TIDMSTAN
RNS Number : 5162H
Standard Chartered PLC
01 August 2019
Standard Chartered PLC - Performance highlights
For the six months ended 30 June 2019
Standard Chartered PLC (the Group) today releases its results
for the six months ended 30 June 2019. All figures are presented on
an underlying basis and comparisons are made to the first half of
2018, unless otherwise stated. A reconciliation between statutory
and underlying results is set out on page 82 of the 2019 half year
report.
"We made good progress both financially and on our strategic
priorities in the first half, growing income 4% and improving
profits 13%, at constant currency. We have positioned ourselves to
develop and scale innovative new business models, as we support and
grow with our clients. We are investing now to create optionality
for the future, and I am excited by the opportunities we are
already generating."
Bill Winters, Group Chief Executive
Strategic execution and outlook
-- Primary performance measure return on tangible equity improved 88 basis points to 8.4%
-- Good progress on refreshed strategic priorities
o Income from corporate and institutional clients using the
Group's international network increased 9%
o Income from affluent individual clients grew 5%
o Productivity is improving, with income per full-time employee
up 4%
o Corporate entity restructuring to create capital and liquidity
hubs in Hong Kong and Singapore is on track
o Several innovative digital initiatives underway, including
preparations to launch Hong Kong virtual bank
-- Shares worth c.$740m bought and cancelled as at 26 July 2019
as part of $1bn buy-back programme
-- Trade tensions are affecting sentiment and monetary policy
normalisation is expected to reverse
-- Global growth projections are supported by solid
fundamentals, and are being driven by markets in our footprint
-- Remain confident the strategy will deliver a full-year return
on tangible equity greater than 10% in 2021
Financial performance
-- Underlying Profit before tax improved 11% to $2.6bn
-- Statutory profit before tax of $2.4bn is stated after
provisions for regulatory matters, restructuring and other items,
and increased 3%
-- Operating income of $7.7bn up 1% and up 4% on a constant currency basis
-- Positive income-to-cost jaws of 4% on both a reported and constant currency basis
o Operating expenses of $5.0bn down 3% and flat on a constant
currency basis
o Pre-provision operating profit up 8% and up 10% on a constant
currency basis
o Expect costs in H2 2019 to be slightly higher than in H1 2019
and full-year costs to grow below the rate of inflation
-- Credit impairment of $254m was 13% lower, and asset quality overall improved year-on-year
o Stage 3 credit impairment was 44% lower driven by Commercial
Banking and a $48m release in Private Banking
o Stage 1 & 2 credit impairment of $80m compared to a net
release of $17m in H1 2018
-- Taxation for the period of $918m includes a $179m charge in
relation to corporate entity restructuring
o Underlying effective tax rate of 28.6% compared to 26.5% in H1
2018
-- Earnings per share up 9% to 49.1 cents; statutory earnings
per share impacted by provisions for regulatory matters and higher
taxation
-- Interim dividend of 7 cents per share declared; a 17% increase
Balance sheet and capital
-- Average interest-earning assets and interesting-bearing
liabilities compared to the same period in 2018 were up 6% and 5%
respectively
o Growth in loans and advances to customers and trading book
assets were primarily within Corporate & Institutional
Banking
o Growth in liabilities was driven by higher customer account
balances offsetting the run-off of repurchase agreements
-- RWAs up 5% since 31 December 2018 and at a similar level to
30 June 2018; growing slightly below equivalent rates for
income
o 2/3 of the increase in H1 2019 related to underlying asset
growth and 1/3 related to market risk seasonality and IFRS 16
o Organic and inorganic optimisation initiatives support
expectation that income growth will exceed RWA growth over time
-- CET1 ratio of 13.5% is in the middle of the 13-14% target range
o In the first half higher RWAs were funded by underlying profit
attributable to ordinary shareholders
o CET1 ratio is stated after deducting 39bps for the full impact
of the $1bn share buy-back programme
o Regulatory provisions and tax in relation to corporate entity
restructuring reduced the ratio by 15bps
Standard Chartered PLC - Summary of results
For the six months ended 30 June 2019
6 months 6 months 6 months
ended ended ended
30.06.19 31.12.18 30.06.18
$million $million $million
----------------------------------------------------- ---------- ---------- ----------
Underlying performance
Operating income 7,696 7,319 7,649
Operating expenses (4,969) (5,347) (5,117)
Credit impairment (254) (447) (293)
Other impairment (21) (97) (51)
Profit from associates and joint ventures 157 73 168
Profit before taxation 2,609 1,501 2,356
Return on ordinary shareholders' tangible equity
(%) 8.4 2.7 7.5
Cost-to-income ratio (%) 64.6 73.1 66.9
----------------------------------------------------- ---------- ---------- ----------
Statutory performance
Operating income 7,830 7,162 7,627
Operating expenses (5,298) (6,462) (5,185)
Credit impairment (254) (439) (214)
Other impairment (44) (132) (50)
Profit from associates and joint ventures 180 73 168
Profit before taxation 2,414 202 2,346
Profit/(loss) attributable to parent company
shareholders 1,477 (506) 1,560
Profit/(loss) attributable to ordinary shareholders1 1,256 (725) 1,343
Return on ordinary shareholders' tangible equity
(%) 6.5 (3.6) 6.8
Net interest margin (%) 1.59 1.56 1.59
Cost-to-income ratio (%) 67.7 90.2 68.0
----------------------------------------------------- ---------- ---------- ----------
Balance sheet and capital
Total assets 712,504 688,762 694,874
Total equity 50,439 50,352 51,488
Loans and advances to customers 263,595 256,557 259,331
Customer accounts 401,597 391,013 382,107
Total capital 54,957 55,696 58,019
Advances-to-deposits ratio (%)2 63.7 63.1 64.9
Common Equity Tier 1 ratio (%) 13.5 14.2 14.2
Total capital (%) 20.3 21.6 21.3
UK leverage ratio (%) 5.3 5.6 5.8
----------------------------------------------------- ---------- ---------- ----------
Information per ordinary share Cents Cents Cents
--------------------------------------- ------- ------- -------
Earnings per share - underlying 49.1 16.5 44.9
- statutory 38.0 (21.9) 40.7
Ordinary dividend per share3 7.0 15.0 6.0
Net asset value per share 1,338.7 1,319.3 1,353.4
Tangible net asset value per share 1,181.6 1,166.4 1,202.8
--------------------------------------- ------- ------- -------
1 Profit/(loss) 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
2 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 includes customer accounts held
at fair value through profit or loss
3 Represents the recommended ordinary dividend per share
Standard Chartered PLC - Table of contents
Table of contents
---------------------------------------
Performance highlights 1
Summary of results 2
Group Chairman's statement 4
Group Chief Executive's review 5
Group Chief Financial Officer's review 7
Client segment reviews 14
Regional reviews 20
Group Chief Risk Officer's review 25
Supplementary financial information 32
Shareholder information 37
---------------------------------------
Standard Chartered PLC - Group Chairman's statement
Group Chairman's statement
Executing our refreshed strategic priorities
I am pleased to report good progress in the first half of the
year, both on our refreshed strategic priorities that we announced
in February, and in pursuit of our purpose to drive commerce and
prosperity through our unique diversity. As a result, our financial
performance continues to improve
We are investing to reinforce what already differentiates us, to
improve or develop new customer propositions particularly in
digital offerings, and to capture the opportunities in our markets,
which remain substantial.
Capital and dividend
Our capital position remains strong, with the primary ratio -
Common Equity Tier 1 or CET1 - in the middle of the 13-14 per cent
range which we refreshed in February. This is after the deduction
of 39 basis points for the $1 billion share buy-back programme
launched shortly after our first quarter results, which is
currently approximately three quarters complete. The resolution in
April of the legacy financial crime matters was the main regulatory
uncertainty facing the Group. We are now determined to manage our
capital more dynamically to deliver sustainably higher returns for
shareholders.
As I described in the 2018 Annual Report, starting this year we
are taking a formulaic approach to setting the interim dividend,
being one-third of the prior year's full-year dividend per share.
Last year's full-year dividend was 21 cents, so the interim
dividend for 2019 is proposed to be 7 cents per share, which is 1
cent or 17 per cent higher than at the interim stage in 2018.
Focus on governance and sustainability
As well as reviewing performance and the execution of our
strategy, in the first half of this year the Board has focused on
key issues such as cyber security, our digital and brand and
campaign strategies, our share buy-back programme, as well as
various deep dives into business segments and regions.
We have continued to develop our sustainability philosophy,
reflecting a shift of focus of our environmental and sustainability
efforts away from looking at how we can do no harm by considering
what we won't do, to how we can actively be a force for good,
integrating sustainability into our organisational decision-making.
This includes looking at how we will work with our clients,
suppliers, governments and non-governmental organisations in our
markets to address some of the key sustainability and environmental
challenges.
We also announced in June that David Tang has joined our Board.
David is based in Beijing and brings a deep understanding and
experience of emerging technologies in the context of some of our
key markets, most notably mainland China. I am delighted to welcome
David to our Board.
Geopolitical and macroeconomic backdrop
Global economic growth slowed in the late months of 2018 and in
the first half of this year. While economic uncertainty remains
high, with unresolved trade issues standing out, the relatively
higher dynamism of our markets continues to support the Board's
confidence in our ability to execute our strategic priorities.
Trade protectionism is bad for the global economy, and fears
concerning this matter continue to affect sentiment across global
markets and on the ground in many of our locations. However, we
stand to benefit over time as China continues to open and places
more emphasis on trade corridors radiating through Asia and
connecting it with our markets in Africa and the Middle East.
And in the meantime, clients find it even more valuable to have
a bank with our physical network and specialist expertise to help
them navigate the shifting sands of international trade. We look
forward to a sustainable resolution of trade uncertainties so that
clients can deal with the consequences more confidently.
Conclusion
We set out a plan in February to shift the bank from turnaround
to transformation and deliver a return on tangible equity above 10
per cent by 2021. I am pleased with the evidence of progress
halfway through the first year of that plan and can assure you of
our determination to continue to improve our performance and our
contribution to the clients and communities that we serve.
José Viñals
Group Chairman
1 August 2019
Standard Chartered PLC - Group Chief Executive's review
Group Chief Executive's review
Good progress; on track
We made good progress in the first half of this year, growing
income 4 per cent and underlying profit 13 per cent, at constant
currency. We are on track financially, despite turbulent
geopolitical conditions, and our focus on our clients and strategic
priorities is paying off
Operating highlights
Both of our corporate-focused client segments grew year-on-year,
supported by momentum in our Financial Markets business that
continues to perform well both absolutely and relative to many
peers. Our segments focused on individuals had more mixed fortunes:
weaker market sentiment that affected customer activity in our
Wealth Management business led to a small contraction in Retail
Banking compared with a particularly strong performance in the same
period last year. By contrast, investments made in our Private
Banking business over recent years led to a growth of over 10 per
cent.
We have made encouraging progress addressing performance in the
four lower-returning markets we referenced in our full-year
results. There is a long way to go but the profit we generated in
aggregate in those markets improved 14 per cent compared with the
first half of 2018, driven by actions intended to further improve
the quality and sustainability of our businesses there.
Leveraging our network advantage
Income generated from corporate and institutional clients using
our international network continues to grow nicely, increasing 9
per cent compared with last year. The global impact of China-US
trade tensions will continue to reverberate throughout 2019, but
our advantage over most of our local and regional competitors as
well as many of our global peers increases as cross-border
financing requirements get more complex. As one of the only
international banks present across all ASEAN and most South Asian
markets, the Group is well positioned to capture opportunities over
the medium term arising from the reconfiguration of regional and
global supply chains. We will continue to invest to reinforce this
key element of differentiation despite and because of the current
choppy conditions.
Helping our clients prosper
As millions emerge into the middle class across our markets, we
see our responsibility to help grow, invest and protect the wealth
and prosperity of our customers as ever more important and
relevant. We grew our affluent Priority segment client base in our
top 10 markets by 14 per cent in the first half of the year and are
continuing to invest in our distinctive and higher-returning
affluent and wealth activities. This will convert to income over
time.
Improving productivity
We have introduced a series of stretching productivity
objectives to improve how effectively and efficiently we respond to
the needs of our clients. We are on track to beat those targets for
the full-year across all client segments and functions. One of the
productivity performance indicators we track is the amount of
risk-adjusted revenue that each client-facing employee generates,
on average. Risk-adjusted revenue is income minus credit
impairment, which we consider a better indicator of sustainability
than simple revenue growth. In the first half of the year this
figure increased significantly: by 13 per cent.
We are overhauling our corporate structure, with the intent to
enhance the Group's capital and liquidity utilisation. Although the
process is complex, and the expected substantial financial benefits
will take time to come through, we have already made considerable
progress.
-- In March, the entity that controls our largest single market
business in Hong Kong became wholly owned directly by the Group's
listed holding company, and it has now assumed ownership of our
China subsidiary. We are seeking regulatory approval to move the
Korea and Taiwan subsidiaries under the Hong Kong entity as well,
to complete our desired Greater China & North Asia hub
-- In May, we transferred various businesses from our branch to
our subsidiary in Singapore, making us the first global
bank to fully subsidiarise locally. In time this entity will be
at the centre of our planned ASEAN hub
Standard Chartered PLC - Group Chief Executive's review
Transforming and disrupting digitally
We committed in February to use digitisation and partnerships to
reinforce our competitive advantages. We have been very busy on
this front. The following is just a handful of the many initiatives
under way:
-- Shortly after our full-year results we announced the
establishment of a strategic joint venture with PCCW, HKT and Ctrip
Finance to deliver a new stand-alone virtual retail bank in Hong
Kong. We were one of three groups to be granted a licence in the
initial batch and are working hard with our partners to prepare the
new bank for launch
-- With the support of the Monetary Authority of Singapore, we
will be establishing early next year a foreign exchange e-trading
and pricing engine that will provide clients in the region more
convenient access to trade 130 currencies and more than 5,000
currency pairs
-- We launched a Trade Augmented Intelligence Engine in
partnership with IBM to enhance the operational efficiency and
control of trade document processing
-- We signed a memorandum of understanding with Linklogis to
deliver its leading digital blockchain-enabled supply chain
financing capabilities to our corporate clients in China
-- We announced the launch of an open digital platform for small
and medium-sized enterprises in India, to help them grow by
providing access to a range of financial and business solutions
Meanwhile we continue to roll out the digital retail banking
proposition that we developed last year in Côte d'Ivoire across our
Africa network, launching it in Botswana, Zambia and Zimbabwe in
the second quarter. Since its launch we have now deployed this
digital bank solution in eight markets - a remarkable pace by any
standards.
Resolution of legacy conduct and control issues
We paid $947 million to various US agencies and GBP102 million
to the UK Financial Conduct Authority in April to resolve
previously disclosed investigations into our historical sanctions
and financial crime controls issues. As I said at the time, the
circumstances that led to that resolution are completely
unacceptable and not representative of the Standard Chartered I am
proud to lead today. The vast majority of the violations and
control deficiencies identified by the authorities predated 2012
and none occurred after 2014. The resolution documents recognised
that we have undergone a comprehensive and positive transformation
as an institution since the conduct and control issues outlined in
the resolutions occurred, and I am pleased that the FCA and US
agencies commented positively at the time of the resolution on our
remediation efforts, improved culture of compliance and leading
role in public-private partnerships to fight financial crime
Conclusion and outlook
We are pleased with our results so far this year. Our
performance resulted in an 88 basis point improvement in our
primary measure - return on tangible equity - reaffirming our
confidence in our ability to achieve the financial targets we set
out in February.
Sentiment in and relating to many of our markets remains
delicately balanced, tipping one way or the other mainly because of
geopolitical pressures. The dispute between China and the US has
moved beyond trade into areas of security and technology, which
will likely prove more difficult to resolve. The global economy is
still growing but inflation is stubbornly low so USD interest rates
look likely to decline, presenting us with some additional
challenge.
Future global growth is expected to be driven increasingly from
the markets in our footprint. We remain alert to both the
opportunities and the risks created by this eastward shift in the
global economic centre of gravity.
The outlook remains uncertain, but it always is. What is clear
is our commitment to further improving our service to our clients
and sustainably improving our returns.
As I said in February, we have actively positioned ourselves to
develop and scale innovative new business models. We are investing
now to create optionality for the future, and I am excited at the
opportunities we are already generating.
Bill Winters
Group Chief Executive
1 August 2019
Standard Chartered PLC - Group Chief Financial Officer's
review
Group Chief Financial Officer's review
Further improvement in profitability and returnsThe Group
delivered an encouraging performance in the first half of 2019.
Income grew at a significantly faster rate than costs, credit
quality improved, capital and liquidity levels remain strong, and
the balance sheet is growing.
All commentary that follows is on an underlying basis and
comparisons are made to the equivalent period in 2018 unless
otherwise stated. A full reconciliation between statutory and
underlying results is set out in the notes to the financial
statements in the Half Year Report.
-- Profit before tax of $2.6 billion grew 11 per cent and 13 per
cent on a constant currency basis. Statutory profit before tax is
stated after provisions for regulatory matters, restructuring and
other items and rose 3 per cent to $2.4 billion
-- Operating income of $7.7 billion was 1 per cent higher and 4
per cent on a constant currency basis
-- Net interest income was 6 per cent higher as a result of
volume growth and an increased contribution from trading book
assets in Financial Markets. The net interest margin on banking
book assets was broadly stable
-- Other income was 6 per cent lower due to a reduced
contribution from hedges associated with trading book assets in
Financial Markets and a $70 million adverse movement in the debit
valuation adjustment (DVA)
-- The effect of currency translation that is adversely
impacting income is benefiting costs, with operating expenses of
$5.0 billion 3 per cent lower and flat on a constant currency
basis. Tight control of costs generated positive income-to-cost
jaws of 4 per cent on both a reported and constant currency
basis
-- Credit impairment of $254 million was $39 million lower
having benefited from a $48 million release in Private Banking and
the loan-loss rate reduced from 21 basis points in 2018 to 17 basis
points
-- Other impairment of $21 million was $30 million lower
following the decision to discontinue the Group's ship leasing
business. Impairment of ship leases is reported as a restructuring
charge in 2019 and excluded from underlying results
-- Profit from associates and joint ventures of $157 million was
7 per cent lower. Following the decision that PT Bank Permata Tbk
is no longer core, the Group's share of its earnings are excluded
from underlying performance in 2019
-- Taxation for the period of $918 million includes $179 million
in relation to the transfer of the Group's subsidiary in China to
Standard Chartered Bank (Hong Kong) Limited. The underlying
effective tax rate excluding this charge and the impact of tax on
provisions for regulatory matters, restructuring and other items
was 28.6 per cent (H1 2018: 26.5)
-- The CET1 ratio of 13.5 per cent is stated after the 39 basis
point impact of the full $1 billion share buy-back programme that
was announced in May 2019
-- The Group's return on tangible equity improved 88 basis points to 8.4 per cent
-- Underlying earnings per share (EPS) increased 4.2 cents to
49.1 cents. Statutory EPS was down 2.7 cents to 38.0 cents,
impacted by provisions for regulatory matters and the higher tax
charge
-- The Board has declared an interim ordinary dividend of 7
cents per share - up 1 cent or 17 per cent - being one-third of the
2018 full-year dividend
Standard Chartered PLC - Group Chief Financial Officer's
review
Performance summary
H1 2019 vs
H1 2018
Better/(worse)
----------------------------------- ---------- --------------- ----------
6 months 6 months
ended ended
6 months
30.06.19 ended 31.12.18 30.06.18
$million $million $million % % Ccy1
----------------------------------- ---------- --------------- ---------- ------ ---------
Net interest income 4,643 4,453 4,387 6
Other income 3,053 2,866 3,262 (6)
----------------------------------- ---------- --------------- ---------- ------ ---------
Operating income 7,696 7,319 7,649 1 4
Other operating expenses (4,969) (5,023) (5,117) 3
UK bank levy - (324) - -
Operating expenses (4,969) (5,347) (5,117) 3 (0)
----------------------------------- ---------- --------------- ---------- ------ ---------
Operating profit before impairment
and taxation 2,727 1,972 2,532 8 10
Credit impairment (254) (447) (293) 13
Other impairment (21) (97) (51) 59
Profit from associates and joint
ventures 157 73 168 (7)
----------------------------------- ---------- --------------- ---------- ------ ---------
Underlying profit before taxation 2,609 1,501 2,356 11 13
Provision for regulatory matters (204) (900) - nm
Restructuring and other items 9 (399) (10) nm
----------------------------------- ---------- --------------- ---------- ------ ---------
Statutory profit before taxation 2,414 202 2,346 3
Taxation (918) (686) (753) (22)
----------------------------------- ---------- --------------- ---------- ------ ---------
Profit/(loss) for the period 1,496 (484) 1,593 (6)
----------------------------------- ---------- --------------- ---------- ------ ---------
Net interest margin (%) 1.59 1.56 1.59
Underlying return on tangible
equity (%) 8.4 2.7 7.5
Underlying earnings per share
(cents) 49.1 16.5 44.9
Statutory return on tangible
equity (%) 6.5 (3.6) 6.8
Statutory earnings/(loss) per
share (cents) 38.0 (21.9) 40.7
Dividend per share (cents) 7.0 15.0 6.0
Common Equity Tier 1 (%) 13.5 14.2 14.2
----------------------------------- ---------- --------------- ---------- ------ ---------
1 Comparisons presented on the basis of the current period's
functional currency rate
Income by product
Transaction Banking income was up 6 per cent following a strong
performance in Cash Management. Income from Retail Products was up
1 per cent and up 5 per cent on a constant currency basis.
Financial Markets income was 7 per cent higher, or 12 per cent
higher excluding DVA, with double-digit growth in Credit and
Capital Markets, Rates and FX despite the more challenging market
conditions evident later in the period. Wealth Management income
included an additional $28 million in relation to the increased
recognition of part of an annual bancassurance bonus but was 2 per
cent lower given the exceptionally buoyant market conditions last
year. Treasury income was down 11 per cent, impacted by higher
interest rates that more than offset a favourable movement in hedge
ineffectiveness. Other product income was $77 million lower partly
driven by the impact of adopting IFRS 16.
Income by client segment
Corporate & Institutional Banking income was 5 per cent
higher with good performances in capital-lite and network-related
activities. Financial Markets benefited from broad-based growth
across multiple products that more than offset the impact of DVA
and, in Transaction Banking, Cash Management continued to perform
strongly. Together this offset the impact of asset margin
compression in Trade, Corporate Finance and Lending.
Retail Banking income was down 1 per cent and up 3 per cent on a
constant currency basis. The impact of less buoyant market
conditions in Wealth Management was offset by continued growth in
income from Deposits. Income grew 2 per cent in Greater China &
North Asia which was more than offset by a 1 per cent reduction in
ASEAN & South Asia and a 14 per cent decline in Africa &
Middle East, predominantly driven by the UAE.
Commercial Banking income grew 6 per cent or 9 per cent on a
constant currency basis, with growth across all regions
predominately from increased balances and margins within Cash
Management.
Private Banking attracted $1.7 billion net new money and grew
income 13 per cent driven by Wealth Management and Deposits.
Income in Central & other items (Segment) declined 26 per
cent as the impact of higher interest rates, adopting IFRS 16 and a
tax refund in India in 2018 offset the benefit of a favourable
change in hedge ineffectiveness where a small gain in 2019 compared
to a larger loss in 2018.
Standard Chartered PLC - Group Chief Financial Officer's
review
Income by geographic region
Income from Greater China & North Asia declined 1 per cent
and was up 2 per cent on a constant currency basis. The benefit of
interest rate rises on income from Cash Management and Retail
Deposits was partly offset by a lower contribution from Treasury
and Wealth Management. Higher income in China was more than offset
by lower income in Korea and Taiwan. Income in Hong Kong was flat
with a higher contribution from Cash Management and Financial
Markets offsetting a lower contribution from Treasury.
Income from ASEAN & South Asia was 3 per cent higher and 6
per cent higher on a constant currency basis, with growth in most
markets, in particular Singapore, Bangladesh and India. Financial
Markets and Transaction Banking income grew at a double-digit rate
and was partly offset by lower income in Treasury.
In Africa & Middle East, performance was particularly
negatively affected by the impact of local currency translation.
Income declined 3 per cent while on a constant currency basis it
rose 3 per cent. Lower income in the UAE and Zimbabwe was partly
offset by higher income in Nigeria.
Income from Europe & Americas was 9 per cent lower
reflecting an adverse movement in DVA within Financial Markets.
Excluding the impact of DVA income declined 4 per cent with lower
Treasury income offset by increased income from Cash
Management.
Income in Central & other items (Region) was 48 per cent
higher primarily driven by a favourable movement in hedge
ineffectiveness.
Expenses
Operating expenses of $5.0 billion were 3 per cent lower and
flat on a constant currency basis. The actions taken to deliver
cost efficiencies contributed to 4 per cent positive income-to-cost
operating leverage, or jaws, on both a reported and constant
currency basis.
The Group continues to target cost growth below inflation and
positive jaws between 2019-2021 while investing significantly, with
an increasing proportion into projects related to strategic
initiatives including technology enhancements. The timing of these
investments through the course of the year together with the
amortisation of prior period investment is expected to result in
costs in the second half of 2019 being slightly higher than in the
first half.
Impairment
Credit impairment of $254 million was 13 per cent lower and
represents 17 basis points of average loans and advances.
Expected credit losses related to stage 1 and 2 exposures of $80
million compared to a net release of $17 million in the first half
of 2018 and were $97 million higher as a result. This was offset by
$136 million lower credit impairment related to stage 3 exposures
that included the benefit of lower new Commercial Banking
impairment, primarily in the Greater China and Middle East regions,
and a $48 million release in Private Banking.
Other impairment more than halved to $21 million. Following the
Group's decision to discontinue its ship leasing business the
related impairment is recorded as a restructuring charge and
excluded from underlying results.
Profit from associates and joint ventures
Profit from associates and joint ventures of $157 million was
lower by 7 per cent as the Group's share of PT Bank Permata Tbk's
earnings are excluded from underlying performance in 2019. Earnings
from the Group's other associates and joint ventures were broadly
stable.
Overall
Profit before tax of $2.6 billion was 11 per cent higher driven
by significant improvement in Corporate & Institutional
Banking, Commercial Banking and Private Banking as a result of
income growth, lower expenses and lower impairments. Retail Banking
profits were flat impacted by foreign exchange translation and
slightly higher impairment. By region, broad-based improvement in
operating profit in most markets was partly offset by lower
Treasury income and the impact of DVA in our Hong Kong, Singapore
and London hubs.
Statutory profit before tax of $2.4 billion, which is stated
after provisions for regulatory matters, restructuring and other
items, was 3 per cent higher.
Standard Chartered PLC - Group Chief Financial Officer's
review
H1 2019 H1 2019
vs H1 vs H1
2018 2018
6 months 6 months 6 months 6 months
ended ended ended ended
30.06.19 30.06.18 Better/(worse) 30.06.19 30.06.18 Better/(worse)
$million $million % $million $million %
-------------- ---------- ---------- ---------------- -------------- ---------- ---------- ----------------
Corporate &
Institutional Greater China
Banking 1,354 1,093 24 & North Asia 1,329 1,289 3
ASEAN & South
Retail Banking 618 617 0 Asia 760 589 29
Africa &
Commercial Middle
Banking 286 140 nm East 441 387 14
Private Europe &
Banking 100 (5) nm Americas 13 86 (85)
Central & Central &
other other
items 251 511 (51) items 66 5 nm
-------------- ---------- ---------- ---------------- -------------- ---------- ---------- ----------------
Underlying Underlying
profit profit
before tax 2,609 2,356 11 before tax 2,609 2,356 11
-------------- ---------- ---------- ---------------- -------------- ---------- ---------- ----------------
Net interest margin
The Group's net interest margin is presented on a statutory
basis. Statutory net interest income of $4.6 billion was 6 per cent
higher. Rises in global interest rates in 2018 and changes in the
asset mix offset the ongoing impact of strong competition and as a
result asset yields were 40 basis points higher. This together with
interest-earning assets that grew more quickly than
interest-bearing liabilities offset a 47 basis points increase in
the rate paid on liabilities.
Statutory net interest income included an increased contribution
from trading book assets, with offsetting amounts in other income
from associated hedges. The Group's net interest margin on banking
book assets was broadly stable compared with the second half of
2018.
6 months 6 months 6 months
ended 30.06.19 ended 31.12.18 ended 30.06.18
$million $million $million
------------------------------------- --------------- --------------- ---------------
Statutory net interest income 4,618 4,432 4,361
Average interest-earning assets 584,769 561,992 554,214
Average interest-bearing liabilities 508,734 481,608 486,569
------------------------------------- --------------- --------------- ---------------
Gross yield (%) 3.39 3.19 2.99
Rate paid (%) 2.07 1.90 1.60
------------------------------------- --------------- --------------- ---------------
Net yield (%) 1.32 1.29 1.39
------------------------------------- --------------- --------------- ---------------
Net interest margin (%)1 1.59 1.56 1.59
------------------------------------- --------------- --------------- ---------------
1 Statutory net interest income divided by average interest
earning assets, annualised
Corporate structure
The Group is executing several changes to its legal entity
structure to create a capital and liquidity hub in Hong Kong for
the Greater China & North Asia region. Since making Standard
Chartered Bank (Hong Kong) Limited a wholly-owned direct subsidiary
of Standard Chartered PLC, the Group has moved its China subsidiary
under the Hong Kong entity. To complete the formation of this
regional hub the Group has sought regulatory approval to similarly
move the Taiwan and Korea subsidiaries under Hong Kong. These
actions allow more efficient use of capital and liquidity that will
over time result in a lower cost of funds for the Group.
As a result of this internal restructuring, the Group incurred a
$179 million capital gains tax charge.
Credit quality
Asset quality overall has improved year-on-year, the quality of
the less well performing assets continues to improve and no new
areas of stress have emerged. The Group remains vigilant
considering continuing geopolitical uncertainty and performs
regular reviews and stress tests of its portfolio to help identify
then mitigate any risks that might arise. Reflecting that the
actions to reduce exposures in the liquidation portfolio were
substantially completed in 2018 the Group is reporting it as part
of its ongoing business in 2019.
Gross stage 3 loans and advances to customers of $6.2 billion
were $706 million lower following several repayments and write-offs
together with significantly lower new inflows. These
credit-impaired loans represent 2.3 per cent of gross loans and
advances, down from 2.6 per cent at 31 December 2018. They are 60
per cent covered before collateral and 81 per cent covered after
collateral.
The proportion of corporate exposures that are investment grade
reduced to 57 per cent because of a reduction in reverse repurchase
agreements with clearing brokers. The proportion of investment
grade exposures in the rest of the portfolio remained stable,
exposures on early alert reduced by $699 million and credit grade
12 accounts were lower by $107 million.
Standard Chartered PLC - Group Chief Financial Officer's
review
30.06.19 31.12.18
$million $million
--------------------------------------- ---------- -------------------------------
Ongoing Liquidation
Total business portfolio Total
--------------------------------------- ---------- --------- ----------- -------
Gross loans and advances to customers1 268,055 260,094 1,361 261,455
---------- --------- ----------- -------
Of which stage 1 and 2 261,837 254,445 86 254,531
Of which stage 3 6,218 5,649 1,275 6,924
---------- --------- ----------- -------
Expected credit loss provisions (4,460) (3,932) (966) (4,898)
---------- --------- ----------- -------
Of which stage 1 and 2 (757) (838) (4) (842)
Of which stage 3 (3,703) (3,094) (962) (4,056)
---------- --------- ----------- -------
Net loans and advances to customers 263,595 256,162 395 256,557
---------- --------- ----------- -------
Of which stage 1 and 2 261,080 253,607 82 253,689
Of which stage 3 2,515 2,555 313 2,868
---------- --------- ----------- -------
Cover ratio of stage 3 before/after
collateral (%) 60/81 55/78 75/93 59/81
Credit grade 12 accounts ($million) 1,416 1,437 86 1,523
Early alerts ($million) 4,068 4,767 - 4,767
Investment grade corporate exposures
(%) 57 62 - 62
--------------------------------------- ---------- --------- ----------- -------
1 Includes reverse repurchase agreements and other similar
secured lending held at amortised cost of $2,704 million at 30 June
2019 and $3,151 million at 31 December 2018
Restructuring and other items
The Group's statutory performance is adjusted for profits or
losses of a capital nature, amounts consequent to investment
transactions driven by strategic intent, other infrequent and/or
exceptional transactions that are significant or material in the
context of the Group's normal business earnings for the period and
items which management and investors would ordinarily identify
separately when assessing performance period-by period. These
adjustments are set out below.
The Group made a provision for regulatory matters of $204
million mostly relating to the resolution of legacy conduct and
control issues.
Revaluations of Principal Finance exposures together with
profits related to the Group's discontinued ship leasing business
contributed the majority of the $14 million net restructuring
charges in the first half of 2019.
As previously communicated the Group's joint venture investment
in Indonesia is no longer considered core and the related profits
of $23 million in 2019 are excluded from underlying and reported in
other items.
6 months ended 6 months ended
6 months ended 30.06.19 31.12.18 30.06.18
--------------- ---------------------------------------- ----------------------------- ------------------------
Provision Provision
for regulatory Other for regulatory Other
matters Restructuring items matters Restructuring Restructuring items
$million $million $million $million $million $million $million
--------------- -------------- ------------- --------- -------------- ------------- ------------- ---------
Operating
income - 134 - - (157) (91) 69
Operating
expenses (204) (125) - (900) (215) (68) -
Credit
impairment - - - - 8 79 -
Other
impairment - (23) - - (35) 1 -
Profit from
associates
and joint
ventures - - 23 - - - -
--------------- -------------- ------------- --------- -------------- ------------- ------------- ---------
Profit/(loss)
before
taxation (204) (14) 23 (900) (399) (79) 69
--------------- -------------- ------------- --------- -------------- ------------- ------------- ---------
Balance sheet and liquidity
The Group's balance sheet is strong, highly liquid and
diversified.
Loans and advances to customers increased 3 per cent since 31
December 2018 to $263.6 billion with broad-based growth across a
range of products and particularly within Corporate &
Institutional Banking and in Greater China & North Asia.
Customer accounts rose 3 per cent since 31 December 2018 mostly in
corporate time deposits. The Group continues to focus on improving
the quality and mix of its liabilities.
The advances-to-deposits ratio increased slightly to 64 per cent
from 63 per cent at 31 December 2018.
Standard Chartered PLC - Group Chief Financial Officer's
review
Increase/ Increase/
30.06.19 31.12.18 (decrease) (decrease)
$million $million $million %
-------------------------------- ---------- ---------- ------------ ------------
Assets
Loans and advances to banks 59,210 61,414 (2,204) (4)
Loans and advances to customers 263,595 256,557 7,038 3
Other assets 389,699 370,791 18,908 5
-------------------------------- ---------- ---------- ------------ ------------
Total assets 712,504 688,762 23,742 3
-------------------------------- ---------- ---------- ------------ ------------
Liabilities
Deposits by banks 30,783 29,715 1,068 4
Customer accounts 401,597 391,013 10,584 3
Other liabilities 229,685 217,682 12,003 6
-------------------------------- ---------- ---------- ------------ ------------
Total liabilities 662,065 638,410 23,655 4
-------------------------------- ---------- ---------- ------------ ------------
Equity 50,439 50,352 87 -
-------------------------------- ---------- ---------- ------------ ------------
Total equity and liabilities 712,504 688,762 23,742 3
-------------------------------- ---------- ---------- ------------ ------------
Advances-to-deposits ratio1 64% 63%
-------------------------------- ---------- ---------- ------------ ------------
1 The Group now excludes $6,835 million held with central banks
(31 December 2018: $7,412 million) that have been confirmed as
repayable at the point of stress
Risk-weighted assets by business and type
Since 31 December 2018 total risk-weighted assets (RWAs)
increased by $12.4 billion or 5 per cent.
Credit risk RWA was $8.9 billion higher reflecting asset growth,
primarily in Corporate & Institutional Banking, and the $1.4
billion impact of adopting IFRS 16, partly offset by positive
credit migration, RWA efficiencies and the positive impact of
foreign exchange translation.
Market risk RWA increased by $4.0 billion due to an increase in
trading book debt securities from the seasonally low position as at
31 December 2018 and model changes following an increase in
regulatory backtesting exceptions.
Operational risk RWA was $0.4 billion lower primarily due to a
decrease in average income as measured over a rolling three-year
time horizon, with lower income in 2018 replacing higher income in
2015.
Increase/ Increase/
30.06.19 31.12.18 (decrease) (decrease)
$million $million $million %
---------------------------------- ---------- ---------- ------------ ------------
By client segment
Corporate & Institutional Banking 137,986 128,991 8,995 7
Retail Banking 42,772 42,903 (131) -
Commercial Banking 31,574 30,481 1,093 4
Private Banking 6,615 5,861 754 13
Central & other items 51,792 50,061 1,731 3
---------------------------------- ---------- ---------- ------------ ------------
Total RWAs 270,739 258,297 12,442 5
---------------------------------- ---------- ---------- ------------ ------------
By risk type
Credit Risk 220,010 211,138 8,872 4
Operational Risk 27,620 28,050 (430) (2)
Market Risk 23,109 19,109 4,000 21
---------------------------------- ---------- ---------- ------------ ------------
Capital base and ratios
The Group remains well capitalised and highly liquid with all
metrics above regulatory thresholds.
The common equity tier 1 (CET1) capital ratio of 13.5 per cent
is in the middle of the Group's 13-14 per cent range. Underlying
profit attributable to ordinary shareholders offset the impact of
higher RWAs. The Group is required to recognise the full 39 basis
points impact of the $1 billion share buy-back programme announced
in May 2019. Provisions for regulatory matters and a tax on capital
gains related to the transfer of the Group's China subsidiary to
its Hong Kong entity reduced the ratio by 15 basis points.
The Board has recommended a 17 per cent higher interim dividend
of 7 cents per ordinary share which is consistent with the
previously communicated intention to adopt a formulaic approach to
interim dividends, setting them at one-third of the prior year's
full-year dividend.
Standard Chartered PLC - Group Chief Financial Officer's
review
30.06.19 31.12.18
$million $million
-------------------------------------------- ---------- ----------
CET1 capital 36,511 36,717
Additional Tier 1 capital (AT1) instruments 6,612 6,684
-------------------------------------------- ---------- ----------
Tier 1 capital 43,123 43,401
Tier 2 capital 11,834 12,295
-------------------------------------------- ---------- ----------
Total capital 54,957 55,696
-------------------------------------------- ---------- ----------
CET1 capital ratio end point (%) 13.5 14.2
Total capital ratio transitional (%) 20.3 21.6
UK leverage ratio (%) 5.3 5.6
-------------------------------------------- ---------- ----------
Summary and outlook
We have made good progress in executing on the financial
objectives that we laid out in February. Foreign exchange
translation is materially impacting year-on-year comparisons for
income but it is also benefiting costs to a similar extent, so at a
profit level the impact is broadly neutral. We committed to deliver
significantly positive jaws through to 2021 and we have done so in
the first half of the year on both a reported and constant currency
basis, driving pre-provision operating profit 8 per cent higher.
This together with the continued low level of impairment has led to
another sequential increase in return on tangible equity, our
primary performance measure.
Our balance sheet is fundamentally more resilient as evidenced
by the low level of impairment, client satisfaction is increasing,
and we are working hard to embed a performance-orientated and
innovative culture.
RWAs were flat year-on-year and up 5 per cent in the first half,
while income grew at slightly higher rates over the same periods.
We continue to focus on organic and inorganic RWA optimisation
initiatives that support our expectation that over time income
growth will exceed RWA growth.
Concerns surrounding the potential escalation of trade tensions
has affected sentiment and central banks' commentary is indicating
a reversal of monetary policy normalisation. But global growth
projections have remained resilient, supported by solid
fundamentals particularly in our markets, and we are pursuing
several self-help initiatives designed to improve cost, capital and
liquidity efficiency and the quality of our income. This gives us
confidence we can achieve at least a 10 per cent return on tangible
equity by 2021.
Andy Halford
Group Chief Financial Officer
1 August 2019
Standard Chartered PLC - Client segment reviews
Client segment reviews
Underlying performance by client segment
Analysis of operating income by product and segment
The following tables provide a breakdown of the Group's
underlying operating income by product and client segment.
6 months ended 30.06.19
----------------------------- --------------------------------------------------------------------------------------
Corporate
& Institutional Commercial Central &
Banking Retail Banking Banking Private Banking other items Total
$million $million $million $million $million $million
----------------------------- ---------------- -------------- ---------- --------------- ------------ ---------
Transaction Banking 1,519 9 424 - - 1,952
---------------- -------------- ---------- --------------- ------------ ---------
Trade 366 9 184 - - 559
Cash Management 983 - 240 - - 1,223
Securities Services 170 - - - - 170
---------------- -------------- ---------- --------------- ------------ ---------
Financial Markets 1,339 - 157 - - 1,496
---------------- -------------- ---------- --------------- ------------ ---------
Foreign Exchange 508 - 95 - - 603
Rates 338 - 19 - - 357
Commodities 75 - 14 - - 89
Credit and Capital Markets 279 - 6 - - 285
Capital Structuring
Distribution Group 146 - 10 - - 156
Other Financial Markets (7) - 13 - - 6
---------------- -------------- ---------- --------------- ------------ ---------
Corporate Finance1 601 - 48 2 - 651
Lending and Portfolio
Management 159 - 110 - - 269
Wealth Management - 778 2 195 - 975
Retail Products - 1,809 3 109 - 1,921
---------------- -------------- ---------- --------------- ------------ ---------
CCPL and other unsecured
lending - 625 - - - 625
Deposits - 896 3 92 - 991
Mortgage and Auto - 239 - 17 - 256
Other Retail Products - 49 - - - 49
---------------- -------------- ---------- --------------- ------------ ---------
Treasury - - - - 559 559
Other (11) (1) 2 - (117) (127)
----------------------------- ---------------- -------------- ---------- --------------- ------------ ---------
Total underlying operating
income 3,607 2,595 746 306 442 7,696
----------------------------- ---------------- -------------- ---------- --------------- ------------ ---------
1 In Dec 2018, it was decided to discontinue the Ship Operating
Lease business; any future profits and losses will be reported as
restructuring. Prior periods have not been restated
6 months ended 30.06.18
----------------------------- --------------------------------------------------------------------------------------
Corporate
& Institutional Commercial Central &
Banking Retail Banking Banking Private Banking other items Total
$million $million $million $million $million $million
----------------------------- ---------------- -------------- ---------- --------------- ------------ ---------
Transaction Banking 1,430 10 400 - - 1,840
---------------- -------------- ---------- --------------- ------------ ---------
Trade 385 10 194 - - 589
Cash Management 875 - 206 - - 1,081
Securities Services 170 - - - - 170
---------------- -------------- ---------- --------------- ------------ ---------
Financial Markets 1,248 - 153 - - 1,401
---------------- -------------- ---------- --------------- ------------ ---------
Foreign Exchange 439 - 91 - - 530
Rates 281 - 17 - - 298
Commodities 92 - 12 - - 104
Credit and Capital Markets 187 - 6 - - 193
Capital Structuring
Distribution Group 133 - 14 - - 147
Other Financial Markets 116 - 13 - - 129
---------------- -------------- ---------- --------------- ------------ ---------
Corporate Finance 616 - 49 - - 665
Lending and Portfolio
Management 174 - 104 - - 278
Wealth Management - 820 1 170 - 991
Retail Products - 1,793 2 101 - 1,896
---------------- -------------- ---------- --------------- ------------ ---------
CCPL and other unsecured
lending - 696 - - - 696
Deposits - 739 3 83 - 825
Mortgage and Auto - 314 - 18 - 332
Other Retail Products - 44 (1) - - 43
---------------- -------------- ---------- --------------- ------------ ---------
Treasury - - - - 628 628
Other (17) (3) (3) - (27) (50)
----------------------------- ---------------- -------------- ---------- --------------- ------------ ---------
Total underlying operating
income 3,451 2,620 706 271 601 7,649
----------------------------- ---------------- -------------- ---------- --------------- ------------ ---------
Standard Chartered PLC - Client segment reviews
Underlying performance by client segment
6 months ended 30.06.19
------------------------------ --------------------------------------------------------------------------------------
Corporate
& Institutional Commercial Central &
Banking Retail Banking Banking Private Banking other items Total
$million $million $million $million $million $million
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Operating income 3,607 2,595 746 306 442 7,696
---------------- -------------- ---------- --------------- ------------ ---------
External 3,703 2,134 799 171 889 7,696
Inter-segment (96) 461 (53) 135 (447) -
---------------- -------------- ---------- --------------- ------------ ---------
Operating expenses (2,124) (1,823) (425) (253) (344) (4,969)
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Operating profit before
impairment losses and
taxation 1,483 772 321 53 98 2,727
Credit impairment (110) (154) (35) 47 (2) (254)
Other impairment (19) - - - (2) (21)
Profit from associates
and joint ventures - - - - 157 157
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Underlying profit before
taxation 1,354 618 286 100 251 2,609
Provision for regulatory
matters - - - - (204) (204)
Restructuring 23 (1) - (1) (35) (14)
Share of profits of
PT Bank Permata Tbk
joint venture - - - - 23 23
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Statutory profit before
taxation 1,377 617 286 99 35 2,414
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Total assets 332,599 103,320 32,821 15,654 228,110 712,504
Of which: loans and
advances to customers
including FVTPL 152,577 101,195 28,229 15,521 9,120 306,642
---------------- -------------- ---------- --------------- ------------ ---------
loans and advances to
customers 110,677 100,892 27,388 15,521 9,117 263,595
loans held at fair value
through profit or loss 41,900 303 841 - 3 43,047
---------------- -------------- ---------- --------------- ------------ ---------
Total liabilities 386,223 142,655 34,773 18,616 79,798 662,065
Of which: customer accounts 239,816 139,256 31,876 18,473 15,490 444,911
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
6 months ended 30.06.18
------------------------------ --------------------------------------------------------------------------------------
Corporate
& Institutional Commercial Central &
Banking Retail Banking Banking Private Banking other items Total
$million $million $million $million $million $million
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Operating income 3,451 2,620 706 271 601 7,649
---------------- -------------- ---------- --------------- ------------ ---------
External 3,560 2,413 799 155 722 7,649
Inter-segment (109) 207 (93) 116 (121) -
---------------- -------------- ---------- --------------- ------------ ---------
Operating expenses (2,218) (1,884) (460) (275) (280) (5,117)
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Operating profit/(loss)
before impairment losses
and taxation 1,233 736 246 (4) 321 2,532
Credit impairment (81) (119) (106) (1) 14 (293)
Other impairment (59) - - - 8 (51)
Profit from associates
and joint ventures - - - - 168 168
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Underlying profit/(loss)
before taxation 1,093 617 140 (5) 511 2,356
Restructuring (76) (4) (1) (6) 8 (79)
Gains arising on repurchase
of senior and subordinated
liabilities 3 - - - 66 69
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Statutory profit/(loss)
before taxation 1,020 613 139 (11) 585 2,346
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Total assets 310,487 103,581 32,347 13,616 234,843 694,874
Of which: loans and
advances to customers
including FVTPL 143,297 101,530 28,571 13,565 9,756 296,719
---------------- -------------- ---------- --------------- ------------ ---------
loans and advances to
customers 106,780 101,017 28,213 13,565 9,756 259,331
loans held at fair value
through profit or loss 36,517 513 358 - - 37,388
---------------- -------------- ---------- --------------- ------------ ---------
Total liabilities 384,593 135,384 35,024 19,938 68,447 643,386
Of which: customer accounts 246,667 132,254 32,696 19,830 3,567 435,014
------------------------------ ---------------- -------------- ---------- --------------- ------------ ---------
Standard Chartered PLC - Client segment reviews
Corporate & Institutional Banking
Supports clients with their Transaction Banking, Corporate
Finance, Financial Markets and borrowing needs across more than 60
markets, providing solutions to over 5,000 clients
Strategic priorities
-- Deliver sustainable growth for clients by understanding their
agendas, providing trusted advice, data-driven analytical insights
and improving network delivery
-- Generate high-quality returns by driving balance sheet
velocity, improving funding quality and maintaining risk
controls
-- Partner with clients and third parties to expand capabilities
while accelerating our digital platform and data analytics
Progress
-- Continued to deepen relationships with existing clients and
new OECD-based clients. New OECD clients income rose 24 per
cent
-- Quality of income continues to improve driven by capital-lite
income up 15 per cent and network income up 9 per cent
-- Maintained balance sheet quality, with investment-grade
clients representing 56 per cent of customer loans and advances
(2018: 63 per cent) and high-quality operating account balances1
improving to 57 per cent of Transaction Banking customer balances
(2018: 49 per cent1)
-- Continued to invest in our platforms to drive client experience, digitisation and automation
-- Entered into strategic partnership with Linklogis, a supply
chain financing focused fintech in China
-- Strong Financial Markets performance supported by global
Credit initiatives across key network corridors
Performance highlights
-- Underlying profit before taxation of $1,354 million was up 24
per cent, primarily driven by higher income and lower costs
-- Income of $3,607 million was up 5 per cent2, primarily driven
by Cash Management and Financial Markets income which partially
offset margin compression in Trade Finance. Good balance sheet
momentum, with loans and advances to customers up 6 per cent
-- Proportion of low-returning client risk-weighted assets
(RWAs) at 15.2 per cent (December 2018: 15.5 per cent)
-- RoTE improved from 7.6 per cent to 10.0 per cent
1 June 2019 operating account (OPAC) balance restated for new
OPAC methodology
(more granular transactional information used to determine core
vs non-core balances)
2 Excluding debit valuation adjustments and Shipping Operating
Leases impact, CIB underlying income up 8 per cent
Standard Chartered PLC - Client segment reviews
Retail Banking
Serving over nine million individuals and small businesses, with
a focus on affluent and emerging affluent in many of the world's
fastest-growing cities
Strategic priorities
-- Invest in our affluent and emerging affluent clients with a
particular focus on Wealth Management and Deposits to capture the
significant rise of the middle class in our markets
-- Build on our client ecosystem and alliances initiatives
-- Improve our clients' experience through an enhanced
end-to-end digital offering, with intuitive platforms,
best-in-class products and service responding to the change in
digital habits of clients in our markets
Progress
-- Increased the share of income from Priority clients from 47
per cent in 2018 to 49 per cent as a result of strong Wealth
Management and Deposit income growth and increasing client
numbers
-- Launched the Côte d'Ivoire model digital bank in four
markets: Kenya, Uganda, Tanzania, Ghana in Q1 2019 followed by
another three markets in Botswana, Zambia and Zimbabwe in June
-- Successful application for HK digital bank licence in
partnership with PCCW, HKT and Ctrip Finance which will redefine
customer experience of banking services
-- Launched real-time onboarding for Credit Cards and Personal
Loans (CCPL) in India and Singapore, enabling more efficient CCPL
applications with significantly improved customer experience
-- A further improvement in digital adoption, with 52 per cent
of clients now actively using online or mobile banking compared
with 47 per cent
Performance highlights
-- Underlying profit before taxation of $618 million was flat as
lower expenses were offset by lower income and higher credit
impairment
-- Underlying income of $2,595 million was down 1 per cent (up 3
per cent on a constant currency basis). Growth of 2 per cent (up 5
per cent on a constant currency basis) in Greater China & North
Asia offset a 1 per cent decline (up 3 per cent on a constant
currency basis) in ASEAN & South Asia and a 14 per cent decline
(down 7 per cent on a constant currency basis) in Africa &
Middle East
-- Strong income momentum from Deposits with improved margins
and balance growth at 21 per cent. Together, Wealth Management and
Deposits income, representing 65 per cent of Retail Banking income,
grew 7 per cent
-- RoTE improved to 14.6 per cent from 14.3 per cent
Standard Chartered PLC - Client segment reviews
Commercial Banking
Supporting over 45,000 local corporations and medium-sized
enterprises
Strategic priorities
-- Drive quality sustainable growth by deepening relationships
with existing clients and onboarding new clients, focusing on
rapidly growing and internationalising companies
-- Improve balance sheet and income mix, accelerating
utilisation of growth in Cash and FX products
-- Continue to enhance capital allocation discipline and Credit Risk management
-- Improve client experience, leveraging technology and
investing in frontline training, tools and analytics
Progress
-- Onboarded 3,100 new clients in H1 2019 while monetising 6,400
new clients onboarded in 2018. These clients generated around $78
million of income and $3 billion in cash liabilities
-- Continued to reshape the income mix towards capital-lite
products: share of Cash and FX income increased from 42 per cent of
total income in H1 2018 to 45 per cent
-- Network income grew 12 per cent, notably from Chinese and
Indian clients, as we continue to support Commercial Banking
clients and capture international opportunities
-- Strengthened foundations in Credit Risk management and
improved asset quality: RWAs efficiency1 improved to 74 per cent
(H1 2018: 79 per cent) and credit impairments are down 67 per cent,
primarily from lower Stage 3
-- Continued to improve client experience: reduced client
turnaround time from nine days to five days
-- Leveraging partnerships to accelerate client acquisition:
partnered with a digital-blockchain supply chain platform in
China
Performance highlights
-- Underlying profit before taxation of $286 million was up 104
per cent driven by lower impairments, income growth and lower
costs
-- Underlying income of $746 million was up 6 per cent mainly
driven by growth from Cash Management and Financial Markets. Income
was up 2 per cent in Greater China & North Asia, up 6 per cent
in ASEAN & South Asia and up 12 per cent in Africa & Middle
East
-- RoTE improved from 4.3 per cent to 9.1 per cent
1 RWA efficiency calculated based on Credit RWA divided by
Assets and Contingents
Standard Chartered PLC - Client segment reviews
Private Banking
Private Banking offers a full suite of investment, credit and
wealth planning solutions to grow and protect the wealth of
high-net-worth individuals across our footprint
Strategic priorities
-- Leverage the significant wealth creation and wealth transfers
taking place in our markets to achieve greater scale in the
business
-- Make it easier for clients to access products and services
across the Group. Improve clients' experience and grow the share of
our clients' assets under management by enhancing our advisory
proposition and reducing the turnaround time of the investment
process
-- Implement a rigorous controls enhancement plan to balance growth and controls
Progress
-- Drove sharper client segmentation to deliver our distinct
advisory and product proposition, and grow profitability
-- Deepened client engagement through stronger Relationship
Management, Product Specialist coverage model and sales
discipline
-- Stepped up brand visibility of our key differentiators with
the launch of a Private Banking marketing campaign around
uncovering biases for making better financial decisions,
underscoring our unbiased and open architecture Advisory
proposition
-- Continued to tap into wealth opportunities in Greater China and South Asia
-- Continued to further enhance our open architecture
derivatives platforms through full automation and
straight-through-processing of the transactions
-- Continued investments in building a senior team of frontline
relationship managers across our markets
Performance highlights
-- Underlying profit of $100 million includes a $48 million
credit impairment release, improving from a loss of $6 million in
the prior period driven by top-line income growth and costs
reduction
-- Underlying income of $306 million was up 13 per cent, making
a second consecutive year of top-line growth. Income increase
mainly driven by higher Wealth products income (up 15 per cent) and
improved product margins
-- Assets under management increased $6 billion or 10 per cent
from 31 December 2018, mainly driven by $1.7 billion of net new
money and positive market movements
-- RoTE increased from negative 1.0 per cent to 15.7 per cent
Standard Chartered PLC - Regional reviews
Underlying performance by region
6 months ended 30.06.19
------------------------------ ------------------------------------------------------------------------------
Greater China ASEAN & South Africa & Europe & Central &
& North Asia Asia Middle East Americas other items Total
$million $million $million $million $million $million
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Operating income 3,080 2,136 1,340 794 346 7,696
Operating expenses (1,826) (1,292) (850) (715) (286) (4,969)
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Operating profit before
impairment losses and
taxation 1,254 844 490 79 60 2,727
Credit impairment (70) (84) (49) (66) 15 (254)
Other impairment (8) - - - (13) (21)
Profit from associates
and joint ventures 153 - - - 4 157
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Underlying profit before
taxation 1,329 760 441 13 66 2,609
Provision for regulatory
matters - - - - (204) (204)
Restructuring (3) (16) (2) (15) 22 (14)
Share of profits of
PT Bank Permata Tbk
joint venture - 23 - - - 23
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Statutory profit/(loss)
before taxation 1,326 767 439 (2) (116) 2,414
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Net interest margin 1.48% 1.96% 3.10% 0.55% 1.59%
Total assets 275,414 151,714 59,189 214,126 12,061 712,504
Of which: loans and
advances to customers
including FVTPL 134,440 82,826 30,161 59,215 - 306,642
------------- ------------- ------------ --------- ------------ ---------
loans and advances to
customers 127,769 80,769 29,289 25,768 - 263,595
loans held at fair value
through profit or loss 6,671 2,057 872 33,447 - 43,047
------------- ------------- ------------ --------- ------------ ---------
Total liabilities 240,802 132,763 37,000 215,504 35,996 662,065
Of which: customer accounts 196,994 101,594 29,621 116,702 - 444,911
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
6 months ended 30.06.18
------------------------------ ------------------------------------------------------------------------------
Greater China ASEAN & South Africa & Europe & Central &
& North Asia Asia Middle East Americas other items Total
$million $million $million $million $million $million
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Operating income 3,097 2,073 1,376 870 233 7,649
Operating expenses (1,903) (1,360) (919) (736) (199) (5,117)
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Operating profit before
impairment losses and
taxation 1,194 713 457 134 34 2,532
Credit impairment (17) (138) (70) (68) - (293)
Other impairment (44) 7 - 17 (31) (51)
Profit from associates
and joint ventures 156 7 - 3 2 168
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Underlying profit before
taxation 1,289 589 387 86 5 2,356
Restructuring (26) 88 (41) (5) (95) (79)
Gains arising on repurchase
of senior and subordinated
liabilities - - - 3 66 69
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Statutory profit/(loss)
before taxation 1,263 677 346 84 (24) 2,346
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Net interest margins 1.46% 2.03% 3.12% 0.44% 1.59%
Total assets 268,294 147,017 58,343 208,599 12,621 694,874
Of which: loans and
advances to customers
including FVTPL 132,679 82,078 30,967 50,995 - 296,719
Total liabilities 235,214 126,815 38,493 210,002 32,862 643,386
Of which: customer accounts 190,305 95,228 31,540 117,941 - 435,014
------------------------------ ------------- ------------- ------------ --------- ------------ ---------
Standard Chartered PLC - Regional reviews
Greater China & North Asia
Greater China & North Asia generated the largest share of
the Group's income in the first half of 2019, at 40 per cent, and
includes our clients in Hong Kong, Korea, China, Taiwan, Japan and
Macau
Strategic priorities
-- Leverage our network strength to serve the inbound and
outbound cross-border trade and investment needs of our clients
-- Capture opportunities arising from China's opening, including
the Greater Bay Area, renminbi, Belt & Road initiative, onshore
capital markets and mainland wealth, as well as from development of
our digital capabilities
-- Strengthen market position in Hong Kong and improve performance in Korea
Progress
-- Actively participated in the opening of China's capital
markets, helping overseas investors do business through channels
such as Bond Connect, Stock Connect and the Qualified Domestic
Institutional Investor initiative
-- Continuing good progress in Retail Banking in Hong Kong. We
attracted around 32,500 new Priority clients during the year and
increased our active qualified Priority clients by 11 per cent
-- We were granted a virtual banking licence from the Hong Kong
Monetary Authority on 27 March 2019: one of the first to receive a
licence under Hong Kong's new virtual banking scheme teamed up with
PCCW, HKT and Ctrip Finance
-- Continued to transform the Korea franchise to improve returns
and focus on China's opening. China generates more network income
for the Group than nearly every other market
Performance highlights
-- Underlying profit before taxation of $1,329 million was up 3
per cent, with lower expense partly offset by higher credit
impairment
-- Underlying income of $3,080 million was broadly flat, with
broad-based growth across the markets and segments, particularly in
Hong Kong and China, offset by weak Treasury income performance.
Retail Banking income grew 2 per cent, driven by Deposits with
improving margins and strong balance sheet growth partly offset by
a subdued performance in Wealth Management. Private Banking
performed well with income up 26 per cent, driven by Wealth
Management. Corporate & Institutional Banking and Commercial
Banking income grew 4 per cent and 2 per cent respectively driven
by strong Cash Management and Financial Markets
-- Balance sheet momentum was sustained with loans and advances
to customers up 1 per cent while customer accounts remained up 4
per cent
Standard Chartered PLC - Regional reviews
ASEAN & South Asia
We are the only international bank with a presence in all ASEAN
countries and have meaningful operations across most South Asian
markets
Strategic priorities
-- Leverage the strength of our international network to support
our clients' cross-border trade and investment activities across
the high-growth ASEAN and South Asia corridors
-- Deliver comprehensive client propositions in key markets
(Singapore, India, Malaysia and Bangladesh) and a targeted offering
in other high-growth markets such as Indonesia and Vietnam
-- Continue to invest in technology and digital capabilities to
enhance client experience and build scale efficiently
-- Improve capital efficiency and sharpen our investments in higher-returning businesses
-- Continue to reshape our India and Indonesia franchises to improve returns
Progress
-- Operating profit grew in all client segments and in nine out of 12 markets
-- Double-digit growth in high-returning businesses such as
Priority Banking and Global Subsidiaries, and capital-lite income
contributing to 60 per cent of overall income
-- Attracting more than 8,000 new Priority Banking clients and
1,000 new Commercial Banking clients
-- Sharpened our value propositions with Priority Private for
affluent clients in Singapore and Malaysia, and launched the ASEAN
proposition for Commercial Banking
-- Launch of instant onboarding for credit cards and savings
accounts in Singapore and India helped accelerate digital adoption
and improved client advocacy
-- In aggregate, India and Indonesia experienced double-digit
growth in operating profit; India's cost-to-income ratio improved
from 71 to 65 per cent
Performance highlights
-- Underlying profit before taxation grew by 29 per cent to $760
million, underpinned by 3 per cent income growth and 39 per cent
lower credit impairments from improved credit quality
-- Underlying income of $2,136 million is 3 per cent higher,
with double-digit income growth in Corporate & Institutional
Banking, Commercial Banking and Private Banking offsetting a
marginal income decline in Retail Banking
-- RWAs declined by 2 per cent while customer loans and advances
were up 1 per cent, reflecting improved credit quality. Customer
accounts were up 7 per cent with retail current and savings
accounts and cash liabilities growing 6 per cent
Standard Chartered PLC - Regional reviews
Africa & Middle East
Present in 25 markets, of which the most sizeable by income are
the UAE, Nigeria, Kenya and Pakistan. We are present in more
sub-Saharan African markets than any other international banking
group
Strategic priorities
-- Provide best-in-class structuring and financing solutions and
drive origination through client initiatives
-- Invest to accelerate growth in differentiated international
network and affluent client businesses
-- Invest in market-leading digitisation initiatives in Retail
Banking to protect and grow market share in core markets; continue
with our retail transformation agenda to recalibrate our network
and streamline structures
-- De-risk and improve the quality of income with continuous focus on return enhancements
Progress
-- A number of marquee Corporate & Institutional Banking
transactions across the region with sovereign clients in particular
are reflective of the strong client franchise
-- Network income was 13 per cent higher and the Group's Global
Subsidiaries business grew by 10 per cent
-- After a successful launch of a digital-only bank in Côte
d'lvoire in the first half of 2018, roll-out was extended to seven
additional markets (Uganda, Tanzania, Ghana, Kenya, Zimbabwe,
Botswana and Zambia)
-- Despite continued geopolitical and macroeconomic headwinds,
improved asset quality and good risk discipline led to lower credit
impairments
-- Cost efficiencies have allowed investments to continue through the cycle
Performance highlights
-- Underlying profit before taxation of $441 million was 14 per
cent higher with lower expenses and improved credit impairment
offset by a decrease in income
-- Underlying income of $1,340 million up 3 per cent on a
constant currency basis, down 3 per cent on reported basis, with
good performance in our Corporate & Institutional Banking and
Commercial Banking business across the region. On a constant
currency basis, Africa was up 9 per cent and the Middle East and
Pakistan were 1 per cent down
-- Strong performances in Financial Markets and Corporate
Finance were offset by margin compression in Retail Banking and
lower Wealth Management in UAE and Botswana
-- Since December 2018, loans and advances to customers were up
1 per cent and customer accounts were down 1 per cent
Standard Chartered PLC - Regional reviews
Europe & Americas
Clients based in Europe & Americas generate over one-third
of Corporate & Institutional Banking income, with two-thirds of
that income booked in the Group's other regions where the service
is provided
Strategic priorities
-- Continue to attract new international corporate and financial
institutional clients and deepen relationships with existing and
new clients by banking them across more markets in our network,
connecting them to the world's fastest growing markets
-- Scale up our continental European business, leveraging
significant trade corridors with Asia and Africa
-- Enhance capital efficiency, maintain strong risk oversight
and further improve the quality of our funding base
-- Grow our Private Banking franchise and assets under management in London and Jersey
-- Leverage our network capabilities as new e-commerce based industries grow internationally
Progress
-- Good progress in improving the share of business from
targeted multinational corporate clients, with income up 25 per
cent and 9 per cent from 'New' OECD and 'Next' client initiatives
respectively
-- Continued growth in our key Greater China corridor providing
high network returns from Europe & Americas clients
-- The Group is well prepared for Brexit with Standard Chartered
Bank AG (Germany) operational and providing a strong base to grow
our continental Europe franchise
-- Launched sustainable finance business and issued inaugural
sustainable bond focused on emerging markets
Performance highlights
-- Underlying profit before taxation of $13 million, down 85 per
cent primarily due to lower operating income, partially offset by
reduced costs
-- Underlying income of $794 million was down 9 per cent due to
an adverse swing in the debit valuation adjustment (DVA) in
Financial Markets, resulting from an improvement in the Group's own
credit risk, and lower Treasury income. This offset strong
performance in Transaction Banking and Financial Markets
-- Income generated by Europe & Americas clients, but booked
elsewhere in our network, increased by 4 per cent
-- Improvement in credit quality of assets combined with good
income growth resulted in an increase in the returns originated
from Europe & Americas clients
All comparisons are based on the same period last year unless
otherwise stated
Standard Chartered PLC - Group Chief Risk Officer's review
Group Chief Risk Officer's review
Sustainable growth; solid foundations
The risk landscape is constantly evolving, and we need to ensure
our approach is agile and efficient in dealing with the challenge.
We have continued to invest in technology, streamlined our
processes in order to serve clients better, and embraced
innovation. We have maintained a strong focus on key risk
fundamentals, with asset quality improving year-on-year and
remaining stable since the end of 2018 and ongoing credit
impairment, which now includes the liquidation portfolio, lower
than the equivalent period in 2018. We continue to manage our
portfolios to ensure that they remain diversified in terms of
sectors, products, and geographies. Our strong capital position has
allowed us to grow our risk-weighted assets (RWAs) in a controlled
manner through growth in assets while also buying back shares. Our
liquidity metrics also remain at healthy levels.
2019 has seen considerable global uncertainty, with US-China
trade tensions and other geopolitical issues forcing all companies
to assess the way they do business. Setting up our new German
subsidiary has allowed us to alleviate some of the risks related to
Brexit, while continuing to serve clients. We have also
strengthened our focus on global environmental concerns, while
increasing our support to areas that promote a sustainable future.
Sustainability is one of the key items on our agenda, and we
recognise that we have an important role to play in promoting
economic and social development in a sustainable manner.
More information about the Group's sustainability philosophy can
be found at sc.com/en/sustainability/philosophy
Our key risk priorities
We are ensuring the best use of our people and resources to
strengthen and fully optimise the way risk is managed within the
Group. We recognise the need to evolve to stay relevant in the
markets in which we operate, and as such we need to strive to
enhance our capabilities in a number of areas. Below are our key
priorities for 2019:
Strengthen the Group's risk culture
Embedding a healthy risk culture continues to be a core
objective across all areas of the Group. It underpins an
enterprise-level ability to identify and assess, openly discuss,
and take prompt action to address all existing and emerging risks.
Our Enterprise Risk Management Framework (ERMF) sets out the
guiding principles for our people, enabling us to have integrated
and holistic risk conversations across the Group. By continuing to
ensure that the right risk behaviours are ingrained across the
Group, we can focus on the Risk function's refreshed purpose of
increasing prosperity by taking the right risks.
Enhance information and cyber security
We continue to invest in our security capabilities to ensure
that Information and Cyber Security Risk management is embedded in
each stage of the client journey. During 2019, a new Group
information and cyber security strategy has been developed to align
with the Group's overall corporate strategy and drive cohesion
across the Group on managing Information and Cyber Security Risk.
It is a three-year forward-looking plan that complements the
Group's innovation agenda and commitment to client service, while
recognising a rapidly evolving cyber threat landscape. The Group
has progressed initiatives to strengthen information and cyber
security foundations, embed robust governance, executive
engagement, and improve business accountability to drive a culture
of security excellence.
Managing climate risk
We consider climate change as one of the greatest challenges
facing the world today, given its widespread and proven impacts on
the physical environment, human health and its potential to
adversely impact economic growth. Climate-related risks have been
designated as a principal uncertainty for the Group since 2017. We
have established a central Climate Risk team within our Enterprise
Risk Management function, which will develop a Climate Risk
framework that sets out a consistent approach to identify, assess
and manage climate risks across the Group, as well as addressing
regulatory requirements. We are collaborating with external experts
and various cross-industry forums to share and build a robust
response to climate risks. We recognise that we can contribute
towards the fight against climate change by supporting our clients
in driving a low-carbon transition and building climate resilience
or adaptive capabilities. We continue to increase our financing
towards those aligned with the UN's Sustainable Development Goals.
We are committed to measure, manage and ultimately reduce the
emissions linked to our financing, and published a white paper in
May 2019 detailing our progress and inviting clients, peer banks,
regulators and others to join us in solving the identified
challenges. We are dedicated to playing our part in driving an
orderly transition to a low-carbon economy through identifying and
managing the associated risks and opportunities in a robust
manner.
More information about the Group's white paper can be found at
sc.com/emissions
Standard Chartered - Group Chief Risk Officer's review
Manage financial crime risks
In the first half of 2019 we resolved the previously disclosed
investigations by the US and UK authorities related to historical
sanctions and financial crime controls, and we are focused on
delivering on the remaining actions required of us under the
settlement orders. We have a refreshed mission for financial crime
compliance, which is "Partnering to lead in the fight against
financial crime". The increased focus on partnering recognises that
it is through partnerships with other financial institutions,
regulators, law enforcement and NGOs that we can most effectively
combat financial crime. To that end, in addition to cooperating
with FIUs and other authorities around the globe we are
participating in formal public-private information sharing
partnerships in the UK, US, Hong Kong and Singapore, working with
law enforcement, regulators, financial institutions and other
stakeholders to better identify and report suspicious activity. We
have refreshed our Fighting Financial Crime microsite, which acts
as a source of information and thought leadership on financial
crime compliance. Our Correspondent Banking Academies continue to
advocate best practice and encourage financial inclusion by
"de-risking through education", an initiative that has received
particular recognition from the Financial Stability Board.
Strengthen our conduct environment
Conduct remains a key focus across the Group, and was elevated
to a Principal Risk Type last year to help ensure that conduct
considerations are central to decisions taken throughout the Group.
The emphasis in 2019 is to further embed the framework at a more
granular level across our countries, businesses and functions. The
Conduct Risk Type Framework provides a robust and consistent
approach to help ensure Conduct Risk identification, monitoring and
management. A key part of our framework are Conduct Plans, for all
of our countries, businesses and functions. These identify,
document and develop action plans to mitigate Conduct Risks.
Ownership of Conduct Plans is with the first line of defence, with
review and challenge from Compliance. These Plans will play a
significant part in helping us to uphold the highest standards of
conduct, acknowledging that while incidents cannot be entirely
avoided, the Group has no appetite for wilful or negligent
misconduct.
Enhance our compliance infrastructure
We have continued to deliver tangible progress on our multi-year
programme to review and strengthen our existing structures and
processes. In the first quarter of 2019 we installed a new solution
for policy and document management, as part of a broader
implementation of a strategic Governance, Risk & Compliance
(GRC) solution. Through the remainder of the year, we will
implement further GRC enhancements, including modules for issue
management and compliance assurance automation. To enable faster
business decision making, we have introduced an automated
self-service information and advisory portal, which we will further
expand by adding a mobile channel and machine-learning chatbot. We
have integrated our Advisory Teams within Compliance and FCC to
form a unified Conduct, Financial Crime and Compliance function
(CFCC) Advisory team. This will reduce organisational complexity
resulting in a greater client focus, reduced hierarchy and faster
decision making. In turn, the integrated team will build stronger
cross-knowledge of the Conduct, Financial Crime and Regulatory
Compliance Risk types, delivering more holistic risk management to
support the business as they take on greater first-line risk
ownership.
Improve our efficiency and effectiveness
We have continued to invest in improvements to infrastructure,
including exposure management, data quality and stress testing. We
are successfully using agile delivery methods to enhance our
Operational Risk management, workflow and reporting platforms. We
have developed concepts from both internal innovation and
collaboration with fintech partners to explore and implement
opportunities with machine learning and artificial intelligence. We
are further developing our data and analytics infrastructure to
enhance the speed and quality of risk decision-making.
Infrastructure improvements enable us to continue to streamline and
simplify our processes, to serve clients better and drive internal
efficiencies.
Our risk profile and performance
The Group's risk performance in the first six months of the year
demonstrates our commitment to strong and sustainable growth, and
the metrics detailed below indicate stable asset quality, strong
capital metrics, and robust liquidity and funding profiles. While
no new areas of stress have emerged, we remain vigilant in light of
continued geopolitical uncertainty.
We continue to focus on lending to high-quality counterparties
within our defined risk appetite, adding new clients selectively.
Through our focus on quality origination, we have strengthened our
risk profile significantly over the past three years, ensuring that
it is well positioned for any potential changes in the economic
environment. The Group's client exposures remain predominantly
short tenor, and our portfolios remain well diversified across
client segments, geographies and industry sectors. There was an
increase in the net exposure to our top 20 corporate clients as a
percentage of Tier 1 capital (H1 2019: 62 per cent; H2 2018: 55 per
cent), primarily in short-dated exposure to investment grade
clients. We continue to focus on early identification of emerging
risks across all of our portfolios
Standard Chartered - Group Chief Risk Officer's review
so that we can manage any areas of weakness on a proactive
basis. We also perform regular reviews and stress tests of our
portfolio to help mitigate any risks that might arise.
The Group's credit impairment has seen sustained improvements
over the past three years, with the Group total at $254 million for
the first half of 2019, representing a loan loss rate of 17 basis
points of average customer loans and advances. This was a 13 per
cent reduction compared with the first six months of 2018 (H1 2018:
$293 million(1) ). Corporate & Institutional Banking credit
impairment was lower than the previous six months, but higher than
in the first half of 2018 due to lower recoveries, and lower net
releases in stage 1 and 2 impairments. The Commercial Banking
segment has experienced a significant reduction from the prior year
due to lower stage 3 provisions and recoveries observed in the
period. The increase in the Retail Banking credit impairment is due
to non-recurring releases in the unsecured portfolio and the
restructured portfolio in Korea in the first half of 2018;
excluding these, the underlying impairment remains comparable.
Private Banking is lower due to a net provision release of $47
million in 2019.
Credit impairment
6 months
ended
6 months 6 months
30.06.19 ended 31.12.18 ended 30.06.18
$million(1) $million $million
---------------------------------- ------------- --------------- ---------------
Corporate & Institutional Banking 110 161 81
Commercial Banking 35 138 106
Retail Banking 154 148 119
Private Banking (47) (1) 1
Central & others 2 1 (14)
---------------------------------- ------------- --------------- ---------------
Total credit impairment charge 254 447 293
Restructuring charge - (8) (79)
---------------------------------- ------------- --------------- ---------------
1 In 2019 the Liquidation portfolio has been included in Ongoing
business. Prior periods have not been restated
The credit quality of the corporate portfolio has remained
stable, with improvement across a number of metrics. Credit grade
12 balances are slightly lower compared with year end at $1.4
billion, although this is 40 per cent higher than the first half of
2018. This increase is primarily due to a material upgrade from
stage 3 in India, and inflows that were recorded in the last
quarter of 2018 for Commercial Banking. We have observed a
continued decrease in net exposure on early alert, down from $4.8
billion to $4.1 billion in the first six months of the year, mainly
due to reductions in counterparty exposure and accounts being
regularised. While the percentage of investment grade clients in
our corporate net exposure has decreased to 57 per cent from 62 per
cent in the first half of 2019, this is primarily driven by a
reduction in repurchase agreements with clearing brokers, which are
volatile in nature. Excluding the impact of repurchase agreements,
the investment grade net exposure remains stable at 52 per cent (31
December 2018: 51 per cent).
The Group is now reporting the liquidation portfolio as part of
its underlying business. Gross credit-impaired (stage 3) loans have
decreased to $6.2 billion (31 December 2018: $6.9 billion). The
majority of the reduction occurred in Corporate & Institutional
Banking, which decreased by $0.5 billion, mainly due to write-offs
and write-downs of well or fully-provided material accounts in the
Africa & Middle East region. Both Corporate & Institutional
Banking and Commercial Banking saw a lower level of stage 3
inflows. Stage 3 loans in Retail Banking and Private Banking
remained stable in the year to date at $0.8 billion and $0.2
billion respectively.
Stage 3 cover ratio before collateral, of the total book,
increased slightly to 60 per cent in the first half of 2019 (31
December 2018: 59 per cent), and including collateral remained
stable at 81 per cent.
The Group maintains a strong liquidity position with healthy
buffers above its risk appetite and minimum regulatory
requirements. The liquidity coverage ratio decreased to 139 per
cent from 154 per cent at the end of 2018, driven by period-end
inflows and a shift in liability mix that led to higher outflows,
and a smaller increase in high-quality liquid assets. Loans and
deposits grew, with our advances-to-deposits ratio remaining
broadly unchanged at 64 per cent (H2 2018: 63 per cent). We remain
a net provider of liquidity to the interbank markets and our
customer deposit base is diversified by type and maturity. We have
a substantial portfolio of marketable securities which can be
realised in the event of a liquidity stress.
Our Common Equity Tier 1 ratio of 13.5 per cent is in the middle
of the Group's 13-14 per cent range, and is 72 basis points lower
in the first half of 2019 primarily due to the share buyback,
regulatory provisions and tax in relation to corporate entity
restructuring. Group RWA increased $12.4 billion driven by
underlying asset growth, partially offset by RWA efficiencies.
Average Group value at risk (VaR) in the first half of 2019 was
36 per cent higher than the previous six months, and 38 per cent
higher than the equivalent period in 2018, at $28.2 million (H2
2018: $20.8 million; H1 2018: $20.4 million), primarily driven by
an increase in non-trading book VaR, which has seen an increase in
the Treasury Markets bond Standard Chartered - Group Chief Risk
Officer's review
inventory, as well as reduced portfolio diversification. Trading
activities remain primarily client driven.
Further details of the risk performance for the first six months
of 2019 are set out in the Risk profile section
Key indicators
30.06.19 31.12.18 30.06.18
$million $million $million
----------------------------------------------------- ---------- ---------- ----------
Group total business(1)
Stage 1 loans ($ billion) 245.7 237.1 235.1
Stage 2 loans ($ billion) 16.1 17.4 21.8
Stage 3 loans ($ billion) 6.2 6.9 7.7
Stage 3 cover ratio 60% 59% 57%
Stage 3 cover ratio (including collateral) 81% 81% 79%
----------------------------------------------------- ---------- ---------- ----------
Corporate & Institutional Banking and Commercial
Banking
Investment grade corporate exposures as a percentage
of total corporate exposures 57% 62% 61%
Loans and advances maturing in one year or
less as a percentage of total loans and advances
to customers 61%(2) 60%(2) 71%
Early alert portfolio ($ billion) 4.1 4.8 6.9
Credit grade 12 ($ billion) 1.4 1.5 1.0
Aggregate top 20 corporate exposures as a percentage
of Tier 1 capital 62% 55% 53%
Collateralisation of sub-investment grade exposures
maturing in more than 1 year 47% 51% 55%
----------------------------------------------------- ---------- ---------- ----------
Retail Banking
Loan-to-value ratio of retail mortgages 44% 45% 45%
----------------------------------------------------- ---------- ---------- ----------
1 These numbers represents total loans and advances to
customers
2 Excludes fair value through profit or loss (including fair
value through profit or loss: 30.06.19: 69 per cent; 31.12.18: 70
per cent)
Our risk management approach
We have continued to build out the ERMF, allowing the Group to
identify and manage risks holistically, as well as strengthening
the Group's capabilities to understand, articulate and control the
nature and level of risks we take while still effectively serving
our clients.
Since the launch of the ERMF in 2018, awareness of the framework
has increased significantly and we have made good progress in
delivering our strategic initiatives to embed the ERMF across the
organisation. An ERMF Effectiveness Review was carried out last
year, following which we identified key initiatives to address
areas of improvement in the management of the 10 principal risks.
We are closely monitoring implementation progress across these
deliverables for the Group.
The ERMF, which sets out a refreshed risk culture and sharper
delineation of responsibilities across the three lines of defence,
is being adopted in the branches and subsidiaries. To facilitate
this, we have rolled out a country self-assessment process to
evaluate how the ERMF and Risk Type Frameworks are embedded
locally. Over the course of the year the Group aims to further
strengthen its risk management practices across the markets in
which we operate, with stronger links between the three lines of
defence and greater first-line risk ownership.
Principal risks
Principal risks are those risks that are inherent in our
strategy and business model. These are formally defined in our ERMF
which provides a structure for monitoring and control of these
risks through the Board-approved Risk Appetite. The Group will not
compromise adherence to its Risk Appetite in order to pursue
revenue growth or higher returns. The table below provides an
overview of the Group's principal risks and how these are managed.
The Group's principal risks have not changed since the time of
publication of our 2018 Annual Report and further details on these
can be found in our 2018 Annual Report.
Standard Chartered - Group Chief Risk Officer's review
Principal Risk
Types How these are managed
Credit Risk The Group manages its credit exposures following the
principle of diversification across products, geographies,
client segments and industry sectors
--------------------- ---------------------------------------------------------------
Country Risk1 The Group manages its country cross-border exposures
following the principle of diversification across geographies
and controls business activities in line with the level
of jurisdiction risk
--------------------- ---------------------------------------------------------------
Traded Risk The Group should control its trading portfolio and activities
to ensure that Traded Risk losses (financial or reputational)
do not cause material damage to the Group's franchise
--------------------- ---------------------------------------------------------------
Capital and Liquidity The Group should maintain a strong capital position,
Risk including the maintenance of management buffers sufficient
to support its strategic aims, and hold an adequate
buffer of high-quality liquid assets to survive extreme
but plausible liquidity stress scenarios for at least
60 days without recourse to extraordinary central bank
support
--------------------- ---------------------------------------------------------------
Operational Risk The Group aims to control Operational Risks to ensure
that operational losses (financial or reputational),
including any related to conduct of business matters,
do not cause material damage to the Group's franchise
--------------------- ---------------------------------------------------------------
Reputational The Group aims to protect the franchise from material
Risk damage to its reputation by ensuring that any business
activity is satisfactorily assessed and managed by the
appropriate level of management and governance oversight
--------------------- ---------------------------------------------------------------
Compliance Risk The Group has no appetite for breaches in laws and regulations,
while recognising that regulatory non-compliance cannot
be entirely avoided, the Group strives to reduce this
to an absolute minimum
--------------------- ---------------------------------------------------------------
Conduct Risk The Group has no appetite for negative Conduct Risk
outcomes arising from negligent or wilful actions by
the Group or individuals, recognising that while incidents
are unwanted, they cannot be entirely avoided
--------------------- ---------------------------------------------------------------
Information and The Group seeks to avoid risk and uncertainty for our
Cyber Security critical information assets and systems and has a low
Risk appetite for material incidents affecting these or the
wider operations and reputation of the bank
--------------------- ---------------------------------------------------------------
Financial Crime The Group has no appetite for breaches in laws and regulations
Risk related to financial crime, recognising that while incidents
are unwanted, they cannot be entirely avoided
--------------------- ---------------------------------------------------------------
1 Effective from July 2019, the Country Risk Type Framework has
been updated to expand our risk coverage from the existing Country
Cross Border Risk to Gross Country Risk, which encompasses Transfer
and Convertibility Risk and Local Currency Risk. Further details
will be provided in the 2019 Annual Report
Our principal uncertainties
Principal uncertainties refer to unpredictable and
uncontrollable outcomes from certain events and circumstances which
may have the potential to have a material impact on our business.
As part of our continuous risk identification process, we have
updated the Group's principal uncertainties from those disclosed in
the 2018 Annual Report.
The table below summarises our current list of principal
uncertainties, outlining the risk trend changes relative to
2018-year end, the reasons for the changes and the mitigating
actions we are taking based on our current knowledge and
assumptions. This reflects the latest internal assessment of
material risks that the Group faces as identified by senior
management. This list is not designed to be exhaustive and there
may be additional risks which materialise or have an adverse effect
on the Group. Our mitigation approach for these risks may not be
successful in completely eliminating them, but rather shows the
Group's attempt to reduce or manage the risk. As certain risks
develop and materialise over time, management will take appropriate
incremental steps based on the materiality of the impact of the
risk to the operations of the Group.
Risk trend
Principal since December Key risk trend
uncertainties 20181 drivers How these are mitigated
---------------- --------------- ----------------- ----------------------------------------------------------------
Geopolitical ñ There are
events, in increasing * We monitor and assess geopolitical events and act as
particular: concerns on appropriate to ensure we minimise the impact to the
extended trade global Group and our clients
tensions driven geopolitical and
by geopolitical trade
and trade implications * We conduct stress tests and portfolio reviews at a
concerns, following the Group, country and business level to assess the
unrest in Hong deterioration impact of extreme but plausible geopolitical events
Kong, Middle of relations
East between
geopolitical the US and China.
tensions, and Recent political
post-Brexit protests have
implications additionally
elevated
the risk in Hong
Kong. The risk
in the Middle
East has elevated
due to concerns
about Iran while
political events
in the UK have
increased the
risk of
disorderly
Brexit
---------------- --------------- ----------------- ----------------------------------------------------------------
Macroeconomic ó The risk remains
conditions, in at similar levels * We monitor economic trends and conduct stress tests
particular: as at the end and portfolio reviews at a Group, country and
moderation of 2018 business level to assess the impact of extreme but
of growth in plausible events
key footprint
markets led by
China and * We monitor on a centralised basis contractual and
political behavioural Interest Rate Risk exposures, and manage
volatility. these within a clearly defined risk management
Sharp framework and risk appetite
interest rate
changes, and
foreign currency
volatility in
both emerging
and developed
markets
---------------- --------------- ----------------- ----------------------------------------------------------------
Standard Chartered - Group Chief Risk Officer's review
Climate related ó The risk remains
physical risks at similar levels * We are developing a climate risk framework to deliver
and transition as at the end of a consistent group-wide approach to climate risk
risks2 2018 management. We are also a member of the Risk
Management Working Group under the Bank of England's
Climate Financial Risk Forum
* We have reduced our risk appetite to carbon-intensive
sectors by introducing technical standards for
coal-fired power plants, and restrictions on new coal
mining clients and projects. In September 2018, we
announced that we would no longer provide financing
for new coal-fired power plants anywhere in the
world. In February 2019, we communicated that we
would no longer trade coal-based derivative products
* We achieved, two years ahead of schedule, our public
target to fund and facilitate $4 billion toward clean
technology between 2016 and 2020
--------------------- ------ -------------------- -----------------------------------------------------------------
Regulatory reviews ò Following settlement
and investigations, with the US and * We have invested in enhancing systems and controls,
legal proceedings UK authorities and implemented remediation programmes (where
on long-standing relevant)
financial
crime-related
matters, this risk * We continue to train and educate our people on
has now decreased conduct, conflicts of interest, information security
and financial crime compliance in order to reduce our
exposure to legal and regulatory proceedings
--------------------- ------ -------------------- -----------------------------------------------------------------
Regulatory changes ó The risk remains
at similar levels * We actively monitor regulatory initiatives across our
as at the end of footprint to identify any potential impact and change
2018 to our business model
* We have established relevant project management
programmes to review and improve end-to-end processes
in terms of oversight and accountability,
transparency, permission and controls, legal entry
level limits and training
--------------------- ------ -------------------- -----------------------------------------------------------------
New technologies ñ New technologies
and digitisation, are becoming more * We monitor emerging trends, opportunities and risk
including Business sophisticated and developments in the technology space which may have
Disruption Risk, further embedded implications on the banking sector
responsible use in the banking
of artificial sector. Regulators
intelligence are placing * We are engaged in building our capabilities to ensure
and Obsolescence increasing we remain relevant and are able to capitalise rapidly
Risk emphasis on on technology trends
resilience.
Our business model
is placing * We continue to make headway in harnessing new
increasing technologies, and we are investing in
reliance on machine-learning solutions that rapidly analyse large
third-party datasets and fine-tune the accuracy of our financial
suppliers crime tools
* We are actively targeting the reduction of
obsolescent/end-of-support technology following a
technology and innovation-led approach
--------------------- ------ -------------------- -----------------------------------------------------------------
Increased data ñ Recent penalties
privacy and security on firms who have * We have existing governance and control frameworks
risks from strategic suffered data losses for the deployment of new technologies
and wider use or breaches
of data demonstrates
the increasing * We have designed a programme to manage the risks
risk posed by rapidly evolving cyber security threats
* We maintain a vigilant watch on legal and regulatory
developments in relation to data protection to
identify any potential impact to the business
--------------------- ------ -------------------- -----------------------------------------------------------------
1 The risk trend refers to the overall risk score trend which is
a combination of potential impact, likelihood and velocity of
change
2 Physical risks refer to the risk of increasingly extreme
weather events while transition risks refer to the risk of changes
to market dynamics due to governments' response to climate
change
Standard Chartered - Group Chief Risk Officer's review
Summary
We want to be at the forefront of building a sustainable,
resilient finance industry with a risk culture that champions
social and economic development across our global footprint. We
have laid the foundations, and now seek to create an innovative
Risk and Conduct, Financial Crime and Compliance function that
fully harnesses our competitive advantages. By being cognisant of
both our strengths and areas where we can do better, we can ensure
that the progress we make is enduring and consistent with our brand
promise to be Here for good.
Mark Smith
Group Chief Risk Officer
1 August 2019
Standard Chartered PLC - Supplementary financial information
Supplementary financial information
1. Analysis of underlying performance by key market
The following tables provide information for key markets in
which the Group operates. The numbers are prepared on a management
view. Refer to the notes to the financial statements in the Half
Year Report for details.
6 months ended 30.06.19
--------------------------------------------------------------------------------------
Hong
Kong Korea China Singapore India UAE UK US
$million $million $million $million $million $million $million $million
--------- --------- --------- --------- --------- --------- --------- ---------
Operating income 1,854 505 445 871 502 327 330 365
Operating expenses (938) (390) (323) (484) (328) (210) (342) (296)
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Operating profit/(loss)
before impairment losses
and taxation 916 115 122 387 174 117 (12) 69
Credit impairment (36) 7 (43) (7) (41) (26) (15) (50)
Other impairment (8) - - - - - - -
Profit from associates
and joint ventures - - 153 - - - - -
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Underlying profit/(loss)
before taxation 872 122 232 380 133 91 (27) 19
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Total assets employed 158,434 50,832 31,702 84,532 31,036 20,934 150,284 53,320
Of which: loans and
advances to customers
including FVTPL 73,924 32,059 15,725 46,953 16,154 10,673 41,903 15,008
Total liabilities employed 142,036 44,965 27,523 83,526 21,188 14,467 154,052 53,447
Of which: customer accounts 118,556 36,132 20,513 63,702 15,808 10,702 86,514 26,335
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
6 months ended 31.12.18
------------------------------ --------------------------------------------------------------------------------------
Hong
Kong Korea China Singapore India UAE UK US
$million $million $million $million $million $million $million $million
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Operating income 1,903 475 399 702 467 280 378 334
Operating expenses (983) (393) (342) (497) (333) (220) (341) (300)
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Operating profit before
impairment losses and
taxation 920 82 57 205 134 60 37 34
Credit impairment (42) 2 (21) (59) (101) (140) (6) (7)
Other impairment (64) (4) - 10 1 - (7) -
Profit from associates
and joint ventures - - 49 - - - - -
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Underlying profit/(loss)
before taxation 814 80 85 156 34 (80) 24 27
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Total assets employed 153,372 51,306 30,272 81,882 29,886 19,847 136,967 48,706
Of which: loans and
advances to customers
including FVTPL 71,971 33,435 12,894 46,342 16,567 10,749 41,248 13,464
Total liabilities employed 139,332 45,347 27,158 80,200 20,554 13,679 148,041 42,301
Of which: customer accounts 116,999 36,894 21,801 58,415 16,306 10,517 93,096 16,218
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
6 months ended 30.06.18
------------------------------ --------------------------------------------------------------------------------------
Hong
Kong Korea China Singapore India UAE UK US
$million $million $million $million $million $million $million $million
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Operating income 1,849 534 422 845 482 357 441 333
Operating expenses (961) (404) (333) (512) (344) (233) (330) (321)
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Operating profit before
impairment losses and
taxation 888 130 89 333 138 124 111 12
Credit impairment (15) (3) (9) (56) (29) (56) (45) (29)
Other impairment (45) 5 - (10) (2) - 24 -
Profit from associates
and joint ventures - - 156 - - - - -
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Underlying profit/(loss)
before taxation 828 132 236 267 107 68 90 (17)
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Total assets employed 153,021 52,536 31,639 83,211 27,370 18,477 140,227 52,578
Of which: loans and
advances to customers
including FVTPL 73,390 33,289 13,959 46,022 15,958 11,100 37,828 11,173
Total liabilities employed 135,252 46,942 28,693 82,305 18,049 14,373 154,925 45,610
Of which: customer accounts 112,948 38,029 21,492 59,619 14,397 11,890 94,960 18,190
------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Standard Chartered PLC - Supplementary financial information
2. Analysis of underlying performance by Retail Banking and
Commercial Banking segments
Retail Banking
6 months ended 30.06.19
----------------------------------- --------------------------------------------------------------
Greater China ASEAN & Africa & Europe &
& North Asia South Asia Middle East Americas Total
$million $million $million $million $million
----------------------------------- ------------- ----------- ------------ --------- ---------
Operating income 1,520 707 349 19 2,595
Operating expenses (979) (531) (301) (12) (1,823)
----------------------------------- ------------- ----------- ------------ --------- ---------
Operating profit before impairment
losses and taxation 541 176 48 7 772
Credit impairment (65) (63) (26) - (154)
----------------------------------- ------------- ----------- ------------ --------- ---------
Underlying profit before taxation 476 113 22 7 618
Restructuring - (1) - - (1)
----------------------------------- ------------- ----------- ------------ --------- ---------
Statutory profit before taxation 476 112 22 7 617
----------------------------------- ------------- ----------- ------------ --------- ---------
Loans and advances to customers
including FVTPL 67,192 28,103 5,371 529 101,195
Customer accounts 95,598 34,152 8,440 1,066 139,256
----------------------------------- ------------- ----------- ------------ --------- ---------
6 months ended 31.12.18
----------------------------------- --------------------------------------------------------------
Greater China ASEAN & Africa & Europe &
& North Asia South Asia Middle East Americas Total
$million $million $million $million $million
----------------------------------- ------------- ----------- ------------ --------- ---------
Operating income 1,401 640 361 19 2,421
Operating expenses (987) (524) (330) (11) (1,852)
----------------------------------- ------------- ----------- ------------ --------- ---------
Operating profit before impairment
losses and taxation 414 116 31 8 569
Credit impairment (41) (70) (37) - (148)
Other impairment (5) - - - (5)
----------------------------------- ------------- ----------- ------------ --------- ---------
Underlying profit/(loss) before
taxation 368 46 (6) 8 416
Restructuring (17) (17) (30) - (64)
----------------------------------- ------------- ----------- ------------ --------- ---------
Statutory profit/(loss) before
taxation 351 29 (36) 8 352
----------------------------------- ------------- ----------- ------------ --------- ---------
Loans and advances to customers
including FVTPL 67,718 27,812 5,595 510 101,635
Customer accounts 95,086 32,120 8,433 1,052 136,691
----------------------------------- ------------- ----------- ------------ --------- ---------
6 months ended 30.06.18
----------------------------------- --------------------------------------------------------------
Greater China ASEAN & Africa & Europe &
& North Asia South Asia Middle East Americas Total
$million $million $million $million $million
----------------------------------- ------------- ----------- ------------ --------- ---------
Operating income 1,485 712 404 19 2,620
Operating expenses (972) (559) (338) (15) (1,884)
----------------------------------- ------------- ----------- ------------ --------- ---------
Operating profit before impairment
losses and taxation 513 153 66 4 736
Credit impairment (31) (65) (23) - (119)
----------------------------------- ------------- ----------- ------------ --------- ---------
Underlying profit before taxation 482 88 43 4 617
Restructuring (1) (3) - - (4)
----------------------------------- ------------- ----------- ------------ --------- ---------
Statutory profit before taxation 481 85 43 4 613
----------------------------------- ------------- ----------- ------------ --------- ---------
Loans and advances to customers
including FVTPL 66,897 28,128 5,973 532 101,530
Customer accounts 90,840 31,292 8,987 1,135 132,254
----------------------------------- ------------- ----------- ------------ --------- ---------
Standard Chartered PLC - Supplementary financial information
Commercial Banking
6 months ended 30.06.19
------------------------------------------ ---------------------------------------------------
Greater China ASEAN & Africa &
& North Asia South Asia Middle East Total
$million $million $million $million
------------------------------------------ ------------- ----------- ------------ ---------
Operating income 301 278 167 746
Operating expenses (177) (143) (105) (425)
------------------------------------------ ------------- ----------- ------------ ---------
Operating profit before impairment
losses and taxation 124 135 62 321
Credit impairment (9) (13) (13) (35)
------------------------------------------ ------------- ----------- ------------ ---------
Underlying profit before taxation 115 122 49 286
------------------------------------------ ------------- ----------- ------------ ---------
Statutory profit before taxation 115 122 49 286
------------------------------------------ ------------- ----------- ------------ ---------
Loans and advances to customers including
FVTPL 14,051 9,255 4,923 28,229
Customer accounts 19,018 9,694 3,164 31,876
------------------------------------------ ------------- ----------- ------------ ---------
6 months ended 31.12.18
------------------------------------------ ---------------------------------------------------
Greater China ASEAN & Africa &
& North Asia South Asia Middle East Total
$million $million $million $million
------------------------------------------ ------------- ----------- ------------ ---------
Operating income 289 260 136 685
Operating expenses (191) (170) (102) (463)
------------------------------------------ ------------- ----------- ------------ ---------
Operating profit before impairment
losses and taxation 98 90 34 222
Credit impairment (6) (48) (84) (138)
------------------------------------------ ------------- ----------- ------------ ---------
Underlying profit/(loss) before taxation 92 42 (50) 84
Restructuring (6) (3) (2) (11)
------------------------------------------ ------------- ----------- ------------ ---------
Statutory profit/(loss) before taxation 86 39 (52) 73
------------------------------------------ ------------- ----------- ------------ ---------
Loans and advances to customers including
FVTPL 13,926 9,118 4,227 27,271
Customer accounts 22,011 9,720 3,129 34,860
------------------------------------------ ------------- ----------- ------------ ---------
6 months ended 30.06.18
------------------------------------------ ---------------------------------------------------
Greater China ASEAN & Africa &
& North Asia South Asia Middle East Total
$million $million $million $million
------------------------------------------ ------------- ----------- ------------ ---------
Operating income 295 263 148 706
Operating expenses (198) (160) (102) (460)
------------------------------------------ ------------- ----------- ------------ ---------
Operating profit before impairment
losses and taxation 97 103 46 246
Credit impairment (17) (25) (64) (106)
------------------------------------------ ------------- ----------- ------------ ---------
Underlying profit/(loss) before taxation 80 78 (18) 140
Restructuring (1) - - (1)
------------------------------------------ ------------- ----------- ------------ ---------
Statutory profit/(loss) before taxation 79 78 (18) 139
------------------------------------------ ------------- ----------- ------------ ---------
Loans and advances to customers including
FVTPL 14,628 9,281 4,662 28,571
Customer accounts 20,496 9,282 2,918 32,696
------------------------------------------ ------------- ----------- ------------ ---------
Standard Chartered PLC - Supplementary financial information
3. Average balance sheets and yields
The following tables set out the average balances and yields for
the Group's assets and liabilities for the periods ended 30 June
2019, 31 December 2018 and 30 June 2018. For the purpose of these
tables, average balances have been determined on the basis of daily
balances, except for certain categories, for which balances have
been determined less frequently. The Group does not believe that
the information presented in these tables would be significantly
different had such balances been determined on a daily basis.
Average assets
6 months ended 30.06.19
--------------------------------------------- --------------------------------------------------------------
Average non-interest Average interest Interest
earning balance earning balance income Gross yield
$million $million $million %
--------------------------------------------- -------------------- ---------------- --------- -----------
Cash and balances at central banks 18,068 30,318 189 1.26
Gross loans and advances to banks 2,306 84,011 1,356 3.25
Gross loans and advances to customers - 318,653 5,851 3.70
Impairment provisions against loans
and advances to banks and customers - (5,030) - -
Investment securities 2,794 156,817 2,447 3.15
Property, plant and equipment and intangible
assets 10,945 - - -
Prepayments, accrued income and other
assets 79,040 - - -
Investment associates and joint ventures 2,547 - - -
--------------------------------------------- -------------------- ---------------- --------- -----------
Total average assets 115,700 584,769 9,843 3.39
--------------------------------------------- -------------------- ---------------- --------- -----------
6 months ended 31.12.18
--------------------------------------------- --------------------------------------------------------------
Average non-interest Average interest Interest
earning balance earning balance income Gross yield
$million $million $million %
--------------------------------------------- -------------------- ---------------- --------- -----------
Cash and balances at central banks 21,126 32,238 193 1.19
Gross loans and advances to banks (109) 86,389 1,210 2.78
Gross loans and advances to customers - 302,311 5,527 3.63
Impairment provisions against loans
and advances to banks and customers - (5,384) - -
Investment securities 2,456 146,438 2,107 2.85
Property, plant and equipment and intangible
assets 10,825 - - -
Prepayments, accrued income and other
assets 74,894 - - -
Investment associates and joint ventures 2,439 - - -
--------------------------------------------- -------------------- ---------------- --------- -----------
Total average assets 111,631 561,992 9,037 3.19
--------------------------------------------- -------------------- ---------------- --------- -----------
6 months ended 30.06.18
--------------------------------------------- --------------------------------------------------------------
Average non-interest Average interest Interest
earning balance earning balance income Gross yield
$million $million $million %
--------------------------------------------- -------------------- ---------------- --------- -----------
Cash and balances at central banks 28,382 33,230 171 1.04
Gross loans and advances to banks 2,809 85,661 1,083 2.55
Gross loans and advances to customers - 301,476 5,091 3.41
Impairment provisions against loans
and advances to banks and customers - (6,023) - -
Investment securities 2,625 139,870 1,882 2.71
Property, plant and equipment and intangible
assets 10,492 - - -
Prepayments, accrued income and other
assets 82,047 - - -
Investment associates and joint ventures 2,477 - - -
--------------------------------------------- -------------------- ---------------- --------- -----------
Total average assets 128,832 554,214 8,227 2.99
--------------------------------------------- -------------------- ---------------- --------- -----------
Standard Chartered PLC - Supplementary financial information
Average liabilities
6 months ended 30.06.19
-------------------------------------------- ------------------------------------------------------------
Average non-interest Average interest Interest
bearing balance bearing balance expense Rate paid
$million $million $million %
-------------------------------------------- -------------------- ---------------- --------- ---------
Deposits by banks 6,027 39,264 613 3.15
Customer accounts:
Current accounts and savings deposits 38,489 179,706 989 1.11
Time and other deposits 8,390 217,373 2,625 2.44
Debt securities in issue - 57,510 608 2.13
Accruals, deferred income and other
liabilities 87,681 4 - -
Subordinated liabilities and other
borrowed funds - 14,877 390 5.29
Non-controlling interests 9 - - -
Shareholders' funds 50,054 - - -
-------------------------------------------- -------------------- ---------------- --------- ---------
Total average liabilities and shareholders'
funds 190,650 508,734 5,225 2.07
-------------------------------------------- -------------------- ---------------- --------- ---------
Net yield 1.32
-------------------------------------------- -------------------- ---------------- --------- ---------
Net interest margin 1.59
-------------------------------------------- -------------------- ---------------- --------- ---------
6 months ended 31.12.18
-------------------------------------------- ------------------------------------------------------------
Average non-interest Average interest Interest
bearing balance bearing balance expense Rate paid
$million $million $million %
-------------------------------------------- -------------------- ---------------- --------- ---------
Deposits by banks 5,899 33,529 372 2.20
Customer accounts:
Current accounts and savings deposits 37,585 174,397 940 1.07
Time and other deposits 9,309 205,271 2,230 2.16
Debt securities in issue (26) 53,488 682 2.53
Accruals, deferred income and other
liabilities 98,040 - - -
Subordinated liabilities and other
borrowed funds - 14,922 381 5.06
Non-controlling interests 22 - - -
Shareholders' funds 49,711 - - -
-------------------------------------------- -------------------- ---------------- --------- ---------
Total average liabilities and shareholders'
funds 200,540 481,608 4,605 1.90
-------------------------------------------- -------------------- ---------------- --------- ---------
Net yield 1.29
-------------------------------------------- -------------------- ---------------- --------- ---------
Net interest margin 1.56
-------------------------------------------- -------------------- ---------------- --------- ---------
6 months ended 30.06.18
-------------------------------------------- ------------------------------------------------------------
Average non-interest Average interest Interest
bearing balance bearing balance expense Rate paid
$million $million $million %
-------------------------------------------- -------------------- ---------------- --------- ---------
Deposits by banks 6,748 35,481 439 2.50
Customer accounts:
Current accounts and savings deposits 40,255 182,578 727 0.80
Time and other deposits 8,000 197,362 1,867 1.91
Debt securities in issue 301 54,496 447 1.65
Accruals, deferred income and other
liabilities 92,341 - - -
Subordinated liabilities and other
borrowed funds - 16,652 386 4.67
Non-controlling interests 74 - - -
Shareholders' funds 50,779 - - -
-------------------------------------------- -------------------- ---------------- --------- ---------
Total average liabilities and shareholders'
funds 198,498 486,569 3,866 1.60
-------------------------------------------- -------------------- ---------------- --------- ---------
Net yield 1.39
-------------------------------------------- -------------------- ---------------- --------- ---------
Net interest margin 1.59
-------------------------------------------- -------------------- ---------------- --------- ---------
Standard Chartered PLC - Shareholder information
Dividend and interest payment dates
2019 interim dividend
----------------------------------------------- -----------------------------
8 August 2019 (UK), 7 August
Ex-dividend date 2019 (HK)
Record date for dividend 9 August 2019
Dividend payment date 21 October 2019
----------------------------------------------- -----------------------------
2019 final dividend (provisional only)
----------------------------------------------- -----------------------------
Results and dividend announcement date 27 February 2020
----------------------------------------------- -----------------------------
Preference shares Next half-yearly dividend
----------------------------------------------- -----------------------------
7 3/8 per cent Non-cumulative irredeemable
preference shares of GBP1 each 1 October 2019
8 1/4 per cent Non-cumulative irredeemable
preference shares of GBP1 each 1 October 2019
----------------------------------------------- -----------------------------
6.409 per cent Non-cumulative preference shares
of $5 each 30 July 2019, 30 October 2019
7.014 per cent Non-cumulative preference shares
of $5 each 30 July 2019
----------------------------------------------- -----------------------------
Previous dividend payments (unadjusted for the impact of the
2015/2010/2008 Rights Issues)
Cost of one new
ordinary share
Dividend and under share dividend
financial year Payment date Dividend per ordinary share scheme
--------------- -------------------- ---------------------------------------------------- ---------------------
Interim 2006 11 October 2006 20.83c/11.14409p/HK$1.622699 GBP13.2360/$25.03589
Final 2006 11 May 2007 50.21c/25.17397p/HK$3.926106 GBP14.2140/$27.42591
Interim 2007 10 October 2007 23.12c/11.39043p/HK$1.794713 GBP15.2560/$30.17637
Final 2007 16 May 2008 56.23c/28.33485p/HK$4.380092 GBP16.2420/$32.78447
Interim 2008 9 October 2008 25.67c/13.96133p/HK$1.995046 GBP14.00/$26.0148
Final 2008 15 May 2009 42.32c/28.4693p/HK$3.279597 GBP8.342/$11.7405
Interim 2009 8 October 2009 21.23c/13.25177p/HK$1.645304 GBP13.876/$22.799
Final 2009 13 May 2010 44.80c/29.54233p/HK$3.478306 GBP17.351/$26.252
Interim 2010 5 October 2010 23.35c/14.71618p/HK$1.811274/INR0.9841241 GBP17.394/$27.190
Final 2010 11 May 2011 46.65c/28.272513p/HK$3.623404/INR1.99751701 GBP15.994/$25.649
Interim 2011 7 October 2011 24.75c/15.81958125p/HK$1.928909813/INR1.137971251 GBP14.127/$23.140
Final 2011 15 May 2012 51.25c/31.63032125p/HK$3.9776083375/INR2.66670151 GBP15.723/$24.634
Interim 2012 11 October 2012 27.23c/16.799630190p/HK$2.111362463/INR1.3498039501 GBP13.417/$21.041
Final 2012 14 May 2013 56.77c/36.5649893p/HK$4.4048756997/INR2.9762835751 GBP17.40/$26.28792
Interim 2013 17 October 2013 28.80c/17.8880256p/HK$2.233204992/INR1.68131 GBP15.362/$24.07379
Final 2013 14 May 2014 57.20c/33.9211444p/HK$4.43464736/INR3.3546261 GBP11.949$19.815
Interim 2014 20 October 2014 28.80c/17.891107200p/HK$2.2340016000/INR1.6718425601 GBP12.151/$20.207
Final 2014 14 May 2015 57.20c/37.16485p/HK$4.43329/INR3.5140591 GBP9.797/$14.374
Interim 2015 19 October 2015 14.40c/9.3979152p/HK$1.115985456/INR0.861393721 GBP8.5226/$13.34383
Final 2015 No dividend declared N/A N/A
Interim 2016 No dividend declared N/A N/A
Final 2016 No dividend declared N/A N/A
Interim 2017 No dividend declared N/A N/A
Final 2017 17 May 2018 11.00c/7.88046p/HK$0.86293/INR0.6536433401 GBP7.7600/$10.83451
Interim 2018 22 October 2018 6.00c/4.59747p/HK$0.46978/INR0.36961751 GBP6.7104/$8.51952
Final 2018 16 May 2019 15.00c/11.569905p/HK$1.176260/INR0.9576916501 N/A
--------------- -------------------- ---------------------------------------------------- ---------------------
1 The INR dividend is per Indian Depository Receipt
ShareCare
ShareCare is available to shareholders on the Company's UK
register who have a UK address and bank account, and allows you to
hold your Standard Chartered shares in a nominee account. Your
shares will be held in electronic form so you will no longer have
to worry about keeping your share certificates safe. If you join
ShareCare you will still be invited to attend the Company's AGM and
you will still receive your dividend at the same time as everyone
else. ShareCare is free to join and there are no annual fees to
pay. If you would like to receive more information please contact
the shareholder helpline on 0370 702 0138.
Donating shares to ShareGift
Shareholders who have a small number of shares often find it
uneconomical to sell them. An alternative is to consider donating
them to the charity ShareGift (registered charity 1052686), which
collects donations of unwanted shares until there are enough to
sell and uses the proceeds to support UK charities. Further
information can be obtained from the Company's Registrars or from
ShareGift on 020 7930 3737 or from sharegift.org. There is no
implication for Capital Gains Tax (no gain no loss) when you donate
shares to charity and UK tax payers may be able to claim income
tax
Standard Chartered PLC - Shareholder information
relief on the value of their donation.
Bankers' Automated Clearing System (BACS)
Dividends can be paid straight into your bank or building
society account. Please register online at investorcentre.co.uk or
contact our registrar for a mandate form.
Registrars and shareholder enquiries
The Company's ordinary shares are listed on the Official List
and traded on the London Stock Exchange. The Company's ordinary
shares are also listed on The Stock Exchange of Hong Kong Limited,
and through Indian Depository Receipts on the Bombay Stock Exchange
and National Stock Exchange of India.
If you have any enquiries relating to your shareholding and you
hold your shares on the United Kingdom register, please contact our
registrar Computershare Investor Services PLC at The Pavilions,
Bridgwater Road, Bristol, BS99 6ZZ, or contact the shareholder
helpline on 0370 702 0138.
If you hold your shares on the Hong Kong branch register and you
have enquiries, please contact Computershare Hong Kong Investor
Services Limited, 17M Floor, Hopewell Centre, 183 Queen's Road
East, Wan Chai, Hong Kong. You can check your shareholding at:
computershare.com/hk/investors.
If you hold Indian Depository Receipts and you have enquiries,
please contact Karvy Fintech Private Limited, Karvy Selenium, Tower
B, Plot 31-32, Financial District, Nanakramguda, Hyderabad 500032,
India.
Chinese translation
If you would like a Chinese version of this Half Year Report,
please contact: Computershare Hong Kong Investor Services Limited
at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai,
Hong Kong. 183 17M Shareholders on the Hong Kong branch register
who have asked to receive corporate communications in either
Chinese or English can change this election by contacting
Computershare. If there is a dispute between any translation and
the English version of this Half-Year Report, the English text
shall prevail.
Taxation
Information on taxation applying to dividends paid to you if you
are a shareholder in the United Kingdom, Hong Kong and the United
States will be sent to you with your dividend documents.
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, such 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
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END
IR MMGGRFMNGLZG
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