After decades of carving out a niche serving the affluent market here, Standard Chartered Bank (StanChart) surprised locals with the launch of its digital banking joint venture Trust Bank on Sept 1.
The bank’s tie-up with FairPrice Group boasts connections to the latter’s loyalty programme Link Rewards, while Trust Bank’s savings account promises a base interest rate of 1% p.a. on deposits up to $50,000. The product suite also includes the Trust credit card and family personal accident insurance by Income, another key piece of NTUC.
The partnership, however, spurned Oversea-Chinese Banking Corp (OCBC), which had run co-branded cards with the NTUC FairPrice supermarket chain for 18 years. OCBC’s Plus! card partnership with NTUC will expire at the end of January 2023.
The aggressive rollout saw Trust Bank signing on 100,000 new customers within 10 days of launch, and the digital bank doubled that number before the month was over.
Judy Hsu, the bank’s CEO of its consumer, private and business banking, declined to comment on the dollar figure that the bank offered to woo NTUC.
However, she is clear that a lot of work has been done that does not make headlines, and a lot more work is still needed. “We don’t shout enough about all the stuff we do,” she says.
Hence, in an interview with The Edge Singapore, Hsu relishes the opportunity to celebrate the UK-based bank’s successes here. “It’s not because we’re aggressive; it’s because we’ve been banking [in Singapore] for 163 years. We understand the compliance, we understand the regulations, we understand how complex it is. We’re good at what we do.”
Compared to Singapore’s two digital full banks (DFBs) — with one yet to launch — StanChart has a “huge competitive advantage” with its banking background, says Hsu.
Trust Bank’s debut came a day after that of Grab and Singtel’s GXS Bank, which launched with only a savings account. Under the Monetary Authority of Singapore’s (MAS) rules on digital banks here, GXS’s customers face a deposit cap, which will increase progressively.
With the qualifying full bank (QFB) licence StanChart received in 1999, Trust Bank has more freedom than GXS and Sea’s upcoming MariBank.
Hsu says: “I can’t comment on these new players but it’s very clear what MAS wants. Yes, we want to give out digital bank licences, [but] these players must ultimately be on a level playing field in terms of governance, security [and] compliance. You don’t get a pass just because you’re new.”
For all her bullishness, Hsu cannot escape StanChart group chief financial officer Andy Halford’s comments during a recent results briefing.
Neither Mox — StanChart’s digital-only bank in Hong Kong — nor Trust Bank is likely to be generating income for some time.
Halford says: “We’ve got Mox with about 400,000 customers and Trust now moving up above the 200,000 level. The financial contributions for those are still relatively low. Obviously, it does take time to build up the income. But the bottom line is we are very happy to progress with both [Mox and Trust], and particularly the relatively nascent Trust business has seen a very encouraging start.”
A level playing field
StanChart stands to benefit from the regulators’ push for a “level playing field” as much as digital banks like GXS, says Hsu. “As an international bank, it’s not that we didn’t want to serve the heartlander. It’s just that in terms of the licence we had, we were restricted to 25 branches… What digital does for you is it enables you to scale.”
See also: Standard Chartered's new regional wave
The launch of Trust Bank was years in the making. In 2013, StanChart incorporated a local subsidiary: Standard Chartered Bank (Singapore). In May 2019, StanChart completed the transfer of its commercial, private and corporate and institutional banking business to this local subsidiary.
StanChart’s QFB status, as Hsu highlights, allowed it a maximum of 25 places of business (POBs) here.
In 2020, StanChart was named a Significantly Rooted Foreign Bank (SRFB), which raised this number to 50, of which up to 35 may be branches. The new label also allowed StanChart to set up a digital-only bank as a separate unit with a smaller paid-up capital, on a par with the three local banks.
StanChart also has in Singapore a major investor. Temasek Holdings first bought a stake in StanChart in March 2006. As at March 31, Temasek, with its 17% stake, is the bank’s largest shareholder.
Trust Bank not only represents a new chapter for the multinational bank but also new customer segments. “If you look at digital banks around the world, they break even probably after three years and become profitable after four years, because it’s a pretty big investment… But we have to keep investing,” says Hsu.
Hsu is “super passionate” about democratising wealth management, and hopes to add investments and equity trading to Trust Bank’s product suite. “We want to make it a more universal offering, so clients can do more with us… Through digital, how do we create the same kind of quality digital advisory capabilities? StanChart has two million affluent clients [with wealth above US$25,000 or $34,350]. I think we haven’t penetrated as much from a wealth perspective in Singapore; it’s something we are absolutely working towards.”
StanChart’s weight in Asia
StanChart posted on Oct 26 a 40% jump in pre-tax profit to US$1.39 billion for 3QFY2022 ended September. The bank’s shares have gained to reflect the improved earnings and are up 26.65% year to date as of Nov 23, valuing the company at GBP17.06 billion ($27.95 billion).
Despite its UK roots, Asia contributed the bulk of profits, making up US$1.06 billion of the US$1.41 billion in underlying profit before taxes.
Asia’s contribution is up 15% y-o-y, or 19% when adjusted for currency changes. Singapore, in particular, grew its contribution 29% y-o-y.
Europe and the Americas contributed some US$293 million, up 92% y-o-y after currency adjustments; while Africa and the Middle East contributed US$163 million.
On Nov 15, Morgan Stanley upgraded both HSBC and StanChart to overweight from underweight, mainly because they are undervalued. As at Sept 30, StanChart’s book value stood at US$12.43, down 3.9% y-o-y. This is a significant discount to its last done price of 578.98 British pence (677.4 US cents) taking P/NAV to 0.54x.
In contrast, the Singapore banks are trading at premiums to book due to all-round better management and healthier portfolios.
Singapore is a critical business hub for StanChart, says Hsu. “Malaysia, Vietnam and Thailand — these three are all part of the Singapore subsidiary.”
Singapore is “probably the third-largest” offshore hub for wealth management, behind Switzerland and Hong Kong, says Hsu. “Our view is that Hong Kong will remain a financial hub and wealth will continue to grow. It is a much deeper, stronger capital market where people go and list their companies… China has a lot of unicorns and when they want to go public, it’s still going to be in Hong Kong. I don’t see that coming to Singapore; I still think Hong Kong is an important gateway city and financial centre.”
Hsu reports that the Taiwanese have been shifting their money overseas for some time, with this accelerating in the “past couple of years”. “We’re seeing more of that shift to Singapore. The other big corridor is [from the United Arab Emirates] into Singapore and the UAE into India.”
To capture these opportunities, StanChart has been investing in its wealth footprint here, serving both local and international banking clients. According to Hsu, StanChart doubled its team of international banking relationship managers from about 100 in 2019 to over 200 today.
StanChart currently offers international banking in four of its cross-border hubs: Singapore, Hong Kong, Dubai and Jersey. In October, StanChart announced the appointment of former actor James Lye as its global head of international banking, a newly-created role. Lye was most recently head of markets for Citibank International Personal Bank Singapore.
Thus, Trust Bank is but one example of StanChart’s investments into digitalisation. “The truth is: We can rely on people to serve no more than 50% of [our customer base]. A digital platform gives us an opportunity to better serve the other million clients that probably haven’t gotten the same kind of attention,” says Hsu.
“Being able to scale our international business, which is a big part of Singapore, enables us to also better serve our local affluent clients. So, our network is absolutely our differentiator, but by leveraging on that network, we want to be much more relevant here.”
