Full Year - Press Release: Results (25 February 2021, PDF)

Standard Chartered PLC 4Q'20 and FY'20 Results

25 February 2021

Registered in England under company No. 966425 Registered Office: 1 Basinghall Avenue, London, EC2V 5DD, UK

Table of contents

Performance highlights 3

Statement of results 4

Group Chairman's statement 5

Group Chief Executive's review 8

Group Chief Financial Officer's review 10

Supplementary financial information 20

Underlying versus statutory results reconciliations 46

Group Chief Risk Officer's review 52

Risk review 59

Capital review 64

Financial statements 69

Other supplementary financial information 74

Shareholder information 78

Forward-looking statements

This document may contain 'forward-looking statements' that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'may', 'could', 'will', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek', 'continue' or other words of similar meaning.

By their very nature, forward-looking statements are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. The factors that could cause actual results to differ materially from those described in the forward-looking statements include (but are not limited to) changes in global, political, economic, business, competitive, market and regulatory forces or conditions, future exchange and interest rates, changes in tax rates, future business combinations or dispositions and other factors specific to the Group. Any forward-looking statement contained in this document is based on past or current trends and/or activities of the Group and should not be taken as a representation that such trends or activities will continue in the future.

No statement in this document is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will necessarily match or exceed the historical or published earnings of the Group. Each forward-looking statement speaks only as of the date of the particular statement. Except as required by any applicable laws or regulations, the Group expressly disclaims any obligation to revise or update any forward-looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Please refer to the Group's 2019 Annual Report and the 2020 Half-Year Report for a discussion of certain risks and factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.

Unless another currency is specified, the word 'dollar' or symbol '$' in this document means US dollar and the word 'cent' or symbol 'c' means one-hundredth of one US dollar.

The information within this report is unaudited. The information in this results announcement, which was approved by the Board of Directors on 25 February 2021, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The financial statements for the year ended 31 December 2019 were filed with the Registrar of Companies, and the audit report was unqualified and contained no statements in respect of Sections 498(2) and 498(3) of the UK Companies Act 2006. The financial statements for the year ended 31 December 2020 will be filed with the Registrar of Companies in due course. In accordance with the Listing Rules of the UK Listing Authority, these results have been agreed with the Company's auditors, Ernst & Young LLP, and the Directors have not been made aware of any likely modification to the auditor's report to be included in the Group's Annual Report for the year ended 31 December 2020. The results have been prepared on a basis consistent with the accounting policies set out in the Group's Annual Report for the year ended 31 December 2020.

Unless the context requires, within this document, 'China' refers to the People's Republic of China and, for the purposes of this document only, excludes Hong Kong Special Administrative Region (Hong Kong), Macau Special Administrative Region (Macau) and Taiwan. 'Korea' or 'South Korea' refers to the Republic of Korea. Greater China & North Asia (GCNA) includes Mainland China, Hong Kong, Japan, Korea, Macau and Taiwan; ASEAN & South Asia (ASA) includes Australia, Bangladesh, Brunei, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Philippines, Singapore, Sri Lanka, Thailand and Vietnam; Africa & Middle East (AME) includes Angola, Bahrain, Botswana, Cameroon, Cote d'Ivoire, Egypt, The Gambia, Ghana, Iraq, Jordan, Kenya, Lebanon, Mauritius, Nigeria, Oman, Pakistan, Qatar, Saudi Arabia, Sierra Leone, South Africa, Tanzania, the United Arab Emirates (UAE), Uganda, Zambia and Zimbabwe; and Europe & Americas (EA) includes Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Ireland, Jersey, Poland, Sweden, Turkey, the UK and the US. Within the tables in this report, blank spaces indicate that the number is not disclosed, dashes indicate that the number is zero and nm stands for not meaningful.

Standard Chartered PLC is incorporated in England and Wales with limited liability. Standard Chartered PLC is headquartered in London. The Group's head office provides guidance on governance and regulatory standards. Standard Chartered PLC stock codes are: HKSE 02888 and LSE STAN.LN.

Standard Chartered PLC - full-year and fourth quarter 2020 results

All figures are presented on an underlying basis and comparisons are made to 2019 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items excluded from underlying results is set out on pages 46-51.

Bill Winters, Group Chief Executive, said:

"We are weathering the health crisis and geopolitical tensions very well, our strategic transformation continues to progress and our outlook is bright. We remain strong and profitable, although returns in 2020 were clearly impacted by higher provisions, reduced economic activity and low interest rates, in each case the result of COVID-19. I am proud of the way our colleagues around the world have responded to the challenges of the pandemic by supporting each other, our communities and our clients. Looking ahead, our unique exposure to the most dynamic markets in the world puts us in a great position to benefit from the clear signs of recovery there."

Refreshed strategic priorities support our commitment to reaching 10% RoTE in the medium term

We have refreshed our strategic priorities to reflect the evolving macroeconomic outlook. We will continue to focus on our differentiated and high returning Network corporate and Affluent personal businesses and through our recently augmented digital capabilities we can now selectively extend our reach into the Mass Retail segment. We will also lead with a differentiated Sustainability offering because we know we can make a difference in the world where it matters most, and do so profitably.

The progress we were making up to the onset of the COVID-19 pandemic in every key financial and strategic metric gives us confidence that we can achieve our ambition to deliver a double-digit RoTE. By 2023 we expect to deliver at least 7% RoTE, higher if interest rates normalise earlier than anticipated, through strong operating leverage and disciplined capital management.

Selected information concerning financial performance (FY'20 unless otherwise stated)

• • Income down 3% to $14.8bn, down 2% at constant currency (ccy)

  - Net interest margin down 31bps to a FY'20 average of 1.31%; 1bp higher QoQ in 4Q'20 at 1.24%

• • Expenses (excluding the UK bank levy) reduced 2% to $9.8bn; down 1% ccy - Preparing for anticipated economic recovery: investment P&L charge increased $100m QoQ in 4Q'20

• • Credit impairment of $2.3bn up $1.4bn YoY; $374m in 4Q'20 up slightly QoQ but flat YoY

  • - $827m stage 1 and 2 charge, four-fifths booked in 1H'20; 4Q'20 charge of $50m includes $41m overlay release

  • - Stage 3 up $823m YoY, 1/3 from unconnected fraud-related losses in 1Q'20; no significant new exposures in 4Q'20

  • - High risk assets reduced for the second consecutive quarter in 4Q'20; down $2.7bn (14%) in 2H'20

• • Return on tangible equity down 340bps to 3.0% due to the impact of COVID-19

  • - Pre-provision operating profit down 4% ccy: diversified income streams and cost control largely offset impact of lower interest rates

  • - Underlying profit before tax down 40% to $2.5bn driven by COVID-related elevated impairments and lower interest rates

  • - Statutory profit before tax down 57% to $1.6bn, includes $489m goodwill impairment in India, UAE and Indonesia

• • Tax charge of $862m: underlying effective tax rate of 38%, up 8%pts with lower profits increasing impact of non-deductible items - Statutory effective tax rate of 53% elevated by non-deductible items including goodwill impairment

• • The Group's balance sheet remains strong, liquid and well diversified - Asset-to-deposit ratio down from 64.2% to 61.1%; liquidity coverage ratio broadly stable YoY despite 1H'20 disruption - Customer loans and advances up 5%; customer accounts up 8% with a higher proportion of CASA and OPAC balances

• • Risk-weighted assets of $269bn up $2.2bn since 30.09.20 and up $4.7bn since 31.12.19 - $15bn credit migration inflation in the year partly offset by $9bn Permata stake disposal benefit

• • The Group remains strongly capitalised and highly liquid; returning the maximum capital currently allowed by the Group's regulator

  • - Common equity tier 1 (CET1) ratio 14.4% above the top of the 13-14% target range (3Q'20: 14.4%)

  • - CET1 ratio includes accrual for proposed final 2020 ordinary dividend of $284m or 9c per share

  • - $254m share buy-back starting imminently will reduce the CET1 ratio at 31.03.21 by ~10bps

• • Earnings per share reduced 52% to 36.1c

Outlook

Improving prospects for COVID-19 vaccines should enable the global economy to transition back to growth through 2021, with pre-pandemic growth rates re-emerging in most of our markets from 2022. We believe that our decision to continue investing in the transformation of our business throughout the crisis will enable us to disproportionately benefit from that recovery over time, not least because it will most likely be led by large markets in Asia where we generate two-thirds of our income.

Overall income in 2021 is expected to be similar to that achieved in 2020 at constant currency given the full-year impact of the global interest rate cuts that occurred in 1H'20, which will likely cause 1H'21 income to be lower than last year. The FY'21 net interest margin should stabilise at marginally below the 4Q'20 level of 1.24%. Our performance in the opening weeks of this year gives us the confidence that we are on the right track with strong performances in our less interest rate-sensitive Financial Markets and Wealth Management businesses. We expect income to return to 5-7% growth per annum from 2022.

We expect pressure on credit impairments to reduce this year compared with 2020. Expenses are likely to increase slightly in FY'21 as we continue to invest in our digital capabilities but should remain below $10 billion at constant currency and excluding the UK bank levy, supported in part by restructuring actions in 4Q'20 and through FY'21.

We will continue to manage our balance sheet prudently, particularly throughout the remainder of the pandemic. Our intent is to operate within our 13-14% target CET1 range and we will seek approval to return to shareholders capital that cannot be deployed profitably within the business through a mixture of dividends and share buy-backs.

Statement of Results

Standard Chartered PLC - Statement of Results

2020	2019	Change1
$million	$million	%
Underlying performance
Operating income	14,765	15,271	(3)
Operating expenses (including UK bank levy)	(10,142)	(10,409)	3
Credit impairment	(2,294)	(906)	(153)
Other impairment	15	(38)	139
Profit from associates and joint ventures	164	254	(35)
Profit before taxation	2,508	4,172	(40)
Profit attributable to ordinary shareholders²	1,141	2,466	(54)
Return on ordinary shareholders' tangible equity (%)	3.0	6.4	(340)bps
Cost to income ratio (excluding UK bank levy) (%)	66.4	65.9	50bps
Statutory performance
Operating income	14,754	15,417	(4)
Operating expenses	(10,380)	(10,933)	5
Credit impairment	(2,325)	(908)	(156)
Goodwill impairment	(489)	(27)	nm3
Other impairment	(98)	(136)	28
Profit from associates and joint ventures	151	300	(50)
Profit before taxation	1,613	3,713	(57)
Taxation	(862)	(1,373)	37
Profit for the year	751	2,340	(68)
Profit attributable to parent company shareholders	724	2,303	(69)
Profit attributable to ordinary shareholders2	329	1,855	(82)
Return on ordinary shareholders' tangible equity (%)	0.9	4.8	(390)bps
Cost to income ratio (%)	70.4	70.9	(50)bps
Balance sheet and capital
Total assets	789,050	720,398	10
Total equity	50,729	50,661	-
Average tangible equity attributable to ordinary shareholders2	38,590	38,574	-
Loans and advances to customers	281,699	268,523	5
Customer accounts	439,339	405,357	8
Risk weighted assets	268,834	264,090	2
Total capital	57,048	55,965	2
Total capital (%)	21.2	21.2	0bps
Common Equity Tier 1	38,779	36,513	6
Common Equity Tier 1 ratio (%)	14.4	13.8	60bps
Net Interest Margin (%) (adjusted)	1.31	1.62	(31)bps
Advances-to-deposits ratio (%)4	61.1	64.2	(3.1)
Liquidity coverage ratio (%)	143.0	144.0	(1)
UK leverage ratio (%)	5.2	5.2	(0)bps
Information per ordinary share	Cents	Cents	Cents1
Earnings per share - underlying5	36.1	75.7	(39.6)
10.4	57.0	(46.6)
Net asset value per share6	1,409	1,358	51
Tangible net asset value per share6	1,249	1,192	57
Number of ordinary shares at period end (millions)	3,150	3,191	(1)

- statutory5

1 Variance is better/(worse) other than assets, liabilities and risk-weighted assets. Change is percentage points difference between two points rather than percentage change for total capital (%), common equity tier 1 ratio (%), net interest margin (%), advances-to-deposits ratio (%), liquidity coverage ratio (%), UK leverage ratio (%). Change is cents difference between two points rather than percentage change for earnings per share, net asset value per share and tangible net asset value per share

• 2 Profit attributable to ordinary shareholders is after the deduction of dividends payable to the holders of non-cumulative redeemable preference shares and Additional Tier 1 securities classified as equity

• 3 Not meaningful

• 4 When calculating this ratio, total loans and advances to customers excludes reverse repurchase agreements and other similar secured lending, excludes approved balances held with central banks, confirmed as repayable at the point of stress and includes loans and advances to customers held at fair value through profit and loss. Total customer accounts include customer accounts held at fair value through profit or loss

• 5 Represents the underlying or statutory earnings divided by the basic weighted average number of shares

• 6 Calculated on period end net asset value, tangible net asset value and number of shares