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RETAIL BANKING | Tim Charlton, Singapore

Standard Chartered's Singapore-based operations to merge with local unit

This will triple its assets and add its large banking businesses.

Standard Chartered will transfer its commercial banking, corporate & institutional banking and private banking businesses, which are operating in Singapore, to its local unit Standard Chartered Bank (Singapore) Limited (SCBSL).

According to a press release, SCBSL commenced operations in 2013 as a wholly-owned, Singapore-incorporated subsidiary of Standard Chartered. At that time, the bank transferred its retail banking and business banking businesses, as well as part of its commercial banking business to SCBSL.

SC said that building a sustainable business in Singapore is its priority. “The Bank regards Singapore as an important market which presents many competitive advantages. This move reinforces its long-term commitment to this market, and highlights Singapore’s importance as a strategic hub,” the bank said.

Subject to legal and regulatory approvals, the transfer of these businesses is expected to complete in the next 12 to 18 months.

S&P Global said the transfer will cause the subsidiary's assets to increase threefold. “We expect the group to keep significant gross nonperforming loans out of the subsidiary and inject a material amount of capital as part of the transfer,” it added.

Moody’s Investors Service noted that some of these additional exposures will subject SCBSL to higher credit risk, compared to SCBSL's current lower-risk and retail-focused operations in Singapore. “The bank's loan book will become more concentrated on industries and single-parties, many of which are active internationally and/or regionally. SCBSL's NPL ratio will decrease after the merger, because problem loans currently at the branch will not be transferred to SCBSL. However, Moody's expects that the NPL ratio of the merged bank will gradually normalize at a moderately higher level in 2019.”

Banks in Singapore are finding it easier to buy and merge their services recently, as shown by DBS' acquisition of ANZ’s wealth management and retail banking business. This has caused the bank's assets under management (AUM) and loans to balloon to $206b, with $18b coming from ANZ.

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