Economies in Asia are in a “different place” than their Western counterparts as the region continues its economic recovery from the coronavirus pandemic, according to Andy Halford, Standard Chartered’s chief financial officer.
Markets in Standard Chartered’s footprint, particularly in Asia, are not facing the same inflationary pressures as Western economies and are expected to post much higher economic growth over the next two years as China’s economy reopens, Halford said.
“There is just genuinely a sense there that things are more on the up,” Halford told the Post.
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“Hong Kong in particular, prior to December when the border was closed, was suffering from a lack of transference of people,” he said. “They’ve seen quite a pickup, even in a three- or four-month period, of volumes albeit the level of air travel in and out of China is low compared to pre-Covid levels. Hence, that is why our management team in Hong Kong would be quite encouraged by the progression over the next several quarters.”
On Wednesday, the London-based bank reported a 9.4 per cent jump in net profit to US$1.16 billion in the first quarter, driven by strong growth in its Asia and cash management businesses. Underlying pre-tax profit in Hong Kong, its largest market, quadrupled to US$529 million in the quarter.
“We have had quite the significant uptick in new account openings in both China and Hong Kong in the early part of this year. Financially, its takes a lot of new customers to sign up over several months for it to make an impact in a dollar sense,” Halford said. “That is a lead indicator for us and it is one, at this point in time, seems to be moving forward in a quite positive way.”
China’s economy is expected to grow by 5.2 per cent this year and account for about one-third of global growth this year, according to the International Monetary Fund (IMF). Hong Kong is projected to grow at 3.5 per cent in 2023 after contracting last year, according to the IMF.
By comparison, the global economy is expected to grow by 2.8 per cent this year, with advanced economies, such as the United States, posting gross domestic product gains of a combined 1.3 per cent.
“The growth of our income in China was a little bit more muted in the first quarter, but the growth of our income of our Chinese customers across Asia was significant – 50 per cent higher, ” Halford said. “We’re definitely seeing more flow now between countries than we were before. That is more of a corporate comment, than it is a consumer comment. The consumer side will be on the slow burn until travel and such get back to the pre-Covid levels. That’s going to take a period of time.”
Andy Halford, Standard Chartered’s chief financial officer, speaks during a Bloomberg Television interview on April 26. Photo: Bloomberg alt=Andy Halford, Standard Chartered’s chief financial officer, speaks during a Bloomberg Television interview on April 26. Photo: Bloomberg>
At the same time, Standard Chartered does not expect the fallout from a recent banking crisis spawned by the collapse of Silicon Valley Bank to affect business sentiment or activity in its markets in Asia, Africa and the Middle East as severely as it has in the West.
Bill Winters, the Standard Chartered CEO, said on a call with analysts last week that the recent stress in the sector was different from the 2008 global financial crisis and reflected a loss of confidence in a handful of banks rather than a “broader solvency issue”.
Regulators are likely to undertake a review of reporting requirements, particularly less onerous ones for smaller banks in the US, as part of an effort to learn from the recent stress in the sector, Halford said.
“There will be a question about comparability of regulatory requirements across different sizes of banks. Banks that are established in the sector and newcomers: I’m sure that will be the focus of some of the review,” Halford said. “The question as to what collateral is acceptable to be posted to enable banks that are in difficulty to get liquidity so they have a better chance to get through a difficult period. I suspect that will come under review as well.”
Standard Chartered was one of several lenders that appeared to benefit from a “flight to safety” as depositors sought to shift some of their funds to larger institutions amid the chaos. The bank said that its customer deposits remained stable during the first quarter at US$462 billion.
“People are saying if I am at all in doubt, I’d rather put my money with an institution that has been around a very long time. That is known to be stable,” Halford said. “The fact that our deposit levels remained really, really constant throughout this period is testament to that.”
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.