Asia-focused bank is proving that if you get it right, even the bad times can look rather good

 
Elizabeth Fournier
EARLIER this week Deutsche Bank, a Europe-focused bank with a core Tier 1 ratio well below seven per cent, announced plans to axe 1,900 bankers.

Yesterday, Standard Chartered, an Asia-focused bank with a core Tier 1 ratio of 11.6 per cent, said it is hiring more than 1,500 new staff.

The divide couldn’t be clearer, and the two banks’ results read like a cautionary tale of how (and how not) to run a profitable bank in the current climate.

As in every one of its last 10 first-half updates, Standard Chartered’s growth story is centred firmly on emerging markets, if we in the west can even dare to call them that anymore.

Hong Kong profits before tax were up 10 per cent, Singapore grew by 15 per cent, and Korea registered a massive 57 per cent growth.

Even a fall in India, where earnings were hit by a weakening rupee, wasn’t enough to slow the record profit train.

It’s rare in this environment to cheer a bank’s regulatory nous and growth strategy, but StanChart seems to have hit the nail on the head. It has little exposure to at-risk European peripherals, a more-than healthy balance sheet (the loans to deposit ratio is 78 per cent) and is even growing its wholesale banking business in the face of strong deal headwinds.

Yes, there’s a growing threat of a slowdown in Asia, compounded yesterday when China’s PMI slipped to an eight-month low. But with trade inside the region likely to remain strong and an impressive set of buffers to fall back on, it looks like Standard Chartered can remain a breath of fresh air for some time.