As Standard Chartered looks to offload US$20bn of assets that sit outside its revised risk profile, a senior official from the bank has said that it will not have a material impact on its trade and export finance divisions.
The bank reported its first loss since 1989 in February and new CEO Bill Winters is set to restructure US$100bn of assets in total, with US$20bn expected to be liquidated.
This week, it was reported that at least US$4.4bn in stressed assets were up for grabs in Asia, including US$1.4bn of stressed loans owed by Indian infrastructure companies.
However, Michael Vrontamitis, who is responsible for the bank’s Asian trade finance business, tells GTR that while the bank’s new risk appetite will lead to an increase in trade distribution – whereby assets from its trade book are sold down to other financial institutions – he does not expect trade finance volumes to fall.
“I would expect not,” he responded, when asked if Standard Chartered’s trade business would decrease in line with the asset sales elsewhere in the business.
“If anything we want to do more. I don’t think there’s a huge impact on the trade finance programme. We have an active trade distribution strategy; we do a lot of distribution.
“It’s really to increase our risk capacity on individual loans and portfolios and also to improve our capital position. That enables us to do more trade finance. Our expectation is that we’ll continue to churn our books as appropriate,” he adds.
“The US$4.4bn programme is not specifically to do with trade finance,” Michael Vrontamitis, Standard Chartered
Vrontamitis says it is important to distinguish the sale of distressed assets from the trade distribution programme.
“The trade distribution programme is not stressed assets. The US$4.4bn programme is not specifically to do with trade finance,” he says.
He adds: “It’s a very specific de-risking action to improve asset quality, that is to do with managing the US$20bn portfolio that sits outside of our risk profile.”
The trade distribution side allows Standard Chartered to increase liquidity and capital, while managing risk, Vrontamitis says.
At a time when banks are under regulatory pressure to increase capital holdings, more banks are taking similar moves to de-risk their balance sheets. In some cases, such as the recently reported cases of RBS and ANZ, this has meant full or partial withdrawal from markets considered to be “non-core”.
In a recent interview with GTR in Mumbai, the chairman of the Indian Exim Bank, Yaduvendra Mathur, predicted disastrous results for developing economies, saying that the retrenchment of international banks to their home markets would result in local trade sectors “becoming starved of finance”.
Indeed, it is likely that the trend will result in the increased use of export credits and development finance, something which Standard Chartered is keen to increase.
The bank already has numerous trade and supply chain financing collaborative agreements with the likes of the IFC, ADB and AfDB and Vrontamitis says this will be a key part of its strategy going forward.
He says: “We have a number of programmes which are both bilateral in nature, where we sell down financial institution risk to other financial institutions, for examples insurers, or participating in insurance-backed receivables transactions, where we use insurance to mitigate our capital requirements.”
Standard Chartered, which is arguably the most emerging markets-focused of all western banks, announced losses of US$1.5bn for 2015. It has also announced an 87% rise in bad debts.
Winters, the replacement for the beleaguered Peter Sands last year, has been charged with de-risking the balance sheet, but has overseen the bank’s first loss for 26 years.