Standard Chartered’s India profit up, but bad loans rise
Pre-tax profit from India rises 3% to $697 mn over the previous year, driven by consumer banking business
Mumbai: Standard Chartered Plc, on Wednesday said its gross non-performing assets (NPAs) increased to a record level in 2013 as the bank battled a slowdown in the local economy. Standard Chartered, the largest foreign bank in India with 99 branches, said its gross NPAs had risen to 7.9% in 2013 from 6.7% in 2012 and 3% in 2011, the highest ever in the country. Pre-tax profit from India increased just 3% to $697 million (around 4,320 crore) over the previous year, driven by its consumer banking business but weighed by higher provisions.
Chief financial officer Anurag Adlakha said provisions due to bad loans had increased to $195 million in 2013 from $165 million in 2013 reflecting the “muted economic environment today".
“Growth rates have come off, interest rates are elevated and policy actions have been delayed. The 7.9% NPAs should be seen in the context of the local banking industry which has seen stress in loans and has chosen to restructure loans which we have not done," Adlakha said in a telephone interview.
The bank’s gross NPAs increased to $997 million in 2013 up from $819 million in 2012, Standard Chartered said on its website.
Slower economic growth, which slumped to a decade’s low of 4.5% in the last fiscal year and is estimated to stay below 5% in the year ending March, has made it tough for many corporate borrowers to repay debt, leading to a pile up of bad loans at banks.
Besides NPAs the bank also had to suffer $105 million losses on its investments which also included “private equity investments and corporate bonds," Adlakha said. “These are mainly mark to market losses reflecting the current value of the investments on which we did a slight profit last year and have now slipped into a loss," he added.
The non-performing assets mostly came from wholesale banking or corporate loans particularly from two large telecom and gems and jewellery clients, said an official at the bank. He declined to be named because he is not authorised to speak to the media.
The increase in non-performing assets offset a 26% increase in consumer banking profit, which was driven by higher income from mortgage loans and improved margins in credit cards and personal loans.
Sunil Kaushal, regional chief executive officer for India and South Asia, said the outlook for 2014 is “cautious" because the economic environment in India is likely to “remain somewhat challenging and uncertain".
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