Slide 1: Full Year 2015 Results Presentation
Full Year 2015 Results Presentation 23 February 2016
Slide 2: Forward looking statement
Forward looking statement This document contains or incorporates by reference ‘forward-looking statements’ regarding the belief, assumptions or current expectations of the Company, the Directors and other members of its senior management about the Group’s strategy, businesses, performance and the ot
Slide 3: Bill Winters, Chief Executive Officer
Bill Winters Chief Executive Officer
Slide 4: Summary
Summary y Poor performance in 2015 but we have taken action We have a good and valuable franchise with outstanding client relationships We remain confident that the strategy is right for the Group The strategy was designed for just this sort of external environment We will continue to take
Slide 5: Andy Halford, Group Chief Financial Officer
Andy Halford Group Chief Financial Officer
Slide 6: Group performance summary
Group ppperformance summary y Better/ US$m FY 14 FY 15 (Worse)% Income 18,236 15,439 (15) YoY change in income (US$m) (2,797) Operating expenses (9,662) (9,032) 7 - Currency translation ~(700) Regulatory expenses1 (717) (1,006) (40) - Divestments and exits ~(400) B k levy Bank l (366) (440) (20) - C
Slide 7: Income impacted by adverse market conditions and management actions
Income impacted by adverse market conditions and managgement actions Operating income (US$m) ~(400) ~(100) ~(200) ~(300) ~(700) ~(300) 18,236 ~(700) 15,439 FY 14 Divestments Commodity CCPL and MTM Currency Commodity Business FY 15 de-risking other CIC valuations translation price falls momentum de r
Slide 8: Taking action to address declining income trajectory
Taking g action to address declining g income trajjectoryy • Lower balance sheet momentum… but taking action US$m Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Reflects R fl t adverse d macro conditions diti iin 2015 Operating income 4,448 4,421 4,074 3,682 3,262 Selective asset origination 1 Mark to market 148
Slide 9: Client segment performance has been similarly impacted
Client seg gment performance has been similarly y imp pacted Better/ Key operational themes US$m (underlying) FY 14 FY 15 (Worse) % Corporate and Institutional Clients (CIC) • CIC with weaker income and higher loan Income 10,431 8,696 (17) impairment, largely in liquidation portfolio Profit before t
Slide 10: We have stepped up our cost focus to improve profitability
We have stepped up our cost focus to improve profitability and create investment cap pacity y Annual cost efficiencies (US$bn) ~1.3 • Underlying operating expenses1 down 7% year >1.0 on year >0 6 >0.6 • US$1bn efficiencies in 2016 already identified 0.4 • Staff numbers down ~7,000 YoY 2014¹ 2015¹ 20
Slide 11: Decisive action on exposures beyond tightened risk tolerance
We have taken decisive action on exposures beyond tightened risk tolerance US$m Liquidation portfolio Ongoing business Total Group Loan impairment 1,627 2,381 4,008 Loan impairment included in restructuring charge 968 - 968 Total loan impairment 2,595 2,381 4,976 US$m $ Gross loans and advances to c
Slide 12: Assertively managing past risk issues
Assertively y manag ging g past risk issues • Broadly stable combined CG12s and Total NPLs and CG12 accounts NPLs (inclusive of the liquidation portfolio) 16,000 • Inflow to NPL largely from existing CG12 14,000 12,000 • Majority of NPL inflow in Q4 2015 from a large connected group from CG12 10,000
Slide 13: Reduced targeted exposures and improving credit quality
We have reduced targeted exposures... and are improving the credit qualityy of our ong going g business portfolio Reduced targeted exposures (US$bn) • Actions are improving ongoing business portfolio 78.5 (36%) • Portfolio is more diverse by industry and client 50.0 • India and commodities represent
Slide 14: Reduced commodity exposures and improved portfolio quality
Reduced our commodity exposures and improved the quality of ong going g portfolio Reducing targeted commodity exposures • Actively managing, net exposure down 28% (US$bn) YoY • Top 5 exposures down 29% YoY 61 8 61.8 60 7 60.7 (28%) 54.9 • 68% of portfolio with maturity <1 year 48.8 • Oil and Gas pro
Slide 15: Our balance sheet is stronger and well positioned
Our balance sheet is stronger and well positioned to weather the current volatile external conditions Minimum requirement for Leverage ratio own funds and CET1 Increased cover g strong 12.6%, eligible liabilities ratio 53% 5.5% 24% in 12-13% target range CIC andd CC2 Liquid Asset L&A to customers Ad
Slide 16: Disciplined balance sheet management
Discip plined balance sheet manag gement Customer loans and advances (US$bn) (11) (12) 289 1 (3) Commodity price falls (3) Management actions 261 FY 14 Currency translation Corporate and Commercial Private Banking Retail FY 15 Institutional Customer deposits (US$bn) Time deposits down 30% YoY (11) (
Slide 17: The Group is strongly capitalised and generating further capital
The Group is strongly capitalised and is generating further capital from underlying y g business activityy 2015 – CET1 % Rights Issue Restructuring ~170bps ~(60)bps Underlying ~80bps 1.7% (0.6%) 1.2% (0.4%) 13.2% 12 6% 12.6% 11.5% 10.7% FY 14 Change in assets FX / Other Pre-rights Rights issue Post-
Slide 18: Significant reduction in risk-weighted assets
Sig gnificant reduction in risk-weig ghted assets 2015 RWA (US$bn) Underlying Restructuring (42.3) 3.6 15.3 (24.2) Net restructuring credit (9.6) migration Net underlying credit (17.3) 341.6 migration g 14.2 (10 6) (10.6) (8.8) 2.3 299.3 302.9 FY 14 Credit Provisions Asset RWA Currency Other Pre- Cr
Slide 19: Summary of our 2015 financial performance
Summary y of our 2015 financial performance We have taken action to strengthen We strengthen the Group’ Group’s s balance sheet We have tightened our risk tolerance and have reduced concentrations We have delivered on 2015 committed cost efficiencies and... ... We will deliver cost saves of
Slide 20: Bill Winters, Chief Executive Officer
Bill Winters Chief Executive Officer
Slide 21: Executing our new strategy designed for this challenging environment
We are executing our new strategy which was designed for this challeng ging g environment We have a valuable, We valuable differentiated franchise and and strong 1 client relationships Facing real challenges from challenging macro and 2 past decisions New Built our new strategy to weather adverse ma
Slide 22: Delivering on commitments and executing the strategy
We are delivering on the commitments we have made and executing g on the strategy gy to drive sustainably y hig gher returns 1 • Financial framework: CET1 of 12-13%, ROE of 10% in medium term • Reduce / exit exposures to within the refreshed Group risk tolerance by 2017 • Businesses and assets compr
Slide 23: Delivering on commitments and executing the strategy: progress
We are delivering on the commitments we have made and executing g on the strategy gy to drive sustainably y hig gher returns Reorganised the Group around a new and simpler organisation structure 1 Completed new management team with Group Chief Risk Officer and CEO of CIB Secure the foundations
Slide 24: Early actions to restructure one third of Group RWA
We have taken early actions to restructure approximately one third of Group p RWA Restructuring progress Liquidate assets Focus countries • US$1.8bn restructuring charges taken in Q4 2015 ... Portfolio of assets Korea Retail Indonesia beyond risk tolerance and ~US$20bn C Commercial i l • ... the bul
Slide 25: Assertive action on exposures outside tightened risk tolerance
1 We have taken assertive action on exposures outside of tig ghtened risk tolerance • Tightened our risk tolerances • Concentrated exposures largely in liquidation portfolio • In 2015 representt 3% off gross lloans and I 2015, d advances d tto customers t butt 59% off b gross non-performing loans an
Slide 26: Actively managing low returning client relationships
2 Continuing g to activelyy manag ge low returning g client relationship ps We are committed to optimising US$50bn of RWA across CIB and Commercial All clients are identified and discussions are ongoing to manage returns up or RWA out Expect p to have completed p the process p in the next 18-24 mont
Slide 27: Focus countries – Korea and Indonesia
3 Focus countries – Korea and Indonesia Korea Indonesia • Significant headcount reduction from SRP1 • Aim to reduce to a single presence • Simp plified corp porate structure • In active discussions with joint venture partner and local regulators • De-risked retail unsecured • Continued focus on driv
Slide 28: Exiting peripheral businesses
4 Exiting gpperip pheral businesses • Progressing sale of peripheral non-strategic investments Timing dependent on market conditions • Exiting selected sub-scale sub scale Retail Banking markets Sales processes underway or planned Will update on signing • Comp pleting g exit of eq quity y deri
Slide 29: Building underlying momentum across focus areas
While 2015 performance was poor, we are building underlying momentum across focus areas • Maintained leadership ppposition in Asia Transaction Banking g Corporate and • Increased FX, Cash FX and Rates notional Institutional Banking • Grew share of non-financing revenue • Added ~3,000 new clients Com
Slide 30: Positioning for improved returns in Corporate and Institutional Banking
Positioning for improved returns in Corporate and Institutional Bankingg Upgrade or exit Risk weighted assets (US$bn) • Delivered ~US$4bn low returning relationship efficiencies lower returning client RWAs • Stepping up efficiencies in 2016 from ~US$40bn portfolio 245 (12%) Favour network • ~60% of
Slide 31: Strong and leading transaction banking franchise
The Group has a strong and leading underlying transaction banking g franchise • #1 Transaction Banking provider +2.1% (3.5)% (0.8)% +1.3% +1.4% +1.3% across Asia1 • Primary banker to 22% of top 68% Asian institutions 57% 57% 48% • Extending leadership each year 22% 43% since 2010 with growing share
Slide 32: Overhauling Commercial Banking
Overhauling g Commercial Banking g Risk weighted assets (US$bn) • CDD1 remediation progressing, credit standards tightened 25 • Drive efficiency and digital channels to achieve structurally 20 Re-structure and re-cost lower cost base • Targeting T i to up-tier it ~US$10bn ti or exit US$10b off llow-
Slide 33: Investing into Private Banking and Wealth Management
Investing g into Private Banking g and Wealth Manag gement Wealth Management AUM ((US$bn))1 69 Distinctive and • Investment product penetration up from 51% to 57% in 2015 digital • Hiring high quality Relationship Managers in 2015 distribution • Plan to enhance digital g distribution across Private
Slide 34: Transforming Retail Banking
Transforming g Retail Banking g Focus on • Grew share of Priority income from 27% to 35% of Group Retail Priority clients income (US$m) Priority y and urban affluent • Focusing on 64 core cities across 24 markets in major cities 1,794 • Core cities, ex Korea and China, already delivering >10% RoE +1
Slide 35: Stepping up investment despite challenging conditions
We are stepping up investment despite challenging external conditions in order to deliver our strateg gic ag genda Cash investment spend (US$m) • Upgrade systems • Enhance Retail Digital capabilities • Improve flexibility • Upgrade Private and WM1 platforms • Deliver process and • Invest in our Afri
Slide 36: Committed to rebuilding strength and profitability
Committed to rebuilding g streng gth and profitabilityy 11. Maintain strong capital position 22. Improve asset quality 33. Take action on areas generating below target returns 10% R Return t on 44. Invest where we have, or can have, Equity in the sustainable advantage medium term 55. Establish best-
Slide 37: Summary and outlook
Summary y and outlook Poor performance in 2015 but we have taken action We have a good and valuable franchise with outstanding client relationships We remain confident that the strategy is right for the Group The strategy was designed for just this sort of external environment We will cont
Slide 38: Q&A
Q&A S andard @&& Chartered Ss
Slide 39: Appendix
Appendix S andard @&& Chartered Ss
Slide 40: Group performance summary
Group ppperformance summary y YoY QoQ Better/ Better/ Better/ US$m FY 14 FY 15 (Worse)% Q4 14 Q3 15 Q4 15 (Worse)% (Worse)% Client income 16,623 14,613 (12) 4,075 3,513 3,194 (22) (9) Other income 1,613 826 (49) 372 169 68 (82) (60) Income 18 236 18,236 15 439 15,439 (15) 4 448 4,448 3 682 3,682 3 2
Slide 41: Corporate and Institutional Clients – Reshaping for higher returns
Corp porate and Institutional Clients – Reshap ping g for hig gher returns Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % Income 10,431 8,696 (17) • Embarking on significant costs and RWA restructuring Expenses (5,191) (5,198) (0) • Multi-year investment program on track Workin
Slide 42: Commercial Clients – Overhauling to build on differentiated strengths
Commercial Clients – Overhauling to build on differentiated streng gths Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % Income 1,183 826 (30) • Significant multi-year change programme underway Expenses (739) (711) 4 • De-risking and remediation now largely complete Working profi
Slide 43: Private Banking Clients – Investing to leverage distinctive platform
Private Banking g Clients – Investing g to leverag ge distinctive platform Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % Income 612 557 (9) • Add d ~1,000 Added 1 000 new clilients Expenses (447) (361) 19 • Investment penetration to ~57% of AUM (2014: 51%) Working profit 165 1
Slide 44: Retail Clients – Accelerating the transformation
Retail Clients – Accelerating g the transformation Better/ Progress on strategic priorities US$m FY 14 FY 151 (Worse) % Income 6,010 5,360 (11) • Income broadl dly flflat ex. divestments, di d i king and deriski d FX Expenses (4,002) (3,768) 6 • Grew share of Priority income to 35% (2014: 27%) Worki
Slide 45: Continue to reduce our commodities exposures actively
Continue to reduce our Commodities exp posures actively y Commodity portfolio overview Commodities1 (US$bn) Producers (49% of exposure)1 (FY15) ( ) (36%) 30.1 28.1 24.3 21.4 • Actively managing, net exposure 19.2 down 28% YoY 61.8 (36%) 60.7 H2 13 H1 14 H2 14 H1 15 H2 15 • Represents 8% of CIB and C
Slide 46: Actively managing our China exposures
Activelyy manag ging g our China exp posures Portfolio Overview1 (FY15) China CIB / CB exposure1 (US$bn) • Tottall exposure US$50bn, US$50b down 30% YoY Y Y (36%) • 84% <1 year in tenor mainly trade or interbank (ALM) 84.6 78.5 71.0 66.4 • Continuing actions reduce concentrations 50.0 Bank exposure
Slide 47: Continuing to reduce selected more vulnerable exposures in India
Continuing g to reduce selected more vulnerable exp posures in India Credit problems remain despite GDP growth India loan impairment2 (US$m) Hi h llevell off weak • High k credits dit th throughout h tb banking ki systtem • Corporate stress remains elevated 483 472 • Credit growth lowest in last two