Euromoney, January 2018
To read the full story of the Euromoney 25, click here
History will probably observe that 2017 was when Standard Chartered started to turn things around after several years of misery and misadventure.
It is still a very hard slog. But more than two years on from Bill Winters’ appointment as chief executive in June 2015, the bank is making profits, improving asset quality, shedding bad businesses and strengthening its balance sheet.
More than that, the bank has sought to completely change its culture, particularly in its most vital business, corporate and institutional banking. Led by Simon Cooper, its practices look increasingly like those of his old shop HSBC, and many of his key hires – notably Paul Skelton – also made their name at that bank.
Mantras under Cooper include: velocity of the balance sheet; using the footprint; overhauling the coverage model; moving bankers away from a product-led approach towards relationship management; taking accountability for risk; and lending on its own is not enough.
Throughout its considerable travails, StanChart still had the advantage of a deeply entrenched network in high-growth emerging markets. In the past, that network could have been better geared towards serving clients who bring in a lot of money. Now it is.
One of Cooper’s favourite slides for investor briefings illustrates how the bank is improving the share of wallet from targeted clients – the ones that use multiple products across multiple locations. The corollary of that is that others will need to be cut adrift – that work continues without apology.
Cooper says that even after redeploying three quarters of the low-returning risk weighted assets identified in 2015, still about 17% of his group’s RWA generate a return of less than 3%.
“We will bring that number down over time,” he says. “But you can see the direction of travel.”
The last of Cooper’s big hires was Roberto Hoornweg, brought in to be global head of the financial markets team in January 2017. At any institution, this is a lousy time to be trying to get a financial markets business moving, and Hoornweg still has much to do to regain market share and improve productivity.
This will be a key area to watch, as will the new credit structuring and distribution group.
“That’s allowing us to move away from traditional silos to look at how we can structure transactions of greater benefit to clients,” Cooper says.
On the positive side, the calibre of hires – not just in Asia but in Europe and even the US – has been high, almost surprisingly so, and there is the sense of a coherent vision.
“There’s clearly been a massive amount of change and there was definitely a time a year or so ago when there was a degree of paralysis in the organization as a result of that change in risk focus,” says Cooper. “But now there is a very clear strategy that people really understand, with scorecards in place that show the individual what their contribution to that strategy is. There is a degree of optimism in the firm.”
On the negative side, there are two problems.
At a group level, recovery has not been a straight line. First- and second-quarter numbers were welcomed by investors; the third quarter was less impressive, as revenue fell in most markets (although crucially not Greater China) and investors tired of the absence of a dividend.
A great deal has been done on restructuring, but the work is not complete, with the private equity unit still being wound down. Investors are happy that the worst of impairments are behind them and that the risk profile looks much better, but now they want growth.
The second challenge is just how far Standard Chartered fell in terms of volumes, market share and reputation during the bad times. It still does not show up in competitor conversations as much as it should, from debt capital markets to transaction services. It is still thought of as a shadow of its former self.
But everything takes time. “I’m never one to be satisfied – ask my colleagues – but I’m pretty pleased,” says Cooper.
“The message I have tried to convey to investors is that this is a different Standard Chartered to the one people have seen in the past.
“It is different because we are going back to the real fundamentals and basics of banking, to a focus on portfolios, on the balance sheet, on quality and on clients.”