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Hong Kong has been knocked off its pedestal.

Singapore bankers are Standard Chartered's new darlings

Standard Chartered Bank

Standard Chartered have just released its Q3 results. The bank had a successful three months when it comes to profitability.

With pre-tax profits of $1.4Bn up 40% on Q3 last year and a $300m improvement on analyst estimates, Standard Chartered benefited from rising rates. As usual, its highest performing market was Asia. However, its primary profit-driver this quarter was a break from the norm. 

In most quarters, Standard Chartered's Hong Kong bankers are the major source of profit for the bank. But in Q3 it was the Singaporean employees that made all the difference. 

Asia as a whole is still Standard Chartered's most important market. In Q3, the bank made around $1bn in profits there. around 2.5 times all other markets combined. However, while the bank's Asian profits were up 19% from last year, pre-tax profits in the key Hong Kong market fell, from $506M in Q321 to just $324M this year. 

While Hong Kong languished, Standard Chartered's Singapore operation had an excellent quarter. Operating profits in the region rose 156% to $282m. Underlying pre-tax profits of $345m were up 80% to exceed Hong Kong's $324m. The return on tangible equity at Standard Chartered's Singapore business was 20.2% in Q3, the highest in all its markets and nearly double the 15% it made in Hong Kong. 

What happened? There was the launch of Trust, the digital bank in Singapore in August, but this is unlikely to have made much difference (although Stan Chart said today that it's "leveraging" Hong Kong earnings to get Trust up and running). It surely helps that Singapore hasn't been afflicted by write-downs.  Mostly, though, Hong Kong's slump was down to rising credit impairments and the knock-on effect of issues in China, which is suffering at the hands of the real estate markets issues and pandemic restrictions.

The obvious implication is that Standard Chartered should be investing more in its Singapore business and investing less in Hong Kong. It may also want to invest more in its macro traders, whose revenues rose 36% year-on-year in Q3. This wasn't bad, but was considerably less than the doubling of comparable revenues at Deutsche Bank and Barclays. 

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AUTHORAlex McMurray

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