No job cuts yet at Standard Chartered as earnings fall but bank tips North Asia recovery
It’s not often that a bank chief financial officer begins a quarterly earnings presentation by chatting about HR issues. But Standard Chartered CIO Andy Halford did just that earlier today when he outlined some of the main ways the bank, which made 83% of its profits from Asia in Q1, has been supporting staff during the Covid-19 pandemic.
Stan Chart has not made any job cuts as a result of the impact of Covid-19 and no employees have been furloughed, said Halford, who emphasised that saving existing jobs remains a priority. Stan Chart is doing “everything we can to protect jobs”, Halford added within the bank’s Q1 financial report.
This brings Stan Chart into line with rival Asia-focused banks HSBC, DBS, OCBC and UOB, and with global firms like Citi, Goldman Sachs Morgan Stanley and Deutsche Bank, all of whom have also refrained from redundancies during the crisis.
It is difficult to predict whether Stan Chart will resist culling roles over the long term, given that both Halford and CEO Bill Winters said today that revenue will be under pressure for the remainder of 2020 and the bank will need to keep a firm hand on costs. Stan Chart has already imposed a two-month hiring freeze.
Halford also said that about 70,000 Standard Chartered employees are now working from home. That’s about 90% of the firm’s global headcount, according to our calculations, although Halford said the percentage varies from market to market and is much lower in China and Korea, for example, where lockdowns are not in place. Some of the travel-cost savings that Stan Chart made in February and March have been “partially reinvested in remote working tools”.
Meanwhile, global pre-tax profits at Stan Chart fell by nearly 12% year-on-year to $1.2bn as credit impairment rose to $956m, up from $78m a year previously, driven mainly by the economic impact of Covid-19.
There were no client-sector highlights in Q1 – all of the firm’s units suffered falls in profit, although corporate and institutional banking, the largest division, was only down 4% to $656m. Commercial banking and private banking were particularly hard hit, with year-on-year declines of 45% and 49%, respectively. The latter generated global profits of $37m, well below the $144m that HSBC’s private bank made in Asia alone in the first quarter.
However, Stan Chart also breaks out its results in terms of products, and it is clear that some of its traders, many of whom are based in Asia, enjoyed a good opening quarter. Operating income from rates and foreign exchange was up 71% and 39% year-on-year, respectively, according to Stan Chart’s financial report. As at other banks – HSBC and Credit Suisse also reported trading increases in Asia – these gains were driven by short-term “heightened market volatility” and may be difficult to sustain for the rest of 2020.
If you were to choose where to base yourself at Stan Chart, Greater China and North Asia (including Hong Kong) seems a better bet than the bank’s other dominant region, ASEAN and South Asia (encompassing Singapore). Profit for North Asia was down by just 1% to $650m “despite being the region most impacted by the effect of Covid-19 in the first quarter”, according to Stan Chart’s earnings report. ASEAN and South Asia fell 6% to $367, partly because of a much larger credit impairment.
Despite warning of a “protracted period of severe dislocation” as a result of Covid-19, Stan Chart also believes a recovery may be on its way later this year. “We expect a gradual recovery from the Covid-19 pandemic, with major contraction in economic growth rates across most of the world in the second quarter, before the global economy moves out of recession in the latter part of 2020, most likely led and driven by markets in our footprint,” said Halford in the financial report.
Halford also told analysts today that North Asia in particular should get through the recession “more quickly” than other regions and that this will be “beneficial” for Stan Chart (and presumably for jobs in Hong Kong and other markets in the region). “Asia is well placed to recover from the Covid shock,” he added.
Stan Chart’s cautiously optimistic outlook contrasts with the more downbeat analysis of Asia-focused rival HSBC. Noel Quinn, HSBC chief executive, said China “will not be immune” from the damage that the virus inflicts on other areas of the global economy.
Separately, there was good news for technology jobs at Stan Chart. Halford said that while the bank will review its investments to save costs this year, “strategic” digital projects will be going “at full steam”. “Digital learning” undertaken by all Stan Chart staff in Q1 this year is up 60% on the whole of 2019, he added.
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