StanChart sees more cost cuts, but plans for growth in Singapore

The Business Times by LYNETTE TAN


STANDARD Chartered is doubling down on its restructuring with more cost cuts that may involve shaving jobs. But, the bank also has plans for growth in Singapore and said it would grow its affluent clientele and put more money behind digitalisation, among other strategies.

Singapore chief executive Patrick Lee laid out new targets for the bank in Singapore in his first media interview since assuming the mantle in July 2018. The bank is aiming for 9 per cent per annum growth in operating income. By 2021, it also wants to raise underlying returns on equity to 10 per cent, from 6.1 per cent in 2018.

On Monday, Mr Lee said the bank will cut an unspecified amount of costs by 2021 by streamlining operational processes, reviewing third-party vendor costs and headcount in "more expensive locations across the group". This will be in line with StanChart's group strategy.

When asked if there will there be job cuts in Singapore, Mr Lee said the bank could not give forward-looking headcount numbers, but affirmed the possibility of job cuts locally.

"The three broad directions that I told you...if you extrapolate from that, then yes, there may be. But in terms of numbers, it will be determined in due course," he said.

But, the bank has plans to drive growth across its business in Singapore, which remains the group's second largest generator of income and profits.

Mr Lee said the bank will focus on the emerging affluent and mass affluent, and look at "strategies in the retail space to disrupt the millennial base". He said it was too early to reveal specific initiatives but said those would come this year.

The bank will also look at catering to the needs of affluent seniors, who have wealth and retirement requirements, while planning for health as well.

Private banking is also an important pillar of the bank's overall growth, said Mr Lee. The segment saw income drop 4 per cent year-on-year to US$201 million, as financial markets turned sour in the second half of last year. The bank has also been de-risking the client portfolio, which dampened topline.

But, StanChart has been working on growing the business over the years by hiring relationship managers, including some from other banks. According to Asian Private Banker's league table, StanChart had 350 relationship managers in 2017, up 2.6 per cent year-on-year.

Growth would also come from digitalisation and innovation - also where most of StanChart's investment will be going, said the chief executive. He cited the new concept branch at Takashimaya Shopping Centre, as an example of the bank "investing in the future".

Increasingly, he said, StanChart and other banks are growing their digital accounts much faster than traditional areas. Hence, there will be more investment on the digital front than on the physical side.

On the corporate and commercial banking fronts, Mr Lee, whose background was largely in corporate and investment banking, said the bank would venture into "new growth platforms".

"As our clients digitalise, as they look at how relevant they need to be in the digital economy, we have looked at ways of investing in technologies that will help them - through the payment systems or creating platforms for them to grow."

Finally, the bank will take advantage of its network across markets to capture opportunities in Asean, and from the Belt and Road initiative.

Mr Lee's briefing comes after the bank's group chief executive Bill Winters announced a new group strategy last week, as full-year net profit fell. The strategy would involve cost-cutting measures totalling US$700 million and the bank repositioning its operations in markets where it is weak, like in India, Indonesia, South Korea and the United Arab Emirates.

In January, the Financial Times reported that Temasek, the largest investor in StanChart, had grown frustrated with the slow pace of reform at the UK-listed bank.

Temasek asked the bank's executives why, after three years of restructuring, they were unable to generate close to the double-digit return on equity enjoyed by Asian rivals such as DBS Group, FT said.

To that, Mr Lee said he "can't comment on how accurate that report is".

But, he added: "I think, as shareholders, we all want to see higher growth and better performance, but that can't be at the expense of risk and has to be sustainable."

This year - StanChart's160th year in Singapore - will also see the bank consolidate all its local businesses into its Singapore subsidiary. It means the bank will operate with one balance sheet, which Mr Lee said will result in more efficient governance, administration and management of liquidity and funds.