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Below is the transcript of a CNBC Exclusive interview with Bill Winters, Standard Chartered CEO. The interview was first broadcast on CNBC's Squawk Box Asia on 26 March 2019.
All references must be sourced to a "CNBC Interview'.
Interviewed by CNBC's Nancy Hungerford and Emily Tan
EMILY TAN: Now we just of course heard about your company's earnings. You join it back in 2015. And since then have been streamlining, you cut something like 15000 jobs sold underperforming businesses. But the plans is to keep cutting 700 million dollars in cost cuts over the next three years. The overhaul is still in progress. Where are things going to look like on the back of that?
BILL WINTERS: Well let me get a couple of things right. We cut 15000 jobs and we added 15000 jobs. So we did take about close to 30 percent of our gross expense base out but we reinvested all of that back in the business. So between 2015 and today, our expenses were flat. Our headcount is flat but we've significantly reshaped the business. And you're right we disposed of a few businesses relatively small in the overall scheme of things. Much more importantly we streamlined the organization and we've invested for growth and we've over the past two years we've had some good growth very good growth in the key areas where we've made our investments and we're looking to continue with that growth in the years to come.
EMILY TAN: When you talk about those investments and growth where are you seeing that?
BILL WINTERS: So we have two parts to our business. So about half of our bank is retail so individual customers the other half is wholesale. On the wholesale side of our business, we've seen double digit growth in what we refer to as our network business. So we operate in 65 countries around the world. We have a very extensive operation in transaction banking, cash management, cross-border investment, risk management. Things of that nature that business is booming for us and because of our unique footprint operating in markets across Asia, the Middle East, and Africa, the only international bank operating across the continent of Africa we have a highly valued and differentiated network. That business is booming. The returns are good. It now represents close to 70 percent of our wholesale banking income and we want to continue to drive that hard. On the retail side of the business, the other half, we have a very differentiated proposition with affluent customers. We have an extensive risk management and wealth management suite of products which has performed very well for us. Again growing close to double digits. High returning. Now comprising over half of the income of the bank it was worth less than half when we started a few years ago. So we've got these two engines of growth that are going really well and we're still working through some of the challenges from the previous years but in a thoughtful way.
NANCY HUNGERFORD: But Bill, many analysts shareholders have welcomed them as you have already taken in line with the cost cutting plans. Also some restructuring that you've laid out but there are some skeptics still out there perhaps some of that as evidenced by the share price performance that this is a difficult environment to make money. How do you answer that?
BILL WINTERS: Yeah there are plenty of challenges and I have to say in my decades in banking there's always been plenty of challenges. But what we keep on coming back to is that the core parts of our franchise which represented about a third of the bank three years ago which are now closer to two thirds of the bank. They're growing fast double digits. They're returning well. And that's our future. So that's the source of our investment. And that's despite the challenges in the environment.
NANCY HUNGERFORD: And you're talking about the leverage in which you can control. There are also elements outside of your control. Considering the macro environment you and I had a conversation back in Singapore which was Q4 of last year and things were looking pretty ugly at that time for emerging markets. Now, the picture has changed. We also have a more dovish Fed. Is this encouraging to you?
BILL WINTERS: Yeah I think on balance things feel okay right now. So we know that the global economy has slowed. But there are signs of a bottoming out and beginning to pick up there are signs in China. There are signs in Europe I would say a more tender in Europe. But the idea that we were in in a straight line to a recession you know sometime next year. Looks less likely today. Part of it is the Fed, part of it is the sense that there is progress on the trade discussions between the U.S. and China. Part of it is that we are in a cycle and we've probably gone through the deleveraging period in China. The deleveraging period and some of the rest of emerging Asia. Not completely but there's a sense that we're coming back up and that that's of course encouraging.
NANCY HUNGERFORD: So you don't worry about being hurt in the yield curve flashing recession warning signs.
BILL WINTERS: I do worry about the signals that the U.S. economy in particular is continuing to slow and then inverted yield curve as one indication of that.
The persistently low inflation is another. But I think we've hit something that feels a little bit closer to an equilibrium than what we saw in the fourth quarter of last year.
EMILY TAN: What about to the China trade war that we do have talks going to be taking place in China later this week 28 and 29. You were in Beijing for the China Development Forum. What are you hearing on the ground what is your expectation?
BILL WINTERS: My expectation is that. Well first of all I think both sides want a deal. And I therefore think they will have a deal. How and when it comes I think remains to be seen but it would seem to be in a bit of a [inaudible] for the time being. Things aren't getting worse but not getting better. I sense the very clear determination in China that China is committed to continue to open up when we look at things like the Foreign Investment Law. This is a material step in the direction of addressing many of the issues that the U.S. has been raising for some time. And obviously the law has to be enacted and enforced and some of the spirit behind the law has to match the letter of the law that will take some time to evidence and I think that's a lot of the discussion between the U.S. and China is how do we know for sure right how do we verify. But I'm encouraged by the progress. I think we'll get to a decent outcome. I don't think that will be the end of it. I think this is something that will go on for some time.
NANCY HUNGERFORD: How do the demands by President Trump made business for you in China easier because you do have some very ambitious growth plans in China.
BILL WINTERS: Well. The world is reacting in different ways to the sense of pressure from trying to supply chains are being reconfigured today. Chinese companies are less inclined to be one dependent on the U.S. and two to have their material manufactured exclusively in China. So Chinese companies are investing outside of China for the most part they're investing into the markets where we have a very strong position. Vietnam, Korea, Indonesia, Thailand even India in some cases. So this is actually benefiting us not that that's what it's all about. Likewise, U.S. companies. are redirecting their supply chains. They want to make sure that they've got an alternative to Chinese supply in case things don't go well. So this is actually helping us and it's a shifting supply chains that is directionly favour Standard Chartered bank
NANCY HUNGERFORD: One thing you said about China's determination to do a deal. I'm curious how your view on the U.S. side. Because what has been seen as a big victory for the Trump administration this week with the conclusion of the Mueller probe. Do you think it makes things easier for Trump at the negotiating table harder for China?
BILL WINTERS: Yeah I don't know. Look, people speculate all the time about does the U.S. need to win? Does Trump need to win? Does China need a win? I think these are all tactics. At the end of the day, what the U.S. and China need is to find a way to work in partnership. I think both sides understand that and agree that it's not yet clear that they'll find a way to actually resolve that. But they both want it because they know that the economic growth in both countries will be richer if we can get that kind of an outcome and then we'll see.
EMILY TAN: With the softening of the Chinese economy and basically opening up of financial services to foreign firms. How are you placing yourself in China and capitalizing on potentially what growth opportunities there.
BILL WINTERS: Well we've been operating in China for 160 years. We've been operating in the new China with steadily increasing capabilities in licenses and the like. We've got some very important new capability licenses last year including the ability to be a custodian for local funds. These are indications that China is continuing to open up new sectors to foreign companies. And Standard Chartered is very frequently at the front of the queue because we've been committed to the country for a long time. And I certainly met with the several senior leaders while in Beijing. In addition to the panels and the speeches -- the keynote speeches that were made, I'm convinced that China is committed to opening up. I'm also recognizing that they will expect us to be patient so we always get a bit nervous when we hear about the thousand year plans that might move past my retirement date -- I'm not sure. But the things are happening every day as we see and it's encouraging.
EMILY TAN: And we talk about headwinds we mentioned the trade war we talked about of course the potential recession in the United States. What about Brexit? We're trying to get -- Theresa May is trying to get a deal across so they pushed out -- potentially the deadline to May 22nd operating in the United Kingdom. How does that make things for you?
BILL WINTERS: The one thing I'm sure about is -- you know Standard Chartered is ready for any scenario. I think every bank is -- the Bank of England, the regulator APRA have been very clear, that we've got to be prepared for the worst case scenario. So I don't think there's a likelihood that the banking system has a big challenge. It's been expensive it's been inconvenient and the uncertainty is very bad for the economy. That much we know. My concern right now is it looks reasonably likely that we'll have an extended period of uncertainty -- so will be on May 22nd. For example. And that is really bad for the UK economy. So I would only encourage Parliament to -- I read in the press this morning has now taken over the schedule to get their act together deliver an understanding of how parliament intends to move forward in a realistic way. You know not this pie in the sky stuff where they ask Europe for stuff that they never get to get from Europe.
NANCY HUNGERFORD: So you say you're ready for any scenario out of Brexit I do wonder though with the political upheaval we've seen around the situation if we get to a general election. How worried are you about a potential Prime Minister Jeremy Corbyn?
BILL WINTERS: I think we have to see how that election shaped up and and what the manifesto positions are at the time. I suspect if some of the worst fears of a Labor government manifest themselves in a manifesto. That would render them much more difficult to be elected. So I imagine that some of the most aggressive positions that we hear about from time to time. Not policies just hear about it might be moderated by the time we got to an election but we'd have to judge at the time.
EMILY TAN: Bill thank you so much for taking the time to chat with us here on Squawk Box. We've been speaking with Bill Winters, CEO of Standard Chartered.
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