Stanchart upbeat as banks cut back
Standard Chartered Bank sees an opportunity to increase its market share and gain higher margins in Asia as other European banks pull out owing to higher capital requirements and constraints on liquidity.
Jaspal Bindra, Standard Chartered's Asia chief executive, says European banks are having trouble growing their business in Asia because stricter regulations are constraining capital and liquidity.
'Right now, I don't think they have lost their faith or confidence in the potential of Asia. It's just that ... keeping capital afloat and their balance sheet at the same level is where the challenge is,' said Bindra.
He said the withdrawal of European banks could create more market share and bargaining power for Standard Chartered.
'We have seen this happen already across many of our markets.'
Even though more than two-thirds of Standard Chartered's income comes from Asia, a region Bindra calls 'home', he said the bank had no immediate plans to move its headquarters from London, despite higher taxes.
Relocation, he said, was something the board looked at all the time. However, it is a decision not to be taken lightly, as it could last 'for at least the next 50 to 100 years'.
Bindra said Europe's debt crisis would force European banks - and maybe even some United States banks that have large operations in Europe - to retreat from Asia, posing a threat to short-term liquidity and growth. But this could mean opportunities for Asian banks accustomed to maintaining higher levels of capital.
'Asian banks have always been operating at 10 per cent of Tier 1 capital - it's not an issue,' he said.
Spanish banking group BBVA was reported to have reduced staff in Asia this week. European banks in Hong Kong were also withdrawing from funding trade finance, said Michael Werner, a senior analyst at Sanford Bernstein.
Most European banks fund their clients' trade finances in US dollars, usually through US money market funds. The funds have become reluctant to lend them money, affecting their trade-related activities, said Werner.
Manufacturers recently said the deepening crisis in Europe had stifled trade financing, including letters of credit and syndications for infrastructure and vessel leasing, areas in which European banks are experienced.
Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho said last month that the trade finance situation would be very severe in the next six to nine months.
Apart from reducing their business in Asia, European banks have the option to raise equity, but Bindra said this was a difficult time to do so.
UniCredit, Italy's largest bank by total assets, this week offered stockholders a bigger-than-expected 43 per cent discount on new shares, signalling how expensive such moves could be.