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Fitch: StanChart's Korea Sales Signal Restructuring Progress
June 24, 2014 / 3:27 AM / 3 years ago

Fitch: StanChart's Korea Sales Signal Restructuring Progress

(The following statement was released by the rating agency) HONG KONG/SINGAPORE, June 23 (Fitch) The sale by Standard Chartered of two subsidiaries in South Korea will have a limited direct impact on profitability and capital, Fitch Ratings says. That said, we view the divestments as a meaningful step towards the group's larger efforts to streamline its struggling Korean business and re-orient toward wholesale and transaction banking. The Korean business is core to the group's wider global strategy, and yet has been a drag on performance since 2011. So the restructuring -- aimed at downsizing and transitioning away from retail and consumer finance - is likely to help generate more sustainable profitability over the long term.. In addition to the 16 June sales, the restructuring has included the closure of roughly 40 branches (with plans to close an additional 50 in 2014) and selling KRW8trn of retail mortgage assets in 2012. Further rationalisation in the consumer and retail space should be expected, but this is unlikely to happen quickly in light of Korea's tight labour laws, and the process will keep costs high. Standard Chartered is not the only international lender which has struggled in the Korean retail market. Citi Korea shut down one-third of its branch network in April 2014, while HSBC closed its entire retail business in 2013. The latest divestments are a meaningful signal of the continued restructuring at SC Korea, while it is important to note that they represent only a small part of the broader strategic objectives. The Korean units which were sold (SC Savings Bank Korea and the consumer financing subsidiary of SC Capital Korea) accounted for only USD1.6bn of around USD57bn of SC Korea's assets (total group assets were USD674bn at end-2013). As such, any direct profitability benefits are likely to be small. Furthermore, the retail business still accounts for roughly 40% of SC's Korean assets, indicating that the process of restructuring primarily toward SMEs with international business still has much further to go. Korea is not the only market where Standard Chartered is orienting toward wholesale and transaction banking. The bank has also announced the recent sale of parts of its brokerage unit in Taiwan. This includes margin-loan exposures worth TWD579m (USD19m) at book value and its securities licence for TWD106m (USD4m). Contacts: Sabine Bauer Senior Director Financial Institutions +852 2263 9966 Fitch (Hong Kong) Limited 2801 Tower Two, Lippo Centre 89 Queensway, Hong Kong Jin Hur Analyst Financial Institutions +852 2263 9944 Justin Patrie Senior Director Fitch Wire +65 6796 7232 The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. Applicable Criteria and Related Research: Standard Chartered Plc here Standard Chartered Bank Korea Limited here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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