StanChart completes 2-year restructuring and sets sights on expansion

Staff numbers in Greater China, North Asian have been cut 18pc and overall expenses are 6pc down, as non-profitable units sold or closed

PUBLISHED : Sunday, 04 June, 2017, 10:01pm
UPDATED : Sunday, 04 June, 2017, 10:41pm

Standard Chartered has completed a 2-year restructuring process, according to regional chief executive Ben Hung Pi-cheng, which has seen the successful sell-off or closure of a number of non-profitable units.

In an interview with South China Morning Post, Hung insisted it is now in a strong position to look at expansion, with the focus on RMB-denominated services and financing, and lending involved in the “Belt and Road Initiative” – the Chinese government’s planned international infrastructure building project, covering some 65 nations stretching from Asia to Europe, along the old silk trading routes.

“This major restructuring has been aimed at cutting out units which were not profitable, allowing us to relocate our resources to what we are good at.

“This has included the shut down of our equities business, and sale of consumer finance and MPF units,” he said.

Its stock broking, equity research, and equity listing desks worldwide were shut in January 2015, and the MPF business sold that year to insurer Manulife. In December 2014 it also sold its consumer finance unit PrimeCredit to a consortium led by China Travel Financial Holdings.

Hung said that as a result, the leaner bank has cut its exposure to loans to the oil and gas industry, where it had taken a big hit due to falling prices of commodities.

“This major restructuring is now at an end and we are already seeing the positive results of having a better capital ratio, lower bad debts, and higher cost efficiencies,” he said.

The bank’s staff in greater China and North Asian region has been cut 18 per cent and overall expenses are 6 per cent down, compared with January 2015 when it first started the restructuring, to December 2016.

Its bad debt ratio dropped a dramatic 52 per cent to US$963 million in 2015 and US$471 million in 2016.

“The restructuring has cut business volume and loan size. We are now healthier, and so it’s time to expand again,” he said, especially in areas of business linked with China’s continued market liberalisation.

Hung will be growing its yuan business, via offshore regional treasury centres, and expanding its offshore mainland wealth management services, which on top of its Belt and Road-related work brought in US$1 billion in income last year.

“These areas of business will benefit from China’s opening up and will offer substantial growth over the next five to ten years for our business. They will be our focus,” he said.

Hung said Standard Chartered already operates in 45 markets along the new silk road routes, and is involved in over 100 projects in these countries.

“These range from energy, railways, roads and trade. The Standard Chartered network in Pakistan and other Middle East countries will help investors from the mainland and other markets invest in these projects,” he said.

He added the bank was wary of the ongoing uncertainty over North Korea, as well as growing protectionist sentiment in countries including the US, which could spark a trade war that might affect future growth.

On Hong Kong’s standing, 20 years on from being handed back to China, he said it continued to be a strong major international financial centre, boosted more recently by the opening up of Chinese markets, illustrated well by the launch of the two Stock Connect schemes, which link the Hong Kong stock exchange with Shanghai and Shenzhen.

“The only setback I have seen [in that time] is a widening gap between the rich and poor,” he added.

“Living conditions have not improved. I would want property prices to gradually fall, so there was a better supply for those who need affordable housing.”