the warehouses around Qingdao was about $250 million in total,” Chief Executive Officer Peter Sands said on a conference call with journalists today. “In the provisioning we have taken, we have taken a very conservative approach.”

HSBC Holdings Plc and ABN Amro Bank NV have also sued Chen, who has been detained in China, according to Singapore’s foreign ministry.

Banks are examining lending linked to metals at Qingdao Port amid concern fraudulent activity is more widespread throughout the country, where commodities like gold and copper are used as collateral to get funding.

Standard Chartered’s operating profit for corporate and institutional clients in greater China, which includes Hong Kong, Taiwan and Macau, fell to $728 million in the first half from $745 million a year earlier, the bank said today as it reported a 20 percent drop in earnings. It also said it’s facing more U.S. fines over failings in systems that monitor potential money laundering.

The roughly remaining $10 million of the first-half other impairments relate to “certain strategic and associate investments” in Europe, the bank said in a statement today.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net

To contact the editors responsible for this story: Simone Meier at smeier@bloomberg.net Keith Campbell, Jon Menon

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