Final Results Part 2 of 2
Standard Chartered PLC
19 February 2003
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Country Risk
Country Risk is the risk that a counterparty is unable to meet its contractual
obligations as a result of adverse economic conditions or actions taken by
governments in the relevant country.
The following table based on the Bank of England Cross Border Reporting (C1)
guidelines shows the Group's cross border assets including acceptances where
they exceed one per cent of the Group's total assets. Cross border assets
exclude facilities provided within the Group. They comprise loans and advances
interest bearing deposits with other banks trade and other bills acceptances
amounts receivable under finance leases certificates of deposit and other
negotiable paper and investment securities where the counterparty is resident in
a country other than that where the cross border asset is recorded. Cross border
assets also include exposures to local residents denominated in currencies other
than the local currency.
2002
Public
sector Banks Other Total
$m $m $m $m
USA 1 084 1 729 2 462 5 275
Germany - 2 363 234 2 597
Hong Kong 16 181 1 842 2 039
Korea 12 1 334 407 1 753
Singapore 1 190 1 361 1 552
France 4 1 202 323 1 529
Italy 488 613 374 1 475
Australia 359 988 59 1 406
2001
Public
sector Banks Other Total
$m $m $m $m
USA 1 637 1 330 1 750 4 717
Germany - 3 546 119 3 665
Hong Kong 8 167 1 685 1 860
Singapore 25 310 1 485 1 820
Korea 5 1 214 203 1 422
France - 1 281 409 1 690
Italy 396 1 047 239 1 682
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Argentina
Standard Chartered has net exposure (net of cash collateral and export credit
agency guarantees) of $211 million (2001: $380 million) against which provisions
of $136 million (2001: $56 million) are held. This provides a cover ratio of 64
per cent (2001: 15 per cent). The following table shows the breakdown of this
exposure:
2002 2001
$m $m
Banks
Foreign owned banks 79 174
Government owned banks 21 34
Local banks 41 93
Corporates 63 79
Government bonds 7 -
Total exposure after cash collateral and export credit agency cover 211 380
Provisions held (136) (56)
Net at risk 75 324
Cover ratio 64% 15%
Other Latin American exposure
In addition to Argentina the Group has exposure to a number of other Latin
American countries. The following table shows cross border assets based on the
Bank of England Cross Border Reporting (C1) guidelines (net of specific
provisions where appropriate).
2002 2001
Banks Non banks Total Banks Non banks Total
$m $m $m $m $m $m
Brazil 195 78 273 607 168 775
Chile 120 43 163 171 115 286
Colombia 155 45 200 178 150 328
Peru 18 218 236 48 299 347
Venezuela 6 46 52 21 112 133
Others 8 8 16 35 11 46
Local currency exposure to local residents in these countries totals $165
million (2001: $212 million).
Market Risk
The Group recognises Market Risk as the exposure created by the potential
changes in market prices and rates. Market Risk arises on financial instruments
which are either valued at current market prices (mark to market) or at cost
plus any accrued interest (non-trading basis). The Group is exposed to market
risk arising principally from customer driven transactions.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Market Risk is supervised by the Group Risk Committee which agrees policies and
levels of risk appetite in terms of Value at Risk (VaR). A Group Market Risk
Committee sits as a specialist body to provide business level management
guidance and policy setting. Policies cover the trading book of the Group and
also market risks within the non-trading books. Limits by location and portfolio
are proposed by the business within the terms of agreed policy. Group Market
Risk agrees the limits and monitors exposures against these limits.
Group Market Risk augments the VaR measurement by regularly stress testing
aggregate market risk exposures to highlight potential risk that may arise from
extreme market events that are rare but plausible. In addition VaR models are
back tested against actual results to ensure pre-determined levels of accuracy
are maintained.
Additional limits are placed on specific instrument and currency concentrations
where appropriate. Factor sensitivity measures are used in addition to VaR as
additional risk management tools. Option risks are controlled through
revaluation limits on currency and volatility shifts limits on volatility risk
by currency pair and other underlying variables that determine the options'
value.
Value at Risk
The Group measures the potential impact of market prices and rates using Value
at Risk (VaR) models.
The total VaR for trading and non-trading books combined as at 31 December 2002
was $12.4 million. Of this total $11.3 million related to interest rate risk and
$1.1 million to exchange rate risk. The corresponding figures as at 31 December
2001 were $13.9 million and $1.5 million respectively.
The average total VaR for trading and non-trading books during the year was
$15.2 million (2001: $13.4 million) with a maximum exposure of $21.5 million.
The average level of risk was higher in 2002 than the prior year due to higher
market volatility post September 11th 2001.
The total VaR for market risks in the Group's trading book was $2.7 million at
31 December 2002 compared to $3.5 million a year earlier. Of this total $1.6
million related to interest rate risk and $1.1 million to exchange rate risk.
The corresponding figures as at 31 December 2001 were $2.1 million and $1.5
million respectively.
VaR for interest rate risk in the non-trading books of the Group totalled $10.6
million at 31 December 2002 compared to $11.6 million a year earlier.
The group has no significant trading exposure to equity or commodity price risk.
The average daily revenue earned from market-risk related activities including
asset and liability management was $3.4 million compared with $3.3 million
during 2001. An analysis of the frequency distribution of daily revenues shows
that there were no days with negative revenues during 2002. The most frequent
result was daily revenue of between $2.5 million and $3.0 million with 58
occurrences. The highest daily revenue was $7.1 million.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Foreign Exchange Exposure
The Group's foreign exchange exposures comprise trading and structural foreign
currency translation exposures.
Foreign exchange trading exposures are principally derived from customer driven
transactions. The average daily foreign exchange trading revenue during 2002 was
$1.2 million.
Interest Rate Exposure
The Group's interest rate exposures comprise trading exposures and structural
interest rate exposures. Interest rate risk arises on both trading positions and
non-trading books.
Structural interest rate risk arises from the differing re-pricing
characteristics of commercial banking assets and liabilities including
non-interest bearing liabilities such as shareholders' funds and some current
accounts.
The average daily interest rate revenue from market-risk related activities
during 2002 was $2.2 million.
Derivatives
Derivatives are contracts whose characteristics and value derive from underlying
financial instruments interest and exchange rates or indices. They include
futures forwards swaps and options transactions in the foreign exchange and
interest rate markets. Derivatives are an important risk management tool for
banks and their customers because they can be used to manage the risk of price
interest rate and exchange rate movements.
The Group's derivative transactions are principally in plain vanilla instruments
where the mark to market values are readily determinable by reference to
independent prices and valuation quotes or by using standard industry pricing
models. The total off balance sheet credit risk exposure to derivatives at 31
December 2002 was $9 783 million (2001: $7 517 million) based on net replacement
cost.
The Group enters into derivative contracts in the normal course of business to
meet customer requirements and to manage its own exposure to fluctuations in
interest and exchange rates.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
Only offices with sufficient product expertise and appropriate control systems
are authorised to undertake transactions in derivative products.
The credit risk arising from a derivative contract is calculated by taking the
cost of replacing the contract where its mark-to-market value is positive
together with an estimate for the potential change in the future value of the
contract reflecting the volatilities that affect it. The credit risk on
contracts with a negative mark-to-market value is restricted to the potential
future change in their market value. The credit risk on derivatives is therefore
usually small relative to their notional principal values.
The Group applies a potential future exposure methodology to manage counterparty
credit exposure associated with derivative transactions.
Liquidity Risk
The Group defines liquidity risk as the risk that funds will not be available to
meet liabilities as they fall due. At the local level in line with policy the
day to day monitoring of future cash flows takes place and suitable levels of
easily marketable assets are maintained by the businesses.
A substantial proportion of the Group's assets are funded by customer deposits
made up of current and savings accounts and other short-term deposits. These
customer deposits which are widely diversified by type and maturity represent a
stable source of funds. Lending is normally funded by liabilities in the same
currency and if other currencies are used the foreign exchange risk is usually
hedged.
Operational and Other Risks
Operational Risk is the risk of direct or indirect loss due to an event or
action causing failure of technology processes infrastructure personnel and
other risks having an operational impact. Standard Chartered seeks to minimise
actual or potential losses from Operational Risk failures through a framework of
policies and procedures that identify assess control manage and report risks.
An independent Group Operational Risk function is responsible for establishing
and maintaining the overall Operational Risk framework. The Group Operational
Risk function provides reports to the Group Risk Committee.
Compliance with Operational Risk policy is the responsibility of all managers.
In every country a Country Operational Risk Group (CORG) has been established.
It is the responsibility of the CORG to ensure appropriate risk management
frameworks are in place and to monitor and manage operational risk. CORGs are
chaired by Country Chief Executives.
Business units are required to monitor their Operational Risks using Group and
business level standards and indicators. Significant issues and exceptions must
be reported to the CORG. Where appropriate issues must also be reported to
Business Risk Committees and the Group Risk Committee.
Other risks recognised by the Group include Business Regulatory and Reputational
risks.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
CAPITAL
Standard Chartered's policy is to maintain a conservative balance sheet and
strong capital base. The Group Asset and Liability Committee targets Tier 1 and
Total capital ratios of 7 - 9 per cent and 12 - 14 per cent respectively. The
Group believes that being well capitalised is important.
2002 2001*
$m $m
Tier 1 capital:
Shareholders' funds 7 327 7 538
Minority interests 249 73
Innovative tier 1 securities 997 929
Unconsolidated associated companies 31 22
Less: premises revaluation reserves (3) (61)
goodwill capitalised (2 118) (2 269)
own shares held (note 1) (57) -
Total tier 1 capital 6 426 6 232
Tier 2 capital:
Premises revaluation reserves 3 61
General provisions 468 468
Undated subordinated loan capital 1 853 1 804
Dated subordinated loan capital 2 605 2 677
Total tier 2 capital 4 929 5 010
Investments in other banks (558) -
Other deductions (4) (19)
Total capital 10 793 11 223
Risk weighted assets 55 931 53 825
Risk weighted contingents 18 623 15 517
Total risk weighted assets and contingents 74 554 69 342
Capital ratios:
Tier 1 capital 8.6% 9.0%
Total capital 14.5% 16.2%
2002 2001*
$m $m
Shareholders' funds
Equity 6 695 6 279
Non Equity 632 1 259
7 327 7 538
Post tax Return on Equity (normalised) 13.4% 12.0%
Note 1 Relates to shares held in trust to fulfil the Group's obligations under
employee share options.
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
The Group identified improving the efficiency of capital management as a
strategic priority for 2002. A capital plan to achieve this has been developed.
This includes several key elements. In particular to reduce the amount of Tier 2
capital and to improve the overall capital mix within the broad target ratios.
In October 2002 Standard Chartered PLC listed on the Hong Kong Stock Exchange.
The Company issued 35 million ordinary shares of $0.50 per share. The shares
were issued at HKD 84 per share raising $17.5 million of share capital and $328
million of share premium.
In November 2002 the Company repurchased 659 126 Non-cumulative Preference
Shares with a nominal value of $5 and issued at a price of $1 000 per Preference
Share. The Shares were repurchased at $1 110 per share together with an amount
to compensate for accrued dividend. The deduction from the share premium reserve
was restricted to the $328 million premium raised on the Hong Kong listing.
STANDARD CHARTERED PLC - FINANCIAL REVIEW (continued)
EFFICIENCY PROGRAMME
In August 2000 the Group announced an Efficiency Programme the purpose of which
was to improve productivity and to build an operational platform to support
future growth. Excellent progress continues to be made.
Headcount reductions have exceeded the original targets set.
Original Target
Achieved in 2002 over 3 Years
Headcount Headcount Headcount Headcount
reduction addition Reduction addition
Centralising of processing and support operations 2 350 2 200 2 000 1 000
Operational efficiencies 3 100 - 2 100 -
Integration of acquisitions 2 700 - 2 100 -
8 150 2 200 6 200 1 000
Achieved Target
Cost Synergies Full year Full year Original Revised
2002 2001 2001 2002 2003
$m $m $m $m $m
Centralising of processing and support operations 60 19 29 64 100
Operational efficiencies 90 60 29 80 90
Integration of acquisitions 115 70 50 100 115
265 149 108 244 305
Investment spend (110) (93) (167) (114) (136)
Net Cost Benefit 155 56 (59) 130 169
Original Net Cost Benefit (59) 82 159
At the end of 2001 the Group increased its targets for savings from the
Efficiency Programme. These higher targets have been delivered in 2002.
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2002
2002 2001*
Notes $m $m
Interest receivable 5 288 6 419
Interest payable (2 225) (3 519)
Net interest income 3 063 2 900
Fees and commissions receivable net 991 977
Dealing profits 3 420 470
Other operating income 4 65 58
1 476 1 505
Net revenue 4 539 4 405
Administrative expenses:
Staff (1 270) (1 241)
Premises (269) (285)
Other (673) (735)
Depreciation and amortisation of which: (345) (324)
Amortisation of goodwill (156) (140)
Other (189) (184)
Total operating expenses (2 557) (2 585)
Operating profit before provisions 1 982 1 820
Provisions for bad and doubtful debts 9 (705) (732)
Provisions for contingent liabilities and commitments (7) 1
Amounts written off fixed asset investments (8) -
Operating profit before taxation 1 2 1 262 1 089
Taxation 5 (387) (378)
Profit after taxation 875 711
Minority interests (equity) (31) (12)
Profit for the financial year attributable to shareholders 844 699
Dividends on non-equity preference shares 6 (108) (68)
Dividends on ordinary equity shares 7 (545) (474)
Retained profit for the financial year 191 157
The 2002 and 2001 results are all from continuing operations.
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS (continued)
SUMMARISED CONSOLIDATED BALANCE SHEET
As at 31 December 2002
2002 2001*
Notes $m $m
Assets
Cash balances at central banks and cheques in course of collection 1 237 1 174
Treasury bills and other eligible bills 5 050 5 105
Loans and advances to banks 1 16 001 19 578
Loans and advances to customers 1 57 009 53 005
Debt securities and equity shares 20 437 16 080
Intangible fixed assets 2 118 2 269
Tangible fixed assets 928 992
Prepayments accrued income and other assets 10 230 9 332
Total assets 113 010 107 535
Liabilities
Deposits by banks 1 10 850 11 688
Customer accounts 1 71 626 67 855
Debt securities in issue 1 4 877 3 706
Accruals deferred income and other liabilities 12 626 11 327
Subordinated liabilities:
Undated loan capital 1 853 1 804
Dated loan capital 3 602 3 544
Minority interests (equity) 249 73
Shareholders' funds 12 7 327 7 538
Total liabilities and shareholders' funds 113 010 107 535
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2002
2002 2001
Notes $m $m
Profit for the financial year attributable to shareholders 844 699
Premises revaluation (48) -
Exchange translation differences - (118)
Total recognised gains and losses relating to the financial year 796 581
Prior year adjustment 16 156 -
Total recognised gains and losses since the last annual report 952 581
NOTE OF CONSOLIDATED HISTORICAL COST PROFITS AND LOSSES
For the year ended 31 December 2002
There is no material difference between the results as reported and the results
that would have been reported on a historical cost basis. Accordingly no note of
historical cost profits and losses has been included.
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS (continued)
Consolidated cash flow statement
For the year ended 31 December 2002
2002 2001*
$m $m
Net cash inflow from operating activities (see note 14) 4 778 6 113
Returns on investments and servicing of finance
Interest paid on subordinated loan capital (330) (321)
Subordinated loan capital issue expenses - (12)
Premium and costs on repayment of subordinated liabilities (10) -
Dividends paid to minority shareholders of subsidiary undertakings (18) (18)
Dividends paid on preference shares (123) (41)
Net cash outflow from returns on investments and servicing of finance (481) (392)
Taxation
UK taxes paid (25) (103)
Overseas taxes paid (303) (417)
Total taxes paid (328) (520)
Capital expenditure and financial investment
Purchases of tangible fixed assets (209) (283)
Acquisitions of treasury bills held for investment purposes (10 453) (10 383)
Acquisitions of debt securities held for investment purposes (38 314) (26 356)
Acquisitions of equity shares held for investment purposes (175) (28)
Disposals of tangible fixed assets 32 58
Disposals and maturities of treasury bills held for investment purposes 10 667 9 138
Disposals and maturities of debt securities held for investment purposes 35 530 20 562
Disposals of equity shares held for investment purposes 18 17
Net cash outflow from capital expenditure and financial investment (2 904) (7 275)
Net cash inflow/(outflow) before equity dividends paid and financing 1 065 (2 074)
Equity dividends paid to members of the Company (462) (442)
Financing
Gross proceeds from issue of ordinary share capital 399 22
Ordinary share issue expenses (31) -
Issue of preference share capital - 1 000
Preference share capital - issue expenses - (31)
Redemption of preference share capital (732) -
Preference share capital - redemption expenses (9) -
Issue of subordinated loan capital 11 700
Proceeds from issue of preferred securities - 421
Repayment of subordinated liabilities (355) (204)
Net cash (outflow)/inflow from financing (717) 1 908
Decrease in cash in the period (114) (608)
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - NOTES
1. Segmental information by geographic segment
The following tables set out profit and loss information average loans and
advances to customers net interest margin and selected balance sheet information
by geographic segment for the year ended 31 December 2002 and 31 December 2001.
2002
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific
$m $m $m $m
Interest receivable 1 718 780 349 789
Interest payable (641) (421) (181) (427)
Net interest income 1 077 359 168 362
Fees and commissions receivable 267 80 52 135
net
Dealing profits 68 31 15 73
Other operating income 4 15 (1) 2
Net revenue 1 416 485 234 572
Costs (622) (209) (143) (406)
Amortisation of goodwill
Total operating expenses (622) (209) (143) (406)
Operating profit before 794 276 91 166
provisions
Charge for debts contingent (428) (41) (13) (61)
liabilities and commitments
Amounts written off fixed asset - - - -
investments
Operating profit before taxation 366 235 78 105
Loans and advances to customers - 21 121 7 534 3 808 5 952
average
Net interest margin (%) 3.0 2.3 2.6 2.3
Loans and advances to customers - 21 313 8 060 4 201 6 390
period end
Loans and advances to banks - 2 507 2 027 394 2 703
period end
Total assets employed 41 143 17 387 6 732 16 295
Total risk weighted assets and 19 958 11 570 3 724 7 512
contingents
2002
Americas
Middle UK &
East & Group
Other Head
India S Asia Africa Office Total
$m $m $m $m $m
Interest receivable 597 638 316 1 541 6 728
Interest payable (369) (319) (113) (1 194) (3 665)
Net interest income 228 319 203 347 3 063
Fees and commissions 85 119 89 164 991
receivable net
Dealing profits 43 58 37 95 420
Other operating income 38 5 3 (1) 65
Net revenue 394 501 332 605 4 539
Costs (190) (196) (228) (407) (2 401)
Amortisation of goodwill (156) (156)
Total operating expenses (190) (196) (228) (563) (2 557)
Operating profit before 204 305 104 42 1 982
provisions
Charge for debts contingent (38) (13) (3) (115) (712)
liabilities and commitments
Amounts written off fixed - - - (8) (8)
asset investments
Operating profit before 166 292 101 (81) 1 262
taxation
Loans and advances to 2 186 4 369 1 042 8 451 54 463
customers - average
Net interest margin (%) 4.2 3.7 6.9 1.0 3.1
Loans and advances to 2 458 4 883 1 168 8 536 57 009
customers - period end
Loans and advances to banks - 212 1 792 218 6 148 16 001
period end
Total assets employed 6 411 10 400 3 880 42 327 144 575
Total risk weighted assets and 4 367 6 709 1 556 20 430 75 826
contingents
a. Total interest receivable and total interest payable include intra-group
interest of $1 440 million.
b. Group central expenses have been distributed between segments in proportion
to their direct costs and the benefit of the Group's capital has been
distributed between segments in proportion to their risk weighted assets.
c. Business acquisitions have been made as part of the Group's growth strategy.
These activities are a result of corporate decisions made at the centre and
the amortisation of purchased goodwill is included in the Americas UK and
Group Head Office segment.
d. Total assets employed include intra-group items of $25 874 million and
balances of $5 691 million which are netted in the Summarised Consolidated
Balance Sheet. Assets held at the centre have been distributed between
geographic segments in proportion to their total assets employed.
e. Total risk weighted assets and contingents include $1 272 million of balances
which are netted in calculating capital ratios.
STANDARD CHARTERED PLC - NOTES (continued)
1. Segmental information by geographic segment (continued)
2001
Asia Pacific
Other
Hong Asia
Kong Singapore Malaysia Pacific
$m $m $m $m
Interest receivable 2 377 913 385 892
Interest payable* (1 283) (608) (218) (580)
Net interest income 1 094 305 167 312
Fees and commissions receivable net 301 95 47 121
Dealing profits 50 40 20 90
Other operating income (3) - 3 6
Net revenue 1 442 440 237 529
Costs (679) (205) (131) (404)
Amortisation of goodwill
Total operating expenses (679) (205) (131) (404)
Operating profit before provisions 763 235 106 125
Charge for debts contingent (257) (51) (130) (86)
liabilities and commitments
Operating profit before taxation 506 184 (24) 39
Loans and advances to customers - 21 233 6 311 3 555 5 520
average
Net interest margin (%) 3.2 1.9 2.7 2.3
Loans and advances to customers - 21 145 6 828 3 705 5 842
period end
Loans and advances to banks - period 1 227 2 315 607 3 184
end
Total assets employed* 39 508 15 086 6 223 14 580
Total risk weighted assets and 19 320 8 933 3 630 7 446
contingents
2001
Americas
Middle UK &
East & Group
Other Head
India S Asia Africa Office Total*
$m $m $m $m $m
Interest receivable 572 749 339 2 479 8 706
Interest payable* (373) (468) (134) (2 142) (5 806)
Net interest income 199 281 205 337 2 900
Fees and commissions receivable 78 96 86 153 977
net
Dealing profits 42 55 62 111 470
Other operating income 36 4 2 10 58
Net revenue 355 436 355 611 4 405
Costs (209) (207) (226) (384) (2 445)
Amortisation of goodwill (140) (140)
Total operating expenses (209) (207) (226) (524) (2 585)
Operating profit before 146 229 129 87 1 820
provisions
Charge for debts contingent (27) (39) (13) (128) (731)
liabilities and commitments
Operating profit before taxation 119 190 116 (41) 1 089
Loans and advances to customers 1 909 4 102 1 007 9 198 52 835
- average
Net interest margin (%) 4.0 4.0 8.2 1.0 3.0
Loans and advances to customers 1 923 4 117 969 8 476 53 005
- period end
Loans and advances to banks - 398 1 704 325 9 818 19 578
period end
Total assets employed* 5 994 9 604 3 487 41 335 135 817
Total risk weighted assets and 3 590 5 802 1 343 19 778 69 842
contingents
f. Total interest receivable and total interest payable include intra-group
interest of $2 287 million.
g. Group central expenses have been distributed between segments in proportion
to their direct costs and the benefit of the Group's capital has been
distributed between segments in proportion to their risk weighted assets.
h. Business acquisitions have been made as part of the Group's growth strategy.
These activities are a result of corporate decisions made at the centre and
the amortisation of purchased goodwill is included in the Americas UK and
Group Head Office segment.
i. Total assets employed include intra-group items of $24 724 million and
balances of $3 558 million which are netted in the Summarised Consolidated
Balance Sheet. Assets held at the centre have been distributed between
geographic segments in proportion to their total assets employed.
j. Total risk weighted assets and contingents include balances of $500 million
which are netted in calculating Capital ratios.
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - NOTES (continued)
1. Segmental information by geographic segment (continued)
The following table sets out the structure of the Group's deposits by principal
geographic region where it operates at 31 December 2002 and 31 December 2001.
2002
Asia Pacific
Hong Other
Kong Singapore Malaysia Asia Pacific
$m $m $m $m
Non interest bearing current and 1 341 992 828 597
demand accounts
Interest bearing current and 10 841 1 860 76 1 590
demand accounts
Savings deposits 553 455 514 1 117
Time deposits 14 615 7 779 2 739 4 812
Other deposits 5 382 444 1 097
Total 27 355 11 468 4 601 9 213
Deposits by banks 649 1 356 422 2 183
Customer accounts 26 706 10 112 4 179 7 030
27 355 11 468 4 601 9 213
Debt securities in issue 1 813 177 295 358
Total 29 168 11 645 4 896 9 571
2002
Americas
Middle UK &
East & Group
Other Head Total
India S Asia Africa Office Deposits
$m $m $m $m $m
Non interest bearing current and 807 1 465 696 428 7 154
demand accounts
Interest bearing current and 3 500 908 2 939 18 717
demand accounts
Savings deposits 584 1 151 416 11 4 801
Time deposits 2 722 3 531 525 11 726 48 449
Other deposits 113 410 26 878 3 355
Total 4 229 7 057 2 571 15 982 82 476
Deposits by banks 1 078 1 156 113 3 893 10 850
Customer accounts 3 151 5 901 2 458 12 089 71 626
4 229 7 057 2 571 15 982 82 476
Debt securities in issue 82 - - 2 152 4 877
Total 4 311 7 057 2 571 18 134 87 353
2001
Asia Pacific
Hong Other
Kong Singapore Malaysia Asia Pacific
$m $m $m $m
Non interest bearing current 1 207 901 728 439
and demand accounts
Interest bearing current and 10 002 1 622 107 1 301
demand accounts
Savings deposits 582 437 579 1 042
Time deposits 16 687 7 078 2 824 4 565
Other deposits 4 253 303 1 099
Total 28 482 10 291 4 541 8 446
Deposits by banks 1 001 1 028 472 2 051
Customer accounts 27 481 9 263 4 069 6 395
28 482 10 291 4 541 8 446
Debt securities in issue 1 305 81 245 363
Total 29 787 10 372 4 786 8 809
2001
Americas
Middle UK &
East & Group
Other Head Total
India S Asia Africa Office Deposits
$m $m $m $m $m
Non interest bearing current 672 980 714 669 6 310
and demand accounts
Interest bearing current and 5 767 711 2 228 16 743
demand accounts
Savings deposits 518 1 040 372 220 4 790
Time deposits 2 798 3 672 461 9 831 47 916
Other deposits 57 205 190 1 673 3 784
Total 4 050 6 664 2 448 14 621 79 543
Deposits by banks 1 115 1 298 67 4 656 11 688
Customer accounts 2 935 5 366 2 381 9 965 67 855
4 050 6 664 2 448 14 621 79 543
Debt securities in issue 82 - 3 1 627 3 706
Total 4 132 6 664 2 451 16 248 83 249
STANDARD CHARTERED PLC - NOTES (continued)
1. Segmental information by class of business
2002 2001*
Consumer Wholesale Consumer Wholesale
Banking Banking Total Banking Banking Total
$m $m $m $m $m $m
Net interest income 1 867 1 196 3 063 1 702 1 198 2 900
Other income 549 927 1 476 520 985 1 505
Net revenue 2 416 2 123 4 539 2 222 2 183 4 405
Costs (1 190) (1 211) (2 401) (1 254) (1 191) (2 445)
Amortisation of goodwill - - (156) (140)
Total operating expenses (1 190) (1 211) (2 557) (1 254) (1 191) (2 585)
Operating profit before provisions 1 226 912 1 982 968 992 1 820
Charge for debts contingent liabilities (603) (109) (712) (330) (401) (731)
and commitments
Amounts written off of fixed assets - (8) (8) - - -
investments
Operating profit before taxation 623 795 1 262 638 591 1 089
Total assets employed 40 465 104 110 144 575 44 992 90 825 135 817
Total risk weighted assets and
contingents 23 779 50 775 74 554 21 688 47 654 69 342
* Comparative restated (see note 16)
Please refer to note 1 (a) - (d) and (f) - (i)
3. Dealing profits
2002 2001
$m $m
Income from foreign exchange dealing 319 374
Profits less losses on dealing securities 65 22
Other dealing profits 36 74
420 470
4. Other operating income
2002 2001
$m $m
Other operating income includes:
Profits less losses on disposal of investment securities 18 23
Dividend income 5 3
STANDARD CHARTERED PLC - NOTES (continued)
5. Taxation
2002 2001
$m $m
United Kingdom corporation tax at 30% (2001: 30%) 257 211
Relief for overseas tax (180) (179)
95
77 32
Overseas tax 310 346
387 378
Effective tax rate 30.7% 34.7%
6. Dividends on preference shares
2002 2001
$m $m
Non-cumulative irredeemable preference shares:
7 3/8% preference shares of £1 each 11 11
8 1/4% preference shares of £1 each 12 12
Non-cumulative redeemable preference shares:
8.9% preference shares of $5 each 85 45
108 68
7. Dividends on ordinary shares
2002 2001
Cents per $m Cents per share $m
share
Interim 14.10 160 12.82 145
Final 32.90 385 29.10 329
47.00 545 41.92 474
The 2002 final dividend of 32.9 cents per share will be paid in sterling unless
shareholders elect to be paid in US dollars on 13 May 2003 to shareholders on
the register of members at the close of business on 28 February 2003. It is
intended that shareholders will be able to elect to receive shares credited as
fully paid instead of all or part of the interim dividend. Details will be sent
to shareholders on or around 17 March 2003.
STANDARD CHARTERED PLC - NOTES (continued)
8. Earnings per ordinary share
2002 2001
Average Per Average Per
number of Share number of Share
Profit shares Amount Profit shares Amount
$m ('000) Cents $m ('000) Cents
Basic EPS
Profit attributable to ordinary shareholders 736 1 135 664 - 631 1 128 407 55.9c
Premium and costs paid on redemption of preference (82) - - - - -
shares
Basic earnings per ordinary share 654 1 135 664 57.6c 631 1 128 407 55.9c
Effect of dilutive potential ordinary shares:
Convertible bonds 17 34 488 16 34 488
Options - 2 168 - 4 478
Diluted EPS 671 1 172 320 57.2c 647 1 167 373 55.4c
The Group measures earnings per share on a normalised basis. This differs from
earnings defined in Financial Reporting Standard 14. The table below provides a
reconciliation.
2002 2001
$m $m
Basic earnings per ordinary share as above 654 631
Premium and costs paid on redemption of preference shares 82 -
Amortisation of goodwill 156 140
Profits less losses on disposal of investment securities (18) (23)
Amounts written off fixed asset investments 8 -
Impairment of tangible fixed assets 9 -
Gain on close out of interest rate swap to hedge preference share dividends (57) -
Tax charge relating to profit on interest rate swap 17 -
Normalised earnings 851 748
Normalised earnings per ordinary share 74.9c 66.3c
9. Provisions for bad and doubtful debts
2002 2001
Specific General Specific General
$m $m $m $m
Provisions held at beginning of period 951 468 1 146 468
Exchange translation differences 1 - (12) -
Amounts written off (1 008) - (633) -
Amounts written down (23) - (368) -
Recoveries of amounts previously written off 65 - 51 -
Other (3) - 35 -
New provisions 1 012 - 994 -
Recoveries/provisions no longer required (307) - (262) -
Net charge against profit 705 - 732 -
Provisions held at end of period 688 468 951 468
Corporate loans and advances to customers against which provisions have been
outstanding for two years or more are written down to their net realisable
value.
STANDARD CHARTERED PLC - NOTES (continued)
10. Non-performing loans and advances
2002 2001
SCNB SCNB
(LMA) Other Total (LMA) Other Total
$m $m $m $m $m $m
$m
Loans and advances on which interest is suspended 693 1 912 2 605 742 2 451 3 193
Specific provisions for bad and doubtful debts (3) (685) (688) (3) (948) (951)
Interest in suspense - (205) (205) - (225) (225)
690 1 022 1 712 739 1 278 2 017
The Group acquired Standard Chartered Nakornthon Bank (SCNB) (formerly
Nakornthon Bank) in September 1999. Under the terms of the acquisition
non-performing loans (NPLs) of THB 39 billion ($904 million) are subject to a
Loan Management Agreement (LMA) with the Financial Institutions Development Fund
(FIDF) a Thai Government agency. Under the LMA the FIDF has guaranteed the
recovery of a principal amount of the NPLs of THB 23 billion ($533 million). The
LMA also provides inter alia for loss sharing arrangements whereby the FIDF will
bear up to 85 per cent of losses in excess of the guaranteed amount. The
carrying cost of the NPLs is reimbursable by the FIDF to SCNB every half year
for a period of five years from the date of acquisition.
Excluding the SCNB non-performing loan portfolio subject to the LMA agreement
specific provisions and interest in suspense together cover 47 per cent (2001:
48 per cent) of total non-performing lending to customers. If lending and
provisions are adjusted for the cumulative amounts written off of $1 652 million
(2001: $1 574 million) the effective cover is 71 per cent (2001: 68 per cent).
11. Called up share capital
2002 2001
$m $m
Equity capital
Ordinary shares of $0.50 each 585 566
Non-equity capital
Non-cumulative irredeemable preference shares:
7 3/8% preference shares of £1 each 161 145
8 1/4% preference shares of £1 each 161 145
Non-cumulative redeemable preference shares:
8.9% preference shares of $5 each 2 5
909 861
In November 2002 the Group repurchased 659 126 8.9 per cent preference shares of
$5 each. The shares were repurchased at a price of $1 110 per share. The total
premium paid on the buy back equated to $82 million. This however was partially
offset by a gain on unwinding the interest rate swaps hedging the position of
$57 million.
STANDARD CHARTERED PLC - NOTES (continued)
12. Shareholders' funds
Share
Share premium Capital
capital account reserve
$m $m $m
At 1 January 2002 previously published
861 2 761 5
Prior year adjustment
- - -
(note 16)
At 1 January 2002 restated 861 2 761 5
Exchange translation differences 32 - -
Shares issued net of expenses 19 329 -
Repurchase of preference shares (3) (328) -
Retained profit - - -
Premises revaluation - - -
Capitalised on exercise of share options - 2 -
Realised on disposal of premises - - -
At 31 December 2002 909 2 764 5
Equity interests
Non-equity interests
At 31 December 2002
Capital Premises Profit Total
redemption revaluation and loss shareholders'
reserve reserve account funds
$m $m $m
At 1 January 2002 previously
published - 45 3 710 7 382
Prior year adjustment
- 16 140 156
(note 16)
At 1 January 2002 restated - 61 3 850 7 538
Exchange translation (6) (26)
differences - -
Shares issued net of expenses
- - 39 387
Repurchase of preference
shares 3 - (413) (741)
Retained profit - - 191 191
Premises revaluation - (48) - (48)
Capitalised on exercise of
share options - - (2) -
Realised on disposal of (4) 4
premises - -
At 31 December 2002 3 3 3 643 7 327
7 080
Equity interests 6 695
Non-equity interests 632
At 31 December 2002 7 327
13. Net interest margin and interest spread
2002 2001*
% %
Net interest margin 3.1 3.0
Interest spread 2.7 2.6
$m $m
Average interest earning assets 99 667 96 738
Average interest bearing liabilities 86 484 86 624
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - NOTES (continued)
14. Consolidated cash flow statement
Reconciliation between operating profit before taxation and net cash inflow
from operating activities:
2002 2001*
$m $m
Operating profit 1 262 1 089
Items not involving cash flow:
Amortisation of goodwill 156 140
Depreciation impairment and amortisation of premises and equipment 189 184
Loss on disposal of tangible fixed assets 3 1
Gain on disposal of investment securities (18) (23)
Amortisation of investments (48) (11)
Charge for bad and doubtful debts and contingent liabilities 712 731
Amounts written off fixed asset investments 8 -
Debts written off net of recoveries (966) (950)
Decrease in accruals and deferred income (256) (66)
(Increase)/decrease in prepayments and accrued income (16) 236
Adjustments for items shown separately:
Interest paid on subordinated loan capital 330 321
Premium and costs on repayment of subordinated liabilities 10 -
Net cash inflow from trading activities 1 366 1 652
Net increase in cheques in the course of collection (19) (71)
Net (increase)/decrease in treasury bills and other eligible bills (93) 1
Net decrease in loans and advances to banks and customers 485 1 282
Net increase in deposits from banks customer accounts and debt 2 891 3 805
securities in issue
Net increase in dealing securities (302) (606)
Net decrease in mark-to-market adjustment 414 63
Net increase/(decrease) in other accounts 36 (13)
Net cash inflow from operating activities 4 778 6 113
Analysis of changes in cash
Balance at beginning of period 3 549 4 278
Exchange translation differences 61 (121)
Net cash outflow (114) (608)
Balance at end of period 3 496 3 549
* Comparative restated (see note 16)
STANDARD CHARTERED PLC - FINANCIAL STATEMENTS
15. Consolidated profit and loss account (unaudited)
First half and second half 2002
2nd 1st
Half Half
2002 2002
$m $m
Interest receivable 2 735 2 553
Interest payable (1 214) (1 011)
Net interest income 1 521 1 542
Fees and commissions receivable net 515 476
Dealing profits 191 229
Other operating income 27 38
733 743
Net revenue 2 254 2 285
Administrative expenses:
Staff (636) (634)
Premises (131) (138)
Other (358) (315)
Depreciation and amortisation of which: (188) (157)
Amortisation of goodwill (88) (68)
Other (100) (89)
Total operating expenses (1 313) (1 244)
Operating profit before provisions 941 1 041
Provisions for bad and doubtful debts (299) (406)
Provisions for contingent liabilities and commitments (6) (1)
Amounts written off fixed asset investments (8) -
Operating profit before taxation 628 634
Taxation (186) (201)
Profit after taxation 442 433
Minority interests (equity) (14) (17)
Profit for the financial period attributable to 428 416
shareholders
Dividends on non-equity preference shares (52) (56)
Dividends on ordinary equity shares (385) (160)
Retained profit for the financial period (9) 200
STANDARD CHARTERED PLC - NOTES (continued)
16. Change in accounting policies
Financial Reporting Standard 19 - Deferred Tax ('FRS 19') is effective for
accounting periods ending on or after 23 January 2002 and the Group adopted
FRS19 in the current period.
It specifies the provisions that are required for deferred tax which are on
a different basis to its predecessor Statement of Standard Accounting
Practice 15.
The adjustments have no effect on current or prior periods tax charge but
affect the Deferred Tax balances and Reserves. The brought forward balances
at 1 January 2001 have been restated as follows: the Deferred Tax Asset
balance is increased by $156 million the Profit and Loss Reserves balance is
increased by $140 million and the Premises Revaluation Reserve is increased
by $16 million.
In February 2002 the Urgent Issues Task Force issued Abstract 33 (UITF 33) -
'Obligations in Capital Instruments'. This reviewed the classification of
instruments that have the characteristics of both liabilities and
shareholders' funds and provided further guidance on the accounting
treatment of these issues.
In 2001 the £300 million 8.103 per cent Step-up Callable Perpetual Trust
Preferred Securities and the Eur500 million 8.16 per cent non-cumulative
Trust Preferred Securities were treated as minority interests (non-equity)
in the consolidated accounts of Standard Chartered PLC in accordance with
Financial Reporting Standard 4 - Capital Instruments.
As a result of complying with UITF 33 the instruments have been reclassified
from minority interests (non-equity) to liabilities. The restatement of
principal balances at 31 December 2001 is $878 million together with accrued
interest of $51 million and fee accruals of $11 million. The associated
minority interest payable reclassified to interest payable is $59 million
for the year ended 31 December 2001.
Comparative figures for the year ended 31 December 2001 are restated to
reflect these changes to accounting policy.
17. Remuneration
The Group employed 29 400 staff at 31 December 2002 (2001: 28 400).
Within the authority delegated by the Board of Directors the Board Remuneration
Committee is involved in determining the remuneration policy of Standard
Chartered Group but specifically for agreeing the individual remuneration
packages for executive directors and other highly remunerated individuals. No
executive directors are involved in deciding their own remuneration.
The success of the Group depends upon the performance and commitment of talented
employees. The Group's remuneration policy is to:-
• Support a strong performance-oriented culture and ensure that individual
rewards and incentives relate directly to the performance of the individual
the operations and functions for which they are responsible the Group as a
whole and the interests of the shareholders; and
STANDARD CHARTERED PLC - NOTES (continued)
• Maintain competitive awards that reflect the international nature of the
Group and enable it to attract and retain talented employees of the highest
quality internationally.
In terms of applying this policy:
• Base salaries are set at the median of the Group's key international
competitors.
• Annual bonus awards are made wholly on the basis of Group and individual
performance and also an individual's adherence to the Group's values.
• Standard Chartered Group believes strongly in encouraging employee share
ownership at all levels in the organisation. The Group is proud to announce
that in 2002 50 per cent of employees globally participated in its all
employee sharesave scheme. In addition the Group operates certain
discretionary share plans which are designed to provide competitive
long-term incentives. Of these plans the Performance Share Plan and the
Executive Share Option Scheme are only exercisable upon the achievement of
tough performance criteria.
18. Charge on Group assets
The following table shows assets which are subordinated to the claims of
other parties.
2002 2001
$m $m
Loans and advances to banks 128 111
Loans and advances to customers 4 4
Debt securities 552 11
Other assets - Hong Kong certificates of deposit 2 015 1 884
2 699 2 010
19. Contingent liabilities and commitments
The table below shows the total contract amount of contingent liabilities and
commitments.
2002 2001
$m $m
Contingent liabilities 17 913 15 576
Non-cancellable commitments 14 988 15 471
Contingent liabilities include acceptances and endorsements guarantees and
irrevocable letters of credit. Commitments largely relate to undrawn
non-cancellable commitments to extend credit.
The contract amounts reflect the volume of business outstanding and do not
represent amounts at risk.
The financial information included herein has been derived from the audited and
unaudited information contained in the Group's Report and Accounts for the year
ended 31 December 2002. Statutory accounts for 2001 have been delivered to the
Registrar of Companies. The auditors have reported on these accounts; their
report was unqualified and did not contain a statement under Section 237(2)
(accounting records or returns inadequate or accounts not agreeing with records
and returns) or 237(3) (failure to obtain necessary information and explanation)
of the Companies Act 1985.
Financial Calendar
Ex-dividend date 26 February 2003
Record date 28 February 2003
Posting to shareholders of 2002 Report and Accounts 17 March 2003
Annual General Meeting 8 May 2003
Payment date - final dividend on ordinary shares 13 May 2003
Copies of this statement are available from Investor Relations Standard
Chartered PLC 1 Aldermanbury Square London EC2V 7SB or from our website on
www.standardchartered.com/investor
For further information please contact:
Tracy Clarke Group Head of Corporate Affairs
(020) 7280 7708
Paul Marriage Head of Media Relations
(020) 7280 7163
Benjamin Hung Head of Investor Relations
(020) 7280 7245
The following information is available on our website www.standardchartered.com/
investor
• A live webcast of the final results analyst presentation (available 9:30am
GMT)
• A pre-recorded webcast and Q/A session of analyst presentation in London
(available 1:00pm GMT)
• Interviews with Mervyn Davies Group Chief Executive and Peter Sands Group
Finance Director (available from 8.00am GMT).
• Slides for the Group's presentations (available 11.00am GMT)
Images of Standard Chartered are available for the media at www.newscast.co.uk
Information regarding the Group's commitment to corporate and social
responsibility is available at www.standardchartered.com/ourbeliefs
The 2002 Report and Accounts will be made available on the website of the Stock
Exchange of Hong Kong and on our website as soon as is practicable.
This information is provided by RNS
The company news service from the London Stock Exchange
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