Star Man from the Pru’s results turns spotlight on to Standard Chartered – Bottom Line
It’s little surprise that the chief executives of Standard Chartered and Prudential “have a very good existing relationship,” to quote the latter. Peter Sands and Tidjane Thiam may come from very different corners of the world – Sands was born in England, Thiam in the Ivory Coast – yet these days both can regularly be found in north London, watching their beloved Arsenal take to the pitch.
And they have more in common than just football. Both men are notably bullish about business prospects in emerging markets, and particularly in Asia. Their firms have linked up in many such places, with StanChart selling the Pru’s insurance products to an increasingly affluent client base.
Indeed, Thiam has become famed for laughing in the face of Asian bears. Earlier this year, he described worries about shrinking current account surpluses in emerging markets as “funny”. Referring specifically to China, he said: “This is not the end of the growth story. On the contrary, we’re only just getting started.”
There is a stark difference between the two companies’ fortunes of late, however. Prudential was the second highest riser on the FTSE 100 yesterday, after revealing that operating profits have jumped seven per cent despite the negative effects of several Asian currencies flopping against the pound.
Contrast with StanChart, where operating profits were down 11 per cent in the first half of the year. The firm was the star of the banking world as it rode the wave of an emerging markets boom up until and including 2012, yet has struggled since as economic problems affect many of its key areas.
But if Prudential can thrive in such an environment, why can’t StanChart?
Some say that Sands’ firm has been hit by one-off blips. This year’s poor results are partly due to a 20 per cent dive in income from its financial markets division, prompted by low rates and sluggish markets. Combined with its problems in Korea, these two factors knocked $700m off StanChart’s earnings. That’s some blip.
Coming under heavy pressure at the start of this month, Sands argued that he has been forced to make tough yet bold decisions in recent times (“We have completely reorganised the group, made a number of disposals…”). These impacted on first-half performance, he says, but will reap tangible benefits in coming quarters and years.
If such comments risk Sands becoming a hostage to fortune, his mate Thiam’s latest set of storming results might only make matters worse. Directly comparing a bank to an insurance firm is a tad unfair, and Sands is right that StanChart isn’t doing too badly when compared to similar banks. But in terms of the macro environment, Prudential is proving that Asia is still ripe enough for financial services firms to boost profits.
“Our markets across Asia, Africa and the Middle East are continuing to grow rapidly, and demand for financial services is growing faster than GDP,” Sands said recently. Investors want to see that he can still take advantage of this growth as successfully as his rival CEOs.