It was in 2015, when banks in the region attempted to weather a slowdown in the global economy that Standard Chartered’s Regional Management Team for Africa and Middle East led by Sunil Kaushal decided “securing the foundations” was the need of the hour. “There were a lot of questions around our capital levels and whether our portfolio was of the right quality and adequately provided. And we needed to address that,” he says.
As Standard Chartered consolidated its operations across the world to deliver a cost efficiency program of USD 2.9bn by 2018, Kaushal was promoted to the top job in the region in July the same year. A thirty-year veteran of the industry, he is now one of the bank’s four global heads, overseeing all of Africa and the Middle East including Pakistan, and responsible for leading a remarkable turnaround in the emerging market lender’s operations in the region.
“When we look back over the last couple years, Standard Chartered is a very different bank now in terms of the overall risk profile. The quality of our portfolio, capital levels and liquidity are now very strong, and there and there’s a strong foundation in the conduct, compliance and control culture, where previously these urgent issues were bogging down the bank. It’s a big change,” he says. Standard Chartered’s success story is evident in its figures: The bank posted $3.0bn of profit before tax, a 175 percent increase from 2016 and restored issuing dividends first suspended in 2015 when it posted its first annual loss in a quarter century. The Africa and Middle East region, of which the UAE is a part, posted profits before tax of $642 million, which represent a 49 percent jump from the previous year. Since 2015, the year when Kaushal was appointed, Standard Chartered’s profits in the Africa and Middle East region have grown by over 325 percent.
The turnaround is the result of a “laser sharp focus on managing the cost base and making room for investments”. Those investments have doubled since 2014, according to Kaushal, and have prepared the bank to benefit from encouraging structural growth trends in the region: a growing young population, and massive infrastructure development.
“This is very important,” says Kaushal. “When oil was at $110, there was a lot of liquidity sloshing with local banks which were able to satisfy investment demands in the local economy. But when oil prices crashed, the demand for capital continued,” he says. Unable to tap into local banks, that demand looked to the debt-capital markets to be satisfied. GCC governments raised $38.9 billion in debt capital in 2016; a figure that was surpassed with $57.4 billion in issuances in just the first half of 2017.
“It’s an outrageous amount of money. Instead of having local banks going out into the international markets to raise funds and finance projects, why not have international banks themselves participate locally?” he says. Standard Chartered relied on that very phenomenon in a development that has “paid off very well, says Kaushal. “Through catering to sovereign funds, Tier 1 banks and larger corporates, our share and profits among all international banks in the region has been one of the highest.”
The region is going through a structural change, according to Kaushal. “Generally, in the short term, reforms might slow down activity. But if you take the longer term, when you’re a bank such as us that has been around for over 150 years, you’ll see that these reforms are going to make the economy more sustainable. A broader revenue base, with funding on commercial terms in projects that are viable and participation from both governments and the private sector are all encouraging signs for growth. And you have to see, we’re only just beginning to scratch the surface of private sector participation in the economy,” says Kaushal.
Still, Kaushal remains modest when discussing the bank’s improved fortunes, asserting that the bank has done well, instead of tremendously well, and is best poised to do better. “We are seeing a return of topline growth. But we’re not looking for runaway growth. We have to be realistic,” he says. “Banks are a mirror image of the underlying economies, and the economies are growing just upwards of one percent.”
Kaushal’s attitude espouses being reverse averse and eschews brash from brash optimism, but it also belies an enthusiasm for a new digital world and future where inclusiveness isn’t binary that could almost see him being described as a millennial at heart. That he prefers “experiences over shopping,” parellels how he has trouble hiding his enthusiasm when speaking about Standard Chartered’s first fully digital bank in Cote D’Ivoire in Africa. “Retail is a high returning business, but footfall in branches is declining as clients prefer online experiences,” he says.
The first fully digital bank in Cote D’Ivoire in Africa “is a low-cost pilot programme that will help us provide a best in class digital digital offering and which we will be able to roll out across the Middle East and Africa soon. It’s a very exciting proposition,” he says.
Kaushal’s push to invest in digitising Standard Chartered’s own internal operations, what he refers to as “doing more with less” is a reflection of being “conservative with our cost base.” The bank’s restructuring in 2015 prompted a revision of its management layers, span of control, and whether the distribution of its retail branches would be best serviced digitally. Kaushal acknowledges it has required the bank’s human resources to double their output, but as the bank continues to chart a growth course, it’s also giving staff a chance to contribute to a bigger agenda.
Standard Chartered’s employees are vested in its interests, according to Kaushal, because of an overarching diversity and inclusiveness agenda that drives home the point that the bank is also behind their own wide-ranging goals, says Kaushal. “The leadership goals and demographics that matter to us don’t stop at gender, but include nationality, demographics, and recruiting the differently-abled as well. Sitting in Dubai, we have talent coming in locally as well as from all over the world, and everyone needs to understand why to be sensitive and appreciative of everyone.” Chaired by Kaushal himself, Standard Chartered’s diversity and inclusion council is seeing a difference being made already. “We made a commitment to have 30 percent of our senior leadership roles staffed by women, and we’ll be able to announce that milestone being reached in just a few years.”
As the bank continues to take up a greater role in the region’s economic landscape, getting employees to “buy in” to the plan comes before even attempting to pursue it, according to Kaushal. “A top down approach where you just try to ram it through to get things done is never going to work, unless perhaps you’re in a family run business, not in a multi-national corporation. You need to get everyone to believe in what you’re doing. My strategy has always been to build the framework, get people together and then get them to own it and drive it,” he says.”
Mohammed Abdel Bary, Regional CFO, Africa and Middle East
Our 2017 results are a clear testament to the strong work and the progress we continue to make against the strategy we set out at the end of 2015.
Our foundations are now secure. We have tightened up on costs, cleaned up our loan book, and improved our risk controls. For the bank, globally, loan impairments in 2017 were half what they were the previous year. Our AME region had a good year and its performance stabilised in 2017 despite severe economic challenges. We remain confident that the opportunities in Africa and Middle east will support long term sustainable growth for the Group. Operating income was up with resilient performance in Africa where income was also on the rise.
As we enter 2018 we will continue to build on our income momentum while remaining focused on returns. We have demonstrated that we have a strategy that will allow us to realise our full potential, and we have the people, the resources and the will to execute it. We will continue to invest in digitisation as a key enabler to deliver our strategic targets. Governance, conduct and controls will remain to be our focal point as we selectively grow our business.
Philip Panaino, Regional head, transaction banking, Africa and Middle East
Corporations are looking beyond their organisational boundaries, to ensure that supply chains as a whole are secure and equipped to deliver growth, and to manage risk and liquidity effectively. Meanwhile the client definition of a financial services provider has changed in line with evolving technology and shifting trading patterns.
As global supply chains continue to grow, supporting them is a very relevant and compelling proposition for our clients. We call this Banking the ecosystem. It is where we connect clients’ ecosystems (their buyers and suppliers) and integrate their financial, informational and physical flows to optimise their working capital, helping them grow and compete globally. We do this by using data and technology to leverage the combined value of our corporate, commercial and retail bank to support our clients, their buyers and their suppliers. We continue to play a leading role in digitisation and innovation using distributed ledger technology, machine learning and artificial intelligence.
As an example; In West Africa, we support the financing of suppliers to our client, a large multinational company. The suppliers otherwise may not be able to get readily accessible, low cost funding on their own. By leveraging the strength of the buyer-supplier network, Standard Chartered delivered a fully automated supplier financing solution via Straight2Bank, our internet banking platform. In addition, our commercial and retail banks support suppliers with other products such as asset finance to support the same supply chain.
Emmanuel DeGroote, Regional head of compliance, Africa and Middle East
We focus on four areas: Strengthening our conduct so that each and every one of us sees financial crime controls as a core part of the day job; ensuring our compliance systems match the risks inherent in the markets in which they operate; working hand-in-hand with regional client banks across the world to improve practices; and taking the lead on establishing new collaborative models to tackle financial crime.
We play an active role in combating financial crime, while providing quality service for our clients.
Our Group and country financial crime risk committees were established to strengthen governance. In 2015, we launched the Financial Crime Compliance Academy, through which we hosted our first Financial Crime and Compliance workshop for financial institutions and correspondent banking clients in the region.
In early 2017, we brought together over 100 representatives from correspondent banking clients, regulators and law enforcement across the Middle East for the latest in our series of Correspondent Banking Academies.
One of the strategic priorities for the Bank is to participate in and influence industry initiatives in correspondent banking. To that end, we have enacted programmes to address specific regulatory challenges and concerns and have made several hires to strengthen the function.
Millicent Clarke, Regional head of HR, Africa and Middle East
Among our key people priorities is building our leadership pipeline and talent pools. We have put in place a programme to identify and develop African, Arab and female talent into senior roles and ensure exposure to key leadership, forums and projects. For women in senior leadership roles we stand at 25.8% against a target of 26% for 2018 which puts us on track to meet our target at the end of the year.
We have several initiatives across the region, from a development and employee engagement perspective. Two examples are: Our Women in Leadership mentorship programme in Kenya formed to ensure that our women increase their exposure and readiness for leadership roles; and the workshops we run in the UAE to encourage employees to provide feedback on their experiences of working in a diverse environment and how we can make it better.
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