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Standard Chartered’s Q3 results – which came out yesterday – revealed the numbers behind something many have seen going on for a while: two cities are subsiding the entire rest of the bank.
Singapore and Hong Kong are, by some margin, Standard Chartered’s money makers. 79% of the bank’s underlying profit came from those two cities, despite them employing less than 39% of the bank’s capital, combined. They were, along with Taiwan and the UAE, by far the most efficient regions in terms of underlying ROTE too, as well as having the lowest cost-income ratios.
Where does the bank lose money? Easy: the UK, mostly. It employs nearly a quarter of Standard Chartered’s assets and posted a nearly $200m loss, possibly by virtue of being the headquarters and carrying the costs associated with that. However, the bank did write off an ugly $700m related to its position in Bohai Bank, a local retail bank. Even so, it’s still optimistic about its Chinese business and “Seize China opportunity” is still a strategic objective for it.
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China might be struggling, but Standard Chartered’s Hong Kong office isn’t. It had a blockbuster first quarter, a pretty good second and a not bad third. The financial markets division, which encompasses its investment banking and trading offerings, is a drag on Hong Kong, however. Revenue there was nearly 10% lower this quarter compared to Q3 of 2022.
Standard Chartered is in the grips of a substantial cost-cutting program – the bank wants to get rid of $1.3bn worth of costs by 2024, of which more than half have gone. But it still needs to cut around $600m, which is probably the reasoning behind its hiring of Warren Young, Credit Suisse’s former co-COO of investment banking & capital markets earlier this year. At Credit Suisse, Young was in charge of the bank’s ill-fated plan to save itself, and it’s likely that the axe he sharpened for Credit Suisse will be put to the test at Standard Chartered.
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