Standard Chartered Plc · LSE:STAN
Standard Chartered — Q1 2023 Earnings Presentation
38 slides from Standard Chartered's earnings presentation, Apr 26, 2023
Slide 1: 1Q'23 Results Presentation
CONFIDENTIAL 1Q’23 Results Presentation 26 April 2023
Slide 2: Contents
CONFIDENTIAL Contents Bill Winters 3 Group Chief Executive Andy Halford 5 Group Chief Financial Officer Appendix Liquidity and balance sheet 18 Strategic actions progress, macroeconomic indicators, interest rate assumptions, 24 sovereigns, CRE, other income breakdown, summary of guidance Notes, abbr
Slide 3: Bill Winters, Group Chief Executive
CONFIDENTIAL Bill Winters Group Chief Executive 3
Slide 4: Opening remarks
CONFIDENTIAL Opening remarks • Strong 1Q’23 performance; → Introduction o Operating income up 13% at ccy Income Expenses o 3% positive income-to-cost jaws Risk Balance Sheet o Underlying profit before tax $1.7bn, up 25% at ccy Capital Summary Conclusion o Return on tangible equity of 11.9%, up 170bp
Slide 5: Andy Halford, Group Chief Financial Officer
CONFIDENTIAL Andy Halford Group Chief Financial Officer 5
Slide 6: Strong income growth, positive jaws and robust capital
CONFIDENTIAL Strong income growth, positive jaws and robust capital ($bn) 1Q’22 1Q'23 YoY1 ccy1 Net interest income 1.8 2.0 13% 18% → Introduction Other income 2.3 2.4 4% 9% • Operating income up 13% at ccy; Income Operating income 4.1 4.4 8% 13% Expenses Operating expenses (2.6) (2.7) (5%) (10%) Ri
Slide 7: Income up 13% with good performance across large markets
CONFIDENTIAL Income up 13% with good performance across large markets Income 1Q'23 vs 1Q’221 – Product view ($m) +13% Introduction 548 2 → Income (2) (9) (74) Expenses 715 (129) Risk 4,398 Balance Sheet (551) Capital 3,898 Conclusion +203% +245% +1% (0)% (3)% (5)% (23)% (202)% 1Q’22 ccy2 Transaction
Slide 8: Further NIM progression and NII growth in the quarter
CONFIDENTIAL Further NIM progression and NII growth in the quarter Adjusted basis1 Introduction Gross yield (bps) 192 221 288 376 437 → Income Rate paid (bps) 68 92 157 236 297 • 1Q’23 Adjusted NII2 up 29% YoY, up 36% at ccy Expenses Risk Balance Sheet 1.58 1.63 o AIEA up $13bn / 2%; AIBL up $9bn /
Slide 9: Financial Markets momentum driven by higher flow income
CONFIDENTIAL Financial Markets momentum driven by higher flow income Quarterly income trend ($m) (9)% / (5)% ccy YoY% ccy • 1Q’23 FM income down 5% at ccy Introduction 1,557 +130%1 → Income 71 94 1,386 28 1,414 +130%1 o Up 1% excluding $94m gain on mark-to-market Expenses 1,255 152 453 122 187 1,147
Slide 10: Wealth Management starting to rebound; broad based growth across top markets
CONFIDENTIAL Wealth Management starting to rebound; broad based growth across top markets Quarterly income trend ($m) (3)% / 0% ccy Introduction 528 → Income 511 456 454 • 1Q’23 income broadly flat YoY at ccy; strong Expenses Risk comparator in 1Q’22 Balance Sheet 358 Capital o Strong growth in Trea
Slide 11: Expense growth primarily driven by business initiatives and inflation
CONFIDENTIAL Expense growth primarily driven by business initiatives and inflation Total operating expenses1 1Q'23 vs 1Q'22 ($m) • 1Q'23 expenses up 10% at ccy Introduction +10% Income o Business initiatives & others includes increases → Expenses 135 2,675 Risk in staff costs across Financial Market
Slide 12: Low impairment charge in the quarter; Credit quality indicators stable
CONFIDENTIAL Low impairment charge in the quarter; Credit quality indicators stable Credit impairment ($m) Introduction $(172)m 340 • Credit impairment of $26m vs $198m in 1Q’22 Income Expenses → Risk 100 o Sovereign downgrades net release of $23m Balance Sheet 198 (see p28) Capital 17 163 96 Conclu
Slide 13: Customer assets slightly down; Customer deposits strong and stable
CONFIDENTIAL Customer assets slightly down; Customer deposits strong and stable… Loans and advances (L&A) to customers ($bn) Introduction Income 311 0 Expenses (1)% • Underlying L&A to customers down $2bn / 1% Risk (2) 303 301 → Balance Sheet (6) (2) o Reduction in Retail Mortgages reflecting tighte
Slide 14: With diverse base across markets, segments and industries
CONFIDENTIAL … with diverse base across markets, segments and industries… Customer deposits by market • Unique footprint and deposit franchise in 59 markets Introduction Income Hong Kong 12% Expenses 3% 29% Singapore o No single market >30%; no single industry >5% (see p21) Risk United Kingdom 4% →
Slide 15: Migration and betas performing as expected; guidance unchanged
CONFIDENTIAL …and migration and betas performing as expected; guidance unchanged TB CASA % of Total CCIB Deposits1 CCIB TB (USD) CASA Beta Introduction 66% 65% Income 60% 60% 59% FY’23/FY’24 FY’24 CASA % Expenses 60-80% Risk 55-65% 61% < FY’23 321 55% → Balance Sheet 308 311 312 Capital 268 110 Conc
Slide 16: CET1 towards top of the target range
CONFIDENTIAL CET1 towards top of the target range Risk-weighted assets (RWA) ($bn) • RWA up $6bn / 3% to $251bn Introduction +$6bn o $4.3bn asset growth and mix in Financial Markets Income Expenses 1.8 1.6 0.8 250.9 and Treasury Risk 4.3 0.6 Balance Sheet (1.8) (1.1) o Asset quality deterioration of
Slide 17: In conclusion
CONFIDENTIAL In conclusion • The Group delivered a strong performance in 1Q’23 Introduction • Leading indicators from China reopening very encouraging; good momentum in Financial Markets and Income Wealth Management our largest fee engines Expenses Risk Summary • Well positioned with a robust balanc
Slide 18: Appendix
CONFIDENTIAL Appendix • Liquidity and balance sheet • Strategic actions progress, macroeconomic indicators, interest rate assumptions, sovereigns, CRE, other income breakdown, summary of guidance • Notes, abbreviated terms and important notice 18
Slide 19: Steady deposit growth and disciplined balance sheet management
CONFIDENTIAL Steady deposit growth and disciplined balance sheet management Customer deposits growth ($bn) and ADR (%) $462bn 75% CAGR 4.9% • Track record of prudent liquidity management o Disciplined approach to balance sheet growth o ADR maintained in conservative range over time $234bn 56% • Stea
Slide 20: Market positioning supports a strong liquidity base
CONFIDENTIAL Market positioning supports a strong liquidity base #6 largest global USD clearer Bank of choice for global corporates in Group LCR 161% Weighted average #1 FI network trade bank Europe and Americas doing business in deposit insurance: Group ADR 56% Global Systemically Important Bank As
Slide 21: Diverse and stable deposit base supports steady and sustainable growth
CONFIDENTIAL Diverse and stable deposit base supports steady and sustainable growth CCIB customer deposits by industries1 Central Banks & Development Organisations • CCIB deposits diversified by segment and industry 17% Broker Dealers 32% Oil & Gas • >20k clients across the footprint Technology, Har
Slide 22: Prudent balance sheet management
CONFIDENTIAL Prudent balance sheet management Total assets Total equity & liabilities $821bn $821bn 31.03.2023 31.03.23 • Highly liquid and flexible balance sheet Derivatives & Other Derivatives & Other o Cash & liquid securities ~50%5 of customer accounts assets 128 liabilities 120 o 61% of total a
Slide 23: High levels of liquid resources
CONFIDENTIAL High levels of liquid resources 1Q’23 Liquidity Coverage Ratio (LCR) components • Group LCR of 161% up 14%pts QoQ $246bn • Group has $246bn of high-quality liquid resources available, $70bn of other liquid resources: of which $176bn is HQLA and included in LCR • Country surplus HQLA o K
Slide 24: Appendix
CONFIDENTIAL Appendix • Liquidity and balance sheet • Strategic actions progress, macroeconomic indicators, interest rate assumptions, sovereigns, CRE, other income breakdown, summary of guidance • Notes, abbreviated terms and important notice 24
Slide 25: Strong progress on our five strategic actions
CONFIDENTIAL Strong progress on our five strategic actions Description 2024 target 1Q'23 Status CCIB: • CCIB Income RoRWA: 160bps improvement from 4.9% in 2021 to 6.5% 6.5% 8.0% Drive • RWA reduction of $22bn (2022-2024) $22bn $14.8bn1 improved • Hold RWA flat to $163bn $163bn $148bn returns • Finan
Slide 26: Changes to baseline forecasts for key footprint markets
CONFIDENTIAL Stage 1 and 2 credit impairments Changes to baseline forecasts1 for key footprint markets 4Q’22 1Q’231 Crude price China Hong Kong Korea Singapore India Brent, bbl GDP growth (YoY): 2023 Forecast 5.8% 5.8% 2.4% 3.2% 2.1% 1.7% 2.8% 2.0% 5.5% 5.5% $91.0 $91.0 GDP growth (YoY
Slide 27: Interest rate assumptions
CONFIDENTIAL Interest rate assumptions USD SOFR O/N (bps) 3M HIBOR (bps) 470 451 471 377 409 367 365 357 Average as at Basis Average as at Basis 31.03.23 points 31.03.23 points 1Q’23 449 1Q’23 382 2Q’23 489 2Q’23 409 3Q’23 485 3Q’23 424 4Q’23 459 19 4Q’23 420 5 2021 2022 2023 2024 2021 2022 2023 202
Slide 28: Sovereigns
CONFIDENTIAL Sovereigns • Stagflation, tighter liquidity and USD strength are Net nominal1,2 ($bn) challenging for some EM sovereigns 6.2 • Three stressed markets with total net nominal of $5.4bn (down $0.8bn QoQ), <1% of total CCIB and CPBB net nominal 3.8 2.8 • Total credit provision to date of $2
Slide 29: China Commercial Real Estate
CONFIDENTIAL China Commercial Real Estate Exposure by booking location as at 31.03.23 ($bn)1,2 • Early signs of stabilisation with China re-opening & support 3.4 measures 0.4 o Credit impairment provisions $830m3,4, no material change 2.4 QoQ: Stage 1&2 includes $167 net overlay 0.1 1.5 o Further im
Slide 30: Global Commercial Real Estate
CONFIDENTIAL Global Commercial Real Estate Exposure by markets as at 31.03.23 (%)1 • CRE 5% of total corporate exposures, diversified by markets and asset types • 55% is investment grade; 76% secured, secured assets average LTV2 at 50% 22% China • Some reduction in valuations in EU, UK & US but over
Slide 31: Other income up 9% at ccy
CONFIDENTIAL Other income up 9% at ccy Other income ($m) +4% / +9%ccy 2,389 2,293 • 1Q'23 net fees and commissions down 5% YoY 2,212 at ccy 1,931 830 Net fees and commissions 904 802 1,742 o Growth in Financial Markets, Lending and ($m) Portfolio Management 798 585 o Offset by lower Wealth Managemen
Slide 32: Summary of guidance
CONFIDENTIAL Summary of guidance • Income to grow around 10% at the top end of 8-10% range at ccy in 2023, and in the 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 • 202
Slide 33: Appendix
CONFIDENTIAL Appendix • Liquidity and balance sheet • Strategic actions progress, macroeconomic indicators, interest rate assumptions, sovereigns, CRE, other income breakdown, summary of guidance • Notes, abbreviated terms and important notice 33
Slide 34: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the preceding pages Page Explanatory note or definition 1. YoY = year-on-year variance is better/(worse) other than for RWA, CET1 ratio and LCR, which is increase/(decrease) / ccy = constant currency / n.m. = not meaningful / c
Slide 35: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the preceding pages Page Explanatory note or definition 1. Early Alerts (Non-Purely Precautionary) (EA(NPP)) are on a net nominal basis 12 2. High-risk assets in this context means exposures classified in EA(NPP), CG12 and Net
Slide 36: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the preceding pages Page Explanatory note or definition 1. Expected net cash outflows over the following 30 days 23 2. European Central Bank Targeted longer-term refinancing operations (TLTRO) & Bank of England’s Term Funding S
Slide 37: Select technical and abbreviated terms
CONFIDENTIAL Select technical and abbreviated terms Term Definition Term Definition ADR Advances to Deposits ratio Loan-loss rate Total credit impairment for loans and advances to customers over average loans and advances to AIBL Average interest-bearing liabilities (LLR) customers AIEA Average inte
Slide 38: 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