In an interview with Euromoney, Sands said the bank, which saw profits in the first half increase 9% versus a year earlier, was well aware of the slowdown affecting the core emerging market economies. However, he considered that growth was falling to more sustainable levels and the bank’s businesses should remain resilient.
“We’re not at all complacent that there are parts of the world that are slowing down but they are slowing down to rates of growth that the European economy or the US economy would love to see themselves,” Sands told Euromoney.
He added that the bank has “enormous resilience” in its ability to keep growing in emerging markets where it operates, although the slowdown is forcing the bank to adjust its businesses accordingly to “anticipate how we see this unfolding”.
In what is the tenth consecutive record of first half profit growth, Standard Chartered reported profits of $3.95 billion and income of $9.51 billion – up 9% on the same period a year earlier. Growth in its core markets of Asia, Africa and the Middle East was driven by a robust performance in its consumer and wholesale banking businesses.
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| Peter Sands, group chief executive |
Income in the consumer banking business was up 5% at $3.5 billion, while wholesale banking delivered income of $6 billion – an increase of 10% versus a year earlier. On shareholder returns and capital strength, the bank said its return on equity hit 13.8%, and it had a core tier 1 capital ratio of 11.6%.
The International Monetary Fund (IMF) warned last month that the economic turmoil throughout Europe was adversely affecting emerging market economies, many of which have been strong performers in recent years.
The IMF shaved its growth forecast by one-tenth of a percentage point for emerging market economies to 5.6% in 2012, and 5.9% in 2013. Its 2012 forecast for China was cut to 8% from 8.2% previously, and its forecast for India was cut to 6.1% from 6.9%.
“While China has experienced a slowdown, we have good business momentum. We have delivered 22 per cent income growth during the first half and have no exposure to local government investment vehicles and our corporate real estate exposure is minimal, “ Standard Chartered said in the earnings statement.
Headquartered in London, Standard Chartered’s core regions are Asia, Africa and the Middle East, with its consumer and wholesale banking operations in Asia-Pacific historically generating the bulk of its income.
In other comments made in the interview, Sands said the Libor scandal that has engulfed Barclays is a “huge issue with potentially damaging implications” for the entire banking sector, and that new regulation is one of the greatest challenges the industry faces.
“I think if you take a broad definition of regulation to include the political aspect to regulation, I do think it is a big risk to the industry,” said Sands.
He added that much of the impetus behind new financial regulation was being “driven out of western regulators reacting to the failures of the western regulatory systems”, and that as a result some of the "solutions being proposed are therefore not terribly well suited or geared to the needs and capabilities of emerging markets.”
“The challenge is that there is just so much new regulation that is not all coordinated and consistent...as a result, unintended consequences are inevitable,” Sands said.
On London as a global financial centre, and whether or not Standard Chartered would consider moving its headquarters from London to another jurisdiction, Sands said: “London has clearly lost ground somewhat in the wake of the crisis and I don’t think anyone in London can be complacent about its position but it still has great strength.”
However, he added: “To some extent one should expect there to be a gradual shift towards Asia simply because the world economy is moving in that direction.”
Similar to HSBC, Standard Chartered’s strong historical banking presence in Asia has always afforded it the option of potentially relocating to the region should it choose to, but for now, Sands said “we don’t have any plans to move and we would prefer to stay here in the UK but we do have options and we keep those options under review.”