Standard Chartered, a British bank, is optimistic about the UAE’s future potential and its Middle East and Africa operations.
In the next five years, the developing markets-focused lender expects a much bigger revenue contribution from these areas, according to its chairman.
According to Jose Vinals of The National, the UAE is one of the top five global markets for the London-based bank, and the Middle East and Africa area accounted for nearly 20% of the lender’s revenue in 2021.
“The growth we expect in the next five years for the UAE and the area — Africa and the Middle East — is much larger than the growth we saw in the previous five years,” said Mr Vinals, who visited the UAE and Saudi Arabia last month.
Around 70% of the lender’s revenue comes from Asia, 10% from the Middle East, 10% from African markets, and the balance from its operations in the United States and Europe.
Standard Chartered, which operates in 59 nations, announced a 3.5 percent increase in Middle East and Africa revenue to $2.45 billion in 2021, as well as the greatest operating profit in the region since 2015.
Last year, the UAE operation turned a profit, with operational profit of $242 million, up from a deficit of $110 million in 2020, when the pandemic was at its peak.
“We had a great year, but it’s something we want to improve on.” Mr Vinals stated, “We are quite optimistic about the UAE’s short- to medium-term prospects and are dedicated to assisting the country in achieving its economic ambitions.”
“As a connector of commerce and economic activity in the region, the UAE plays a critical role, and we are a trade bank, so our DNA is very much tied to that of the UAE, and we profit from it.”
In Saudi Arabia, Mr Vinals is as optimistic about the bank’s institutional, advisory, and wealth divisions. As part of its African expansion strategy, the lender plans to launch its first full-fledged branch in Egypt later this year.
Standard Chartered believes Asia will continue to be its main source of growth this year and next, and that Russia’s military intervention in Ukraine would have no influence on its operations or profitability. The bank has no operations in Russia or Ukraine, and its exposure to clients in these countries is small.
Because banks have minimal exposure to Russia, Mr Vinals does not envisage a systemic weakness, an impact on earnings, or an increase in loan losses in Europe’s banking industry.
He does expect European central banks to follow the US Fed’s monetary tightening policy, which is due to begin later this month, because the EU is more affected by geopolitical instability than the US. The speed of rate decisions in Europe, on the other hand, is likely to be slower.
“I have no doubt that higher interest rates will continue to be pursued. “The question is whether we’ll see… some impact on the rate at which interest rates rise,” he said.
“I wouldn’t be shocked if European central banks continue on a gradual withdrawal [road], but with a little more caution than the market anticipated before the Ukrainian incursion.”
Mr Vinals anticipates the US central bank to raise rates six times this year and next, at a rate of 25 basis points each time, depending on inflation and other factors.
The Ukraine-Russia situation has heightened uncertainty, but he believes there are enough opportunities for the global economy to thrive after pandemic-related hurdles have passed.
“Remember, the pandemic is now much more under control in most parts of the world,” Mr Vinals said, “though there are still some obstacles.”
“The fact that economies are still recovering and reaping the benefits of opening up will continue to support global growth.”
Despite the “turbulence we are seeing right now,” growth is more widespread across economies this year, putting the global economy on “solid footing.”
Despite pandemic-related challenges and the development of new Covid-19 variations that resulted in border closures and new restrictions in Europe and Asia, the global economy rebounded robustly in 2021. These limits are finally being lifted, and growth has accelerated this year.
Global economic output is expected to grow by 4.4 percent in 2022, according to the International Monetary Fund. Due to variables such as rising prices and supply chain interruptions, this is 0.5 percentage point lower than previous estimates. The fund has warned that the Ukraine-Russia situation will have a negative impact on global growth.
Mr Vinals believes it is too early to tell whether the multiyear highs in oil prices are a one-time occurrence.
“The question is if this is a temporary scenario and [what will be] suppliers’ response,” he said, adding that price stability was in the best interests of both oil producers and consumers.
As supply adjusted to market conditions, he believed “self-regulating mechanisms” will reduce the current high price.
Oil prices have surged dramatically in recent weeks, after rising 67 percent last year on the basis of a solid economic rebound and strong demand for crude. At the close of trading on Friday, Brent, the worldwide benchmark for two-thirds of the world’s oil, rose 6.9% to $118.11 per barrel. The US crude benchmark, West Texas Intermediate, was up 7.4 percent at $115.68.
Brent closed at its highest level since February 2013 and WTI at its highest level since September 2008. During the global financial crisis, Brent touched a record high of $147.02 on July 11, 2008, while WTI jumped to $146.90.
If the conflict in Ukraine continues, analysts and market watchers predict that oil will rise above $130 a barrel.