Peter Sands, Standard Chartered PLC's Group Chief Executive, was recently in India to flag off road shows for the bank's maiden listing of Indian Depository Receipts (IDRs). In a candid interaction with Rajiv Bhuva, Sands shared his thoughts on the global developments and the bank's experience through the turbulence. Excerpts:
First it was the US, and now Europe. Where is the global economy headed?
There are still a lot of problems with the world economy. The US still has quite a few issues ahead of it. We are through the worst, but not out of the woods yet. The ongoing stress in western countries would mean that interest rates would remain low longer than people thought. And that will create pressures because, in other parts of the world, interest rates would be going up, weighing on the currencies. There are lots of uncertainties.
When do you see the situation improving in Europe given the large rescue package?
Countries like Greece do have significant public finance problems. The markets, though, in my opinion, have rather exaggerated the concerns. It was expected that the euro zone would come together to find a way of dealing with the problem. It took quite a long time for European leaders to act. And it further aggravated the situation.
From here, fiscal consolidation (cutting public expenditures) has to be done pretty quickly and in a credible way, otherwise the market concerns will return.
Given your focus on Asia, Africa and West Asia, how instrumental has your business model been in leaving you less affected than peers?
No international bank has been unaffected by the crisis. In terms of running our business, we have clearly not been unscathed. But on the other hand, we have continued to deliver record profits and incomes. That's because we are very focussed on the Asia, Africa and West Asia markets. We have focussed on the basics of banking and deliberately taken a very conservative approach towards the way we manage our balance sheet. And on the asset side also, we have deliberately diversified our portfolio.
Do you expect the same level of success with IDR as you had with your rights issue?
We are confident that the IDR will be a success. Though the rights issue in 2008 was done with existing investors, the circumstances are entirely different. Here the IDR itself is new and poses communication challenges of what it is and how it works. While many people are familiar with Standard Chartered in India, we need to tell them the story of Standard Chartered outside India. India contributes just 20 per cent of our global profits. It's a positive story. Standard Chartered, as a whole, has done very well, and in India, has done extremely well.
Recently, the banking regulator revived hopes of foreign banks' liberal entry into India. What does it mean for you?
We do see a lot of opportunities for growth in both our consumer and wholesale banking businesses in India. And we see these opportunities even if nothing changes on the regulatory side. To the extent that regulatory changes allow us to do more is great. However, we have demonstrated that even within the current framework we have built a highly successful business.
