Standard Chartered Says 'Big Pain' of India Bad Loans Behind Itby and
Bank sees improvement in revenue and profit from next year
Focus on growing India consumer loans and transaction banking
Standard Chartered Plc expects revenue and profit from its South Asia operations to start improving from next year, as the London-based bank recovers from the "big pain" of its record $1.34 billion of provisions against loans to Indian borrowers in 2015.
The bank has already made the bulk of charges on its loans to stressed companies in India, and is now focused on building up in other areas such as consumer lending and transaction banking, said V Anantharaman, Standard Chartered’s head for international corporates in the Asean and South Asia regions.
"The big pain is over," Anantharaman said in an interview Monday in his office in Mumbai. "Provisions and profit figures will be normalized from next year as improved fundamentals begin to be factored in,” he added.
Standard Chartered, which generates most of its income from Asia, has seen a surge in bad debt as a result of the now-abandoned policy of rapidly expanding its lending to emerging markets like India. Since taking over last year, 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.
The lender incurred a $981 million loss in India for 2015 compared to a profit before tax of $561 million in the previous year. The impairment losses on its India loans of $1.34 billion were the highest of any country in which Standard Chartered operates, and up from $171 million in 2014.
Anantharaman cautioned that it will take a while for the turnaround in the bank’s fortunes in India to start showing through, given continuing pressures on the economy. “Though the bank’s fundamentals here are better now, it is yet to reflect in revenues as India’s credit environment remains bad and margin pressure continues," he said.
The bank has reduced its India exposure by 28 percent, from $42 billion to $30 billion, over the two years to the end of 2015, according to a bank presentation on Feb. 23. About $2 billion came from “proactive measures” to curtail Standard Chartered’s exposure to stressed companies, with the remainder due to the repayment of loans and bonds on maturity, Anantharaman said.
Standard Chartered is focused on building up its Indian market share in transaction banking in areas such as cash management, trade finance and foreign exchange, Anantharaman said. The bank is also investing in technology and infrastructure as part of plans to boost its consumer-banking business in India, he added.
The London-based lender is seeking to sell at least $4.4 billion of assets in Asia, of which $1.4 billion were stressed loans in India, people with knowledge of the matter said last month. The bank is also seeking to sell part of its portfolio in Africa and the Middle East, the people said. Anantharaman declined to provide details of the sale process.