Asia a transaction banking goldmine for StanChart

Singapore

ASIA's burgeoning economies are often the only growth engine for many multinationals and that in turn has helped boost Standard Chartered Bank's transaction banking business.

"Transaction banking is doing very well, revenues grew double digits in first half year-on-year," said Alex Manson, StanChart global head of transaction banking.

The business enjoyed strong momentum from the second half of 2016 and the bank continues to add more corporate accounts in the cash management space, said Mr Manson in a recent interview.

One new client is the giant German insurer Allianz which expects business in Asia to more than double by 2020 from 2015.

Asia is now the third largest contributor to the group, after Germany and the US, up from 4th two years ago, said Han Na-il, Allianz Singapore branch head of finance transformation. The Singapore office which is Allianz's regional headquarters steers 14 operating entities in nine Asian countries, said Mr Han at the same interview.

In addition to robust topline growth, StanChart's transaction banking business is also enjoying better profitability as it is doing more advisory work and less financing where margins are thin amid keen competition, said Mr Manson.

Transaction banking went through a slowdown in the last 2-3 years following the ending of the super commodity cycle and moderating China growth; at the same time the bank also restructured by deleveraging some of its portfolio to focus on higher quality clients, he said.

"We now have higher grade clients in every segment," said Mr Manson.

The transformation is paying off with revenues in the first six months of 2017 "not so far from the peak in 2013," he said.

Transaction banking is made up of cash management, trade financing and custody services.

Transaction banking operating income for the bank in first half of 2017 was US$1.6 billion, 12.5 per cent up year-on-year, and 9 per cent higher half-on-half. Of the US$1.6 billion income, US$1 billion was from cash management and custody, while the rest, US$0.6 billion was from trade.

At its 2013 peak, the bank's transaction banking operating income was US$3.474 billion.

StanChart runs the business globally out of Singapore where many MNCs also have their regional treasury centres (RTCs). Singapore is home to more than 7,000 MNCs, with over half of them basing their regional headquarters here.

Geographically, StanChart serves customers in Asia, Africa and the Middle East and helps western MNCs expand in these three regions, he said.

Asia is helping a lot of international companies grow, "in fact for western clients it's the only part that's growing," he said.

With Asia contributing to much of the growth, the nature of operations for the MNCs and complex decision making is shifting, he noted. And Singapore is the fortunate beneficiary of this trend, said Mr Manson.

Last month, the International Monetary Fund said the global economy is enjoying the "broadest synchronised upswing" it has experienced in the past decade, thanks largely to buoyant growth in world trade which is expected to continue over the next two years.

Advanced economies is projected to grow 2 per cent in 2017, while China and India are estimated to expand 6.7 per cent and 7.2 per cent respectively. The Asean-5 made up of Indonesia, Malaysia, Philippines and Thailand and Vietnam will grow 5.1 per cent, it said.

Some of StanChart's largest markets are Greater China and India, he said.

While the bank does not compete with the large Chinese banks on the domestic front, its value to Chinese corporates is its large footprint in almost all of Asia, as well as in many markets in Africa and Middle East, he said. "We don't really compete with large Chinese banks, they serve large Chinese clients domestically. When it comes to international business, we are well-positioned.

"When clients want to speak to someone on the ground, for instance, to speak about setting up regional treasury centres, and doing business in places like Pakistan... we have local knowledge in each market, and the ability to execute in the local environment," he said.

Mr Manson added that a number of the bank's regional treasury centre clients are in fact Chinese.

Of the 60 plus countries along China's One Belt, One Road initiative, StanChart has operations in 45 of them. One Belt, One Road is China's plan to build trade links through infrastructure projects that connect Asia, Europe and Africa.