StanC India loss soars to $981 mn;NPA jumps 8-fold to $1.34 bn

Standard Chartered India, the country's largest foreign bank by branches, today reported a whopping USD 981 million in pre-tax losses in 2015 as its bad loans soared over eight-fold to USD 1.34 billion from USD 173 million in 2014.
For the parent, 2015 marked the worst in 26 years with the pre-tax loss of USD 1.5 billion as against a pre-tax profit of USD 4.2 billion in 2014, making India operations contributing close to 60 per cent of the losses for the Asia-focused lender as its overall loan impairments doubled to USD 4 billion last year from USD 2.14 billion in 2014.

The bank, in an exchange filing, said loan impairments, including restructured loans, across its India portfolio surged eight-fold to USD 1.34 billion in 2015 from 2014, again contributing over a third of the British banking group's total dud assets.
"Loan impairments jumped significantly, primarily driven by exposures to commodities and India, where corporates were impacted by continued stress on their balance sheets, coupled with a more challenging refinancing environment," the bank said in its earnings report.
"The bank has been actively managing the India corporate and institutional clients and commercial clients portfolio in 2015 by reducing exposures to vulnerable accounts while limiting any rise in exposure to select client groups with credit grades stronger than the portfolio average," the second oldest foreign bank said.

The bank has massive exposure to some of the very indebted companies, including almost USD 2.5 billion to the Essar Group and recently media reported the bank had classified around USD 5 billion loans to domestic borrowers as on the verge of default.

The bank said the macroeconomic environment in India has been challenging due to slow reforms, high indebtedness in some sectors and a lower-than-expected refinancing appetite of local banks, which has resulted in exposure to stressed corporates getting further impacted.
It also said its recoveries were not satisfactory.
"As a result, impairments rose significantly in 2015, mainly driven by counter-parties who were already stressed in 2014. There was also a change in underlying assumptions regarding prospects of recovery on available collateral due to the challenging market conditions and recent experience from recoveries on impaired accounts."

The bank said due to these headwinds, it has brought down its India portfolio to USD 30 billion in 2015 from USD 35 billion in 2014, down from a peak of USD 42 billion in 2012.
The Indian Depository Receipts of StanChart tanked 5 per cent to Rs 40 on the BSE, whose benchmark Sensex dropped 1.71 per cent.