Tough regulations will curb Standard Chartered Plc's profitability in the next two or three years but should help pave the way for "remarkable" medium-term growth as European rivals retreat from Asia, its finance boss told Reuters.
The cost of holding more capital and liquidity is likely to see Standard Chartered missing its return on equity (RoE) target of nearly 15 percent for 2012, 2013 and possibly 2014, its finance director Richard Meddings said.
But Europe's third biggest bank, which relies on Asia and the Middle East for the bulk of profits, should hit RoE targets again after that. In the meantime, it is on track to grow annual income by at least 10 percent this year and beyond, he said.
"With the amount of incremental equity capital we're now carrying, with the rising regulatory costs impacting on the business, particularly liquidity costs, it's much more difficult to see those returns getting back up to mid-teens for two or three years," Meddings said in an interview on November 30.
But the same pressures will force European rivals to retreat from Asia, and Meddings said his bank is well-placed and primed to snap up market share and higher margin business.
Highlighting the bank's balance sheet strength, Standard & Poor's - which has downgraded 15 top western banks battered by the sovereign debt crisis and economic woes - upgraded its Standard Chartered credit rating on December 01.
"Standard Chartered has got to steer through all this economic uncertainty and an avalanche of regulatory demands, but if we do that well I think we're on the cusp of quite a remarkable period for the bank," Meddings said.
"Given the strength of our balance sheet and the markets we're in, we have the opportunity to transform the bank again in good growth markets by repricing and winning market share."
The Asia-focused bank, one of the few still hiring while the bulk of the industry shrinks across the globe, expects to add up to 2,000 net new staff this year - around double previous predictions - as Asian economies buck western woes.
Similar expansion is likely next year, although Meddings declined to specify how many will be added to its 85,000 workforce: "You'd expect us to be on a similar growth trajectory," he said.