Standard Chartered Plc · LSE:STAN
Standard Chartered — FY2019 Earnings Presentation
55 slides from Standard Chartered's earnings presentation, Feb 27, 2020
Slide 1: FY'19 and 4Q'19 Results Presentation
FY’19 and 4Q’19 Results Presentation 27 February 2020
Slide 2: Contents
Contents Bill Winters 2 Group Chief Executive and 19 Andy Halford 5 Group Chief Financial Officer Appendix 29 Macroeconomic outlook, novel coronavirus responses and interest rate sensitivity 30 Fixed income information 34 Sustainability 44 Definitions and important notice 52 1
Slide 3: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive 2
Slide 4: We delivered on our strategic and financial commitments in 2019
We delivered on our strategic and financial commitments in 2019 We passed several important strategic milestones, generated profitable growth and returned surplus capital • Network1 and Affluent2 activities continue to deliver premium growth and returns • Massive push on digitisation and innovation
Slide 5: We are now fitter - more able to both adapt to challenges and seize opportunities
We are now fitter - more able to both adapt to challenges and seize opportunities We are better equipped to lead in a rapidly evolving world • We are enabling client-centric ways of working • We are deploying our diverse talent into the areas of biggest opportunity Building a more skilled and produc
Slide 6: Andy Halford, Group Chief Financial Officer
Andy Halford Group Chief Financial Officer 5
Slide 7: We made good progress financially in FY'19
We made good progress financially in FY’19 Financial framework Strategic priorities ($bn) FY’18 FY’19 YoY1 Ccy2 Operating income 15.0 15.3 2% 4% • Income up 2%; 4% at constant currency Operating expenses4 (10.1) (10.1) 1% (1)% ▪ Up 5% at constant currency and excluding DVA5 … UK bank levy (0.3) (0.3
Slide 8: Our primary performance measure RoTE continued to improve
Our primary performance measure RoTE continued to improve Financial framework Strategic priorities Underlying return on tangible equity (RoTE) increased 130bps driven by strong positive jaws and lower equity Underlying RoTE 0.2% 6.4% 0.5% 0.0% 0.1% 0.7% (0.1%) 5.1% (0.2%) FY’18 Net interest Fees and
Slide 9: FY'19 income was up 4% at constant currency; up 5% ex-DVA
FY’19 income was up 4% at constant currency; up 5% ex-DVA1 Financial framework Strategic priorities Clear underlying business momentum: strong Financial Markets and Transaction Banking partially offset by Treasury Income ($m) +5% 56 103 194 (25) 195 15,271 (293) 538 14,968 (288) 14,503 (177) 22% 5%
Slide 10: 4Q'19 income was up 1% at constant currency; up 4% ex-DVA
4Q’19 income was up 1% at constant currency; up 4% ex-DVA1 Financial framework Strategic priorities Similar trends in 4Q with continued strength in Financial Markets and good Wealth Management performance Income ($m) +4% 22 43 72 (18) (36) 177 3,595 3,597 (110) (30) 3,447 (118) 33% 21% 5% 12% (2)% (
Slide 11: All client segments grew, generated positive jaws and improved RoTE
All client segments grew, generated positive jaws and improved RoTE1 in FY’19 Financial framework Strategic priorities Corporate businesses grew profits strongly; Retail Banking continues to be the highest returning client segment FY’19 FY’19 vs FY’18 (inc/(dec)) YoY2 Corporate & Income $7.2bn 5% +6
Slide 12: Broad-based improvement in operating profit in all regions
Broad-based improvement in operating profit in all regions Financial framework Strategic priorities Strong profit growth in ASA and AME and resilient performance in GCNA; positive jaws in all regions FY’19 FY’19 vs FY’18 (inc/(dec)) YoY1 Income $6.2bn 0% +1% Jaws Greater China & North Expenses $3.8b
Slide 13: Lower contribution from Central & other items
Lower contribution from Central & other items Financial framework Strategic priorities Items excluded from both Items excluded from Client Segments Client Segments and Regions Items excluded from Regions Client Segment Centrally managed Region Treasury Markets Treasury Capital Portfolio Management A
Slide 14: Tight control over expenses creates capacity to invest in our future
Tight control over expenses creates capacity to invest in our future… Financial framework Strategic priorities Substantial investment budget maintained; with a greater proportion on strategic initiatives Operating expenses1 ($bn) • Operating expenses down 1%; up 1% constant currency 9.9 10.1 10.1 ▪
Slide 15: … and should enable us to maintain positive jaws in a softer income environment
… and should enable us to maintain positive jaws in a softer income environment Financial framework Strategic priorities Cost discipline is now embedded within the organisation and several management levers can be deployed Income- to-cost 0.1% 2.3% 2.8% • Improving productivity is a key strategic pr
Slide 16: Credit quality stable year-on-year; impairment remains at historically low level
Credit quality stable year-on-year; impairment remains at historically low level Financial framework Strategic priorities Credit impairment increased in 2019 but remains at historically low levels Credit impairment ($m)1 / Loan loss rate (bps)2 • Credit impairment increase driven by stage 1 & 2 50bp
Slide 17: The balance sheet is growing; self-help actions to stabilise net interest margin in 2020
The balance sheet is growing; we are focusing on self-help actions to start to stabilise net interest margin in 2020 Financial framework Strategic priorities Broad-based balance sheet growth… …with an improving mix Average assets ($bn)3 YoY1 FY’18 FY’19 YoY1 202 222 Gross asset yield (bps) 318 334 1
Slide 18: Strong capital is supporting growth, higher dividends and share buy-backs
Strong capital is supporting growth, higher dividends and share buy-backs Financial framework Strategic priorities CET1 ratio1 (%) +16bps 1.0 • (55)bps from buy-back2, restructuring, regulatory provisions 14.2 • Underlying CET1 increased by 16bps (0.6) 13.8 (0.4) 13.7 (0.3) ▪ Profit +105bps partiall
Slide 19: Good progress delivering the financial framework outcomes in first year of plan
Good progress delivering the financial framework outcomes in first year of plan Financial framework Strategic priorities 2019-21 targets @ Feb’19 FY’19 Outlook @ Feb’20 1 +130bps • Continue to target at least 10% RoTE >10% by 2021 • Now believe it will take longer to achieve (YoY) 5-7% CAGR 1 +4% •
Slide 20: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive 19
Slide 21: Investing in our network continues to deliver income growth at premium returns
Investing in our network continues to deliver income growth at premium returns Financial framework Strategic priorities Clients FY’19 YoY1 ‘Next + New’ income2 +22% • Adding new clients attracted by our network Income ▪ Good progress with OECD-based corporates 4.7 Network³ 4.0 4.4 +6% • Deepening re
Slide 22: Our affluent client business showed resilience in less buoyant conditions
Our affluent client business showed resilience in less buoyant conditions Financial framework Strategic priorities Clients FY’19 YoY1 Number of Retail Banking Priority clients2 +8% 2.2 2.6 +1.9bn Private Banking Net New 0.7 Money ($bn) • Affluent client base continues to grow Affluent AUM4 ($bn) +19
Slide 23: Action and encouraging progress in four large optimisation markets
We are taking action and seeing encouraging progress in four large optimisation markets Financial framework Strategic priorities India Korea UAE Indonesia Income growth YoY 10% / 13% (4)% / 2% (3)% / (3)% 5% / 4% Reported / constant currency Cost-to-income ratio Improved Flat Improved Improved Pre-p
Slide 24: Driving operational improvements to scale revenue and improve efficiency
We are driving operational improvements to scale revenue and improve efficiency Financial framework Strategic priorities Clients FY’19 YoY1 Retail Banking % 16% 21% 28% +7%pt of digital sales2 • Digital sales gaining significant traction 16 Corporate & Institutional 8 7 -1 day • Income productivity
Slide 25: Executing multiple digital initiatives to transform our business
We are executing multiple exciting digital initiatives to transform our business Financial framework Strategic priorities Greater China & North Asia: Retail Banking FY’19 YoY1 • Beta-testing Hong Kong virtual bank • LINE (Taiwan) and Toss Bank (Korea) partnerships Mobile adoption² 23% 29% 35% +6%pts
Slide 26: Our purpose drives our business decisions, bold actions and ambitious commitments
Our purpose drives our business decisions, bold actions and ambitious commitments Financial framework Strategic priorities Our purpose: Driving commerce and prosperity through our unique diversity We understand our We will lead sustainable We will maximise We support the responsibilities financing a
Slide 27: Significant income headwinds likely in 2020
Significant income headwinds likely in 2020 Financial framework Strategic priorities Clear underlying momentum in areas of differentiation, but conditions have become more challenging USD 3-month LIBOR (bps) -50bps $(290)m $(180)m $(120)m earnings sensitivity1 262 • Key interest rates have reduced a
Slide 28: Executing our strategy to create the leading bank for clients in Asia, Africa and the Middle East
We are executing our strategy to create the leading bank for clients in Asia, Africa and the Middle East Financial framework Strategic priorities We are in the right markets and our strategy is working • We continue to target at least 10% RoTE ▪ This is the minimum expected of the franchise, and is
Slide 29: Standard Chartered
Standard Chartered &Q 28
Slide 30: Appendix
Appendix Standard Chartered
Slide 31: Appendix: Macroeconomic outlook, novel coronavirus responses and interest rate sensitivity
Appendix: Macroeconomic outlook, novel coronavirus responses and interest rate sensitivity 30
Slide 32: 2020 will be a year of soft but stabilising growth for the global economy
2020 will be a year of soft but stabilising growth for the global economy Economic uncertainty remains high Novel coronavirus outbreak to impact growth in Q1 Real GDP growth1 (%) 2019 2020e Potential headwinds Hong Kong -1.2 -2.4 GCNA • Escalation in trade tensions China 6.1 5.5 • High debt, ageing
Slide 33: Covid-19 response: we care about our employees, clients and communities
Covid-19 response: we care about our employees, clients and communities • Launched relief measures to support our clients ▪ Mortgage principal payment holiday ▪ Principal moratorium to support small and medium enterprises ▪ Trade finance loans extension for Commercial and Business Banking clients ▪
Slide 34: Our sensitivity to interest rate movements has reduced
Our sensitivity to interest rate movements has reduced Estimate of banking book NII sensitivity to instantaneous +/(-) 50bps change in interest rates across all currencies1 Annualised benefit ($m) +50bps -50bps Interest rate sensitivity in the banking book updated: 210 • Sensitivity has reduced sinc
Slide 35: Appendix: Fixed income information
Appendix: Fixed income information 34
Slide 36: Standard Chartered overview
Standard Chartered overview Over 160 years in some of the world's most dynamic markets FY’19 Performance highlights 59 >80% 4 $15.3bn $4.2bn (FY’18: $15.0bn) (FY’18: $3.9bn) markets income from Asia, 4 client segments & Operating income Profit before taxation Africa & 4 regions Middle East 13.8% 6.4
Slide 37: Balance sheet diversity
Balance sheet diversity FY’19 Balance sheet assets FY’19 Customer loans & advances by market and segment Hong Kong CIB 9% 18% Korea RB Loans & advances to customers 5%3% 25% 10% China CB Investment securities 8% 5% Singapore PB 7% 44% Cash & balances at central banks $720bn $315bn 50% India C&OI Der
Slide 38: Liquid and resilient balance sheet
Liquid and resilient balance sheet Total customer deposits ($bn) 1 Liquidity coverage ratio ($bn) 398 408 412 154% 144% 139% 175 189 173 150 155 158 223 219 239 97 111 110 FY'18 1H'19 FY'19 FY'18 1H'19 FY'19 CASA Time deposits & other HQLA Net outflows Liquidity coverage ratio Advances to deposits r
Slide 39: CET1 requirements
CET1 requirements • Strong CET1 ratio at upper end of 13-14% target range • Any breach of the MDA ¹ threshold would restrict discretionary distributions (dividends, variable pay and AT1 coupons) • Combined Buffer comprises the G-SII buffer (G-SII), Countercyclical buffer (CCyB) and the Capital Conse
Slide 40: Strong balance sheet position
Strong balance sheet position • CET1 towards top of 13-14% target range: strong capital Capital & MREL surplus vs. end-point requirements supporting growth, higher dividends and share buy-backs • Passed 2019 BoE stress test, increased resilience to stress: 30% lower stress drawdowns and higher stres
Slide 41: Funding
Funding Currency mix ($bn) 1 2019 SC PLC issuance of ~$7.7bn across 4 currencies USD USD MREL issuances USD EUR GBP Other • Tier 2 USD 1bn (10.25NC5.25) Total • Senior USD 4.8bn in total (3NC2, 6NC5, 11NC10) Senior 12.4 3.4 0.8 3.3 19.9 Tier 2 9.7 3.3 0.9 0.5 14.4 USD 100m Senior – Formosa zero coup
Slide 42: MREL transition – well positioned
MREL transition – well positioned 28.6% 26.7% PLC Senior Combined Buffer ~$17.8bn 3.9% • At 31 December 2019, the Group’s expected 2022 Pillar 2A MREL is 26.7% of RWA including the Combined Buffer Recapitalisation 3.4% • The Group meets its expected 2022 MREL today AT1 + Tier 2 ~$21.3bn • SC PLC iss
Slide 43: Internal MREL
Internal MREL Group’s issuance framework (non-equity MREL) External MREL • SC PLC is the sole issuer of external MREL • External MREL down-streamed to material SC PLC subsidiaries via internal issuance ($39.5bn) • Internal MREL required for the Group’s 5 material Internal MREL subsidiaries Material
Slide 44: Standard Chartered Group – simplified legal structure
Standard Chartered Group – simplified legal structure Standard Chartered PLC BBB+/A2/A (S&P/Moody’s/Fitch) Standard Chartered Bank Standard Chartered Bank Hong Kong A/A1/A+ A+/A1/- (S&P/Moody’s/Fitch) (S&P/Moody’s/Fitch) Principal Branches Principal Subsidiaries Principal Subsidiaries 1 100% UK Sing
Slide 45: Appendix: Sustainability
Appendix: Sustainability 44
Slide 46: Our sustainable finance philosophy
Our sustainable finance philosophy Social Impact Responsible Banking Impact Driven Financing Collaboration with Development Corporate Governance, Finance Anti‐Corruption Institutions Funding Defined linked to taxonomy desired Climate linking finance social Labour impact, to SDGs outcomes standards,
Slide 47: Standard Chartered: a unique opportunity
Standard Chartered: a unique opportunity Financing impact in some of the world’s least developed countries through a UK regulated institution… OECD Development Footprint Markets in Markets in Assistance Committee markets Markets in Markets in countries in our footprint Greater China & ASEAN & South
Slide 48: Sustainability embedded across our business
Sustainability embedded across our business Over 19,000 Over 1,100 Over 1,000 bank-wide client clients and transactions reviewed frontline and risk staff trained in assessments against by Environmental and Social Risk environmental and social risk and position statements in 2019 Management team in 2
Slide 49: Our refreshed commitments on climate change
Our refreshed commitments on climate change “ There is still much work to be done to ultimately reduce the emissions generated by our financing activities, but we are making good progress toward doing so and are determined to continue to leverage our strong position across our markets to bring the r
Slide 50: Leading private sector catalyser of finance for the SDGs in our footprint
Leading private sector catalyser of finance for the SDGs in our footprint Green & Sustainable Product Framework Green and Sustainable Product Framework launched in 2019 governs Green and Sustainable Products, developed with Sustainalytics Sustainable Deposits… Sustainability Bonds… • Launched the wo
Slide 51: Financing the SDGs where it matters the most
Financing the SDGs where it matters the most Leadership in Sustainable Finance Committed to Sustainability Environmental and Social Risk Management policy created in 1997 Green Finance Deal of the World’s Best for Africa’s Best Bank for Year (Middle East) 2019 Sustainable Finance Sustainable Finance
Slide 52: Sustainable finance governance
Sustainable finance governance We have overhauled our sustainable finance, climate and sustainability governance this year with dedicated forums reporting to management and the Board • This gives greater board oversight over sustainability matters, including climate risk and sustainable finance • Ti
Slide 53: Appendix: Definitions and important notice
Appendix: Definitions and important notice 52
Slide 54: Definitions
Definitions Term Explanation Term Explanation Term Explanation AAME Asia, Africa & Middle East FI Financial Institutions OPAC Operating account AME Africa & Middle East FTE Full-time employee P.A. Per annum ASA ASEAN & South Asia FVTPL Fair Value Through Profit or Loss P&L Profit and loss (Income st
Slide 55: Important notice
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, business