Standard Chartered Plc · LSE:STAN
Standard Chartered — FY2020 Earnings Presentation
67 slides from Standard Chartered's earnings presentation, Feb 25, 2021
Slide 1: FY'20 and 4Q'20 Results and investor update
PUBLIC FY’20 and 4Q’20 Results and investor update 25 February 2021
Slide 2: Contents
PUBLIC Contents Bill Winters 3 Group Chief Executive and 19 Andy Halford 4 Group Chief Financial Officer Appendix Income guidance, macroeconomic indicators and interest rate sensitivity 30 Vulnerable sectors and COVID-19 relief measures 35 Information for fixed income investors 38 Sustainability 50
Slide 3: We are weathering the health crisis and geopolitical tensions well
PUBLIC We are weathering the health crisis and geopolitical tensions well Our strategic transformation continues Strategic • We have been successfully executing the 2019 strategic priorities progress o Delivering our differentiated network and affluent businesses o Launching transformational digital
Slide 4: Andy Halford, Group Chief Financial Officer
PUBLIC Andy Halford Group Chief Financial Officer 4
Slide 5: The Group delivered a resilient performance in 2020
PUBLIC The Group delivered a resilient performance in 2020 … … in extremely challenging conditions ($bn) FY’19 FY’20 YoY1 Ccy1 Net interest income 7.7 6.9 (11)% (9)% • Income diversity largely offset the impact of ➢ Results Other income 7.6 7.9 4% 5% interest rate cuts Income Segment/region Operatin
Slide 6: FY'20 income reduced 3%; 4Q'20 income down 11%
PUBLIC FY’20 income reduced 3%; 4Q’20 income down 11% Benefits of product diversity outweighed by interest rate cuts Income FY’20 vs FY’19 ($m) -3% ➢ Results 92 74 Income 536 Segment/region (8) 15,371 (248) Expenses 15,198 Risk (259) (173) 14,752 Capital/liquidity 2018-20 progress (631) ➢ Guidance 2
Slide 7: Interest rate cuts in 1H'20 created a strong headwind
PUBLIC Interest rate cuts in 1H’20 created a strong headwind FY’21 NIM expected to stabilise marginally below the 4Q’20 level Gross yield 234 319 334 199 (bps) ➢ Results Rate paid Income (bps) 192 112 184 82 1.62 1.54 1.52 • Adjusted Net Interest Income (NII) Segment/region Expenses 1.31 down 14% Yo
Slide 8: Economic dislocation negative overall but boosted trading in 1H'20
PUBLIC Other income1 was up 2% and is now 54% of total income Economic dislocation negative overall but boosted trading in 1H’20 Income, statutory basis ($m) ➢ Results • Net fees and commissions down Income 10% YoY Segment/region Expenses 7,750 7,902 2,497 o Retail and Private Banking down Risk Capi
Slide 9: Higher impairments drove decline in profits in every segment
PUBLIC Higher impairments drove decline in profits in every segment … CIB diversity: strong FM performance overcame lower TB income FY’20 FY’20 vs FY’19 (inc/(dec)) YoY1 ➢ Results 2% Income Corporate & Income2 $7.2bn +5% Jaws Segment/region Institutional Banking Expenses $4.2bn (3)% Expenses PPOP $3
Slide 10: … and in the GCNA, ASA and AME regions
PUBLIC … and in the GCNA, ASA and AME regions Positive jaws in ASA and EA drove pre-provision operating profit growth FY’20 FY’20 vs FY’19 (inc/(dec)) YoY1 ➢ Results Income $6.0bn (2)% Income -1% Jaws (1)% Segment/region Greater China & North Expenses $3.7bn Expenses Asia PPOP $2.3bn (4)% Risk Profi
Slide 11: Central & other adversely impacted by interest rate reductions
PUBLIC Central & other adversely impacted by interest rate reductions Higher expenses reflect continued focus on investment initiatives Items excluded from Items excluded from both Items excluded from Client Segments Client Segments and Regions Regions ➢ Results Income Segment/region Centrally manag
Slide 12: Focus on underlying cost control will be maintained in 2021
PUBLIC Focus on underlying cost control will be maintained in 2021 … … creating capacity for investment in anticipation of recovery ➢ Results 80 • Expenses 2% lower YoY; 1% ccy Income 67 71 70 • Investments maintained in FY’20 Segment/region Expenses Cost-to- income ratio1 65 60 o Up 31% QoQ in 4Q’2
Slide 13: Two-thirds of the FY impairment charge was taken in 1H'20
PUBLIC Two-thirds of the FY impairment charge was taken in 1H’20 Major uncertainties and risks remain, but conditions stabilised in 2H’20 Credit impairment ($m) / Loan-loss rate (bps) ➢ Results Income Loan-loss rate1 (bps) 27bps 66bps 27bps 66bps • Credit impairment up $1.4bn YoY Segment/region Expe
Slide 14: We maintained a strong capital position despite external challenges
PUBLIC We maintained a strong capital position despite external challenges We have capacity to fund both growth and shareholder returns Risk-weighted assets ($bn) +$4.7bn ➢ Results 14.9 • RWA up $4.7bn (2%) YoY Income 5.7 264.1 0.9 3.4 268.8 o ~$15bn of net credit migration Segment/region Expenses (
Slide 15: Strong progress improving RoTE until the onset of COVID-19
PUBLIC Strong progress improving RoTE until the onset of COVID-19 We were delivering every element of the financial framework 2019 Financial Framework1 1Q’19 2Q’19 3Q’19 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 ➢ Results 8% Income 6% 4% 6% 4% Segment/region 4% Expenses Income 5-7% CAGR Income YoY3 Risk Capital
Slide 16: The global economy is expected to transition back to growth in 2021
PUBLIC The global economy is expected to transition back to growth in 2021 Led by global trade, and driven by markets in our footprint • Improving prospects for vaccines should enable the global economy to recover ➢ Results Income o Growth is likely to be led by Asia, where we generate ~2/3 of our i
Slide 17: We have refreshed our medium-term financial framework
PUBLIC We have refreshed our medium-term financial framework We expect to reach at least 7% RoTE by 2023 on our path to >10% • Rebalance products, clients, liability structure and ➢ Results Income Income2 5-7% CAGR asset allocation to improve NII Segment/region Expenses • Continue to pursue differen
Slide 18: Our path to >10% RoTE is clear
PUBLIC Our path to >10% RoTE is clear Positive jaws, robust credit control and capital optimisation Underlying RoTE (%) ➢ Results Income growth 5-7%1 Positive income-to- RWA growth < Target CET1 Income (see page 31) cost jaws Asset growth 13-14% Segment/region Expenses Risk Capital/liquidity 2018-20
Slide 19: Bill Winters, Group Chief Executive
PUBLIC Bill Winters Group Chief Executive 19
Slide 20: We will fulfil our Purpose through four strategic priorities
PUBLIC We will fulfil our Purpose through four strategic priorities Enabled by innovation, new ways of working and people & culture The opportunity ➢ Results Income • Asia GDP growth: 7.4% in ‘21, 5.2% in ‘221 Segment/region Network Expenses • Import/Export growth ~6-7% p.a. 2021-252 Risk Capital/li
Slide 21: Unlock the power of our unique footprint
PUBLIC Unlock the power of our unique footprint Strategic priority 1 of 4: Wholesale Network Our strategic advantages Selected actions/objectives ➢ Results Income • Unique presence supporting MNCs • Accelerate roll-out of digital platforms Segment/region Expenses across fast-growing AAME region • St
Slide 22: Reinforce our strong credentials in the affluent segment
PUBLIC Reinforce our strong credentials in the affluent segment Strategic priority 2 of 4: Affluent Our strategic advantages Selected actions/objectives ➢ Results • Drive efficiencies by harmonising client Income Segment/region coverage and technology investment Expenses • ‘Best-in-class’ for Priori
Slide 23: Substantially and economically scale up in mass market retail
PUBLIC Substantially and economically scale up in mass market retail Strategic priority 3 of 4: Mass Retail Our strategic advantages Selected actions/objectives ➢ Results Income • ‘Best Digital Bank’ in multiple markets 1 • Continue to develop digital attackers Segment/region Expenses • Developed se
Slide 24: Make a difference in the world where it matters the most
PUBLIC Make a difference in the world where it matters the most Strategic priority 4 of 4: Sustainability Our strategic advantages Selected actions/objectives ➢ Results Income Segment/region • Develop ~$1bn income SF franchise Expenses Risk • Unique position connecting developed over medium-term Cap
Slide 25: Embed innovation into our culture and all that we do
PUBLIC Embed innovation into our culture and all that we do Critical enabler 1 of 3: Innovation Selected actions ➢ Results • Scale-up and develop ventures in Income Segment/region Aspiration Expenses markets across our footprint Risk o Launched SME platform (SOLV) Capital/liquidity 2018-20 progress
Slide 26: Empower our people to continuously improve the way we work
PUBLIC Empower our people to continuously improve the way we work Critical enabler 2 of 3: New ways of working Selected actions ➢ Results Income Segment/region Aspiration Expenses • Detailed plans to increase productivity Risk Capital/liquidity o Streamline coordination and digitise 2018-20 progress
Slide 27: Give our people a differentiated experience
PUBLIC Give our people a differentiated experience Critical enabler 3 of 3: People and culture Selected actions ➢ Results Income Aspiration • Adapt to post COVID-19 environment Segment/region Expenses o Increased flexibility in how and where Risk Capital/liquidity we work, starting in 9 largest mark
Slide 28: Creating a thriving and dynamic culture, powered by our Purpose
PUBLIC Creating a thriving and dynamic culture, powered by our Purpose … … driving commerce and prosperity with our unique diversity ➢ Results • We are accelerating the impact of our strategy by Income connecting it to bold ambitions on some of the big issues Segment/region Expenses facing the world
Slide 29: PUBLIC
PUBLIC 29
Slide 30: Appendix
PUBLIC Appendix Income guidance, macroeconomic indicators and interest rate sensitivity Vulnerable sectors and COVID-19 relief measures Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 30
Slide 31: We continue to anticipate 5-7% income growth in the medium term
PUBLIC We continue to anticipate 5-7% income growth in the medium term1 Driven by a mix of internal actions and underlying factors ~25% ~30% Income ($bn) Net interest income Fees and ~30% other income Volume growth and improving mix Enabled by investments in technology and people 5-7% CAGR 14.8 FY’2
Slide 32: 2021 is expected to be a year of recovery from COVID-19
PUBLIC 2021 is expected to be a year of recovery from COVID-19 The focus is likely to be on vaccinations, amidst continued policy support Real GDP growth1 (%) 2020e 2021e Potential headwinds1 Hong Kong (6.1) 3.5 GCNA • Continued spread of COVID-19 coronavirus China 2.3 8.0 • Risk of inflation Korea
Slide 33: Changes to baseline forecasts for key footprint markets
PUBLIC Stage 1 and 2 credit impairments Changes to baseline forecasts1 for key footprint markets: 3Q’20 to 4Q’20 3Q’20 4Q’20 Crude price China Hong Kong Korea Singapore India Brent, bbl GDP (YoY): 2020 Forecast 2.4% 2.1% (7.2)% (5.8)% (0.6)% (0.8)% (5.9)% (6.0)% (8.0)% (8.0)% $36 $41 G
Slide 34: Interest Rate Risk in the Banking Book
PUBLIC Interest Rate Risk in the Banking Book (simplified scenario analysis) Sensitivity increased YoY, particularly as rates are now close to zero Annualised benefit to banking book NII from instantaneous parallel shifts in interest rates across all currencies ($m)1 • Underlying sensitivity + and -
Slide 35: Appendix
PUBLIC Appendix Income guidance, macroeconomic indicators and interest rate sensitivity Vulnerable sectors and COVID-19 relief measures Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 35
Slide 36: Loans & Advances in 'vulnerable sectors' fell by $3.3bn during 4Q'20
PUBLIC We continue to monitor sectors most at risk from COVID-19 Loans & Advances in ‘vulnerable sectors’1 fell by $3.3bn during 4Q’20 IFRS 9 Commodity Metals & (as at 31 December 2020) Traders Oil and Gas Mining Aviation3 • Vulnerable sectors % < 1 year maturity 2 91% 56% 71% 24% o 7% of Group L&A
Slide 37: Loans subject to relief down $3.3bn since 3Q'20
PUBLIC We are providing relief from the impact of COVID-19 for our clients Loans subject to relief down $3.3bn since 3Q’20 to $3.6bn 1; 1% of L&A Approved RB COVID-19 relief applications by region (L&A $m) 1,838 • RB loans subject to payment reliefs 1,554 reduced by $1.0bn to $2.4bn during 4Q’20 746
Slide 38: Appendix
PUBLIC Appendix Income guidance, macroeconomic indicators and interest rate sensitivity Vulnerable sectors and COVID-19 relief measures Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 38
Slide 39: Resilient performance founded on a diverse franchise
PUBLIC Resilient performance founded on a diverse franchise Over 160 years in some of the world's most dynamic markets 59 >80% 4 $14.8bn $2.5bn (FY’19: $15.3bn) (FY’19: $4.2bn) Markets Income from Asia, 4 client segments & Operating income Profit before taxation Africa & 4 regions Middle East 67% 3.
Slide 40: Balance sheet strength through volatile times
PUBLIC Balance sheet strength through volatile times CET1% 14.4% 13.8% 14.3% Min requirement 10.0% • CET1 capacity to manage further uncertainty FY'19 1H'20 FY'20 and support clients, whilst resuming distributions MREL% 30.7% 30.9% 28.6% Min requirement 26.1%1 • ~$10bn of MREL issuance in 2020 acros
Slide 41: Balance sheet: business and geography diversity underpins resilience
PUBLIC Balance sheet Business and geography diversity underpins resilience FY’20 Balance sheet assets FY’20 Customer loans & advances1 by market and segment 3% Hong Kong CIB 1 4% 8% Loans & advances to customers 5% Other 4% 23% RB 8% 5% 6% Investment securities Singapore 8% CB 8% 43% Derivatives UK
Slide 42: Stronger foundations supporting resilient performance
PUBLIC Stronger foundations supporting resilient performance Key risk indicators FY’20 FY’14 FY’20-14 • Key portfolio indicators improved since (IFRS 9) (IAS 39) Movement Investment grade as a % of corporate exposure 62% 42% FY’14 reflecting: Top 20 corporates as a % of Tier 1 capital 60% 83% o Inve
Slide 43: The Group's liquidity position remained resilient in FY'20
PUBLIC Funding and Liquidity The Group’s liquidity position remained resilient in FY’20 Liquidity coverage ratio ($bn) 144% 149% 143% • LCR has remained resilient during 2020: well above regulatory minimum requirements 158 157 176 110 105 123 • Market liquidity conditions continued to improve, FY'19
Slide 44: CET1 strongly positioned: absolutely and relative to requirements
PUBLIC CET1 Strongly positioned: absolutely and relative to requirements 1 CET1 minimum requirement reduced in the period 10.2% 10.0% 2.5% 2.5% CCB • Minimum CET1 requirement reduced by CCyB 0.35% 0.14% G-SII ~28bps YoY 1.0% 1.0% Pillar 2A o ~21bps on decrease in countercyclical 1.9% 1.8% Pillar 1 b
Slide 45: Debt Issuance
PUBLIC Debt Issuance Successful delivery of funding programme despite stressed markets Maturity profile of existing stock ($bn)1 2020 funding progress 10.1 8.5 1.0 7.7 2.0 6.3 2.4 0.6 5.4 5.5 1.0 4.5 2.0 1.0 1.0 0.6 4.3 1.6 2.1 6.8 1.3 2.0 6.1 4.5 4.6 3.0 3.3 3.2 2.4 2019 2020 2021 YTD 2021 2022 202
Slide 46: MREL transition
PUBLIC MREL transition Well positioned for future growth and requirements External MREL position ahead of known 2022 requirement 30.9% 26.1% PLC Senior 8.5% Combined Buffer 3.6%1 • FY’20 MREL position of 30.9% of RWA meets Loss absorption Recapitalisation Pillar 2A 3.2% Tier 2 5.9% expected 2022 MRE
Slide 47: Further Hold Co loss absorbency
PUBLIC 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 are taken at Hold Co Op Co losses follow Op Op Co losses are Co creditor hierar
Slide 48: Strong credit ratings maintained through COVID
PUBLIC Strong credit ratings maintained through COVID Delivery of Group strategy to defend and, over time, improve credit ratings Senior long- and short-term ratings • Group maintained strong foundations through COVID-19 and is focused on sustainable growth to achieve target returns • Well-rated wit
Slide 49: Standard Chartered Group simplified legal structure
PUBLIC Standard Chartered Group Simplified legal structure Medium Term Senior notes Standard Chartered PLC Tier 2 securities BBB+/A2/A Tier 1 securities (S&P/Moody’s/Fitch) Equity Standard Chartered Bank CP / CDs Standard Chartered Bank CP / CDs Hong Kong Medium Term Notes A/A1/A+ Medium Term Notes
Slide 50: Appendix
PUBLIC Appendix Income guidance, macroeconomic indicators and interest rate sensitivity Vulnerable sectors and COVID-19 relief measures Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 50
Slide 51: We will lead with a differentiated sustainability offering
PUBLIC We will lead with a differentiated sustainability offering… … catalysing the UN SDGs where it matters most The challenge ➢ Introduction • Not enough financing to meet the UN SDGs ➢ Pillars o 60% being met in EM; 10% in Africa Business Operations Sustainable o $10trn financing gap in 15 footpr
Slide 52: Pillar 1: Business - Sustainable finance
PUBLIC Pillar 1: Business Sustainable finance Do more good … … while doing less harm Supporting sustainable growth Setting and raising client standards ➢ Introduction We provide financial products and services to people and businesses to help drive Our position statements outline the standards we en
Slide 53: Pillar 2: Operations - Responsible company
PUBLIC Pillar 2: Operations Responsible company Our values Our people and impact ➢ Introduction Fight financial crime Invest in our people ➢ Pillars Our ambition is to tackle some of today’s most damaging crimes by making the Our workforce is diverse and inclusive and highly motivated to do the righ
Slide 54: Pillar 3: Communities - Inclusive communities
PUBLIC Pillar 3: Communities Inclusive communities Empowering young people Investing in our communities through Futuremakers ➢ Introduction COVID-19 response Education ➢ Pillars Set up $50m COVID-19 Global Charitable Fund Reach one million girls and young women through Goal - 2006 to 2023 Business O
Slide 55: Our role in tackling climate change
PUBLIC Our role in tackling climate change Accelerating climate finance… … while managing climate risks ➢ Introduction Mobilising finance for climate Funding applied climate research ➢ Pillars Facilitate $75bn aligned to our green and sustainable product framework Business comprising $40bn towards s
Slide 56: Measurement and validation
PUBLIC Measurement and validation Ratings ➢ Introduction AA 28.7 C ➢ Pillars Business Operations Communities ➢ Climate ➢ Validation 19 sustainability awards granted in 2020 Green & Sustainable Product Framework Verified by Sustainalytics SDG Bond Framework Verified by Sustainalytics Sustainable Fina
Slide 57: Further resources
PUBLIC Further resources sc.com/sustainability Pillar 1: Business Pillar 2:Operations Pillar 3: Communities Our role in tackling Sustainable Finance Responsible Company Inclusive Communities climate change ➢ Introduction Supporting sustainable Fighting financial crime Commitments Mobilising finance
Slide 58: Appendix
PUBLIC Appendix Income guidance, macroeconomic indicators and interest rate sensitivity Vulnerable sectors and COVID-19 relief measures Information for fixed income investors Sustainability Notes, abbreviated terms and important notice 58
Slide 59: Notes
PUBLIC Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Year-on-year growth in aggregate underlying profit before tax in India, Indonesia, Korea and the UAE, on a constant currency basis 3 1. YoY = year-on-year variance is better/
Slide 60: Notes
PUBLIC 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. The equivalent ratio in FY’19 / FY’20 including DVA is 66% / 66% 12 2. Excludes the U
Slide 61: Notes
PUBLIC Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. The FY’21 cost guidance excludes the UK bank levy and is on a constant currency basis 16 2. The impact of foreign exchange fluctuations on the Group’s income and costs tends
Slide 62: Notes
PUBLIC Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Best-in-class amongst international banks based upon Rfi NPS methodology 22 2. Affluent income / RoTE / AUM / from Priority, Premium and Private Banking clients; Number of ac
Slide 63: Notes
PUBLIC Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. Source: Standard Chartered Global Research, India’s financial year starts in April each year. The forecasts reflect Global Research projections, and not 32 necessarily those
Slide 64: Notes
PUBLIC Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition 1. FY’14 includes both individual and portfolio impairment provisions. FY’20 includes Stage 3 provisions. Following adoption of IFRS9, the definition of non- 42 performing loans
Slide 65: Selected technical and abbreviated terms
PUBLIC Selected technical and abbreviated terms Term Definition Term Definition [A]AME The Group’s business in the [Asia,] Africa & Middle East region E&A The Group’s business in the Europe & Americas region Affluent Exposure At Default: The estimation of the extent to which the Group may be exposed
Slide 66: Selected technical and abbreviated terms
PUBLIC Selected technical and abbreviated terms Term Definition Term Definition Network Corporate and institutional banking services offered to clients utilising the Group’s unique RWA Risk-Weighted Assets are a measure of the Group’s assets adjusted for their associated risks activities network in
Slide 67: Important notice
PUBLIC 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 strategy, b