StanChart reinforces commitment to Singapore

StanChart Singapore's commercial, corporate and institutional banking and private banking businesses now operating under the Singapore branch will be transferred to Standard Chartered Bank (Singapore).
StanChart Singapore's commercial, corporate and institutional banking and private banking businesses now operating under the Singapore branch will be transferred to Standard Chartered Bank (Singapore).

It will be consolidating all its local businesses into its subsidiary here

Standard Chartered Singapore (StanChart Singapore) will be the first major international bank here to fully consolidate its local business.

This means it will have to set aside more capital against banking assets soon to be held under the local subsidiary.

The bank remains domiciled in Britain but has significant global operations here.

The move announced yesterday paves the way for StanChart Singapore to list the local operations as it did in Hong Kong.

But analysts are not forecasting this yet.

"Our rating assumes that the group will inject a large amount of capital and the subsidiary will continue to build up capital via retained earnings over the next few years," S&P analyst Michael Puli said.

StanChart Singapore's commercial, corporate and institutional banking and private banking businesses now operating under the Singapore branch will be transferred to Standard Chartered Bank (Singapore).

This follows a move in 2013, when StanChart Singapore was incorporated as a subsidiary here.

It transferred its retail and business banking, as well as part of its commercial banking business, to its Singapore unit.

The decision to transfer the retail banking business here into the Singapore subsidiary in 2013 was partly a response to regulators wanting foreign banks that hold a significant amount of retail customers' funds to ring-fence their business by keeping a capital buffer here.

But it was also said the move would raise StanChart's local profile, so it would be viewed by customers and regulators as a local bank.

StanChart, along with Citi, HSBC, Maybank and the three local lenders, were designated in 2015 as being "too big to fail".

This meant they have to answer to more supervision from the Monetary Authority of Singapore and have a higher capital requirement than other financial institutions.

StanChart Singapore, which has been operating here for 159 years, said the move to fully consolidate its local business "reinforces its long-term commitment to this market, and highlights Singapore's importance as a strategic hub".

Ms Judy Hsu, chief executive of the Singapore and Asean markets, said: "As a key gateway to other Asean markets, Singapore's strategic location has enabled us to seamlessly support clients as they expand overseas."

The transfer is expected to be completed in the next 12 to 18 months.

The bank was unable to provide estimates on the additional capital to be pumped into the unit at this time.

S&P analysts said they expect the group to keep significant gross non-performing loans (NPLs) out of the Singapore subsidiary, and inject a material amount of capital as part of the transfer.

The rating agency has assigned a preliminary A/A-1 rating on StanChart Singapore, and expects a stable outlook from the unit.

Mr Puli said: "The region is a significant contributor to group profitability and reflects the group's focus on trade finance.

"These elements support our view that Singapore is 'core' to the wider group, the highest designation we give to subsidiaries."

But Moody's said it would review StanChart Singapore's ratings for a possible downgrade, saying that the transfer will subject StanChart Singapore to a higher credit risk.

Moody's expects the NPL ratio of the merged bank will gradually normalise at a moderately higher level next year.

"The bank's loan book will become more concentrated on industries and single parties, many of which are active internationally or regionally," said Moody's analysts .

A version of this article appeared in the print edition of The Straits Times on February 23, 2018, with the headline 'StanChart reinforces commitment to Singapore'. Print Edition | Subscribe