Standard Chartered Steps Up Amid Crisis
This is the third in a six-part series of articles on the rise and fall of economic and business empires following the global financial crisis triggered by the bankruptcy of Lehman Brothers ― ED.
By Kim Jae-kyoung
The global credit crisis triggered by the bankruptcy of Lehman Brothers has changed the financial landscape in the global market, with one set of big banks giving way to another set of big banks in the wake of the financial turmoil.
Depending on how banks coped with the situation, their fates have turned out very differently. While those seeking only to maximize returns, such as Lehman Brothers and Bear Stearns, went belly up, those that were quick to cut risks in balance sheets have risen from the ashes of the crisis.
Standard Chartered is one of the winners of the financial crisis. Its strategy of focusing on risk management and key markets has paid off, solidifying its position as a leader in the global financial arena.
The UK banking giant has had its share of mishaps during the crisis but it was quick to come up with a credible strategy for its global banking, challenging the dominance of its rivals, Citi and HSBC.
While most global players are trying to minimize the shocks from the turmoil, Standard Chartered is seeing the crisis as a strategic opportunity to deepen its relationships with clients, to win market share and to transform its competitive position
``At Standard Chartered we have stuck to our strategy of focusing on Asia, Africa and the Middle East, markets we know well, doing business with customers with whom we have long-standing relationships, selling products we understand fully,'' Peter Sands, CEO of Standard Chartered, told The Korea Times.
``We also focus on the basics of banking. That is, strong risk management, controlling costs, maintaining a strong balance sheet and high levels of liquidity across all our markets. That has enabled us to take market share from competitors by supporting our customers throughout the crisis and deepening relationships in a way that others have been unable to match,'' he added.
Standard Chartered has a 150-year history in the banking business in China, India, Hong Kong and Singapore. This history has given the lender a competitive edge as it has experienced a lot of ups and downs along the way.
Among many factors, its focused strategy has played a key role in its resilience throughout the crisis. It has stuck to its long-standing strategy, concentrating on the basics of banking and staying true to its values and culture.
"The overall strategy of our group remains unchanged. We have taken the time to step back and review our strategy in the light of the crisis and the fundamental changes happening in the world of banking," a SC executive said.
"Put simply, our main conclusion was that our strategy appears even more compelling than it was before."
It has globalized with very clear plan in mind. It focuses on key markets it knows well ― Asia, Africa and the Middle East ― and builds long-term relationships there.
"We have clearly focused on these markets, and we learned hard lessons when we deviated from our core strategy. We are in the right markets at the right time, and are well positioned for future growth as economic power shifts from west to east," Choi Jung-kiu, group head of strategy, said.
Thanks to the approach, it now has a globally competitive risk management system that has helped the lender take preemptive measures to cut risks.
"We will remain focused on Asia, Africa and the Middle East ― markets that offer growth and which we know intimately. We will also remain focused on building deep, long-term deep relationships with our clients. In fact, the shift to a more customer-focused model in consumer banking reinforces this," another SC executive said.
The group's global cadre of staff members has made it possible to put its strategy into action during the crisis. It has 125 different nationalities on staff, including 60 in senior management. ``We have a large pool of people who are able and willing to go out to other countries to transfer best practices and to build the business," the executive said
The group is one of the few global banks that enjoyed profit growth in 2008 when the world was mired in financial turmoil.
In 2008, its income and operating profit rose 26 percent and 13 percent, respectively, to $13.97 billion and $4.57 billion, with a 31 percent growth in customer deposits. Growth was broad-based across all product categories and geographies, with global markets reporting a 60 percent jump in income.
Standard Chartered has also boosted its profitability this year while substantially reducing the amount of risk on its balance sheet.
In the first six months of 2009, its profit before taxation rose 10 percent to $2.84 billion and its income jumped 14 percent to $7.96 billion. Its board has declared an interim dividend of 21.23 cents per share.
Its wholesale banking had a very strong first half, as it drives to become the core bank for more of its clients. Its consumer banking also made progress in the first half after repositioning to serve customers in well-defined segments and improving operational and service efficiency.
Commenting on the first-half results, Standard Chartered Chairman John Peace, said, "We have achieved record results through our disciplined management approach and the diversity of our business and markets in Asia, Africa and the Middle East."
"Our strong levels of capital and liquidity have given us a competitive advantage and our decision to raise further capital will reinforce this and support our future growth."
Standard Chartered Korea
In the midst of the crisis, Standard Chartered made a giant step toward becoming a major player here by launching a financial holding company, Standard Chartered Korea, based on its focused strategy and localization efforts.
Standard Chartered Korea became the first foreign-owned financial holding company following its final approval from the Financial Services Commission (FSC) in June. Currently, five companies ― Standard Chartered First Bank, Standard Chartered First Fund Service, Standard Chartered Capital, Standard Chartered Mutual Savings Bank and Standard Chartered Securities ― have been incorporated as subsidiaries of the holding company.
The establishment has enabled the financial group to leverage the marketing capabilities in each of its affiliates, dramatically increasing cross-selling opportunities across the businesses, and realizing synergies by sharing core capabilities and services.
The launch came as a result of the Standard Chartered's long-term approach to localization efforts. When it goes into other countries, it always pursues sustainability and long-term commitment,
The lender seeks to secure people who understand cultures, languages, and ways of working in different countries. Since its main strategy in every country is to grow organically, it tries to build relationships with regulators and with companies in other countries.
``Whatever investment we make in a new market, we have to recognize upfront that this is a long-term commitment, and we need to demonstrate that not only to our employees, but also to our customers, the communities and regulators,'' Choi said.
The bank said that it will continue to focus on organic growth as the primary driver of value creation, with acquisitions playing an important, but secondary role.
Standard Chartered Korea CEO David Edwards has been at the center of the group's localization efforts here. Since he took office, Edwards has appointed many local leaders to key positions, creating a balance of expats and locals to make best of the both worlds.
Standard Chartered Korea has a vision to increase its operating profit to 1 trillion won by 2011 to become the strongest bank here in terms of profit. It posted an income of 953 million won in the first half of 2009, up 11.4 percent from the same period last year. Its flagship Standard Chartered First Bank recorded an income of 905.8 million won during the same period, up 8.9 percent from a year ago.
Standard Chartered Bank acquired Korea First Bank in April 2005 for 3.4 trillion won ($2.7 billion) and renamed it SC First Bank in September of the same year. Standard Chartered Korea has consolidated over $4 billion of investments in Korea to date.