Western banks undeterred by China-US tensions

Growing geopolitical tensions and cancelled initial public offerings (IPOs) have done little to dampen Western banks’ appetite for Hong Kong and China.

Standard Chartered CEO Bill Winters was the latest executive in recent weeks to signal that a sweeping Chinese government crackdown and rising geopolitical tensions between China and the US won’t derail his lender’s focus and investment in the region.

“We don’t see a structural or fundamental change in terms of the business opportunities for Standard Chartered,” Winters said on a call with reporters Tuesday. Hong Kong’s continuing role as a conduit into Guangdong-Hong Kong-Macau Greater Bay Area mean “the opportunities for us in corporate banking and wealth management will be very, very substantial”.

His comments echo those of other firms such as Citigroup, HSBC and Credit Suisse, which all used earnings to underline it’s business as usual in the Greater China region. That comes despite a broad crackdown by Beijing on industries from its booming education industry to the technology sector last month as Xi Jinping’s Communist Party tightens its grip on the world’s second-largest economy.

The US Securities and Exchange Commission has halted initial public offerings of Chinese companies in response.

International banks have long been bullish on Greater China. Hong Kong has provided growth to international banks as some forms of revenue from their home countries were shaken by the pandemic, while China is viewed as a lucrative area for growth in wealth management.

Strongest region

It’s easy to see why. Asia was Standard Chartered’s strongest region in the second quarter, with profit up 75% to $1.01bn, countering declines in Europe and the Americas. HSBC, which is moving several of its most senior executives to Asia, said on Monday that risk-weighted assets in the region increased by 6% from the start of the year

“We’re investing heavily in the market and investing heavily in China and the rest of the region,” HSBC CFO Ewen Stevenson said in an interview with Bloomberg Television. “We’re very confident about the long-term macro trends in Hong Kong and the rest of Asia.”

Citigroup’s CFO said last week that China’s recent moves to crack down on companies isn’t likely to harm the bank’s business across the Asia-Pacific region. Credit Suisse CEO Thomas Gottstein said that while recent events contribute to “a less predictable short-term situation”, the firm sees “very strong and robust economic development not only in China, but in Asia, that we consider to be very attractive for our business models”.

China’s actions has even boosted business in the region. HSBC said on Monday that the local capital markets had been given a boost by a shift in business from the US as Chinese listings there were halted.

The bank also said about a quarter of a $35bn year-on-year increase in customer lending at its wealth and personal banking unit related to short-term loans in Hong Kong was linked to initial public offerings, where clients borrow money to fund their purchase of shares in the latest listings.

“Hong Kong is the place to be if you want to participate in the Chinese capital markets,” Winters said in a Bloomberg Television interview on Tuesday. “This is the hub of the Chinese capital markets and I don’t think there’s going to be any change any time soon.”

Bloomberg News. More stories like this are available on bloomberg.com