Standard Chartered on Tuesday said it has incurred a pre-tax loss of $981 million from its India operations owing to rise in impaired assets to $1.3 billion in 2015, the bank said in its annual report.
In 2014, the Asia-focused bank had reported a profit before tax (PBT) of $561 million and $171 million impaired loans.
The bank said that its commercial banking business was very uneven across markets with some presences more established than others. “Overall performance has been poor with high loan impairments and weak income,” it said, adding that impairments increased 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.
In India, the bank’s operating income stood at $1 billion and net interest income at $921 million in 2015.
The group has reduced its India exposures to $30 billion as on 31 December 2015 ($35 billion in 2014). The slowdown, it said, observed in 2014 has continued into 2015 and the macroeconomic backdrop continues to be challenging with slow progress in reforms which were promised by the new government in 2014 along with continued high indebtedness in some sectors and tightening in refinancing by local banks.
“Consequently, impairments have risen significantly in 2015, mainly driven by counterparties who were already stressed in 2014,” the bank explained.
Globally, the bank reported a pre-tax loss of $1.5 billion in 2015 from a PBT of $4.2 billion in the previous year. Standard Chartered’s total impaired loans stood at $4 billion, up 87% from 2014.
Stating that 2015 was a challenging year, chairman John Peace said, “While our 2015 financial results were poor, they are set against a backdrop of continuing geo-political and economic headwinds and volatility across many of our markets as well as the effects of deliberate management actions.” He added that the share price performance has also been disappointing, under-performing the wider equity market which has seen broad declines driven largely by the same macroeconomic concerns.