Aug 19, 2010 (LBO) – The Sri Lankan unit of Standard Chartered Bank’s (SCB) June quarter profits shot up 679 percent to 8.773 billion rupees on a specific loan loss provision reversal on an oil hedging deal, its published accounts showed.
SCB’s interest income fell 32 percent to 3.41 billion rupees, while interest costs fell at a much faster rate of 51 percent to 1.28 billion, resulting in a net interest income of 2.13 billion rupees, down 13 percent.
The bank made 9.16 billion reversal on specific provision and 242 million rupees reversal on general provisions.
In 2008 SCB entered into an agreement with state-run Ceylon Petroleum Corporation (CPC) to hedge 33 percent of its crude oil imports.
The deal backfired after oil prices fell when the global commodities bubble burst in mid-2008.
Suddenly CPC was faced with payments of around 30 million dollars a month.
Citibank, Deutsche, state-run People’s Bank and Commercial Bank of Ceylon, a private bank had also sold options structures to CPC.
In December 2008, CPC suspended payments on these contracts, pending an inquiry by the Monetary Board of Sri Lanka.
SCB’s Sri Lankan unit classified these dues amounting to 18.5 billion rupees as non-performi