- Analysts cite implications of Australian bank's bad loans
- Standard Chartered commodity exposure is 6% of total assets
Standard Chartered Plc dropped the most in a month as oil fell and Australia & New Zealand Banking Group Ltd. warned plunging resource prices had pushed up bad debts, renewing concern that the British lender may face more pain from its own commodity loans.
ANZ, which has Australia’s biggest exposure to commodities, said provisions for bad debts would be more than expected at about A$900 million ($676 million) as miners and associated resource companies made bigger losses. Oil futures fell as much as 3.4 percent in New York, pushing prices toward their first weekly decline since mid-February.
While Standard Chartered has cut its commodities exposure to $40 billion from $62 billion at the end of 2013, the industry still accounts for 6 percent of the London-based bank’s total assets, a higher proportion than at Australia’s big four lenders. Standard Chartered reported its first annual loss since 1989 last year as loan impairments almost doubled to $4 billion, the highest in the bank’s history.
“Read-across from ANZ appears to offer no encouragement at all,” said Ian Gordon, an analyst at Investec Plc who downgraded the stock to sell this month. Standard Chartered “has shown a propensity to rally hard on any respite in commodity prices on the basis that impairments may be ‘less bad,’ but this does not in itself make achieving even a moderate, positive return a credible outcome in the near term.”
Spokesman Simon Kutner declined to comment on the bank’s share price, which had rallied for a month after touching the lowest since 1998 in February.
The stock plunged as much as 10 percent Wednesday, the most since Feb. 23, and traded 8.4 percent lower at 437.25 pence at 2:20 p.m. in London. It’s lost 70 percent of its value since the start of 2013.
Chief Executive Officer Bill Winters, 54, is exiting or restructuring $100 billion of risky assets as he attempts to steady a bank reeling from overly-concentrated lending to the commodity industry and developing countries when markets were booming.
ANZ shares fell 5.2 percent in Sydney. Bad debt provisions at Australia’s largest lenders are set to rise to their highest in eight years by 2018 as the prospects of defaults in the mining, agricultural and dairy sectors snowball, according to a report from the Reserve Bank of Australia. The nation’s big four banks, including ANZ, have about 1.8 percent of their total A$3.56 trillion in assets in commodities, based on their latest filings.
Standard Chartered’s share move is down to “read-across from the ANZ profits warning on corporate credit,” said Joseph Dickerson, an analyst at Jefferies International Ltd. in London with an underperform rating on the shares.