Dubai: Strong growth trends in key emerging markets supported by improved capital flows into these markets are expected to boost profitability of Standard Chartered during the next few years, José Viñals, chairman of the Standard Chartered Group told Gulf News in an interview.
Standard Chartered’s full year operating income rose 5 per cent in 2018, to $15 billion, with underlying profit before tax of $2.5 billion. The results reflect income growth in the retail and corporate & institutional divisions, while a decline in bad loans saw expenses fall substantially.
Net interest income rose 8 per cent year-on-year to $8.8 billion, with a slight improvement in net interest margin, offsetting lower loans to customers. An improvement in loan quality saw money set aside for bad loans fall 38 per cent to $740 million.
Standard Chartered, which makes most of its revenue in Asia, faces the risk of a slowdown in its core emerging markets due to the China-US trade war as well as economic uncertainties in China and Britain.
“Even with some slowdown, emerging markets are still growing at a healthy rate. We are very strong in China and the rest of Asia. A lot of our incomes comes from there. China, North Asia, Asean, and South Asia accounts for more than 70 per cent of the income of the group. It is very important to consider the fact that, that part of the world is going to contribute more than 60 per cent of the global economic growth for the next few years in spite of the slight slowdown in the growth,” said Viñals.
Standard Chartered has set itself some ambitious targets for the next three years. Most significant among these is a target of 5 per cent to 7 per cent a year a year income growth. While factors such as a risk of US-China trade war.
“One of the factors that will have an impact on the growth of emerging markets is the US monetary policy. “One year ago the fear was that there could be a faster than expected increase in interest rates, but one year after we are seeing that the Fed is willing to be patient. This has increased a lot of risk appetite on emerging markets. Capital — that was flowing out of the emerging markets for good part of last year now — have started coming back. So from a global point of view, these markets have stronger growth supported by capital inflows in terms of equities, bonds and foreign direct investments. I believe this is good news for us,” said Viñals.
Viñals said the impact of US China trade dispute will be more indirect than direct. “The impact will be only about 2 to 3 per cent of our income. But a trade war situation will have an impact on the global trade system. But the good news is that both countries are headed for some sort of a trade agreement, this will improve the confidence in the global trade system,” he said.
The bank, he said is well prepared for all outcomes from Brexit. “Under all possible scenarios we will continue to provide continuity of service to our customers in the UK and Europe. We are a unique bank. Although we are headquartered in the UK, we don’t do any significant business in the UK,” he said.
The bank has about 550 strong corporate clients in European Union. To offer continuity of business relations with these companies, the bank will convert one of its branches in Europe into a subsidiary. “We have asked for a full-fledged banking licence for a subsidiary in Frankfurt. We have taken all steps to make it operationally ready even as early as April 1, this year, just in case,” said Viñals.