Standard Chartered Plc · LSE:STAN
Standard Chartered — H1 2021 Earnings Presentation
60 slides from Standard Chartered's earnings presentation, Aug 3, 2021
Slide 1: 1H'21 / 2Q'21 Results Presentation
CONFIDENTIAL 1H’21 / 2Q’21 Results Presentation 3 August 2021
Slide 2: Contents
CONFIDENTIAL Contents Bill Winters 3 Group Chief Executive and 15 Andy Halford 4 Group Chief Financial Officer Appendix Summary of guidance, macroeconomic indicators, interest rate sensitivity, 28 other income, critical enablers, C&O, stands Information for fixed income investors 35 Sustainability 4
Slide 3: Our first half of 2021 was one of recovery, albeit an uneven one
CONFIDENTIAL Our first half of 2021 was one of recovery, albeit an uneven one We enter 2H’21 with positive momentum, purpose and confidence • We delivered a resilient and encouraging performance in 1H’21 o Profit before tax has recovered strongly from a year ago, up 37% 1... o … mainly driven by imp
Slide 4: Andy Halford, Group Chief Financial Officer
CONFIDENTIAL Andy Halford Group Chief Financial Officer 4
Slide 5: The Group delivered a resilient and encouraging performance in 1H'21
CONFIDENTIAL The Group delivered a resilient and encouraging performance in 1H’21… … with strong underlying business momentum ($bn) 1H’20 1H’21 YoY1 Ccy1 Net interest income 3.5 3.4 (4)% (6)% • Income momentum offset by low interest rates and → Introduction Other income (ex-DVA) 4.4 4.2 (4)% (6)% lo
Slide 6: 1H'21 YoY: NII headwinds, lower FM and Treasury realisation gains
CONFIDENTIAL 1H’21 YoY: NII headwinds, lower FM and Treasury realisation gains… … record WM and strong asset growth; QoQ NII headwinds abating Income 1H’21 vs 1H’20 ($m) (6)% Introduction Lower Lower → Income Record Asset NII 1H’21 Growth Market Realisation Headwinds Segment/region Volatility Gains
Slide 7: 1H'21 NII impacted by 18bps YoY reduction in NIM
CONFIDENTIAL 1H’21 NII impacted by 18bps YoY reduction in NIM Strong asset growth, with AIEA up $19bn / 4% in 1H’211 Gross yield (bps) 265 185 237 186 • Adjusted NII down 7% YoY Introduction → Income Rate paid (bps) 139 69 121 69 o NIM down 18bps / 13% YoY Segment/region Expenses 1.40 ▪ ~$500m headw
Slide 8: A record performance in Wealth Management
CONFIDENTIAL A record performance in Wealth Management… … with strong momentum going into 2H’21 WM income ($m) Introduction → Income 1H’19 1H’20 1H’21 Segment/region • 1H’21 income up 23%, 2Q’21 up 26% Expenses Risk Capital o Record quarter in 1Q’21 and 1H’21 Guidance Strategy o 16% of Group income,
Slide 9: FM comparatives impacted by unprecedented volatility levels in 1H'20
CONFIDENTIAL FM comparatives impacted by unprecedented volatility levels in 1H’20… … but exiting 2Q’21 strongly FM ex-DVA income ($m) and market volatility 1H’19 1H’20 1H’21 • 1H’21 FM ex-DVA income down 3%, 2Q’21 → Introduction Income down 11% YoY Segment/region Expenses o 1H’21 > 1H’19 Qtr avg Ris
Slide 10: CPBB recovery driven by WM, CCIB facing tough income comparatives
CONFIDENTIAL Improving returns driven by lower impairments offset by NII headwinds …CPBB recovery driven by WM, CCIB facing tough income comparatives Segments Regions Introduction 1H’21 1H’21 vs 1H’20 (inc/(dec)) YoY1 Income 1H’21 1H’21 vs 1H’20 (inc/(dec)) YoY1 → Segment/region Expenses Asia Risk C
Slide 11: Expenses increased in 1H'21 as we continue to invest
CONFIDENTIAL Expenses increased in 1H’21 as we continue to invest FY’21 expenses should remain <$10bn excl. FX; may increase for performance pay 80 Cost-to- 67 70 70 • Expenses 8% higher YoY; 4% ccy Introduction income Income 59 63 ratio1 Segment/region (%) 60 • FX impact ~50% of YoY increase; ~$300
Slide 12: We expect credit impairment to remain low for the remainder of the year
CONFIDENTIAL We expect credit impairment to remain low for the remainder of the year We remain cautiously optimistic Credit impairment ($m) / Loan-loss rate Introduction Income Loan-loss rate1 92bps 0bps 92bps 0bps • Credit impairment down $1,614m Segment/region Expenses o Stage 1 & 2 net release of
Slide 13: RWA growth continues to be driven primarily by client demand
CONFIDENTIAL RWA growth continues to be driven primarily by client demand We have capacity to fund both growth and capital returns Risk-weighted assets (RWA) ($bn) Introduction • RWA up $11bn (4%) from 31.12.20 Income +$11.4bn Segment/region 1.3 2.2 280.2 o Mainly client demand led asset growth Expe
Slide 14: Looking ahead
CONFIDENTIAL Looking ahead • With the current level of normalised NIM and strong customer demand likely to continue in 2H’21, we still expect FY’21 income to be similar to that achieved in Introduction Income FY’20 on a constant currency basis… Segment/region Expenses Risk • … and to return to our m
Slide 15: Bill Winters, Group Chief Executive
CONFIDENTIAL Bill Winters Group Chief Executive 15
Slide 16: We are more confident in achieving our RoTE targets
CONFIDENTIAL We are more confident in achieving our RoTE targets Encouraging progress made in the first half of 2021 ~25% Introduction Income Good momentum and an improving outlook Segment/region Expenses Strong underlying business momentum… Risk Capital … against a challenging backdrop Guidance → S
Slide 17: Focus on Hong Kong
CONFIDENTIAL Focus on Hong Kong Strong underlying income momentum, improving returns and driving innovation Financial Highlights Key highlights Introduction Income • RoTE in 1H’21 is almost back to 1H’19 record level Segment/region Strong growth in Other income offsetting NIM headwinds Expenses 1H’2
Slide 18: Focus on China
CONFIDENTIAL Focus on China Good returns, fast growing and well set to benefit from China’s opening Structural shifts Our strategic advantages Introduction Income • Strong financial performance Segment/region Expenses Global asset redenomination into RMB amid China opening o Record profit before tax
Slide 19: Focus on the optimisation markets
CONFIDENTIAL Focus on the optimisation markets Despite significant challenges we continue to make good progress in 1H’21 India Korea UAE Indonesia Introduction Income Segment/region Expenses Risk Capital Income CAGR % (2018 - 2020) 15% 2% (5)% 9% Guidance → Strategy 1H’21 Profit before tax $284m $20
Slide 20: Network: unlocking the power of our unique footprint
CONFIDENTIAL Network: unlocking the power of our unique footprint CCIB’s network business Introduction Income Segment/region • RoTE2 of 13.1%, +1.9%pts vs CCIB Expenses Risk • New client tiering in place to deliver distinct client propositions Capital Guidance → Strategy • Global trade volumes have
Slide 21: Affluent: reinforcing our strong credentials; Mass retail: scaling up
CONFIDENTIAL Affluent: reinforcing our strong credentials Mass retail: substantially and economically scaling up Affluent client business Mass retail business Introduction Income Segment/region • Affluent client base continues to grow Expenses • Nexus: partnering with Bukalapak and Risk o Added 162k
Slide 22: Sustainability: making a difference in the world where it matters the most
CONFIDENTIAL Sustainability: making a difference in the world where it matters the most Sustainability Introduction Income • Launched sustainable supply chain benchmarking tool Segment/region Expenses • Announced Climate Impact X (CIX)1, a global exchange and Risk Capital marketplace for carbon cred
Slide 23: Focus on digital and virtual banking
CONFIDENTIAL Focus on digital and virtual banking Multi faceted strategy of self build, partnering and strategic investment 2 Introduction Africa digital bank Strategic Investments Income Segment/region • Launched in Hong Kong in • Investments made for insight, value • Launched in Côte d'Ivoire in E
Slide 24: Focus on new business ventures
CONFIDENTIAL Focus on new business ventures Off to an exciting start with a number of innovative propositions in the pipeline Introduction Income Segment/region BaaS business, allowing digital B2B digital commerce platform Expenses ecosystems to offer lending, credit cards & connecting buyers and se
Slide 25: It's time to take a stand
CONFIDENTIAL Its time to take a stand The world is being reset and we need to transform further and fast Introduction What we want to stand for: Our stands represent our aspiration – the difference we want to make Income Segment/region Expenses Risk Capital Accelerating Zero Lifting Participation Re
Slide 26: In conclusion
CONFIDENTIAL In conclusion Introduction Income Segment/region Capital and ROTE Business momentum Innovation and disruption Expenses Risk • Digital bank offerings now in Capital • We are more confident in • Record Wealth Management several markets with scale – Guidance → Strategy achieving our RoTE t
Slide 27: CONFIDENTIAL
CONFIDENTIAL 27
Slide 28: Appendix
CONFIDENTIAL Appendix Summary of guidance, macroeconomic indicators, interest rate sensitivity, other income, critical enablers, C&O, stands Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 28
Slide 29: Summary of guidance
CONFIDENTIAL Summary of guidance 2021 guidance Medium-term guidance • With the current level of normalised1 NIM and strong customer demand • We expect to return to 5-7% growth per annum from 2022 likely to continue in 2H’21, we still expect FY’21 income to be similar to that • We assume minimal rate
Slide 30: Changes to baseline forecasts for key footprint markets: 1Q'21 to 2Q'21
CONFIDENTIAL Stage 1 and 2 credit impairments Changes to baseline forecasts1 for key footprint markets: 1Q’21 to 2Q’21 1Q’21 2Q’211 Crude price China Hong Kong Korea Singapore India Brent, bbl GDP (YoY): 2021 Forecast 8.0% 8.0% 4.0% 6.9% 3.3% 3.9% 5.2% 6.3% 11.5% 8.5% $51.0 $63.9 GDP (
Slide 31: Interest Rate Risk in the Banking Book
CONFIDENTIAL Interest Rate Risk in the Banking Book Sensitivity increased to reflect actual experience Annualised benefit to banking book NII from instantaneous parallel shifts in interest rates across all currencies ($m)1, 2 (50)bps +100bps +50bps • Following a review of the actual impact of fallin
Slide 32: Other income ex-DVA was down 5%
CONFIDENTIAL Other income ex-DVA was down 5%1 Income, statutory basis ($m) 4,497 2,305 2,281 • Net fees and commissions up 25% YoY 4,259 o CPBB up 28% YoY driven by Wealth 1,929 1,978 1,557 695 Management Net fees and 1,013 commissions ($m) 1,939 o CCIB up 19% YoY driven by 1,463 918 926 Transaction
Slide 33: Critical enablers overview
CONFIDENTIAL Critical enablers overview Introduction Innovation New ways of working People and culture Income Segment/region • Partnering with Northern Trust to Expenses Risk launch Zodia Custody, a • Project speed to market times have • Flexible working available in 50% of Capital cryptocurrency cu
Slide 34: Central & other adversely impacted by interest rate reductions
CONFIDENTIAL Central & other adversely impacted by interest rate reductions Items excluded from Items excluded from both Items excluded from Client Segments Client Segments and Regions Regions Centrally managed Treasury Markets Treasury Capital Portfolio Management Associates and Joint Ventures Corp
Slide 35: Appendix: Information for fixed income investors
CONFIDENTIAL Appendix Summary of guidance, macroeconomic indicators, interest rate sensitivity, other income, key enablers, critical enablers, C&O, stands Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 35
Slide 36: Resilient performance founded on a unique franchise
CONFIDENTIAL Resilient performance1 founded on a unique franchise Over 160 years in some of the world's most dynamic markets 59 >85% $7.6bn $2.7bn (1H’20: $8.0bn) (1H’20: $2.0bn) Markets Income from Asia, Operating income Profit before taxation Africa & Middle East 67% 9.3% (1H’20: 59%) (1H’20: 6.0%
Slide 37: Balance sheet strength through volatile times
CONFIDENTIAL Balance sheet strength through volatile times CET1 14.3% 14.4% 14.1% Min requirement • CET1 capacity in support of organic growth, 9.9% investment opportunities and shareholder distributions 1H'20 FY'20 1H'21 MREL 30.7% 30.9% 31.7% Min requirement • MREL issuance of $7.2bn in 1H’21 acro
Slide 38: Balance sheet
CONFIDENTIAL Balance sheet Business and geography diversity underpins resilience 1H’21 Balance sheet assets1 1H’21 Customer loans & advances1,2 by market and segment Hong Kong CCIB 9% Loans & advances to customers1 17% 7% Singapore CPBB Investment securities 7% 24% UK 8% 3% C&O 45% Cash & balances a
Slide 39: Stronger foundations supporting resilient performance
CONFIDENTIAL Stronger foundations supporting resilient performance 1H’21 FY’14 1H’21-FY’14 Key risk indicators (IFRS 9) (IAS 39) Movement • Key portfolio indicators improved since Investment grade as a % of corporate exposure 63% 42% FY’14 reflecting: Top 20 corporates as a % of Tier 1 capital 58% 8
Slide 40: The Group's liquidity position remained resilient in 1H'21
CONFIDENTIAL Funding and Liquidity The Group’s liquidity position remained resilient in 1H’21 Liquidity coverage ratio ($bn) 149% 146% • LCR has remained resilient during 1H’21: well 143% above regulatory minimum requirements 157 105 176 123 168 115 • Continued LCR optimisation supported by better l
Slide 41: CET1: Strongly positioned absolutely and relative to requirements
CONFIDENTIAL CET1 Strongly positioned: absolutely and relative to requirements 1 CET1 minimum requirement reduced in the period 10.0% 9.9% CCB 2.5% 2.5% CCyB 0.14% 1.0% 0.15% G-SII • Minimum CET1 requirement reduced by 7bps 1.0% 1.8% 1.7% Pillar 2A due to change in Pillar 2A calculation Pillar 1 4.5
Slide 42: MREL transition: Well positioned for future growth and requirements
CONFIDENTIAL MREL transition Well positioned for future growth and requirements External MREL position ahead of known 2022 requirement 31.7% 25.9% Combined Buffer PLC Senior 9.7% • 1H’21 MREL position of 31.7% of $280bn RWA 3.7%1 meets expected 2022 MREL requirement with Recapitalisation Pillar 2A 3
Slide 43: Debt Issuance: Good progress on delivery of 2021 funding programme
CONFIDENTIAL Debt Issuance Good progress on delivery of 2021 funding programme Maturity profile of existing stock ($bn)1 2021 YTD issuance ($bn) 8.5 2.0 10.1 6.0 6.3 5.4 2.0 0.6 1.0 1.0 1.0 1.6 3.2 2.1 2.0 4.6 3.2 3.8 3.2 2.4 2.4 7.2 2021 2022 2023 2024 2025 AT1 1.3 Senior Tier 2 AT1 $1.25bn PerpNC1
Slide 44: Further Hold Co loss absorbency
CONFIDENTIAL Resolution example Significant loss absorbing capacity (LAC) Once investments in Op Co are written down or converted to equity, losses • Internal LAC (iLAC) intended to recapitalise Further Hold Co loss absorbency Op Co losses follow Op Op Co losses are are taken at Hold Co Operating Co
Slide 45: Strong credit ratings maintained through COVID
CONFIDENTIAL Strong credit ratings maintained through COVID Delivery of Group strategy to defend and, over time, improve credit ratings Senior long- and short-term ratings • Well-rated with strong credit fundamentals, absolutely and relative to peers: S&P Moody’s Fitch o Well-established network is
Slide 46: Standard Chartered Group simplified legal structure
CONFIDENTIAL Standard Chartered Group Simplified legal structure, proposed creation of ASEAN hub Standard Chartered PLC Medium Term Senior notes • Proposed creation of the ASEAN hub Tier 2 securities BBB+/A3/A Tier 1 securities based in Singapore in 2H’21, subject (S&P/Moody’s/Fitch) Equity to regul
Slide 47: Appendix: Sustainability
CONFIDENTIAL Appendix Summary of guidance, macroeconomic indicators, interest rate sensitivity, other income, key enablers, critical enablers, C&O, stands Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 47
Slide 48: We will lead with a differentiated sustainability offering
CONFIDENTIAL We will lead with a differentiated sustainability offering… … making a difference in the world where it matters most Our impact • EM are most at risk from climate change… o … but have the biggest opportunity to move to low carbon o Solar in India avoids >7x the CO2 of a similar project
Slide 49: We are part of the solution
CONFIDENTIAL We are part of the solution Our commitments 1H’21 achievements • $1bn at cost financing for companies providing goods • ~$770m credit approved to help clients producing and services to fight COVID-19 goods and services in the fight against COVID-192 • Net zero by 2050 for financed emiss
Slide 50: Building a leading Sustainable Finance franchise
CONFIDENTIAL Building a leading Sustainable Finance franchise Catalysing the UN SDGs where it matters the most Market leading solutions Trade and transition opportunity • Launched a new sustainable trade finance proposition • $1.6tn exports for supply chains in 12 EM for early and a sustainable supp
Slide 51: Progress to accelerate to net zero for financed emissions by 2050
CONFIDENTIAL Progress to accelerate to net zero for financed emissions by 2050 • Founding signatory and appointed Chair to the Definition Achieving net zero financed Net-Zero Banking Alliance emissions by 2050, defining in- scope financing activities o Committed to aligning lending portfolios with n
Slide 52: Appendix: Notes, abbreviated terms and important notice
CONFIDENTIAL Appendix Summary of guidance, macroeconomic indicators, interest rate sensitivity, other income, key enablers, critical enablers, C&O, stands Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 52
Slide 53: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. 1H’21 year-on-year underlying profit before tax growth 3 2. 1H’21 Wealth Management income is the record half since the Group started disclosing operating income by pro
Slide 54: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Cost-to-income ratio is calculated as Income ex-DVA / Operating expense ex-UK bank levy 11 2. Excludes the UK bank levy and investments 3. Other includes incremental 20
Slide 55: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Source: Morgan Stanley estimates 18 2. Source: Bridgewater Associates estimates 3. Source: BCG Report: “Redrawing the Map of Global Trade” 4. Source: GlobalData Plc: Ch
Slide 56: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Standard Chartered, DBS, SGX and Temasek announced plans on the 20th May 2021 to develop a carbon exchange and marketplace, Climate Impact X; 22 providing organisations
Slide 57: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. YoY = year-on-year variance is better/(worse) other than for RWA which is increase/ (decrease) / Nm = Not meaningful 34 2. Profit before tax includes Profit from associ
Slide 58: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Combined Buffer comprises the Capital Conservation Buffer, G-SII Buffer and any Countercyclical Buffer 42 2. Financial Stability Board’s (FSB) “Principles on Loss-absor
Slide 59: Selected technical and abbreviated terms
CONFIDENTIAL Selected technical and abbreviated terms Term Definition Term Definition Affluent Loan-loss rate Total credit impairment for loans and advances to customers over average loans and advances to Personal banking services offered to affluent and emerging affluent customers (LLR) customers a
Slide 60: Important notice
CONFIDENTIAL 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 members of its senior management about the strat