StanChart India operating profit dips 16% to $676 mn in 2012
Standard Chartered India Tuesday reported 16 percent drop in its 2012 pre-tax profit at USD 676 million due to lower corporate activity and currency fluctuations, but its coveted position as the third largest profit centre for its British parent is intact.
Mumbai: Standard Chartered India Tuesday reported 16 percent drop in its 2012 pre-tax profit at USD 676 million due to lower corporate activity and currency fluctuations, but its coveted position as the third largest profit centre for its British parent is intact.
StanC Regional Chief Executive for India & South Asia Sunil Kaushal, while announcing the numbers here today, blamed decline in operating profit to the poor macroeconomic conditions in the country, which saw its cash-cow business of wholesale banking getting impacted.
"The performance was impacted by a difficult macro environment, combined with lower corporate activity and currency headwinds," Kaushal said, adding that in constant currency terms, the drop is only 4 percent.
Notably, between 2011 and 2012, the rupee declined a steep 15 percent against the US currency. The average rupee- dollar exchange rate was 46.63 to the dollar in 2011 against 53.43 in 2012, he said.
For the group as a whole income grows 8 percent to USD 19.07 billion, led by wholesale banking income of USD 11.78 billion, taking the operating profit to USD 6.9 billion, up just 1 percent over 2011, Kaushal said.
Kaushal said India operations retained the coveted position of the third largest profit centre for its Asia-focused parent, after Hong Kong and Singapore, with a revenue share of a little over 10 percent.
He also said despite rising bad loans in the domestic banking system, the StanC reported lower impairment charges which declined to USD 156 million in the reporting period from USD 172 million a year ago. As the portion of its total loan book, the impairment charges stood 9 percent, he said.
Total income of the oldest foreign bank in India, which is the largest MNC lender in terms of foot print with 99 branches, also declined 12 percent to USD 1,585 million, from USD 1,805 million in 2011.
The bank's operating profit before impairment also declined 15 percent from USD 976 million to USD 832 million, which would have been only 4 percent but for the rupee depreciation.
StanC consumer banking income dipped by 9 percent to USD 440 million from USD 482 million, which led to a 3 percent decline in operating profit to USD 95 million from USD 98 million.
The impairment charges or provision for bad loans in this business vertical, however, improved to USD 27 million from USD 32 million, or stood at 16 percent.
Wholesale banking, which constitutes 75 percent of its assets, Kaushal said, income stood at USD 1,145 million from USD 1,323 million, a decline of 13 percent, while operating profit declined more at 18 percent to USD 581 million from USD 706 million during the reporting period.
The impairment charges at the wholesale banking book stood at 8 percent or USD 129 million from USD 140 million in 2011, Anurag Adalkha, Chief Financial Officer for StanC India and South Asia said.
Kaushal said the two portfolios it had bought from Barclays India in February and December last (SME and retail assets and credit cards) had fetched it USD 10 million in income.
When asked about the net interest margin, Adlakha said it improved 40 bps to 3.5 percent in the reporting year. The core net interest income contributed to 66 percent of its total income, with the rest coming in from non-core income, he added.
Total loan book grew 11 percent to over USD12 billion, while liabilities grew 7 percent to USD 14 billion. Its merchant banking arm, StanC Capital Markets was joint book runner on 17 of 18 bond transactions for domestic banks, raising over USD 6 billion, in 2012.
Kaushal said the opened 2 branches last year and three in 2013, taking its total to 99 branches spanning 42 cities employing 18,500.
When asked about the media reports that StanC was planning to buy out the mutual fund arm of Morgan Stanley India, Kaushal said, the bank is always on the look out for good assets.
On the higher priority sector lending norms, he said, it will be a challenge for the bank to meet the farm lending target with its limited rural reach.