Standard Chartered Plc · LSE:STAN
Standard Chartered — Q3 2023 Earnings Presentation
39 slides from Standard Chartered's earnings presentation, Oct 26, 2023
Slide 1: 3Q’23 Results
3Q’23 Results 26th October 2023
Slide 2: Contents
CONFIDENTIAL Contents Bill Winters Group Chief Executive • Opening remarks 3 Andy Halford 4 Group Chief Financial Officer • Group performance Appendix Strategic actions progress; macroeconomic variables; interest rate assumptions; 20 China CRE; China and Hong Kong portfolio; sovereigns; Bohai; guida
Slide 3: Opening remarks
CONFIDENTIAL Opening remarks Strong progress towards our financial targets • Delivered a solid performance in 3Q’23 o Operating income of $4.4bn, up 7% YoY at ccy; underlying profit before tax of $1.3bn o Expenses remain well controlled, down 1% QoQ at ccy o 7.0% RoTE, down 2%pts YoY, driven by incr
Slide 4: 3Q’23: On-track to meet full-year targets
CONFIDENTIAL 3Q’23: On-track to meet full-year targets 3Q’23 performance ($bn) → Overview Income 3Q’22 3Q’23 YoY1 ccy1 • Operating income up 7% YoY at ccy Markets Expenses Net interest income 2.0 2.4 18% 20% o NII up 20%; normalised NIM 1.67% ex. 4bps one-off Risk Balance Sheet Other income 2.1 2.0
Slide 5: YTD’23: Income growth and positive jaws drives RoTE to 10.4%
CONFIDENTIAL YTD’23: Income growth and positive jaws drives RoTE to 10.4% YTD’23 performance ($bn) → Overview Income YTD’22 YTD’23 YoY1 ccy1 Markets • Operating income up 11%, 15% YoY at ccy Expenses Net interest income 5.7 7.2 25% 30% Risk Other income 6.3 6.2 (2%) 1% o NII up 30%; NIM up 30bps YoY
Slide 6: 3Q’23 NII up 20% YoY supported by higher volumes and margins
CONFIDENTIAL 3Q’23 NII up 20% YoY supported by higher volumes and margins Net Interest Margin (NIM) components Overview → Income Markets Net Interest Margin (NIM)1 % Expenses 1.67 Risk • Normalised 1.66 1.71 1.58 1.63 1.63 Balance Sheet • Reported 1.36 1.43 Capital Guidance 7,165 2,256 2,341 2,436 2
Slide 7: NIM down 4bps QoQ; expansion expected for 4Q’23 and FY’24
CONFIDENTIAL NIM down 4bps QoQ; expansion expected for 4Q’23 and FY’24 Overview 2Q’23 vs 3Q’23 (bps) • 3Q’23 normalised NIM 167bps, down 4bps QoQ → Income Markets 171 2 o 2bps from interest rates offset by higher deposit Expenses Risk (1) passthroughs (PTR) Balance Sheet (2) 167 (3) o (1)bps margin
Slide 8: Rates tailwind and strong WM offsetting lower FM and Treasury
CONFIDENTIAL Rates tailwind and strong WM offsetting lower FM and Treasury 3Q’23 vs 3Q’22 – Product view ($m, ccy1) Overview → Income +7% Markets 304 80 Expenses (6) Risk 446 (42) Balance Sheet (106) 4,429 (114) Capital 4,127 (260) Guidance Conclusion +61% +50% +18% (2)% (26)% (8)% (24)% n.m. 3Q’22
Slide 9: Financial Markets: Resilient performance despite lower volatility
CONFIDENTIAL Financial Markets: Resilient performance despite lower volatility Income trend ($m) Overview → Income (3)%/ 0% ccy (10)%/ (8)% ccy Markets 4,198 • YTD’23 income flat YoY at ccy; up 7% excluding $244m gain Expenses Risk 4,058 1,386 1,414 1,391 244 +34%1 28 1,253 on mark-to-market (MTM) l
Slide 10: Wealth Management: Strong growth and positive leading indicators
CONFIDENTIAL Wealth Management: Strong growth and positive leading indicators Overview → Income Income trend ($m) • 3Q’23 income up 18% YoY at ccy; highest quarterly income over the Markets Expenses +7% / +9% ccy last 6 quarters Risk +16% / +18% ccy Balance Sheet 1,532 526 o Strong growth in Bancass
Slide 11: Good performance in many key markets
CONFIDENTIAL Good performance in many key markets Select markets (YoY % ccy) Overview Income → Markets Expenses Hong Kong China Korea Risk Income growth Income growth Income growth Balance Sheet 3Q’23 YTD’23 3Q’23 YTD’23 3Q’23 YTD’23 Capital 25% 2% Guidance Income $1.1bn $3.2bn Income $0.3bn $0.9bn
Slide 12: China: Strong offshore growth, up 47%; onshore resilient
CONFIDENTIAL China: Strong offshore growth, up 47%; onshore resilient $bn, YoY% at ccy Key highlights Overview Income • Onshore income: 3Q’23 down 4% YoY; YTD’23 up 2%, at ccy→ Markets +YoY% +YoY% Expenses China onshore and +25% +14% o Strong WM up 31% YTD’23 supported by AUM growth Risk offshore in
Slide 13: Expenses higher from inflation and targeted investments
CONFIDENTIAL Expenses higher from inflation and targeted investments Operating expenses1 – 3Q’23 vs 3Q’22 ($m) Overview Income +8% Markets → Expenses 32 2,770 Risk 89 Balance Sheet 104 2,576 • 3Q'23 expenses up 8% YoY, at ccy Capital 51 Guidance (16) o Inflation up ~$0.1bn, at 4% Conclusion (67) o B
Slide 14: Impairment primarily China CRE; remaining Group portfolio resilient
CONFIDENTIAL Impairment primarily China CRE; remaining Group portfolio resilient Credit impairment ($m) / Loan-loss rate (bps) Overview Income Loan-loss rate1 18bps 20bps Markets Expenses $(30)m +$62m • Credit impairment $294m in 3Q’23, up $62m YoY → Risk 496 340 Balance Sheet China CRE 466 294 o Ch
Slide 15: Asset growth remains muted with focus on improving returns
CONFIDENTIAL Asset growth remains muted with focus on improving returns Overview Loans and advances to customers ($bn) • Underlying L&A up 1% / $2bn since 30.6.23 primarily trade Income Markets Expenses 290 o Reduction in mortgages due to continued macro and Risk +1% rates headwinds in Hong Kong and
Slide 16: Strong CET1 driven by significant further RWA optimisation actions
CONFIDENTIAL Strong CET1 driven by significant further RWA optimisation actions Overview Risk-weighted assets ($bn) Income • 3Q’23 RWA down 3% / $8bn since 30.6.23 to $242bn Markets Expenses (3)% o $(4)bn RWA reduction from optimisation and efficiency Risk 0.3 249.1 1.2 0.6 actions (o/w CCIB ~$2bn)
Slide 17: 2023 guidance
CONFIDENTIAL 2023 guidance • Income to increase in the 12-14% range, at ccy in 2023 Income Overview • Full year average NIM approaching 170bps Income Markets Expenses Risk Balance Sheet Expenses • Positive income-to-cost jaws of around 4%, excluding UK bank levy at ccy in 2023 Capital → Guidance Con
Slide 18: In conclusion
CONFIDENTIAL In conclusion Overview Strong progress towards our financial targets Income Markets Expenses • Delivered a solid performance in the quarter Risk Balance Sheet Capital Guidance • Continued strong progress on our five strategic actions → Conclusion • Positioned well with a robust balance
Slide 19: Appendix
CONFIDENTIAL Appendix • Strategic actions progress; macroeconomic variables; interest rate assumptions; China CRE; China and Hong Kong portfolio; sovereigns; Bohai; guidance details • Liquidity and balance sheet information • Notes, abbreviated terms and important notice
Slide 20: Strategic actions progress
CONFIDENTIAL Strategic actions progress Description 2024 Target YTD'23 Status • CCIB Income RoRWA: 160bps improvement from 4.7%7 in 2021 to 6.5% 6.5% 7.9% CCIB: • RWA reduction of $22bn (2022-2024) $22bn $21.9bn1 Drive improved returns • Hold RWA flat to $163bn $163bn $143bn • Financial Institutions
Slide 21: Macroeconomic variables for ECL calculations
CONFIDENTIAL Macroeconomic variables for ECL calculations 2Q’23 3Q’231 ~ Crude price China Hong Kong Korea Singapore India Brent, bbl GDP growth (YoY): 5.8% 5.4% 3.6% 4.3% 1.3% 1.3% 1.3% 0.8% 5.5% 6.1% $88.8 $83.9 2023 Forecast GDP growth (YoY): 5-year average base 5.1% 4.6% 3.0% 2
Slide 22: Interest rate assumptions
CONFIDENTIAL Interest rate assumptions USD SOFR O/N Avg. (bps) 3M HIBOR Avg. (bps) 536 539 524 523 526 500 505 497 502 489 479 521 522 476 465 449 497 502 428 475 476 467 462 382 428 432 423 408 391 381 FY Avg FY Avg bps bps as at 05.10.23 as at 05.10.23 FY’22 165 FY’22 212 FY’23 501 FY’23 459 FY’24
Slide 23: China Commercial Real Estate: ~1% of total L&A to customers
CONFIDENTIAL China Commercial Real Estate: ~1% of total L&A to customers Exposure by booking location as at 30.9.23 ($bn)1,2 2.7 • Remain cautious given continued weak consumer sentiment and uncertainty 0.2 CG 1-5 • Latest stimulus measures encouraging but buyer confidence remains subdued… CG 6-11 C
Slide 24: China portfolio resilient ex. CRE; Hong Kong property stable
CONFIDENTIAL China portfolio resilient ex. CRE; Hong Kong property stable China ultimate parent company exposure1 ($bn) China 3% Corporates • Growing new economy sectors (Clean Tech, EVs & advanced manufacturing) 3% 20% Banks • CCIB exposures mostly to industry leaders with strong financial resilien
Slide 25: Select sovereign markets: Exposures halved in less than two years
CONFIDENTIAL Select sovereign markets: Exposures halved in less than two years Net nominal1,2 ($bn) • Macro environment challenging for EM sovereigns with high oil prices, inflation, … 6.2 31.12.21 • … limited liquidity, recent conflicts in the Middle East and USD strength 31.12.22 • Pakistan, Ghana
Slide 26: Bohai: Strategic investment in the China domestic market
CONFIDENTIAL Bohai: Strategic investment in the China domestic market Overview ($bn) • Publicly listed on Hong Kong Stock Exchange 16.07.20 FY’21 FY’22 1H’23 3Q’23 • Bohai Carrying Value of $0.8bn, post impairment, >2x investment Market value1,2 1.1 0.7 0.4 0.4 cost of $0.4bn Carrying value pre-impa
Slide 27: Guidance details
CONFIDENTIAL Guidance details • Income to increase in the 12-14% range at ccy in 2023; 8-10% range at ccy in 2024 • Adverse currency translation impact estimated at $0.3bn in 2023 Income • Full year average NIM approaching 170bps for 2023; around 175bps for 2024 driven by client asset growth • 2023
Slide 28: Appendix
CONFIDENTIAL Appendix • Strategic actions progress; macroeconomic variables; interest rate assumptions; China CRE; China and Hong Kong portfolio; sovereigns; Bohai; guidance details • Liquidity and balance sheet information • Notes, abbreviated terms and important notice
Slide 29: Balance sheet is conservatively positioned
CONFIDENTIAL Balance sheet is conservatively positioned Total assets Total equity & liabilities $826bn $826bn 30.9.23 30.9.23 • Highly liquid and flexible balance sheet Derivatives & Derivatives & Other assets Other liabilities o 64% of total assets maturing in under 1 year 130 132 o High-quality li
Slide 30: Strong and diverse deposit base; franchise supports deposit quality
CONFIDENTIAL Strong and diverse deposit base; franchise supports deposit quality Customer deposits by market1 ($bn) Hong Kong USA 12% Singapore Taiwan 3% United Kingdom India • Well-diversified footprint and deposit base in 53 markets 31% 4% South Korea UAE 4% China Others o In Hong Kong & Singapore
Slide 31: Deposit passthroughs and migration within expectations
CONFIDENTIAL Deposit passthroughs and migration within expectations TB CASA% of CCIB deposits1 ($bn) Top 4 markets2 CASA% of CPBB deposits ($bn) FY’23 63% FY’23 60% 59% 59% 61% 60% 58% 56% 55-65% CASA % 55-65% CASA % 311 312 318 300 139 140 142 142 TD & 129 125 129 118 Others3 TD 52 56 60 62 CASA 18
Slide 32: High levels of liquid resources and stable funding
CONFIDENTIAL High levels of liquid resources and stable funding Liquidity metrics 164% • Strong liquidity position through turbulent times 156% LCR1 147% 130% 135% NSFR2 • Diversified and stable funding base maintained 133% ADR 57.4% • ADR provides capacity for future loan growth 53.6% 54.5% 31.12.2
Slide 33: Capital & MREL: Well-positioned for future growth and requirements
CONFIDENTIAL Capital & MREL: Well-positioned for future growth and requirements Capital metrics • CET1 capacity to support growth & shareholder distributions CET1 minimum 33.3% requirement1: 32.1% 32.1% o $8.3bn or ~340bps buffer to minimum CET1 requirement 10.5% PLC Senior 11.9% o CET1 minimum up 8
Slide 34: Appendix
CONFIDENTIAL Appendix • Strategic actions progress; macroeconomic variables; interest rate assumptions; China CRE; China and Hong Kong portfolio; sovereigns; Bohai; guidance details • Liquidity and balance sheet information • Notes, abbreviated terms and important notice
Slide 35: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition Page Explanatory note or definition 4 1. YoY variance is better/(worse) other than assets and liabilities which is increase/(decrease). 13 1. Excludes UK bank levy Ccy = c
Slide 36: Notes
CONFIDENTIAL Notes These notes refer to the metrics and defined terms on the following pages Page Explanatory note or definition Page Explanatory note or definition 23 1. Net Nominal basis (see selected technical and abbreviated terms page 37): based on where 29 1. Cash balance includes $21.2bn held
Slide 37: Selected technical and abbreviated terms
CONFIDENTIAL Selected technical and abbreviated terms Term Definition Term Definition ETR Effective Tax Rate ADR Advances-to-Deposits ratio EM Emerging Markets AIBL Average interest-bearing liabilities E&S Environmental and Social AIEA Average interest-earning assets FCY Foreign currency AUI Assets
Slide 38: Selected technical and abbreviated terms
CONFIDENTIAL Selected technical and abbreviated terms Term Definition Term Definition NPS Net Promoter Score WM The Group’s Wealth Management business NSFR Net Stable Funding Ratio Ventures SC Ventures + Mox + Trust NTB New to bank clients VIX Volatility Index NZBA Net-Zero Banking Alliance YoY Year
Slide 39: Important notice
CONFIDENTIAL Important notice Forward-looking statements 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 li