Why Standard Chartered Bank Operates Outside UK

Standard Chartered bank  is a UK bank with its  headquarters in London the assumed hob of financial activities in Europe. Standard Chartered bank has little commercial activities in UK compared with the financial activities in Asia, Africa and some part of middle east.

The question that comes to mind is why did Standard Chartered moved? or why don't they have considerable presence in the UK or even EU at large? Our  submission at EcoInshore is that, there  has always been contagion effects in the UK banking sector where the problem with one financial institution affects the other this is because of the exposure of trading of these other banks in the same market, the risk of one will ultimately affect the other.

The British banks that operates and realise more than 60% of their business activities  in the UK like Lloyds banking group , Royal Bank of Scotland (RBS) fell victim of this contagion effect predominantly caused by the Euro crisis which eventually affects their  balance sheet position and profits.  The unwillingness to diversify and enter into the emerging markets in other to hedge their risk exposure to Euro lead them to government bailout. This is evident because the UK government had to use tax payers money to bail out both Lloyds bank and RBS with the government having 43% stake and 83% respectively.

The two British banks Standard Chartered and HSBC have significantly diversify their business operations in Asia, Africa, Latin America and Middle east see their businesses not only grow compared to its other UK banks but with no bail out from government. 

Standard Chartered bank half year result of 2012 shows Income growth of 9%  these growth are based on 2 elements which are not evident in other UK banks  like  RBS and Lloyds bank.

1. Diversification and multiple income engines with growth rates in double digit : UK and America 26% , China 22% , Malaysia  21%, Indonesia 20% , Korea 13%  and Hong Kong 10%.

2. Cost and risk : The Payment Protection Insurance(PPI) provisions have depleted the profits Lloyds and RBS because of their more reliance on the UK increased their cost. Standard Charted have limited exposure to the Euro though but only acts as a bridge to link the Asia ,Africa with Euro

Though some might argue that Standard Chartered bank is not much of a retail bank that is why they do not have much presence in UK, but they understood that doing business in Malaysia, Singapore , china , Indonesia, Africa and middle east has been the best business decision they make because these regions make up 90% of their operating profit in the half year result.  

Banco Santander: Dividend of diversification and Latin America

Banco Santander is one of the Spanish banks downgraded early this year due to the crisis rocking the Euro but most especially the crisis in the home country where it all started for the bank . The crisis in the home country did not have much impact on the firms profitability looking at her half year report 2012.

" The situation in the country worries me but the situation of the bank does not" those are the words of Emilio Botin the Chairman of Santander. Reading these words gave me the indication how diversification is helping Santander to weather the storm in Euro by looking at the Latin America as the saviour.

Banco Santander entrance into the Latin America has shown significant rise on its impact on the bank attributable profit. The 2012 half year result shows the Latin America contributing 50% of the group's profit with Brazil the major contributor taking 26% compare to UK's 13% contribution. While financial institutions like Royal Bank of Scotland (RBS) and Lloyds bank are struggling with their financial position, Banco Santander is hedging the Euro crisis by looking at the Latin America to cushion the effect.