Transcription
[CC may contain inaccuracies] I do actually want to speak and start off asking about the news of the week, which is this détente of sorts between President Trump and President Xi? There's going to be a meeting on Thursday. Do you see that and think, okay, this is good for my business?
Yeah, of course it's good for the world. If the US and China can de-escalate, it's going to be good for confidence. It's going to be good for growth. Of course it will be good for the U.S., it will be good for China. And these are. So these are all good things. Our business really does well, in kind of any scenario that's not extreme. The extreme scenarios of of the U.S. and China spiraling into a into a really bad place, which it looks possible that I don't think was ever likely. That's a bad scenario. But the good scenarios are ones where the world gets back to business and is focusing on investing, creating jobs, good services, trade, cross-border. And it looks like we're a step in that direction.
How have tariffs affected the bank? I'm really not at all so far. So what we've seen is, on the one hand, a number of our clients are looking to basically hedge their hedge, the outcomes. So there's been much more activity in financial markets. There's been a lot of preemptive funding of of future projects for future capitalism, which is good for business. So that business is probably is as good as it's been.
On the other hand, we know that tariffs defer some investments. So some of our clients who, for example, have been looking at how they would diversify their manufacturing away from China into other markets, including many Chinese companies, in part because of tariffs, in part because that's the nature of the evolution of business nowadays with other countries having low-cost capabilities that can complement China's. Those investment plans go on hold when there's so much uncertainty. So on balance, it's probably been neutral to our business. And but I think clearly in the medium term, decompression of these tensions is going to be good for our business, is going to be good for the global economy.
I was on a panel with the UAE trade minister a couple of weeks ago, and he made this really nice analogy. He said trade is like water. It will find a way to flow. Exactly right. And I wonder whether for you, that's also created an opportunity, the rerouting of some of these trade flows.
Oh, it's a it's a huge opportunity for us because the central bank operates globally, but concentration on the ground across Europe, Middle East, Asia, and Africa, and big business in China and Hong Kong. Every Asean country, every South Asian country, everywhere in the Gulf, in the Middle East, North Africa and Africa. So the investments are led by Chinese companies and other companies are moving into all of our markets where we have a natural home position. Of course, China is investing heavily as well. The new economy sector in China is absolutely booming. And that's a great business opportunity as well. So but you're right, the analogy of water flowing through a rock is perfectly correct and water will come out the back end. And interestingly, when it comes out through, the rock is cleaner than it was when it came in. We have to credit the UAE trade minister with Dr. Thani.
Look, let's talk about the Middle East and you speak to me about it. Which which parts of your business do you see going the fastest in the next couple of years here? So we were present across the Middle East. We've got a full bank here in Saudi, which of course is growing very fast. In your opening comment, you referred to a liquidity squeeze. The flip side of that is we're seeing an investment boom and it's public sector investment and private sector investment that needs to be financed and that is the source of the liquidity squeeze. But this is because the opportunities are so great. So Saudi is booming. Our we've been in the region for over a hundred years. So this is but Dubai and Abu Dhabi, which are together but but distinct, are both growing extremely nicely. We opened a full bank in Egypt three years back. Egypt is on a wonderful path of recovery, which is also great to see. And also across North Africa and the other the other states in the GCC, all of which are doing well at the moment. Yeah.
How about your wealth management business over here? I feel like so many people I speak to are really beefing up their wealth management presence. It's becoming a lot more competitive, is very competitive and it's very sophisticated. But our traditional hubs for wealth management have been Singapore, Hong Kong and Jersey, UK. We've had Dubai, but we've invested like perhaps others through your question, investing heavily in Dubai to serve the region. And I must say that's going very well. Yeah.
And let me ask you a broad macro question, because again, we've got the Fed meeting coming up tomorrow and the US economy seems to be doing okay. But, you know, there will be an interest rate cuts. But at the same time, there were some credit fears that popped up a couple of weeks ago. How do you see those double incidents of tricolour and first browns?
So essentially, we don't have material exposure to either. So so we don't have the insight into what went wrong. But I think we remind ourselves that these are probably one-offs, but the credit cycle is still the life, that there is a credit cycle. We happen to be in a very benign phase of it, but we've never suggested. To our shareholders or anyone else that we would be in a benign phase forever where we don't think that the world has changed. So whether this is the precursor to some a stepping up of credit losses or one-offs, I don't know. I can tell you and I'll be very careful because we report our earnings tomorrow. I'm not out Thursday, actually, so I really can't say it.
Talk about earnings. But broadly, what we said up until this moment is we see no signs of stress in our portfolio. And it doesn't mean that there's problems out there someplace. We just don't see them. Yeah.
What about private credit again, You know, this explosion of interest in the space over the past year. Are investors getting adequately compensated for the risk they're taking now?
Well, that's that'll be the big question. But the a lot of the noise and drama around private credit is, you know, somehow that there's a whole bunch of risk that's hidden in the system because it's no longer in the banking system, and that's going to present some systemic exposure. I don't see it. I think private credit is these are professional investors excuse me, professional investors who are managing the money from pension funds, insurance companies, wealthy individuals. And and they're not leveraged or they're not leveraged very much. And that that, to me says, of course, at some point, if the credit cycle turns down, they'll have losses and those investors will will have lower returns or negative returns. But that's business.
But all said and done, are you positive going into next year?
I'm as I sit here today, I'm very positive for the rest of this year and into next year. We're in a sweet spot of interest rates are high enough to keep things moving. That's the highest to stymie growth. The credit environment, as I said, it remains robust so far. Trade is actually increasing and its and the trade flows are changing in a way that suits our business. So yeah, I'm quite positive. Yeah.
So I want to ask you about something else that I know is a project of yours to digital assets. I interviewed Eric Trump again last week and he was talking about their big believer. I mean, the Trump Organization has a lot of money tied up in crypto, but he made this pretty much, you know, quite outlandish statement saying that traditional banks are going to be pushed out because they're not offering cryptocurrency and the ability to trade or access to cryptocurrency. You take a different approach.
We've taken it, but it's just not correct. We so first of all, to make the distinction between cryptocurrency and then digital assets more broadly. Cryptocurrencies have a place in the world, but they're you could say they're alternatives to conventional money or you can say that they're they're speculative instruments. The digital assets probably most obviously in the current market being stablecoins or variations on the single coin theme. Those are the the lubricant. Those are those are the money that makes the digital economy run, not cryptocurrencies, but but it's U.S. usdc and central bank digital currencies. And many of them, we're just getting started there. So my and we'll be talking about this later in the form, I'm sure. I think we're at the beginning of the phase of one of the most profound evolutions in my working life, which is the digitization of money, the digitization of money. All money will become digital, which is not cryptocurrencies. That's one part of it. Yeah.
But interestingly, the infrastructure to support that digitization of money starts with cryptocurrency, which is why it is Standard Chartered. We have the leading institutional grade cryptocurrency digital asset custodian marketplace, the third largest interim burner of U.S. dollars Stablecoins meaning that the onboarding and operating from fiat to digital, digital Fiat, the first two are digital native companies. Coinbase and Binance were the third. And the reason is that we're playing a critical role in helping the they call it the real economy to bridge between the old way and the new and the new ways.
So one of the obvious challenges there is regulatory divergence though, because there's no streamlining of various regulatory jurisdictions. When you look at the UAE, it's a completely different business climate for these currencies than it is for Europe. So again, I'll make the distinction between cryptocurrencies and other digital assets as a bank. And most banks can't own, we can't hold cryptocurrencies and we're technically allowed to, but the capital charge is so penal that as a practical matter, we can't. So while we have a cryptocurrency trading license for the only GS of banks that has a cryptocurrency trading license and we are making markets in cryptocurrencies, we can't have an overnight position without it being very dilutive to our returns. Yeah, that could change over time, although there's no sign that that's going to happen immediately. But the infrastructure we can own and operate completely and you know, when we get right down to it as a bank, we do the plumbing, we do the plumbing, and and we built that plumbing over seven years. It's best in class. We have great partners like Circle who have come in to partner with us on that infrastructure and other groups, many, many corporations, financial institutions. The custody business is truly institutional grade and. And this is part of the maturation of these markets and we are 100% there. So.