Douglas Flint, Chairman, Commonplace Life Aberdeen

Beneath is the transcript of a CNBC Unique interview with Douglas Flint, Chairman, Commonplace Life Aberdeen. In case you select to make use of something, please attribute to CNBC and Nancy Hungerford.

Nancy Hungerford (NH): Sir Douglas, thanks a lot for taking the time to talk to CNBC as a part of the Singapore summit. and there’s a massive dialogue underway on the summit as to the place we’re when it comes to this COVID restoration. And as we glance ahead, if we will simply look again briefly, as a result of in August, your organization did spotlight a fairly sharp fall in income and withdrawals. And you probably did blame an enormous a part of that the CEO on the time did on what was occurring with COVID-19. And I am merely curious to listen to from you should you suppose the worst of the COVID-19 influence on the enterprise is over.

Douglas Flint (DF): To be trustworthy, I do not suppose anyone is aware of. I imply, it isn’t simply COVID. For the time being, we’re in a really uncommon interval the place we’re within the early phases of the run as much as the US election. We now have an unsure state of affairs within the UK round Brexit. We have had a little bit of a bounce again within the within the third quarter when it comes to the economic system, however I feel there may be nonetheless quite a lot of uncertainty as as to whether we get a second wave or a recurrence of the pandemic within the UK and elsewhere that will put constraints on a resurgence of the economic system. So I feel it’s too quickly to say. And I feel we’re coming into a very unsure interval with these three components dominant.

NH: And on high of all of that, I imply, there are considerations that a number of the measures the federal government has put in place around the globe, but in addition within the UK, the place you might be, such because the furlough scheme and extra stimulus measures, that after they wind down, we might be a fairly harsh financial actuality. Is that one thing that considerations you?

DF: It considerations me a fantastic deal. I feel that the numerous economies have turn into depending on authorities help and whereas that authorities help was well timed it was extraordinarily heavy when it comes to its influence, however it may possibly’t go on endlessly. And I feel the problem for governments the world over is methods to wean the economic system of governmental help methods to do it on a sector by sector foundation. Some sectors will proceed to require help, however methods to get the economic system functioning in an unbiased means, once more, I feel goes to be crucial, and methods to use the firepower that the central banks and governments might have left to focus on that very particularly and effectively to these sectors that want it. It will be it is going to be a big problem, as a result of as that as jobs start to get misplaced, confidence will fall. And that had an has a kind of a multiplier impact on what occurs when it comes to folks’s willingness to exit and spend and do the issues that will convey the economic system again. 

NH: Do you suppose that maybe all of this authorities help whether or not it is coming from the fiscal aspect or predominantly it is actually coming from the central banks is resulting in an unhealthy complacency amongst buyers displaying up out there even immediately?

DF: No, I do not suppose buyers are complacent. I feel there could also be sections of the economic system that consider that this could get can go on and on. I feel there must be an training course of that begins to let folks perceive that and to inform him except folks begin going again to work consuming in a extra a extra conventional means, the economic system goes to be within the doldrums and there’ll come a restrict to the extent to which governments can help the economies and the bounds of the extent to which the markets will proceed to help ever increasing fiscal deficit.

NH: Sure, it does appear that that might be a fear for a while is what we hold listening to. However the query is once we get up to those realities, and methods to cope with them, I hear you on that. And if that weren’t fear sufficient, we’ve some self-imposed political points as you as it’s possible you’ll need to name them. I am curious in your ideas on what’s occurring with Brexit proper now, as a result of it does appear as if Boris Johnson, the federal government are keen to flirt with this notion of a tough Brexit –  I noticed a examine from Goldman Sachs lately, although, saying {that a} disorderly Brexit might be even worse for the economic system than what we have seen with the pandemic. I imply, how dangerous wouldn’t it be for enterprise do you suppose?

DF: Effectively, I feel enterprise is ready for a tough Brexit. No person knew how  it might play by way of. And subsequently you needed to put together for the worst potential and hope that it might be higher. I feel, as in any negotiation, issues look very darkish till the very, final minute. However clearly, we have solely bought three and a bit months to go earlier than the tip of the transition interval. And I feel it might be a really tough time if we find yourself with a really skinny Brexit. So with a really skinny deal or no deal, and we enter the winter interval, if there have been to be a resurgence at the moment of, of well being points, I feel the economic system and the the boldness throughout the economic system could be very dramatically dangerous. However we will see. I imply, clearly, on each side of the of the negotiations, there’s a want to have a deal that works for each side, and it is only a query whether or not politically that may be constructed up.

NH: Do you suppose it’s going to come to that, a disorderly Brexit?

DF: No, I do not. I feel there’s an excessive amount of at stake. I feel will probably be fairly a skinny cope with this deal. However I feel each side have an actual necessity to get a deal each politically and economically. And I wish to suppose that that can drive habits in direction of the tip of the deal. As I stated, I feel this stuff all the time occur at ten to midnight. So I am not too involved about what’s occurring for the time being. I feel it is an inevitability in a really advanced deal like this, or a really advanced negotiation like this.

NH: Sir Douglas, it wasn’t so way back that there was discuss of a publish Brexit Britain, maybe constructing even nearer relationship with China and constructing nearer ties economically with China. I do know you could have a eager view to this relationship, given your particular envoy function to the Belt and Street initiative. And I simply surprise, given the occasions of the previous couple of months, what we have seen – an actual deterioration, you would possibly say, between the UK and China’s relationship – how detrimental is that this?

DF: I feel China’s massively essential to the worldwide economic system and to world commerce. I imply, to me, it is inconceivable you can tackle the most important challenges dealing with the world –  whether or not it is local weather change, well being points, migration, demographic growing old, inequality, terrorism, sustainability –  all this stuff can’t be performed with out the US and China and Europe and the remainder of the world all participating and collaborating. An important points on the earth, require folks to work collectively, and I feel the pandemic truly illustrates this extremely clearly. Six months in the past, seven months in the past, each single firm on the earth just about noticed its progress alternatives in Asia led by China, I do not suppose that is modified. The emergence of a really robust center class, the need to devour another way, which suggests entry to Western markets and giving entry to Chinese language items into these markets, I feel continues to be what is going to drive the worldwide economic system. I feel protectionism could be a really dangerous factor. And I you already know, I genuinely consider that the proper reply is considered one of engagement. In fact, we can’t agree with every little thing that occurs in each nation on the earth. However I consider that in historical past, we have handled this stuff by way of engagement. And I feel it is actually essential that as we enter into 2021, publish pandemic, publish American election that we we discover a sample of engagement, that permits us to deal with the shared points which might be so essential to us. 

NH: And, sir, as you had been simply explaining that relationship there. I do surprise, within the aftermath of what we have seen with the UK’s response to their considerations round China’s method to Hong Kong,  additionally the UK his determination round Huawei, has any of this modified the enterprise setting for UK based mostly companies reminiscent of yours doing enterprise in China.  Has something turn into tougher in consequence, would you say?

DF: In fact, it is turn into tougher as a result of enterprise operates beneath the umbrella of a geopolitical relationship and when that relationship is tense, it’s tougher for enterprise to function. Having stated that, on the enterprise degree, our personal relationships with our counterparts and purchasers and China continues to be very robust. It isn’t impacted at that degree. However clearly there is a an overriding political relationship that makes issues tough. I additionally suppose you must suppose long run once more, should you have a look at the rhetoric and then you definitely have a look at the actions, there are lots of components within the Chinese language economic system which might be persevering with to open up, and we have seen most of the main US corporations – BlackRock, Vanguard, JP Morgan –  starting to increase their operations even throughout this era in China, which illustrates on the enterprise degree, there continues to be progress in direction of the sort of ambitions for the economic system and the combination of the Chinese language economic system into the worldwide economic system that each side have aspired to. However the political rhetoric is considerably distant from what’s occurring on a business aspect, and I feel we have to try to convey the 2 again collectively. And as I say, I feel that must be performed by way of engagement.

NH: And sir because you spent years in Hong Kong throughout your function at HSBC, I am simply curious in your ideas on the brand new nationwide safety legislation and whether or not you suppose this might be the beginning of a path maybe in direction of an erosion of the one nation two programs coverage.

DF: You realize, we’ll look again at it, and we’ll have a significantly better concept as as to whether the dangers that you just described may occur, I imply, people who find themselves in Hong Kong, companies which might be in Hong Kong are in Hong Kong as a result of they need to have interaction with China. Hong Kong’s markets proceed to be very robust. And I feel that we see instantly the world over –  the US, France, the UK –  that when there may be civil disturbance, actions have to be taken. Mainly everybody in Hong Kong – actually within the enterprise neighborhood says – we have to see a extra secure social setting in order that the economic system can start to develop and the material of society is honest and open. If this legislation contributes to that, then that may be a good thing. If it would not, then it isn’t a very good factor, however I feel it is too early to see what its influence might be. 

NH: And if we will simply put politics apart for a minute, put the COVID subject to the aspect, which I do know is not very tough to do as of late on this setting. However wanting on the Enterprise Commonplace life Aberdeen I imply, there are some inner points that shareholders are in search of some solutions on and now that you’ve your new CEO taking on the helm, Stephen Chook. What would you say his priorities must be at a time when persons are nonetheless apprehensive about charge compression, and only a very aggressive trade and lively administration?

DF: Effectively I feel precedence primary is to is to deal with the publish COVID setting when it comes to working practices, as a result of clearly the way in which we’ll work going ahead throughout all industries, however actually ours might be completely different. The teachings which were discovered and a distributed workforce, I feel have been very highly effective. In order that’s the very first thing. However then it is laborious to develop the enterprise. I imply, no enterprise will be profitable except it has a path to progress. And I feel that harnessing know-how, shifting extra into the digital area, profiting from the terribly robust manufacturers on the geographic and product distribution capabilities that we have got. There are nice alternatives for progress and we’ve a really robust steadiness sheet. So you already know, we have got all of the assets that we want, it is a query of harnessing them. And I feel in a world of very, very low rates of interest, and in a world of very heavy focus into the most important firms, there’s an actual alternative for lively managers to exhibit that they’ve one thing to convey to the desk. I imply, that is the perfect situation for lively administration. So we’re fairly excited in regards to the future.

NH: And on condition that steadiness sheet place you simply described, I imply, would you have a look at potential deal exercise, even a further merger to get scale on this setting, as a result of it is a dialog we’re beginning to see happen, each in relation to banking sector and asset managers and insurers as as to whether additional consolidation is required in these powerful occasions.

DF: I feel there’s an terrible lot we will do with out dipping our toes into the M&A market once more, however you by no means you by no means know what would possibly occur and we’re robust and we’ve capabilities, however I feel the priorities within the within the close to time period are to maximise the alternatives with what we have already constructed from the merger of Commonplace Life with Aberdeen so let’s examine the place that goes first.

NH: I did see one high 25 shareholder quoted as saying that maybe placing the payout on maintain, holding the dividend could be some essential medication. We all know that is by no means well-liked with buyers extra typically talking, however do you suppose that is one thing that’s into consideration?

DF: Effectively, the dividend is simply a part of a capital allocation coverage. I imply, the essential factor is to determine while you bought distributable cash, how a lot of it do you spend on increasing your enterprise, how a lot do you spend on rewarding shareholders for trusting you with their capital and giving them the returns that draws their help. On the finish of the day, all of this stuff should be performed on the again of a rising and worthwhile enterprise. So the very first thing we’ve to do is to be sure that the technology of capital is powerful after which we’ll determine to what extent we will use the capital higher than handing it again as a result of we see nice alternatives to increase, or whether or not there are different issues we should always do, together with ensuring that our shareholders are correctly, adequately, and absolutely rewarded for the help that they proceed to present us. And that is what we have performed traditionally.

NH: And when it comes to what you are able to do on this setting to spice up income streams and enhance income general, to what extent are you wealth administration as a sexy space to increase upon? Clearly, Stephen Chook involves the desk with a whole lot of retail expertise, do you envision that it’s time to increase in wealth administration?

DF: We’re very massive in wealth administration. It is one of many stronger frustrations that we’ve a really massive wealth administration enterprise, notably should you look collectively at our platforms enterprise, which is a enterprise that offers with unbiased monetary advisors, However that collectively alongside our wealth enterprise is sort of an enormous enterprise. However wealth undoubtedly is an space of focus, notably digitally. I feel that the democratization of financial savings calls for that we transfer far more into that area. And likewise, one of many issues that I feel the pandemic has illustrated is that there’s a lack of resilience within the particular person area in corporates and in governments and subsequently, serving to folks perceive that each their demographics both residing longer, and the truth that they want extra resilience performs into the financial savings might be increasingly essential. So I feel the wealth area is an space that we’ll, we’ll concentrate on

NH: And sir as you are speaking about this subject of resilience or lack thereof earlier than going into the pandemic disaster, I’ve had a whole lot of questions from panels I’ve performed on the Singapore summit already as to what the post-covid world will seem like and as a enterprise chief, all through your profession, pondering of assorted crises that you’ve been by way of, I imply, what do you suppose the largest lesson we will take away from this disaster is?

DF: I feel it’s considered one of resilience. I imply, should you consider the main focus that we’re now having of focus in provide chains, in suppliers, in nations that we take companies from I feel that is been large. I imply, I feel that, you already know, coming from the banking aspect, as you stated, you already know, are you able to think about what the pandemic would have been like if the strengthening of the resilience of the banking system that was performed within the aftermath of the worldwide monetary disaster hadn’t been performed. I imply, the banks enter the pandemic interval with large quantity of capital, far more operational resistance, residing wills, all these good issues. That meant that we all know one of many issues we must be very happy with is the monetary system did not break, the utilities did not break. You realize, principally, the essential companies of society got here by way of a rare stress check and got here by way of it. Effectively, if we hadn’t had the monetary system extra resilient, I feel we might have had a monetary disaster in addition to an financial disaster. And if the sum of money that had been spent strengthening the monetary system had been spent on strengthening the well being service and different components of the economic system which were severely examined within the pandemic, we most likely would have been a a lot decrease price to society of coping with this pandemic. So resilience i feel goes to be massively essential, which is the S of ESG.

NH: That is a superb level and a very good level for us to conclude on as properly hoping to construct resilience for the long run. That is for positive. So Douglas, thanks a lot for taking the time to talk to me for CNBC. Actually respect it. Thanks.

DF: My pleasure. Thanks.

END

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