It would be fair to say that British bank Standard Chartered PLC’s decision to take the off-the-beaten track into emerging markets 150 years ago has paid off. Despite the recent global economic crisis, the bank’s net income last year reached an all-time high US$15.18 billion, while its global rivals just started eking out profits amid a gradual recovery.
Standard Chartered set up its first operation in China in 1853 when emerging markets were considered a mystery to the West. Now, more than 90 percent of the London-based bank’s revenues come from developing countries such as India and other Asian nations, whose economies have rebounded faster than that of developed countries such as the US and Europe.
In Taiwan, which was one of the Asian economies less affected by the economic slump, Standard Chartered also saw its ranking improve to second place among multinational banks, overtaking the long-standing No. 2 placeholder HSBC. Standard Chartered’s Taiwanese branch reported NT$4.07 billion (US$134.3 -million) in net profits in the first nine months of this year, according to the Financial Supervisory Commission’s tally.
Photo: Courtesy of Standard Chartered Bank
Standard Chartered wants to reinforce its foothold in fledgeling emerging markets by investing more.
“We continue to focus on Asia, Africa and the Middle East. These are regions where we see significant opportunities to grow our business,” Standard Chartered chairman John Peace said in a media briefing held in London in the middle of last month.
Despite growing concerns about inflation risks in Asian countries and the debt crisis in Europe, Standard Chartered would take a wider viewpoint in expanding its businesses over the next 20 years and would benefit from the shift in economic growth from the West to the East, Peace said.
Peace saw Taiwan’s growth potential coming from improving trade ties with China on the heels of the signing the Economic Cooperation Frame Agreement in June.
“This will have profound impact on both economies,” Peace said. “It is the perfect time for Taiwanese companies to really start to expand in global markets.”
Taiwan ranked No. 6 in terms of operating income among Standard Chartered’s emerging market branches last year.
Standard Chartered’s business would grow along with its client base in both Taiwan and China, Peace said. Standard Chartered said it aimed to become a partner to small and medium-sized Taiwanese businesses expanding in China and other countries.
The bank would continue to invest in Taiwan in the future and would look at potential investment opportunities cautiously, he said.
Currently, Standard Chartered is seeking organic growth from its existing operations in Taiwan, he said.
In 2006, Standard Chartered acquired Hsinchu International Bank (新竹商銀) to make Standard Chartered the biggest foreign bank in Taiwan as it expanded its number of branches from three to 89.
As trade volumes and business opportunities in Taiwan and other markets in Asia, Africa and the Middle East soar, it would be important for the bank to put itself in a position to support the continuity of such trends, Peace said.
In addition to Taiwan, Standard Chartered has also set its eye on fledgeling rural areas in China. Two years ago, Standard Chartered set up a branch in Mongolia, targeting dairy farmers there. It already operates 42 branches and 16 sub-branches in other areas of China.
It is also expanding its branch network to second-tier cities such as Hangzhou in Zhejiang Province and Chengdu in Sichuan Province, where many multinational corporations, such as the world’s biggest PC maker, Hewlett-Packard, picked as their second manufacturing center in China, the bank said.
To boost its brand awareness in Asia, Standard Chartered is venturing into its biggest-ever sporting sponsorship; it plans to bring the Liverpool soccer club to the region next year.
The four-year sponsorship deal has been reported to be costing the bank about ￡80 million (US$126 million).
Last season, Asia made up about 25 percent of Liverpool’s global television audience of 300 million, bank statistics showed. Among the 75 million viewers in Asia, China makes 60 million of them.
However, skepticism about the sustainability of growth momentum in emerging markets was spreading as governments in Europe and the US were adopting drastic measures to cut debt to support economic recovery, which has led to the persistent inflow of hot money into China, Brazil and other emerging markets. Local currencies, therefore, appreciated sharply, putting those economies under a higher inflation risk that could cripple their economic growth.
Following in the steps of South Africa and Brazil, Asian countries, including Taiwan, are considering imposing rules such as a transaction tax on foreign investments in government bonds to divert inflows of hot money. This comes after the US Federal Reserve’s latest injection of US$600 billion into the US market by buying back government bonds to step up its lukewarm economic recovery.
Peace, however, looked to be more practical and detached himself from any speculative thinking.
There were “an awful lot of talks about different nations’ [economic stimulus] measures and currency wars. I think it’s not worth speculation,” Peace said.
It would be premature to judge how fast those measures taken would bring “stability to some of this turbulence,” Peace said.
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