Standard Chartered’s CFO on bank’s performance<\/h3>\n

Chinese financial \u201ccontagion\u201d may spread to the rest of the world after a British bank lost more than \u00a3500million \u201cbetting big\u201d on the country, a UK-based expert has warned.<\/p>\n

The world\u2019s second-largest economy has been under the microscope in recent months, especially after Country Garden, one of its largest property developers, hit the skids in August.<\/p>\n

Reports in the South China Post suggested the company was bracing itself for a loss of between 45billion and 55billion yuan (\u00a34.88billion to \u00a36billion), compared with earnings of \u00a3210million in the first half of last year.<\/p>\n

Tax consultant Bob Lyddon, the founder of Lyddon Consult, told Express.co.uk: \u201cProblems in China have now come to the surface at Standard Chartered Bank, which has bet big on the country, buying into China Bohai Bank.\u201d<\/p>\n

A \u201cwrite-down” of that investment by \u00a3596million ($697 million) cut Standard Chartered\u2019s profits for the third quarter of 2023 by 54 percent compared to the same period in 2022, Mr Lyddon pointed out.<\/p>\n

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He continued: \u201cStandard Chartered has also built up its own portfolio of loans to Chinese borrowers, and not rock-solid ones.<\/p>\n

\u201cIt has had to create a provision for losses on loans into the Chinese commercial property sector of $186million.<\/p>\n

\u201cChina Bohai Bank appears to do the retail property lending and is losing its shirt on that, while Standard Chartered does the commercial property lending with the same result.\u201d<\/p>\n

Mr Lyddon said Standard Chartered had sought to characterise the loss as the result of what he called \u201cthe growing pain of the Chinese\u201d and a rough patch prior to the resumption of normal service.<\/p>\n

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  He continued: \u201cThey would say that, of course, and for the sake of their shareholders let\u2019s hope they are right, and that there is no contagion into UK financial markets.<\/p>\n

  \u201cFrom Planet Earth the Chinese real estate market looks like a huge bubble and Ponzi scheme, financed in large part with debt in a foreign currency – US dollars.<\/p>\n

  \u201cThis is against a backdrop of rising interest rates and a Chinese currency whose value will need to reduce if the Chinese economy is to resume normal service.\u201d<\/p>\n

  Such factors would inevitably increase the interest bill on the debt and magnify the debt\u2019s size in yuan terms, Mr Lyddon pointed out.<\/p>\n

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  <\/p>\n

  He warned: \u201cThat is like turning off the life support for China\u2019s borrowers.<\/p>\n

  \u201cStandard Chartered is a UK-headquartered bank and this is a thumping loss on a flagship investment into a market the bank sees as core to its future.<\/p>\n

  \u201cThat shows how quickly and directly contagion can hit the UK from China and in what quantity.<\/p>\n

  \u201cWho knows how big the black hole is in China\u2019s real estate market but the initial loss a bank takes on a bad investment is rarely the last.\u201d<\/p>\n

  Speaking to CNBC last week, Standard Chartered\u2019s Chief Financial Officer Andy Halford said the \u201coverall performance of the bank is very strong,\u201d despite the news from China.<\/p>\n

  <\/p>\n

  He said the country\u2019s commercial real estate sector \u201cclearly has been problematic,\u201d but that GDP was forecast to bounce back by about five percent within the next two or three years.<\/p>\n

  He added: \u201cWhat we\u2019re seeing is probably a slower recovery post-Covid than in some countries. But it\u2019s a huge population to mobilise after such a big event.<\/p>\n

  \u201cMost countries would be more than happy to have that kind of growth level.<\/p>\n

  \u201cSo we are very, very much of the view that this is a period that we need to go through.<\/p>\n

  \u201cWe\u2019ll stick with it and as the economy gets going, then that should be good with us and should be good for others.\u201d<\/p>\n

  Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

  Standard Chartered’s CFO on bank’s performance Chinese financial \u201ccontagion\u201d may spread to the rest of the world after a British bank lost more than \u00a3500million […]<\/p>\n","protected":false},"author":3,"featured_media":134715,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"\n