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.
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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.
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.