Standard Chartered had a difficult 2014 with a number of divisions including transaction banking, capital markets, lending and portfolio management, and retail products underperforming but the bank remained a leading provider of structured products in the Asia-Pacific region.
Stanchart marketed 120 structured products in 2014 across the region, including 37 in Singapore, 36 in Hong Kong, 33 in Malaysia, 12 in China, and 11 in Taiwan, according to SRP data. More than half of the products sold by the bank were structured deposits (69), followed by equity-linked investments (25), wealth management schemes (12), equity-linked deposits (12), and structured notes (11).
SRP data also shows that Stanchart was the second most active issuer in Asia-Pacific with over US$24.5bn worth of sales and a 7% market share.
The bank also saw two of its most senior structured products bankers leave in 2014, including Ken Olson, global head of equity-linked solutions in Hong Kong, and Ed Steel, former global head of equity derivatives trading and structuring in Hong Kong and London, who joined Nomura's equities team as managing director with a particular focus on equity front office risk and structured derivative products globally.
As a result of poor performance, Stanchart decided to close its loss-making institutional cash equities, equity research and equity capital markets operations in Asia Pacific which did not have an impact in its derivatives operations, which includes structured products, warrants and certificates.
The bank's 2014 results show that income from transaction banking was down by 1%, reflecting lower global volumes in trade finance, while financial markets income fell 11% compared to 2013, driven by low market volatility leading clients to reduce hedging activity and by a decline in capital market income.
Its performance last year was also affected by factors specific to its footprint including renminbi band widening and lower structured notes income in North East Asia, factors that were partially offset by strong growth in cash FX volumes, said the bank.
Despite intense competition, the bank maintained trade margins, while market share rose slightly. Trade balance sheet volumes were lower as a result of management actions and the continuing slow trade environment which saw overall market volumes decline.
The bank's financial markets saw its income decreased by 12% compared to 2013 driven by low market volatility leading clients to reduce hedging activity and also from the impact of RMB band widening in the first quarter of the year. Rates income also fell 18% reflecting lower levels of client hedging due to the continuing low interest rate environment which impacted structured products in particular.
Foreign exchange income fell 7% year on year due to lower spreads reflecting low levels of volatility across its markets although pockets of volatility returned in the second half of the year. However, cash FX notional increased by 47% compared to 2013. Income from FX options was adversely affected by the renminbi band widening, which reduced client demand for hedging, stated the bank.
The bank reported a 22% income fall in capital markets which was affected by margin compression, lower fees and negative mark-to-market movements on syndicated loans.
The bank's wealth management posted an income growth of 17% driven by strong growth in bancassurance income, which benefitted from the renewal of a strategic multi-year bancassurance partnership in the second half of the year. Assets under management also increased strongly primarily in Hong Kong and Singapore due to a stronger value proposition and favourable market conditions in the first half of the year. This growth, however, was partly offset by lower income from structured products which was impacted by low levels of volatility.
Income from retail products fell 4% compared to 2013 due to de-risking actions, regulatory changes and adverse mortgage market conditions in certain markets. De-risking actions included the exit of personal loans originations in riskier segments in Korea and Thailand and the replacement of third-party sales channels with internal staff.
Risk weighted assets rose 5% and customer deposits rose 4% as the bank increased current account, savings account (Casa) balances across the region, with reduced reliance on higher cost structured deposits.
The bank also reported a 10% fall in client income reflecting both "difficult market conditions and the impact of management action to return the franchise to profitability".
Retail clients' income fell 10% mainly due to a loss of unsecured income as the bank continued to de-risk the personal lending portfolio in light of high credit losses; while corporate and institutional clients' income also fell 14% mainly due to reduced financial markets income driven by lower sales of structured products.
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