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StanChart 'go-to' bank for clients venturing overseas
ASEAN'S mid-sized corporates have done well, riding on the region's strong economic growth, and are now poised for their next stage of expansion.
According to Jiten Arora, Standard Chartered Bank's global head, commercial banking, the bank is well placed with its comprehensive international network to work with these mid-sized corporates as they venture out of their domestic markets.
"Our biggest value to clients is our network - international business is a focus for StanChart," he said in a recent interview with The Business Times.
"We are the go-to bank for clients who want to go beyond their home base to Asean, Middle East and Africa," he said.
The annual turnover of a mid- sized corporate, as defined by the bank, ranges from US$10 million to US$500 million, he said. StanChart has over 45,000 such clients in Asia, Africa and the Middle East.
"Year-on-year revenue growth of commercial banking in 2018 for Asean was double digit," said Mr Arora.
The mid-sized corporate segment contributed a hefty chunk to the group income. Termed under commercial banking, it is the group's third largest client segment, earning US$1.39 billion income in 2018.
StanChart is focusing on Asean mid-sized corporates in the three sectors of manufacturing, retail & consumer as well as infrastructure, he said.
These are key growth sectors accounting for 44 per cent of Asean GDP, and are expected to maintain strong growth in the near future of 7-9 per cent annually by 2021, according to BMI Research, a unit of Fitch Solutions.
Asean as a bloc is the fifth largest economy in the world with GDP of US$2.89 trillion in 2018, and is projected to become the fourth largest by 2030. The current top four economies are US, China, Japan and Germany.
Foreign direct investment flows to Asean rose to a record of US$137 billion in 2017, he noted.
An example of an Asean mid-sized corporate ready to go overseas is Wings, an Indonesian conglomerate, which makes a range of products for consumers in its home market, like a "mini Unilever".
"It has become really good at what it does," Mr Arora said. Armed with the capabilities it has developed in Indonesia, Wings will next venture to other countries with a similar set of demographics for its next growth phase. There are many such companies all over Asean, he said.
Another type of corporate that has done well at home are contractors such as Singapore's Utracon, a specialist engineering company which has expanded into emerging markets including Vietnam, Sri Lanka, and Uganda, he said.
StanChart assisted Utracon in opening its operating accounts and infrastructure project accounts at its respective branch network, including issuance of cross-border guarantees to support its overseas projects.
Huge infrastructure projects in the region are usually won by international companies in China, the US and Europe but they work with local contractors once the contracts are awarded, he said.
The local contractors then pick up the expertise which they can apply when they subsequently venture overseas, he added.
StanChart gets into the picture in multiple ways, Mr Arora said.
"We're a big bank in China, we have corporates (clients) in the US and Europe, and generally all the large projects are being won by these clients whether they come from China, US or Europe, because they are the large players in this space," he said.
These large corporates need local partners, and since many of the latter are also StanChart clients, the bank is able to link them up.
When Asean corporates go to places like Africa, StanChart can "handhold" them in these new markets. Some of the assistance includes mitigating sovereign risks, helping to issue guarantees and bonds when bidding for projects and opening operating accounts in those countries, he said.
The bank has project finance teams that can advise on sovereign and regulatory risks, as well as local practices, he said.
As Asean corporates expand, they need to diversify their funding and not rely only on bank loans, he said.
StanChart has introduced investors in the form of private equity funds, as well as helped these corporates secure syndicated loan facilities and also access capital markets, he said.
In October 2018, Standard Chartered Vietnam successfully placed Hoan My Medical Corporation's inaugural VND2.33 trillion (S$135.4 million) dual-tranche fixed rate bonds, guaranteed by CGIF (Credit Guarantee and Investment Facility, a trust fund of Asian Development Bank rated AA internationally by S&P).
In January 2019, Standard Chartered Vietnam also placed Refrigeration Electrical Engineering Corporation's inaugural VND2.318 trillion fixed rate bonds, guaranteed by CGIF.
Based in Singapore, Mr Arora runs a global team of more than 2,000 people which includes 800 working in Asean and South Asia.