Slide 1: Half Year 2018 Results Presentation
Half Year 2018 Results Presentation 31 July 2018
Slide 2: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive
Slide 3: Further progress on the path to higher returns
Further progress on the path to higher returns • Solid start to the year ▪ Improving financial performance ▪ Digital and growth agendas advancing ▪ Strengthened risk discipline improving returns ▪ Capital and liquidity remain strong in the face of EM volatility ▪ RoE improvement underpins resumption
Slide 4: Our higher quality portfolio is driving better returns
Our higher quality portfolio is driving better returns H1 18 H1 18 YoY HoH • Operating income ($bn) 7.2 7.6 6.8 7.0 7.1 Targeted investments1 3.2 3.3 3.5 3.7 4.0 14% 8% Return optimisation2 1.7 1.7 1.6 1.6 1% (4)% 1.7 Primarily markets-related3 2.0 2.0 2.1 1.6 2.0 (4)% 23% 7.3 • Risk-adjusted income
Slide 5: Andy Halford, Group Chief Financial Officer
Andy Halford Group Chief Financial Officer
Slide 6: We have delivered an encouraging performance
We have delivered an encouraging performance ($bn) H1 18 HoH YoY Better / (Worse) % Operating income 7.6 8 6 • Income growth in line with medium-term guidance Other operating expenses (4.5) (1) (7) Regulatory costs (0.6) 9 (7) Operating profit before impairment 2.5 48 3 • Pace and scale of investmen
Slide 7: Broad-based improvement across products
Broad-based improvement across products Income up 6% YoY or 5% at constant currency ($m) Growth of $575m Drag of $(148)m 120 (20) (60) (68) 135 56 21 243 7,777 7,649 ✓ Continued strong momentum in Wealth, Deposits and TB Non-repeat of Treasury gains and other one-offs in H1 17 ✓ Improvement in FM
Slide 8: All client segments are showing momentum
All client segments are showing momentum 1 Income Income Profit before Cost / RWA RoE H1 2018 ($bn) YoY (%) tax ($bn) income (%) ($bn) (%) Corporate & Institutional Banking 3.4 7 1.1 64 139 6.9 Retail Banking 2.6 9 0.6 72 43 13.0 +8% YoY Commercial Banking 0.7 7 0.1 65 33 3.9 Private Banking 0.3 12
Slide 9: Strong performance in GCNA, improvement in ASA / EA
Strong performance in GCNA, improvement in ASA / EA Income Income Profit before Cost / RWA H1 2018 ($bn) YoY (%) tax ($bn) income (%) ($bn) Greater China & North Asia 3.1 11 1.3 61 83 ASEAN & South Asia 2.1 6 0.6 66 96 +7% YoY Africa & Middle East 1.4 (1) 0.4 67 54 Europe & Americas 0.9 8 0.1 85 41
Slide 10: $2.9bn efficiency target achieved ahead of schedule
$2.9bn efficiency target achieved ahead of schedule Sources of gross cost efficiencies since 2015 Other 8% • Achieved $2.9bn cost reduction target 6 months early Branches / Staff exits (incl. Premises 7% $2.9bn divestment) • Maintaining cost discipline to create investment capacity 72% Third party s
Slide 11: The pace and scale of investment has picked up
The pace and scale of investment has picked up Cash investments ($bn) Up 10% YoY, with increased proportion in ‘Strategic’ Retail Banking Commercial Banking Digitally active clients (%) Active Straight2Bank clients1 (%) 0.7 47 57 H1 18 45 50 52 YoY 40 36 0.6 +33% Strategic 0.5 2015 2016 2017 H1 18 2
Slide 12: Credit quality overall continues to improve
Credit quality overall continues to improve Credit impairment ($m) 50% • Risk culture strengthened across the Group • Management actions driving better credit quality: 617 583 ▪ Ongoing stage 3 / NPL down 6% HoH to $6.2bn 42 125 ▪ Early alerts2 down 21% and CG122 down 31% HoH 172 ▪ Proportion of inv
Slide 13: Our balance sheet is more resilient, supporting growth
Our balance sheet is more resilient, supporting growth Net interest income improving Corporate exposure more resilient Net interest 1.55% 1.55% 1.59% Top 20 corporate 56% 53% exposure as % of 50% margin (%) Tier 1 capital Net interest 4,215 4,361 +10% Investment grade 61% 3,966 YoY 54% 57% income ($
Slide 14: Organic capital growth is helping to reinforce our resilience
Organic capital growth is helping to reinforce our resilience CET1 ratio (%) +60bps (0.2) 0.2 0.6 • CET1 +60bps from FY17 to 14.2% 14.2 • Driven mainly by profit in the period 13.6 and lower RWA 2017 Profit after tax Dividends1 RWA and other H1 18 Risk-weighted assets ($bn) (3)% • RWA down 3% from F
Slide 15: Concluding remarks
Concluding remarks • Income growth in line with 5-7% medium term guidance • Strong momentum in areas where we have invested to reinforce differentiation • Continue to expect annual expenses to grow below inflation over the medium term • Past actions on risk tolerances and focus on higher quality ori
Slide 16: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive
Slide 17: RoE guidance supported by positive leading indicators
RoE guidance supported by positive leading indicators Corporate & Institutional Banking Retail Banking RoE: 6.9% (+280bps YoY) RoE: 13.0% (+220bps YoY) Network income1 to Non-financing income2 Wealth and Deposits Digitally active total client income (%) to total client income (%) income to total (%)
Slide 18: Digitally transforming our unique franchise
Digitally transforming our unique franchise Progress, so far… Strategic Innovating using existing capabilities objectives Impact For example: • Côte d'Ivoire: First fully digital bank In-house Higher client Ability to • India: Real-time onboarding; data analytics Improve client development satisfact
Slide 19: Investing in people, strengthening culture and values
Investing in people, strengthening culture and values Renewed Liverpool (LFC) sponsorship Our culture is one of our core strengths Our Purpose is what sets us apart ‘My Voice’ results show improved engagement Embedding our shared valued behaviours Never settle 195+ million LFC fans across our market
Slide 20: Strengthening our foundations in risk, control and conduct
Strengthening our foundations in risk, control and conduct Key risk priorities Our strategy around cyber security is focused on • Strengthen the Group’s risk four key investment priorities culture • Manage and improve Protect Enable information and cyber security …and monitor our critical …our digit
Slide 21: Solid macro fundamentals, but risks exist
Solid macro fundamentals, but risks exist Direct exposure to US-China trade • Escalating trade protectionism % of Group income from: • Policy uncertainty and geopolitical tensions • Direct US-China corridor1 ~1% Potential • Other potentially impacted corridors2 ~1-2% • Monetary policy normalisation
Slide 22: Further progress on the path to higher returns
Further progress on the path to higher returns • Solid start to the year ▪ Improving financial performance ▪ Digital and growth agendas advancing ▪ Strengthened risk discipline improving returns ▪ Capital and liquidity remain strong in the face of EM volatility ▪ RoE improvement underpins resumption
Slide 23: Q&A
Standard Q@&° Chartered &Q Q&A 22
Slide 24: Appendix: Group financial analysis
Appendix: Group financial analysis
Slide 25: Group financial summary
Group financial summary ($m) H1 18 H2 17 H1 17 HoH %1 YoY %1 Q2 18 Q1 18 Q2 17 QoQ %1 YoY%1 Operating income 7,649 7,067 7,222 8 6 3,776 3,873 3,614 (3) 4 Other operating expenses (4,479) (4,429) (4,170) (1) (7) (2,313) (2,166) (2,101) (7) (11) Regulatory costs (638) (702) (599) 9 (7) (335) (303) (2
Slide 26: Operating income performance by product
Operating income performance by product ($m) H1 18 H2 17 H1 17 HoH %1 YoY %1 Q2 18 Q1 18 Q2 17 QoQ %1 YoY%1 Transaction Banking 1,840 1,732 1,597 6 15 924 916 812 1 14 Trade 589 604 593 (2) (1) 285 304 296 (6) (4) Cash Management and Custody 1,251 1,128 1,004 11 25 639 612 516 4 24 Financial Markets
Slide 27: Ongoing business and liquidation portfolio
Ongoing business and liquidation portfolio 30 Jun 2018 (IFRS 9) 1 Jan 2018 (IFRS 9) Ongoing Liquidation Ongoing Liquidation ($m) business portfolio Total business portfolio Total 26 1) Includes reverse repurchase agreements and other similar secured lending held at amortised costs of $4,231 million
Slide 28: Interest rate sensitivity
Interest rate sensitivity Estimate of NII sensitivity to instantaneous +50bps rise in interest rates across all currencies1 Annualised benefit ($m) Interest rate sensitivity updated: • Higher USD pass-through as hiking cycle matures • Income upside on HK mortgages capped as HIBOR-based mortgages mig
Slide 29: Appendix: Client segment financial analysis
Appendix: Client segment financial analysis
Slide 30: Performance by client segment
Performance by client segment Retail Commercial Private Central & H1 2018 ($m) CIB Banking Banking Banking other items Total Operating income 3,451 2,620 706 271 600 7,649 Operating expenses (2,218) (1,884) (460) (275) (280) (5,117) Operating profit before impairment 1,233 736 246 (4) 321 2,532 Cred
Slide 31: Corporate & Institutional Banking
Corporate & Institutional Banking Financial analysis ($m) H1 18 HoH %1 YoY %1 Progress • Completed on-boarding of over 100 ‘New 90’ OECD clients, and delivered strong Operating income 3,451 5 7 growth from the next generation of ‘Next 100’ clients Transaction Banking 1,430 7 16 • Improved balance sh
Slide 32: Retail Banking
Retail Banking Financial analysis H1 18 HoH %1 YoY %1 Progress ($m) • Increased the share of income from Priority clients from 45 per cent in 2017 to 47 Operating income 2,620 7 9 per cent as a result of strong Wealth Management and Deposit income growth and increasing client numbers Greater China &
Slide 33: Retail Banking: Regional performance
Retail Banking Regional performance Greater China & ASEAN & Africa & Europe & Total North Asia South Asia Middle East Americas ($m) H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 Operating income 1,485 1,349 1,335 712 667 635 404 403 410 19 19 16 2,620 2,43
Slide 34: Commercial Banking
Commercial Banking Financial analysis Progress ($m) H1 18 HoH %1 YoY %1 • On-boarded over 2,800 new clients, of which over 20 per cent came from our Operating income 706 5 7 clients’ international and domestic networks of buyers and suppliers Greater China & North Asia 295 12 12 • Continued strength
Slide 35: Commercial Banking: Regional performance
Commercial Banking Regional performance Greater China & ASEAN & Africa & Total North Asia South Asia Middle East ($m) H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 H1 18 H2 17 H1 17 Operating income 295 263 264 263 262 242 148 148 154 706 673 660 Operating expenses (198) (193) (193) (160) (1
Slide 36: Private Banking
Private Banking Financial analysis ($m) H1 18 HoH %1 YoY %1 Progress • Continued to strengthen our relationship management team by adding 15 senior Operating income 271 5 12 frontline hires Wealth Management 170 10 18 • Leveraged our new open architecture platforms like Equity Structured Products an
Slide 37: Appendix: Region financial analysis
Appendix: Region financial analysis
Slide 38: Performance by region
Performance by region Greater China & ASEAN & Africa & Europe & Central & H1 2018 ($m) North Asia South Asia Middle East Americas other items Total Operating income 3,097 2,073 1,376 870 233 7,649 Operating expenses (1,903) (1,360) (919) (736) (199) (5,117) Operating profit before impairment 1,194 7
Slide 39: Performance by key markets
Performance by key markets Income Underlying profit / (loss) before tax ($m) H1 18 H2 17 H1 17 HoH%1 YoY %1 H1 18 H2 17 H1 17 HoH%1 YoY %1 Hong Kong 1,849 1,714 1,670 8 11 828 724 662 14 25 Korea 534 464 503 15 6 132 (5) 139 n.m. (5) China 422 366 341 15 24 236 122 145 93 63 Singapore 845 686 733 23
Slide 40: Greater China & North Asia
Greater China & North Asia Financial analysis ($m) H1 18 HoH %1 YoY %1 Progress • We have been active in the opening of China’s capital markets, helping overseas Operating income 3,097 10 11 investors do business through channels such as Bond Connect, Stock Connect Hong Kong 1,849 8 11 and the Quali
Slide 41: ASEAN & South Asia
ASEAN & South Asia Financial analysis ($m) H1 18 HoH %1 YoY %1 Progress • Broad-based income growth from portfolio reshaping in most markets, with Operating income 2,073 11 6 double-digit growth in six markets Singapore 845 23 15 • Good progress on improving business mix, with cash liabilities growi
Slide 42: Africa & Middle East
Africa & Middle East Financial analysis ($m) H1 18 HoH %1 YoY %1 Progress Operating income 1,376 0 (1) • Successfully launched digital-only bank in Côte d’lvoire. On track to deliver digital solutions across more countries in Africa during 2018 Africa 719 (4) (2) • Improved risk profile through tigh
Slide 43: Europe & Americas
Europe & Americas Financial analysis ($m) H1 18 HoH %1 YoY %1 Progress Operating income 870 10 8 • Good progress in improving the share of business from targeted multinational corporate clients, with income up 114 per cent and 14 per cent from ‘New 90’ UK 441 27 10 OECD and ‘Next 100’ client initiat
Slide 44: Appendix: Central & other items
Appendix: Central & other items
Slide 45: Central & other items
Central & other items Segment Centrally managed Region Treasury Markets Treasury Capital Principal Finance1 Associates and Corporate Centre costs Joint Ventures Portfolio Management Strategic investments Other non-segment specific items UK bank levy Other global items Central & other items (segment)
Slide 46: Appendix: Glossary
Appendix: Glossary Standard Chartered
Slide 47: Glossary
Glossary Acronym / Acronym / Acronym / term Explanation term Explanation term Explanation AAME Asia, Africa and the Middle East CIB Corporate & Institutional Banking NII Net interest income ADR Advances-to-deposits ratio Extent to which non-performing loans NIM Net interest margin Cover ratio AI Art
Slide 48: 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