Standard Chartered Plc · LSE:STAN
Standard Chartered — H1 2016 Earnings Presentation
49 slides from Standard Chartered's earnings presentation, Aug 3, 2016
Slide 1: Half Year 2016 Roadshow Presentation
Half Year 2016 Roadshow Presentation 3 August 2016
Slide 2: Forward looking statements
Forward looking statements 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
Slide 3: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive
Slide 4: Reflections on my first year at the Bank
Reflections on my first year at the Bank • We have a valuable, differentiated franchise with strong client relationships • The strategy remains right for the Group • We have made good progress on strategic actions and there is a lot more to do • The economies have slowed during 2016 and the outlook
Slide 5: Andy Halford, Group Chief Financial Officer
Andy Halford Group Chief Financial Officer
Slide 6: Group performance summary
Group performance summary H1 16 vs H1 16 vs $m H1 15 H2 15 H1 16 H1 15 %1 H2 15 %1 Income 8,495 6,944 6,810 (20) (2) • Income slightly down on Operating expenses (4,589) (4,443) (3,988) 13 10 H2 15, now broadly stable Regulatory expenses2 (453) (553) (546) (21) 1 UK bank levy - (440) - nm nm • Stron
Slide 7: Quarterly income and balance sheet trends have broadly stabilised
Quarterly income and balance sheet trends have broadly stabilised Operating income ($m) 4,421 4,075 • Income has broadly stabilised in the first 3,682 3,262 3,465 3,345 half at around Q4 15 levels • Stopped sequential quarterly income Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 decline Customer loans and ad
Slide 8: Client segment financial performance
Client segment financial performance Underlying profit / (loss) before tax ($m) Corporate & Institutional Commercial Private Retail Banking Banking Banking Banking 784 615 431 239 98 (379) 20 (663) 1 51 304 (12) H1 15 H2 15 H1 16 H1 15 H2 15 H1 16 H1 15 H2 15 H1 16 H1 15 H2 15 H1 16 • Challenging co
Slide 9: Geographic financial performance
Geographic financial performance Underlying profit / (loss) before tax ($m) Greater China & ASEAN & Africa & Europe & North Asia South Asia Middle East Americas 1,126 169 377 359 342 147 722 112 (470) (171) 24 397 H1 15 H2 15 H1 16 H1 15 H2 15 H1 16 H1 15 H2 15 H1 16 H1 15 H2 15 H1 16 • Slower China
Slide 10: Central and other items
Central and other items Client segment central Geographic central & Drivers of results in Central and Other Items & other items other items • Variability in ALM income • Variability in Principal Finance income and impairment Treasury ALM Principal Finance • Changes in key interest rates, e.g. in Kor
Slide 11: On track to deliver >$1billion of efficiencies in 2016
On track to deliver >$1billion of efficiencies in 2016; underlying costs down 13% year-on-year (excluding regulatory costs) Annual cost efficiencies ($bn) Driving efficiencies and improving service • Created CIB specialist support teams to >1.0 Remain facilitate client onboarding and management comm
Slide 12: Market conditions remain challenging but no significant deterioration in credit quality
Market conditions remain challenging but no significant deterioration in the credit quality of the portfolio Group loan impairment ($m) • Retail Banking: Sequential quarterly 968 improvement in loan impairment 837 790 200 • CIB and Commercial: Impairment 2,356 1,652 1,519 remains elevated but at sig
Slide 13: The balance sheet is strong and well placed
The balance sheet is strong and well placed to weather the more difficult external environment and outlook Leverage ratio Cover ratio1 5.5% CET1 Total capital 53% 13.1% 19.5% (Target range 12-13%) Corporate2 Liquidity L&A to customers Minimum Advances to coverage ratio short tenor requirement for de
Slide 14: The Group remains strongly capitalised
The Group remains strongly capitalised H1 2016 – CET1 % +50bps 0.2% 0.1% (0.1%) 0.1% 0.2% 13.1% 12.6% FY 15 Profit after tax Dividends 1 Credit RWA Operational / Others HY 16 Mark RWA Market RW A H1 2016 – Risk-weighted Assets (RWA) ($bn) • CET 1 ratio slightly above (4) 12-13% target range 2 (1) (3
Slide 15: Summary – actions underway, but at an early stage
Summary – actions underway, but at an early stage • Making steady progress on strategic actions • Encouraging signs from actions taken, but returns still weak Income showing relative stability Costs tightly managed and launched first phase of investment plans Reduced portfolio sensitivity to e
Slide 16: Bill Winters, Group Chief Executive
Bill Winters Group Chief Executive
Slide 17: Making steady progress on strategic plan
Making steady progress on strategic plan 1 • Reduce / exit exposures to within the refreshed Group risk tolerance by 2017 • Businesses and assets comprising approximately one third of Group RWA to be restructured Secure the • Deliver our conduct and financial crime risk programmes foundations • Re-f
Slide 18: Making steady progress on strategic plan
Making steady progress on strategic plan 1 • Reduce / exit exposures to within the refreshed Group risk tolerance by 2017 • Businesses and assets comprising approximately one third of Group RWA to be restructured Secure the • Deliver our conduct and financial crime risk programmes foundations • Re-f
Slide 19: Businesses and assets comprising one third of Group RWA to be restructured
Businesses and assets comprising approximately one third of 1 Group RWA to be restructured Exposures outside Assertive actions taken risk tolerance ~$20bn with early progress Taking restructuring actions… • Progress on low returning RWAs offset by market conditions Low returning Optimised $15bn so f
Slide 20: Delivering our conduct and financial crime risk programmes
1 Delivering our conduct and financial crime risk programmes • Embedding a positive conduct framework FCRMP1 structure #knowtherules campaign Financial ccrime intelligence Anti briberry and corruption nd organisation Approach conduct as a competitive differentiator Risk based approach Highest
Slide 21: Corporate & Institutional Banking – Focusing on our clients
Corporate & Institutional Banking 2 – Focusing on our clients • Refined coverage structure so that the client is at the centre of everything we do Enhancing coverage • Identify and improve share of business with under-served clients model • Optimised $13bn of low returning client RWAs to date • Esta
Slide 22: Retail Banking – Building momentum; transformation on track
Retail Banking 2 – Building momentum; transformation on track • Increased Priority income to 38% of Retail income • Enhanced client value proposition in Priority Banking across key markets Growing affluent clients • Successfully leveraging strategic alliances e.g. Asia Miles in Hong Kong • Retail pr
Slide 23: Commercial Banking – Good progress on plan but still loss making
Commercial Banking 2 – Good progress on plan but still loss making • Built additional scale from Local Corporates transfer • Significant progress on de-risking and remediation Fix the foundations • Ongoing strengthening of operational and credit risk management • Embedding new organisational model t
Slide 24: Private Banking – Investing to capture future growth
Private Banking 3 – Investing to capture future growth • Income growth challenging in H1 16 due to difficult market conditions Grow in key markets • Focusing on net new money growth, particularly Greater China and targeted segments • Continuing to streamline geographic presence • Technology logy pro
Slide 25: Commencing multi-year investment programme
3 Commencing multi-year investment programme System investments Strategic investments • Standardised FX derivative platform • Retail workbench now in 9 markets • Improved project management and • Mobile banking in 8 African markets workflow tools • Moving to a single Wealth • Enhanced client onboard
Slide 26: Summary
Summary • We have a valuable, differentiated franchise with strong client relationships • Strategy remains right for the Group and we have made good initial progress • Economies have slowed during 2016 and the outlook is more uncertain • It is therefore likely to take us long longer to deliver the r
Slide 27: Fixed Income
Fixed Income
Slide 28: Surplus over future requirements
Surplus over future requirements Recent actions have further strengthened the Capital surplus vs. known 2019 requirement Group’s capital position…. 30% • CET1 of 13.1% and Total Capital of 19.5% • CET1 slightly above target range of 12-13% 25% ~1.9 • Current surplus to known 2019 requirements: 20%
Slide 29: Balance sheet diversity
Balance sheet diversity Balance Sheet Assets $661bn Customer Loans $266bn by region Hong Kong Loans to customers Korea 9% 20% 23% Investment securities China 10% Cash Singapore 40% 5% Loans to banks India 11% 11% Derivatives 11% UAE Other assets 4% UK 10% 4% 6% 16% 19% US Other Balance Sheet Liabili
Slide 30: Resilient funding structure
Resilient funding structure Composition of Deposits ($bn)¹ • Focus on growth of Time Deposits has extended the maturity profile 470 435 18 • LCR has been maintained above 100% 9 413 397 • Continuing low levels of encumbrance 24 39 • Comprehensive liquidity stress testing regime & large 213 portfolio
Slide 31: Funding profile
Funding profile1 Maturity profile Issuance activity 10.0 2014 2015 2016 AT1 2.0bn T2 2.0bn AT1 2.0bn 8.0 USD Senior 2.5bn Senior 3.0bn T2 1.25bn Senior 4.0bn (US $bn) Senior 2.0bn 6.0 3.6 EUR T2 0.5bn 4.0 GBP T2 0.9bn 1.3 3.0 2.0 3.9 2.1 Other T2 SGD 0.7bn JPY 150.0bn 0.7 1.7 1.2 0.8 0.0 2016 2017 2
Slide 32: LC loss absorbency
Example application of UK resolution waterfall • Internal LAC is designed to Once investments in OpCo recapitalise the OpCo, avoid “A” are written down or OpCo failure, maintaining OpCo losses follow converted to equity, losses are OpCo creditor critical economic functions taken to HoldCo hierarchy
Slide 33: MREL: Well positioned
MREL: Well positioned • BoE implementing TLAC through MREL ~25% 23.1% • MREL likely calibrated using RWA but set as a % of PLC Senior Combined $14.6bn balance sheet Buffer 3.7% • G-SII status requires MREL to be met by 2019 Non-equity • Hold Co (PLC) issuance strategy results in substantial capital
Slide 34: Standard Chartered Group: simplified legal structure
Standard Chartered Group: simplified legal structure Medium Term Senior Notes Standard Chartered PLC Tier-2 Benchmark Issuances BBB+/A1/A+ Legacy Tier-1 Securities and AT1 Securities (S&P/M/F) Equity Standard Chartered Holdings Limited Medium Term Senior Notes Standard Chartered Bank Structured Prod
Slide 35: Distribution considerations
Distribution considerations • A breach of the Combined Buffer¹ restricts discretionary distributions • Combined Buffer is phased-in from 2016 and will include any future Countercyclical Buffer (“CCyB”) • Discretionary distributions include dividends, variable compensation and AT1 coupons2 • HY16 PLC
Slide 36: Appendix
Appendix
Slide 37: Group quarterly performance summary
Group quarterly performance summary Q2 16 vs Q2 16 vs $m Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q1 16 % Q2 15 % Income 4,421 4,075 3,682 3,262 3,345 3,465 4 (15) Operating expenses (2,280) (2,310) (2,235) (2,207) (2,007) (1,981) 1 14 Regulatory expenses (222) (231) (237) (316) (243) (304) (
Slide 38: Corporate & Institutional Banking
Corporate & Institutional Banking – Reshaping for higher returns despite challenging conditions H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 3,943 3,238 3,147 (20) (3) • Asset momentum stabilising in Q2 2016 Expenses (2,272) (2,184) (2,090) 8 4 Working profit 1,671 1,054 1,
Slide 39: Commercial Banking
Commercial Banking – Overhauling to build on differentiated strengths H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 919 686 667 (27) (3) • Significant multi-year change programme underway Expenses (519) (552) (436) 16 21 Working profit 400 134 231 (42) 72 • De-risking now la
Slide 40: Private Banking
Private Banking – Investing to leverage distinctive platform H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 290 244 261 (10) 7 • Income impacted by challenging equity markets Expenses (195) (146) (209) (7) (43) • Significant progress on building platform Working profit 95 98
Slide 41: Retail Banking
Retail Banking – Accelerating the transformation H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 2,742 2,365 2,316 (16) (2) • Challenging external market impacted income Expenses (1,762) (1,748) (1,643) 7 6 • Priority share of income to 38% despite broadly flat Working profit
Slide 42: Greater China & North Asia (GCNA)
Greater China & North Asia (GCNA) – Impacted by China slowdown; progress in repositioning China and Korea H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 3,388 2,689 2,551 (25) (5) • Performance impacted by China slowdown Expenses (1,906) (1,857) (1,654) 13 11 • Early signs of
Slide 43: ASEAN & South Asia (ASA)
ASEAN & South Asia (ASA) – Decisive actions taken; challenging macroeconomic conditions continue H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 2,200 2,053 2,054 (7) 0 • Returned to underlying profit Expenses (1,287) (1,334) (1,189) 8 11 • Challenging external conditions impa
Slide 44: Africa & Middle East (AME)
Africa & Middle East (AME) – Resilient performance in Africa, turning around Middle East H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 1,553 1,305 1,420 (9) 9 • Returned to underlying profit after weak H2 15 Expenses (907) (883) (845) 7 4 • Resilient performance in Africa, w
Slide 45: Europe & Americas (EA)
Europe & Americas (EA) – Origination centre delivering the network to clients H1 16 v H1 16 v Key messages $m H1 15 H2 15 H1 16 H1 15% H2 15% Income 986 891 817 (17) (8) • EA generates one quarter of global CIB income Expenses (688) (699) (669) 3 4 • ~$560m of network income generated in this region
Slide 46: Continue to actively manage our Commodities exposures
Continue to actively manage our Commodities exposures Commodity portfolio overview Commodities1 ($bn) Emerging risks • Actively managing, net exposure • Oil and gas offshore support down 6% since H2 15 services portfolio • Represents 7% of CIB and CB net 60.7 (39%) • Certain more oil dependent expos
Slide 47: Actively managing our China exposures
Actively managing our China exposures Portfolio Overview China CIB / CB exposure1 ($bn) • Total exposure $56.2bn, up 12% since H2 15 (34%) 84.6 • 87% <1 year in tenor mainly trade or interbank (ALM) 71.0 66.4 56.2 50.0 • Continuing actions to reduce concentrations Bank exposure $30bn H1 14 H2 14 H1
Slide 48: Growing selectively in India
Growing selectively in India Credit problems remain despite GDP growth India CIB/CB exposure1 ($bn) • Corporate stress remains elevated (14%) • Low refinancing appetite from local banks 37.7 34.7 34.9 30.2 32.5 Portfolio overview • Total exposure $32.5bn, up since H2 15 H1 14 H2 14 H1 15 H2 15 H1 16
Slide 49: Continue to take decisive action on exposures beyond tightened risk tolerance
Continue to take decisive action on exposures beyond tightened risk tolerance H1 2016 FY 2015 Liquidation Ongoing Total Liquidation Ongoing Total $m portfolio business Group portfolio business Group Gross loans and advances 7,266 265,293 272,559 7,940 260,143 268,083 Net loans and advances 4,204 261