Being a major retail bank in Asia may be a blessing and a curse, the emerging markets' major discovers.

Despite the considerable overhang of a U.S.-China trade war, Standard Chartered – which generates the bulk of its earnings in Asia – reported a $2.5 billion profit before tax in 2018, a 6 percent increase from the previous year.

Over the same period, the private bank widened pre-tax losses from $1 million in the previous year to $14 million in 2018, despite a 3 percent rise in operating income at the division which includes its retail bank.

Industry Watchers Disagree

A spokesperson for the bak was quick to attribute the increase in income to both retail and wealth management, saying it was a result of «improved product margins across Retail Deposits and Wealth Lending and higher Managed Investment income».

Industry watchers disagree. Although income from wealth management rose by 2 percent in 2018, income from retail products increased 5 percent in a year that was marked by the bank investing in its high-end client servicing business rather than its retail bank.

Hard Pressed CEO

«The two businesses have been clubbed together but one is in start-up mode and the other is a cash cow,» says one previous employee at the bank referring to wealth and retail. He is not completely off-piste.

Revenues garnered by the wealth division have consistently struggled to top those of cards and personal loans – a relatively lower risk business with higher margins. For a traditionally risk-shy shop, the choice seems to be a simple one. Not surprisingly, a CEO promising serious cost cuts ($700 million over the next three years) and a dramatic increase in return on equity – like Bill Winters is – will be hard pressed to justify making any further serious investments into the wealth business.

With the Uber-Wealthy

In line with that expectation, operating expenses at the private bank fell by 6 percent in a year when its closest competitors in wealth management – Singaporean giant DBS for example – continue to invest.

«It is a tough bank to attract serious private banking talent to,» says one headhunter in Asia. Ironically enough, it is the brand’s strength in the retail space that undermines its cachet with the uber-wealthy.

Deep Relationships

That, and the fact that it does not have the product manufacturing capabilities or capital market access of wealth powerhouses like UBS or Credit Suisse that have strong investment banking franchises or Citibank which can offer best-in-class global markets capabilities.

An alliance with Leonteq to boost its structured product repertoire will be hard pressed to make up for this gap, especially given its retreat from the private equity business which many would assume is a natural fit for bank that has deep relationships with small and medium-sized enterprises in one of the world’s most interesting private equity markets.

Loftier Ambitions

«Its DNA is of solid retail, merchant and commercial bank, that is where it has a clear advantage,» says the ex-employee. But it is an advantage that may not allow for any loftier ambitions.