Q: What about the idea that it might merge you with Singaporean bank DBS, in which it has a significant shareholding?
A: It has got lots of financial holdings. There is a new phenomenon in the world: governments have surplus funds and reserves, which they have traditionally invested just in currency and in dollar treasuries, and that is changing.
Q: Surely being content with a return on equity [ROE] in the high teens is not very ambitious? Normalised return on shareholder’s equity was 18% last year.
A: In the past few years, we have more than doubled profits, more than doubled the ROE and brought the cost/income ratio down. If we wanted to turn off the investment tap and improve profitability, the ROE would go through the roof, but we are investing in high growth regions for the medium and long term.The shareholders are very happy with the return on equity; that is shown in the price/earnings ratio of the company.
Q: In what areas could you do better?
A: We need to grow faster in private banking and non-resident Indian/Chinese/ African. We can do even better in mobile and internet banking. We have done a great job in building the debt/capital markets business and we could do even more.
Q: Why are you building a mergers and acquisitions (M&A) team? It is not an obvious area for you to get involved in.
A: If you go back five years, we had a wholesale bank that was destroying value for the shareholders. We had a trade and cash management business [plus
corporate loans] that was historically strong but not producing enough economic profit. The reality is that you need to be in higher value-added products. What we set about doing was expanding the product array in wholesale banking.
As we expanded the options – the foreign exchange business, the debt/capital markets including syndicated loans, fixed income, securitisation and project finance – the natural extension of that was slowly and surely to build up corporate finance advisory, cross-border M&A and private equity capability. No big hiring, no big names, no big teams, just quickly building it up.
Q: You are known as a flexible, fast-moving and innovative bank but can the reverse of that coin be a tendency to slip more on banana skins?
A: The great thing about Standard Chartered is its resilience. It has been around for 153 years. In the past few years, we have shown tremendous resilience. Yes, in the 1980s we had accidents, but that was 20 years ago.
In the past seven years, while Organisation for Economic Co-operation and Development banks have had benign, favourable, economic circumstances, we lost our data centre in 9/11, had the tsunami, had earthquakes in Pakistan and in Indonesia, Sars [severe acute respiratory syndrome], which paralysed most of our Asian markets, and a credit card collapse in Hong Kong. I think we are good at managing risk across a multitude of countries.
Q: When Bryan Sanderson was appointed, it was said that he was not as impressive a chairman as Standard Chartered could have found.
A: He is an outstanding chairman, who brings huge international experience.
Q: How has your commitment to corporate social responsibility helped the business?
A: It is part of a management philosophy. In my humble view, in the next few years people are going to get more tuned in to the environment, to health, to fitness, to climate change, to the role of companies in all this.
We started to think about this deeply a couple of years ago and say that, actually, socially responsible companies that are putting something back into the communities will be the sorts of companies that young people will want to work for, will be the sorts of companies that will produce superior value. It will become part of your brand proposition. At the same time, I realise that the most important thing is that we have to make our profit, so it is profit with principles.
