- Stressed Indian loan portfolio draws interest from SSG Capital
- U.K. bank seeks to pare balance sheet after record impairments
Standard Chartered Plc is seeking to sell at least $4.4 billion of assets in Asia, people with knowledge of the matter said, as the lender pares its balance sheet after booking record impairments.
The London-based bank is speaking with potential buyers for about $1.4 billion of stressed loans made to Indian firms including GMR Infrastructure Ltd., according to the people, who asked not to be named as the information is private. Standard Chartered has also started a sale of around $3 billion of assets in the rest of Asia, one of the people said. Those assets include loans as well as proprietary bond and equity investments in China, Indonesia and Malaysia, another person said.
Chief Executive Officer Bill Winters has pledged to review all of Standard Chartered’s business lines and customer relationships, ranking their risk and returns, with the aim of restructuring or jettisoning about $100 billion of assets. In February, the bank posted its first annual loss since 1989 as revenue fell and loan impairments nearly doubled to the highest in its history.
“This is a positive move to show investors that the bank and Bill Winters are doing something to improve their operations and capital position,” Ronald Wan, chief executive at Partners Capital International in Hong Kong, said by phone Monday. “Investors have been concerned about StanChart’s asset quality in India, and they are now showing efforts to resolve the problem loans there.”
Standard Chartered shares rose 1.7 percent to 451.05 pence, the highest in a week, at 9:51 a.m. in London trading Monday. The benchmark FTSE 100 Index was little changed.
Special-situations funds including Hong Kong’s SSG Capital Management have expressed interest in the stressed Indian loans being sold by Standard Chartered, which include borrowings in both rupees and U.S. dollars, the people said. KKR & Co. was previously in talks with Standard Chartered about buying some of the Indian assets and may consider returning to the process, one of the people said.
The bank is also seeking to sell part of its portfolio in Africa and the Middle East, the people said.
“We said in November when we announced our strategic review that we would be aligning our risk profile to the new strategy, and confirmed then that the group had identified a number of exposures for liquidation that exceeded the new risk tolerance levels,” Standard Chartered said in an e-mailed statement. “We are making good progress on executing our strategy, and we will provide an update to our investors in due course.”
KKR and SSG Capital declined to comment by e-mail, while a spokesman for GMR said the company is “unaware of any such developments.”
The stressed Indian portfolio Standard Chartered is selling includes loans to more than 10 companies, primarily from the infrastructure and power industries, that the bank has already made provisions for, one of the people said. The lender may sell just part of the portfolio, depending on demand from buyers, according to one person.
“Standard Chartered has been doing group-based lending to infrastructure companies, which are in the high-end risk category,” Mukul Kochhar, head of institutional sales at Investec Plc’s India unit, said by phone Monday. “The bank is now doing a rethink of its strategy and, like others, is cleaning up its books.”
The lender said in November it will restructure or reposition $30 billion of risk-weighted assets in specific countries to improve returns, while it will liquidate another $20 billion of assets that are outside its risk tolerance. It will also seek to exit or improve returns on another $50 billion of assets relating to less-profitable corporate and commercial banking customers.
Standard Chartered already sold off about $1 billion of low-yielding assets in India last year as part of its balance sheet management, one of the people said. It recently decided not to proceed with a planned sale of at least $1.5 billion in non-stressed loans extended to mid-market Indian companies, after testing buyer interest in the portfolio earlier this year, the person said.
Winters, 54, has asked investors to bear with him as he takes “painful” steps to reverse his predecessor Peter Sands’s revenue-focused expansion across emerging markets, which left the bank saddled with bad loans when the commodity market crashed and growth stalled from China to India.
The bank is also asking clients in the Indian and Belgian diamond trade to get payment insurance or provide 100 percent collateral as the bank seeks to tighten standards, people with knowledge of the new policy said last month. From mid-2014, the lender has reduced its exposure to commodities by about a third to $40 billion at the end of December, company filings show.