Standard Chartered PLC · LSE:STAN
Standard Chartered — 1H 2023 Earnings Presentation
57 slides from Standard Chartered's earnings presentation, Jul 28, 2023
Slide 1: 2Q'23 / 1H'23 Results
standard chartered 2Q'23 / 1H’23 Results 28th July 2023
Slide 2: Contents
CONFIDENTIAL Contents Bill Winters Group Chief Executive • Summary 3 • Strategy update 21 Andy Halford Group Chief Financial Officer • Financial performance 5 Appendix Strategic actions progress; macroeconomic variables; interest rate assumptions; IRRBB; sovereigns; 29 China CRE; reconciliation to r
Slide 3: Summary
CONFIDENTIAL Summary • Strong set of 1H’23 results; making excellent progress on our strategic actions • First half income, up 18% YoY at ccy and profit, up 29% YoY at ccy, highest since 2015 • Upgraded income, jaws and RoTE guidance for FY’23 Performance • Strongly profitable, highly liquid and wel
Slide 4: Financial Performance
Financial Performance Andy Halford Group Chief Financial Officer
Slide 5: 2Q'23: Continued strong income and profit growth
CONFIDENTIAL 2Q’23: Continued strong income and profit growth 2Q’23 performance ($bn) → Overview Income 2Q’22 2Q’23 YoY1 ccy1 • Operating income up 24% YoY at ccy, 60% rates Segments Network Net interest income2 Regions / Markets 1.9 2.4 29% 33% o NII up 33%; other income up 15% Expenses Other incom
Slide 6: 1H'23: Highest income and profit since 2015
CONFIDENTIAL 1H’23: Highest income and profit since 2015 1H’23 performance ($bn) → Overview Income 1H’22 1H’23 YoY1 ccy1 • Operating income up 18% YoY at ccy, 75% rates Segments Network Net interest income2 3.7 4.8 29% 35% o NII up 35%; other income up 4% Regions / Markets Expenses Other income2 4.2
Slide 7: Strong income growth from rate rises and business momentum
CONFIDENTIAL Strong income growth from rate rises and business momentum 2Q’23 vs 2Q’221 – Product view ($m) Overview +24% → Income 177 46 10 3 Segments 501 Network (180) 4,562 Regions / Markets 653 Expenses (329) Risk 3,681 Balance Sheet Capital Guidance Strategy +138% +146% +15% +10% +3% +2% (31)%
Slide 8: Rising rates and reduced hedge impact driving NIM expansion
CONFIDENTIAL Rising rates and reduced hedge impact driving NIM expansion Net Interest Margin (NIM) components Overview 1.67 1.71 → Income 1.58 1.63 Segments 1.32 1.35 1.43 Network • 1H’23 NII up 29% YoY; 35% at ccy Regions / Markets NIM1 (%) 4,777 2,436 Expenses 2,341 2,017 2,256 o AIEA up 2% / $11b
Slide 9: Financial Markets growth driven by higher flow income
CONFIDENTIAL Financial Markets growth driven by higher flow income Half-yearly income trend ($m) Overview (0)%/ +4% ccy → Income YoY% ccy Segments 2,812 2,805 • 2Q’23 FM income up 15% at ccy Network Regions / Markets 2,492 2,375 216 228 +95%2 Expenses 125 2,013 163 183 10 o Record1 FM income, up 27%
Slide 10: Wealth Management income rebound across top markets
CONFIDENTIAL Wealth Management income rebound across top markets Half-yearly income trend ($m) Overview → Income Segments +2% / +5% ccy • 2Q’23 income up 10% at ccy; reversing five quarters of YoY Network 1,195 Regions / Markets declines Expenses 1,006 Risk 973 973 984 • 1H’23 income up 5% at ccy Ba
Slide 11: Client segments are delivering strong growth
CONFIDENTIAL Client segments are delivering strong growth Corporate, Commercial & Institutional Banking Overview Income → Segments • Cash Management and record Macro and Credit Network Regions / Markets +33% ccy +9%pts Trading in FM supporting strong income Expenses Risk performance Balance Sheet Ca
Slide 12: Cross-border income continues to grow across key corridors
CONFIDENTIAL Cross-border income continues to grow across key corridors 1H’23 CCIB cross-border income1 – Region view Overview Income E&A Segments cross-border income Asia • Cross-border1 income up 44% to $3.4bn in 1H’23 → Network $1.4bn, +42% YoY cross-border income Regions / Markets $1.5bn, +38%Yo
Slide 13: Broad-based strong performance across regions and markets
CONFIDENTIAL Broad-based strong performance across regions and markets Regions ($bn, YoY % ccy) Select markets ($bn, YoY % ccy) Overview Asia Hong Kong Singapore Income 19.1% Income growth Income growth Segments 11.3% 1H’23 1H’23 Network +YoY% ccy 30% 32% 45% 43% RoTE → Regions / Markets Income $2.1
Slide 14: Higher inflation and targeted investments to drive long term growth
CONFIDENTIAL Higher inflation and targeted investments to drive long term growth Total operating expenses1 1H'23 vs 1H'22 ($m) • 1H'23 expenses up 8%, 12% YoY at ccy Overview +8% / +12% ccy Income o Inflation up ~$0.2bn at 4% Segments 295 5,501 Network 209 o Business initiatives supporting growth up
Slide 15: Credit impairment low, mainly China CRE
CONFIDENTIAL Credit impairment low, mainly China CRE Credit impairment ($m) / Loan-loss rate (bps) Overview 15bps 11bps Income Loan-loss rate1 • Portfolio remains resilient; credit impairment of $172m in Segments $(92)m 1H’23; down $92m YoY Network Regions / Markets 264 340 Ventures + o China CRE ch
Slide 16: Customer assets broadly stable in a low growth environment
CONFIDENTIAL Customer assets broadly stable in a low growth environment Loans and advances to customers ($bn) Overview Income 301 1 0% Segments Network (3) 289 1 290 (4) (6) • Underlying L&A to customers stable since 31.3.23 Regions Expenses / Markets Risk o Growth in wealth lending, FM and trade… →
Slide 17: Customer deposits remain strong and well diversified
CONFIDENTIAL Customer deposits remain strong and well diversified Customer deposits – Group view ($bn) Overview +2% Income Segments 11 470 Network 462 Regions / Markets 458 Expenses (4) • Customer deposits excluding FX up $11bn Risk → Balance Sheet reflecting strong second quarter Capital Guidance o
Slide 18: CET1 ratio remains strong; disciplined RWA management
CONFIDENTIAL CET1 ratio remains strong; disciplined RWA management Risk-weighted assets ($bn) Overview +2% Income • RWA down 1% / $2bn in 2Q’23 Segments 2.0 1.3 0.1 Network 8.2 2.7 • 1H’23 RWA up 2% / $4bn to $249bn Regions / Markets (2.9) 249.1 Expenses 244.7 (6.9) o Higher RWA from asset growth an
Slide 19: 2023 guidance
CONFIDENTIAL 2023 guidance Overview Income • Income to increase in the 12-14% range, at ccy in 2023 Segments Network Income • Full year average NIM of around 170bps Regions / Markets Expenses • Low single digit percentage growth in assets in 2H’23 Risk Balance Sheet Capital → Guidance Strategy Expen
Slide 20: Strategy Update
Strategy Update Bill Winters Group Chief Executive
Slide 21: CCIB: Accelerated delivery of returns and optimisation targets
CONFIDENTIAL CCIB: Accelerated delivery of returns and optimisation targets Performance vs 2024 Targets Key highlights Overview Income 8.0% Segments 6.2% 6.5% 4.7% Network Income RoRWA1 • Income RoRWA of 8.0% in 1H’23; significantly Regions / Markets Expenses (%) ahead of 2024 target Risk FY’211 FY’
Slide 22: CPBB: On track to deliver cost-to-income ratio target
CONFIDENTIAL CPBB: On track to deliver cost-to-income ratio target Performance vs 2024 Targets Key highlights Overview Income 74% 69% Segments 58% ~60% Cost-income • CPBB cost-income ratio improved 14%pts YoY to Network Regions / Markets ratio 58% Expenses (%) Risk FY’21 FY’22 1H’23 2024 Target o Po
Slide 23: China: Good progress; on track to deliver 2024 profit target
CONFIDENTIAL China: Good progress; on track to deliver 2024 profit target Performance vs 2024 Targets Key highlights Overview Income +YoY% ccy Segments China onshore and +31% • Record China onshore income, up 5% ccy to ~$0.6bn in Network Regions / Markets offshore income 1H’23 Expenses 1.6 ($bn) Ris
Slide 24: Capital: $3.9bn distributions announced since 1.1.22
CONFIDENTIAL Capital: $3.9bn distributions announced since 1.1.22 Performance vs 2024 Targets Key highlights Overview Income Segments Network • Well on-track to exceed the $5bn shareholder Regions / Markets 0.4 Ordinary Dividend distributions target (2022-2024) Expenses Risk (paid / declared 0.2 Bal
Slide 25: Additional management actions accelerating path to returns
CONFIDENTIAL Additional management actions accelerating path to returns Key highlights Overview Income Segments Network • Signed agreements for sale of Jordan and Zimbabwe businesses in 1H’23 Regions / Markets Expenses Markets Risk • Announced in July agreement for sale of a further five markets1; A
Slide 26: Sustainability: Sustainable Finance central to our growth ambitions
CONFIDENTIAL Sustainability: Sustainable Finance central to our growth ambitions Key highlights Overview • SF income up 37% YoY; SF assets up 8%1 Income Segments Mobilise capital • Facilitated $65bn of sustainable finance from 1.1.21 to 31.3.23 Network Regions / Markets SF income approaching $1bn by
Slide 27: In conclusion
CONFIDENTIAL In conclusion Overview Income Segments Network Regions / Markets • The Group delivered a very strong performance in 1H’23 Expenses Risk Balance Sheet Capital Summary • Making excellent progress on our five strategic actions Guidance Strategy → Conclusion • Well positioned with a robust
Slide 28: Appendix
CONFIDENTIAL Appendix • Strategic actions progress; macroeconomic variables; interest rate assumptions; IRRBB; sovereigns; China CRE; reconciliation to reporting definitions; guidance details • Information for fixed income investors • Notes, abbreviated terms and important notice
Slide 29: Strategic actions progress
CONFIDENTIAL Strategic actions progress Description 2024 Target 1H'23 Status • CCIB Income RoRWA: 160bps improvement from 4.7%7 in 2021 to 6.5% 6.5% 8.0% CCIB: • RWA reduction of $22bn (2022-2024) $22bn $19.9bn1 Drive improved • Hold RWA flat to $163bn $163bn $147bn returns • Financial Institutions
Slide 30: Macroeconomic variables: Stage 1 and 2 credit impairments
CONFIDENTIAL Macroeconomic variables: Stage 1 and 2 credit impairments 1Q’23 2Q’231 ~ Crude price China Hong Kong Korea Singapore India Brent, bbl GDP growth (YoY): 5.8% 5.8% 3.2% 3.6% 1.7% 1.3% 2.0% 1.3% 5.5% 5.5% $91.0 $88.8 2023 Forecast GDP growth (YoY): 5-year average base 5.3%
Slide 31: Interest rate assumptions
CONFIDENTIAL Interest rate assumptions USD SOFR O/N Avg. (bps) 3M HIBOR Avg. (bps) 521 522 475 476 497 502 462 467 425 424 432 420 449 489 408 485 393 391 423 382 459 409 430 381 352 344 340 392 357 329 FY Avg FY Avg bps bps as at 14.6.23 as at 14.6.23 FY’22 165 FY’22 212 FY’23 497 FY’23 440 FY’24 4
Slide 32: Interest Rate Risk in the Banking Book
CONFIDENTIAL Interest Rate Risk in the Banking Book Annualised benefit to banking book NII from instantaneous parallel shifts in interest rates across all currencies ($m) 1, 2 • 1H’23 NII sensitivity is applied to projected USD short-term interest rates of ~5% for the next 12 months • Reported NII s
Slide 33: Selected sovereign markets
CONFIDENTIAL Selected sovereign markets Net nominal1,2 ($bn) • Macro environment (inflation, FX, external financing) remains 6.2 challenging 31.12.21 • Pakistan, Ghana and Sri Lanka ~$5bn net nominal (down $0.5bn QoQ) 31.12.22 3.8 o <1% of total CCIB and CPBB net nominal 2.8 2.9 31.3.23 2.4 o Impair
Slide 34: China Commercial Real Estate
CONFIDENTIAL China Commercial Real Estate Exposure by booking location as at 30.6.23 ($bn)1,2 • Remain cautious given weaker sentiment as contracted sales declined in 2Q’23 3.0 • Policies remain supportive but a recovery may require additional measures 0.4 o Improvements in buyer confidence is key t
Slide 35: Reconciliation to reporting definitions
CONFIDENTIAL Reconciliation to reporting definitions $bn FY’22 2Q’23 1H’23 FY’22 2Q’23 1H’23 FY’22 2Q’23 1H’23 Statutory Net Interest Income 7,593 1,978 3,984 Statutory Other Income 8,725 2,589 5,143 Statutory Operating Income 16,318 4,567 9,127 Trading Book Funding Cost Trading Book Funding Cost Tr
Slide 36: Guidance details
CONFIDENTIAL Guidance details • Income to increase in the 12-14% range at ccy in 2023; 8-10% range at ccy in 2024 • Adverse currency translation impact estimated at $0.2bn in 2023 Income • Full year average NIM of around 170bps for 2023 and around 175bps for 2024 • 2023 trading book funding cost lik
Slide 37: Appendix
CONFIDENTIAL Appendix • Strategic actions progress; macroeconomic variables; interest rate assumptions; IRRBB; sovereigns; China CRE; reconciliation to reporting definitions; guidance details • Information for fixed income investors • Notes, abbreviated terms and important notice
Slide 38: Strong performance founded on a unique franchise
CONFIDENTIAL Strong performance founded on a unique franchise 57 87% Income from $9.0bn $3.3bn 61% 12.0% Markets Asia and AME Operating income PBT Cost income ratio RoTE (1H’22: $7.9bn1) (1H’22: $2.8bn1) (1H’22: 65%1) (1H’22: 9.3%1) Group income diversified by market and segment Group income diversi
Slide 39: Balance sheet strength provides resilience and capacity for growth
CONFIDENTIAL Balance sheet strength provides resilience and capacity for growth Capital metrics 32.1% 32.1% 31.0% 7.0% • CET1 capacity to support shareholder distributions and growth 30.0% 6.5% 25.0% 6.0% CET1 • MREL issuances of $6.2bn in 2023 across capital structure 20.0% (Min requirement: 10.4%)
Slide 40: Balance sheet is conservatively positioned and tightly managed
CONFIDENTIAL Balance sheet is conservatively positioned and tightly managed Total assets Total equity & liabilities $839bn $839bn • Highly liquid and flexible balance sheet 30.6.23 30.6.23 o 63% of total assets of $839bn maturing <1 year Derivatives & Other Derivatives & Other o High-quality liquid
Slide 41: Strong and diverse deposit base
CONFIDENTIAL Strong and diverse deposit base Customer deposits by market1 ($bn) Hong Kong 11% 3% Singapore • Unique footprint and deposit base in 57 markets 4% 29% United Kingdom 4% South Korea o No single market >30% 4% USA $470bn 5% China o In our two largest markets, Hong Kong and Singapore we ar
Slide 42: Deposit migration and betas managed within expectations
CONFIDENTIAL Deposit migration and betas managed within expectations TB CASA % of Total CCIB Deposits1 ($bn) CCIB TB (USD) CASA Beta 66% 65% 60% 60% 59% 59% FY’23/FY’24 FY’24 CASA % 100% 55-65% 80% 321 308 311 312 318 60 to 67%4 < FY’23 268 61% 80% 110 60% 55% 109 125 129 129 TD & Others 3 108 40% 2
Slide 43: High levels of liquid resources and stable funding
CONFIDENTIAL High levels of liquid resources and stable funding Components of Liquidity Coverage Ratio (LCR): 164%1 $255bn • 30.6.23 LCR up 3%pts QoQ to 164% Other liquid • Country surplus HQLA: $34bn resources: • <1 month investments: $16bn • $255bn of high-quality liquid resources available $58bn
Slide 44: CET1 strongly positioned relative to requirements
CONFIDENTIAL CET1 strongly positioned relative to requirements CET1 minimum requirement1 10.4% 10.4% • Minimum CET1 requirement broadly unchanged at 10.4% 2.5% 2.5% CCB o UK CCyB3 rate expected to increase to 2% in 3Q’23… CCyB 0.27% 0.29% 1.0% 1.0% G-SII o … expected to increase Group’s CCyB buffer
Slide 45: MREL: Well positioned for future growth and requirements
CONFIDENTIAL MREL: Well positioned for future growth and requirements External MREL position versus requirements 32.1% • MREL ratio of 32.1% meets requirements with a buffer of ~480bps $12bn 26.7% 27.3% PLC Senior • Total Group MREL of ~$80bn Combined Buffer Combined Buffer 3.8%1 10.7% 3.8%1 • MREL
Slide 46: Good progress on delivery of funding programme
CONFIDENTIAL Good progress on delivery of funding programme Recent and indicative MREL Issuance ($bn) 1 Maturity and Call schedule of existing stock ($bn)2 10.8 Senior Tier 2 AT1 8.6 0.6 8.1 7.8 2.8 7.0-9.0 1.0 1.6 1.2 6.3 AT1 Planned 1.2 7.2 0.8-2.8 2.1 issuance 1.3 Tier 2 1.3 4.3 0.8 2.0 Senior 1.
Slide 47: Group strategy to support and, over time, improve credit ratings
CONFIDENTIAL Group strategy to support and, over time, improve credit ratings Senior long-term and short-term ratings S&P Moody’s Fitch A+ A1 A+ • Well-rated with strong credit fundamentals, absolutely and Standard Chartered Bank A-1 P-1 F1 relative to peers Stable Stable Stable o Stable outlooks at
Slide 48: Stronger risk foundations supporting resilient performance
CONFIDENTIAL Stronger risk foundations supporting resilient performance 1H’23 FY’14 Key risk indicators (IFRS 9) (IAS 39) CCIB Investment grade as a % of corporate exposure 74% 42% • Key portfolio indicators improved since FY’14 reflecting: 1 Top 20 corporates as a % of Tier 1 capital 62% 83% Total
Slide 49: Standard Chartered Group: simplified legal structure
CONFIDENTIAL Standard Chartered Group: simplified legal structure Medium Term Senior notes Standard Chartered PLC Tier 2 securities BBB+/A3/A Tier 1 securities (S&P/Moody’s/Fitch) Equity CP / CDs Standard Chartered Bank Standard Chartered Bank (Hong Kong) Medium Term Notes A+/A1/A+ A+/A1/- Structure
Slide 50: Appendix
CONFIDENTIAL Appendix • Strategic actions progress; macroeconomic variables; interest rate assumptions; IRRBB; sovereigns; China CRE; reconciliation to reporting definitions; guidance details • Information for fixed income investors • Notes, abbreviated terms and important notice
Slide 51: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition Page Explanatory note or definition 5 1. YoY = year-on-year variance is better/(worse) other than assets and liabilities 7 1. Income growth on a constant currency basis, p
Slide 52: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition Page Explanatory note or definition 18 1. RWA ‘Others’ include incremental Operational risk RWA +$0.7bn, Market risk RWA 26 1. 37% May 2023 YoY; up 8% as at 31.3.23 from 3
Slide 53: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition Page Explanatory note or definition 40 1. Cash balance includes $24.7bn held with central banks that has been confirmed as 33 1. Net Nominal basis (see selected technical
Slide 54: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition Page Explanatory note or definition 43 1. Point in time 46 1. Standard Chartered PLC only as at 10.7.23. Includes the $2.5bn issued on 06.7.23 2. Average of four preceding
Slide 55: Selected technical and abbreviated terms
CONFIDENTIAL Selected technical and abbreviated terms Term Definition Term Definition ADR Advances-to-Deposits ratio EM Emerging Markets AIBL Average interest-bearing liabilities E&S Environmental and Social AIEA Average interest-earning assets FI Financial Institutions, e.g. banks, insurance compan
Slide 56: Selected technical and abbreviated terms
CONFIDENTIAL Selected technical and abbreviated terms Term Definition Term Definition NPS Net Promoter Score WM The Group’s Wealth Management business NSFR Net Stable Funding Ratio Ventures SC Ventures + Mox + Trust NTB New to bank clients VIX Volatility Index NZBA Net-Zero Banking Alliance YoY Year
Slide 57: Important notice
CONFIDENTIAL Important notice The information included in this document may contain “forward-looking statements” based upon current expectations or beliefs as well as statements formulated with assumptions about future events. Forward-looking statements include, without limitations, projections, est