Standard Chartered expects its revenue from the Middle East and Africa region to maintain a mid-single digit growth trajectory over the next five years as the growth potential of the region remains intact, despite economic slowdown this year, the bank's regional chief executive has said.
The London-based lender expects all segments of its business to perform well.
The non-oil sector of major economies such as Saudi Arabia and the UAE, as well as markets in Africa, remain in expansion mode that will continue to drive its top-line growth, Sunil Kaushal told The National on Tuesday.
“We are looking at a healthy underlying growth, mid-single digit … that's what we'll deliver as a group, about 5 to 7 per cent,” he said on the sidelines of the International Monetary Fund and World Bank annual meetings in Marrakesh.
“We spoke about Saudi Arabia, we spoke about [the] UAE, we've had very good growth in parts of southern Africa, and East Africa has been pretty good [as well] … so I think it's been overall a pretty decent performance.”
Standard Chartered remains focused on growing its business in the region, which is vital for the emerging market-focused lenders’ global growth agenda.
The UAE, the Arab world’s second-largest economy, is among the top three global markets for Standard Chartered and the broader Middle East Africa accounts for about 20 per cent of the bank’s total global revenue, Mr Kaushal said.
Last year, the lender reported a 25 per cent jump in its underlying profit to $937 million on a constant currency basis as operating income jumped 14 per cent to $2.6 billion.
The drop in the pace of economic expansion in the region this year is largely underpinned by the slowdown in the oil sector as Opec push for caps on production to stabilise the global energy market, he said.
The regional economies, especially those in the six-member economic bloc of the GCC were due for moderation after an exceptional 2022 with Saudi Arabia growing at about 9 per cent last year.
“It's the base year effect in these markets,” Mr Kaushal said. “But, if you look at activity on the ground [for example] in Saudi Arabia, investment is still going on under the Vision 2030 programme.”
The market in the UAE continues to be very strong and after post-World Cup moderation, Qatar is also expected to see accelerated growth next year, he added.
Growth in the Middle East and North African economies is expected to slow sharply this year as the regional oil exporters continue to cap crude production amid stiff global economic headwinds, according to the World Bank.
Aggregate economic growth in Mena markets is expected to drop to 1.9 per cent in 2023, sharply down from the 6 per cent gross domestic product expansion recorded last year, the World Bank said in its Mena Economic Update earlier this month.
The latest forecast is lower than the Washington-based lender’s 3 per cent Mena growth projection released in April.
IMF's 2023 outlook for Gulf and Middle East - Business Extra
Economies in the GCC, which accounts for about a third of the world’s proven oil reserves, grew sharply in 2022 when oil prices surged after Russia invaded Ukraine. They are expected to expand by 1 per cent this year after 7.3 per cent GDP growth in 2022, according to the World Bank.
Standard Chartered is closely monitoring the economic slowdown as well the direction of oil prices amid a rise in geopolitical uncertainties in the region, Mr Kaushal said.
Last year, the bank announced its complete exit from seven markets: Angola, Cameroon, Gambia, Jordan, Lebanon, Sierra Leone and Zimbabwe and said it would shut its consumer, private and business banking in Tanzania and Cote d’Ivoire.
Standard Chartered does not plan to exit other regional markets and it remains focused on investing in existing markets to accelerate growth, according to Mr Kaushal.
The lender is setting up a wealth management centre in the UAE, which will be the third largest in the world after Hong Kong and Singapore.
“We are investing on the ground as performance has been good. Our business model has been resilient,” he said.
The bank is also keen to boost its business in Saudi Arabia to capitalise on opportunities created by the overarching Vision 2030 programme as the kingdom continues to overhaul its economy.
It also plans to launch operations in Egypt, the most populous Arab nation, next month, as it remains bullish on long-term growth prospects of the market, despite current economic headwinds in the country, Mr Kaushal said.
“It's under [economic] stress … but you know, we're going there for the next 50 to 100 years,” he added.
With growth plans for Saudi Arabia and the launch of Egyptian operations, the bank has its “hands full” however, it keeps “reviewing markets” for further expansion.
Mr Kaushal is also bullish on prospects of growth in Africa, where it sees potential for expansion of its trade finance business amid a push for a single market under the African Continental Free Trade Area (AfCFTA) pact.
Standard Chartered expects Africa’s total exports to reach $952 billion by 2035 and AfCFTA will increase that number by 29 per cent. With greater connectivity, intra-Africa trade is expected to reach $140 billion by the middle of next decade, accounting for 15 per cent of Africa’s total exports, the bank said in its Future of Trade: Africa report on Wednesday.
Africa’s trade corridors with some of the world’s fastest-growing regions including South Asia and the Middle East also bode well for the region’s growth prospects, with their combined trade volume expected to reach almost $200 billion by 2035.
The bank also sees exponential growth in the sustainable financing business in the region as both government and private sector clients push for green funding options.
“There are new technologies coming and more investments are going into hydrogen, more investments are going into solar. You've never seen before that sort of investment,” he said.
“The diversification is real, and that's what is very exciting.”
