7th Mar 2016 11:45
LONDON (Alliance News) - Standard Chartered PLC, an emerging markets lender which last month reported its first annual loss since 1989, could suffer from "weak" profitability for at least two years, Moody's Investors Service said on Monday.
Moody's issued the warning as it downgraded several ratings on Standard Chartered's debt. The lender made a USD2.2 billion net loss in 2015, as restructuring costs were accompanied by concerns about China's economic slowdown and depressed commodity prices.
"Standard Chartered Group's (the group) asset quality and profitability deteriorated significantly in 2015, affected by its commodities and Indian exposures. This led to an increase in the problem loan ratio to 4.8% at end-2015 from 2.7% at end-2014. The group reported a net loss of USD2.2 billion for 2015," Moody's said.
"The group is implementing a number of initiatives to reduce its credit risk and restore its profitability, including a reduction in risky exposures and a downsizing of its operations in some of its less profitable markets. However, Moody's expects profitability to remain weak for at least two years, and the operating environment in some of the markets in which Standard Chartered operates has become more challenging," the ratings agency added.
Moody's downgraded Standard Chartered Bank's long-term deposits and senior unsecured debt ratings by one notch to Aa3 from Aa2, and Standard Chartered PLC's senior unsecured debt rating by one notch to A1 from Aa3. Moody's has also downgraded other long-term ratings of Standard Chartered Bank and Standard Chartered PLC by one notch.
At the same time, Moody's has affirmed SCB's P-1 short-term deposit and debt rating and SCPLC's Ba1(hyb) Additional Tier 1 Capital rating.
The outlook on SCPLC's senior unsecured debt and SCB's long-term deposits and senior unsecured debt is negative.
There were positives to take from the lender's 2015 results, Moody's said, such as an improvement in capital strength and risk profile, as well as a strong liquidity profile.
Shares in Standard Chartered were down 3.4% at 469.60 pence on Monday.
By Samuel Agini; [email protected]; @samuelagini
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