When Citibank exited Brunei in 2014, followed by HSBC in 2018, many felt Standard Chartered would be the next international bank to follow suit. Coupled with Brunei’s prolonged economic downturn from 2014 to 2017, the banking industry was undergoing major shifts that would permanently affect the financial landscape. But Standard Chartered launched a campaign saying they were “here for good”, committed to growing their business in Brunei and the rest of ASEAN.
We sat down with SCB’s newly-appointed CEO, Pg Aki Ismasufian Pg Hj Ibrahim — only the second local CEO to be appointed in the bank’s 60 year history in the sultanate — about his views on the country’s economy, plans for a Brunei stock market, and how China’s economic might will shape Brunei and the rest of the region.
After the closure of HSBC in Brunei, SCB ran a marketing campaign that they were “Here for good”. What is the current outlook like for Standard Chartered’s business in Brunei and what are the plans for the next five years?
Pg Aki: SCB has been here for 60 years now and we are the only major international bank in the country — and the longest bank in the country to date.
We have grown tremendously during that time, especially in terms of supporting the country’s national agenda. What I forecast in the next five years is to continue growing the Brunei franchise.
The economy in Brunei is an oil-dominated economy — when oil price goes down, business will also go down and [it will be] very slow. But when the economy goes up, banks will do well… So I think for us we are happy to continue to invest in our franchise here and look at where we can help the country as a whole.
The banking landscape has changed over the last five years, and you have seen the market dislocation of the banking industry – HSBC left, Citibank left. When two international banks have left, many people thought the next one is going to be us. But we have never thought about this, we focus on our niche.
Last year was our milestone, 60 years, and it was a very successful year for Standard Chartered Brunei, in comparison to 2017. Our revenue has seen double-digit growth – overall we grew 15 percent, we grew retail by eight percent, we grew corporate banking 67 percent.
What was the main driver of that growth?
Pg Aki: Because we bank all the multi-national corporations and FDIs [foreign direct investment] projects as well, so it was exponential growth for us.
There are other factors as well – we had fantastic recovery on our bank debts, we had a good team who managed to recover our debts and our operating profits were 78 percent higher compared to 2017. These are significant figures showing the confidence of our clients, of our key stakeholders from the government, as well in our promise to continue serving Brunei.
We are the only major international bank that has a presence in all 10 ASEAN countries, which is an advantage for businesses that want to expand around the region. We continue to assist FDIs to the country through our network of clients.
So our plans for the next five years is to continue to transform digitally; grow the emerging pipeline of affluent customers and clients… and continue to lead our wealth management business offerings. We will focus on growing further our corporate banking business to promoting FDIs, and partnering with the Brunei government as a whole.
Pg Aki: In terms of FDI, if you look at the whole country’s economy, we are still lacking in manufacturing and industrialisation… I think moving forward, the banks have a very strong appetite to support FDIs into Brunei. Standard Chartered has a strong advantage as well, because of the international network we have, because FDIs are mostly from major multi-national corporations who bank with us globally. We support them from both ends, from funding, cash management and also employee banking for their staff.
Pg Aki: I think China’s Belt and Road Initiative (BRI) has the potential to be the greatest force for globalisation in this century.
Standard Chartered is one of the major banks, or rather the one bank for the BRI, so we support the Belt and Road Initiative across any related projects.
Standard Chartered signed an MoU with the China Development Bank in 2017 formalising a strategic partnership to facilitate trade and investment to China’s Belt and Road Initiative. We provide financing of up to US$20 billion for BRI-related projects and initiatives.
In Sri Lanka for example, there is a lot of Chinese investments going to building bridges, roads etc, so these companies are the ones looking for financing.
But there has been a lot of consternation over the debt risks countries take on when borrowing money for these massive infrastructure projects, Sri Lanka being an example of that. Does Standard Chartered forsee any pitfalls?
Pg Aki: None that we are aware of, or we would not commit US$20 billion if we were not confident on supporting this. Obviously, we look at what kind of projects are [tabled] in terms of supporting companies and governments. Out of the 60 Belt and Road country markets, we are covering 45 of them.
There’s a few financial institutions that provide funding to develop [BRI projects], not just Standard Chartered, also Chinese banks, the Chinese Development Bank, Asian Infrastructure Investment Bank – it is quite encouraging to see that there’s means of accessing funds for development projects.
In terms of Bank of China’s (BOC) presence in Brunei, how will it shape the banking landscape here?
Pg Aki: It is encouraging to see more competition, more competition leads to a better economy.
I can’t fully comment on BOC’s operations and business here, whether they just focus on banking Chinese companies [in Brunei] or the people tapping into those companies.
But I think for the Chinese companies coming into Brunei, I see it as a good step to leverage on the country’s focus on FDI. Chinese investment for industrial or non-industrial projects has its advantages.
For example the Hengyi project has the potential of contributing billions to GDP, but at the same time it is also about sharing skills and knowledge as well. Spin off opportunities can be advanced as well.
The latest banking industry report from AMBD states that the industry’s assets rose to 4.8 percent from $17.5 billion in 2017 to $18.3 billion in 2018, with high liquidity of 51 percent. What does this indicate about the overall banking industry in Brunei?
Pg Aki: It’s showing that more people are borrowing; more people are lending money… My personal view is that it shows a good recovery for the economy because things are moving. Maybe not at the pace that everybody would like it to be, but it shows some progress. So corporates are borrowing for projects… whether they are FDI or oil and gas projects, they need capital funding.
Every bank [in Brunei] has high liquidity, so similarly for SCB we would like to continue lending based on our strategic focus.
So in the past GLCs weren’t allowed to borrow from banks or it just wasn’t the done thing?
Pg Aki: Last time there was no proper corporate governance for GLCs before the creation of Darussalam Assets… Historically when they wanted to expand they would go to the government and ask for $10 million, for example… So I think when Darussalam Assets was established the first key portion they brought to the table for all these GLCs was corporate governance.
When I say corporate governance, it’s proper corporate governance where they are starting to look at guiding them, proper decision-making… So now GLCs are more independent, they can go to the banks [to seek financing], and every bank is supportive. GLCs are one of the key focuses for [economic] growth.
In the future they can not only go to banks for financing, but can also go through the Brunei stock exchange for investment.
What’s your view on the eventual establishment of the Brunei stock exchange?
Well, I think it is still too early to comment on this one, because the stock exchange is still being [developed] by the government.
But we as a bank — not only SCB, but as a banking industry — are keen to support the establishment of the stock exchange because in other countries it does help provide credibility to companies, the local corporations and GLCs.
At the same time, I think it can also create a competitive environment in terms of growing the economy. It needs to start somewhere, so the bank is very keen to support in any way on this one. For Standard Chartered, being a global network bank, we have some expertise in the stock exchange because we do have stock exchange businesses in some markets that we operate in, such as Malaysia and Singapore, where we provide the kind of A to Z kind services to help companies get listed on the stock exchange.
Portions of this interview have been edited and condensed for clarity.