Standard Chartered, like most of its peers, is emerging from the pandemic with both strength and considerable relief. Third-quarter numbers, reported in November, showed pre-tax profit more than doubling year on year, driven by lower credit impairment charges.
“The single most encouraging thing has been the level of underlying client demand in the regions in which we are operating,” Andy Halford, CFO, tells Euromoney. “It is patchy: there have been points when some countries, most notably India four or five months ago, were having a very difficult time with Covid. But fortunately, most countries seem to have bounced back quickly.”
The $107 million credit charge for the third quarter was well down on $353 million a year earlier.
So far so good: given the scale of its footprint, StanChart had more to lose than most from Covid disruption and correspondingly more to gain as the countries within its orbit recover. It is a big deal when StanChart boasts 13% year-on-year growth in transaction banking trade income for Q3, the best quarter since 2018, because trade is so instrumental to what the bank is about.
But with that recovery under way, priorities return to what they were before the pandemic: digitalization, delivering the international network as a differentiator, growth alongside a more streamlined cost base, and better return on equity, alongside chief executive Bill Winters’ admirable sustainability ambitions.
Things are happening on the digital side. The Mox digital bank brand in Hong Kong now has more than 175,000 customers; StanChart will launch an equivalent business in Singapore in partnership with NTUC, the national trade union congress.
It has made some selective investments in crypto and blockchain-related ideas and its SC Ventures unit continues to impress.
The bank’s participation in Climate Impact X married the aim for digital innovation with Winters’s conviction to be a credible force for carbon reduction.
“The focus we have got on digital activities is now as high as it has ever been,” Halford says.
On the downside, the share price still underperforms peers such as HSBC, and judged by valuation, nothing has changed in the market’s perception of the bank as an also-ran. Winters has been saying the right things for six years without quite persuading investors that he is getting where he wants to go. The dream of double-digit RoTE growth remains just that, although the 7.1% figure in the third quarter is moving in the right direction.
The single most encouraging thing has been the level of underlying client demand in the regions in which we are operating
Andy Halford
“Our headline numbers have been held back by interest rates” and the pandemic, Halford says. “Without greater knowledge, it might look as if the top line has not made as much progress as the underlying client activity might suggest.”
But there is optimism that the economic recovery and modest rate rises will help in that regard, and in terms of big programmes, “we haven’t had much slippage. Like most businesses, there’s a heightened emphasis upon quality of staff and continuity of staff in order to get through a more difficult period.”
Ultimately, StanChart’s greatest strength remains its footprint; great things can be done with a map like that, provided the strategy and execution is correct.
“As the economy comes back, we still think the markets which we are in are extremely interesting markets,” says Halford. “That will benefit us progressively as Covid becomes something from the past.”
