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Financial institution, Standard Chartered Bank is not experiencing the best of times presently.
The fortunes of the bank is also not expected to improve anytime soon, as speculated indices have not gone as planned by the bank.
This situation is reflected in the Negative Outlook assigned to the bank’s ‘A+’ rating, says Fitch Ratings-London.
Standard Chartered Bank seems aware of the situation, as it declared on Tuesday, August 3, that it expects to take longer to achieve its targeted return on equity (ROE) levels due to slowing global growth.
Industry Watchers, have however ascribed delay in implementing strategic plans as one of the bank’s immediate problems.
According to Fitch Ratings-London, the chance of revising the bank’s ratings outlook to stable depends heavily on immediate implementation of strategic plans.
Standard Charter’s results for 1H16 showed modest profitability, but a ROE of 2.1% falls well below targets – 8% for 2018 and 10% by 2020 – announced by management in November 2015. This is according to Fitch Ratings-London.
The bank’s management has identified indices such as low rates, slow growth in key markets and weaker global trade volumes, as reasons for these poor results. However, their postulations have been refuted by Industry Watchers who says internal factors such as the inability of the recently added management to deliver at optimum level could be responsible for the poor fortunes of the bank.
Another problem that has been identified is Standard Chartered’s unreserved portion of its legacy book which is a high USD4.2bn. Its liquidation portfolio still holds USD7.3bn of loans of which 93% are non-performing. The bank has offloaded less than 10% of risky loans out of a total USD8bn portfolio earmarked for liquidation. While the management says they expect to exit the majority of positions by the end of 2017, Industry Watchers say the bank’s plan to offload these bad legacy loans will however take a longer time.
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