Standard Chartered Bank, the largest foreign lender in the country with a network of 94 branches, on Wednesday said its pre-tax profit from India business declined 33 per cent to $804 million in 2011, compared with $1.2 billion a year earlier. Lower income, higher expenses, and an increase in provisions led to the fall in earnings.
India, the most profitable market for the British lender in 2010, has now slipped to the third position, behind Hong Kong and Singapore, in terms of profitability. Globally, Standard Chartered’s profit rose 11 per cent to $6.78 billion.
In India, the bank’s income fell 11 per cent to $1.81 billion, owing to a sharp decline in the bank’s wholesale banking income amid reduced investment activity. Expenses, however, climbed 11 per cent year-on-year to $829 million, as the bank continued investing in people, technology, and infrastructure. The net interest margin narrowed 30 basis points to 3.1 per cent last year, as interest rates in the domestic market remained high.
Last year also saw higher provisioning by the bank. Loan impairment charges surged 42 per cent to $112 million. Sunil Kaushal, chief executive for the bank’s operations in India and south Asia, said, “We are being conservative and pushing up our portfolio provisions (on corporate loans) due to uncertain market conditions. But in terms of the overall book, we remain extremely comfortable. We are starting 2012 on a slightly better footing. We are cautiously optimistic about our prospects in India.”
Loan impairment charges in wholesale banking rose 248 per cent to $80 million. The bank’s senior management said despite the increase in provisions, the bank was comfortable with the quality of loans in the telecom and aviation sectors. Income from bank’s wholesale business fell 14 per cent last year, while expenses rose 15 per cent.
The consumer banking business fared relatively better, with the income falling only two per cent and expenses rising five per cent. The quality of unsecured consumer loans improved during the year, resulting in a 43 per cent fall in loan impairment charges.
In 2011, the bank’s India loan portfolio expanded 15 per cent in constant currency terms to $10.8 billion, while deposits rose 11 per cent to $12.75 billion.
