Among multinational banks with a global reach, the investment banking and private banking units typically enjoy the highest profile. The former helps huge corporations raise billions in headline-grabbing deals; the latter helps high-net-worth individuals manage their millions.
Standard Chartered’s Xie Wen — who takes care of the bank’s small and medium enterprises (SME) customers under the business banking unit which she heads — sees her unit playing a “super-connector” role between the two main businesses: The one dealing with large corporations on the one hand, and the other serving individual customers.
“We are relevant to every part of the chain. We support the supply chain; many affluent private banking customers are small business owners. We are very relevant on both sides,” she tells The Edge Singapore in an interview.
StanChart’s business banking is known as small and business enterprise (SME) banking. It is organised under its consumer, private and business banking (CPBB) arm. The other big arm is the corporate, commercial and institutional banking (CCIB) divisions.
Just like many organisations, organisational structures and names of business units have evolved in line as markets change. “There’s really no, like, global standard in terms of how do you define yourself,” explains Xie. In some markets, for example, this segment is defined by those generating annual sales of less than US$100 million ($136 million); others classify companies as SMEs if their headcount does not exceed a certain number.
In the case of StanChart, a general guideline for SMEs is a turnover of approximately US$50 million. However, its executives can bank with certain clients as SMEs even if their turnover surpasses this threshold.
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Xie says StanChart’s business banking unit has a presence in 21 markets, with a total of 2,000 employees, lends out a total of US$10 billion and is “very, very profitable” with a return on tangible equity at 41%, versus the 12% the bank can achieve on average for the most recent 1HFY2023.
StanChart has identified what it calls “core” markets for the unit under Xie to focus on, including China, Hong Kong, Singapore, Malaysia and Vietnam. While the bank has a significant presence across regions, it cannot be everywhere for everyone, and the core markets are those the bank figures it has the “best chance” to scale, she reasons.
In today’s business landscape, crossing borders is the norm, even amid the prevailing geopolitical tensions between the US and China that loom ominously. Across diverse markets, trade and commerce thrive, benefiting multinational corporations and SMEs.
Xie acknowledges that her unit originally focused on local businesses. About half of her customers’ deposit balances are now held in a foreign currency as markets evolve. This reflects their international outlook and recognition of StanChart as a bank with a multi-market presence, mirroring the regional footprint they aspire to or already operate in.
The urgency of crossing borders intensifies as supply chains adapt to the pandemic. In the past, large multinational corporations, the customers of these SMEs, prioritised efficiency. Everyone in the ecosystem could depend on just-in-time logistics for delivery.
After the pandemic and amid the ongoing standoff between the US and China, the keyword is now “reliability”. Vietnam — one of the core SME markets identified by StanChart — is at the receiving end of more investments in production capacity as more manufacturers hedge their exposure in China. Malaysia is also benefiting, so it makes sense for the bank to enhance its proposition across these various markets, says Xie.
Competition
n SME customers are not restricted to those in manufacturing and logistics. Xie notes that StanChart can cater to various industries, including trading and e-commerce. She also mentions that the industries with the most promising growth potential can vary by market when asked to single them out.
However, it is more apparent that some sectors are under more strain than usual, such as construction in China and manufacturers that still rely heavily on labour. In contrast, growth occurs in other specific areas, such as industrial parks in Vietnam. These parks are bustling with demand for new spaces from manufacturers in Japan, Korea and China.
Singapore and Malaysia have their respective traits, observes Xie. For example, Singapore is an international hub, an open economy that serves as the regional treasury operations centre for companies setting up capacity in, for example, Penang — or, for that matter, other parts of Asean — she adds.
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The markets and dynamics outlined by Xie are also observed by other banks. StanChart competes with other multinational banks within an SME segment where strong local lenders operate.
Xie acknowledges that the local banks have a certain advantage in their extensive physical presence and know the community well. Yet, she claims that StanChart’s unique traits position it well to serve SMEs. Firstly, compared to other multinational banks, StanChart is structured differently, offering a dedicated proposition for SMEs. In contrast, other banks often group SME customers with larger ones, potentially neglecting the priority service they could receive.
StanChart provides SME customers with user-friendly tools and apps, offering convenient access and transaction flexibility. The bank recognises that SME owners often handle transactions personally due to the absence of dedicated finance teams, akin to consumers managing their accounts through mobile apps. “We borrow that digital design mindset of consumer banking and put this into SME applications,” says Xie.
As the SME customers grow, they might undertake more ambitious fund-raising exercises and not just borrow. And that is when Xie’s unit works closely with the investment banking side of StanChart. As these SME customers reach a certain size, Xie is happy for them to “graduate” into the care of her colleagues running the business units taking care of these newly-emerged multinationals.
There are SME customers, given the niche nature of their business, being perfectly fine staying as a small, local enterprise instead of chasing growth across borders, says Xie, citing an example of a local company that is a key supplier of coffee to coffee shops here. This particular company, she adds, has kept up with the changing market trends and adapted its business models — but at the core — it remains an SME running a very resilient business across generations.
StanChart has set growth plans for its business banking unit. It aims to double its business volume through organic growth, as outlined in a fiveyear plan starting in 2022. Xie says because there are enough opportunities in the various markets, the bank has not thought of acquisitions or inorganic growth, but it is actively looking for ways to work with partners like e-commerce players to help capture the growth.
“In a way, it is about having additional capabilities to enlarge the catchment area of the SME population,” she explains, adding that the bank is on track to hit the growth target.
Growth accelerators
Banks have found it easier to expand their SME business in multiple ways. The pandemic served as a catalyst, with various governments introducing support and funding initiatives, recognising that their SMEs often form the backbone of their economies.
Some of these schemes include the co-funding element, where governments will match what the lenders are willing to dole out. Or, there is some form of guarantee or backstop put in place with taxpayers’ money, which drastically reduces the risks banks have to stomach and, by doing so, boosts the confidence and health of the economies. “Every government is very proactive with that,” she adds, referring to Singapore, Malaysia, Hong Kong and India.
Another factor is the easier availability of sound data to help the banks decide. Specifically, most markets StanChart operates in have in place credit bureaus of various kinds, where banks can buy data related to specific individuals and businesses and make their lending assessments more quickly, and, by extension, grow their loan books more rapidly if they want.
“With all this development on the digital infrastructure, we’re able to get a digital profile of the client, which is a lot more comprehensive. It is also, in a way, making financing more accessible to SMEs,” says Xie.
