Heightened tensions in the Middle East are impacting global banks, particularly HSBC and Standard Chartered, which have significant exposure in the region. HSBC, a British bank, provides financial services worldwide. Standard Chartered is a British multinational bank providing banking and financial services. Just before recent strikes in Iran, HSBC’s CEO highlighted the Asia-Middle East corridor’s growing importance. However, the escalating conflict has disrupted operations, with Standard Chartered evacuating its Dubai office and HSBC closing its Qatar branches. These measures highlight the conflict’s immediate impact on their business activities and regional growth strategies.
According to a Reuters analysis, both banks have strategically focused on increasing trade between the Middle East and Asia. Although their regional assets represent a small percentage of their global lending, the financial hubs of Dubai, Riyadh, and Abu Dhabi are strategically important. JPMorgan analysts estimate that Middle Eastern exposure accounts for approximately 8% of Standard Chartered’s revenue and 12% of its profit before tax, while HSBC’s exposure is around 4%. This makes them the most exposed European lenders to the region.
The market has responded negatively to the increased risk. HSBC shares have fallen 14% since the strikes on Iran, while Standard Chartered shares are down about 11.4%. Despite the challenges, Standard Chartered maintains that its network remains adaptable and resilient, allowing it to continue serving clients and facilitating trade. Similarly, HSBC has expressed ongoing confidence in the region’s prospects. Other international banks, including JPMorgan and Citigroup, also have a presence in the Gulf, with Citigroup recently announcing temporary closures of its UAE branches as a precaution.
Analysts suggest that while the conflict poses risks to trade finance and credit costs, the banks could also benefit from increased demand for services like foreign exchange and cash management. JPMorgan analysts noted that Standard Chartered’s exposure is somewhat mitigated by the fact that 73% of its UAE exposure is to government-related entities and banks. Both banks’ UAE and Saudi Arabia-based operations serve as proxies for their overall Middle Eastern exposure, offering insight into their regional performance.
