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Standard Chartered could exit non-core business areas in response to the potential losses in the commodities sector.

The bank is believed to have up to some US$61bn in outstanding loans to commodity traders and manufacturers at a time in which the prices of oil, copper, iron ore and other major components of Standard Chartered’s portfolios are hitting all-time lows.

Economists at Macquarie, the Australian bank, became the latest to forecast gloomy times ahead for Standard Chartered, with analysts predicting cumulative losses of almost US$6bn – about the same amount as a year’s profits.

While reiterating the bank’s stance of not responding to individual analysts’ notes, a Standard Chartered spokesperson in Singapore told GTR that the bank has hiked up diligence and has the capability of absorbing any losses. They also said that it is open to “exiting or reconfiguring non-core and underperforming businesses”.

Many banks are expected to incur heavy losses due to the collapse in commodities markets. However, a series of research notes have predicted that the British-based bank will be hit hardest.

“StanChart will suffer from a combination of commodity finance-related defaults and revenue pressure, in our view,” say the authors of the Macquarie report, adding: “For StanChart we estimate US$3.9bn stress test losses on its US$61bn commodity exposure. In addition we see the risk that the bank may have to top up currently weak NPL coverage ratios to a more comfortable level of 80% which would cost US$2bn (pre-tax). Adding all negative together, one year of pre-tax profit (2015E) would get wiped out by assuming front end loaded losses and the capital shortfall would increase to just below US$8bn based on our assumptions.”

This reiterates the stance taken by many in the market. In January, GTR reported that Credit Suisse predicts that Standard Chartered would be forced to source an additional US$4.4bn in capital, potentially in a share issue.

Analysts wrote: “We think the needed provisioning could be large enough to require further capital measures, such as further equity raising, and/or dividend reductions. We believe the last two years of de-rating have been driven largely by weaker revenue and that the asset quality deterioration leg is now setting in.”

The spokesperson refused to be drawn on the specific sectors in which the bank would consider scaling back, but said they “remain watchful of commodity loan exposures, and have tightened our underwriting criteria and are managing exposures particularly carefully.”

She added: “The group’s fundamentals remain strong; we are well capitalised and highly liquid. We are operating at capital levels above current minimum requirements and additionally, have a number of levers at our disposal, to manage future regulatory requirements as they finalise or emerge over the next few years.”

It has been a miserable few months for the bank and its executives, with chief executive Peter Sands the most high-profile casualty. It’s been widely reported that the search is already underway for Sands’ successor and that the bank is keen to recruit somebody with in-depth Asian and regulatory experience.