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Standard Chrtrd PLC (STAN)

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Thursday 27 February, 2020

Standard Chrtrd PLC

SCPLC Final Results 2019

RNS Number : 2871E
Standard Chartered PLC
27 February 2020
 

27 February 2020

Standard Chartered PLC - full-year and fourth quarter 2019 results

Standard Chartered PLC (the Group) today releases its results for the year and quarter ended 31 December 2019. All figures are presented on an underlying basis and comparisons are made to the full-year 2018 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items that have been excluded from underlying results is set out on page 59 of the Annual Report.

"Discipline on the things we control and a sharp focus on where we are differentiated enabled us to grow underlying profit 8% and improve earnings per share by 23% in 2019, despite an increasingly challenging external environment. We are in the right markets guided by the right strategy and united through our purpose to drive commerce and prosperity. I am confident that we have set ourselves up for lasting success."

Bill Winters, Group Chief Executive

Progress in 2019 on strategic priorities

· Deliver our network: income from corporate and institutional clients using our international network grew 6% 

· Grow our affluent business: income from Premium, Priority and Private Banking clients increased 6%

· Optimise low-returning markets: aggregate profit before tax in India, Indonesia, Korea and UAE improved 10%

· Improve productivity: income per full-time employee increased 5%; Hong Kong liquidity hub is delivering benefits

· Transform and disrupt with digital: beta-testing virtual bank in Hong Kong; digital banks in nine African markets 

· Drive sustainability: taking bold and ambitious actions to lead the way on global sustainability issues

Progress in 2019 on financial framework

· Return on tangible equity up 130bps to 6.4%

Underlying profit before tax up 8% to $4.2bn

Statutory profit before tax up 46% to $3.7bn

· Income up 2% to $15.3bn; up 4% on a constant currency basis

Up 5% at constant currency excluding $(177)m movement in Debit Valuation Adjustment (DVA)

4Q'19 income flat YoY; up 1% at constant currency and up 4% excluding $(118)m movement in DVA

4Q'19 momentum continued into January 2020

· Costs (excluding the UK bank levy) down 1% at $10.1bn; up 1% on a constant currency basis

Positive income-to-cost jaws of 3%; cost-to-income ratio (excluding UK bank levy) improved 2% to 66%

· Capital

Common equity tier 1 ratio remains within 13-14% target range at 13.8%: up 28bps since 3Q'19

Proposed $0.5bn share buy-back will reduce the CET1 ratio by ~20bps

Proposed final ordinary dividend per share of 20c will result in full-year dividend of 27c, up 29%

Risk-weighted assets of $264bn up $6bn or 2%; down $5bn since 3Q'19

Other financial highlights in 2019

· Pre-provision operating profit up 8% to $4.9bn

· Earnings per share up 14c or 23% to 75.7c

· Asset quality remains stable; credit impairment up $166m remains at an historically low level:

Stage 1 and 2 impairment increase of $275m including impact of deteriorating macroeconomic variables

Stage 3 impairment reduction of $109m: stage 3 loans down 50bps to 2.7% of total, lowest level since 2014

· Average interest-earning assets up 4% to $495bn; gross yield up 16bps to 3.34%

· Average interest-bearing liabilities up 3% to $445bn; rate paid up 27bps to 1.92%

· Net interest margin down 7bps to 1.62%

Outlook

The underlying momentum in the fourth quarter of 2019 continued in the opening weeks of 2020 but lower interest rates, slower global economic growth, a softer Hong Kong economy and the impact of the recent novel coronavirus outbreak will likely result in income growth in 2020 below our medium-term 5-7% target range. These headwinds are expected to be transitory, but we now believe it will take longer to achieve our RoTE target of 10% than we previously envisaged.

We have improved our RoTE every year since 2015 and we are focused on doing so again in 2020 through a combination of positive income-to-cost jaws and continued discipline on returning surplus capital to shareholders. The Board has authorised the purchase and cancellation of up to $0.5bn worth of shares starting shortly and will review the potential for making a further capital return upon the completion of the Permata sale.  

 

 

Standard Chartered PLC - Statement of results

For the year ended 31 December 2019

 

2019
$million

2018
$million

Change
%6

Underlying performance

 

 

 

Operating income

15,271

14,968

2

Operating expenses (including UK bank levy)

(10,409)

(10,464)

1

Credit impairment

(906)

(740)

(22)

Other impairment

(38)

(148)

74

Profit from associates and joint ventures

254

241

5

Profit before taxation

4,172

3,857

8

Profit/(loss) attributable to ordinary shareholders1

2,466

2,031

21

Return on ordinary shareholders' tangible equity (%)

6.4

5.1

130bps

Cost to income ratio (%) (excluding UK bank levy)

65.9

67.7

180bps

Statutory performance

 

 

 

Operating income

15,417

14,789

4

Operating expenses

(10,933)

(11,647)

6

Credit impairment

(908)

(653)

(39)

Goodwill impairment

(27)

-

nm

Other impairment

(136)

(182)

25

Profit from associates and joint ventures

300

241

24

Profit before taxation

3,713

2,548

46

Taxation

(1,373)

(1,439)

5

Profit for the year

2,340

1,109

111

Profit/(loss) attributable to parent company shareholders

2,303

1,054

119

Profit/(loss) attributable to ordinary shareholders1

1,855

618

200

Return on ordinary shareholders' tangible equity (%)

4.8

1.6

325bps

Cost to income ratio (%) (including UK bank levy)

70.9

78.8

784bps

Balance sheet and capital

 

 

 

Total assets

720,398

688,762

5

Total equity

50,661

50,352

1

Tangible equity attributable to ordinary shareholders1

38,574

39,613

(3)

Loans and advances to customers

268,523

256,557

5

Customer accounts

405,357

391,013

4

Risk weighted assets

264,090

258,297

2

Total capital

55,965

55,696

-

Net Interest Margin (%) (adjusted)

1.62

1.69

(7)bps

Advances-to-deposits ratio (%)2

64.2

63.1

115

Liquidity coverage ratio (%)

144

154

(10)

Common Equity Tier 1 ratio (%)

13.8

14.2

(40)

Total capital (%)

21.2

21.6

(40)

UK leverage ratio (%)

5.2

5.6

(40)

 

Information per ordinary share

Cents

Cents

Cents

Earnings per share - underlying3

75.7

61.4

14.3

  - statutory3

57.0

18.7

38.3

Ordinary dividend per share4

27

21

6

Net asset value per share5

1,358

1,319

39

Tangible net asset value per share5

1,192

1,168

25

Number of ordinary shares at period end (m)

3,191

3,307

(3)

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

4 Represents the recommended ordinary dividend per share

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

6  Variance is better/(worse) other than assets, liabilities and risk weighted assets

 

 

 

Standard Chartered PLC - Table of Contents

Performance highlights  1

Summary of results                                                                                                                                 2

Group Chairman's statement  4

Group Chief Executive's review 6

Group Chief Financial Officer's review 8

Client segment reviews  15

Regional reviews   25

Group Chief Risk Officer's review                                                                                                        33

Supplementary information 39

  Capital Review                                                                                                                                   39

  Financial Statements                                                                                                                          43

  Supplementary financial information 48

Shareholder information  56

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 should not be taken as a representation that such trends or activities will continue in the future.

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

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

 

This information will be available on the Group's website at www.sc.com

 

 

Standard Chartered PLC - Group Chairman's statement

'Driving more profitable and sustainable growth'

I have been clear since I joined the Group that to increase our returns over the medium term, we need to grow income in a strong, safe and sustainable manner, while maintaining both cost and capital discipline. Together with my Board colleagues, I have also fully supported the Management Team's drive to improve our resilience to external shocks, while helping ensure excellent governance and the highest ethical standards.

The transformation that is underway is creating a more efficient and agile organisation with higher growth potential. As a result, despite the challenging global macroeconomic and geopolitical environment in 2019 we continued to make progress and delivered the Group's fourth consecutive year of improvement in our key performance measure: return on tangible equity.

We are on track to digitise our business and form strategic collaborations: we launched digital banking platforms in a further eight markets in Africa; received a coveted licence to launch a standalone virtual bank in Hong Kong; and boosted our corporate banking capabilities through a series of partnerships with Linklogis, IBM and SAP Ariba.

We are making big strides in sustainable banking by pioneering new products and delivering several world firsts, including blue bonds to help protect our oceans and deposits designed to finance sustainable development. Not only are we offering investors access to dynamic markets, but giving them an opportunity to put their money to work addressing some of the world's biggest long-term threats including climate change, health, financial inclusion and education.

We are living our Here for good promise and continue to stand behind the communities we operate in, not just giving back but also in building a better tomorrow for the next generations:

We rolled-out Futuremakers by Standard Chartered to tackle inequality and promote economic inclusion in our communities. We contributed $9 million through fundraising and Group donations in this first year, which sets us on our way towards achieving our $50 million target by 2023

Our innovative Belt & Road Relay, through 44 markets across our unique network, was a great success. Some of the girls involved in Goal, our girls' empowerment programme, joined the runs taking place in our Africa & Middle East region, and the relay leg in Saudi Arabia was the first ever mixed gender race in the country - an historic event that reflects our support for gender balance around the globe

Improving our potential

The Group's longer-term growth potential has continued to improve. After having secured our foundations, we have resolved legacy conduct and control issues, allowing full focus on executing the strategic priorities that we refreshed last year. We are starting to convert our potential into real, sustainable growth, which our positive results across all segments and regions demonstrate.

We of course still have much to do. As an organisation we have become more open to change but need to press on; and our productivity and cost of funds could be improved further. But the refreshed priorities include clear plans which are addressing these issues.

More resilient

There were several reminders in 2019 as well as in the first weeks of this year of the importance of the progress we have made improving our resilience to external shocks. Just to name the most significant ones: the ups and downs in the US-China trade negotiations, the social unrest in Hong Kong and the recent novel coronavirus (Covid-19) outbreak.

Geopolitics and societal change - often interlinked - have become more uncertain than ever, often conducted via social media. This means that instability and rapid change are becoming the new normal. We must constantly assess and adapt to significant change - a skill I see as being core to the Group's DNA. We have a long track record in serving the areas of the globe that have undergone the most radical changes over the past 100 years.

I am very proud of how our team in Hong Kong dealt with the social unrest there last year; and am equally proud of how colleagues in that region and globally are pulling together currently to respond to the impact of the coronavirus outbreak.

 

 

Our risk management framework that includes non-financial risks has been fundamentally overhauled in recent years, and we have built strong capital and liquidity positions. This means we can face an uncertain future confidently, while we continue to expand our capabilities to keep pace with evolving threats such as cyber and financial crime.

It is easy to dwell on the negatives, but it is important not to forget the incredible opportunities that exist in our footprint. For example, while the US-China trade dispute rumbles on, many of our clients have learned to live with - and in some cases benefit from - the uncertainty. We have seen supply chains move and adapt to the new realities, often to our benefit as China trades and invests more within Asia, Africa and the Middle East.

Our markets have plenty of growth potential, reflecting rapid industrialisation and relatively young and hard-working populations. Against this backdrop, our strength and the opportunity will come from continuing to focus on what we can control, and what we do best.

Enhanced governance and culture

I commissioned an externally facilitated Board effectiveness review in the middle of the year, which concluded that overall we continue to demonstrate good governance and our Board is operating effectively.

Of course, there are always areas for improvement, and these are detailed in the Directors' report section of the Annual Report.

I continue to visit many markets across our network, and it is clear to me that we have some of the most dedicated, diverse, inspiring and creative individuals in the industry who uphold our valued behaviours and endeavour to deliver the very best for our clients and the Group.

Dividend and share buy-backs

As Andy will explain later in this report, our results in 2019 show good progress on the medium-term financial objectives that he and Bill laid out at the start of the year. The Board has accordingly declared a final ordinary dividend of 20 cents per share, which would result in a full-year dividend for 2019 of $863 million or 27 cents per share, a 29 per cent improvement on 2018.

This return to shareholders is in addition to the $1 billion of surplus capital that we used to buy and cancel existing ordinary shares last year. And with our common equity tier 1 capital ratio back near the top end of our 13-14 per cent target range, we are pleased to announce the decision to purchase a further $0.5 billion worth of ordinary shares starting shortly.

Moving forward

The Group continued to move forwards and upwards in 2019 despite the external uncertainties. The team has stayed on track to deliver a solid performance and through it all, has exhibited great focus, discipline and resilience.

There is still much to be done and while external conditions are likely to be more challenging in the near-term we remain excited by the opportunities that lie ahead.

The Board will continue to oversee the task of striking the right balance between maximising opportunities on the one hand and maintaining appropriate risk controls on the other. I am convinced this will allow us to improve returns in a strong, safe and sustainable manner.

 

José Viñals

Group Chairman

27 February 2020

 

 

Standard Chartered PLC - Group Chief Executive's review

'Delivering on our commitments'

This time last year, I said that Standard Chartered stood at an inflection point, poised for sustainable and higher-returning growth. Guided by the refreshed strategic priorities we set for ourselves in 2019, we are now delivering on that promise.

By maintaining discipline on the things within our control and keeping a sharp focus on the areas in which we are most differentiated, we grew underlying earnings per share 23 per cent and generated a further significant improvement in our return on tangible equity (RoTE). This is despite volatile geopolitics and lower interest rates.

We also passed several strategic milestones, demonstrating our ability to execute at pace. Highlights include obtaining one of the first virtual bank licences in Hong Kong, successful completion of the Group's first ever share buy-back - our next will start shortly - and agreeing to sell our stake in our Indonesian joint venture, Permata. We also resolved in April our previously disclosed investigations in the US and UK into historical sanctions and financial crime controls issues.

From turnaround to transformation

Every client segment and region grew income last year on a constant currency basis and each managed to do so at a faster rate than costs, but the numbers only tell part of the story. In parallel, we made tangible progress against each of our strategic priorities.

We are supporting trade and investment by delivering our global network to our corporate and institutional clients

We are growing our affluent client business, helping our individual clients prosper

We have stepped up our digitisation and innovation efforts, transforming how we serve our customers and - in the process - being recognised at the Global Finance Awards as the World's Best Consumer Digital Bank

We made encouraging progress and in aggregate grew operating profits in four large markets where we are focused on optimising returns

We have launched several initiatives to improve productivity that are delivering positive results. For example, our new legal entity structures in Hong Kong and Singapore are already allowing us to better deploy our strong capital and liquidity to generate income more efficiently

Culture and sustainability

Last year, we articulated an aspiration to drive an inclusive, innovative performance culture that emphasises sustainability and conduct.

We are making good progress improving the day-to-day experience of our customers, our colleagues and the communities in which we operate. And we have set out how we can lead the way on many globally important issues, leveraging the unique diversity of our people, products, and network.

Emerging markets will be the most affected by climate change and have the greatest opportunity to leapfrog to new low-carbon technology, but there has not been sufficient investment into this sector across emerging markets in Asia, Africa and the Middle East. We are part of the solution in bridging what the UN estimates to be a $2.5 trillion a year funding gap.

Our refreshed Sustainability Aspirations reinforce our commitment to the UN's Sustainable Development Goals (SDGs). We are taking bold and ambitious actions in a number of areas:

Having met our previous $4 billion target early, we increased our aspiration for funding and facilitating renewable energy to $35 billion from 2020 to the end of 2024

We will only support clients who actively transition their business to generate less than 10 per cent of their earnings from thermal coal by 2030, and will review our activities within other industries generating substantial CO2 emissions

We are targeting net zero emissions and to use only renewable energy sources by 2030

We have launched a number of innovative sustainable finance products linked to the SDGs

These themes speak directly to that for which Standard Chartered stands: we are Here for good.

 

 

Conclusion and outlook

We improved our RoTE by 130 basis points to 6.4 per cent in 2019. This is decent progress, especially considering an increasingly challenging external environment:

Interest rates continue to fall, putting pressure on our net interest income despite ongoing efforts to improve our cost of funding

The global economy is still driven disproportionately by markets in our footprint, but is growing at a slower pace than before

China and the US only recently passed the first phase of what is likely to be a drawn-out process to resolve their differences

Our largest market, Hong Kong, tipped into recession, driven by a combination of the extended US-China trade dispute, slower economic growth in China and local social unrest

And more recently, the outbreak of the novel coronavirus (Covid-19) comes with unpredictable human and economic consequences

These external challenges will mean that income growth in 2020 is likely to be lower than our anticipated 5-7 per cent medium-term range, and that it will take longer to achieve our 10 per cent RoTE target than we previously envisaged. I want to be clear, though, that we continue to target RoTE above 10 per cent; this remains the minimum hurdle rate we use to run the business and is the least I expect from this franchise. However, it is important that we do not jeopardise our recently secured foundations. Nor will we sacrifice achieving our medium-term objectives to satisfy shorter-term financial targets. We remain sensitive to external conditions generally and recognise that these could as easily recover as worsen. We are prepared for moves in either direction.

We will continue to invest in areas of our competitive strength in 2020 and will not compromise on the quality of the income we generate. If the external environment means our top-line grows more slowly then so will our costs, and if there are fewer opportunities to effectively deploy surplus capital to fuel incremental high-returning growth then we will have more to return to shareholders. We have improved our RoTE every year since 2015 and we are focused on doing so again this year through maintaining positive -income-to-cost jaws and disciplined capital deployment.

We have taken significant steps to reshape our business and we are prepared to take further action if the dampening external factors turn out to be more structural or long-lasting. But I believe the factors that are likely to create economic headwinds in 2020 will turn out to be transitory. The synchronised global policy easing that started earlier in 2019 should stimulate growth but there is always a lag. And on top of this monetary support, China and India - by far the two biggest drivers of global growth - have fiscal levers to deploy to underpin growth.

As we continue to transform Standard Chartered this year, we will welcome challenge, adapt swiftly and be uncompromising in our pursuit of high performance. A perfect example of this in 2019 was how colleagues adapted to the disruption in Hong Kong to maintain their client focus in the second half of the year; truly exemplifying our valued behaviours.

We are in the right markets, guided by the right strategy and united through our purpose to drive commerce and prosperity. I am confident that we have set ourselves up for lasting success.

 

Bill Winters

Group Chief Executive

27 February 2020

 

 

Standard Chartered PLC - Group Chief Financial Officer's review

'An encouraging and resilient performance'

Summary of financial performance

 

4Q'19
$million


4Q'18
$million

Change
%

Constant
currency
change2
%

3Q'191
$million

Change
%

FY'19
$million


FY'18
$million

Change
%

Constant currency
change2
%

Net interest income1

1,899

2,029

(6)

 

1,937

(2)

7,698

7,840

(2)

 

Other income1

1,698

1,566

8

 

2,041

(17)

7,573

7,128

6

 

Underlying operating income

3,597

3,595

-

1

3,978

(10)

15,271

14,968

2

4

Other operating expenses

(2,592)

(2,512)

(3)

(4)

(2,501)

(4)

(10,062)

(10,140)

1

(1)

UK bank levy

(347)

(324)

(7)

 

-

nm3

(347)

(324)

(7)

 

Underlying operating expenses

(2,939)

(2,836)

(4)

(4)

(2,501)

(18)

(10,409)

(10,464)

1

(2)

Underlying operating profit before impairment and taxation

658

759

(13)

(12)

1,477

(55)

4,862

4,504

8

10

Credit impairment

(373)

(332)

(12)

 

(279)

(34)

(906)

(740)

(22)

 

Other impairment

(12)

(21)

43

 

(5)

(140)

(38)

(148)

74

 

Profit from associates and joint ventures

52

26

100

 

45

16

254

241

5

 

Underlying profit before taxation

325

432

(25)

(24)

1,238

(74)

4,172

3,857

8

10

Provision for regulatory matters

-

(900)

100

 

(22)

100

(226)

(900)

75

 

Restructuring

(117)

(392)

70

 

(123)

5

(254)

(478)

47

 

Other items

(14)

-

nm3

 

12

nm3

21

69

(70)

 

Statutory profit/(loss) before taxation

194

(860)

123

123

1,105

(82)

3,713

2,548

46

49

Taxation

(122)

(376)

68

 

(333)

63

(1,373)

(1,439)

5

 

Profit/(loss) for the period

72

(1,236)

106

106

772

(91)

2,340

1,109

111

113

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (%)1

1.54

1.72

 

 

1.61

 

1.62

1.69

 

 

Underlying return on tangible equity (%)

(0.1)

(1.9)

 

 

8.9

 

6.4

5.1

 

 

Underlying earnings per share (cents)

(0.4)

(5.6)

 

 

26.6

 

75.7

61.4

 

 

Statutory return on tangible equity (%)

(1.3)

(14.5)

 

 

7.5

 

4.8

1.6

 

 

Statutory earnings/(loss) per share (cents)

(3.9)

(43.3)

 

 

22.5

 

57.0

18.7

 

 

1 The Group has changed its accounting policies for net interest income, net trading income and net interest margin. Prior period has been restated. Refer to Note 1 to the financial statements in the Annual Report

2 Comparisons presented on the basis of the current period's functional currency rate, ensuring like-for-like currency rates between the two periods

3 Not meaningful

The Group delivered a resilient performance in 2019 notwithstanding an unusual combination of geopolitical and macroeconomic challenges that impacted some of its largest markets. Income grew at a faster rate than costs, profitability and return on tangible equity 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 full-year 2018 on a reported currency basis, unless otherwise stated. A full reconciliation between statutory and underlying results is set out on page 59 of the Annual Report.

Operating income grew 2 per cent or 4 per cent on a constant currency basis

Net interest income decreased 2 per cent with increased volumes more than offset by a reduction in net interest margin

Other income increased 6 per cent with a particularly strong performance in Financial Markets

Operating expenses excluding the UK bank levy were down 1 per cent or up 1 per cent on a constant currency basis, with tight control of costs generating positive income-to-cost jaws of 3 per cent. The cost-to-income ratio (excluding the UK bank levy) improved 2 percentage points to 66 per cent. The Group will continue to invest in its strategic priorities while - as previously guided - targeting cost growth below the rate of inflation and positive jaws. The UK bank levy rose $23 million to $347 million

 

 

Credit impairment increased by $166 million to $906 million. This was driven mainly by a $275 million increase in stage 1 and 2 impairments, around half of which related to a deterioration in macroeconomic variables, which includes the downward revision to Hong Kong GDP in the second half of the year. Impairments of stage 3 assets decreased by $109 million, despite a $141 million charge booked in the fourth quarter relating to a single client exposure in ASEAN & South Asia. Credit impairment of $906 million represents a loan-loss rate of 27 basis points (2018: 21 basis points) and remains at an historically low level

Other impairment reduced by $110 million to $38 million following the Group's decision to discontinue its ship leasing business, with the related impairment now recorded as a restructuring charge and excluded from underlying results

Profit from associates and joint ventures was up 5 per cent with continued good performance at China Bohai Bank partially offset by the exclusion from underlying performance of the Group's share of PT Bank Permata Tbk's earnings

Profit before tax improved 8 per cent or 10 per cent on a constant currency basis. Charges relating to restructuring, provisions for regulatory matters and other items decreased $850 million to $459 million, primarily driven by a reduction in regulatory provisions. The resolution of previously disclosed investigations in the UK and US into historical sanctions and financial crime control issues included monetary penalties of $1,086 million, of which $186 million was provided for in the current year. Including these items, statutory profit before tax increased 46 per cent

Taxation was $1,373 million on a statutory basis including a $179 million capital gains tax charge arising from the changes in legal entity structure to create a capital and liquidity hub in the Greater China & North Asia region. The underlying effective tax rate was 29.3 per cent, a decrease of 5.3 percentage points reflecting a greater proportion of profits from markets with lower tax rates and a reduction in non-deductible expenses

Underlying return on tangible equity improved by 130 basis points to 6.4 per cent, reflecting the increase in underlying profit and the reduction in tangible equity following the completion of the $1 billion share buy-back programme

Underlying basic earnings per share (EPS) increased 23 per cent and statutory EPS trebled

A final ordinary dividend per share of 20 cents has been proposed by the Board which would result in a full-year dividend of 27 cents, an increase of 6 cents or 29 per cent

Operating income by product

 

4Q'19
$million

4Q'18
$million

Change
%

3Q'19
$million

Change
%

FY'19
$million

FY'18
$million

Change
%

Transaction Banking

921

942

(2)

976

(6)

3,849

3,718

4

Trade

259

257

1

282

(8)

1,100

1,123

(2)

Cash Management

577

604

(4)

606

(5)

2,406

2,262

6

Securities Services

85

81

5

88

(3)

343

333

3

Financial Markets

631

580

9

789

(20)

2,916

2,612

12

Foreign Exchange

264

232

14

261

1

1,128

1,001

13

Rates

163

63

159

176

(7)

696

555

25

Commodities

37

50

(26)

39

(5)

165

192

(14)

Credit and Capital Markets

125

83

51

167

(25)

577

324

78

Capital Structuring Distribution

 

 

 

 

 

 

 

 

Group

86

91

(5)

87

(1)

329

309

6

DVA

(72)

46

nm3

14

nm3

(100)

77

nm3

Other Financial Markets

28

15

87

45

(38)

121

154

(21)

Corporate Finance1, 2

328

370

(11)

281

17

1,143

1,186

(4)

Lending and Portfolio Management2

202

181

12

204

(1)

792

755

5

Wealth Management

415

343

21

488

(15)

1,878

1,799

4

Retail Products

957

925

3

971

(1)

3,849

3,750

3

CCPL and other unsecured lending

311

294

6

315

(1)

1,251

1,310

(5)

Deposits

483

481

-

508

(5)

1,982

1,782

11

Mortgage and Auto

129

127

2

123

5

508

573

(11)

Other Retail Products

34

23

48

25

36

108

85

27

Treasury

196

253

(23)

335

(41)

1,090

1,223

(11)

Other

(53)

1

nm3

(66)

20

(246)

(75)

nm3

Total underlying operating income

3,597

3,595

-

3,978

(10)

15,271

14,968

2

1 In December 2018 it was decided to discontinue the ship operating lease business and any future profits and losses will be reported as restructuring. Prior periods have not been restated

2 There has been a reorganisation of certain product teams between Corporate Finance and Lending and Portfolio Management. Prior periods have been restated

3 Not meaningful
 

Transaction Banking income grew 4 per cent with strong performance in Cash Management on the back of improved margins and increased volumes. Growth in Securities Services was offset by a 2 per cent decline in Trade.

Financial Markets income grew 12 per cent benefiting from market volatility and increased hedging and investment activity by clients. There was strong double-digit growth in Credit and Capital Markets and Rates and double-digit growth in Foreign Exchange partly offset by a negative $177 million movement in the Debit Valuation Adjustment, of which a negative $118 million movement occurred in the fourth quarter of 2019.

Corporate Finance income was down 4 per cent impacted by the Group's decision to discontinue its ship leasing business, with the related income now recorded as restructuring and excluded from underlying results. Excluding the impact of this decision, Corporate Finance income was up 2 per cent.

Lending and Portfolio Management income was up 5 per cent with improved margins and increased volumes in Corporate Lending.

Wealth Management income grew 4 per cent - despite more challenging market conditions - primarily from growth in FX, fixed income and structured products.

Retail Products income grew 3 per cent or 5 per cent on a constant currency basis with continued growth in Deposits from improved margins and increased volumes partly offset by margin compression in Mortgages and Credit Cards & Personal Loans.

Treasury income reduced 11 per cent with the impact of interest rate movements within the Treasury Markets portfolio partly offset by $122 million favourable movement in hedge ineffectiveness.

Other products income of negative $246 million includes increased funding costs reflecting the impact of adopting
IFRS 16.

Profit before tax by client segment and geographic region

 

4Q'19
$million

4Q'18
$million

Change
%

3Q'19
$million

Change
%

FY'19
$million

FY'18
$million

Change
%

Corporate & Institutional Banking

375

495

(24)

589

(36)

2,318

2,072

12

Retail Banking

167

142

18

298

(44)

1,083

1,033

5

Commercial Banking

44

13

nm1

118

(63)

448

224

100

Private Banking

(3)

(9)

67

(3)

-

94

(14)

nm1

Central & other items (segment)

(258)

(209)

(23)

236

nm1

229

542

(58)

Underlying profit before taxation

325

432

(25)

1,238

(74)

4,172

3,857

8

Greater China & North Asia

493

515

(4)

610

(19)

2,432

2,369

3

ASEAN & South Asia

23

116

(80)

242

(90)

1,025

970

6

Africa & Middle East

96

41

134

147

(35)

684

532

29

Europe & Americas

82

52

58

62

32

157

154

2

Central & other items (region)

(369)

(292)

(26)

177

nm1

(126)

(168)

25

Underlying profit before taxation

325

432

(25)

1,238

(74)

4,172

3,857

8

1  Not meaningful

Corporate & Institutional Banking improved its profit by 12 per cent and was the largest contributor to the overall Group's profit before tax, from a client segment perspective. Commercial Banking doubled its profit and Retail Banking's grew by 5 per cent. Private Banking generated a profit of $94 million up from an operating loss of $(14) million in 2018. The improved profitability of the client segments was partly offset by a 58 per cent reduction in the profit generated by Central & other items (segment) due to lower Treasury income from higher rates internally paid on liabilities and one-off liquidity requirements.

Greater China & North Asia was the largest regional contributor to the overall Group's profit before tax, and grew profit by 3 per cent. Africa & Middle East was the fastest growing region, with profit up 29 per cent. ASEAN & South Asia generated 6 per cent growth, while profit in Europe & Americas improved 2 per cent. The loss incurred by Central & other items (region) decreased by $42 million to $126 million with higher external debt costs offset by a favourable change in hedge ineffectiveness and increased internal capital charges.

 

 

Adjusted net interest income and margin

 

4Q'19
$million

restated
4Q'181
$million

Change2
%

restated
3Q'191
$million

Change2
%

FY'19
$million

restated
FY'181
$million

Change2
%

Adjusted net interest income

1,978

2,079

(5)

2,025

(2)

8,007

8,032

-

Average interest-earning assets

508,001

479,496

6

499,260

2

494,756

476,114

4

Average interest-bearing liabilities

457,413

424,461

8

451,579

1

444,595

430,167

3

 

 

 

 

 

 

 

 

 

Gross yield (%)3

3.19

3.38

(19)

3.3

(11)

3.34

3.18

16

Rate paid (%)3

1.83

1.87

(4)

1.87

(4)

1.92

1.65

27

Net yield (%)3

1.36

1.51

(15)

1.43

(7)

1.42

1.53

(11)

Net interest margin (%)3,4,5

1.54

1.72

(18)

1.61

(7)

1.62

1.69

(7)

1  The Group has changed its accounting policies for net interest income, net trading income . Prior periods have been restated. Refer to Note 1 to the financial statements

2  Variance is better/(worse) other than assets and liabilities which is increase/(decrease)

3  Change is the basis points (bps) difference between the two periods rather than the percentage change

4  Adjusted net interest income divided by average interest-earning assets, annualised

5  Restated as per Net interest margin, defined under Alternative performance measures in the Strategic report

The Group has changed its accounting policy for net interest income and the basis of preparation of its net interest margin to better reflect the underlying performance of its banking book. See notes to the financial statements in the Annual Report for further details.

Adjusted net interest income was flat with growth in interest-earning assets offsetting a 7 basis points reduction in net interest margin which averaged 162 basis points for the full year.

Average interest-earning assets increased 4 per cent driven by an increase in investment securities balances and higher loans and advances to customers. Gross yields increased 16 basis points compared to the average in 2018 and predominantly reflected the flow-through of rises in global interest rates that occurred through 2018, partly offset by declining interest rates in the second half of 2019

Average interest-bearing liabilities increased 3 per cent driven by growth in customer accounts. The rate paid on liabilities increased 27 basis points compared to the average in 2018 reflecting interest rate movements

The 7 basis point reduction in net interest margin was primarily driven by margin pressure on liabilities.

Credit risk summary

 

20191
$million

 

20181,2
$million

Total

Ongoing
business

Liquidation
portfolio

Total

Increase/
(decrease)
%

Gross loans and advances to customers3

274,306

 

261,216

1,769

262,985

4

Of which stage 1 and 2

266,908

 

254,445

86

254,531

5

Of which stage 3

7,398

 

6,771

1,683

8,454

(12)

 

 

 

 

 

 

 

Expected credit loss provisions

(5,783)

 

(5,054)

(1,374)

(6,428)

(10)

Of which stage 1 and 2

(779)

 

(838)

(4)

(842)

(7)

Of which stage 3

(5,004)

 

(4,216)

(1,370)

(5,586)

(10)

 

 

 

 

 

 

 

Net loans and advances to customers

268,523

 

256,162

395

256,557

5

Of which stage 1 and 2

266,129

 

253,607

82

253,689

5

Of which stage 3

2,394

 

2,555

313

2,868

(17)

 

 

 

 

 

 

 

Cover ratio of stage 3 before/after collateral (%)

68 / 85

 

62 / 82

81 / 95

66 / 85

2 / 0

Credit grade 12 accounts ($million)

1,605

 

1,437

86

1,523

5

Early alerts ($million)

5,271

 

4,767

-

4,767

11

Investment grade corporate exposures (%)

61

 

62

-

62

(1)

1 Balances for 2019 and 2018 reflect interest due but unpaid together with equivalent credit impairment charge

2 2018 Stage 3 balances, provisions and cover ratios have been restated

3 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $1,469 million at 31 December 2019 and $3,151 million at 31 December 2018

The Group has changed its accounting policy to report interest in suspense for stage 3 exposures. This results in an increase in gross stage 3 exposures and provisions, with no change to net stage 3 assets. Prior period balances have been restated. See notes to the financial statements in the Annual Report for further details.

 

 

Asset quality overall was broadly stable in the year with credit impairment rising but remaining at historically low levels well below those seen in previous years. The Group remains vigilant considering significant volatility in some markets, with continuing geopolitical uncertainty and weakening economic forecasts. Reviews and stress tests of the Group's portfolio are carried out regularly to help identify then mitigate any risks that may arise. The actions to reduce exposures in the Group's former liquidation portfolio were substantially completed in 2018 so the remaining exposures are reported as part of the ongoing business in 2019.

Gross stage 3 loans and advances to customers of $7.4 billion were down 12 per cent compared with 31 December 2018. The reduction is due to repayments, write-offs and upgrades to stage 2 mainly in Corporate & Institutional Banking and Commercial Banking. These credit-impaired loans represented 2.7 per cent of gross loans and advances, a reduction of 0.5 percentage points compared with 31 December 2018.

The stage 3 cover ratio increased to 68 per cent from 66 per cent in 2018. The cover ratio post collateral was stable at 85 per cent.

Credit grade 12 balances increased 5 per cent since 31 December 2018 reflecting sovereign ratings downgrades in Zimbabwe, Zambia and Lebanon which impacted the ratings of certain accounts in those countries. Early alert accounts increased 11 per cent in the year due to the transfer in the fourth quarter of 2019 of a handful of unrelated clients that had been previously under review.

The proportion of investment grade corporate exposures has remained broadly stable at 61 per cent.

Restructuring and other items

 

2019

2018

Provision for regulatory
matters
$million

Restructuring
$million

Other items
$million

Provision for regulatory
matters
$million

Restructuring
$million

Other items
$million

Operating income

-

146

-

 

-

(248)

69

Operating expenses

(226)

(298)

-

 

(900)

(283)

-

Credit impairment

-

(2)

-

 

-

87

-

Other impairment

-

(98)

(27)

 

-

(34)

-

Profit from associates and joint ventures

-

(2)

48

 

-

-

-

Profit/(loss) before taxation

(226)

(254)

21

 

(900)

(478)

69

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 underlying performance period-by period.

As previously disclosed, the Group expects to incur around $500 million of restructuring charges between 2019 and 2021 to execute its refreshed strategic priorities. Restructuring charges of $254 million for 2019 primarily related to redundancy provisions taken in the fourth quarter together with impairments related to the Group's discontinued ship leasing business. Other items of $21 million included profits from the Group's joint venture investment in Indonesia, which the Group has classified as held for sale having signed a conditional share purchase agreement to sell its 44.56 per cent equity interest, and goodwill impairment relating to the Group's subsidiaries in Sri Lanka, Nepal and Oman. The provision for regulatory matters primarily relates to the agreement to pay monetary penalties following the resolution of investigations into historical sanctions and financial crime control issues, described further in Note 26 to the financial statements.

 

 

Balance sheet and liquidity

 

31.12.19
$million

30.09.19
$million

Change1
%

30.06.19
$million

Change1
%

31.12.18
$million

Change1
%

Assets

 

 

 

 

 

 

 

Loans and advances to banks

53,549

60,743

(12)

59,210

(10)

61,414

(13)

Loans and advances to customers

268,523

269,703

-

263,595

2

256,557

5

Other assets

398,326

404,354

(1)

389,699

2

370,791

7

Total assets

720,398

734,800

(2)

712,504

1

688,762

5

Liabilities

 

 

 

 

 

 

 

Deposits by banks

28,562

32,603

(12)

30,783

(7)

29,715

(4)

Customer accounts

405,357

387,857

5

401,597

1

391,013

4

Other liabilities

235,818

263,644

(11)

229,685

3

217,682

8

Total liabilities

669,737

684,104

(2)

662,065

1

638,410

5

Equity

50,661

50,696

-

50,439

-

50,352

1

Total equity and liabilities

720,398

734,800

(2)

712,504

1

688,762

5

 

 

 

 

 

 

 

 

Advances-to-deposits ratio (%)2

64.2%

65.6%

 

63.7%

 

63.1%

 

Liquidity coverage ratio (%)

144%

133%

 

139%

 

154%

 

1 Variance is increase/(decrease) comparing current reporting period to prior reporting periods

2 The Group now excludes $9,109 million held with central banks (30.06.19: $6,835 million, 31.12.18: $7,412 million, 30.09.18: $7,172 million) that has been confirmed as repayable at the point of stress

The Group's balance sheet remains strong, liquid and well diversified.

Loans and advances to customers increased 5 per cent since 31 December 2018 to $269 billion driven mainly by growth in Financial Markets, Corporate Lending and Mortgages

Customer accounts of $405 billion increased 4 per cent since 31 December 2018 with an increase in operating account balances within Cash Management offset by a run-off in Corporate Term Deposits

Other assets and other liabilities increased 7 per cent and 8 per cent respectively since 31 December 2018. The growth in other assets was driven by increased investment securities and reverse repurchase agreements partly offset by a reduction of cash balances at central banks. The growth in other liabilities reflects increased trading book liabilities and repurchase agreements

The advances-to-deposits ratio increased slightly to 64.2 per cent from 63.1 per cent at 31 December 2018 while the liquidity coverage ratio at year-end decreased 10 percentage points to 144 per cent, well above the minimum regulatory requirement.

Risk-weighted assets

 

31.12.19
$million

30.09.19
$million

Change1
%

30.06.19
$million

Change1
%

31.12.18
$million

Change1
%

By risk type

 

 

 

 

 

 

 

Credit risk

215,664

218,198

(1)

220,010

(2)

211,138

2

Operational risk

27,620

27,620

-

27,620

-

28,050

(2)

Market risk

20,806

22,850

(9)

23,109

(10)

19,109

9

Total RWAs

264,090

268,668

(2)

270,739

(2)

258,297

2

1. Variance is increase/(decrease) comparing current reporting period to prior reporting periods

Total risk-weighted assets (RWA) increased 2 per cent or $5.8 billion since 31 December 2018 to $264.1 billion.

Credit Risk RWA increased $4.5 billion to $215.7 billion, with asset growth partially offset by RWA efficiencies, foreign currency translation and the partial sale of the Group's Principal Finance portfolio

Market Risk RWA increased by $1.7 billion to $20.8 billion due to higher levels of Financial Markets activity and some policy and methodology changes

Operational Risk RWA reduced by $0.4 billion primarily due to a decrease in average income as measured over a rolling three-year time horizon, with lower 2018 income replacing higher 2015 income

Total RWA increased at broadly the same rate in 2019 as income. The ongoing execution of organic and inorganic RWA optimisation initiatives supports the expectation that income growth will exceed RWA growth in the medium-term.

 

 

Capital base and ratios

 

31.12.19
$million

30.09.19
$million

Change1
%

30.06.19
$million

Change1
%

31.12.18
$million

Change1
%

CET1 capital

36,513

36,386

-

36,511

-

36,717

(1)

Additional Tier 1 capital (AT1)

7,164

7,153

-

6,612

8

6,684

7

Tier 1 capital

43,677

43,539

-

43,123

1

43,401

1

Tier 2 capital

12,288

11,401

8

11,834

4

12,295

-

Total capital

55,965

54,940

2

54,957

2

55,696

-

CET1 capital ratio end point (%)2

13.8

13.5

0.3

13.5

0.3

14.2

(0.4)

Total capital ratio transitional (%)2

21.2

20.4

0.8

20.3

0.9

21.6

(0.4)

UK leverage ratio (%)2

5.2

5.1

0.1

5.3

(0.1)

5.6

(0.4)

1.   Variance is increase/(decrease) comparing current reporting period to prior reporting periods

2.   Change is percentage point difference between two points rather than percentage change

The Group remains well capitalised and highly liquid with all metrics above regulatory thresholds.

The Group's common equity tier 1 (CET1) ratio of 13.8 per cent was towards the top of the 13-14 per cent target range, 39 basis points lower than as at 31 December 2018. On an underlying basis CET1 rose 16 basis points as profits generated in the year were partly offset by credit and market RWA growth and higher dividends. This was offset by the impact of the $1 billion share buy-back, the costs of the legal entity restructuring in Greater China & North Asia and regulatory provisions.

The Group repurchased 116,103,483 ordinary shares for an aggregate consideration of approximately $1 billion between 2 May 2019 and 25 September 2019. The shares were subsequently cancelled, reducing the total issued share capital by 3.5 per cent.

The Board has decided to carry out a share buy-back for up to a maximum consideration of $0.5 billion to further reduce the number of ordinary shares in issue by cancelling the repurchased shares. The terms of the buy-back will be announced and the programme will start shortly and is expected to reduce the Group's CET1 ratio in the first quarter of 2020 by approximately 20 basis points.

The Group's UK leverage ratio of 5.2 per cent was down 38 basis points compared with 31 December 2018 as higher Tier 1 capital was offset by growth in the leverage exposure measure. The Group's leverage ratio is significantly above its minimum requirement of 3.7 per cent.

In the period the Group's Pillar 2A buffer increased from 2.9 to 3.4 per cent of which 1.9 per cent has to be held in CET1. The UK Financial Policy Committee and the Hong Kong Monetary Authority also announced changes to their counter-cyclical buffer rates with the UK increasing its rate from 1 per cent to 2 per cent with effect from 16 December 2020 and Hong Kong reducing its rate from 2.5 per cent to 2 per cent with effect from 14 October 2019. The changes to the counter-cyclical buffer rates are not expected to materially impact the Group's minimum CET1 requirements and it continues to target a CET1 ratio of 13-14 per cent.

The Board has recommended a final ordinary dividend of 20 cents per share which, together with the interim dividend of 7 cents per share, would result in a full-year ordinary dividend of 27 cents a share or $863 million, which represents a 29 per cent increase in the full-year ordinary dividend.

Outlook

The underlying momentum in the fourth quarter of 2019 continued in the opening weeks of 2020 but lower interest rates, slower global economic growth, a softer Hong Kong economy and the impact of the recent novel coronavirus (Covid-19) outbreak will likely result in income growth in 2020 below our medium-term 5-7 per cent target range. These headwinds are expected to be transitory, but we now believe it will take longer to achieve our RoTE target of 10 per cent than we previously envisaged.

We have improved our RoTE every year since 2015 and we are focused on doing so again in 2020 through a combination of positive income-to-cost jaws and continued discipline on returning surplus capital to shareholders. The Board has authorised the purchase and cancellation of up to $0.5 billion worth of shares starting shortly and will review the potential for making a further capital return upon the completion of the Permata sale.

 

Andy Halford

Group Chief Financial Officer

27 February 2020

 

 

Standard Chartered PLC - Client segment reviews

Underlying performance by client segment

 

2019

Corporate & Institutional Banking
$million

Retail
Banking
$million

Commercial Banking
$million

Private
Banking
$million

Central &
other items
$million

Total
$million

Operating income

7,185

5,171

1,478

577

860

15,271

External

7,356

4,223

1,539

329

1,824

15,271

Inter-segment

(171)

948

(61)

248

(964)

-

Operating expenses

(4,361)

(3,754)

(907)

(514)

(873)

(10,409)

Operating profit/(loss) before impairment losses and taxation

2,824

1,417

571

63

(13)

4,862

Credit impairment

(474)

(336)

(123)

31

(4)

(906)

Other impairment

(32)

2

-

-

(8)

(38)

Profit from associates and joint ventures

-

-

-

-

254

254

Underlying profit before taxation

2,318

1,083

448

94

229

4,172

Provision for regulatory matters

-

-

-

-

(226)

(226)

Restructuring

(110)

(63)

(11)

(11)

(59)

(254)

Goodwill impairment

-

-

-

-

(27)

(27)

Share of profits of PT Bank Permata Tbk joint venture

-

-

-

-

48

48

Statutory profit/(loss) before taxation

2,208

1,020

437

83

(35)

3,713

Total assets

329,866

108,801

31,244

14,922

235,565

720,398

Of which: loans and advances to customers including FVTPL

156,599

106,570

26,686

14,821

10,078

314,754

loans and advances to customers

111,304

106,332

25,990

14,821

10,076

268,523

loans held at fair value through profit or loss

45,295

238

696

-

2

46,231

Total liabilities

393,040

147,698

36,864

18,480

73,655

669,737

Of which: customer accounts

248,748

144,045

34,083

18,424

7,433

452,733

 

 

2018

Corporate & Institutional
Banking
$million

Retail
Banking
$million

Commercial Banking
$million

Private
Banking
$million

Central &
other items
$million

Total
$million

Operating income

6,860

5,041

1,391

516

1,160

14,968

External

7,055

4,493

1,570

270

1,580

14,968

Inter-segment

(195)

548

(179)

246

(420)

-

Operating expenses

(4,396)

(3,736)

(923)

(530)

(879)

(10,464)

Operating profit/(loss) before impairment losses and taxation

2,464

1,305

468

(14)

281

4,504

Credit impairment

(242)

(267)

(244)

-

13

(740)

Other impairment

(150)

(5)

-

-

7

(148)

Profit from associates and joint ventures

-

-

-

-

241

241

Underlying profit/(loss) before taxation

2,072

1,033

224

(14)

542

3,857

Provision for regulatory matters

(50)

-

-

-

(850)

(900)

Restructuring

(350)

(68)

(12)

(24)

(24)

(478)

Gains arising on repurchase of senior and subordinated liabilities

3

-

-

-

66

69

Statutory profit/(loss) before taxation

1,675

965

212

(38)

(266)

2,548

Total assets

308,496

103,780

31,379

13,673

231,434

688,762

Of which: loans and advances to customers including FVTPL

146,575

101,635

27,271

13,616

10,274

299,371

loans and advances to customers

104,677

101,235

26,759

13,616

10,270

256,557

loans held at fair value through profit
or loss

41,898

400

512

-

4

42,814

Total liabilities

369,316

140,328

37,260

19,733

71,773

638,410

Of which: customer accounts

243,019

136,691

34,860

19,622

2,989

437,181

 

 

 

Corporate & Institutional Banking

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

1,710

1,763

(3)

1,868

(8)

7,185

6,860

5

Transaction Banking

712

731

(3)

761

(6)

2,992

2,887

4

Trade

169

166

2

186

(9)

721

729

(1)

Cash Management

459

484

(5)

487

(6)

1,929

1,825

6

Securities Services

84

81

4

88

(5)

342

333

3

Financial Markets

563

519

8

715

(21)

2,617

2,328

12

Foreign Exchange

225

195

15

217

4

950

829

15

Rates

158

58

172

168

(6)

664

527

26

Commodities

31

44

(30)

34

(9)

140

168

(17)

Credit and Capital Markets

121

80

51

164

(26)

564

312

81

Capital Structuring Distribution Group

77

87

(11)

79

(3)

302

285

6

DVA

(72)

46

nm5

14

nm4

(100)

77

nm4

Other Financial Markets

243

9

156

39

(41)

97

130

(25)

Corporate Finance2, 3

308

351

(12)

251

23

1,048

1,098

(5)

Lending and Portfolio Management3

135

130

4

147

(8)

553

542

2

Other

(8)

32

(125)

(6)

(33)

(25)

5

nm4

Operating expenses

(1,123)

(1,082)

(4)

(1,114)

(1)

(4,361)

(4,396)

1

Operating profit before impairment losses and taxation

587

681

(14)

754

(22)

2,824

2,464

15

Credit impairment

(207)

(169)

(22)

(157)

(32)

(474)

(242)

(96)

Other impairment

(5)

(17)

71

(8)

38

(32)

(150)

79

Underlying profit before taxation

375

495

(24)

589

(36)

2,318

2,072

12

Provision for regulatory matters

-

(50)

100

-

nm5

-

(50)

100

Restructuring

(28)

(278)

90

(105)

73

(110)

(350)

69

Gains arising on repurchase of senior and subordinated liabilities

-

-

nm4

-

nm4

-

3

(100)

Statutory profit before taxation

347

167

108

484

(28)

2,208

1,675

32

Total assets

329,866

308,496

7

354,341

(7)

329,866

308,496

7

Of which: loans and advances to customers including FVTPL

156,599

146,575

7

159,467

(2)

156,599

146,575

7

Total liabilities

393,040

369,316

6

406,895

(3)

393,040

369,316

6

Of which: customer accounts

248,748

243,019

2

246,752

1

248,748

243,019

2

Risk-weighted assets

132,050

128,991

2

137,082

(4)

132,050

128,991

2

Underlying return on risk-weighted assets (%)

1.1

1.5

(40)bps

1.7

(60)bps

1.7

1.5

20bps

Underlying return on tangible equity (%)

5.5

7.5

(200)bps

8.4

(290)bps

8.5

7.4

110bps

Cost to income ratio (%)

65.7

61.4

(430)bps

59.6

(610)bps

60.7

64.1

340bps

1  Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 In December 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

3 There has been a reorganisation of certain product teams between Corporate Finance and Lending and Portfolio Management. Prior periods have been restated

4 Not meaningful

Strategic priorities

Deliver sustainable growth for clients by leveraging our network to facilitate trade, capital and investment flows across our footprint markets

Generate high-quality returns by growing capital-lite income, driving balance sheet velocity and improving funding quality while maintaining risk controls

Partner with strategically selected third parties to expand capabilities and to access new clients

Deliver a true frictionless cross-product digital banking experience to our clients through our integrated client portal, open banking and API solutions

Accelerate Sustainable Finance products to our clients through product innovation and enabling transition to a low carbon future

 

 

Progress

Quality of income continues to improve driven by capital-lite1 income up 9 per cent and Network income up 6 per cent; Network contributes to 69 per cent of total CIB segment income

Maintained balance sheet quality with investment-grade clients representing 57 per cent of customer loans and advances (2018: 63 per cent) and high-quality operating account balances improving to 60 per cent of Transaction Banking customer balances (2018: 49 per cent)

Strengthened focus on digital client experience, investments and talent pool by establishing Digital Channels and Client Data Analytics division

Digitised c.3,000 client entities and increased S2B NextGen2 client transaction volumes from 1 per cent to 32 per cent of total transaction volume

Resilient performance driven by diversified product suite and expanded client solutions delivering growth despite challenging geopolitical and macroeconomic conditions across footprint markets

 

Performance highlights

Underlying operating profit before taxation of $2,318 million was up 12 per cent, primarily driven by higher income and prudent cost management

Underlying operating income of $7,185 million was up 5 per cent primarily driven by Financial Markets and Cash Management

Good balance sheet momentum with loans and advances to customers up 7 per cent

Proportion of low returning client RWA at 13.8 per cent (2018: 15.5 per cent)

Underlying RoTE up 110 bps to 8.5 per cent

1  Capital-lite income refers to products with low RWA consumption or of a non-funded nature. This mainly includes Cash Management and FX products

2  Our next generation transaction banking digital platform

 

 

Retail Banking

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

1,257

1,153

9

1,319

(5)

5,171

5,041

3

Transaction Banking

5

5

-

5

-

19

20

(5)

Trade

5

5

-

5

-

19

20

(5)

Wealth Management

341

279

22

395

(14)

1,514

1,491

2

Retail Products

903

870

4

917

(2)

3,629

3,535

3

CCPL and other unsecured lending

311

294

6

315

(1)

1,251

1,310

(5)

Deposits

439

435

1

462

(5)

1,797

1,603

12

Mortgage and Auto

118

118

-

115

3

472

537

(12)

Other Retail Products

35

23

52

25

40

109

85

28

Other

8

(1)

nm2

2

nm2

9

(5)

nm2

Operating expenses

(992)

(927)

(7)

(939)

(6)

(3,754)

(3,736)

-

Operating profit before impairment losses and taxation

265

226

17

380

(30)

1,417

1,305

9

Credit impairment

(100)

(79)

(27)

(82)

(22)

(336)

(267)

(26)

Other impairment

2

(5)

140

-

nm2

2

(5)

140

Underlying profit before taxation

167

142

18

298

(44)

1,083

1,033

5

Restructuring

(54)

(60)

10

(8)

nm2

(63)

(68)

7

Statutory profit before taxation

113

82

38

290

(61)

1,020

965

6

Total assets

108,801

103,780

5

104,884

4

108,801

103,780

5

Of which: loans and advances to customers including FVTPL

106,570

101,635

5

102,786

4

106,570

101,635

5

Total liabilities

147,698

140,328

5

142,778

3

147,698

140,328

5

Of which: customer accounts

144,045

136,691

5

139,263

3

144,045

136,691

5

Risk-weighted assets

44,452

42,903

4

42,714

4

44,452

42,903

4

Underlying return on risk-weighted assets (%)

1.5

1.3

20bps

2.8

(130)bps

2.5

2.4

10bps

Underlying return on tangible equity (%)

7.4

6.6

80bps

13.8

(640)bps

12.6

11.8

80bps

Cost to income ratio (%)

78.9

80.4

150bps

71.2

(770)bps

72.6

74.1

150bps

1  Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2  Not meaningful

Strategic priorities

Invest in our affluent and emerging affluent clients with a 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 Premium and Priority clients from 56 per cent in 2018 to 57 per cent as a result of strong Wealth Management and Deposit income growth and increasing client numbers

Launched the Côte d'Ivoire digital banking model across eight other markets in the Africa & Middle East region: Kenya, Uganda, Tanzania, Ghana, Botswana, Zambia and Zimbabwe and Nigeria

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 on-boarding (RTOB) for Credit Cards and Personal Loans (CCPL) in India in addition to saving account launch a year earlier, enabling more efficient credit cards and personal loan applications with significantly improved customer experience. RTOB launched in three new markets: Singapore, Malaysia and UAE

Driving affluent growth with Priority Private launched in five markets: Singapore, Malaysia, Taiwan, China and Hong Kong, which is a key lever to accelerate Priority Banking growth

Premium Banking, which serves emerging affluent clients and serves as feeder to Priority growth, now launched in 10 markets: Hong Kong, Korea, China, Singapore, India, Malaysia, UAE, Kenya, Pakistan and Taiwan

A further improvement in digital adoption, with 54 per cent of clients now actively using online or mobile banking compared with 49 per cent in 2018

 

Performance highlights

Underlying operating profit before taxation of $1,083 million was 5 per cent higher, as higher income more than offset higher credit impairment

Underlying operating income of $5,171 million was up 3 per cent (up 5 per cent on a constant currency basis). Growth of 4 per cent (up 6 per cent on a constant currency basis) in Greater China & North Asia, 6 per cent (up 8 per cent on a constant currency basis) in ASEAN & South Asia and a 9 per cent decline (down 3 per cent on a constant currency basis) in Africa & Middle East

Strong income momentum growth of 12 per cent from Deposits with improved margins and balance growth. Together, Wealth Management and Deposits income, representing 64 per cent of Retail Banking income, grew 7 per cent

Underlying RoTE improved to 12.6 per cent from 11.8 per cent

 

 

Commercial Banking

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

360

339

6

372

(3)

1,478

1,391

6

Transaction Banking

204

206

(1)

210

(3)

838

811

3

Trade

85

86

(1)

91

(7)

360

374

(4)

Cash Management

118

120

(2)

119

(1)

477

437

9

Securities Services

1

-

nm4

-

nm4

1

-

nm4

Financial Markets

68

61

11

74

(8)

299

284

5

Foreign Exchange

39

37

5

44

(11)

178

172

3

Rates

5

5

-

8

(38)

32

28

14

Commodities

6

6

-

5

20

25

24

4

Credit and Capital Markets

4

3

33

3

33

13

12

8

Capital Structuring Distribution Group

9

4

125

8

13

27

24

13

Other Financial Markets

5

6

(17)

6

(17)

24

24

-

Corporate Finance2, 3

20

19

5

30

(33)

93

88

6

Lending and Portfolio Management3

67

51

31

57

18

239

213

12

Wealth Management

-

1

(100)

-

nm4

2

3

(33)

Retail Products

1

-

nm4

2

(50)

6

4

50

Deposits

1

(1)

200

2

(50)

6

4

50

Other Retail Products

-

1

(100)

-

nm4

-

-

nm4

Other

-

1

(100)

(1)

100

1

(12)

108

Operating expenses

(252)

(236)

(7)

(230)

(10)

(907)

(923)

2

Operating profit before impairment losses and taxation

108

103

5

142

(24)

571

468

22

Credit impairment

(64)

(90)

29

(24)

(167)

(123)

(244)

50

Underlying profit before taxation

44

13

nm4

118

(63)

448

224

100

Restructuring

(11)

(9)

(22)

-

nm4

(11)

(12)

8

Statutory profit before taxation

33

4

nm4

118

(72)

437

212

106

Total assets

31,244

31,379

-

31,962

(2)

31,244

31,379

-

Of which: loans and advances to customers including FVTPL

26,686

27,271

(2)

27,553

(3)

26,686

27,271

(2)

Total liabilities

36,864

37,260

(1)

34,971

5

36,864

37,260

(1)

Of which: customer accounts

34,083

34,860

(2)

32,305

6

34,083

34,860

(2)

Risk-weighted assets

28,066

30,481

(8)

29,521

(5)

28,066

30,481

(8)

Underlying return on risk-weighted assets (%)

0.6

0.2

40bps

1.6

(100)bps

1.5

0.7

80bps

Underlying return on tangible equity (%)

3.1

0.8

230bps

7.7

(460)bps

7.3

3.4

390bps

Cost to income ratio (%)

70.0

69.6

(40)bps

61.8

(820)bps

61.4

66.4

500bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 In December 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

3 There has been a reorganisation of certain product teams between Corporate Finance and Lending and Portfolio Management. Prior periods have been restated

4 Not meaningful

Strategic priorities

Drive quality sustainable growth by deepening relationships with existing clients and on-boarding new clients, focusing on rapidly growing and internationalising companies

Improve balance sheet and income mix, accelerating utilisation of growth in Cash Management 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

Delivered 6 per cent income growth while reducing RWA consumption (down 8 per cent) and maintaining cost discipline (down 2 per cent)

Onboarded over 6,400 new clients in 2019, which helped generate $75 million additional income and $3 billion additional Cash liabilities

Grew Network income 18 per cent year-on-year, notably from clients in India and China, as we continue to help our Commercial Banking clients capture international opportunities

Continued to reshape business mix towards capital-lite products: Cash Management and FX income up 8 per cent year-on-year accounting for 44 per cent of total income, while Cash operating account balances grew 11 per cent year-on-year

Strengthened origination discipline and improved asset quality: RWA efficiency1 improved to 68 per cent in 2019 from 74 per cent in 2018; impairments reduced 50 per cent primarily from lower stage 3 assets

Continued to improve client experience: reduced client turnaround time from eight days to five days

Leveraging partnerships with Linklogis and SAP Ariba (world's largest digital business network) to make our supply chain financing solutions easily accessible to new clients

 

Performance highlights

Underlying operating profit before taxation of $448 million was up 100 per cent driven by income growth combined with lower costs and impairments

Underlying operating income of $1,478 million was up 6 per cent mainly from growth in Cash Management, Financial Markets and Lending

ASEAN & South Asia and Africa & Middle East income was up 7 per cent and 14 per cent respectively, partially offset by subdued income growth in Greater China & North Asia, up 2 per cent, impacted by lower trade

Underlying RoTE improved from 3.4 per cent to 7.3 per cent

 

 

Private Banking

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

126

118

7

145

(13)

577

516

12

Corporate Finance

-

-

nm2

-

nm2

2

-

nm2

Wealth Management

74

63

17

93

(20)

362

305

19

Retail Products

53

55

(4)

52

2

214

211

1

Deposits

43

46

(7)

44

(2)

179

175

2

Mortgage and Auto

11

9

22

8

38

36

36

-

Other Retail Products

(1)

-

nm2

-

nm2

(1)

-

nm2

Other

(1)

-

nm2

-

nm2

(1)

-

nm2

Operating expenses

(127)

(128)

1

(134)

5

(514)

(530)

3

Operating profit/(loss) before impairment losses and taxation

(1)

(10)

90

11

(109)

63

(14)

nm2

Credit impairment

(2)

1

nm3

(14)

86

31

-

nm2

Underlying profit/(loss) before taxation

(3)

(9)

67

(3)

-

94

(14)

nm2

Restructuring

(6)

(13)

54

(4)

(50)

(11)

(24)

54

Statutory profit/(loss) before taxation

(9)

(22)

59

(7)

(29)

83

(38)

nm2

Total assets

14,922

13,673

9

15,143

(1)

14,922

13,673

9

Of which: loans and advances to customers including FVTPL

14,821

13,616

9

15,007

(1)

14,821

13,616

9

Total liabilities

18,480

19,733

(6)

18,696

(1)

18,480

19,733

(6)

Of which: customer accounts

18,424

19,622

(6)

18,547

(1)

18,424

19,622

(6)

Risk-weighted assets

6,409

5,861

9

6,649

(4)

6,409

5,861

9

Underlying return on risk-weighted assets (%)

(0.2)

(0.6)

40bps

(0.2)

0bps

1.5

(0.2)

170bps

Underlying return on tangible equity (%)

(0.8)

(2.8)

200bps

(0.9)

10bps

7.3

(1.0)

830bps

Cost to income ratio (%)

100.8

108.5

770bps

92.4

(840)bps

89.1

102.7

1,360bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2  Not meaningful

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

Deepened client engagement with our target client base (over $5 million in AUM) by improving our 'Relationship Management, Investment Advisory and Product Specialist' coverage model leading to a growing revenue contribution from these clients

Continued to further enhance our open architecture derivatives platforms through full automation and straight through processing of the transactions. Our FX platform won the Financial Times' 'Best initiative of the year
in relationship management technology, Asia' award

Prioritised investments in user-centric technology such as the development of the 3rd generation relationship manager facing market insights portal, ADVICE

Improved ease of doing business for clients by re-engineering key client-facing processes such as client on-boarding

Further strengthened the stability and resilience of our business through timely execution of our control enhancement programme

Launched our Impact Philosophy as a key pillar of our approach to sustainable finance

 

 

 

 

Performance highlights

Underlying operating profit before taxation of $94 million is driven by a net $31 million release in credit impairment and an improvement in top-line growth

Underlying operating income of $577 million was up 12 per cent, making a third consecutive year of top-line growth. Income increase was mainly driven by higher Wealth-products income (up 19 per cent)

Assets under management increased $8 billion or 14 per cent year-on-year, mainly driven by $2.6 billion of net new money and positive market movements

Underlying RoTE increased 830bps to 7.3 per cent

 

 

Central & other items (segment)

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

144

222

(35)

274

(47)

860

1,160

(26)

Treasury

196

253

(23)

335

(41)

1,090

1,223

(11)

Other

(52)

(31)

(68)

(61)

15

(230)

(63)

nm2

Operating expenses

(445)

(463)

4

(84)

nm2

(873)

(879)

1

Operating profit/(loss) before impairment losses and taxation

(301)

(241)

(25)

190

nm2

(13)

281

(105)

Credit impairment

-

5

(100)

(2)

100

(4)

13

(131)

Other impairment

(9)

1

nm3

3

nm2

(8)

7

nm2

Profit from associates and joint ventures

52

26

100

45

16

254

241

5

Underlying profit/(loss) before taxation

(258)

(209)

(23)

236

nm2

229

542

(58)

Provision for regulatory matters

-

(850)

100

(22)

100

(226)

(850)

73

Restructuring

(18)

(32)

44

(6)

(200)

(59)

(24)

(146)

Gains arising on repurchase of senior and subordinated liabilities

-

-

nm2

-

nm2

-

66

(100)

Goodwill impairment

(27)

-

nm2

-

nm2

(27)

-

nm2

Share of profits of PT Bank Permata Tbk joint venture

13

-

nm2

12

8

48

-

nm2

Statutory profit/(loss) before taxation

(290)

(1,091)

73

220

nm2

(35)

(266)

87

Total assets

235,565

231,434

2

228,469

3

235,565

231,434

2

Of which: loans and advances to customers including FVTPL

10,078

10,274

(2)

13,756

(27)

10,078

10,274

(2)

Total liabilities

73,655

71,773

3

80,764

(9)

73,655

71,773

3

Of which: customer accounts

7,433

2,989

149

11,366

(35)

7,433

2,989

149

Risk-weighted assets

53,113

50,061

6

52,702

1

53,113

50,061

6

Underlying return on risk-weighted assets (%)

(1.9)

(1.6)

(30)bps

1.8

(370)bps

0.4

1.1

(70)bps

Underlying return on tangible equity (%)

(23.7)

(28.9)

520bps

7.7

(3,140)bps

(5.1)

(4.8)

(30)bps

Cost to income ratio (%) (excluding UK bank levy)

68.1

62.6

(550)bps

30.7

(3,740)bps

61.2

47.8

(1,340)bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 Not meaningful

Performance highlights

Income and underlying operating profit before taxation primarily impacted by higher rates internally paid on liabilities and one-off liquidity requirements

 

 

Standard Chartered PLC - Regional reviews

Underlying performance by region

 

2019

Greater China & North Asia
$million

ASEAN &
South Asia
$million

 Africa &
Middle East
$million

Europe &
Americas
$million

Central &
other items
$million

Total
$million

Operating income

6,155

4,213

2,562

1,725

616

15,271

Operating expenses

(3,771)

(2,681)

(1,747)

(1,470)

(740)

(10,409)

Operating profit/(loss) before impairment losses and taxation

2,384

1,532

815

255

(124)

4,862

Credit impairment

(194)

(506)

(132)

(98)

24

(906)

Other impairment

(5)

(1)

1

-

(33)

(38)

Profit from associates and joint ventures

247

-

-

-

7

254

Underlying profit/(loss) before taxation

2,432

1,025

684

157

(126)

4,172

Provision for regulatory matters

-

-

-

-

(226)

(226)

Restructuring

(138)

(34)

(18)

(34)

(30)

(254)

Goodwill impairment

-

-

-

-

(27)

(27)

Share of profits of PT Bank Permata Tbk joint venture

-

48

-

-

-

48

Statutory profit/(loss) before taxation

2,294

1,039

666

123

(409)

3,713

Total assets

277,704

149,785

59,828

220,579

12,502

720,398

Of which: loans and advances to customers including FVTPL

139,977

80,885

31,487

62,405

-

314,754

loans and advances to customers

134,066

78,229

29,940

26,288

-

268,523

loans held at fair value through profit or loss

5,911

2,656

1,547

36,117

-

46,231

Total liabilities

249,004

126,213

36,144

218,794

39,582

669,737

Of which: customer accounts

204,286

97,459

29,280

121,708

-

452,733

 

 

2018

Greater China & North Asia
$million

ASEAN &
South Asia
$million

 Africa &
Middle East
$million

Europe &
Americas
$million

Central &
other items
$million

Total
$million

Operating income

6,157

3,971

2,604

1,670

566

14,968

Operating expenses

(3,812)

(2,711)

(1,810)

(1,453)

(678)

(10,464)

Operating profit/(loss) before impairment losses and taxation

2,345

1,260

794

217

(112)

4,504

Credit impairment

(71)

(322)

(262)

(83)

(2)

(740)

Other impairment

(110)

6

-

17

(61)

(148)

Profit from associates and joint ventures

205

26

-

3

7

241

Underlying profit/(loss) before taxation

2,369

970

532

154

(168)

3,857

Provision for regulatory matters

-

-

-

(50)

(850)

(900)

Restructuring

(106)

105

(100)

(8)

(369)

(478)

Gains arising on repurchase of senior and subordinated liabilities

-

-

-

3

66

69

Statutory profit/(loss) before taxation

2,263

1,075

432

99

(1,321)

2,548

Total assets

269,765

147,049

57,800

201,912

12,236

688,762

Of which: loans and advances to customers including FVTPL

130,669

81,905

29,870

56,927

-

299,371

Total liabilities

238,249

127,478

36,733

198,853

37,097

638,410

Of which: customer accounts

196,870

96,896

29,916

113,499

-

437,181

 

 

 

Greater China & North Asia

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

1,497

1,510

 (1)

1,578

 (5)

6,155

6,157

 -

Operating expenses

(1,001)

(949)

 (5)

(944)

 (6)

(3,771)

(3,812)

 1

Operating profit before impairment losses and taxation

496

561

 (12)

634

 (22)

2,384

2,345

 2

Credit impairment

(54)

(43)

 (26)

(70)

 23

(194)

(71)

 (173)

Other impairment

-

(14)

 100

3

 (100)

(5)

(110)

 95

Profit from associates and joint ventures

51

11

 nm2

43

 19

247

205

 20

Underlying profit before taxation

493

515

 (4)

610

 (19)

2,432

2,369

 3

Restructuring

(84)

(74)

 (14)

(51)

 (65)

(138)

(106)

 (30)

Statutory profit before taxation

409

441

 (7)

559

 (27)

2,294

2,263

 1

Total assets

277,704

269,765

 3

273,854

 1

277,704

269,765

 3

Of which: loans and advances to customers including FVTPL

139,977

130,669

 7

134,775

 4

139,977

130,669

 7

Total liabilities

249,004

238,249

 5

237,881

 5

249,004

238,249

 5

Of which: customer accounts

204,286

196,870

 4

190,716

 7

204,286

196,870

 4

Risk-weighted assets

85,695

81,023

 6

86,367

 (1)

85,695

81,023

 6

Cost to income ratio (%)

66.9

62.8

(410)bps

59.8

(710)bps

61.3

61.9

60bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 Not meaningful

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, awarded 'Top Custodian, Active Bank and Top Dealer' by Bond Connect Awards, 26 per cent market share through Bond Connect

Continuing good progress in Retail Banking in Hong Kong. We attracted over 50,000 new Priority clients during the year, up 22 per cent and increased our active qualified Priority clients by 12 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 and teamed up with PCCW, HKT and Ctrip Finance

Continued to optimise the Korea franchise to improve returns and focus on China's opening. China is the top network income contributor to the rest of the region and Group

Performance highlights

Underlying operating profit before taxation of $2,432 million was up 3 per cent, with steady income growth despite the challenges of the ongoing social unrest in Hong Kong and the extended US-China trade tensions. Expenses were broadly flat, partially offset by higher credit impairment

Underlying operating income of $6,155 million was up 2 per cent on a constant currency basis, with strong growth across Retail Deposits, Financial Markets and Wealth Management, partially offset by a weaker Treasury income performance

Retail Banking income grew 4 per cent, driven by Deposits with improving margins and strong balance sheet growth partly offset by a subdued performance in Wealth Management. Private Banking income was up 27 per cent, driven by a strong Wealth Management performance. Corporate & Institutional Banking and Commercial Banking income grew 2 per cent each, mainly through strong Cash Management and Financial Markets performances, partly offset by lower Corporate Finance and unfavourable debit valuation adjustment within Financial Markets

Balance sheet momentum was sustained with loans and advances to customers up 7 per cent and customer accounts up 4 per cent

 

 

ASEAN & South Asia

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

992

940

6

1,085

(9)

4,213

3,971

6

Operating expenses

(718)

(685)

(5)

(671)

(7)

(2,681)

(2,711)

1

Operating profit before impairment losses and taxation

274

255

7

414

(34)

1,532

1,260

22

Credit impairment

(250)

(150)

(67)

(172)

(45)

(506)

(322)

(57)

Other impairment

(1)

(1)

-

-

nm2

(1)

6

(117)

Profit from associates and joint ventures

-

12

(100)

-

nm2

-

26

(100)

Underlying profit before taxation

23

116

(80)

242

(90)

1,025

970

6

Restructuring

(19)

(45)

58

1

nm2

(34)

105

(132)

Share of profits of PT Bank Permata Tbk joint venture

13

-

nm2

12

8

48

-

nm2

Statutory profit before taxation

17

71

(76)

255

(93)

1,039

1,075

(3)

Total assets

149,785

147,049

2

150,947

(1)

149,785

147,049

2

Of which: loans and advances to customers including FVTPL

80,885

81,905

(1)

83,866

(4)

80,885

81,905

(1)

Total liabilities

126,213

127,478

(1)

127,451

(1)

126,213

127,478

(1)

Of which: customer accounts

97,459

96,896

1

97,478

-

97,459

96,896

1

Risk-weighted assets

88,942

87,935

1

91,668

(3)

88,942

87,935

1

Cost to income ratio (%)

72.4

72.9

50bps

61.8

(1,060)bps

63.6

68.3

470bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 Not meaningful

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

Strong broad-based growth in income and operating profit, all client segments and majority of our markets grew versus prior year

Double-digit income growth in Priority Banking and attracted 12,000 new clients through differentiated propositions and advisory led approach

Investments in network bankers and tailored client solutions delivered double-digit growth in the Global Subsidiaries business

Instant client on-boarding and digitisation of service journeys have improved productivity and accelerated digital adoption amongst Retail Banking clients

Steady progress in our optimisation markets: India saw double-digit income growth and cost-to-income ratio improved to 65 per cent; Indonesia grew income by 5 per cent as we pivoted our focus towards Wealth Management and flow businesses

Performance highlights

Underlying operating profit before taxation grew by 6 per cent to $1,025 million, underpinned by 6 per cent income growth and well-managed costs, offset by higher credit impairment; Singapore, our largest profit contributor grew 33 per cent

Underlying operating income of $4,213 million is 6 per cent higher, with double-digit income growth in Corporate & Institutional Banking and high single-digit growth in Commercial, Retail and Private Banking

Retail current and savings accounts grew by 11 per cent; Transaction Banking cash liabilities grew by 12 per cent and we reduced our Corporate Time Deposits to optimise our cost of funds. RWA growth controlled at 1 per cent

 

 

Africa & Middle East

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

605

624

(3)

617

(2)

2,562

2,604

(2)

Operating expenses

(454)

(446)

(2)

(443)

(2)

(1,747)

(1,810)

3

Operating profit before impairment losses and taxation

151

178

(15)

174

(13)

815

794

3

Credit impairment

(56)

(137)

59

(27)

(107)

(132)

(262)

50

Other impairment

1

-

nm2

-

nm2

1

-

nm2

Underlying profit before taxation

96

41

134

147

(35)

684

532

29

Restructuring

(11)

(50)

78

(5)

(120)

(18)

(100)

82

Statutory profit/(loss) before taxation

85

(9)

nm2

142

(40)

666

432

54

Total assets

59,828

57,800

4

57,696

4

59,828

57,800

4

Of which: loans and advances to customers including FVTPL

31,487

29,870

5

29,243

8

31,487

29,870

5

Total liabilities

36,144

36,733

(2)

35,995

-

36,144

36,733

(2)

Of which: customer accounts

29,280

29,916

(2)

28,958

1

29,280

29,916

(2)

Risk-weighted assets

49,244

53,072

(7)

49,865

(1)

49,244

53,072

(7)

Cost to income ratio (%)

75.0

71.5

(350)bps

71.8

(320)bps

68.2

69.5

130bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 Not meaningful

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 transactions across the region are reflective of the strong client franchise

Network income was 9 per cent higher and the Group's Global Subsidiaries business grew by 3 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 eight additional markets (Uganda, Tanzania, Ghana, Kenya, Zimbabwe, Botswana, Zambia and Nigeria)

Across these nine markets, customer acquisition has trebled

Account funding rates for most markets are relatively healthy and customer feedback has been good

Practically a 'zero touch' platform, with account opening and servicing without the need to visit a branch

This efficiency has translated into a more targeted branch footprint, allowing us to reduce our number of branches by one-third in the last two years

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 operating profit before taxation of $684 million was 29 per cent higher with lower expenses and improved credit impairment partially offset by a 2 per cent decrease in income

Underlying operating income of $2,562 million was down 2 per cent but up 3 per cent on a constant currency basis, with a good performance in our Financial Markets business across the region. Middle East, North Africa and Pakistan were flat, and Africa was down 3 per cent

Strong performances in Financial Markets and Corporate Finance were offset by margin compression in Retail Banking and lower Wealth Management in UAE

Loans and advances to customers were up 5 per cent and customer accounts were down 2 per cent

 

 

Europe & Americas

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

464

409

13

467

(1)

1,725

1,670

3

Operating expenses

(365)

(346)

(5)

(390)

6

(1,470)

(1,453)

(1)

Operating profit before impairment losses and taxation

99

63

57

77

29

255

217

18

Credit impairment

(17)

(11)

(55)

(15)

(13)

(98)

(83)

(18)

Other impairment

-

-

nm2

-

nm2

-

17

(100)

Profit from associates and joint ventures

-

-

nm2

-

nm2

-

3

(100)

Underlying profit before taxation

82

52

58

62

32

157

154

2

Provision for regulatory matters

-

(50)

100

-

nm3

-

(50)

100

Restructuring

(13)

(1)

nm2

(6)

(117)

(34)

(8)

nm2

Gains arising on repurchase of senior and subordinated liabilities

-

-

nm2

-

nm3

-

3

(100)

Statutory profit before taxation

69

1

nm2

56

23

123

99

24

Total assets

220,579

201,912

9

240,925

(8)

220,579

201,912

9

Of which: loans and advances to customers including FVTPL

62,405

56,927

10

70,686

(12)

62,405

56,927

10

Total liabilities

218,794

198,853

10

244,799

(11)

218,794

198,853

10

Of which: customer accounts

121,708

113,499

7

131,082

(7)

121,708

113,499

7

Risk-weighted assets

43,945

40,789

8

44,423

(1)

43,945

40,789

8

Cost to income ratio (%)

78.7

84.6

590bps

83.5

480bps

85.2

87.0

180bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 Not meaningful

Strategic priorities

Continue to attract new international corporate and financial institutional clients and deepen relationships with existing and new clients and banking them across more markets in our network, connecting them to the fastest growing and highest potential economies in the world

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

Strong progress in improving the share of business from targeted CIB Priority clients, with income up 9 per cent from 'Top 100', 'Next 100' and 'New 90' client initiatives

Continued growth in our key Greater China, ASEAN and South Asia corridors providing high network returns from Europe & Americas clients

Standard Chartered Bank AG (Germany) is operational and positioned to support our clients in all Brexit scenarios

Launched Sustainable Finance business and issued inaugural sustainable bond focused on emerging markets

Performance highlights

Underlying operating profit before taxation of $157 million improved 2 per cent driven by higher income, partially offset by higher costs and impairments

Underlying operating income of $1,725 million was up 3 per cent largely due to improved sales and trading performance in Financial Markets and higher income in Cash and Treasury. There was a year-on-year reduction in income of $108m from a swing in the debit valuation adjustment (DVA) due to an improvement in the Group's own Credit Risk

Income generated by Europe & Americas clients, but booked elsewhere in our network, increased by 6 per cent

Loans and advances to customers grew 10 per cent year-on-year and customer accounts grew 7 per cent

 

 

Central & other items (region)

 

4Q'19
$million

4Q'18
$million

Change1
%

3Q'19
$million

Change1
%

FY'19
$million

FY'18
$million

Change1
%

Operating income

39

112

(65)

231

(83)

616

566

9

Operating expenses

(401)

(410)

2

(53)

nm2

(740)

(678)

(9)

Operating profit/(loss) before impairment losses and taxation

(362)

(298)

(21)

178

nm2

(124)

(112)

(11)

Credit impairment

4

9

(56)

5

(20)

24

(2)

nm2

Other impairment

(12)

(6)

(100)

(8)

(50)

(33)

(61)

46

Profit from associates and joint ventures

1

3

(67)

2

(50)

7

7

-

Underlying profit/(loss) before taxation

(369)

(292)

(26)

177

nm2

(126)

(168)

25

Provision for regulatory matters

-

(850)

100

(22)

100

(226)

(850)

73

Restructuring

10

(222)

105

(62)

116

(30)

(369)

92

Gains arising on repurchase of senior and subordinated liabilities

-

-

nm3

-

nm2

-

66

(100)

Goodwill impairment

(27)

-

nm3

-

nm2

(27)

-

nm2

Statutory profit/(loss) before taxation

(386)

(1,364)

72

93

nm2

(409)

(1,321)

69

Total assets

12,502

12,236

2

11,378

10

12,502

12,236

2

Total liabilities

39,582

37,097

7

37,979

4

39,582

37,097

7

Risk-weighted assets

(3,736)

(4,522)

17

(3,655)

(2)

(3,736)

(4,522)

17

Cost to income ratio (%) (excluding UK bank levy)

138.5

76.8

(6,170)bps

22.9

(11,560)bps

63.8

62.5

(130)bps

1 Variance is better/(worse) other than assets ,liabilities and risk-weighted assets which is increase/(decrease)

2 Not meaningful

 

Performance highlights

Higher external debt costs offset by a favourable change in hedge ineffectiveness and increased internal capital charges

 

 

Underlying performance by key market

 

FY'19

Hong Kong
$million

Korea
$million

China
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

3,755

972

872

1,639

1,041

273

617

762

759

Operating expenses

(1,934)

(769)

(666)

(986)

(672)

(180)

(423)

(678)

(587)

Operating profit before impairment losses and taxation

1,821

203

206

653

369

93

194

84

172

Credit impairment

(111)

(15)

(81)

(91)

(290)

(87)

(48)

(33)

(63)

Other impairment

(5)

1

-

-

-

-

-

-

-

Profit from associates and joint ventures

-

-

247

-

-

-

-

-

-

Underlying profit before taxation

1,705

189

372

562

79

6

146

51

109

Total assets employed

159,725

54,408

30,293

85,155

28,163

4,795

20,301

150,103

60,373

Of which: loans and advances to customers including FVTPL

77,277

34,469

14,772

45,951

15,674

2,098

10,406

42,179

17,038

Total liabilities employed

149,703

47,420

27,005

80,006

18,437

3,188

12,905

142,804

66,357

Of which: customer accounts

123,330

38,533

21,797

60,821

13,800

2,320

10,078

82,036

34,733

Cost to income ratio (%)

51.5

79.1

76.4

60.2

64.6

65.9

68.6

89.0

77.3

 

 

FY'18

Hong Kong
$million

Korea
$million

China
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

3,752

1,009

821

1,547

949

260

637

819

667

Operating expenses

(1,944)

(797)

(675)

(1,009)

(677)

(179)

(453)

(671)

(621)

Operating profit before impairment losses and taxation

1,808

212

146

538

272

81

184

148

46

Credit impairment

(57)

(1)

(30)

(115)

(130)

(39)

(196)

(51)

(36)

Other impairment

(109)

1

-

-

(1)

-

-

17

-

Profit from associates and joint ventures

-

-

205

-

-

26

-

-

-

Underlying profit/(loss) before taxation

1,642

212

321

423

141

68

(12)

114

10

Total assets employed

153,372

51,306

30,272

81,882

29,886

4,990

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

2,536

10,749

41,248

13,464

Total liabilities employed

139,332

45,347

27,158

80,200

20,554

3,110

13,679

148,041

42,301

Of which: customer accounts

116,999

36,894

21,801

58,415

16,306

2,061

10,517

93,096

16,218

Cost to income ratio (%)

51.8

79.0

82.2

65.2

71.3

68.8

71.1

81.9

93.1

 

 

 

 

4Q'19

Hong Kong
$million

Korea
$million

China
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

943

220

206

347

275

57

140

214

200

Operating expenses

(510)

(190)

(171)

(260)

(175)

(47)

(102)

(136)

(141)

Operating profit before impairment losses and taxation

433

30

35

87

100

10

38

78

59

Credit impairment

(53)

(3)

(14)

(47)

(181)

(7)

(32)

2

(19)

Other impairment

-

1

-

-

-

-

-

-

-

Profit from associates and joint ventures

-

-

50

-

-

-

-

-

-

Underlying profit/(loss) before taxation

380

28

71

40

(81)

3

6

80

40

Total assets employed

159,725

54,408

30,293

85,155

28,163

4,795

20,301

150,103

60,373

Of which: loans and advances to customers including FVTPL

77,277

34,469

14,772

45,951

15,674

2,098

10,406

42,179

17,038

Total liabilities employed

149,703

47,420

27,005

80,006

18,437

3,188

12,905

142,804

66,357

Of which: customer accounts

123,330

38,533

21,797

60,821

13,800

2,320

10,078

82,036

34,733

Cost to income ratio (%)

54.1

86.4

83.0

74.9

63.6

82.5

72.9

63.6

70.5

 

 

4Q'18

Hong Kong
$million

Korea
$million

China
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

965

244

185

315

259

60

128

191

171

Operating expenses

(492)

(192)

(162)

(254)

(163)

(43)

(116)

(178)

(142)

Operating profit before impairment losses and taxation

473

52

23

61

96

17

12

13

29

Credit impairment

(39)

(9)

(14)

(37)

(77)

(17)

(91)

(8)

-

Other impairment

(13)

1

-

-

-

-

-

-

-

Profit from associates and joint ventures

-

-

11

-

-

12

-

-

-

Underlying profit/(loss) before taxation

421

44

20

24

19

12

(79)

5

29

Total assets employed

153,372

51,306

30,272

81,882

29,886

4,990

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

2,536

10,749

41,248

13,464

Total liabilities employed

139,332

45,347

27,158

80,200

20,554

3,110

13,679

148,041

42,301

Of which: customer accounts

116,999

36,894

21,801

58,415

16,306

2,061

10,517

93,096

16,218

Cost to income ratio (%)

51.0

78.7

87.6

80.6

62.9

71.7

90.6

93.2

83.0

 

 

 

Standard Chartered PLC - Group Chief Risk Officer's review

Staying strong in challenging times

2019 saw considerable geopolitical and macroeconomic uncertainty, with global growth slowing and the long-term impacts of US-China trade tensions, low interest rates, social unrest in Hong Kong and Brexit dominating the financial landscape. This has continued into 2020, with the recent novel coronavirus (Covid-19) outbreak affecting many of our key markets. While ensuring appropriate support of clients, we have taken measures to ensure the ongoing effectiveness of our risk management, maintaining a strong, diversified and resilient portfolio; and ensuring that areas of growth are well controlled and sustainable. Asset quality has remained broadly stable, although credit impairment saw a modest increase compared with 2018. However, this is still below the elevated impairment levels observed in previous years. Our capital and liquidity positions continue to be at healthy levels.

We are constantly scanning the risk landscape for new areas of potential concern and in 2020 we have elevated Model Risk to a Principal Risk Type recognising the importance of Model Risk to the Group. We have also identified Climate Risk as a material cross-cutting risk that should be considered alongside multiple risk types. Sustainability remains a core item on our agenda and our adoption of the UN's Principles for Responsible Banking demonstrates our commitment to provide the right outcomes for all our stakeholders. We continue to invest in technology to further enhance our risk management capabilities.

An update on key risk priorities

In view of the challenging risk environment it is essential that we continue to optimise the way risk is managed within the Group. Innovation is at the heart of our agenda, and we are making progress on the Risk, and Conduct, Financial Crime and Compliance (CFCC) priorities set out at half year:

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) has been embedded and rolled out to all countries. It sets out the guiding principles for our people, enabling us to have integrated and holistic risk conversations across the Group. In 2019, we increased focus on non-financial risks and are implementing a revised framework for the management of Operational Risk. Internal messaging from senior management promotes a healthy risk culture by valuing risk-based thinking across each line of defence, encouraging risk awareness, challenging the status quo and creating a transparent, safe and open environment for employees to communicate risk concerns.

Enhance information and cyber security (ICS): A key part of our Group strategy has been our investment in digitisation and partnerships to better serve our clients. A new Group ICS strategy has been developed to align with the overall corporate strategy and drive cohesion across the Group on managing ICS Risk. The refreshed approach saw the following deliverables in 2019: an enhanced operating model to clarify accountabilities between the first and second lines of defence; Group-wide initiatives to further enhance our cyber capabilities; and increased training and awareness alongside crisis management exercises to ensure business responses with focus on clients and critical services, which has facilitated greater insights into the Group's risk position. In 2020, we will work to implement enhanced ICS capabilities across all our applications and businesses.

Managing Climate Risk: Climate change remains one of the greatest challenges facing the world today, given its widespread and proven impacts on the physical environment and human health, and potential to adversely impact economic growth. We recognise the need to manage both our contribution through direct and financed emissions, and the financial and non-financial risks arising from climate change. The Group is responding responsibly and with urgency on both and has committed to measure, manage and ultimately reduce the emissions linked to our financing in line with the Paris Agreement. In support of this, in December 2019 we announced a substantial new clean technology and renewables target, and that we will only support clients who actively transition their business to generate less than 10 per cent of earnings from thermal coal by 2030. Governance around management of Climate Risk was significantly strengthened in 2019. To provide oversight on the development and implementation of the Climate Risk framework a Climate Risk Management Forum has been appointed that includes senior leaders from the business, risk and strategy. We have also partnered with external experts to further assess the impact of climate related risks, including engaging Imperial College London as academic advisers and piloting the Munich Re tool for physical risk assessments. Climate Risk has been identified as a material cross-cutting risk and multiple workstreams are underway to incorporate it into the relevant Principal Risk Type Frameworks. Our 2019 Taskforce for Climate-related Financial Disclosures Report provides further details on the Group's progress.

More details on the Group's Taskforce for Climate-related Financial Disclosures Report can be found on sc.com/tcfd

Manage financial crime risks: We remain committed to our mission of "partnering to lead in the fight against financial crime" and are delivering on the remediation actions arising from the 2019 resolutions. In 2019, we reached a milestone with the termination of the Independent Consultant appointed by the New York State Department of Financial Services (NY DFS), and the business restrictions previously imposed by the NY DFS are no longer in effect as of 31 December 2019. We reclassified the Fraud Risk sub-type from Operational Risk to Financial Crime Risk, thus providing new insights and a more holistic view of Financial Crime threats. We have also further developed our Fighting Financial Crime microsite as well as delivering on many of our system upgrades. We are demonstrating delivery against our mission through our Correspondent Banking Academies, our ongoing deployment of upgraded systems for AML, sanctions, fraud and customer due diligence, and the Group's plan to collaborate with Quantexa, which will support the Group's Financial Crime team in developing innovative solutions to tackle challenges including money laundering, fraud and terrorist financing. The Group also contributes to industry thinking on reform and information sharing partnerships in a number of markets, as well as working with international forums such as the Wolfsberg Group.

Strengthen our conduct environment: Conduct remains a key focus across the Group. The emphasis in 2019 was to further embed the framework at a more granular level across our footprint, businesses and functions, and ensure that conduct considerations are central to decisions taken throughout the Group. The Conduct Risk Type Framework provides a robust and consistent approach to help the identification, monitoring and management of Conduct Risk. The Conduct Risk Appetite metrics were also revised to focus on our main Conduct Risk outcomes: fair outcomes for clients; employee welfare and relations; and effective markets and stakeholder confidence, to provide a better view of the key Conduct Risks facing the Group. Conduct Plans are a key part of our framework and they 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 CFCC. These 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 Risk and CFCC infrastructure: We continue to invest in our Risk and CFCC infrastructure to streamline processes, serve clients better and drive internal efficiencies. This includes improvements to stress testing, exposure management and data quality by using agile delivery methods to enhance our workflow and reporting systems. We are further developing our data and analytics infrastructure to enhance the speed and quality of risk decision-making; this includes initiatives driven both by internal innovation and collaboration with fintech partners. Our control capability has continued to strengthen with machine learning functionality and increased scope of surveillance and financial crime platforms, as well as adding availability on mobile devices to provide on-demand access to our automated askCompliance portal. We have also made structural changes including integrating financial crime and regulatory compliance teams at Group level to provide a single point of contact for the business. This has simplified our structure resulting in a greater client focus with reduced hierarchy, and faster decision-making. A new country operating model has also been designed and is being implemented across the Group. This mirrors the changes (and resulting benefits) at Group level by bringing together the financial crime and regulatory compliance teams, providing local teams with better access to specialist knowledge at a regional and group level.

Enhance our Model Risk management: We have elevated Model Risk to a Principal Risk Type and identified its development as a key priority for the Group. In 2019, we launched the Model Risk Management Strategic Enhancement Programme which will improve our current capabilities. We have adopted a holistic approach, focusing on areas such as policy and governance, model inventory, Model Risk appetite and risk assessment, roles and responsibilities across first and second line activities, model development and validation standards, model portfolio optimisation and mitigation techniques. We will continue to invest in 2020 to embed the enhanced Model Risk management framework.

 

 

Our risk profile and performance in 2019

Our 2019 risk profile indicates strong performance that reflects the good work done in past years to improve our portfolios and secure our foundations. This should serve us well as the macroeconomic environment becomes more challenging. In 2019, we have remained resilient, with the Group's asset quality remaining broadly stable as well as our capital and liquidity metrics continuing to be at healthy levels.

We remain vigilant against existing and emerging risks that may impact our business, and utilise portfolio reviews and stress testing to assess the risk landscape.

Although credit impairment has increased year-on-year, it remains below the elevated levels seen in previous periods. Total credit impairment excluding the restructuring portfolio is $906 million, an increase of 22 per cent on 2018; however, this was largely due to stage 1 and 2 impairment, which saw a rise due to deteriorating macroeconomic variables, including a reduction in Hong Kong GDP. This was partially offset by lower stage 3 impairments across most segments.

Gross credit impaired (stage 3) loans reduced by 12 per cent to $7.4 billion (2018: $8.5 billion) driven by continued reductions in Corporate & Institutional Banking and Commercial Banking.

The stage 3 cover ratio increased to 68 per cent (2018: 66 per cent) due to new impairment charges, repayments and upgrades in Corporate & Institutional Banking. The cover ratio including collateral was flat at 85 per cent (2018: 85 per cent).

Retail Banking and Private Banking represent a similar proportion of total customer loans and advances to the previous year, with the overall loan-to-value of the mortgage portfolio remaining low at 45 per cent. The percentage of unsecured loans in the portfolio is broadly stable.

Average Group Value at Risk increased by 47 per cent year-on-year as the non-trading book saw an increase in the bond inventory of high quality assets in the Treasury Markets business. While we have seen growth in Financial Markets income, we remain comfortable with the level of risk we are taking and continue to actively monitor the portfolio to ensure that any growth is in line with our risk appetite.

The results of the Bank of England's Annual Cyclical Scenario stress test in 2019 show that the Group is more resilient to stress than a year ago. Despite an increase in the severity of the scenario, the maximum fall in the Group's Common Equity Tier 1 ratio reduced to 520 basis points (2018: 570 basis points), reflecting improved revenue momentum and overall risk profile together with the resolution of legacy conduct and control issues.

Further details of the Group's risk performance for 2019 are set out in the Risk update and the Risk profile section of the Annual Report.

Further details of the Group's risk performance for 2019 can be found in the Annual Report.

 

 

An update on our risk management approach

Since its launch in 2018, we have embedded the Enterprise Risk Management Framework (ERMF) across the Group, including branches and subsidiaries. This allows 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 the risks we take while still effectively serving our clients.

In 2019, we reviewed the ERMF. As part of the review, we have elevated Model Risk to a Principal Risk Type with enhancements to the Group's approach to Model Risk management. This was previously a risk sub-type within the Operational Risk Type Framework. In addition to the Principal Risk Types, the Group now recognises Climate Risk as a material cross-cutting risk that manifests through other relevant Principal Risk Types. Climate Risk is defined as the potential for financial loss and non-financial detriments arising from climate change and society's response to it. The Group aims to measure and manage financial and non-financial risks from climate change, and reduce emissions related to our own activities and those related to the financing of clients in alignment with the Paris Agreement. Over time, the Group will consider if any of the other existing or emerging risks should be treated as material cross-cutting 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.

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

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 Risk

The Group should maintain a strong capital position 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

Country Risk

The Group manages its Country Risk exposures following the principle of diversification across geographies and controls the business activities in line with the level of Jurisdiction Risk

Reputational Risk

The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activity is satisfactorily assessed and managed by the appropriate level of management and governance oversight

Operational Risk1

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

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

Financial Crime Risk

The Group has no appetite for breaches in laws and regulations related to Financial Crime, recognising that whilst incidents are unwanted, they cannot be entirely avoided

Information and Cyber Security Risk

The Group seeks to avoid risk and uncertainty for our critical information assets and systems and has a low appetite for material incidents affecting these or the wider operations and reputation of the bank

Model Risk2

The Group aims to control Model Risk through appropriate level of governance and oversight to protect the franchise from losses that may occur as a consequence of decisions or the risk of mis-estimation that could be principally based on the output of models due to errors in the development, implementation or use of such models

1  Risks arising from execution capability, governance, reporting, operational resilience (including third party vendor services, and system availability) are managed by the Operational Risk Type Framework.

2  Model Risk was added as a Principal Risk Type effective from January 2020. Further details on the Model Risk Type framework will be provided in the 2020 Annual Report

Further details of our Principal Risks and how these are being managed can be found in the Annual Report.

 

 

Emerging risks

Emerging risks refer to unpredictable and uncontrollable outcomes from certain events and circumstances which may have the potential to impact our business materially. These include near-term risks that are on the horizon and can be measured or mitigated to some extent, as well as longer-term uncertainties that are on the radar but not yet fully measurable.

The table below summarises the emerging risks that the Group faces, and the steps we are taking to manage them.

Emerging risks

Risk trend
since 20181

How these are mitigated/next steps

Geopolitical events, in particular: extended trade tensions driven by geopolitical and trade concerns, unrest in Hong Kong, Middle East geopolitical tensions, Brexit implications, and Japan-Korea diplomatic dispute

ñ

We monitor and assess geopolitical events and act as appropriate to ensure we minimise the impact to the Group and our clients

We conduct stress tests and portfolio reviews at a Group, country and business level to assess the impact of extreme but plausible geopolitical events

Moderation of growth in key footprint markets led by China, political volatility, novel coronavirus and disruptions to global supply chains

ñ

We monitor economic trends and conduct stress tests and portfolio reviews at a Group, country and business level to assess the impact of extreme but plausible events

A global downturn with shocks concentrated on China and countries with close trade links with China is one of the regularly run Traded Risk stress tests

The Group has robust Business Continuity Plans that are reviewed regularly to manage a range of scenarios

Climate-related transition
and physical risks2

ñ

We are developing a Climate Risk framework to deliver a consistent Group-wide approach to climate risk management. We are also a member of the Risk Management Working Group under the Bank of England's Climate Financial Risk Forum

The Group has a public target to fund and facilitate $35 billion towards renewable energy from 2020 to the end of 2024

Interbank offered rate (IBOR) discontinuation and transition

ñ

We have implemented a global programme to manage all aspects of the transition

We are actively participating in and contributing to industry associations and business or regulatory forums focusing on different aspects of the LIBOR to Risk-Free Reference Rate (RFR) transition

Regulatory changes

ó

We actively monitor regulatory initiatives across our footprint to identify any potential impact and change 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

Regulatory reviews, investigations and legal proceedings

ó

We have invested in enhancing systems and controls, and implementing remediation programmes (where relevant)

We continue to train and educate our people on relevant issues including conduct, conflicts of interest, information security and financial crime compliance in order to reduce our exposure to legal and regulatory proceedings

New technologies and digitisation, including business disruption risk, responsible use of artificial intelligence and obsolescence risk

ó

We monitor emerging trends, opportunities and risks in the technology space which may have implications on the banking sector

We are engaged in building our capabilities to ensure we remain relevant and can capitalise rapidly on technology trends

We continue to make headway in harnessing new technologies, actively targeting the reduction of obsolescent/end of support technology and ensuring operational resilience

Increased data privacy and security risks from strategic and wider use of data

ó

We have governance and control frameworks which we continue to enhance to meet the needs of emerging technologies

We have designed a programme to manage the risks 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

ñ Risk heightened in 2019  ò Risk reduced in 2019  ó Risk remained consistent with 2018 levels

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 increased extreme weather events while transition risks refer to the risk of changes to market dynamics due to governments' response to
climate change

Further details on our emerging risks can be found in the Annual Report.

 

 

Summary

Risk is an area that provides both challenges and opportunities. The Risk and CFCC functions will remain key to the Group's success. Early in 2020, we have been faced with the outbreak of the novel coronavirus. Major elections are due later in the year and a number of other geopolitical risks remain. Our continued investment and focus on our risk management capabilities will help the Group to navigate these headwinds, with the intention of ensuring a sustainable, innovative, resilient and client-centred bank.

 

Mark Smith

Group Chief Risk Officer

27 February 2020

 

 

Standard Chartered PLC - Supplementary information

Capital review

Capital ratios (unaudited)

 

2019

2018

CET1

13.8%

14.2%

Tier 1 capital

16.5%

16.8%

Total capital

21.2%

21.6%

 

CRD IV Capital base1

 

2019
$million

2018
$million

CET1 instruments and reserves

 

 

Capital instruments and the related share premium accounts

5,584

5,617

Of which: share premium accounts

3,989

3,965

Retained earnings

24,044

25,377

Accumulated other comprehensive income (and other reserves)

11,685

11,878

Non-controlling interests (amount allowed in consolidated CET1)

723

686

Independently reviewed interim and year-end profits

2,301

1,072

Foreseeable dividends net of scrip

(871)

(527)

CET1 capital before regulatory adjustments

43,466

44,103

CET1 regulatory adjustments

 

 

Additional value adjustments (prudential valuation adjustments)

(615)

(564)

Intangible assets (net of related tax liability)

(5,318)

(5,146)

Deferred tax assets that rely on future profitability (excludes those arising from temporary differences)

(129)

(115)

Fair value reserves related to net losses on cash-flow hedges

59

10

Deduction of amounts resulting from the calculation of excess expected loss

(822)

(875)

Net gains on liabilities at fair value resulting from changes in own Credit Risk

(2)

(412)

Defined-benefit pension fund assets

(26)

(34)

Fair value gains arising from the institution's own Credit Risk related to derivative liabilities

(38)

(127)

Exposure amounts which could qualify for risk weighting of 1250%

(62)

(123)

Total regulatory adjustments to CET1

(6,953)

(7,386)

CET1 capital

36,513

36,717

AT1 capital instruments

7,184

6,704

AT1 regulatory adjustments

(20)

(20)

Tier 1 capital

43,677

43,401

 

 

 

Tier 2 capital instruments

12,318

12,325

Tier 2 regulatory adjustments

(30)

(30)

Tier 2 capital

12,288

12,295

Total capital

55,965

55,696

Total risk-weighted assets (unaudited)

264,090

258,297

1  CRD IV capital is prepared on the regulatory scope of consolidation

 

 

Movement in total capital

 

2019
$million

2018
$million

CET1 at 1 January

36,717

38,162

Ordinary shares issued in the period and share premium

25

14

Share buy-back1

(1,006)

-

Profit for the period

2,301

1,072

Foreseeable dividends net of scrip deducted from CET1

(871)

(527)

Difference between dividends paid and foreseeable dividends

(641)

(575)

Movement in goodwill and other intangible assets

(172)

(34)

Foreign currency translation differences

(180)

(1,161)

Non-controlling interests

37

(164)

Movement in eligible other comprehensive income

284

60

Deferred tax assets that rely on future profitability

(14)

10

Decrease/(increase) in excess expected loss

53

267

Additional value adjustments (prudential valuation adjustment)

(51)

10

IFRS 9 day one transitional impact on regulatory reserves

(43)

(441)

Exposure amounts which could qualify for risk weighting

61

18

Other

13

6

CET1 at 31 December

36,513

36,717

 

 

 

AT1 at 1 January

6,684

6,699

Issuances net of redemptions

552

-

Foreign currency translation difference

9

(15)

Excess on AT1 grandfathered limit (ineligible)

(81)

-

AT1 at 31 December

7,164

6,684

 

 

 

Tier 2 capital at 1 January

12,295

13,897

Regulatory amortisation

(1,111)

166

Issuances net of redemptions

1,000

(1,713)

Foreign currency translation difference

(12)

(215)

Tier 2 ineligible minority interest

31

144

Recognition of ineligible AT1

81

-

Other

4

16

Tier 2 capital at 31 December

12,288

12,295

Total capital at 31 December

55,965

55,696

1  $1,006 million includes share buy-back expenses of $6 million

The main movements in capital in the period were:

The CET1 ratio decreased from 14.2 per cent to 13.8 per cent predominantly because of higher RWAs, the impact of the $1.0 billion share buy-back and other distributions to shareholders, including preference dividends, partly offset by profit for the period

CET1 capital decreased by $0.2 billion, mainly due to the share buy-back of $1.0 billion and other distributions during the period of $1.5 billion, partly offset by profit after tax of $2.3 billion

AT1 increased slightly to $7.2 billion, mainly due to the new issuance of SGD 750 million of AT1 securities

Tier 2 capital was unchanged at $12.3 billion mainly due to $1.0 billion of new subordinated debt issuance, offset by amortisation of $1.1 billion during the year

 

 

Risk-weighted assets by business (unaudited)

 

2019

Credit Risk
$million

Operational Risk
$million

Market Risk
$million

Total risk
$million

Corporate & Institutional Banking

98,227

13,261

20,562

132,050

Retail Banking

37,138

7,314

-

44,452

Commercial Banking

25,440

2,626

-

28,066

Private Banking

5,681

728

-

6,409

Central & other items

49,178

3,691

244

53,113

Total risk-weighted assets

215,664

27,620

20,806

264,090

 

 

2018

Credit Risk
$million

Operational Risk
$million

Market Risk
$million

Total risk
$million

Corporate & Institutional Banking

96,954

13,029

19,008

128,991

Retail Banking

35,545

7,358

-

42,903

Commercial Banking

27,711

2,770

-

30,481

Private Banking

5,103

758

-

5,861

Central & other items

45,825

4,135

101

50,061

Total risk-weighted assets

211,138

28,050

19,109

258,297

Risk-weighted assets by geographic region (unaudited)

 

2019
$million

2018
$million

Greater China & North Asia

85,695

81,023

ASEAN & South Asia

88,942

87,935

Africa & Middle East

49,244

53,072

Europe & Americas

43,945

40,789

Central & other items

(3,736)

(4,522)

Total risk-weighted assets

264,090

258,297

Movement in risk-weighted assets (unaudited)

 

Credit Risk

Operational Risk
$million

Market Risk
$million

Total risk
$million

Corporate & Institutional Banking
$million

Retail
Banking
$million

Commercial Banking
$million

Private Banking
$million

Central & other items
$million

Total
$million

As at 1 January 2018

109,368

36,345

29,712

5,134

45,671

226,230

30,478

23,040

279,748

Assets (decline)/growth

(1,527)

1,466

(1,347)

56

2,896

1,544

-

-

1,544

Net credit migration

(2,120)

25

237

-

494

(1,364)

-

-

(1,364)

Risk-weighted assets efficiencies

(3,540)

(597)

-

-

(748)

(4,885)

-

-

(4,885)

Model, methodology and policy changes

(3,338)

(671)

66

-

77

(3,866)

-

(1,948)

(5,814)

Disposals

-

-

-

-

(626)

(626)

-

-

(626)

Foreign currency translation

(1,889)

(1,023)

(957)

(87)

(1,939)

(5,895)

-

-

(5,895)

Other non-credit risk movements

-

-

-

-

-

-

(2,428)

(1,983)

(4,411)

Aa at 31 December 2018

96,954

35,545

27,711

5,103

45,825

211,138

28,050

19,109

258,297

Assets (decline)/growth

1,303

1,020

(557)

528

4,093

6,387

-

-

6,387

Net credit migration

2,565

832

(642)

8

607

3,370

-

-

3,370

Risk-weighted assets efficiencies

(1,112)

(33)

(403)

-

(2,404)

(3,952)

-

-

(3,952)

Model, methodology and policy changes

(904)

(7)

-

-

1,400

489

-

500

989

Disposals

(397)

-

(441)

-

-

(838)

-

-

(838)

Foreign currency translation

(182)

(219)

(228)

42

(343)

(930)

-

-

(930)

Other non-Credit Risk movements

-

-

-

-

-

-

(430)

1,197

767

Aa at 31 December 2019

98,227

37,138

25,440

5,681

49,178

215,664

27,620

20,806

264,090

Movements in risk-weighted assets

RWA increased by $5.8 billion, or 2.2 per cent from 31 December 2018 to $264.1 billion. This was mainly due to increases in Credit Risk RWA of $4.5 billion, Market Risk RWA $1.7 billion, partly offset by a decrease of $0.4 billion in Operational Risk RWA.

 

 

UK leverage ratio

The Group's UK leverage ratio, which excludes qualifying claims on central banks in accordance with a PRA waiver, was 5.2 per cent, which is above the current minimum requirement of 3.7 per cent. The lower UK leverage ratio in the period was mainly due to: an increased exposure measure reflecting asset growth (on and off balance sheet), lower derivative and regulatory consolidation adjustments partly offset by a small increase in Tier 1 capital following the new issuance of SGD750 million of AT1 securities in the period.

UK leverage ratio (unaudited)

 

2019
$million

2018
$million

Tier 1 capital (transitional)

43,677

43,401

Additional Tier 1 capital subject to phase-out

(1,671)

(1,743)

Tier 1 capital (end point)

42,006

41,658

Derivative financial instruments

47,212

45,621

Derivative cash collateral

9,169

10,323

Securities financing transactions (SFTs)

60,414

61,735

Loans and advances and other assets

603,603

571,083

Total on-balance sheet assets

720,398

688,762

Regulatory consolidation adjustments1

(31,485)

(45,521)

Derivatives adjustments

 

 

Derivatives netting

(32,852)

(34,300)

Adjustments to cash collateral

(11,853)

(14,827)

Net written credit protection

1,650

1,221

Potential future exposure on derivatives

32,961

28,498

Total derivatives adjustments

(10,094)

(19,408)

Counterparty Risk leverage exposure measure for SFTs

7,005

8,281

Off-balance sheet items

122,341

115,335

Regulatory deductions from Tier 1 capital

(6,913)

(6,847)

UK leverage exposure (end point)

801,252

740,602

UK leverage ratio (end point)

5.2%

5.6%

UK leverage exposure quarterly average

816,244

734,976

UK leverage ratio quarterly average

5.1%

5.8%

Countercyclical leverage ratio buffer

0.1%

0.1%

G-SII additional leverage ratio buffer

0.4%

0.3%

1  Includes adjustment for qualifying central bank claims

 

Financial statements

Consolidated income statement

For the year ended 31 December 2019

 

2019
$million

restated1
2018
$million

Interest income

16,549

15,150

Interest expense

(8,882)

(7,355)

Net interest income

7,667

7,795

Fees and commission income

4,111

4,029

Fees and commission expense

(589)

(537)

Net fee and commission income

3,522

3,492

Net trading income

3,350

2,681

Other operating income

878

821

Operating income

15,417

14,789

Staff costs

(7,122)

(7,074)

Premises costs

(420)

(790)

General administrative expenses

(2,211)

(2,926)

Depreciation and amortisation

(1,180)

(857)

Operating expenses

(10,933)

(11,647)

Operating profit before impairment losses and taxation

4,484

3,142

Credit impairment

(908)

(653)

Goodwill impairment

(27)

-

Other impairment

(136)

(182)

Profit from associates and joint ventures

300

241

Profit before taxation

3,713

2,548

Taxation

(1,373)

(1,439)

Profit for the year

2,340

1,109

 

 

 

Profit attributable to:

 

 

Non-controlling interests

37

55

Parent company shareholders

2,303

1,054

Profit for the year

2,340

1,109

 

 

 

cents

cents

Earnings per share:

 

 

 

Basic earnings per ordinary share

 

57.0

18.7

Diluted earnings per ordinary share

 

56.4

18.5

1  Refer to Accounting policies section in the Annual Report. The Group has changed its accounting policies for net interest income and net trading income

 

 

Consolidated statement of comprehensive income

For the year ended 31 December 2019

 

2019
$million

2018
$million

Profit for the year

2,340

1,109

Other comprehensive (loss)/income

 

 

Items that will not be reclassified to income statement:

(531)

382

Own credit (losses)/gains on financial liabilities designated at fair value through profit or loss

(462)

394

Equity instruments at fair value through other comprehensive income

13

36

Actuarial losses on retirement benefit obligations

(124)

(19)

Taxation relating to components of other comprehensive income

42

(29)

 

 

 

Items that may be reclassified subsequently to income statement:

131

(1,189)

Exchange differences on translation of foreign operations:

 

 

Net losses taken to equity

(386)

(1,462)

Net gains on net investment hedges

191

282

Share of other comprehensive income from associates and joint ventures

25

33

Debt instruments at fair value through other comprehensive income:

 

 

Net valuation gains/(losses) taken to equity

555

(128)

Reclassified to income statement

(170)

31

Net impact of expected credit losses

7

-

Cashflow hedges:

 

 

Net (losses)/gains taken to equity

(64)

34

Reclassified to income statement

21

7

Taxation relating to components of other comprehensive income

(48)

14

Other comprehensive loss for the year, net of taxation

(400)

(807)

Total comprehensive income for the year

1,940

302

 

 

 

Total comprehensive income attributable to:

 

 

Non-controlling interests

20

34

Parent company shareholders

1,920

268

Total comprehensive income for the year

1,940

302

 

 

 

Consolidated balance sheet

As at 31 December 2019

 

2019
$million

2018
$million

Assets

 

 

Cash and balances at central banks

52,728

57,511

Financial assets held at fair value through profit or loss

92,818

87,132

Derivative financial instruments

47,212

45,621

Loans and advances to banks1

53,549

61,414

Loans and advances to customers2

268,523

256,557

Investment securities

143,731

125,901

Other assets

42,022

35,401

Current tax assets

539

492

Prepayments and accrued income

2,700

2,505

Interests in associates and joint ventures

1,908

2,307

Goodwill and intangible assets

5,290

5,056

Property, plant and equipment

6,220

6,490

Deferred tax assets

1,105

1,047

Assets classified as held for sale

2,053

1,328

Total assets

720,398

688,762

 

 

 

Liabilities

 

 

Deposits by banks

28,562

29,715

Customer accounts

405,357

391,013

Repurchase agreements and other similar secured borrowing

1,935

1,401

Financial liabilities held at fair value through profit or loss

66,974

60,700

Derivative financial instruments

48,484

47,209

Debt securities in issue

53,025

46,454

Other liabilities

41,583

38,309

Current tax liabilities

703

676

Accruals and deferred income

5,369

5,393

Subordinated liabilities and other borrowed funds

16,207

15,001

Deferred tax liabilities

611

563

Provisions for liabilities and charges

449

1,330

Retirement benefit obligations

469

399

Liabilities included in disposal groups held for sale

9

247

Total liabilities

669,737

638,410

 

 

 

Equity

 

 

Share capital and share premium account

7,078

7,111

Other reserves

11,685

11,878

Retained earnings

26,072

26,129

Total parent company shareholders' equity

44,835

45,118

Other equity instruments

5,513

4,961

Total equity excluding non-controlling interests

50,348

50,079

Non-controlling interests

313

273

Total equity

50,661

50,352

Total equity and liabilities

720,398

688,762

1  Reverse repurchase agreements and other similar secured lending balances held at amortised cost of $1,341 million (31 December 2018: $3,815 million) have been included with loans and advances to banks

2  Reverse repurchase agreements and other similar secured lending balances held at amortised cost of $1,469 million (31 December 2018: $3,151 million) have been included with loans and advances to customers

These financial statements were approved by the Board of directors and authorised for issue on 27 February 2020 and signed on its behalf by:

José Viñals  Bill Winters    Andy Halford

Chairman     Group Chief Executive  Group Chief Financial Officer

 

 

Cash flow statement

For the year ended 31 December 2019

 

 

Group

 

Company

2019
$million

2018
$million

2019
$million

2018
$million

Cash flows from operating activities:

 

 

 

 

 

 

Profit before taxation

 

3,713

2,548

 

22,306

790

Adjustments for non-cash items and other adjustments included within
income statement

 

2,417

2,635

 

(16,760)

232

Change in operating assets

 

(35,285)

(12,837)

 

(5,473)

61

Change in operating liabilities

 

29,935

33,859

 

(4,182)

(462)

Contributions to defined benefit schemes

 

(137)

(143)

 

-

-

UK and overseas taxes paid

 

(1,421)

(770)

 

-

-

Net cash (used in)/from operating activities

 

(778)

25,292

 

(4,109)

621

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

(219)

(171)

 

-

-

Disposal of property, plant and equipment

 

119

85

 

-

-

Dividends received from subsidiaries, associates and joint ventures

 

3

67

 

4,494

1,035

Disposal of subsidiaries

 

-

7

 

-

-

Purchase of investment securities

 

(259,473)

(276,388)

 

(7,583)

-

Disposal and maturity of investment securities

 

241,600

263,983

 

1,065

621

Net cash (used in)/from investing activities

 

(17,970)

(12,417)

 

(2,024)

1,656

Cash flows from financing activities:

 

 

 

 

 

 

Issue of ordinary and preference share capital, net of expenses

 

577

14

 

577

14

Exercise of share options

 

7

9

 

7

9

Purchase of own shares

 

(206)

(8)

 

(206)

(8)

Cancellation of shares including share buy-back

 

(1,006)

-

 

(1,006)

-

Premises and equipment lease liability principal payment

 

(332)

-

 

-

-

Gross proceeds from issue of subordinated liabilities

 

1,000

500

 

1,000

500

Interest paid on subordinated liabilities

 

(603)

(602)

 

(547)

(507)

Repayment of subordinated liabilities

 

(23)

(2,097)

 

-

(474)

Proceeds from issue of senior debts

 

9,169

9,766

 

6,012

4,552

Repayment of senior debts

 

(7,692)

(7,030)

 

(3,780)

(3,141)

Interest paid on senior debts

 

(797)

(507)

 

(740)

(355)

Investment from non-controlling interests

 

56

-

 

-

-

Dividends paid to non-controlling interests, preference shareholders
and AT1 securities

 

(483)

(533)

 

(448)

(436)

Dividends paid to ordinary shareholders

 

(720)

(539)

 

(720)

(539)

Net cash (used in)/from financing activities

 

(1,053)

(1,027)

 

149

(385)

Net (decrease)/increase in cash and cash equivalents

 

(19,801)

11,848

 

(5,984)

1,892

Cash and cash equivalents at beginning of the year

 

97,500

87,231

 

17,606

15,714

Effect of exchange rate movements on cash and cash equivalents

 

(245)

(1,579)

 

-

-

Cash and cash equivalents at end of the year

 

77,454

97,500

 

11,622

17,606

 

 

 

Consolidated statement of changes in equity

For the year ended 31 December 2019

 

Ordinary share capital and share premium account
$million

Preference share capital
and share premium account
$million

Capital and merger reserves
$million

Own credit adjustment reserve
$million

Fair value through other compre-hensive income reserve - debt
$million

Fair value through other compre-hensive income reserve -equity
$million

Cash flow hedge reserve
$million

Translation reserve
$million

Retained earnings
$million

Parent company shareholders' equity
$million

Other equity instruments
$million

Non-controlling interests
$million

Total
$million

As at 1 January 2018

5,603

1,494

17,1291

54

(77)

53

(45)

(4,454)

25,895

45,652

4,961

333

50,946

Profit after tax

-

-

-

-

-

-

-

-

1,054

1,054

-

55

1,109

Other comprehensive income/(loss)

-

-

-

358

(84)

67

35

(1,158)

(4)2

(786)

-

(21)

(807)

Distributions

-

-

-

-

-

-

-

-

-

-

-

(97)

(97)

Shares issued, net
of expenses3

14

-

-

-

-

-

-

-

-

14

-

-

14

Treasury shares purchased

-

-

-

-

-

-

-

-

(8)

(8)

-

-

(8)

Treasury shares issued

-

-

-

-

-

-

-

-

9

9

-

-

9

Share option expense, net of taxation

-

-

-

-

-

-

-

-

158

158

-

-

158

Dividends on
ordinary shares

-

-

-

-

-

-

-

-

(539)

(539)

-

-

(539)

Dividends on preference shares
and AT1 securities

-

-

-

-

-

-

-

-

(436)

(436)

-

-

(436)

Other movements

-

-

-

-

-

-

-

-

-

-

-

34

3

As at 31 December 2018

5,617

1,494

17,129

412

(161)

120

(10)

(5,612)

26,129

45,118

4,961

273

50,352

Profit after tax

-

-

-

-

-

-

-

-

2,303

2,303

-

37

2,340

Other comprehensive (loss)/income

-

-

-

(410)

358

30

(49)

(180)

(132)2

(383)

-

(17)

(400)

Distributions

-

-

-

-

-

-

-

-

-

-

-

(35)

(35)

Shares issued,
net of expenses3

25

-

-

-

-

-

-

-

-

25

-

-

25

Other equity instruments issued,
net of expenses

-

 

-

-

-

-

-

-

-

-

552

-

552

Treasury shares purchased

-

-

-

-

-

-

-

-

(206)

(206)

-

-

(206)

Treasury shares issued

-

-

-

-

-

-

-

-

7

7

-

-

7

Share option expense, net of taxation

-

-

-

-

-

-

-

-

139

139

-

-

139

Dividends on
ordinary shares

-

-

-

-

-

-

-

-

(720)

(720)

-

-

(720)

Dividend on
preference shares
and AT1 securities

-

-

-

-

-

-

-

-

(448)

(448)

-

-

(448)

Share buy-back5

(58)

-

58

-

-

-

-

-

(1,006)

(1,006)

-

-

(1,006)

Other movements

-

-

-

-

-

-

-

-

66

6

-

557

61

As at 31 December 2019

5,584

1,494

17,187

2

197

150

(59)

(5,792)

26,072

44,835

5,513

313

50,661

1  Includes capital reserve of $5 million, capital redemption reserve of $13 million and merger reserve of $17,111 million

2  Comprises actuarial loss, net of taxation and share from associates and joint ventures $132 million ($4 million for the year ending 31 December 2018)

3  Comprises share capital of shares issued to fulfil discretionary awards $1 million, share capital of shares issued to fulfil employee share save options $1 million ($5 million for the year ended 31 December 2018) and share premium of shares issued to fulfil employee Sharesave options exercised $23 million ($ 9 million for the year ended 31 December 2018)

4  Movement is mainly due to additional share capital issued by Standard Chartered Bank Angola S.A. subscribed by its non-controlling interest without change in shareholding percentage

5  On 1 May 2019, the Group commenced a share buy-back of its ordinary shares of $0.50 each up to a maximum consideration of $1,000 million. Nominal value of share purchases is $58 million for the year ended 31 December 2019 and the total consideration paid was $1,006 million which includes share buy-back expenses of $6 million. The total number of shares purchased was 116,103,483 representing 3.51% of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account

6  Comprises $10 million disposal of non-controlling interest of Phoon Huat Pte Ltd offset by $4 million withholding tax on capitalisation of revenue reserves for Standard Chartered Bank Ghana Limited

7  Comprises $72 million of non-controlling interest in SC Digital Solutions offset by $17 million disposal of non-controlling interest in Phoon Huat Pte Ltd, Sirat Holdings Limited and Ori Private Limited

 

 

Supplementary financial information

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.

 

2019

Corporate & Institutional Banking
$million

Retail
Banking
$million

Commercial Banking
$million

Private
Banking
$million

Central &
other items
$million

Total
$million

Transaction Banking

2,992

19

838

-

-

3,849

Trade

721

19

360

-

-

1,100

Cash Management

1,929

-

477

-

-

2,406

Securities Services

342

-

1

-

-

343

Financial Markets

2,617

-

299

-

-

2,916

Foreign Exchange

950

-

178

-

-

1,128

Rates

664

-

32

-

-

696

Commodities

140

-

25

-

-

165

Credit and Capital Markets

564

-

13

-

-

577

Capital Structuring Distribution Group

302

-

27

-

-

329

DVA

(100)

-

-

-

-

(100)

Other Financial Markets

97

-

24

-

-

121

Corporate Finance1

1,048

-

93

2

-

1,143

Lending and Portfolio Management

553

-

239

-

-

792

Wealth Management

-

1,514

2

362

-

1,878

Retail Products

-

3,629

6

214

-

3,849

CCPL and other unsecured lending

-

1,251

-

-

-

1,251

Deposits

-

1,797

6

179

-

1,982

Mortgage and Auto

-

472

-

36

-

508

Other Retail Products

-

109

-

(1)

-

108

Treasury

-

-

-

-

1,090

1,090

Other

(25)

9

1

(1)

(230)

(246)

Total underlying operating income

7,185

5,171

1,478

577

860

15,271

1  In December 2018, it was decided to discontinue the ship operating lease business and any future profits and losses will be reported as restructuring. Prior periods have not
been restated

 

2018

Corporate & Institutional
Banking
$million

Retail
Banking
$million

Commercial Banking
$million

Private
Banking
$million

Central &
other items
$million

Total
$million

Transaction Banking

2,887

20

811

-

-

3,718

Trade

729

20

374

-

-

1,123

Cash Management

1,825

-

437

-

-

2,262

Securities Services

333

-

-

-

-

333

Financial Markets

2,328

-

284

-

-

2,612

Foreign Exchange

829

-

172

-

-

1,001

Rates

527

-

28

-

-

555

Commodities

168

-

24

-

-

192

Credit and Capital Markets

312

-

12

-

-

324

Capital Structuring Distribution Group

285

-

24

-

-

309

DVA

77

-

-

-

-

77

Other Financial Markets

130

-

24

-

-

154

Corporate Finance1

1,098

-

88

-

-

1,186

Lending and Portfolio Management1

542

-

213

-

-

755

Wealth Management

-

1,491

3

305

-

1,799

Retail Products

-

3,535

4

211

-

3,750

CCPL and other unsecured lending

-

1,310

-

-

-

1,310

Deposits

-

1,603

4

175

-

1,782

Mortgage and Auto

-

537

-

36

-

573

Other Retail Products

-

85

-

-

-

85

Treasury

-

-

-

-

1,223

1,223

Other

5

(5)

(12)

-

(63)

(75)

Total underlying operating income

6,860

5,041

1,391

516

1,160

14,968

1  There has been a reorganisation of certain product teams between Corporate Finance and Lending and Portfolio Management. Prior periods have been restated

 

 

Analysis of underlying performance by Retail Banking and Commercial Banking segments

Retail Banking

 

2019

Greater China & North Asia
$million

ASEAN &
South Asia
$million

Africa &
Middle East
$million

Europe &
Americas
$million

Total
$million

Operating income

3,003

1,432

700

36

5,171

Operating expenses

(2,015)

(1,097)

(619)

(23)

(3,754)

Operating profit before impairment losses and taxation

988

335

81

13

1,417

Credit impairment

(153)

(136)

(47)

-

(336)

Other impairment

-

-

2

-

2

Underlying profit before taxation

835

199

36

13

1,083

Restructuring

(47)

(7)

(9)

-

(63)

Statutory profit before taxation

788

192

27

13

1,020

Loans and advances to customers including FVTPL

72,759

27,934

5,320

557

106,570

Customer accounts

98,434

35,959

8,585

1,067

144,045

 

 

2018

Greater China & North Asia
$million

ASEAN &
South Asia
$million

Africa &
Middle East
$million

Europe &
Americas
$million

Total
$million

Operating income

2,886

1,352

765

38

5,041

Operating expenses

(1,959)

(1,083)

(668)

(26)

(3,736)

Operating profit before impairment losses and taxation

927

269

97

12

1,305

Credit impairment

(72)

(135)

(60)

-

(267)

Other impairment

(5)

-

-

-

(5)

Underlying profit before taxation

850

134

37

12

1,033

Restructuring

(18)

(20)

(30)

-

(68)

Statutory profit before taxation

832

114

7

12

965

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

Commercial Banking

 

2019

Greater China & North Asia
$million

ASEAN &
South Asia
$million

Africa &
Middle East
$million

Total
$million

Operating income

594

559

325

1,478

Operating expenses

(386)

(310)

(211)

(907)

Operating profit before impairment losses and taxation

208

249

114

571

Credit impairment

(22)

(38)

(63)

(123)

Underlying profit before taxation

186

211

51

448

Restructuring

(7)

(2)

(2)

(11)

Statutory profit before taxation

179

209

49

437

Loans and advances to customers including FVTPL

13,174

8,779

4,733

26,686

Customer accounts

20,590

10,250

3,243

34,083

 

 

2018

Greater China & North Asia
$million

ASEAN &
South Asia
$million

Africa &
Middle East
$million

Total
$million

Operating income

584

523

284

1,391

Operating expenses

(389)

(330)

(204)

(923)

Operating profit before impairment losses and taxation

195

193

80

468

Credit impairment

(23)

(73)

(148)

(244)

Underlying profit/(loss) before taxation

172

120

(68)

224

Restructuring

(7)

(3)

(2)

(12)

Statutory profit/(loss) before taxation

165

117

(70)

212

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

 

 

 

Average balance sheets and yields and volume and price variances

Average assets

 

2019

Average
non-interest earning
balance
$million

Average
interest
earning
balance
$million

Interest
income
$million

Gross yield
interest
earning
balance
%

Gross yield
total
 balance
%

Cash and balances at central banks

17,544

29,177

329

1.13

0.70

Gross loans and advances to banks

26,639

61,040

1,834

3.00

2.09

Gross loans and advances to customers

49,662

274,970

10,775

3.92

3.32

Impairment provisions against loans and advances to banks
and customers

-

(4,786)

-

-

-

Investment securities

29,188

134,355

3,611

2.69

2.21

Property, plant and equipment and intangible assets

11,217

-

-

-

-

Prepayments, accrued income and other assets

84,965

-

-

-

-

Investment associates and joint ventures

2,608

-

-

-

-

Total average assets

221,823

494,756

16,549

3.34

2.31

 

 

2018

Average
non-interest
earning
balance
$million

Average
interest
earning
balance
$million

Interest
income
$million

Gross yield
interest
earning
balance
%

Gross yield
total
 balance
%

Cash and balances at central banks

24,724

32,730

364

1.11

0.63

Gross loans and advances to banks

21,639

65,727

1,783

2.71

2.04

Gross loans and advances to customers

40,302

261,595

10,038

3.84

3.32

Impairment provisions against loans and advances to banks
and customers

-

(5,701)

-

-

-

Investment securities

23,958

121,763

2,965

2.44

2.03

Property, plant and equipment and intangible assets

10,660

-

-

-

-

Prepayments, accrued income and other assets

78,361

-

-

-

-

Investment associates and joint ventures

2,458

-

-

-

-

Total average assets

202,102

476,114

15,150

3.18

2.23

 

 

 

Average liabilities

 

2019

Average
non-interest bearing
balance
$million

Average
interest
bearing
balance
$million

Interest
 expense
$million

Rate paid
interest
bearing
balance
%

Rate paid
total
balance
%

Deposits by banks

17,561

27,619

739

2.68

1.64

Customer accounts:

 

 

 

 

 

Current accounts and savings deposits

38,804

183,323

2,114

1.15

0.95

Time and other deposits

59,094

167,904

4,088

2.43

1.80

Debt securities in issue

9,335

49,351

1,120

2.27

1.91

Accruals, deferred income and other liabilities

95,461

1,336

65

4.87

0.07

Subordinated liabilities and other borrowed funds

-

15,062

756

5.02

5.02

Non-controlling interests

31

-

-

-

-

Shareholders' funds

50,215

-

-

-

-

 

270,501

444,595

8,882

2.00

1.24

 

 

 

 

 

 

Adjustment for Financial Markets funding costs

 

 

(340)

 

 

Total average liabilities and shareholders' funds

270,501

444,595

8,542

1.92

1.19

 

 

2018

Average
non-interest
bearing
balance
$million

Average
interest
bearing
balance
$million

Interest
expense
$million

Rate paid
interest
bearing
balance
%

Rate paid
total
balance
%

Deposits by banks

10,950

29,867

594

1.99

1.46

Customer accounts:

 

 

 

 

 

Current accounts and savings deposits

38,909

178,454

1,667

0.93

0.77

Time and other deposits

52,081

157,928

3,339

2.11

1.59

Debt securities in issue

5,986

48,138

988

2.05

1.83

Accruals, deferred income and other liabilities

95,214

-

-

-

-

Subordinated liabilities and other borrowed funds

-

15,780

767

4.86

4.86

Non-controlling interests

48

-

-

-

-

Shareholders' funds

50,241

-

-

-

-

 

253,429

430,167

7,355

1.71

1.08

 

 

 

 

 

 

Adjustment for Financial Markets funding costs

 

 

(237)

 

 

Total average liabilities and shareholders' funds

253,429

430,167

7,118

1.65

1.04

 

 

 

Volume and price variances

The following table analyses the estimated change in the Group's net interest income attributable to changes in the average volume of interest-earning assets and interest-bearing liabilities, and changes in their respective interest rates for the years presented. Volume and rate variances have been determined based on movements in average balances and average exchange rates over the year and changes in interest rates on average interest-earning assets and average interest-bearing liabilities.

 

2019 versus 2018

(Decrease)/increase
in interest due to:

Net (decrease)/
increase
in interest
$million

Volume
$million

Rate
$million

Interest earning assets

 

 

 

Cash and unrestricted balances at central banks

(40)

5

(35)

Loans and advances to banks

(141)

192

51

Loans and advances to customers

333

404

737

Investment securities

336

310

646

Total interest earning assets

488

911

1,399

Interest-bearing liabilities

 

 

 

Subordinated liabilities and other borrowed funds

(36)

25

(11)

Deposits by banks

(60)

205

145

Customer accounts:

 

 

 

Current accounts and savings deposits

56

391

447

Time and other deposits

247

502

749

Debt securities in issue

28

104

132

Total interest-bearing liabilities

235

1,227

1,462

 

 

2018 versus 2017

(Decrease)/increase
in interest due to:

Net increase/
(decrease) in interest
$million

Volume
$million

Rate
$million

Interest earning assets

 

 

 

Cash and unrestricted balances at central banks

(53)

130

77

Loans and advances to banks

(462)

290

(172)

Loans and advances to customers

(825)

1,935

1,110

Investment securities

(219)

(81)

(300)

Total interest earning assets

(1,559)

2,274

715

Interest-bearing liabilities

 

 

 

Subordinated liabilities and other borrowed funds

(69)

88

19

Deposits by banks

(233)

(64)

(297)

Customer accounts:

 

 

 

Current accounts and savings deposits

123

481

604

Time and other deposits

(877)

1,420

543

Debt securities in issue

(78)

310

232

Total interest-bearing liabilities

(1,134)

2,235

1,101

 

 

 

Earnings per ordinary share

 

4Q'19
$m

4Q'18
$m

Change
%

3Q'19
$m

Change
%

FY'19
$m

FY'18
$m

Change
%

Profit/(loss) for the period attributable to equity holders

72

(1,236)

nm2

772

(91)

2,340

1,109

111

Non-controlling interests

(7)

(11)

36

(11)

36

(37)

(55)

33

Dividend payable on preference shares and AT1 classified as equity

(191)

(185)

(3)

(36)

nm2

(448)

(436)

(3)

Profit/(loss) for the period attributable to ordinary shareholders

(126)

(1,432)

91

725

nm2

1,855

618

nm2

 

 

 

 

 

 

 

 

 

Items normalised:

 

 

 

 

 

 

 

 

Provision for regulatory matters

-

900

nm2

22

nm2

226

900

75

Restructuring

117

392

70

123

5

254

478

47

Profit from associates and joint ventures

(13)

-

nm2

(12)

(8)

(48)

-

nm2

Gains arising on repurchase of subordinated liabilities

-

-

nm2

-

nm2

-

(69)

nm2

Goodwill Impairment

27

-

nm2

-

nm2

27

-

nm2

Tax on normalised items

(19)

(46)

59

(1)

nm2

152

104

46

Underlying profit

(14)

(186)

92

857

Nm

2,466

2,031

21

 

 

 

 

 

 

 

 

 

Basic - Weighted average number of shares (millions)

3,197

3,310

nm2

3,220

nm2

3,256

3,306

nm2

Diluted - Weighted average number of shares (millions)

3,228

3,345

nm2

3,258

nm2

3,290

3,340

nm2

 

 

 

 

 

 

 

 

 

Basic earnings/(loss) per ordinary share (cents)

(3.9)

(43.3)

39.3

22.5

(26.5)

57.0

18.7

38.3

Diluted earnings/(loss) per ordinary share (cents)

(3.9)1

(43.3)1

39.3

22.3

(26.2)

56.4

18.5

37.9

Underlying basic earnings per ordinary share (cents)

(0.4)

(5.6)

5.2

26.6

(27.1)

75.7

61.4

14.3

Underlying diluted earnings per ordinary share (cents)

(0.4)1

(5.6)1

5.2

26.3

(26.8)

75.0

60.8

14.1

1 The impact of any diluted options has been excluded from this amount as required by IAS 33 Earnings per share

2 Not meaningful

 

 

Return on Tangible Equity

 

4Q'19
$m

4Q'18
$m

Change
%

3Q'19
$m

Change
%

FY'19
$m

FY'18
$m

Change
%

Average parent company Shareholders' Equity

44,855

45,751

(2)

44,970

-

45,187

46,130

(2)

Less Preference share premium

(1,494)

(1,494)

-

(1,494)

-

(1,494)

(1,494)

-

Less Average intangible assets

(5,187)

(5,034)

(3)

(5,097)

(2)

(5,119)

(5,023)

(2)

Average Ordinary Shareholders' Tangible Equity

38,174

39,223

(3)

38,379

(1)

38,574

39,613

(3)

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period attributable to equity holders

72

(1,236)

nm1

772

(91)

2,340

1,109

111

Non-controlling interests

(7)

(11)

36

(11)

36

(37)

(55)

33

Dividend payable on preference shares and AT1 classified as equity

(191)

(185)

(4)

(36)

nm1

(448)

(436)

(3)

Profit/(loss) for the period attributable to ordinary shareholders

(126)

(1,432)

91

725

nm1

1,855

618

nm1

 

 

 

 

 

 

 

 

 

Items normalised:

 

 

 

 

 

 

 

 

Provision for regulatory matters

-

900

nm1

22

nm1

226

900

(75)

Restructuring

117

392

71

123

8

254

409

(38)

Profit from associates and joint ventures

(13)

-

nm1

(12)

(8)

(48)

-

nm1

Goodwill Impairment

27

-

nm1

-

nm1

27

-

nm1

Tax on normalised items

(19)

(46)

63

(1)

nm1

152

104

46

Underlying profit for the period attributable to ordinary shareholders

(14)

(186)

92

857

nm1

2,466

2,031

21

 

 

 

 

 

 

 

 

 

Underlying Return on Tangible Equity

(0.1)

(1.9)

173 bps

8.9

(902) bps

6.4

5.1

127 bps

Statutory Return on Tangible Equity

(1.3)

(14.5)

1316 bps

7.5

(881) bps

4.8

1.6

325 bps

1 Not meaningful

 

Net Tangible Asset Value per Share

 

31.12.19
$m

31.12.18
$m

Change
%

30.09.19
$m

Change
%

FY'19
$m

FY'18
$m

Change
%

Parent company shareholders' equity

44,837

45,119

(1)

44,872

-

44,837

45,119

(1)

Less Preference share premium

(1,494)

(1,494)

-

(1,494)

-

(1,494)

(1,494)

-

Less Intangible assets

(5,290)

(5,056)

(5)

(5,083)

(4)

(5,290)

(5,056)

(5)

Net shareholders tangible equity

38,053

38,569

(1)

38,295

(1)

38,053

38,569

(1)

 

 

 

 

 

 

 

 

 

Ordinary shares in issue, excluding own shares ('m)

3,191

3,303

(3)

3,195

-

3,191

3,303

(3)

Net Tangible Asset Value per share (c)

1,192

1,168

26

1,199

(6)

1,192

1,168

2

 

 

Five-year summary1

 

2019
$million

2018
$million

2017
$million

2016
$million

2015
$million

Operating profit before impairment losses and taxation

4,484

3,142

4,008

3,849

4,116

Impairment losses on loans and advances and other credit risk provisions

(908)

(653)

(1,362)

(2,791)

(4,976)

Other impairment

(136)

(182)

(179)

(612)

(855)

Profit/(loss) before taxation

3,713

2,548

2,415

409

(1,523)

Profit/(loss) attributable to shareholders

2,303

1,054

1,219

(247)

(2,194)

Loans and advances to banks2

53,549

61,414

78,188

72,609

64,494

Loans and advances to customers2

268,523

256,557

282,288

252,719

257,356

Total assets

720,398

688,762

663,501

646,692

640,483

Deposits by banks2

28,562

29,715

30,945

32,872

28,727

Customer accounts2

405,357

391,013

370,509

338,185

337,606

Shareholders' equity

44,835

45,118

46,505

44,368

46,204

Total capital resources3

66,868

65,353

68,983

68,181

70,364

Information per ordinary share

 

 

 

 

 

Basic earnings/(loss) per share

57.0c

18.7c

23.5c

(14.5)c

(91.9)c

Underlying earnings/(loss) per share

75.7c

61.4c

47.2c

3.4c

(6.6)c

Dividends per share4

22.0c

17.0c

-

-

13.71c

Net asset value per share

1,358.3c

1,319.3c

1,366.9c

1,307.8c

1,366.0c

Net tangible asset value per share

1,192.5c

1,167.7c

1,214.7c

1,163.9c

1,244.1c

Return on assets5

0.3%

0.3%

0.2%

0.0%

(0.3)%

Ratios

 

 

 

 

 

Statutory return on ordinary shareholders' equity

4.2%

1.4%

1.7%

(1.1)%

(5.3)%

Statutory return on ordinary shareholders' tangible equity

4.8%

1.6%

2.0%

(1.2)%

(5.9)%

Underlying return on ordinary shareholders' equity

5.6%

4.6%

3.5%

0.3%

(0.4)%

Underlying return on ordinary shareholders' tangible equity

6.4%

5.1%

3.9%

0.3%

(0.4)%

Statutory cost to income ratio (excluding UK Bank levy)

68.7%

76.6%

70.7%

69.9%

70.2%

Statutory cost to income ratio (including UK Bank levy)

70.9%

78.8%

72.2%

72.6%

73.1%

Underlying cost to income ratio (excluding UK Bank levy)

65.9%

67.7%

69.3%

69.5%

65.0%

Underlying cost to income ratio (including UK Bank levy)

68.2%

69.9%

70.8%

72.2%

67.8%

Capital ratios:

 

 

 

 

 

(CET1)/ Tier 1 capital6

13.8%

14.2%

13.6%

13.6%

12.6%

Total capital6

21.2%

21.6%

21.0%

21.3%

19.5%

1  The amounts for the three financial years ended 2015 to 2017 are presented in line with IAS 39 and, therefore, not on a comparable basis to the current financial year presented in accordance with IFRS 9

2  Excludes amounts held at fair value through profit or loss

3  Shareholders' funds, non-controlling interests and subordinated loan capital

4  Dividend paid during the year per share

5  Represents profit attributable to shareholders divided by the total assets of the Group

6  Unaudited

 

 

Basis of presentation

The consolidated and Company financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of cash-settled share-based payments, fair value through other comprehensive income, and financial assets and liabilities (including derivatives) at fair value through profit or loss.

The consolidated financial statements are presented in United States dollars ($), being the presentation currency of the Group and functional currency of the Company, and all values are rounded to the nearest million dollars, except when otherwise indicated.

Changes in accounting policy may be found in Note 1 to the financial statements

Alternative performance measures are defined on page 64 of the Annual report.

 

 

 

Standard Chartered PLC - Shareholder information

Shareholder information

Expected dividend and interest payment dates

Ordinary shares

Final dividend

Results and dividend announced

27 February 2020

Ex-dividend date

5 March (UK) 4 March (HK) 2020

Record date for dividend

6 March 2020

Last date to amend currency election instructions for cash dividend

15 April 2020

Dividend payment date

14 May 2020

 

Preference shares

1st half yearly dividend

2nd half yearly dividend

73∕8 per cent non-cumulative irredeemable preference shares of £1 each

1 April 2020

1 October 2020

81∕4 per cent non-cumulative irredeemable preference shares of £1 each

1 April 2020

1 October 2020

6.409 per cent non-cumulative redeemable preference shares of $5 each

30 January and 30 April 2020

30 July and 30 October 2020

7.014 per cent non-cumulative redeemable preference shares of $5 each

30 January 2020

30 July 2020

Annual General Meeting

The Annual General Meeting (AGM) details are as follows:

Date and time  Location

Wednesday 6 May 2020  etc. venues
11.00am London time  200 Aldersgate
(6.00pm Hong Kong time)  St Paul's
  London EC1A 4HD

Details of the business to be transacted at the AGM are included in the Notice of AGM.

Details of voting at the Company's AGM and of proxy votes cast can be found on the Company's website at sc.com/agm

Interim results

The interim results will be announced to the London Stock Exchange, The Stock Exchange of Hong Kong Limited, the BSE Limited (Bombay Stock Exchange), the National Stock Exchange of India Limited, and put on the Company's website.

Country-by-country reporting

In accordance with the requirements of the Capital Requirements (country-by-country reporting) Regulations 2013, the Group will publish additional country-by-country information in respect of the year ended 31 December 2019, on or before 31 December 2020. We have also published our approach to tax and tax policy.

This information will be available on the Group's website at sc.com

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 PLC 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 receive any 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 visit our website at sc.com/shareholders or contact the shareholder helpline on 0370 702 0138.

 

 

Previous dividend payments (unadjusted for the impact of the 2015/2010/2008 Rights Issues)

Dividend and
financial year

Payment date

Dividend per ordinary share

Cost of one new ordinary share under share dividend scheme

Final 2007

16 May 2008

56.23c/28.33485p/HK$4.380092

£16.2420/$32.78447

Interim 2008

9 October 2008

25.67c/13.96133p/HK$1.995046

£14.00/$26.0148

Final 2008

15 May 2009

42.32c/28.4693p/HK$3.279597

£8.342/$11.7405

Interim 2009

8 October 2009

21.23c/13.25177p/HK$1.645304

£13.876/$22.799

Final 2009

13 May 2010

44.80c/29.54233p/HK$3.478306

£17.351/$26.252

Interim 2010

5 October 2010

23.35c/14.71618p/HK$1.811274/INR0.9841241

£17.394/$27.190

Final 2010

11 May 2011

46.65c/28.272513p/HK$3.623404/INR1.99751701

£15.994/$25.649

Interim 2011

7 October 2011

24.75c/15.81958125p/HK$1.928909813/INR1.137971251

£14.127/$23.140

Final 2011

15 May 2012

51.25c/31.63032125p/HK$3.9776083375/INR2.66670151

£15.723/$24.634

Interim 2012

11 October 2012

27.23c/16.799630190p/HK$2.111362463/INR1.3498039501

£13.417/$21.041

Final 2012

14 May 2013

56.77c/36.5649893p/HK$4.4048756997/INR2.9762835751

£17.40/$26.28792

Interim 2013

17 October 2013

28.80c/17.8880256p/HK$2.233204992/INR1.68131

£15.362/$24.07379

Final 2013

14 May 2014

57.20c/33.9211444p/HK$4.43464736/INR3.3546261

£11.949$19.815

Interim 2014

20 October 2014

28.80c/17.891107200p/HK$2.2340016000/INR1.6718425601

£12.151/$20.207

Final 2014

14 May 2015

57.20c/37.16485p/HK$4.43329/INR3.5140591

£9.797/$14.374

Interim 2015

19 October 2015

14.40c/9.3979152p/HK$1.115985456/INR0.861393721

£8.5226/$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

£7.7600/$10.83451

Interim 2018

22 October 2018

6.00c/4.59747p/HK$0.46978/INR0.36961751

£6.7104/$8.51952

Final 2018

16 May 2019

15.00c/11.569905p/HK$1.176260/INR0.9576916501

N/A

Interim 2019

21 October 2019

7.00c/5.676776p/HK$0.548723/INR0.4250286001

N/A

1  The INR dividend is per Indian Depository Receipt

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. There is no implication for capital gains tax (no gain or loss) when you donate shares to charity, and UK taxpayers may be able to claim income tax relief on the value of their donation.

Further information can be obtained from the Company's registrars or from ShareGift on 020 7930 3737 or from sharegift.org

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

If you have any enquiries relating to your shareholding and you hold your shares on the UK register, please contact our registrar Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ or call the shareholder helpline number 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 KFintech, Tower B, Plot 31-32, Selenium Building, Financial District, Nanakramguda, Gachibowli, Hyderabad 500032, Telangana, India.

 

 

Chinese translation

If you would like a Chinese version of the 2019 Annual Report please contact Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.

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 Annual Report, the English text shall prevail.

Electronic communications

If you hold your shares on the UK register and in future you would like to receive the Annual Report electronically rather than by post, please register online at: investorcentre.co.uk. Then click on Register and follow the instructions. You will need to have your Shareholder or ShareCare reference number when you log on. You can find this on your share certificate or ShareCare statement. Once registered you can also submit your proxy vote and dividend election electronically, and change your bank mandate or address information.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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