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Bill Winters,
CEO of Standard Chartered Bank welcome to Stanford into the Industrialist Dilemma.
>> It's great to be here.
>> Tell us a little bit about how the bank has changed since you took over a little
over five years ago?
It's been an odyssey, I will say.
So I was brought in, I had left banking,
I didn't think I'd be going back into banking.
And when I got the call to come into Standard Chartered,
I knew that the bank was having some troubles.
I didn't know, quite how large the problems were.
But there was something fascinating to me about Standard Chartered, which was,
I believed that, and turns out I was right on this one.
Very good customer franchise, great brand,
fantastic presence in the fastest growing markets in the world, right?
Asia, Africa, Middle East all that.
I knew that the bank had gotten a bit over overextended in terms
of credit commitments and had some losses.
And I knew that the bank had had some problems with financial crime compliance.
Whenever the chairman of a company calls up and says, would you like to come in and
be the CEO?
The old CEO is leaving, you know it's not perfect.
It's a clue.
And so, and I took the job,
and I haven't regretted it for a day since, I'll tell you, but it has changed.
The bank has changed a lot, and I've changed a lot,
I learned a lot during that time.
First and foremost, what I found was that there had been a period of maybe seven or
eight years, for the bank had done phenomenally well,
at least phenomenally well in terms of the reported figures.
But it was also trading at a big premium to every other bank in the market,
and the reason was that it had generated consistent top line and
bottom line growth over a five year period, which wasn't surprising given
the markets where we were operating which were growing very fast.
In banking, one thing you must be worried about is things that grow too fast.
And especially if the growth is coming from lending.
Because at some point the controls get loose problems come in.
So I assumed that that's what had happened at Standard Chartered, it was.
And when I came in, I immediately imposed a much more aggressive system of controls,
which was 80% the right thing to do and 20% the wrong thing to do.
Right because the bank did need to sort of quantum adjustment.
The wrong thing to do because,
what I didn't realize was how risk averse the bank had already become.
In the year or so before I arrived, they realized the problems that were there and
had already put the brakes on.
I came in and hit the brakes harder, and we've probably adjusted too much.
>> Right. >> So we went through a period of
18 months of very aggressive cost cutting,
very aggressive sort of reckoning with prior control lapses and
very heavy investment in things where we had under invested for some time.
Another way to make your numbers look good is to not invest in your business.
And we hadn't invested in the basics, control infrastructure, technology,
we had big technology deficit.
So the first 18 months was cleanup.
We called it securing the foundations, and we did that.
The next 18 months was positioning the bank for growth again.
And a little bit like, I suppose when somebody has had a horrific accident and
they've lost the ability to walk,
when they relearn they actually have to train their brain,
train their legs, train the body to learn how to shift the weight the right way.
And we had a little bit of that to go through.
And we did, we made good steady progress.
And my last, it'll be five years in June, so my last year and a half or so
has been, you're taking this body that had learned how to walk again, and
then trying to run, and trying to run and keep pace with the market.
That's- >> That's the journey.
So in the parts of the world where Standard Chartered has a big
footprint- >> Yeah.
>> Asia, Southeast Asia, Africa, a lot of volatility.
And in particular, if you look at the relationships between China and
the US, how do these dynamics in a volatile world impact your business?
>> Standard Chattered has been around for
160 years, and I would venture to say, in any one of those 160 years, there's been
a major crisis in at least one of our 70 or 80 markets where we operate.
And in many cases, I think of the Asian financial crisis or
obviously the great financial crisis, A crisis has been in all those markets.
So, we have a tag line which is at the bottom of my business card and
it's here for good, well, Standard Chattered.
It's a nice double entendre, which obviously means we're here to do good.
And it also means that we come and stay.
And so, we've left very few places in those 160 years.
And we left Iran, we left Afghanistan, that might be about it.
And we're still in Zimbabwe, where we can say shame on us.
But anyway, we are the bank in Zimbabwe.
So, we're used to volatility, and we're used to,
in fact that's in our DNA to take a long term view through volatile periods.
So when we look at, I mean last year the two largest exhaustion or shocks for
us were the deterioration in US-China trade.
We are a global trade bank.
We have a very big business in China,
we are the biggest international bank carrying U.S dollars, second biggest.
So we got a big US business, that's a problem for us.
And we contemplate a world where both China and the U.S byforcade fundamentally,
we are all thinking about that, you are thinking about it here,
and, yeah, we'd be a very different bank in that environment.
And what do we need to do to prepare for that?
Because at the end of the day, we want to remain a very,
very important bank in China and a very important bank in the United States.
The protests in Hong Kong, Hong Kong is our single biggest market.
Our name is on the banknotes in Hong Kong.
And Hong Kong shut down for six months or certainly shut down completely for
three months and was stressed for three months.
Hong Kong is going to be okay.
And Hong Kong is going to come out the back end of this, it will be different.
People will say to me, they'll look at me very earnestly and say,
Hong Kong will never be the same.
Hong Kong never was the same.
Hong Kong is one of the most dynamic places on the planet,
it changes all the time, and it was going to change again, in some ways for
the worse, in some ways for the better, it's a very resilient place.
Let's focus on those things that will represent the future of Hong Kong.
Let's invest in those and let's make sure we're there for that.
>> So speaking of volatility, and even Hong Kong,
you set up some digital activities in a digital bank based in Asia.
Tell us a little bit about those activities and
where you see that headed over the next five to ten years.
>> One of the things I find very exciting about Standard Chartered,
which I think would be off putting for a lot of people.
We are not a big bank.
We're a mid sized bank, but we're global.
And when I talk to shareholders or others about Standard Chartered,
they'll frequently say, do you think you can compete given your scale?
I mean, how can you compete with HSBC who's much bigger than you?
JP Morgan, where I worked for 25 years, it was much bigger than you.
How can you compete?
The answer is, in short, well, we can't compete if we're competing on scale.
So we've got to compete on something else.
And we compete on being very local,
whereas not everybody is as local as we are.
We compete on having element of global scale.
So we have a global network which is unique to Standard Chartered,
all across Africa, all across South Asia, every Asian country, et cetera.
But we also need to be prepared to be more nimble
than these people who are much bigger than we are.
It isn't necessarily in our DNA.
I mean, this is a trait that we've got to acquire.
But we are in a position in many of our markets to be a disrupter.
>> Right. >> And
we can be the disrupter who actually has a brand, who has a physical infrastructure,
who has licenses, who has good relationships with regulators.
We're also a highly desirable partner.
So in Hong Kong, we partnered with Hong Kong Telecom and Secha.
Hong Kong telecom is the ubiquitous Telco provider, fixed and mobile,
as well as media.
And Secha Pacific is a travel agent of the world entirely online
obviously based in China, but very big in Hong Kong.
So with these partners, we can offer an extremely disruptive model
in our home market right now, of course, why would we disrupt ourselves?
Because it's going to be disrupted one way or the other, and we want to make sure
that we are positioned to be a not just a survivor, but a thriver in the new market.
And we're also focusing on a segment of the market which is
probably less penetrated, which is the mass market.
So we're building a digital bank in Hong Kong,
I would hope that we're in a position to do something similar in Singapore,
which is another one of our home markets.
We got very interesting partnerships in China with
some of the tech behemoths who really want to capture part of the financial
services profitability without being a regulated bank, so
there's opportunities for us to partner in digital initiatives there.
We have a venture lab that is in the process of,
we just partnered up with a group out of Australia that is
getting into the merchant acquiring business across Southeast Asia.
Yeah, this is a start up, it's a distinct venture within our organization.
So it doesn't have to deal with any of the Standard Chartered legacy.
But it gets to leverage all the Standard Chartered competence.
It get funny that I hank out my, talking with the Hong Kong Virtual Bank
team who said, we're separate from the rest of the bank,
we're in a fancy, we work style location, we operate in the valley way.
But, sometimes the bank can insinuate itself into our processes and
policies make us though, I can see that.
Let's see how we can work through that.
And who is the competition, right?
When we're competing with Alibaba, we're competing with Sanghan.
They don't have the problem,
their mothership it doesn't have this regulated bureaucracy.
Okay, so I guess they're going to launch way before we will,
because they can sort of move so much faster.
They said no no, we're probably going to launch ahead of them.
So, why is that?
Well, what they don't have is the systems that can do the customer's due diligence,
and know your client.
>> Right. >> Sort of checking up front.
And we can just do a drag and drop out of the main bank into the Virtual Bank.
And say, I get it.
So we are able to save six months of development time because we actually
invest in a couple billion dollars into the world class compliance system.
Whether we love the fact that we have to do that or not,
it doesn't matter, we have it.
And the other guys don't have that,
they're going to have to build that out themselves.
>> It's an interesting dynamic you just described.
You look at the history of the bank,
follow started by two people from Scotland.
Largely doing business in Africa and throughout Asia, and
you talked about being in the local market.
How do you think about that?
How should the world view Standard Chartered Bank?
Where is your local market, and where are your home markets?
You're based in London, how do you communicate that to the rest of the world?
>> It's a challenge, and when I think about the structural challenges and
disadvantages that we have, we don't the single big profitable home market.
We are very big in Hong Kong, it's about a third of our profitability.
But if you look at other big global banks, HSBC is 80% or
something greater in China, JP Morgan IS 80% US.
And DBS, which is the big bank in Singapore is 80% Singapore.
So, on the one hand, there's our challenge and we don't have that home market that
they can sort of feed the profits into other markets as you're growing.
And so we've got to find ways to be creative and innovative in other ways to
leverage the fact that actually what we have is a network that's unique.
So, I mean the two Scottish guys they planted a lot of flags back in 1858.
>> So one final question for you, if we look forward ten years from now,
if you and I are sitting here in 2030, what do you think the bank looks like
then, what are the biggest differences and what will be the same?
>> Yeah, we do this kind of exercise from time to time and
we said what was finance going to look like?
And we've got this simplistic view that the transactional elements of finance will
be what we drive into community platforms.
And we are either going to own or partially own some of those platforms,
which some of them have already taken over the world.
So it's unlikely that we're going to be owning a ubiquitous
platform in China anytime soon, or
we're going to be providing services in terms of the mass market.
And in terms of that transaction element to banking,
we're going to be providing services into that.
And those services are going to be databased.
So our massive investment has been in
enabling digital services that the data enlightened, and
we've got a lot of examples where this is working really well for us.
But it's a very different kind of model.
Thankfully in that segment of the market today, we don't make much money.
So we don't have a lot of stake at stake there.
There's another part of the financial life though,
that will have a heavy element of trust and advice.
And I think when individuals are thinking about their health,
their wealth, their retirement and the education of their children,
maybe the purchase of their home, major life decisions.
I think for a long time after the computer is smarter than than the human being,
will still want to have some human interaction.
And we're making that bet.
We've got that brand.
So we're leveraging that brand locally and investing in that trust asset heavily, and
all the digital tools that go around that.
And I think that applies to a big chunk of the corporate business.
We're roughly half retail half corporate roughly.
And our corporate clients rely on us to execute a whole range of things, but
mostly cross border things.
And we're a cross border network bank.
And we've got this this network, and
we can imagine a world where regulation in Africa is the same as regulation in China,
is the same as regulation in Korea, but we're not there now.
And we're not going to be there, I think in my lifetime or
maybe even your lifetime.
So, there's complexity that comes from helping companies work on a global stage.
Those complexities are getting greater, not lesser,
with anti globalization movements and trade barriers and nationalism.
And we're excellent at navigating those things.
So this is good getting back into the, not so much the transactional part of
the financial services, but something where you have some unique insight.
So 30 years from now we'll be delivering that package.
>> The lack of a home base might actually be an asset.
And an unfair competitive advantage for you going forward because you'll
understand the broader geographical issues.
>> Maybe. >> All right, Bill Winter, CEO,
Standard Chartered, thank you so much for coming to Stanford,
a pleasure to have you here.
>> Thank you for having me.
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