In many ways, Standard Chartered is the perfect bank. It has unique exposure to emerging markets, is well-capitalised with high levels of liquidity, and is reassuringly disciplined when it comes to costs. But yesterday’s update suggests its prudence is less steadfast than previously thought.
Peter Sands can make a good case for growing costs more quickly than income. Everybody, from small local players to giants like HSBC, wants a piece of Asia. These days, it doesn’t come cheap.
Competition for business, both in retail and wholesale, is increasingly stiff. Standard Chartered has built 50 new consumer branches and 90 customer centres, as well as investing in better facilities for its bankers.
Staff costs are also creeping up. In India and China, where the authorities understand that top talent must be paid top whack in a global marketplace, bankers are commanding higher salaries and bonuses than ever before.
Higher investment might make shareholders nervous, but will be worth it in the end.