Standard Chartered is optimistic about economic growth and the strength of the financial system in the Gulf economies and it does not see the banking sector problems in the US and Switzerland spilling over into wider global economic activity, its chief executive has said.
“In this part of the world, liquidity is very, very flush, capital is available and economic growth is good,” Bill Winters told delegates at the Dubai FinTech Summit on Monday.
Despite challenges, economic activity in the Gulf, including the biggest Arab economy Saudi Arabia, has been “outstanding”, with strong flow of talent and capital resources from East to West.
The London-listed bank — whose underlying profit before tax in the Middle East rose 4 per cent to $819 million in 2022 — sees the role that Dubai has carved out through the Dubai International Financial Centre as “very, very important”, as it has become a hub not only for the Gulf, but also for Africa and increasingly South Asia.
“We only see inflows into this region and at Standard Chartered, a big chunk of what we do is to facilitate and finance those inflows, so I'm very optimistic about the Gulf,” Mr Winters said.
Economies in the six-member economic bloc of the GCC have recovered strongly from the pandemic-driven slowdown.
The UAE, the Arab world’s second-largest economy, grew 7.6 per cent last year, its highest pace of growth in a decade, after expanding by 3.9 per cent in 2021, according to the country's central bank.
It is projected to grow by 3.9 per cent in 2023 and 4.3 per cent in 2024, according to the regulator.
However, the economic picture in most other parts of the world, particularly in the US, the world’s biggest economy, does not match that of Gulf countries.
Although a big recession in the US is unlikely, a period of negative growth is possible, Mr Winters said.
“It's less a question of some sort of massive decline in the US … it’s very, very unlikely,” he said.
The US has an extremely strong economy right now, with great job growth, and it is still a magnet for talent from around the world.
However, it also has high inflation and interest rates — which are going to either stay high or may even go higher at some point until the country’s economy slows down.
“Now does that lead us into a big recession? I think [it's] unlikely. Could we have a period of negative growth? Yes,” Mr Winters said.
The fallout from the failure of a number of banks in the US and turbulence following Credit Suisse's financial troubles that culminated in its forced merger with UBS will remain concentrated in the US and Switzerland, Mr Winters said.
“I'm not really concerned about them spilling over into global economic activity,” he said.
The collapse of Silicon Valley Bank in the US and two other regional lenders — Signature and First Republic — were the three largest recorded since Washington Mutual's collapse in 2008.
The midsized lenders' failure sparked fears that the world would again be faced with a financial crisis, but US Federal Reserve Chairman Jerome Powell last week said the “US banking system is sound and resilient”.
Conditions have “broadly improved since early March”, he said after the Fed raised its interest rates by 25 basis points.
In this part of the world, liquidity is very, very flush, capital is available and economic growth is good
Bill Winters,
chief executive of Standard Chartered
Mr Winters said the “reactive response in the US was perfect, which was to provide effectively a guarantee for access to funding for all US banks for basically all deposits”.
“They stemmed the crisis perfectly at that time”, however the ideal response would have been to have provided liquidity to these “challenged banks ahead of the demise”.
Asked if Standard Chartered's biggest shareholder would support the bank if another Gulf lender “came after” it, Mr Winters said that it had the “capacity and resources” to keep growing and “living an independent life”.
“If somebody wants to come in and talk to us about how they can make us better … yeah, be my guest, we can always have a conversation,” he said.
“We have that responsibility to our shareholders. But I'm very, very confident that we can deliver this package all by ourselves.”
Earlier this year, UAE’s First Abu Dhabi Bank said it had evaluated a potential offer for the UK's Standard Chartered. The Abu Dhabi bank was at “the very early stages” of evaluations but was “no longer doing it”, it said in January.
In February, FAB denied media speculation that it was considering a takeover bid for Standard Chartered.
MATCH INFO
Burnley 0
Man City 3
Raheem Sterling 35', 49'
Ferran Torres 65'
CHATGPT%20ENTERPRISE%20FEATURES
%3Cp%3E%E2%80%A2%20Enterprise-grade%20security%20and%20privacy%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Unlimited%20higher-speed%20GPT-4%20access%20with%20no%20caps%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Longer%20context%20windows%20for%20processing%20longer%20inputs%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Advanced%20data%20analysis%20capabilities%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Customisation%20options%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Shareable%20chat%20templates%20that%20companies%20can%20use%20to%20collaborate%20and%20build%20common%20workflows%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Analytics%20dashboard%20for%20usage%20insights%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Free%20credits%20to%20use%20OpenAI%20APIs%20to%20extend%20OpenAI%20into%20a%20fully-custom%20solution%20for%20enterprises%3C%2Fp%3E%0A
MATCH INFO
Day 2 at the Gabba
Australia 312-1
Warner 151 not out, Burns 97, Labuschagne 55 not out
Pakistan 240
Shafiq 76, Starc 4-52
Killing of Qassem Suleimani
The biog
Favourite book: You Are the Placebo – Making your mind matter, by Dr Joe Dispenza
Hobby: Running and watching Welsh rugby
Travel destination: Cyprus in the summer
Life goals: To be an aspirational and passionate University educator, enjoy life, be healthy and be the best dad possible.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
