Standard Chartered Plc · LSE:STAN
Standard Chartered — Non-Deal Roadshow (2010)
84 slides from Standard Chartered's roadshow presentation, 2010
Slide 1: Risk
Risk Richard Goulding Group p Chief Risk Officer Leading the way in Asia, Africa and the Middle East
Slide 2: Forward looking statements
Forward looking statements This presentation contains or incorporates by reference ‘forward-looking statements’ regarding the belief or current expectations of Standard Chartered, the Directors and other members of its senior management about the Group’s businesses and the transactions described in
Slide 3: Investor trip 2010 agenda - Day 4
Investor trip 2010 agenda - Day 4 09:30 – 10:00 Group opening and introduction Richard Meddings to the management team 10:00 – 11:00 Group Risk Richard Goulding 11:00 – 12:00 Capital & Liquidity Pam Walkden 12:00 – 13:30 Lunch with the SCB management team 13:30 – 14:30 Technology & Operations Jan Ve
Slide 4: Current headlines
Current headlines IMF says sovereign risk a threat to recovery 4
Slide 5: Key messages
Key messages Ope Operating g from a sound pos position Diversified portfolio across countries and products Portfolio quality indicators stable, loan impairment charges in both businesses continue to improve Well positioned for growth in our markets Supporting growth opportunities within Gr
Slide 6: Operating from a position of stability
Operating from a position of stability Leading the way in Asia, Africa and the Middle East
Slide 7: Group portfolio: diversified risk exposure
Group portfolio Diversified risk exposure Growth in loans and advances evenly distributed across geographies No single country with more than 20% of loans and advances to customers Major footprint countries in Asia constitute 54% of portfolio Loans & advances - December 2008 Loans & advances
Slide 8: Group portfolio: risk exposure diversified across WB industry groups and CB products
Group portfolio Risk exposure diversified across WB industry groups and CB products Low exposure to asset classes outside our core markets / clients Loans & advances - December 2008 Loans & advances - June 2010 Other Other Wholesale Banking Wholesale Banking 13% 12% Transport, storage Transport,
Slide 9: WB portfolio quality
WB portfolio quality Majority of exposures continue to be with investment ggrade counterparties p Certain degree of negative migration during the financial crisis LGD distribution trend Dec 2008 LGD Dec 2009 LGD Sep 2010 LGD Sep 2010 number of customers 1 2 3 4 5 6 7 8 9 10 11 12 63% investment
Slide 10: WB portfolio quality
WB portfolio quality Overall credit quality improved in 2010, driven by improvements in the corporate book Management actions implemented at inception of financial crisis were effective in: Maintaining a conservative risk appetite for new exposures Reducing LGD by increasing collateral cover
Slide 11: WB early alert
WB early alert Early alerts in 2010 remained at a lower level compared to 2009 No particular concentration in any geography or industry Early alert trend Total EAR nominal Total number of EAR accounts Monthly number of new EAR accounts Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Slide 12: WB loan impairment
WB loan impairment Overall loan impairment well below peak in 1999, reflecting: Anticipation and firm management action action, and Governments’ responses to economic conditions Loan impairment trend Avg WB L&A % of Gross WB loan impairment to avg WB L&A (RHS) 120 2.8 % of Net WB loan impairme
Slide 13: CB portfolio quality
CB portfolio quality Delinquencies continue to show a stable or improving trend across major footprint countries Largest markets show lowest delinquency rates reflecting Higher proportion of exposure to secured products products, and Effective utilisation of credit bureau information Top CB
Slide 14: CB loan impairment
CB loan impairment Downward trend in loan impairments in H1 ’10, after peaking in Q2 ’09 09 as a result of: Decisive intervention by regulators in our markets Improving p g macro-economic conditions Combined with our disciplined approach to risk management Loan impairment trend Avg CB L&A 12
Slide 15: Supporting growth opportunities within risk appetite
Supporting growth opportunities within risk appetite pp Leading the way in Asia, Africa and the Middle East
Slide 16: WB Risk exposure growth
WB Risk exposure growth Re-alignment of exposure within client segments Increased focus on exposure to better rated counterparties p and collaterised transactions Loans and advances Dec 2008 Jun 2010 1% 3% 30% 33% Corporates Banks Governments 64% 69% Total: US$146bn Total: US$168bn Source: SCB d
Slide 17: Managing large WB client relationships
Managing large WB client relationships Corporate large exposures continue to be low relative to overall WB Concentration levels are regulated by Credit reference levels, levels portfolio standards standards, distribution Income from top 10 Income from top 50 Income from top 100 C G 36% CAGR CA
Slide 18: Supporting WB growth opportunities
Supporting WB growth opportunities Increasing risk appetite in chosen markets and business segments India China Local Corporates Supporting business growth opportunities through Resetting industry portfolio limits to increase diversification Risk mitigation through collateralisation an
Slide 19: CB portfolio product mix
CB portfolio product mix 85% of exposure in secured and partially secured products where loss rates are lower Mortgage portfolio well collateralised with average LTV of around 50% Exposure trend % 15 16 8 21 8 20 9 7 Unsecured Part-secured 77 Sec red Secured 76 70 73 Dec 07 Dec 08 Dec 09 Sep 10
Slide 20: Supporting CB growth opportunities
Supporting CB growth opportunities Continue focus on asset growth Within risk appetite and disciplined Credit portfolio management Country Bureau Deepening relationships with H Hong K Kong existing customers India Indonesia Re-balance CB portfolio to Korea capture market opportunities Malays
Slide 21: Market Risk
Market Risk Leading the way in Asia, Africa and the Middle East
Slide 22: Market risk VaR
Market risk VaR Group VaR decreased since Dec ’09, driven by reduction in volatility VaR trend trend, Jan 2009 to 14 Oct 2010 50 40 30 US$m 20 Group VaR 10 0 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Source: SCB data 22
Slide 23: Market risk
Market risk Absolute size of market risk low compared pa to pee peers; s; consistently low average VaR over the past 3 years Relative size of market risk in line with other conservative peers Average VaR (97.5%/ 1 day) Market Risk vs Book Value 250 0.6 US$m alue % 215 500 480 200 0.5 $bn 163 400
Slide 24: Market risk
Market risk No dedicated p proprietary p y trading g teams;; majority jo y of own account revenue derived from market making activities Daily y trading g revenues / average g VaR most consistent over past 4 years Daily trading revenues / average VaR % 2007 2008 2009 H1 2010 100 84% 85% 80 70% 66
Slide 25: Disciplined approach to managing risks
Disciplined approach to managing risks Leading the way in Asia, Africa and the Middle East
Slide 26: Risk management principles
Risk management principles Group’s oup risk management ge p principles p overlay ay all risk po policy cy and decision making: Balancing risk and return Responsibility Accountability Anticipation Competitive advantage 26
Slide 27: Risk governance
Risk governance Board Audit and Risk Committee split into ‘Board Risk Committee and ‘Board Committee’ Board Audit Committee’ Committee to strengthen governance and risk oversight Country Chief Risk Officers and country level risk committees provide in-country governance of all risk types Standar
Slide 28: Risk appetite
Risk appetite Risk appetite is an expression of risk that SCB is willing to take in pursuit of our strategic objectives, objectives Reflecting our capacity to sustain losses, and Continue to meet our obligations g arising g from range of different stress trading conditions Approve Risk Appetit
Slide 29: Risk appetite
Risk appetite Monitoring risk appetite through ‘continuous stress analysis’ Quarterly review (financials) (financials), full review (ICAAP (ICAAP, strategy board) board), specific one-off reviews Monitor risk appetite for volatility of earnings and capital ratios Stress losses and stress RWA
Slide 30: Stress testing
Stress testing Coverage ge All risk types Group, country, business, portfolio specific Macro-economic scenarios, specific event types Impact on profitability, liquidity, business plans, operations Oversight O i ht Governance through Board Stress Testing Committee Stress testing sce
Slide 31: Stress tests
Stress tests Geo-political conflict Iceland KRW / US$ volcano CNY Euro stress test stress test eruptions appreciation US$ devaluation Rising wages Jump oil risk Middle and labour East crises unrest in China LIFFE cocoa Asset price market squeeze decline and interest rate increase Recession character
Slide 32: Risk summary
Risk summary Operating from a sound position Supporting growth opportunities within Group risk appetite Disciplined approach to managing risks 32
Slide 33: Q&A
Q&A Standard Q@ Chartered R 33
Slide 34: Capital and Liquidity
Capital and Liquidity Pam Walkden Group p Treasurer Leading the way in Asia, Africa and the Middle East
Slide 35: We have never forgotten the basics
We have never forgotten the basics Basics of banking gmt L uidity / nding al apita osts s k mg Co Liqu fun Ca Risk R 35
Slide 36: Useful context: Basics of banking
Useful context Basics of banking Risk Mgmt Costs Conservative Disciplined & diverse cost control balance sheet in both businesses CB p portfolio is highly secured WB portfolio has a short contractual maturity Minimal exposure to problem p asset classes 36
Slide 37: A well diversified balance sheet
A well diversified balance sheet Loans & advances by Loans & advances by Geography * Industry groups and products * US$220bn S$ US$220bn Other Wholesale Banking Americas, UK & Europe Hong Kong 12% 16% 17% Transport storage Mortgages and communication 28% Africa Af i 5% 2% Middle East & Other South A
Slide 38: Capital as an enabler
Capital as an enabler Basics of banking Capital Well capitalised at a Core Tier 1, Tier 1 and Total Capital level Consistent equity generation throughout the crisis Basel III impact expected to be c100 bps 38
Slide 39: Fitch upgrade post the rights
Fitch upgrade post the rights Jun-08 Oct-10 Fitch/Moody’s/S&P Fitch Moody’s y S&P Standard Chartered Bank A+/A2/A+ AA- +1 A2 A+ Bank of America, NA AA/Aa2/AA- A+ -2 A2 -3 A -3 Barclays Bank Plc AA/Aa1/AA AA Aa3 -2 AA AA- -2 Goldman Sachs AA-/Aa3/AA- A+ -1 A1 -1 A -2 Citigroup AA-/Aa3/AA- A+ -1 A3 -3
Slide 40: CDS reaction to the rights
CDS reaction to the rights STAN HSBC BARC LLOYDS RBS 12th Oct 2010 83 66 109 151 149 1st Nov 2010 76 66 107 152 151 % change 8% 0% 1% 0% -1% Source: Bloomberg 5yr senior CDS 40
Slide 41: Capital impact of the rights
Capital impact of the rights % 15 5 15.5 4.3 Rights iissue ssue impact 2.2 cc.200 200 basis points increase Tier 1 11.2 in forecast Core Tier 1 9.0 Jun 2010 2010* Core Tier 1 Tier 2 * Basel II basis 41
Slide 42: Overlaying Basel III adjustments
Overlaying Basel III adjustments How did we get to a 100 basis po point impact p on Core Tier 1? Gross of any management actions 50 basis points relates to Core Tier 1 deductions 50 basis points relates to RWA add-ons including a degree of extra conservatism 42
Slide 43: Leading the way
Leading the way in Asia, Africa and the Middle East
Slide 44: Equity generation
Equity generation 2008 & 2009 US$b US$bn inclusive Increase in Core Tier 1 6.9 External equity raising 2008 Rights issue (2.7) 2009 Equity placing (1 7) (1.7) Internal equity generation 2.5 8.8% Incremental Basel II RWA growth during the period 28.4 Internal equity generation has supported a CT1 rat
Slide 45: Leading the way
Leading the way in Asia, Africa and the Middle East
Slide 46: Liquidity as a differentiator
Liquidity as a differentiator Basics of banking Liquidity Strong A/D ratio consistently sub 100% Consistently strong liquid asset ratio Balance sheet built on the right type of deposits Focus on management through the geographic lens 46
Slide 47: Historical liquidity strength
Historical liquidity strength A/D ratio 100 75 % 0 2002 2003 2004 2005 2006 2007 2008 2009 H1 2010 Liquid asset ratio 30 25 % 20 15 2002 2003 2004 2005 2006 2007 2008 2009 H1 2010 47
Slide 48: Strong through the geographic lens too
Strong through the geographic lens too ess nder stre + Cassh flow un alaysia UAE India Korea Hong Kong gapore USA China UK Taiwan Ta - Sing Ma Gross cash flow Marketable securities Net cash flow 48
Slide 49: Limited refinancing need
Limited refinancing need US$bn 7 Average level of 6 senior and subordinated issuance over last 2 yyears 5 4 3 2 1 0 2011 2012 2013 2014 2015 2016 2017 49
Slide 50: Capital: Where does this position us?
Capital: Where does this position us? Core Tier 1 December 2010 Western Global Asian SCB 8 9 10 11 12 13 14 % SOURCE: Estimates from KBW, Goldman Sachs on Basel II basis 50
Slide 51: Liquidity: Where does this position us?
Liquidity: Where does this position us? Advances to Deposits ratio* % 150 “strongly liquid” 100 50 0 SCB Western Global Liquid Assets ratio*† Asian % 50 “strongly liquid” 40 30 20 10 0 SCB * As at 30 June 2010 † LAR calculated 51
Slide 52: Regulatory uncertainty remains
Regulatory uncertainty remains Systemic firms ICB Basel III Stance of RRP country ((Living g Will)) regulators Bail -ins ins Subsidiarisation 52
Slide 53: Key messages
Key messages Capital and Liquidity have been core pillars for some time - both are strong in absolute and relative terms Post P t the th rights i ht we can continue ti to t focus f on capturing t i growth rather than managing to higher capital ratios We engage in the regulatory debate from a p
Slide 54: Q&A
Q&A Standard Q@ Chartered R 04
Slide 55: Group Technology and Operations
Group Technology and Operations Jan Verplancke CIO,, Group p Head Technology gy and Operations p Leading the way in Asia, Africa and the Middle East
Slide 56: Key messages
Key messages Cross border,, cross p product ope operational scalability y Differentiated channel capabilities to enhance customer proposition Globally y integrated, g , resilient and standardised back end systems Cost efficient product and services delivery 56
Slide 57: GTO's organisation design
GTO’s organisation design Group CIO Group CB CIO WB CIO f functions ti CIO Country Technology CIO’s Operations 57
Slide 58: Our technology and operations resources
Our technology and operations resources Technology Operations SCOPE: Chennai, SCOPE: Chennai, Hubs Kuala Lumpur and Tianjin Hubs Kuala Lumpur and Tianjin ~3,300 FTE’s ~7,600 FTE’s Singapore London Singapore, London, Regional Singapore and London Regional Kenya and Ghana hubs ~900 FTE’s
Slide 59: The technology infrastructure journey continues to build stability and scalability
The technology infrastructure journey continues to build stability and scalability Journey so far Road ahead 1 Applications Product focus Customer focus 2 Desktop Divergent to standardised Beyond the desktop 3 Datacentres Dispersed to consolidated Effective localisation 4 Highly redundant self Netwo
Slide 60: Addressing legacy issues - core banking (eBBS) rollout
Addressing legacy issues - core banking (eBBS) rollout 73% 82% 100% Core Banking 44 Countries Core Banking 38 Countries System 44 Countries System 2013 (End State) Core Banking 34 Countries System 2010 (9) BM (0) PAS (0) 2009 (14) BBS (0) ICBS (0) BM (0) PAS (0) Midas (0) Tandem (0) BBS (0) ICBS (1)
Slide 61: GTO cost efficiency trends
GTO cost efficiency trends Income up: 2.8x 15 GTO Cost up: 1.8x 10 McKinsey benchmarking me study of 44 Asian banks % Incom from 2007 to 2009 found the average Technology / income ratio to be at 5 6 7% compared 6.7% d tto 3.6% at SCB 0 2004 2005 2006 2007 2008 2009 Technology BAU Operations BAU 61
Slide 62: Sample operations projects enriching product and service functionality
Sample operations projects enriching product and service functionality across geographies Build scalability through web based data entryy while ensuring g confidentiality y eOps Provide an opportunity to rural populations to participate in the digital economy Rollout - Q Q1 2011 Digitise req
Slide 63: Sample operations projects enriching product and service functionality
Sample operations projects enriching product and service functionality across geographies Customer experience management system Innovative mobile and internet banking Consumer Customer origination system for standardising the loan application process Banking Express Banking Centres (India an
Slide 64: Global roll out of a cost effective, scalable trade processing platform
Global roll out of a cost effective, scalable trade processing platform with rich functionality Trade Finance - revenue & Operations cost income operations cost (US$m) ratio & productivity Operations cost Productivity income ratio (LHS)) (volume in `000 / FTE)) ue 1800 160 ade revenu ations cost 140
Slide 65: Modernising Wholesale Banking across asset classes with focus on Risk
Modernising Wholesale Banking across asset classes with focus on Risk Key business benefits Single product-agnostic, multi-asset class pricing engine able to expand across all sales and trading A deal booking tool that front-ends position keeping and transaction processing systems Workflow eng
Slide 66: Single point of entry to customer information for 'staff-assisted' channel
Single point of entry to customer information for ‘staff-assisted’ channel CONTACT CAMPAIGN ACCOUNT Task Appointment Lead Opportunity Account Balances Detail Total Relationship View Messaging g g CTI Campaign Event Transaction Risk History Detail CUSTOMER SERVICE INTELLIGENCE Customer Banking STP No
Slide 67: Journey beyond the desktop to bring technology to the customer
Journey beyond the desktop to bring technology to the customer Key business benefits V1 Effective communication with clients and spotting blockages in transactions early – key y in a flow business Relationship Managers can approve credit changes g while on the move – faster execution of transact
Slide 68: Driving competitive differentiation through technology in Consumer Banking
Driving competitive differentiation through technology in Consumer Banking… iPhone breeze Express ATM refresh Banking Centres Video access to New branch design specialist advisers High enablement of non branch channels in CB (e.g., in Singapore ~16% of transactions are branch) 68
Slide 69: Enhancing online / mobile banking capabilities
…and by enhancing online / mobile banking capabilities 2010 Active online 20% YTD customers (~1.75 m) Countries with 29 online banking (95% of customer base) Countries with 32 Click 2 Chat mobile banking (98% of customer base) E-statements E statements 35% penetration Social networking & viral marke
Slide 70: Overview of Straight2Bank
Overview of Award winning electronic banking platform for corporate p and institutional clients in our markets - 3rd consecutive year Fully integrated channels catered to our clients’ needs Straight2Bank | Web - Internet based electronic banking Straight2Bank | Link - SCB’s award wining PC b
Slide 71: Key messages
Key messages Cross border,, cross p product ope operational scalability y Differentiated channel capabilities to enhance customer proposition Globally y integrated, g , resilient and standardised back end systems Cost efficient product and services delivery 71
Slide 72: Q&A
Q&A Standard Q@ Chartered R 72
Slide 73: People
People Tracy Clarke Group p Head of Human Resources and Communications Leading the way in Asia, Africa and the Middle East
Slide 74: People demographics
People demographics The Bank employs close to Our staff represent over 85 000 staff across 71 markets 85,000 125 nationalities Close to 20,000 staff in India and 170 languages spoken over 15,000 across greater China across the Bank Female representation at More than 700 people on 45% glo
Slide 75: People strategy
People strategy Our peop people strategy: tegy Continually raise the bar on performance and reward Acquire, deploy and retain talent Reinforce and leverage our distinctive culture and values Build leadership capacity and capability Optimise O ti i the th way we workk ….to create sustainabl
Slide 76: Our people challenges
Our people challenges Increased competition pe across the industry y Limited availability of talent in key markets Integrating I t ti and d developing d l i ttalent l t Retaining our culture and values as we continue to grow Balancing market, regulatory and union pressures on remuneration
Slide 77: Our remuneration framework
Our remuneration framework External Policy y Views Performance Culture SCB practices already Strong governance aligned to FSB and fully compliant with FSA Reward for sustained performance Strong voice in regulatory discussions Effective risk management Key focus: ensuring a Pay reflect
Slide 78: Talent challenge: focus on China
Talent challenge: focus on China China aspirations: China challenges: g Significant revenue growth Expansion of competitors Expansion of our footprint High attrition market Leverage greater China Limitations in depth of talent P j Projected d HC growth h in i China Chi `000’s 8 7 6 5 4 3
Slide 79: Turning talent into competitive advantage: CB academy
Turning talent into competitive advantage: CB academy Mission: To build capability to effectively deliver on our CB business aspirations Key statistics: Core programmes: 13 countries Day 1 readiness: 140 trainers for new joiners in 95,500 learner days frontline roles Powered 2 perform: 9
Slide 80: Building our leadership benchstrength
Building our leadership benchstrength Our leadership population Leadership Development has grown by 40% over Gallup leadership interview the last two years First 100 days support and “Fast Fast Leadership cadre growth Start” programme 1000 900 Executive 800 development curriculum 700 600 Bes
Slide 81: Embedding and nurturing our culture
Embedding and nurturing our culture CREATIVE - RESPONSIVE - INTERNATIONAL - COURAGEOUS - TRUSTWORTHY LAUNCH EMBED LEVERAGE Interviews and Ongoing activities Leadership focus groups to bring the values role modelling with employees to life and customers Refreshed link with strategy and Strong Example
Slide 82: Building a highly engaged workforce
Building a highly engaged workforce Employee engagement: 10 years of strong results 5.0 SCB Q12 grand mean SCB implementation (follow-through mean) ment score 4.5 4.21 3.99 4.02 3.99 4.03 3.92 3.96 40 4.0 Engagem 3.83 83 4 14 4.14 3.74 3.58 3.94 3.82 3.87 3.78 3.69 3.72 3.5 3.56 3.41 3.0 24th 35th 4
Slide 83: Key messages
Key messages Our focus remains on attracting g and developing p g talent at all levels, across the Bank to support our growth aspirations Our culture and values and high levels of employee engagement are a source of competitive advantage “Paying for performance” is key to our culture and in wo
Slide 84: Q&A
Q&A Standard Q@ Chartered R 84