AMID the clouds seeded by the trade war, Standard Chartered (StanChart) sees opportunities from helping clients navigate the increasingly complex cross-border financing landscape.
Its global head of commercial, corporate and institutional banking (CCIB) Simon Cooper told The Business Times that the bank’s global footprint gives it an edge over its rivals at a time when clients “need help more than ever” to do business abroad. StanChart is present in 60 markets and serves clients in a further 85.
“One of the strategies that we had in CCIB for the last three years is to focus our efforts on clients for whom the network is valuable,” the Singapore-based banker explained.
“If I am only focusing on domestic (focused) clients and competing with other banks in one market, basically I end up competing on price and how much money I can lend you – there’s no differentiation.”
This approach to support clients in cross-border activities appears to be bearing fruit since Mr Cooper joined the bank in 2016.
In StanChart’s latest first-half results, its network income in corporate and institutional banking grew by 9 per cent from a year ago to US$2.4 billion, while network income in commercial banking grew by 12 per cent.
Network income refers to income generated across borders, and includes trade financing, cash management and foreign exchange.
It is the biggest contributor to CCIB’s income of US$4.353 billion, making up 69 per cent.
But even with the increasingly challenging external environment, Mr Cooper, whose portfolio makes up more than half of StanChart’s global income (56 per cent in 1H19), is setting his eyes on opportunities in the midst of the turmoil.
He noted that sentiment in Hong Kong and China have “definitely taken a downward turn”, but said that the impact on their business so far has been muted.
Mr Cooper pointed out that more companies have been moving their supply chains into South-east Asia, particularly in Vietnam, over the past year, often using Singapore as the regional treasury centre. While such movements are not particularly new, he said that StanChart has seen this trend accelerate as a result of the trade war.
With a presence in all 10 South-east Asian markets, he said that the bank is “in a good position” to capture these shifts in supply chains, with Singapore poised to reap the benefits.
Earlier in May, StanChart became the first global bank to fully subsidiarise in Singapore – a signal of the scale of its operations and commitment to the country. The entity will have an additional US$3.6 billion in capital, resulting in a total capital base of US$5.7 billion; in time, it will be at the centre of its planned Asean Hub.
Having a “meaningful” balance sheet in Singapore to service clients is part of the bank’s overall strategic direction to “keep Singapore prominent”, said Mr Cooper.
“It supports our view that Singapore is a very important market for StanChart, and a very important hub for Asean,” he added.
The Republic makes up about 11 per cent of StanChart’s operating income of US$7.83 billion, and is home to the majority of its global business and functional leadership, with Mr Cooper as a prime example. State investor Temasek Holdings is also the bank’s biggest shareholder.
The Asean and South Asia regions (known as ASA) are both run from Singapore, generating about a quarter of StanChart’s global income, with plans by the bank to grow its business in those regions even further.
Going forward, one other area of opportunity in Singapore that StanChart is keen to pursue is in relation to the bond market, he said. StanChart is one of the largest foreign banks in the bond space here, after the local banks.
He observed that Singapore’s bond market has been growing steadily – up about S$18 billion year to date – with more global companies viewing the city-state as a good place for issuance, in part due to the government’s push to promote Singapore as Asia’s premier bond hub.
In June, it issued its S$750 million inaugural additional Tier 1 perpetual bonds in Singapore dollars priced with a coupon of 5.375 per cent, which he deemed as “very successful” as it delivered cost savings compared to an issuance in US dollars.
“It tells us that Singapore is an increasingly natural place for MNCs (multinationals) to finance themselves,” he said.
Another development here that StanChart is also working on is a foreign exchange e-trading and pricing engine that will provide clients in the region more convenient access to trade 130 currencies and more than 5,000 currency pairings.
Mr Cooper said that this will help promote Singapore as a global destination for foreign exchange, and will be ready by early next year.
Looking ahead, Mr Cooper said that he is focused on his targets of 5-7 per cent income growth for CCIB, as well as to drive the group’s strategy of a return on tangible equity of at least 10 per cent by 2021.
He appears unfazed by the tumult that is rattling global markets and banks alike, be it Hong Kong’s civil unrest or the trade war.
While he acknowledged that the trade war in particular can have a negative impact on global growth and sentiment, he pointed out that a global recession is not yet in the near horizon.
“There are lots of headwinds, but I’ve been in banking for 30 years and I don’t remember a year where there wasn’t some headwind somewhere in the world,” he noted.
He will be staying the course on the strategy that he set out when he started three years ago, which is to focus on client prioritisation and enabling them to leverage on the bank’s network. “We’ve shown that the strategy is working, so I remain optimistic for the future,” he added.