BackStandard Chartered’s India January-June profit rises 45%
Profit before tax rises to $450 million from $311 million; Net interest margin improves to 3.7% from 3.5% last year
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Standard Chartered Plc said on Tuesday that profit before tax in India rose 45% in the January-June period from the year earlier on an improvement in net interest margin (NIM) and demand for trade and working capital loans from companies.
Profit rose to $450 million from $311 million, it said. Globally, profit before tax increased 4% to $4.08 billion from $3.93 billion, despite a 27% rise in provisions to $730 million from $583 million.
NIM, or the difference between interest earned and interest paid, improved to 3.7% from 3.5% as the cost of deposits dropped from the year before, said Sunil Kaushal, regional chief executive, India and South Asia, Standard Chartered, adding that the bank lost 5-6% in profit due to a weaker rupee.
He declined to give the specific cost of deposit figure.
India was the third-largest individual contributor in terms of profit to the bank globally behind Hong Kong’s $1.03 billion and Singapore’s $544 million.
Total income from India increased 17% to $927 million from $790 million. A 5% drop in expenses to $364 million from $383 million also helped boost profit.
Provisions on bad loans rose 8% to $113 million from $105 million as total non-performing assets (NPAs) rose to $917 million in 2013 from $819 million. Total NPAs as a proportion of total advances was 7.6% at the end of June compared with 6.8% at the end of December 2012.
The bank’s Indian depository receipts ended 2.87% higher at ₹ 125.45 apiece on BSE on Tuesday, while the benchmark Sensex fell 2.34% to 18,733.04 points.
Kaushal, however, cautioned that the second half of 2013 will be more difficult as the Indian economy shows no signs of improvement and interest rates are likely to stay elevated.
“We are cautiously optimistic for the second half. An increase in interest rates will slow down credit offtake both in consumer and wholesale banking. Companies are focusing on their core assets which means there could be opportunities for divestments and mergers and acquisitions. Growth in loans is not happening for capital expenditure but for trade and working capital," Kaushal said.
Wholesale banking income rose 20% to $682 million from $567 million, while consumer income grew 10% to $245 million from $223 million.
Wholesale banking remained the mainstay of the bank’s business in India contributing $379 of the $450 million profit before tax.
Chief financial officer Anurag Adlakha said the bank’s loan book increased 14% driven by demand for loans from small and medium enterprises (SMEs) and as the bank sold some of its corporate bond investments in 2013.
Standard Chartered’s mortgage loans increased 10% from last year to $2.2 billion while loans to SMEs increased 13% to $2.1 billion.
Consumer banking loans, which include credit cards and personal loans, rose 13% to $5.1 billion, while wholesale banking loans inched up 2% to $6.9 billion. Unsecured credit cards and personal loans make up 15-16% of the bank’s loan book, Adlakha said.
“We saw a rise in wholesale income also because we gained from de-risking (selling) our bond portfolio this year. Our margins were under pressure but what we lost in margins we made up in volumes," Kaushal said.
Kaushal said the bank’s portfolio was “diversified and well collaterlized" and India continues to be a core market for Standard Chartered. “India will become one of the world’s largest economies and we will continue to invest selectively in what is a core market for Standard Chartered," he added.
Meanwhile, JPMorgan Chase and Co, said net profit in India rose 36% to ₹ 673 crore for financial year ended March.
Madhav Kalyan, chief executive officer (CEO), JPMorgan Chase Bank NA, India, said the rise in profit was driven by the strong performance of the bank’s key businesses—corporate and investment banking.
Advances increased 18% to ₹ 5,344 crore, while deposits rose 17% to ₹ 10,369 crore. Net non-performing assets remained nil as of March 2013.
Since March 2009, JPMorgan has invested ₹ 2,643 crore in its banking business in India and had a capital adequacy ratio of 26.89% as of March-end.
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