Q1'24
results presentation
2 May 2024
Opening remarks
Good start to the year
Engines of Non NII performing strongly with Wealth Solutions up 23% and Markets up 17%
Momentum in Banking with income up 17%
Maintaining 2024 guidance
Income
- Income growth of 20% YoY at ccy; up 14% excluding two notable items of $234m in Treasury and Other products
- Non NII up 37% YoY at ccy; up 25% excluding two notable items
- NII up 5% YoY at ccy; Underlying L&A to customers up 2% QoQ
Expenses
- Actions taken to simplify organisational structure
- Advancing Fit for Growth programme, with >200 projects identified
- Positive income-to-cost jaws
- Overview Income
Expenses Risk Balance sheet Capital Segments Conclusion
Risk
- Credit quality remains resilient; high risk assets down; early alert portfolio improving
- Net nil credit impairment in CIB
RWA and capital
- Robust capital position with CET1 ratio of 13.6%
- Higher Market risk RWA deployed to help clients capture opportunities
- Around two-thirds of $1bn share buyback announced in February completed to date
2
Strong performance in Q1'24
- Income up 20% YoY at ccy
- NII up from higher rates and one month impact from the full short-term hedge roll-off
- Non NII growth from higher Wealth Solutions, Markets and Banking
- Up 14%, excluding two notable items of $234m in Treasury and Other products1
- Expenses up 6% YoY at ccy due to inflation and business growth
- Credit impairment charge of $176m; WRB charge in line with recent quarters; CIB net nil
- Other impairment relates to write-off of software assets; no CET1 capital impact
- Other items include a provision for Korea ELS of $100m
- Underlying L&A to customers up $4bn or 2% QoQ
-
TNAV per share2 down 3 cents QoQ;
Q1'24 profit offset by share buyback and reserve movements
Q1'24 performance ($m)
Q1'23 | Q1'24 | YoY | ccy | |
Net interest income (NII) | 2,341 | 2,419 | 3% | 5% |
Non NII | 2,055 | 2,733 | 33% | 37% |
Operating income | 4,396 | 5,152 | 17% | 20% |
Operating expenses (ex UK bank levy) | (2,675) | (2,786) | (4%) | (6%) |
Pre-provision operating profit | 1,721 | 2,366 | 37% | 40% |
Credit impairment | (26) | (176) | n.m. | n.m. |
Other impairment | - | (60) | n.m. | n.m. |
Profit from associates | 11 | (1) | (109%) | (109%) |
Underlying profit before tax | 1,706 | 2,129 | 25% | 27% |
Restructuring, DVA, Goodwill & other impairment | 102 | (103) | n.m. | n.m. |
Other items | ||||
- | (112) | n.m. | n.m. | |
Reported profit before tax | 1,808 | 1,914 | 6% | 8% |
Key indicators
RoTE | Cost-to- | Income-to- | Underlying EPS | CET1 ratio | TNAV per share2 |
income ratio | cost jaws | ||||
15.2% | 54% | Positive 13% | 52.9 cents | 13.6% (31.3.24) | $13.90 (31.3.24) |
up 3%pts YoY | down 7%pts YoY | up 41% YoY | 14.1% (31.12.23) | $13.93 (31.12.23) | |
- Overview Income
Expenses Risk Balance sheet Capital Segments Conclusion
1. Refer to slide 21 for details
2. Refer to slide 22 for details | 3 |
Higher NII supported by hedge roll-off and mix improvements
Overview
• NII up 1% QoQ to $2.4bn |
− |
Net Interest Income (NII) components
+1%
One month benefit of the full short- | |
term hedge roll-off | |
− | Improved liability mix |
− | Partially offset by rates, margin and |
lower volumes |
NII ($m)
2,436
2,341
2,3882,3922,419
• Expect to achieve FY'24 NII guidance of |
$10-10.25bn |
− Reduced headwinds from higher for |
longer rate environment reflected in |
currency-weighted forward rates1… |
− … offset by lower volumes as rates |
remain higher for longer… |
− … and continued positive impact |
from short-term hedge roll-off |
Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 | ||||||||||||||||
NIM2 (%) | 1.63% | 1.71% | 1.63% | 1.70% | 1.76% | |||||||||||||||
AIEA ($bn) | 583 | 570 | 580 | (1%) | ||||||||||||||||
558 | 554 | |||||||||||||||||||
58 | ||||||||||||||||||||
68 | 77 | |||||||||||||||||||
67 | 63 | |||||||||||||||||||
Cash at central banks | 171 | 165 | 165 | |||||||||||||||||
157 | 160 | |||||||||||||||||||
Investment securities & others | 42 | 44 | 45 | 46 | 42 | |||||||||||||||
L&A to banks | 312 | 294 | 292 | 288 | 289 | |||||||||||||||
L&A to customers3 | ||||||||||||||||||||
Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 | ||||||||||||||||
NII Q4'23 vs Q1'24 ($m)
57 | ||||||||
42 | 2,419 | |||||||
2,392 | (52) | |||||||
(20) | ||||||||
- Income Expenses
Risk Balance sheet Capital Segments Conclusion
Q4'23 | Short-term | Mix & others | Rates & | Volumes | Q1'24 |
hedge | margin impact |
- Refer to slide 15 for details
- Adjusted net interest income divided by average interest-earning assets, annualised
- L&A to customers is on a gross basis and excludes fair value through profit and loss
4
Engines of Non NII performing strongly
Non NII components ($m)
Overview
▶ Income |
• Non NII up 33%, 37% YoY at ccy |
− Wealth Solutions up 24% at ccy with broad- |
based growth across products |
− Markets up 13% YoY at ccy from higher Macro |
Trading in rates and commodities |
− Banking in CIB up 48% YoY at ccy to $0.3bn, |
driven by higher origination and distribution |
volumes in Lending & Financial Solutions |
• Non NII up 25% YoY at ccy, excluding two notable |
items of $234m in Treasury and Other products1 |
− |
2,055
1,207
2,119
1,302
+33% / +37% ccy
2,015
1,632
1,114
2,733
234
1,534
Q1'24
YoY
+27%2
Expenses |
Risk Balance sheet Capital Segments Conclusion
Treasury: $158m from FX revaluation of Egypt |
branch USD positions |
− Other: $76m from Ghana hyperinflation |
950
848 | 817 | 901 | ||
682 | ||||
965
+14%
Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 |
Notable items | Net Trading & Others | Net Fees & Commissions |
- Refer to slide 21 for details
- Q1'24 Net Trading and Others YoY% excluding $234m of notable items in Treasury and Other products
5
Expenses higher from inflation and business growth
- Expenses up 6% YoY at ccy
- Inflation 3.5%1
- Business growth initiatives include Affluent RMs and CIB capabilities
Fit for Growth programme
- 10 weeks since launch; mobilised pan-bank project infrastructure
- Identified >200 projects, currently being scoped and put into execution
Simplification agenda
- Announced changes to management structure to reduce complexity
- Simplified the matrix with removal of regional management structure
Operating expenses2 trend ($m) | Overview | ||||
Income | |||||
▶ Expenses | |||||
+4% / +6% ccy | Risk | ||||
Balance sheet | |||||
2,826 | |||||
2,786 | Capital | ||||
2,770 | 2,754 | ||||
Segments | |||||
2,675 | Conclusion | ||||
Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 | |
Operating expenses2 Q1'23 vs Q1'24 ($m) | |||||
+4% / +6% ccy | |||||
79 | 2,786 | ||||
2,675 | 91 | ||||
(59) | |||||
Q1'23 | FX | Inflation1 | Business growth3 | Q1'24 |
1. Inflation is based upon yearly average CPI rates for our individual presence markets, based on SC Research applied to the cost base in our footprint
2. Excludes UK bank levy | 6 |
3. Business growth net of gross expense savings from 2022-2024 strategic action KPI
Credit quality remains resilient
Credit impairment ($m) / Loan-loss rate
Overview Income
• Q1'24 credit impairment of $176m, up $150m YoY |
− CIB net nil charge; China CRE charge of $10m offset |
by other releases |
− WRB charge in line with recent quarters; lower |
charge in Q1'23 due to net releases |
− Ventures charge of $28m; down $4m QoQ, with |
improved delinquency trend in Mox |
CIB
WRB Ventures + C&O
26
62
(8) (28)
Q1'23
294 | |||
20 | |||
146 | 115 | 62 | |
23 | 36 | ||
46 | |||
159 | 131 | ||
77 | |||
(105)
Q2'23 Q3'23 Q4'23
176
40
136
0
Q1'24
Expenses ▶ Risk Balance sheet Capital Segments Conclusion
Loan-loss rate | 7bps | 16bps | 37bps | 8bps | 23bps |
• High risk assets1 down ~$2bn QoQ |
− $1bn reduction in CG12 from reversal of existing |
sovereign exposure from reverse repo to investment |
securities |
− Early alerts decreased by $0.6bn from upgrades |
and repayments2 |
• China CRE exposures of $2.4bn, down $0.2bn QoQ |
− $1.5bn stage 3 assets, 90% cover ratio3 |
− $0.9bn performing book, of which 79% secured |
with average LTV <50% |
− Management overlay of $129m |
Credit quality ($bn)
Early Alerts3
Credit Grade 12
Net Stage 3
$(2.0)bn | |||
10.0 | 10.6 | ||
9.4 | |||
8.9 | |||
8.5 | |||
5.4 | 5.5 | ||
4.45.4
4.9
1.6 | 1.3 | 1.1 | 2.2 | 1.0 |
3.0 | 3.2 | 2.9 | 2.9 | 2.6 |
31.3.23 | 30.6.23 | 30.9.23 | 31.12.23 | 31.3.24 |
- High risk assets include exposures classified in Early Alerts Non-Purely Precautionary (NPP), Credit Grade 12 (CG12) and Net Stage 3
- Early Alerts NPP are on a net nominal basis
- Including collateral
7
Underlying growth in assets | |||||||
Loans and advances to customers1 ($bn) | Overview | ||||||
• Underlying L&A to customers up $4bn or 2% since | Income | ||||||
Expenses | |||||||
31.12.23 | Risk | ||||||
− Growth in CIB from increases in Trade & Working | +2% | ▶ Balance sheet | |||||
287 | Capital | ||||||
Capital, Markets and Banking | |||||||
4 | 283 | Segments | |||||
− WRB impacted by mortgage headwinds in Hong | (4) | 279 | Conclusion | ||||
(4) | |||||||
Kong and Korea | |||||||
31.12.23 | FX | Treasury & | Pro forma | Underlying | 31.3.24 | ||
Markets SBL |
Customer deposits2 ($bn)
- Underlying customer deposits down $6bn QoQ
− Growth in WRB | 469 | (1%) | ||||
465 | ||||||
− Offset by lower CIB CASA from month-end client | (4) | 459 | ||||
activity, substantially returned post quarter end | (6) | |||||
• CASA to TD migration broadly stable in CIB; | ||||||
slightly higher in WRB | ||||||
• Stable LCR of 146% as of 31.3.24 | ||||||
31.12.23 | FX | Pro forma | Underlying | 31.3.24 | ||
1. | L&A to customers is on a net basis and excludes fair value through profit and loss |
2. Customer deposits exclude fair value through profit and loss and repurchase agreements | 8 |
CET1 ratio remains robust post share buyback
- Q1'24 RWA up $8bn QoQ
- Market risk RWA up $4bn; RWA deployed to help clients capture opportunities in Markets
- Mechanically higher Operational risk RWA of $2bn
- Offset by $2bn of FX reflecting strengthening USD
- Market risk RWA expected to reduce in Q2'24
- Continue to expect low single-digit percentage growth in RWA for FY'24
- Pro forma CET1 ratio post full $1bn share buyback announced in February 2024 of 13.6%
- Around two-thirds completed to date
- CET1 ratio 13.6% as of 31.3.24
- Profit accretion in Q1'24 offset by higher RWA
- Accrual of half the foreseeable interim 2024 dividend of 4.5 cents in CET1 capital in Q1'243
Risk-weighted assets ($bn) | Overview | |||||||
Income | ||||||||
Expenses | ||||||||
Risk | ||||||||
+$8bn | Balance sheet | |||||||
1.9 | 1.5 | 0.2 | 252.1 | ▶ Capital | ||||
2.1 | Segments | |||||||
4.4 | (2.2) | Conclusion | ||||||
244.2 | ||||||||
31.12.23 | Market | Asset growth Operational | Others1 | Asset | FX | 31.3.24 | ||
risk | & mix | risk | quality | |||||
CET1 ratio (%) | ||||||||
(5)bps | ||||||||
0.6 | 0.0 | |||||||
14.1 | (0.1) | |||||||
13.6 | 13.6 | |||||||
(0.4) | (0.6) | |||||||
31.12.23 | Buyback | Pro forma | PAT | FVOCI, FX | AT1/Div3 | RWA | 31.3.24 | |
& Others2 |
1. Others include derivatives, model and methodology changes in Credit risk RWA and Treasury credit insurance
2. FVOCI, FX & Others include FVOCI of 4bps, intangibles of 2bps and 5bps in Others, offset by FX of (7)bps | 9 |
3. AT1/Dividend includes foreseeable dividend accrual in respect of the interim 2024 ordinary share dividend. This is calculated formulaically at one-third of the ordinary dividend paid in 2023 or 9 cents a share with half of this amount accrued in Q1'24
CIB: Momentum in high-returning businesses
- Income up 10% YoY at ccy
− Markets up 17%
- Flow up 5% from higher rates, foreign exchange and commodities volumes
- Episodic up 30% partially driven by Market risk RWA deployed to help clients capture opportunities
- Banking up 17% driven by higher origination and distribution volumes in Lending & Financial Solutions
- Transaction Services up 4% driven by continued rates benefit in Payments & Liquidity
- Net nil credit impairment
Profit & Loss items ($m)
Q1'23 | Q1'24 | YoY | ccy | |
Transaction Services | 1,561 | 1,603 | 3% | 4% |
Markets | 922 | 1,041 | 13% | 17% |
Banking | ||||
411 | 472 | 15% | 17% | |
Other | ||||
(2) | (1) | 50% | 50% | |
Operating income | 2,892 | 3,115 | 8% | 10% |
Operating expenses | (1,415) | (1,423) | (1%) | (3%) |
Pre-provision operating profit | 1,477 | 1,692 | 15% | 17% |
Credit impairment | 8 | - | (100%) | n.m. |
Other impairment | ||||
- | (53) | n.m. | n.m. |
Overview
Income
Expenses Risk Balance sheet Capital
- Segments Conclusion
Markets income - flow and episodic view
Underlying profit before tax | 1,485 | 1,639 | 10% | 13% |
Balance sheet items ($bn)
Episodic
Flow
922
292
630
877
288
590
716
152
565
534
13
520
1,041
379
662
Q1'24
YoY
+30%
+5%
31.12.23 | 31.3.24 | |
L&A to customers1 | 131 | 135 |
RWA | 142 | 151 |
Customer deposits2 | 268 | 253 |
Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 |
- L&A to customers is on a net basis and excludes fair value through profit and loss
- Customer deposits exclude fair value through profit and loss and repurchase agreements
10
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Standard Chartered plc published this content on 02 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 May 2024 11:52:18 UTC.