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Dip in bad loans reveals green shoots in StanChart revival
April 27, 2017 / 5:23 PM / 4 months ago

Dip in bad loans reveals green shoots in StanChart revival

Standard Chartered Chief Financial Officer Andy Halford is seen in this undated portrait handed out by the bank, in London, Britain, April 27,2017. Standard Chartered handout via REUTERS.

LONDON (Reuters) - A sharp dip in bad loans shows that Standard Chartered (STAN.L) is turning a corner, its Chief Financial Officer told Reuters a day after reporting the bank's first quarter profit had doubled.

StanChart set aside just $200 million (156.07 million pounds) in provisions against bad loans for the first quarter, 58 percent lower than a year ago, lifting its shares 5 percent on Wednesday.

Losses from bad debts have plagued the bank in recent years, with its struggles to recoup a $1 billion loan to Indonesian mining tycoon Samin Tan emblematic of its over-ambitious lending during the boom years up to 2015.

The bank has since tightened limits on who can make decisions about such big loans and decreased internal limits for exposure to a single client, Andy Halford said on Thursday.

"Today we'd not be lending in such large amounts to some of those clients," Halford, adding that the bank remains cautious and that bad loans could still rise if market conditions worsen.

However the strong first quarter gave confidence the total impairment losses for 2017 could come in at under $2 billion against $2.4 billion in 2016, he said.

GREEN SHOOTS

A man walks past the head office of Standard Chartered bank in the City of London February 27, 2015.Eddie Keogh

The signs of green shoots come just over a year on from a low point for Halford, when he and Chief Executive Bill Winters had to present the StanChart's first annual loss in 26 years.

The $1.5 billion loss stemmed from restructuring costs, including redundancies and bad loan impairments, a legacy of years of unfettered growth after the 2008 crisis when profits soared as StanChart lent freely in Asia and the Middle East.

Now it is betting on initiatives including growing its private banking business and a push into developed markets such as the United States to boost revenues, which have remained stubbornly low during the turnaround.

"We're not trying to conquer the U.S. market, but for companies who have business in the emerging markets who have never heard of us, we should be more visible," he said.

Asked whether the bank could resume payouts as soon as this year, as some analysts have suggested following the improved results, Halford said: "I am not ruling anything in or out".

Analysts remain cautious on StanChart's outlook because its cost-cutting has also slashed revenues, with income in its financial markets division down 10 percent in the first quarter, as U.S. investment banks' own trading divisions are booming.

"The returns are not yet up to the level of covering the cost of the business, and until we're at that point we can't declare victory," Halford said.

Editing by Alexander Smith

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