Slide 1: FY2018 Results and Investor Update
FY2018 Results and Investor Update From turnaround to transformation 26 February 2019
Slide 2: Important notice concerning forward-looking statements
Important notice concerning forward-looking statements Important Notice This document contains or incorporates by reference “forward-looking statements” regarding the belief or current expectations of Standard Chartered PLC (the “Company”), the board of the Company (the “Directors”) and other member
Slide 3: Contents and Agenda
Contents and Agenda Contents Agenda FY2018 Results 3 UK time SG/HK time Investor Update 16 8.00 ~ 8.15 am FY2018 Results 4.00 ~ 4.15 pm Appendix 45 FY2018 Group financial analysis 46 FY2018 client segment financial analysis 50 8.15 ~ 9.00 am Investor Update 4.15 ~ 5.00 pm FY2018 region financial ana
Slide 4: FY2018 Results: Andy Halford, Group Chief Financial Officer
FY2018 Results Andy Halford Group Chief Financial Officer 3
Slide 5: Fundamentally more resilient platform delivering improved performance
Fundamentally more resilient platform delivering improved performance ($bn) 2017 2018 YoY1 Operating income 14.3 15.0 5% • Broad-based income momentum Operating expenses (9.9) (10.1) (2)% • Continued discipline on costs resulted in positive jaws UK bank levy (0.2) (0.3) (47)% Operating profit before
Slide 6: Growth returned in FY'17 and continued in FY'18
Growth returned in FY’17 and continued in FY’18 Income grew 3% in FY’17 and 5% in FY’18 Income ($bn) Deliberate actions to YoY secure the foundations momentum (0.5) 0.7 (0.7) 15.4 (0.3) 0.4 15.0 (0.1) 0.1 14.3 13.8 2015 Business De-risking² Others³ Underlying 2016 Business Underlying 2017 Underlying
Slide 7: The improvement in FY'18 was broad-based across most products
The improvement in FY’18 was broad-based across most products Income grew 5% in FY’18 (5% at constant currency) Income ($m) Growth of $784m Drag of $(105)m (53) 58 22 (52) 68 80 167 389 15,051 14,968 14,289 12% 5% 7% 3% 3% 4% (4)% nm 2017 Transaction Retail Treasury Financial Wealth Lending and Corp
Slide 8: Growth continued in Q4'18 but weaker investor sentiment impacted WM
Growth continued in Q4’18 but weaker investor sentiment impacted WM Q4’18 income was up 3% YoY (6% at constant currency) Income ($m) Growth of $203m Drag of $(86)m 6 25 9 (54) 44 (32) 53 66 3,675 3,595 3,478 8% 27% 8% nm 1% 5% (14)% (7)% Q4 17 Transaction Treasury Financial Other Retail Lending and
Slide 9: All client segments grew YoY
All client segments grew YoY CIB resilient; RB and PvB impacted by client sentiment in WM that dipped during the year CIB YoY2 RB YoY2 Income $6.9bn 6% Q4 = 7% Income $5.0bn 4% Q4 = (3)% Costs $4.4bn 0% Costs $3.7bn (4)% PBT $2.1bn 64% PBT $1.0bn 18% RWA $129bn (12)% RWA $43bn (3)% RoTE1 7.4% 299bps
Slide 10: Strong performance in GCNA, challenges in AME
Strong performance in GCNA, challenges in AME AME impacted by challenging economic conditions generally and local currency devaluation GCNA YoY1 ASA YoY1 Income $6.2bn 10% Q4 = 7% Income $4.0bn 4% Q4 = 1% Costs $3.8bn (4)% Costs $2.7bn (2)% PBT $2.4bn 22% PBT $1.0bn 97% RWA $81bn (4)% RWA $88bn (9)%
Slide 11: Tight cost control has enabled significant increase in investments
Tight cost control has enabled significant increase in investments Substantial incremental costs absorbed since 2015 Operating expenses1 ($bn) 0.3% CAGR 2% • Tight control of operating expenses 10.0 10.1 Up 2% YoY, broadly flat since 2015 9.9 9.6 1.0 1.3 Regulatory • Substantial incremental costs
Slide 12: Investment into strategic initiatives has trebled
Investment into strategic initiatives has trebled, driving better client experience and business performance Higher and increasingly strategic investment… … is starting to deliver tangible results Cash investment ($bn) RB CIB Online adoption¹ (%) Days to on-board a new client 3x 49 45 41 1.6 40 31 3
Slide 13: New originations are higher quality within more granular risk appetite
New originations are higher quality within more granular risk appetite Significant improvement in credit quality since 2015… …with continued progress in 2018 Loan / Credit impairment ($bn)1 5.0 (85)% 1.0 2.8 0.4 • Credit quality in the ongoing business improved 4.0 1.4 Continued focus on high-qual
Slide 14: Asset growth and higher interest rates benefited net interest income
Asset growth and higher interest rates benefited net interest income Broad-based balance sheet growth… …with an improving mix Average interest-earnings assets ($bn) YoY 2017 2018 YoY 555 528 558 +6% 509 Gross asset yield (bps) 274 309 35bps 291 267 283 302 +7% Gross liability rate paid (bps) 132 175
Slide 15: Stronger capital position enhanced by RWA efficiencies
Stronger capital position enhanced by RWA efficiencies Improved financial performance and strong capital underpins the Board’s decision to increase the final dividend Risk-weighted assets ($bn) $(45)bn (8)% Underlying organic equity generated since Nov’ 2015 • Absorbed $3.5bn restructuring charges,
Slide 16: Executing the 2015 priorities has delivered positive results
Executing the 2015 priorities has delivered positive results; the priority remains driving RoTE sustainably above 10% Restructure CIB for higher returns Strengthen balance sheet Invest and innovate in WM Operating profit RoRWA (%) CET1 (%) Cash investment ($m) 1.4 130 14.2 0.3 12 2015 2018 12.6 2015
Slide 17: Bill Winters, Group Chief Executive
Investor Update Bill Winters Group Chief Executive 16
Slide 18: Key messages
Key messages We have fundamentally overhauled the bank over the last three years We are a global bank with deep local expertise in many of the world’s most dynamic markets Our refreshed strategic priorities are to … Accelerate in areas where we have distinctive competitive advantage Eliminate residu
Slide 19: From turnaround to transformation
From turnaround to transformation: Actions that build on strengthened foundations We will execute the following refreshed strategic priorities, underpinned by a performance-orientated and innovative culture emphasising conduct and sustainability Embrace digitisation and Deliver our Invest to acceler
Slide 20: Financial framework 2019-2021
Financial framework 2019-2021: We expect to generate significantly and sustainably higher returns 5-7% 13-14% Income CAGR CET1 target $700m Gross >10% 2x Potential cost reduction1 RoTE by 2021 dividend increase2 Costs < Surplus inflation capital For distribution3 Positive jaws / growth 1. Aggregate
Slide 21: We have systematically increased our most profitable cross-border network business
Network We have systematically increased our most profitable cross-border ‘network’ business Network income contributes the majority of CIB income and generates sustainably higher returns with a capital-lite profile Growth Of which YoY RoTE capital-Iite3 Network income1 70% 10% 13% 58% % of CIB inco
Slide 22: Our network is key to our ability to compete profitably
Network Our network is key to our ability to compete profitably, and is why many clients bank with us EA and GCNA contribute 2/3 of CIB network income reflecting our focus on OECD clients and China opening1 Contribution to total CIB Growth RoRWA premium3 network income2 YoY (vs. Domestic) EA 41% 8%
Slide 23: More and deeper client relationships are driving network income growth
Network More and deeper client relationships are driving network income growth… We are actively targeting clients where our network is a … enabling us to deliver strong network income growth key differentiator … CIB network income Growth YoY Income multiplier effect from deepening client relationshi
Slide 24: Focus on better quality resulting in sustainably higher returns
Network … with a focus on better quality that is resulting in sustainably higher returns for shareholders We have focused our efforts on improving the quality of income and liquidity, in this case for a China-based MNC, demonstrating there is significant upside even for our larger clients FY’15 FY’1
Slide 25: Our China franchise is expected to double its contribution
Network Our China franchise is expected to double its contribution as we benefit from China’s opening1 … China’s long-term growth prospects remain robust, We will continue to leverage the Hong Kong – China despite the possibility of near-term headwinds nexus 22% increase in China trade volume2 by 20
Slide 26: We expect Africa to return to growth
Network ... and we expect Africa to return to growth as economies improve and our investments deliver Supportive macroeconomic outlook and rising The breadth of our network across 15 markets creates importance in global trade multiple defensible and disruptive opportunities to grow 27% increase in t
Slide 27: Our focus on serving affluent customers is working
Affluent Our focus on serving affluent customers is working… The proportion of income from higher-return affluent and wealth activities where our brand resonates strongly has increased significantly Growth YoY RoTE Priority, PvB and other 57% 8% 30% Wealth¹ income % of RB and PvB income Other income
Slide 28: Targeting continued growth through increasingly differentiated offerings
Affluent … and we are targeting continued growth through increasingly differentiated offerings Wealth and the affluent segment have a higher cost to We are targeting growth with superior wealth serve but deliver premium returns… propositions… 10x revenue per Priority client (vs. Personal) Health and
Slide 29: Eliminate the drag from markets that suppress Group RoTE
Optimise We are determined to eliminate the drag from markets that currently suppress the Group’s RoTE We operate three distinct market presence models to serve clients in our footprint No. of % of Group Income % of RoTE markets / Group % of income1 Domestic Network2 Costs Domestic Network2 Top loca
Slide 30: Four large markets must improve returns
Optimise Our businesses in four large markets have each shown progress since 2015 but must improve returns Significant value upside potential in four large markets representing 27% of RWAs, 21% of costs and 13% of PBT India – $10tn economy by 2030² Korea – 5th largest export economy globally3 Progre
Slide 31: Realigning around customer journeys
Productivity We are realigning around customer journeys to more effectively embed ourselves with clients and partners Driving operational improvements to scale revenue through improved client acquisition, conversion and retention with enhanced efficiency Aspirations Progress to-date Core benefits Co
Slide 32: Positioned to develop and scale innovative new business models
Digital We have actively positioned ourselves to develop and scale innovative new business models Deploying our own solutions We are investing now to create optionality for the future • Digitisation of the core is essential, but is not the only proxy for innovation Digital bank live in • Substantial
Slide 33: Enhancing client relationships with cutting-edge tools
Digital We enhance our strong client relationships with cutting- edge tools Blockchain / Distributed Artificial Intelligence and Platforms / Ecosystems Ledger Technology Machine Learning Digital “Trade Information Industry’s first blockchain-based Financial crime surveillance tools Network”, part of
Slide 34: Digital investments are shaping our retail offerings
Digital Digital investments are shaping our retail offerings in each of our markets Large RB market? Yes At scale? Yes No e.g. Ghana, No e.g. India, e.g. Hong Kong Kenya Indonesia Digitise to increase reach Disrupt with partnerships Disruptive challenger in in large markets markets where we lead Rel
Slide 35: Targeting significantly and sustainably higher returns for shareholders
We are targeting significantly and sustainably higher returns for shareholders Deliver our network 5-7% 13-14% Income CAGR CET1 target Transform Grow our and disrupt affluent with digital Purpose business $700m >10% 2x and Gross Potential RoTE by 2021 people cost reduction1 dividend increase2 Optimi
Slide 36: Andy Halford, Group Chief Financial Officer
Investor Update Andy Halford Group Chief Financial Officer 35
Slide 37: Actions expected to deliver RoTE above 10% by 2021
Our actions and priorities are expected to deliver an RoTE above 10% by 2021 Illustrative path to above 10% RoTE by FY’211 Net RWA Income growth Cost growth Target CET1 >10% growth ~2% 5-7% < inflation 13-14% CAGR 5.1% NFI 2018 Net interest Fees and other Expenses Impairment Tax and levy3 RWA optimi
Slide 38: Targeting sustainable income growth from differentiated strengths
We are targeting sustainable income growth by focusing on our differentiated strengths … ~45% ~25% Income ($bn) Net interest income other income~25% Fees and ~30% 5-7% Continue to build on 2018 momentum Enabled by investments ~30% in technology CAGR and people 15.0 2018 Volume Mix Rates & Margin Ind
Slide 39: Tight cost discipline expected to deliver strong operating leverage
… and continued tight discipline on costs is expected to deliver strong operating leverage Targeting productivity improvements to enable investments while keeping cost growth below the rate of inflation Operating expenses excluding the UK bank levy1 ($bn) < inflation • Targeted aggregate cost saves
Slide 40: Continue to focus on optimising RWA efficiency
We will continue to focus on optimising RWA efficiency … Headline RWA growth will benefit from divestments and ongoing optimisation initiatives Risk-weighted assets ($bn) ~2% CAGR • Underlying growth in client assets expected to be ~4% p.a. • Planned exits and run-down of low-returning business Co
Slide 41: Equity generation to fuel growth and shareholder distributions
… which with equity generation is expected to fuel both business growth and significant distributions to shareholders We expect to generate significant surplus capital CET1 ratio1 (%) • Updated CET1 target range to 13-14% from 12-13% • Maintain intention to grow ordinary dividend per share 14.2 Po
Slide 42: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive 41
Slide 43: Priorities driven by our purpose and delivered by our people
Our priorities are driven by our purpose and delivered by our people Our purpose: Driving commerce and prosperity through our unique diversity We understand our We will lead We will maximise We support the responsibilities sustainable financing return from investment communities where we across emer
Slide 44: Key messages
Key messages We have fundamentally overhauled the bank over the last three years We are a global bank with deep local expertise in many of the world’s most dynamic markets Our refreshed strategic priorities are to … Accelerate in areas where we have distinctive competitive advantage Eliminate residu
Slide 45: Q&A
Q&A 44
Slide 46: Appendix
Appendix Chartered
Slide 47: Appendix: FY2018 Group financial analysis
Appendix: FY2018 Group financial analysis 46
Slide 48: Group financial summary
Group financial summary ($m) 2018 2017 YoY %1 Q4 2018 Q3 2018 Q4 2017 QoQ %1 YoY %1 Operating income 14,968 14,289 5 3,595 3,724 3,478 (3) 3 Other operating expenses excluding the UK bank levy (10,140) (9,900) (2) (2,512) (2,511) (2,649) (0) 5 UK bank levy (324) (220) (47) (324) - (220) - (47) Opera
Slide 49: Operating income by product
Operating income by product ($m) 2018 2017 YoY %1 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Transaction Banking 3,718 3,329 12 942 936 924 916 876 Trade 1,123 1,197 (6) 257 277 285 304 298 Cash Management and Custody 2,595 2,132 22 685 659 639 612 578 Financial Markets 2,612 2,544 3 580 631 677 724 53
Slide 50: Ongoing business and liquidation portfolio
Ongoing business and liquidation portfolio 31.12.18 01.01.18 Ongoing Liquidation Ongoing Liquidation ($m) business portfolio Total business portfolio Total 260,094 1,361 261,455 254,445 86 254,531 5,649 1,275 6,924 (3,932) (966) (4,898) (838) (4) (842) (3,094) (962) (4,056) 256,162 395 256,557 253,6
Slide 51: Appendix: FY2018 client segment financial analysis
Appendix: FY2018 client segment financial analysis 50
Slide 52: Underlying performance by client segment
Underlying performance by client segment Corporate & Institutional Retail Commercial Private Central & 2018 ($m) Banking Banking Banking Banking other items Total Operating income 6,860 5,041 1,391 516 1,160 14,968 Operating expenses (4,396) (3,736) (923) (530) (879) (10,464) Operating profit/(loss)
Slide 53: Corporate & Institutional Banking
Corporate & Institutional Banking Financial analysis 2018 2017 Progress ($m) YoY %1 • Completed on-boarding of over 100 new OECD clients, and continued to Operating income 6,860 6,496 6 deepen relationships with existing clients Transaction Banking 2,887 2,564 13 • More closely aligned the Corporate
Slide 54: Retail Banking
Retail Banking Financial analysis Progress ($m) 2018 2017 YoY %1 • Increased the share of income from Priority clients from 45 per cent in Operating income 5,041 4,834 4 2017 to 47 per cent as a result of strong Wealth Management and Deposit Greater China & North Asia 2,684 income growth and increas
Slide 55: Retail Banking: Regional performance
Retail Banking Regional performance Greater China & ASEAN & Africa & Europe & Total North Asia South Asia Middle East Americas ($m) 2018 2017 YoY %1 2018 2017 YoY %1 2018 2017 YoY %1 2018 2017 YoY %1 2018 2017 YoY %1 Operating income 2,886 2,684 8 1,352 1,302 4 765 813 (6) 38 35 9 5,041 4,834 4 Oper
Slide 56: Commercial Banking
Commercial Banking Financial analysis Progress ($m) 2018 2017 YoY %1 • On-boarded over 6,400 new clients in 2018, of which 19 per cent came Operating income 1,391 1,333 4 from our clients’ international and domestic networks of buyers and suppliers Greater China & North Asia 584 527 11 • Increased s
Slide 57: Commercial Banking: Regional performance
Commercial Banking Regional performance Greater China & ASEAN & Africa & Total North Asia South Asia Middle East ($m) 2018 2017 YoY %1 2018 2017 YoY %1 2018 2017 YoY %1 2018 2017 YoY %1 Operating income 584 527 11 523 504 4 284 302 (6) 1,391 1,333 4 Operating expenses (389) (386) (1) (330) (304) (9)
Slide 58: Private Banking
Private Banking Financial analysis 2018 2017 Progress ($m) YoY %1 • Targeted marketing of our investment philosophy and advisory capabilities Operating income 516 500 3 which are both focused on mitigating biases in clients’ investment decisions, in order to continue our shift towards clients with m
Slide 59: Appendix: FY2018 region financial analysis
Appendix: FY2018 region financial analysis 58
Slide 60: Underlying performance by region
Underlying performance by region Greater China ASEAN & Africa & Europe & Central & 2018 ($m) & North Asia South Asia Middle East Americas other items Total Operating income 6,157 3,971 2,604 1,670 566 14,968 Operating expenses (3,812) (2,711) (1,810) (1,453) (678) (10,464) Operating profit / (loss)
Slide 61: Greater China & North Asia
Greater China & North Asia Financial analysis Progress ($m) 2018 2017 YoY %1 • We have been active in the opening of China’s capital markets, helping overseas investors do business through channels such as Bond Operating income 6,157 5,616 10 Connect, Stock Connect and the Qualified Domestic Institu
Slide 62: ASEAN & South Asia
ASEAN & South Asia Financial analysis Progress ($m) 2018 2017 YoY %1 • Eight out of 12 markets grew in both income and operating profit, Operating income 3,971 3,833 4 reflecting the actions taken to deliver broad-based growth Singapore 1,547 1,419 9 • Delivered strong growth in targeted client segm
Slide 63: Africa & Middle East
Africa & Middle East Financial analysis Progress ($m) 2018 2017 YoY %1 • After a successful launch of a digital-only bank in Côte d’lvoire in the first Operating income 2,604 2,764 (6) half of 2018, we are extending this to other markets in Africa • Despite geopolitical and macroeconomic headwinds,
Slide 64: Europe & Americas
Europe & Americas Financial analysis Progress ($m) 2018 2017 YoY %1 • Good progress in improving the share of business from targeted Operating income 1,670 1,601 4 multinational corporate clients, with income up 48 per cent and 9 per cent from ‘New 90’ OECD and ‘Next 100’ client initiatives respecti
Slide 65: Performance by key markets
Performance by key markets Underlying profit / (loss) before Operating income taxation ($m) 2018 2017 YoY %1 2018 2017 YoY %1 Hong Kong 3,752 3,384 11 1,642 1,386 18 Korea 1,009 967 4 212 134 58 China 821 707 16 321 267 20 Singapore 1,547 1,419 9 423 185 nm India 949 1,008 (6) 141 96 47 UAE 637 733
Slide 66: Appendix: FY2018 Central & other items
Appendix: FY2018 Central & other items 65
Slide 67: Central & other items
Central & other items Segment Centrally managed Region Treasury Markets Treasury Capital Principal Finance Associates and Corporate Centre costs Joint Ventures Portfolio Management Strategic investments Other non-segment specific items UK bank levy Other global items Central & other items (segment)
Slide 68: Appendix: Macroeconomic outlook
Appendix: Macroeconomic outlook 67
Slide 69: Macro fundamentals remain solid, but uncertainties are weighing on sentiment
Macro fundamentals remain solid, but uncertainties are weighing on sentiment • Trade tensions Real GDP growth1 (%) 2018 2019e Hong Kong 3.4 2.7 • Slowing Chinese economy GCNA Potential China 6.6 6.4 headwinds • Oil price volatility Korea 2.7 2.5 • Currency pressure across EM India 7.2 7.3 ASA Indone
Slide 70: Appendix: Definitions
Appendix: Definitions Chartered
Slide 71: Definitions
Definitions Term Explanation Term Explanation Term Explanation AAME Asia, Africa & Middle East ETB Existing to bank OPAC Operating account AME Africa & Middle East FI Financial Institutions P.A. Per annum API Application Programming Interface FTE Full-time employee P&L Profit and loss (Income statem