Standard Chartered seeks to sell portfolio of distressed loans worth $1.6bn

Standard Chartered Bank’s India operation is looking for buyers for its $1.6 billion distressed loan portfolio including corporate debt in a bid to clean up its books, two people with knowledge of the development said.

Standard Chartered (StanChart) has circulated an ‘eye-catching note’ inviting bids for the ₹12,500 crore portfolio which has been reviewed by ET.

About 98% is made up of rupee-denominated loans and the remaining 2% is made up of bonds. It is one of the largest non-performing asset (NPA) pools sold in a single block by a bank in recent times. In the past, Indian banks have sold portfolios of individual loans and small debts not exceeding ₹1,000 crore at a time. The portfolio includes the debt of 57 companies in the manufacturing, trading, engineering, procurement and construction sectors.

StanChart declined to comment.

The bank is seeking all-cash offers from asset reconstruction companies, according to the memo. Prospective buyers will have to bid for the entire portfolio and selective selection will not be allowed, he said.

StanChart also said it will hold a Swiss challenge auction after receiving binding bids from buyers.

The lender aims to close the deal by the end of the second quarter of FY22, the memo said. It will only share borrower details with potential buyers who sign nondisclosure agreements, he said.

NPA provisions at $23 million in 2021

“It’s a mixed basket – although 84% by value are secured loans, nearly 44% by value are classified as fraudulent accounts,” an ARC executive said. “Recovering the top 10 accounts would do for the rest of the pool.” StanChart’s India operations reported after-tax profit of $516 million for the year ending December 2021, up 53% from $337 million a year earlier. The rise in profits was due to a 90% drop in provisions for bad debts, as ET reported on February 23. Provisions for non-performing loans were $23 million compared to $227 million a year earlier. The bank did not disclose the share of NPAs in the total loan portfolio. India operations’ loan portfolio stood at $14.99 billion for the year ended December 2021, up 5% from the prior year. During the same period, India’s operating profit was $1.28 billion, the second highest after Singapore.