LONDON, Nov 1 (IFR) - Asia-focused bank Standard Chartered said its liquidation portfolio of loans it no longer wants was reduced by US$13bn last month, marking a major step in its turnaround plan. A trading update on Tuesday showed the bank still faces a number of problems, however. It revealed it is under scrutiny from Hong Kong regulators for its advisory work on a 2009 initial public offering and said markets in Asia remain tough. Standard Chartered said its US$19bn liquidation portfolio had reduced by US$13.2bn of risk-weighted assets since the end of September to about US$6bn. Analysts said most of the reduction was likely to have been related to Indian conglomerate Essar Group, which last month sold its holding in Essar Oil and Vadinar port for US$12.7bn. Standard Chartered declined to comment on specific deals, but finance director Andy Halford indicated the decline was due to a small amount of exposures. "There has been a significant amount of progress in a fairly short period of time," he said. The bank provisioned for losses in its liquidation portfolio last year and did not make any further losses on the loans."We have exited at pretty much where we thought we were going to be," Halford said. The reduction will lift the bank's common equity capital ratio by about 50bp. It was 13% at the end of September.
Standard Chartered is getting rid of loans that were made in the past but are now outside a new risk tolerance set by Bill winters, the former JP Morgan investment bank boss who became chief executive in June 2015. Winters said the bank's measured approach to getting rid of unwanted assets was vindicated, and he said the portfolio should be liquidated within his target of 18 months to two years set a year ago. That would be between May and November 2017."The progress we've made in the past year took a while and probably took longer than we wish it had, but the benefit of waiting and being properly reserved was that we could hold out for the transaction structure and terms that suit us," Winters told reporters on a conference call. "We'll do the same thing with the next US$6bn."HEADWINDS
Winters faces a number of other challenges, however. Standard Chartered said Hong Kong's Securities and Futures Commission intended to take action against it in relation to its role as joint sponsor of an IPO on the Hong Kong Stock Exchange in 2009. Swiss bank UBS last week said it was being investigated over its role as sponsor of certain Hong Kong stock market listings. Standard Chartered said it was only being investigated related to one IPO, and declined to comment if it worked alongside UBS on that deal. Standard Chartered exited equity capital markets in January 2015.
It said markets in Asia also remained tough, raising concern about prospects for its revenue growth. Group income in the third quarter was US$3.47bn, down 6% from a year ago. It reported an underlying profit of US$458m, compared to a US$139m loss a year ago. Standard Chartered's shares fell 5% to 676p, although they are still up 20% this year, compared to a 17% fall by Europe's banking sector. Income in Standard Chartered's corporate and institutional banking was down 7% for the third quarter compared with the same period a year ago to US$1.6bn, at a time when most rival investment banks have reported bumper trading results. Winters said the bank's debt capital markets activity was a bright spot, but emerging markets had not seen as strong a rebound in capital markets activity as the US and Europe last quarter."I don't think we're losing ground in our chosen markets, but our particular profile as an emerging markets bank was less favoured in this quarter," he said. Financial markets income rose 15% to US$714m, as credit and capital markets jumped 55% and rates grew 4% on the year, offsetting a 31% fall in foreign exchange revenues. Corporate finance income fell 19% to US$421m.
(The writer is a Reuters contributor. The opinions expressed are his own.)By Chris TaylorNEW YORK Aug 25 It is an American rite of passage. Little Johnny finally grows up, goes off to college, and starts handling money on his own. He probably spends a little too much, and racks up some debt. Does Johnny tell mom and dad the truth - or keep it a secret?More than half of college students (55 percent) admit they hide information from dear old mom and dad about all that money they are spending, according to the 2014 RBC Student Finances Poll. But only 33 percent of parents realize that's the case. Another disconnect: While 90 percent of parents claim to be on top of how much debt their kid owes, just 78 percent of students agree their parents are up-to-speed on their finances. Welcome to a college course that is not really on the curriculum, but that every student is grappling with. Call it Secrets and Lies 101."It may be that a student doesn't have as much money as their peers, and is trying to keep up with what their friends are doing," says Christine Schelhas-Miller, a retired faculty member at Cornell University and co-author of "Don't Tell Me What To Do, Just Send Money: The Essential Parenting Guide to the College Years."
"Or they may be getting lots of credit card offers, and naively sign up," Schelhas-Miller adds. "Then they're not sharing this information with parents, because they're afraid of getting into trouble."Of course, money disconnects between parents and kids are nothing new. In fact they are par for the parenting course, whether they revolve around tooth fairy money or allowance sizes. The difference when kids reach college is that the sums involved are taken to the next level. Serious money, which can, in turn, have very serious consequences, like debt accumulation or poor spending habits that could dog families for years to come. After all, the average Class of 2014 graduate with student-loan debt is in hock to the tune of $33,000, according to Mark Kantrowitz, publisher at Edvisors, a site about planning and paying for college. That's the highest number ever.
The potential scenario, for a college student whose only financial-planning experience has been with Monopoly money? A couple of adviser Darla Kashian's clients were gobsmacked to find out that their kid - unbeknownst to them - had blown through a significant inheritance in his last years of college, to the tune of tens of thousands of dollars."They didn't know what he had done, and were astonished to find out," says Kashian, who is an adviser with RBC in Minneapolis. "In their minds, he was using the inheritance to pay off his student loans, and now he was returning home with lots of debt. He was totally unprepared."Of course, students may suspect how badly they are screwing up financially. According to the RBC poll, 26 percent of college students admit they may be doing damage to their credit rating. Only 17 percent of parents think their little angels could possibly be doing such a thing.
TOUGH TALK Such blind loyalty to one's offspring isn't cute; it's actively harmful. But when it comes to such a delicate and emotional topic, many parents just don't know where to start."It's like the sex conversation: Parents are worried about how to even bring it up," says Schelhas-Miller. "But they need to get over that hurdle, and think of it as a big part of their parenting responsibilities."Her advice: Arrange a pre-emptive strike, and have The Talk over the summer, before your kid even heads off to campus. Then arrange for regular money conversations throughout the school year - maybe once every couple of weeks, or maybe once a semester, depending on how responsible they are - to ensure budgets stay on track. If you just avoid the subject and table the conversation for later, an unprepared college kid could stack up debt very quickly indeed, and it could be too late. Kashian is a fan of online budgeting tools like Mint.com, a unit of Intuit, which can be set up to allow access to both parents and their kids. That, of course, requires plenty of trust from both sides."That way you can have real transparency, and open up a dialogue about the spending that is happening - instead of just shaming and screaming."
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