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StanChart Troubled Loans Top $600 Million on Corporate Woes

Harry Wilson and Chanyaporn Chanjaroen

(Bloomberg) -- Problem loans at some of Standard Chartered Plc’s large clients may top $600 million as a string of corporate scandals coincides with woes at firms hit by the coronavirus pandemic.

NMC Health Plc, the hospital operator that’s uncovered evidence of fraud, and Hin Leong Trading (Pte.), the Singaporean trading house being investigated by police, represent nearly $500 million of lending for Standard Chartered, according to public filings. Separately, a South African farm bank that the London-based company lends to has defaulted on some of its debt.

Loan-loss provisions have dominated banks’ earnings reports this quarter. With lockdowns in response to the pandemic devastating entire industries, lenders are bracing for a spike in corporate defaults and restructurings.

The exposures to problem companies are unlikely to lead to complete write-offs of the loans. However, in the case of Hin Leong, Standard Chartered and other banks may only get back 18 cents on every dollar lent, according to affidavits.

Standard Chartered is likely to have taken steps to minimize its loan losses, including buying credit insurance and using government guarantees to cut its exposure.

The bank learned the hard way what happens when a lender gets this wrong; between 2014 and 2016, StanChart was hit by a spike in problem loans, particularly those related to commodities. That prompted Chief Executive Officer Bill Winters to implement a more cautious approach to corporate lending.

Hin Leong and the other exposures only represent some of the highest-profile loans that could cause trouble for banks as pressures from the pandemic ripple through the financial system. While problems from the Singaporean firm will be maneagable, banks are likely to be hit by loans to energy producers going sour due to the oil crash, analysts at Bloomberg Intelligence said in a report published Friday.

Although headquartered in London, Standard Chartered makes its money largely from doing business with companies and individuals across Asia, Africa and the Middle East -- where the bulk of its operations and staff are also based. Together, the three regions account for nearly 70% of the bank’s assets, according to data compiled by Bloomberg.

Standard Chartered is among several banks facing losses related to Abu Dhabi-based NMC. A committee has already been set up to restructure the hospital operator’s $6.6 billion debt pile; other lenders on the hook include Barclays Plc and HSBC Holdings Plc.

More recently, the implosion of secretive Singapore trading house Hin Leong as oil prices cratered has left banks attempting to claw back nearly $4 billion in loans. Standard Chartered accounts for about $240 million of that total; HSBC is the biggest creditor, with a $600 million exposure.

Land and Agricultural Development Bank of South Africa, a state-owned provider of finance to the farming sector, missed a loan repayment this week. That triggered a default event, and the nation’s government is considering a bailout. Standard Chartered co-led a loan to the company, and $247 million remains outstanding, according to Bloomberg data. The development bank has said it’s suffering a liquidity shortfall and may need to postpone future financial obligations.

A spokeswoman for Standard Chartered declined to comment.

(Updates in fifth paragraph with details of credit-loss mitigation)

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