Standard Chartered Plc · LSE:STAN
Standard Chartered — Non-Deal Roadshow (February 2016)
56 slides from Standard Chartered's roadshow presentation, Feb 23, 2016
Slide 1: Full Year 2015 Roadshow Presentation
Full Year 2015 Roadshow Presentation 23 February 2016
Slide 2: Forward looking statement
Forward looking statement This document contains or incorporates by reference ‘forward-looking statements’ regarding the belief, assumptions or current expectations of the Company, the Directors and other members of its senior management about the Group’s strategy, businesses, performance and the ot
Slide 3: Our Strategy
Our Strategy Standard @&° Chartered Ss
Slide 4: Powerful underlying trends offer exciting long-term opportunities
Powerful underlyying g trends offer exciting g long-term g opportunities pp • Asia ex-Japan is expected to drive global private financial wealth growth Rise off Urban Ri Ub • 29 of the 41 global mega cities are expected to be in Asia, mega-cities Asia Africa and the Middle East by 2030 Middle Class
Slide 5: We are executing our new strategy designed for this challenging environment
We are executing our new strategy which was designed for this challeng ging g environment We have a valuable, We valuable differentiated franchise and and strong 1 client relationships Facing real challenges from challenging macro and 2 past decisions New Built our new strategy to weather adverse ma
Slide 6: Simplified organisation structure to focus more on geographic execution
Simplified organisation structure to focus more on geographic execution • Rolled out simplified organisation New Management Team structure in July 2015 Global Regional • Retail and Commercial businesses managed locally and regionally • New management team established to CIB Retail deliver and execut
Slide 7: Deliver our conduct and financial crime risk programmes
Deliver our conduct and financial crime risk programmes g • Risk and conduct integral to strategic review and organisation structure Creating the • Enhancing controls and strengthening right environment compliance culture: Hiring industry leaders Establishing new governance frameworks Substant
Slide 8: We are delivering on the commitments we have made and executing on the strategy
We are delivering on the commitments we have made and executing g on the strategy gy to drive sustainably y hig gher returns 1 • Financial framework: CET1 of 12-13%, ROE of 10% in medium term • Reduce / exit exposures to within the refreshed Group risk tolerance by 2017 • Businesses and assets compr
Slide 9: We are delivering on the commitments we have made and executing on the strategy
We are delivering on the commitments we have made and executing g on the strategy gy to drive sustainably y hig gher returns Reorganised the Group around a new and simpler organisation structure 1 Completed new management team with Group Chief Risk Officer and CEO of CIB Secure the foundations
Slide 10: We have taken early actions to restructure approximately one third of Group RWA
We have taken early actions to restructure approximately one third of Group p RWA Restructuring progress Liquidate assets Focus countries • US$1.8bn restructuring charges taken in Q4 2015 ... Portfolio of assets Korea Retail Indonesia beyond risk tolerance and ~US$20bn C Commercial i l • ... the bul
Slide 11: We have taken assertive action on exposures outside of tightened risk tolerance
1 We have taken assertive action on exposures outside of tig ghtened risk tolerance • Tightened our risk tolerances • Concentrated exposures largely in liquidation portfolio • In 2015 2015, represent 3% of gross loans and advances to customers but 59% of gross non-performing loans and 52% of loan im
Slide 12: Continuing to actively manage low returning client relationships
2 Continuing g to activelyy manag ge low returning g client relationship ps We are committed to optimising US$50bn of RWA across CIB and Commercial All clients are identified and discussions are ongoing to manage returns up or RWA out Expect p to have completed p the process p in the next 18-24 mont
Slide 13: Focus countries – Korea and Indonesia
3 Focus countries – Korea and Indonesia Korea Indonesia • Significant headcount reduction from SRP1 • Aim to reduce to a single presence • Simplified corporate structure • In active discussions with joint venture partner and local regulators • De-risked retail unsecured • In 2016 we will continue to
Slide 14: Exiting peripheral businesses
4 Exiting gpperip pheral businesses • Progressing sale of peripheral non-strategic investments Timing dependent on market conditions • Exiting g selected sub-scale Retail Banking g markets Sales processes underway or planned Will upd datte on siigniing • Completing exit of equity derivatives b
Slide 15: We are stepping up investment despite challenging external conditions
We are stepping up investment despite challenging external conditions in order to deliver our strateg gic ag genda Cash investment spend (US$m) • Upgrade systems • Enhance Retail Digital capabilities • Improve flexibility • Upgrade Private and WM1 platforms • Deliver process and • Invest in our Afri
Slide 16: Committed to rebuilding strength and profitability
Committed to rebuilding g streng gth and profitabilityy 11. Maintain strong capital position 22. Improve asset quality 33. Take action on areas generating below target returns 10% R Return t on 44. Invest where we have, or can have, Equity in the sustainable advantage medium term 55. Establish best-
Slide 17: Financial Performance
Financial Performance Standard @&° Chartered Ss
Slide 18: Summary of our 2015 financial performance
Summary y of our 2015 financial performance We have taken action to strengthen We strengthen the Group’ Group’s s balance sheet We have tightened our risk tolerance and have reduced concentrations We have delivered on 2015 committed cost efficiencies and... ... We will deliver cost saves of
Slide 19: Group performance summary
Group ppperformance summary y Better/ US$m FY 14 FY 15 (Worse)% Income 18,236 15,439 (15) YoY change in income (US$m) (2,797) Operating expenses (9,662) (9,032) 7 - Currency translation ~(700) Regulatory expenses1 (717) (1,006) (40) - Divestments and exits ~(400) B k levy Bank l (366) (440) (20) - C
Slide 20: Income impacted by adverse market conditions and management actions
Income impacted by adverse market conditions and managgement actions Operating income (US$m) ~(400) ~(100) ~(200) ~(300) ~(700) ~(300) 18,236 ~(700) 15,439 FY 14 Divestments Commodity CCPL and MTM Currency Commodity Business FY 15 de-risking other CIC valuations translation price falls momentum de r
Slide 21: Group performance summary
Group ppperformance summary y YoY QoQ Better/ Better/ Better/ US$m FY 14 FY 15 (Worse)% Q4 14 Q3 15 Q4 15 (Worse)% (Worse)% Client income 16,623 14,613 (12) 4,075 3,513 3,194 (22) (9) Other income 1,613 826 (49) 372 169 68 (82) (60) Income 18 236 18,236 15 439 15,439 (15) 4 448 4,448 3 682 3,682 3 2
Slide 22: Taking action to address declining income trajectory
Taking g action to address declining g income trajjectoryy • Lower balance sheet momentum… but taking action US$m Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Reflects adverse macro conditions in 2015 Operating income 4,448 4,421 4,074 3,682 3,262 Selective asset origination 1 Mark to market 148 112 178 58 81
Slide 23: We have stepped up our cost focus to improve profitability
We have stepped up our cost focus to improve profitability and create investment cap pacity y Annual cost efficiencies (US$bn) ~1.3 13 • Underlying operating expenses1 down 7% year >1.0 on year >0.6 • US$1bn efficiencies in 2016 already identified 0.4 • Staff numbers down ~7,000 YoY 2014¹ 2015¹ 2016
Slide 24: While 2015 performance was poor, we are building underlying momentum
While 2015 performance was poor, we are building underlying momentum across focus areas • Maintained leadership ppposition in Asia Transaction Banking g Corporate and • Increased FX, Cash FX and Rates notional Institutional Banking • Grew share of non-financing revenue • Added ~3,000 new clients Com
Slide 25: Corporate and Institutional Clients – Reshaping for higher returns
Corp porate and Institutional Clients – Reshap ping g for hig gher returns Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % Income 10,431 8,696 (17) • Embarking on significant costs and RWA restructuring Expenses (5,191) (5,198) (0) • Multi-year investment program on track Workin
Slide 26: Positioning for improved returns in Corporate and Institutional Banking
Positioning for improved returns in Corporate and Institutional Bankingg Upgrade or exit Risk weighted assets (US$bn) • Delivered ~US$4bn low returning relationship efficiencies lower returning client RWAs • Stepping up efficiencies in 2016 from ~US$40bn portfolio 245 (12%) Favour network • ~60% of
Slide 27: The Group has a strong and leading underlying transaction banking franchise
The Group has a strong and leading underlying transaction banking g franchise • #1 Transaction Banking provider +2.1% (3.5)% (0.8)% +1.3% +1.4% +1.3% across Asia1 • Primary banker to 22% of top 68% Asian institutions 57% 57% • Extending leadership each year 48% since 2010 with growing share 22% 43%
Slide 28: Commercial Clients – Overhauling to build on differentiated strengths
Commercial Clients – Overhauling to build on differentiated streng gths Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % Income 1,183 826 (30) • Significant multi-year change programme underway Expenses (739) (711) 4 • De-risking and remediation now largely complete Working profi
Slide 29: Overhauling Commercial Banking
Overhauling g Commercial Banking g Risk weighted assets (US$bn) • CDD1 remediation progressing, credit standards tightened 25 • Drive efficiency and digital channels to achieve structurally 20 Re-structure and re-cost lower cost base • Targeting T i to up-tier it ~US$10bn ti or exit US$10b off llow-
Slide 30: Private Banking Clients – Investing to leverage distinctive platform
Private Banking g Clients – Investing g to leverag ge distinctive platform Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % • Added ~1,000 1 000 new clients Income 612 557 (9) Expenses (447) (361) 19 • Investment penetration to ~57% of AUM (2014: 51%) Working profit 165 196 19 •
Slide 31: Investing into Private Banking and Wealth Management
Investing g into Private Banking g and Wealth Manag gement Wealth Management AUM ((US$bn))1 69 Distinctive and • Investment product penetration up from 51% to 57% in 2015 digital • Hiring high quality Relationship Managers in 2015 distribution • Plan to enhance digital g distribution across Private
Slide 32: Retail Clients – Accelerating the transformation
Retail Clients – Accelerating g the transformation Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % • Income broadly flat ex ex. divestments divestments, derisking and FX Income 6,010 5,360 (11) Expenses (4,002) (3,768) 6 • Grew share of Priority income to 35% (2014: 27%) Working
Slide 33: Transforming Retail Banking
Transforming g Retail Banking g Focus on • Grew share of Priority income from 27% to 35% of Group Retail Priority clients income (US$m) Priority y and urban affluent • Focusing on 64 core cities across 24 markets in major cities 1,794 • Core cities, ex Korea and China, already delivering >10% RoE +1
Slide 34: Balance Sheet
Balance Sheet Standard @&° Chartered Ss
Slide 35: Our balance sheet is stronger and well positioned
Our balance sheet is stronger and well positioned to weather the current volatile external conditions Minimum Requirement for Leverage ratio own funds and CET1 Increased cover g strong 12.6%, eligible liabilities ratio 53% 5.5% 24% in 12-13% target range CIC andd CC2 Liquid Asset L&A to customers Ad
Slide 36: Assets: Disciplined management
Assets: Discip plined manag gement Balance Sheet Assets US$640bn1 Customer Loans US$261bn (by region)1 Loans to customers Greater China 8% 10% North East Asia Investment securities 4% Hong Kong 10% 21% South Asia Cash 4% 41% ASEAN 10% Loans to banks 8% CN 5% MENAP Derivatives Other 4% Africa 8% 10%
Slide 37: Liabilities: Highly liquid and customer funded
Liabilities: Highly g y liq quid and customer funded Balance Sheet Liabilities US$592bn1 Customer Accounts US$359bn by region1 Customer accounts Greater China 4% 7% 15% North East Asia Debt securities 6% South Asia Derivatives 5% 37% ASEAN 10% 3% Deposits by banks MENAP 6% 61% Subordinated liabiliti
Slide 38: Risk
Risk Standard @&@ Chartered &
Slide 39: We have taken decisive action on exposures beyond tightened risk tolerance
We have taken decisive action on exposures beyond tightened risk tolerance US$m Liquidation portfolio Ongoing business Total Group Loan impairment 1,627 2,381 4,008 Loan impairment included in restructuring charge 968 - 968 Total loan impairment 2,595 2,381 4,976 US$m $ Gross loans and advances to c
Slide 40: Assertively managing past risk issues
Assertively y manag ging g past risk issues • Broadly stable combined CG12s and Total NPLs and CG12 accounts NPLs (inclusive of the liquidation portfolio) 16,000 • Inflow to NPL largely from existing CG12 14,000 • Majority of NPL inflow in Q4 2015 from a 12,000 large connected group from CG12 10,000
Slide 41: We have reduced targeted exposures and are improving credit quality
We have reduced targeted exposures... and are improving the credit qualityy of our ong going g business portfolio Reduced targeted exposures (US$bn) • Actions are improving ongoing business portfolio 78.5 • Portfolio is more diverse by industry and (36%) client 50.0 • India and commodities represent
Slide 42: Continue to reduce our Commodities exposures actively
Continue to reduce our Commodities exp posures actively y Commodity portfolio overview Commodities1 (US$bn) Producers (49% of exposure)1 (FY15) (36%) 30.1 28.1 • Actively managing, net exposure 24.3 21.4 19.2 down 28% YoY 61.8 (36%) 60.7 % off CIB and CB • Represents 8% 54.9 H2 13 H1 14 H2 14 H1 15
Slide 43: Actively managing our China exposures
Activelyy manag ging g our China exp posures Portfolio Overview1 (FY15) China CIB / CB exposure1 (US$bn) • Total exposure US$50bn US$50bn, down 30% YoY (36%) • 84% <1 year in tenor mainly trade or interbank (ALM) 78.5 84.6 • Continuing actions reduce concentrations 71.0 66.4 50.0 Bank exposure US$24
Slide 44: Continuing to reduce selected more vulnerable exposures in India
Continuing g to reduce selected more vulnerable exp posures in India Credit problems remain despite GDP growth India loan impairment2 (US$m) • High level of weak credits throughout banking system • Corporate stress remains elevated 483 472 • Credit growth lowest in last two decades • Low refinancing
Slide 45: Capital & Liquidity
Capital & Liquidity Standard @&° Chartered Ss
Slide 46: The Group is strongly capitalised and is generating further capital
The Group is strongly capitalised and is generating further capital from underlying y g business activityy 2015 – CET1 % Rights Issue Restructuring ~170bps ~(60)bps Underlying ~80bps 1.7% (0.6%) 1.2% (0.4%) 13.2% 12 6% 12.6% 11.5% 10.7% FY 14 Change in assets FX / Other Pre-rights Rights issue Post-
Slide 47: Significant reduction in risk-weighted assets
Sig gnificant reduction in risk-weig ghted assets 2015 RWA (US$bn) Underlying Restructuring (42.3) 3.6 15.3 (24.2) Net restructuring credit (9.6) migration Net underlying credit (17.3) 341.6 migration g 14.2 (10 6) (10.6) (8.8) 2.3 299.3 302.9 FY 14 Credit Provisions Asset RWA Currency Other Pre- Cr
Slide 48: Capital Position vs. future requirements
Cap pital Position vs. future req quirements Recent actions have further strengthened the Capital surplus vs. known 2019 requirement Group p’s cappital position…. 30% • CET1 of 12.6%, Total Capital 19.5% • CET1 within new target range of 12-13% 25% ~1.0 PLC • Current surplus to known 2019 requiremen
Slide 49: CET1: Surplus over known requirements
CET1: Surp plus over known req quirements Potential CCyB 9.1% Current known 2019 1%3 0.1% 0 minimum (MDA CET1 threshold1) 2.5% 3.6% Current known 5.75%2 12.6% 2019 Combined buffer 1 0% 1.0% 0 25% 0.25% 1.0% 1.00% 4.5% 4.50% CET1 as at 31 Dec 2015 2019 CET1 current known minimum 2016 Bank of England
Slide 50: Fixed Income
Fixed Income Standard @&° Chartered Ss
Slide 51: Resilient funding structure
Resilient funding g structure Composition of Deposits (US$bn)1 • Managed down deposits with low regulatory value 470 • Maintained broadly stable CASA balances 435 18 423 • Reduction in non-TLAC compliant short tenor issuance 6 9 397 24 • Low levels of encumbrance 213 201 200 • Comprehensive liquidit
Slide 52: Funding profile
Funding g profile Maturity profile (US$bn)1 PLC Issuance activity 2014 2015 2016 US T2 2bn AT1 2bn Senior 1bn Tier 2 D ll Dollar S i 2.5bn Senior 2 5b S i 3b Senior 3bn AT1 4.5 Senior 2bn 2.0 Euro T2 500m Senior 3.0 2.4 Sterling T2 900m 36 3.6 39 3.9 Senior Senior 1.8 2.3 2.0 Other T2 SGD700m JPY150
Slide 53: Standard Chartered Group: simplified legal structure
Standard Chartered Group p: simp plified leg gal structure Medium Term Senior Notes Standard Chartered PLC Tier-2 Benchmark Issuances A-/A1/A+ Legacy Tier Tier-1 1 Securities and AT1 Securities (S&P/M/F) Equity Standard Chartered Holdings Limited Commercial Paper / Commercial Deposits Medium Term Se
Slide 54: MREL: Well positioned
MREL: Well positioned ~24% • BoE implementing TLAC through MREL 23% PLC Senior • MREL lik likely l calibrated lib t d using i RWA b butt sett as a Combined buffer US$14bn % of balance sheet 3.6% • G-SII status requires MREL to be met by 2019 Non-equity • Hold Co (PLC) issuance strategy results in ca
Slide 55: Example approach to resolution
Examp ple approach pp to resolution SCPLC FY2015 (“de jure” EU BRRD Single Point of Entry) US OpCo Senior SCPLC Target End State (“de jure” Single Point of Entry) (mirroring US “de jure” waterfall) OpCo Senior OpCo Senior OpCo Sub HoldCo Senior $17.3bn HoldCo Senior HoldCo Senior OpCo HoldCo Sub Hol
Slide 56: AT1 considerations
AT1 considerations • A breach of the Combined Buffer¹ restricts discretionary distributions • Combined Buffer is phased phased-in in from 2016 and will include any future Countercyclical Buffer (“CCyB”) ( CCyB ) • Discretionary distributions include dividends, variable compensation and AT1 coupons2
Standard Chartered — Non-Deal Roadshow (February 2016) on 6ix