Dubai
The growing status of the UAE as a global trade hub connecting Asia with Africa and the West is a key factor in driving Standard Chartered’s transaction banking business which is fast emerging a key contributor to bank’s revenue and profit growth in the region, Farooq Siddiqi, Global Head of Trade and Transaction Banking, and Motasim Iqbal, Head of Transaction Banking, UAE at Standard Chartered told Gulf News in a joint interview.
Globally, the bank reported 175 per cent jump in annual profits, reporting a $2.41 billion (Dh8.85 billion) in pretax earnings for 2017, up from $409 million the year before.
In the Africa & Middle East region, the bank’s profits were up 49 per cent from $431 million in 2016 to $642 million in 2017, with a stellar showing from transaction banking and wealth management.
The UAE delivered an operating profit of $115 million in 2017. The country accounts for a significant share of the underlying income of $2.76 billion in the Africa Middle East region with contributing 27 per cent of the income from the region — with all others together adding up to 73 per cent.
Transaction banking in the UAE contributed significantly to the bank’s return to profitability story in the country. With growing opportunities in the regional trade corridors and the emergence of the UAE as a trade hub, the bank expects to see robust growth in trade finance volumes and profitability from the UAE and the region
“The whole concept of global trade being driven by trade between Asia and the West is changing fast. The emergence of China as a key player in global trade has been driving South-South trade. The emergence of domestic trade and regional trade and the rising share of services trade in total trade volumes have added three new dimensions to global trade,” said Siddiqi.
In South-South commerce, China does more than a trillion-dollar worth of trade. The push China is giving to regional trade has an immediate impact on Standard Chartered’s key markets such as the UAE. This trade is largely driven by infrastructure investments linked projects such as the ‘One Belt, One Road’ initiative where China is trying to export infrastructure, that comes with investments and job creation driving trade volumes.
“In the regional trade, creation of regional trading blocs aimed at maximising intra-regional trade is driving trade growth in Asia, Africa and the Middle East,” said Siddiqi.
Growing trade in services and urbanisation in emerging markets are also expected to drive regional trade volumes in Asia, Africa and the Middle East. In next 10 to 15 years, urbanisation is expected to be a major driver of GDP growth, job creation and trade in emerging markets. New trade corridors in emerging markets are growing fast, in some cases growth rates are higher than that in traditional East-West trade corridor.
In the UAE, trade volume growth with Asia has a corporate dimension with large Japanese, Korean and Chinese corporates doing business directly here. The bank has separate desks to manage corporate business from these countries.
“In recent years the business from China is on a big surge driven by the Belt and Road initiative where large Chinese corporates and state-owned entities are investing heavily. The good connectivity of this region to Africa is driving a lot of corporate driven trade with Africa through the UAE. This trend is really catching up with Indian corporates too. We are seeing a lot of Indian corporates expanding outside the country are looking at Dubai as a big international hub,” said Iqbal.
While the economic challenges faced by Africa & Middle East in recent years largely driven by low commodity prices has stabilised in 2017, Standard Chartered officials remain confident that the opportunities in the region will support long-term sustainable growth for the group.
Standard Chartered’s presence in the UAE, Iqbal said, is very important for its role in supporting global trade. “The ability of Dubai to connect Asia and Africa is very critical. We see tremendous opportunities including the closer relationship between the UAE and China through the One Belt, One Road initiative,” he said.
According to Standard Chartered, the UAE’s well-established trade-hub status, market infrastructure, regulatory and government support to trade will enhance its role in global trade. China is planning to invest about $1 trillion in infrastructure along the Belt and Road trade routes over the next decade, much of it in the Middle East and North Africa. Current outbound investment by Chinese firms into the Gulf region — projected to be around 20 per cent of total volume by numerous sources — makes the calculations surrounding the opportunity straightforward for both the Middle East and the hubs seeking to facilitate business with China.
