Standard Bank writes off US$80m for Qingdao metal financing exposure

PUBLISHED : Friday, 15 August, 2014, 8:24am
UPDATED : Wednesday, 20 August, 2014, 10:10pm

South Africa’s Standard Bank has booked an US$80 million writedown from its exposure to a suspected aluminium financing fraud in China.

Mainland authorities are investigating suspected fraud and detained a cargo of metals that included aluminium and copper at Qingdao port, the third busiest port in the country.

Standard Bank - 20 per cent owned by Industrial and Commercial Bank of China (ICBC) - said in its interim results, published yesterday, that its exposure to the commodity financing arrangements under investigation was US$167 million at the end of June, against which US$210 million of aluminium collateral had been pledged and was now subject to legal processes.

The bank said the US$80 million writedown represented “management’s best estimate of the risk adjustment required in determining the fair value” of its net exposure.

“There is emerging evidence that the financing arrangements were impacted by fraudulent activities in respect of the physical aluminium,” the bank said in its announcement.

Standard Bank announced last month that it had launched legal proceedings to secure its position with respect to US$170 million worth of aluminium held at Qingdao Port.

It also had a further exposure to US$40 million worth of aluminium at other bonded warehouse facilities in Shandong Province, for which it had also started legal proceedings.

Qingdao Port International, the Hong Kong listed vehicle of the port, disclosed that the authorities had launched an investigation into a shipment agency with metals store at the port over its suspected involvement in criminal activities.

It is alleged that this metals cargo was pledged multiple times for loans. Other banks that have taken legal action include Standard Chartered, HSBC and ABN Amro.