Slide 1: Leading the way in Asia, Africa and the Middle East
Leading the way in Asia, Asia Africa and the Middle East Richard Goulding g Group Chief Risk Officer
Slide 2: Today’s objectives
Today’s objectives Demonstrate the very strong foundations of Risk Management of Standard Chartered 9 Controlling risk to remain within risk appetite 9 Working with the front line to optimise the revenue/ impairment equation Show the importance of our diversification, diversification short tenor
Slide 3: Risk management – active and thoughtful
Risk management – active and thoughtful Built on 5 strong g foundations Diversification Tenor Collateralisation Discipline Client driven market risk
Slide 4: Strong foundations: Wholesale Banking diversification
Strong foundations Wholesale Banking diversification Loans and advances by geography Corporate exposures Others Americas, UK 7% & Europe Hong Kong Technology 3% Energy 15% Automobiles 20% 15% 3% Utilities 4% Africa 7% Telecom 4% Singapore Other capital goods 17% 4% Metals and mining Other materials
Slide 5: Strong foundations: Wholesale Banking industry diversification
Strong foundations Wholesale Banking industry diversification Energy Metals and mining Gold and Diamonds Other* precious metal 2% Coal mining 7% loans 5% 7% Oil rig Copper and operattors Trade in fuel ziinc Iron and steel 6% and lubricants 11% 36% 33% Petroleum refineries Non-ferrous 19% metals 13%
Slide 6: Strong foundations: Wholesale Banking industry diversification
Strong foundations Wholesale Banking industry diversification Real estate Transportation Industrial and Hotels Road Rail Logistics 2% Others 2% 1% 4% 6% Others Mixed use 11% 28% Sea 48% 8% Retail and Shopping Mall 17% Air Office 43% Residential 20% 18% 8% of net nominal 7% of net nominal Sprea
Slide 7: Strong foundations: Wholesale Banking short tenor
Strong foundations Wholesale Banking short tenor Wholesale Banking Wholesale Banking Portfolio tenor client assets portfolio tenor p di t ib ti distribution distribution distribution 1% S Sovereign i 87% % 13% 30% >1 year Financial 28% 89% 11% institution ≤1 year 72% 69% Corporates 64% 36% ≤ 1 year
Slide 8: Strong foundations: Wholesale Banking risk mitigation
Strong foundations Wholesale Banking risk mitigation Collateral and guarantees against loans Collateral current market value (CMV) and forced sale value (FSV) – US$bn Higher g collateral for longer g term and non Property investment grade loans Asset Based Securities Diverse collateral mix Cash
Slide 9: Strong foundations: Consumer Banking asset mix
Strong foundations Consumer Banking asset mix Loans and advances by geography Loans and advances to customers A Americas, i UK & E Europe Africa 4% MESA 1% 5% India Hong Kong 19% 19% 4% 26% 17% 16% 9% 9% 9% 57% Other APR 7% collateralised 20% 16% 8% 20% Korea Singapore 7% 19% 21% Note: Total loans a
Slide 10: Strong foundations: Market risk
Strong foundations Market risk Daily trading income / average VaR (%) 136 126 111 104 96 81 85 63 39 46 34 SCB Bank A Bank B Bank C Bank D Bank E Bank F Bank G Bank H Bank I Bank J Number of loss 1 6 N/A N/A 0 7 6 N/A N/A 2 13 days in H1 13 2011 H1 2012 2012 H1 2013 VaR trend (US$m) Average VaR / CT
Slide 11: Stress testing
Stress testing Events Timeline Stress tests Portfolio reviews Timeline China reduced 2012 GDP 2012 Base metals price slump I di India Chi China growth forecast Mar Refinance risk Commercial real estate Apr Sharp US$ appreciation Mono-product clients China deep dive China’s Industrial p production g
Slide 12: Large corporate underwriting
Large corporate underwriting Careful selection of clients – resilience under stress Robust assessment of client business plans and industry risks Facilities are diligently structured Credit decisions on full underwrite, not just hold levels Ongoing Senior Risk Coverage
Slide 13: Top corporate exposures
Top 20 corporate exposures 2009 2010 2011 2012 H1 13 Top 20 corporates net nominal Top 20 corporates as % of WB net nominal Top 20 corporates net nominal as % of GCR* The top 20 relationships are highly diversified On average each exposure is spread across 7 markets and 5 industries Remain bro
Slide 14: India
India Issues 2G Licensing scandal (2011) Onshore: Off h Offshore: Political Stasis (2012) 89% of Over 90% Severe economic downturn exposures are is US$ (2013) below 1 year denominated tenor Actions India Working Group formed taken Overall portfolio: Closely managed top Indian corporate exp
Slide 15: China
China Issues Reduced growth Repositioning of economy Actions Cut limits and exposures to taken Solar materials / equipment producers by 66% since April 2012 Further shortened tenor of ALM placements to Chinese banks – 93% of the book <1 year and – 66% of the book <3 months vs. 36% as at Augu
Slide 16: Commodities
Commodities Issues Falling commodity prices Increased volatility Actions Reduced exposures posu to taken since commodity traders by 2012 US$900m Exited 100 clients with aggregate exposure of US$800m Improved tenor profile with 92% < 1 year Producer 20% to 50% price reduction - commodity
Slide 17: Korea retail unsecured
Korea retail unsecured Issues PDRS* applications started rising in Q4 2011 and have continued to rise Actions Jan 2012 – Increased bureau taken sub-prime sub prime scorecard cutoff Sep 2012 – Tightened unsecured debt income ratio and scorecard cutoff Mar 2013 – F Further th tightened ti ht d
Slide 18: Wholesale Banking impairment experience
Wholesale Banking impairment experience 202bp Pre-IFRS IFRS Average loans & advances to customers 150bp 100bp Gross LI / Average loans and advances 92bp 43bp 32bp 38bp LI / Average loans 31bp 30bp and advances 34bp 26bp 27bp 28bp (25)bp 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 H1
Slide 19: Consumer Banking impairment experience
Consumer Banking impairment experience 300 140 266 120 ments / Average loans and advvances (bps) 250 ans and advancces (US$bn) 100 200 212 156 80 150 60 106 Customer loa 100 120 87 85 80 71 40 59 60 53 50 70 55 20 53 Impairm 42 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 H1 13 Pe
Slide 20: Outlook: Wholesale Banking
Outlook: Wholesale Banking Early alerts trend Early Alerts (EA) is not a leading indicator of loss, but is an indicator of increased account scrutiny Mar 08 Dec 08 Dec 09 Jul 08 Sep 08 Mar 09 Jul 09 Sep 09 Mar 10 Dec 10 Dec 12 Jul 10 Sep 10 Mar 11 Jul 11 Sep 11 Mar 12 Jul 12 Sep 12 Mar 13 Jul 13 S
Slide 21: Outlook: Consumer Banking
Outlook: Consumer Banking 30+ and 90+ days past due trends (US$bn) 1.6 1.89% 2.0% 1.8% 1.4 1.6% 1.2 1.37% 1.4% 10 1.0 1.10% 1.11% 1.2% 1.06% 1.06% 1.00% 0.8 1.0% 0.80% 0 8% 0.8% 0.6 0.60% 0.6% 0.46% 0.44% 0.44% 0.4 0.40% 0.39% 0.4% 0.2 0.2% 0.0 0.0% 2008 2009 2010 2011 2012 H1 13 Sep-13 30dpd (LHS)
Slide 22: Key messages
Key messages Our risk management is built on five strong foundations 9 High portfolio diversification 9 Short tenor t 9 High degree of collateralisation of sub-investment grade exposures 9 A deeply embedded set of risk management disciplines 9 Utilisation of Market Risk onlyyin su pport pp of clie