Sunday, 09 May 2021

StanChart (Hong Kong) maintained robust capital and liquidity levels despite challenging year

Interviewed By Editorial

Standard Chartered Bank Hong Kong (StanChart HK) ranked third in the Strongest Banks by Balance Sheet in Asia Pacific (APAC) in 2020. StanChart HK and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.

Standard Chartered Bank Hong Kong (StanChart HK) ranked third in the Strongest Banks by Balance Sheet in Asia Pacific (APAC) in 2020. StanChart HK and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.

This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in APAC, Middle East, and Africa regions.

The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. For Strongest Banks by Balance Sheet 2020, the financial information in the first half of 2020 (1H 2020) was collated and incorporated into the assessment of how banks performed during the COVID-19 pandemic.

StanChart HK is third strongest bank in Asia Pacific

StanChart moved one notch higher from fourth place in 2019 to the third spot in the strongest bank ranking in Asia Pacific in 2020. The bank had a strong performance in terms of asset quality, capitalisation and liquidity. It recorded higher loan loss reserves (LLR) to gross non-performing loans ratio, while its gross non-performing loan (NPL) ratio remained low at 0.57%. It continued to be highly liquid with the liquid assets to total deposits and borrowings ratio of 43.5% and its capital adequacy ratio (CAR) rose to 19.5% from 18.9% in the previous year.

Esmond Mok, head of corporate affairs, brand and marketing, StanChart HK, in his acceptance speech said, “The year 2020 has been an unprecedented and very challenging one. Our oath in Standard Chartered, our brand promise, ‘Here for Good’ underpins everything we do. We're committed to doing what's right for our clients, our colleagues and the community”.

The following were especially considered in the evaluation of the banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.

The bank demonstrated strong performance in asset quality, risk profile and liquidity

With the strength score of 4.14, the bank took the third spot out of 500 in the Strongest Banks by Balance Sheet in APAC. The top 20 strongest banks in the region include eight Hong Kong banks, four Chinese banks, three Japanese banks, two Malaysian banks and one each from Australia, Singapore, and South Korea. Overall, Hong Kong banks have once again achieved the highest strength score in the evaluation. The weighted average strength score stood at 3.97 out of 5, followed by Singapore banks (3.67), Chinese banks (3.40), and Australian banks (3.36).

Hong Kong banks have remained well-capitalised and highly liquid. In 1H 2020, the weighted average CAR was 20.6% and liquid assets to total deposits and borrowings ratio stood at 49%. The asset quality was also strong with an average gross NPL ratio of 0.66% and an average LLR to gross non-performing loans ratio of 133% at the end of 1H 2020. However, the banks’ profitability weakened. The return on assets (ROA) of Hong Kong banks on the list averaged 0.9% in 1H 2020, down from 1.2% in 1H 2019.

StanChart HK achieved a high strength score in scale, risk profile, asset quality, and liquidity although its profitability was weaker than other banks in the top 10 strongest banks in the region. Compared to Hang Seng Bank, the fourth strongest bank in the region, StanChart HK recorded a lower loan to deposit ratio of 66.6% at the end of 1H 2020 and its liquid assets to total deposits and borrowings ratio was also higher. It maintained stronger capital and liquidity positions than most banks in the top 10 such as the four largest banks in China and DBS from Singapore. In addition, its gross NPL ratio was lower than the five banks and Japan’s Sumitomo Mitsui Financial Group.

Most banking sectors in Asia Pacific maintained adequate capital and liquidity buffers

Although the pandemic had a strong impact on the profitability of the banking sector in the region, capital and liquidity buffers remain relatively resilient across most markets. Hong Kong and Indonesia have the highest average CAR at 20.6% and 20.4%, respectively. The average CAR of banks in Pakistan, Thailand, and Malaysia were also above 18%.

Liquidity levels are most adequate in Pakistan, Japan, Hong Kong, and Kazakhstan. The average liquid assets to total deposits and borrowings ratios were above 45%. Banks in countries like the Philippines, Pakistan, and Thailand saw improvements in liquidity. Deposit growth outpaced loan growth in 19 out of 23 economies resulting in a drop in the average loan to deposit ratio.

On the contrary, banks in Vietnam face the challenge of maintaining sufficient capital levels. The application of Basel II standard has been slow in Vietnam. Banks were required to meet the CAR requirement of at least 8% starting January 2020. However, the State Bank of Vietnam decided in December 2019 to extend the implementation deadline to 2023 as a number of banks are struggling to meet the Basel II norm.

For the evaluation criteria and full ranking list of Strongest Banks click here

About the programme

The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.

The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.

 

 


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