Finance

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Bill Winters just got a lucky break. No, the Standard Chartered CEO hasn't found a magic wand to make regulators overlook the bank's past misconduct. Nor has he discovered potions to ward off Brexit risks or boost returns in a low-rate environment. But it looks as if his sticky loans in India are finally starting to move again.

As much as $5 billion of the $13 billion that the billionaire Ruia brothers are getting by selling Essar Oil, which controls India's second-largest refinery, will go toward repaying lenders in the holding company Essar Global, director Prashant Ruia told Bloomberg News. Assuming StanChart's share of that kitty at $2.5 billion , that's half of Winters's $5 billion India problem solved. 

Winters's Discontent
Nonperforming loans remain elevated, with lumpy advances to Indian groups like Essar playing a big role
Source: Bloomberg

This is easily one of the best things to have happened to the former JPMorgan banker in the two years he's spent trying to fix the British lender, and the bank's Indian depository receipts rose more than 6 percent in intraday trading, while shares of ICICI Bank gained as much as 7.5 percent. StanChart's $1.3 billion provision on its Indian loans led to a loss for 2015, its first in 26 years.

Pining for Profit
StanChart's ability to make money on its assets has fallen off a cliff in the past two years
Sources: Bloomberg
*Calculated on trailing four quarters

The all-cash deal with Rosneft and a consortium of Trafigura and United Capital Partners would also give the Ruias spare cash to invest in Essar Steel, which may help that company restructure its debt load. That would be an unexpected boon for Indian banks, hit by soured advances to the struggling steel industry.

After several years of denial and delays, Indian tycoons are finally dealing decisively with debt. The announcement of the Ruia brothers' deal, which the group is billing as "the largest deleveraging ever in India," came soon after billionaire Anil Ambani's Reliance Communications agreed to sell its mobile-phone tower unit to Brookfield Infrastructure Group for an upfront payment of $1.65 billion.

Tycoons shedding assets is good news for StanChart, whose India franchise had come to depend too much on lumpy loans to holding companies backed by shares in operating businesses. Zarin Daruwala, whom Winters hired from rival ICICI Bank a little less than a year ago to repair the India business, will have a major win to her name once the Ruia check is in the bank.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. StanChart, together with India's ICICI Bank and Axis Bank, had roughly $3.5 billion of loans to unlisted Essar Global in November last year when Bloomberg reported that the creditors were looking to shed their exposure to the overstretched commodities group.

To contact the author of this story:
Andy Mukherjee in Singapore at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net