Titien Ahmad talks to David Edwards,
CEO and president of Standard Chartered First Bank. South Korea,
which has been hit hard by the global downturn, has now become the
bank’s largest market for consumer loans and mortgages – it lent
$25.1bn in 2008 compared to $17.1bn in Hong Kong and $11.3bn in

Standard chartered: consumer loans split, 2008In January 2005, Standard
Chartered trumped rival HSBC in a high-profile all-cash deal of
$3.3 billion to buy Korea First Bank. Last year, Standard Chartered
First Bank (SC Jeil Eun Haeng locally) delivered robust annual
results in a market bogged down by rising delinquency, a volatile
exchange rate and a sluggish export-dependent economy.

SC First Bank outperformed its local rivals in
South Korea last year, posting a 10.5 percent rise in pre-tax
profit to KRW486 billion ($358 million). Its core competitors
registered sharp group income falls, with Hana Financial suffering
the most (see table below).

David Edwards, CEO and president of SC First
Bank, told RBI: “We delivered some great results for
Standard Chartered Group and for Korea. In 2008, the landscape
changed for banking across the world. What was unthinkable has
become fact. It is hard to appreciate the scale of the change in
the banking industry.”

South Korea has now become Standard
Chartered’s third most important market after Singapore and Hong
Kong in terms of consumer banking income, according to its 2008
group results. In terms of consumer loans and mortgages, South
Korea is now Standard Chartered’s largest market. The bank lent
$25.1 billion in 2008 in the market, including loans to SMEs,
compared to $17.1 billion in Hong Kong and $11.3 billion in

Its Korean mortgage portfolio grew by 2
percent in local currency terms last year, although the significant
depreciation of the Korean won during 2008 led to an overall
reduction in the value of the portfolio by $5.5 billion, or 24

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Most of Standard Chartered’s core geographies
delivered strong performance for the year, with seven of the nine
geographic regions recording income of over $1 billion in 2008
(see RBI 608). Singapore saw operating profit before tax
rise 67 percent, India by 37 percent, ‘Middle East and Other South
Asia’ by 25 percent, Korea by 10 percent and Africa by 5

Edwards added: “Standard Chartered [Group] is
one of the few international banks that has remained strong during
the crisis. We had virtually no exposure to subprime and we are
well positioned to continue to support our customers.

“As a result, we have seen a flight to quality
for our banking products. We see the current environment as an
opportunity to strengthen our customer relationships, and to
demonstrate that we can continue to deliver what our customers want
even in a tough environment.”

GDP forecasts for 2009The Korea First Bank
acquisition was initially criticised by many market commentators.
It was a closely fought match against HSBC, with Standard Chartered
having to raise £1 billion in shares to pay for its largest ever
acquisition in cash.

“Korea plays a critical role for our group
performance,” said Edwards. “We are continuing to invest in Korea,
in our people, our products and services, our brand and our
channels. Given our continued investment in Korea, and our future
aspirations for this business, Korea has the potential to be the
single biggest market for the Standard Chartered Group.”

Edwards singled out better product development
in consumer banking as fuelling growth, in particular the
award-winning Do Dream account, launched last November, which
helped increase customer deposits by 73 percent.

The Do Dream product rewards additional
transactions such as automatic salary transfer, utility charges and
internet banking subscription with higher rates of interest of up
to 6.8 percent from a starting rate of 4.1 percent.

Edwards’ team will be focusing on launching
new deposit products as “this is what Korean customers need at this
stage in the financial cycle”. Other products in the pipeline are a
‘spend & save’ bundled product, which saves points earned on a
customer’s card to buy mutual funds, and dental insurance, a first
in South Korea. In the mass affluent market, treasury products such
as premium currency deposits will be the focus for 2009.

The bank is also undergoing a change in
structure to a more customer-centric sales operation under the
‘Customer First’ initiative. It recently announced a $100 million
investment in its branch network in South Korea as part of a
bank-wide plan to upgrade branches across its Asian footprint
including those in China, Pakistan and Taiwan.

For the next 12 months, Edward said, he will
be focusing on a number of core strategic initiatives which
together underpin much of what the bank hopes to achieve over the
next few years. Cross-selling remains one of the biggest
opportunities, not just in Korea but across the group (see
Spain’s Bankinter tops worldwide cross-selling league),
for instance, though the mass affluent segment and customer
acquisition are also important.

When questioned on the likelihood of SC First
increasing its cross-sell in a gloomy economic environment, SC
First Bank’s head of strategy for consumer banking, DJ Choi, told
RBI: “While the market downturn continues to affect the
business, there are sufficient low hanging fruits to exploit.

“Moving the needle on cross-sell will require
firstly, a bundled sales approach targeting the customers’ life
stage needs. Secondly, we need to selectively target and follow up
with newly acquired customers to deepen relationships, and thirdly
execute activation programmes for inactive customers.”

In addition, Edwards said: “We believe there
are unmet needs in the Korean market, especially among affluent
customers. Opportunities to improve non-interest income abound if
we continue to differentiate ourselves by tapping into our global
expertise and specialised knowledge to develop and respond to these
unfulfilled customer needs.”

On 22 April, SC First Bank announced it was
submitting an application to the Financial Services Commission to
establish a Financial Holding Company (FHC). The establishment of a
FHC is expected to enable SC First Bank to leverage the marketing
capabilities in each of its affiliates, “dramatically increasing
cross-sell opportunities across the businesses”, and realising
synergies by sharing core capabilities and services.

Edwards said: “The FHC consolidates our $4.5
billion investment in Korea to date and establishes a platform for
future growth and investment. Establishing the FHC will enable us
to operate integrated business growth, and to co-ordinate the
management of Standard Chartered entities in Korea under one
efficient governance structure.”

The move will, for instance, help the group
integrate Yeahreum Mutual Savings Bank, a local association it
acquired on 25 February last year.

Optimism for the second

The bank is optimistic that the South
Korean economy will start improving by the second half of the year,
though overall, South Korean GDP is forecast to contract by 2.5
percent in 2009 (see bar chart, right).

According to Hong Kong-based David Mann, an
economist with Standard Chartered Bank who covers the Korean
market: “We have noted Korea has been the most sensitive market in
Asia to the global credit crisis. However, our view is the worst of
the panic is over [and] global systemic risks have passed their
worst. Therefore, we are relatively positive from this point

“We expect the domestic economy to go back to
positive growth by the second half of 2009.”

Country survey
South Korea – top six banking groups ranked
by retail deposits
  Group pre-tax profit (KRWbn) Retail pre-tax profit
FY08 FY07 % change FY08 FY07 % change
KB Financial Group(2) 2,716 4,544 -40.2 2,158 4,529 -52.4
Woori Financial Group(2) 1,190 2,923 -59.3 234 1,690 -86.2
Shinhan Financial Group(2) 2,993 3,913 -23.5 3,240 4,158 -22.1
Hana Financial Group(2) 567 1,670 -66 623 1,490 -58.2
SC First(3) 485.8 439.6 10.5 186 199 -6.5
Korea Exchange Bank(2) 1,167 1,516 -23 984 1,318 -25.3
Notes: (1) retail refers to units either wholly or
primarily focused on consumer banking; (2) retail banking profit is
reported as total group banking profit; (3) wholly-owned subsidiary
of Standard Chartered Source: RBI

Country survey
South Korea – top six banking groups
ranked by retail deposits
  Group assets (KRWtrn) Retail loans (KRWtrn)(1) Retail deposits (KRWtrn)(1)
  FY08 FY07 % change FY08 FY07 % change FY08 FY07 % change
KB Financial Group(2) 262 218 20.2 97 88 10.2 159 143 11.2
Woori Financial Group(2) 291 249 16.9 64 62 3.2 144 121 19
Shinhan Financial Group(2) 321 276 16.3 56 52 7.7 105 92 14.1
Hana Financial Group(2) 158 126 25.4 42 38 10.5 84 73 15.1
SC First(3) 100 96 4.5 36 47 -24.2 40 37 8.1
Korea Exchange Bank(2) 104 82 26.8 15.7 14.7 6.8 36 29 24.1
Notes: (1) retail refers to units either wholly or
primarily focused on consumer banking; (2) retail banking profit is
reported as total group banking profit; (3) wholly-owned subsidiary
of Standard Chartered Source: RBI

Country survey

South Korea – top six banking
groups ranked by branches, FY08



Nos of retail banking customers

Cost-income ratio (%)

Return on equity (%)

KB Financial Group





Woori Financial Group





Shinhan Financial Group





Hana Financial Group





Korea Exchange Bank





SC First





n/d=not disclosed Source: RBI