Standard Chartered has long been a bellwether firm in the Asian banking job market. It makes most of its profit in Asia, many of its global heads are based in Singapore, and it’s one of only three lenders authorised to issue currency in Hong Kong.
Stan Chart’s warning today that income growth may slow this year therefore has implications for the entire market.
Lower interest rates, slower global economic growth, a softer Hong Kong economy and the impact of the coronavirus outbreak will likely result in income growth in 2020 falling below Stan Chart’s medium-term 5% to 7% target range, Andy Halford, group chief financial officer, said in the bank’s results report.
Halford’s prediction is not an isolated one – it follows warnings from other Asia-focused banks about the coronavirus. HSBC last week said it could be materially impacted by higher expected credit losses and lower revenue, either as a direct impact on its Hong Kong and mainland China portfolios, or from “broader impacts on global supply chains”. CFO Ewen Stevenson told analysts that if the outbreak continues into the second half of 2020, the “most extreme” coronavirus “downside” for HSBC this year would be $600m in new loan losses.
OCBC CEO Samuel Tsien said last week that he expects a 2% drop in revenue this year because of the coronavirus outbreak – a similar estimate to that made by DBS CEO Piyush Gupta earlier in February, who put his bank’s revenue hit in the 1% to 2% range.
This month, the impact of the coronavirus on the job market in Singapore and Hong Kong is largely limited to hiring processes being delayed as interviews move to video conferences. However, if banks such as Standard Chartered experience significant revenue falls throughout the year, it will become more likely that vacancies – or even existing jobs – will be cut, say recruiters.
“I think most major banks will make cuts if the economy continues to worsen into the second half,” says a senior Singapore-based finance professional, who asked not to be named. “Businesses such as hospitality, and food and beverages are already badly affected by the coronavirus, and this will eventually spill over into correlated industries, including banking, in the form of non-performing loans,” he adds.
In the meantime, Asia-focused banks are hoping that the spread of the coronavirus eases during the first half of the year. This remains uncertain, given current fears that the virus may become a global pandemic. Standard Chartered said today that the “headwinds” it’s facing are expected to be “transitory”. OCBC’s and DBS’s revenue assessments are based on the virus being brought under control by June. HSBC CFO Stevenson said he didn’t expect the bad-loan impact to be “anything like” as bad as the $600m worst-case estimate.
Photo by Shawnn Tan on Unsplash
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