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Carson Block shorts Standard Chartered Bank’s Debt

May 14, 2013

The famous short seller, who identified basket cases such as Sino-Forest announced yesterday that he is short Standard Chartered Bank’s debt. The reason he is short is because of the questionable quality of the bank’s loan book- particularly its mining sector exposure.
Readers of the book Stories in Credit Analysis would recognize that we have never been fans of this bank and never bought the bank’s emerging market story. Most recently, its earnings have been driven by underprovisioning. We have also highlighted the bank’s poor internal controls (which has resulted in the bank paying huge fines to regulators in many countries- the most recent episode being payment to US regulators for money laundering). The root of Standard Chartered bank’s problems is the bank’s management structure. The CEO is a non-playing captain who operates out of London, while the different emerging market units do pretty much what they like. Now non-playing captains are alright for a country’s Davis Cup tennis team- not for an international bank.
For the same reason, we have deep doubts about the sustainability of HSBC’s earnings and fear an orgy of explosion of contingent liabilities into actual liabilities

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From → Credit Analysis

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