The UK-based Standard Chartered bank, reported first loss in its global operations, in the last 26 years. The bank, which has its loans predominantly in Asia, reported a pre-tax loss of $1.5 billion (Rs 10,288 crore) for 2015, down from a profit of $4.2 billion (Rs 28,800 crore) last year.
The key trigger for the losses has been the hit from Indian market, where the bank suffered loss of almost $981-million (Rs 6,728-crore) from its operations, down from a profit of $561 million in 2014 – primarily because the loan impairments surged almost eight times to $1.3 billion. This is the biggest ever loss posted by a bank in India.
As a result, the bank would claw back bonuses from senior staff after slumping to its first annual loss. Other reasons for the dip in profits has been the hefty restructuring costs and weak commodity prices that took toll on their ’emerging markets-focused’ lender.
In the past, India was the largest contributor to StanChart’s profits until 2010. The bank had bet big on India and was the only multinational entity to list here under the Indian Depository Receipts route in 2010. But this dependency did not fair too far.
As a result, the bank has reduced its target India exposure by 28% to $30.2 billion from $42 billion.
“India and commodities represent a large proportion of the liquidation portfolio,” the bank said. In a presentation to investors, the bank said “India represented a high level of weak credit throughout the banking system despite high growth in GDP. It added that credit growth was the slowest in two decades and there was no appetite from local lenders to refinance the loans it wanted to offload”.
To be sure, Standard Chartered is not alone in facing pressure from stressed assets in India. Hence, as a necessary step, Raghuram Rajan, governor of the Reserve Bank of India, set banks a March 2017 deadline for banks to clean up their balance sheets and has nudged them to treat some troubled loan accounts as bad and set aside money to cover the risk of default by the end of March.
Source: Business Standard