Thursday, 9 Jul 2020

StanChart eyes digital banking licence here

Standard Chartered Bank is “clearly interested” in applying for a digital banking licence here, with Asean and South Asia chief executive Judy Hsu saying yesterday that the benefits outweigh the risks.

StanChart has already joined forces with non-banking partners to win a digital banking licence in Hong Kong, where it is more dominant in serving affluent customers.

The lender’s new digital offering there is also aimed at millennials, who make up a smaller segment of its market share, meaning that this is unlikely to impinge much on its current business, Ms Hsu told a media briefing.

She also said that the bank is investing in new business models and partnerships to “disrupt” itself.

Finding a like-minded partner is a key consideration if it decides to apply for a digital banking licence in Singapore as well, she said. Applications here are open until Dec 31.

StanChart, one of four foreign banks with a significant retail presence here, is already in talks with potential partners, said Ms Hsu.

The Monetary Authority of Singapore will issue up to two licences for digital full banks, which can take retail and non-retail deposits.

It will also issue up to three licences for digital wholesale banks, which will be able to take deposits from small and medium-sized enterprises (SMEs) and other non-retail segments.

StanChart’s financial framework: 2019-21

• Return on tangible equity: >10 per cent by 2021

• Income: 5 per cent to 7 per cent compound annual growth rate

• In May, StanChart became the first foreign bank to consolidate all its businesses into a locally incorporated subsidiary, increasing its capital threefold to US$5.7 billion (S$7.9 billion).

Singapore-incorporated banking groups can set up digital full bank subsidiaries under an existing framework, but StanChart is unable to do so as Britain, its country of origin, has no free trade agreement with Singapore.

StanChart will also need to link with a local partner to apply for one of the new digital banking licences.

But Ms Hsu noted that the lack of a licence does not prevent the bank from providing digital offerings in the region.

She cited how StanChart is launching digital options for clients in India, where customers will be able to access all products and services digitally, from opening accounts to filing service requests.

Ms Hsu said that StanChart plans to explore more “capital-lite businesses” in Asean and South Asia – such as those related to foreign exchange, wealth management and deposits – instead of focusing as much on its traditional strategy of lending.

The bank’s income from capital-lite businesses in Asean and South Asia made up 60 per cent of its overall operating income for the first half of the year, an increase from less than 50 per cent previously, she added.

“It’s a shift in our portfolio,” she said. “It’s not only the top line that is growing… The quality of our portfolio is improving. The mix of our income is improving.”

Nine of StanChart’s 12 markets across Asean and South Asia are growing, with Thailand, the Philippines and Brunei the laggards.

Singapore, Ms Hsu added, is set to be at the centre of the bank’s planned Asean hub, while other hubs will be set up in Britain and Hong Kong.

In May, StanChart consolidated its businesses here, establishing itself as the largest foreign banking subsidiary in the Republic.

The process of Singapore becoming an Asean hub is expected to take about two years.

Meanwhile, China, South Korea and Taiwan will become subsidiaries of StanChart Hong Kong by the end of the year, subject to regulatory approval.

While trade flows have slowed, with trade tensions casting a pall on the global economy, Ms Hsu maintained that Asean is still seeing strong investment in the manufacturing, retail and consumer, and infrastructure sectors with the Belt and Road Initiative.

She also addressed the situation in Hong Kong, where protests have taken place for 14 consecutive weekends.

The protests’ impact on business has been “very minimal” for now, she said. “Certainly, SMEs and retail business in Hong Kong are impacted, and that may impact some of our clients… But that hasn’t flowed through to our business yet.”

If protests continue, overall sentiment may be hit, Ms Hsu said, but added that the Hong Kong government has introduced a stimulus package to help smaller businesses.

“So far, we’re doing okay but watching (the situation) closely,” she said. “We can’t underestimate what could happen.”

StanChart remains focused on the Greater Bay Area in China, she said.

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