Q1'24

results presentation

2 May 2024

Opening remarks

Good start to the year

Engines of Non NII performing strongly with Wealth Solutions up 23% and Markets up 17%

Momentum in Banking with income up 17%

Maintaining 2024 guidance

Income

  • Income growth of 20% YoY at ccy; up 14% excluding two notable items of $234m in Treasury and Other products
  • Non NII up 37% YoY at ccy; up 25% excluding two notable items
  • NII up 5% YoY at ccy; Underlying L&A to customers up 2% QoQ

Expenses

  • Actions taken to simplify organisational structure
  • Advancing Fit for Growth programme, with >200 projects identified
  • Positive income-to-cost jaws
  • Overview Income

Expenses Risk Balance sheet Capital Segments Conclusion

Risk

  • Credit quality remains resilient; high risk assets down; early alert portfolio improving
  • Net nil credit impairment in CIB

RWA and capital

  • Robust capital position with CET1 ratio of 13.6%
  • Higher Market risk RWA deployed to help clients capture opportunities
  • Around two-thirds of $1bn share buyback announced in February completed to date

2

Strong performance in Q1'24

  • Income up 20% YoY at ccy
    • NII up from higher rates and one month impact from the full short-term hedge roll-off
    • Non NII growth from higher Wealth Solutions, Markets and Banking
    • Up 14%, excluding two notable items of $234m in Treasury and Other products1
  • Expenses up 6% YoY at ccy due to inflation and business growth
  • Credit impairment charge of $176m; WRB charge in line with recent quarters; CIB net nil
  • Other impairment relates to write-off of software assets; no CET1 capital impact
  • Other items include a provision for Korea ELS of $100m
  • Underlying L&A to customers up $4bn or 2% QoQ
  • TNAV per share2 down 3 cents QoQ;
    Q1'24 profit offset by share buyback and reserve movements

Q1'24 performance ($m)

Q1'23

Q1'24

YoY

ccy

Net interest income (NII)

2,341

2,419

3%

5%

Non NII

2,055

2,733

33%

37%

Operating income

4,396

5,152

17%

20%

Operating expenses (ex UK bank levy)

(2,675)

(2,786)

(4%)

(6%)

Pre-provision operating profit

1,721

2,366

37%

40%

Credit impairment

(26)

(176)

n.m.

n.m.

Other impairment

-

(60)

n.m.

n.m.

Profit from associates

11

(1)

(109%)

(109%)

Underlying profit before tax

1,706

2,129

25%

27%

Restructuring, DVA, Goodwill & other impairment

102

(103)

n.m.

n.m.

Other items

-

(112)

n.m.

n.m.

Reported profit before tax

1,808

1,914

6%

8%

Key indicators

RoTE

Cost-to-

Income-to-

Underlying EPS

CET1 ratio

TNAV per share2

income ratio

cost jaws

15.2%

54%

Positive 13%

52.9 cents

13.6% (31.3.24)

$13.90 (31.3.24)

up 3%pts YoY

down 7%pts YoY

up 41% YoY

14.1% (31.12.23)

$13.93 (31.12.23)

  • Overview Income

Expenses Risk Balance sheet Capital Segments Conclusion

1. Refer to slide 21 for details

2. Refer to slide 22 for details

3

Higher NII supported by hedge roll-off and mix improvements

Overview

• NII up 1% QoQ to $2.4bn

−

Net Interest Income (NII) components

+1%

One month benefit of the full short-

term hedge roll-off

−

Improved liability mix

−

Partially offset by rates, margin and

lower volumes

NII ($m)

2,436

2,341

2,3882,3922,419

• Expect to achieve FY'24 NII guidance of

$10-10.25bn

− Reduced headwinds from higher for

longer rate environment reflected in

currency-weighted forward rates1…

− … offset by lower volumes as rates

remain higher for longer…

− … and continued positive impact

from short-term hedge roll-off

Q1'23

Q2'23

Q3'23

Q4'23

Q1'24

NIM2 (%)

1.63%

1.71%

1.63%

1.70%

1.76%

AIEA ($bn)

583

570

580

(1%)

558

554

58

68

77

67

63

Cash at central banks

171

165

165

157

160

Investment securities & others

42

44

45

46

42

L&A to banks

312

294

292

288

289

L&A to customers3

Q1'23

Q2'23

Q3'23

Q4'23

Q1'24

NII Q4'23 vs Q1'24 ($m)

57

42

2,419

2,392

(52)

(20)

  • Income Expenses

Risk Balance sheet Capital Segments Conclusion

Q4'23

Short-term

Mix & others

Rates &

Volumes

Q1'24

hedge

margin impact

  1. Refer to slide 15 for details
  2. Adjusted net interest income divided by average interest-earning assets, annualised
  3. L&A to customers is on a gross basis and excludes fair value through profit and loss

4

Engines of Non NII performing strongly

Non NII components ($m)

Overview

▶ Income

• Non NII up 33%, 37% YoY at ccy

− Wealth Solutions up 24% at ccy with broad-

based growth across products

− Markets up 13% YoY at ccy from higher Macro

Trading in rates and commodities

− Banking in CIB up 48% YoY at ccy to $0.3bn,

driven by higher origination and distribution

volumes in Lending & Financial Solutions

• Non NII up 25% YoY at ccy, excluding two notable

items of $234m in Treasury and Other products1

−

2,055

1,207

2,119

1,302

+33% / +37% ccy

2,015

1,632

1,114

2,733

234

1,534

Q1'24

YoY

+27%2

Expenses

Risk Balance sheet Capital Segments Conclusion

Treasury: $158m from FX revaluation of Egypt

branch USD positions

− Other: $76m from Ghana hyperinflation

950

848

817

901

682

965

+14%

Q1'23

Q2'23

Q3'23

Q4'23

Q1'24

Notable items

Net Trading & Others

Net Fees & Commissions

  1. Refer to slide 21 for details
  2. Q1'24 Net Trading and Others YoY% excluding $234m of notable items in Treasury and Other products

5

Expenses higher from inflation and business growth

  • Expenses up 6% YoY at ccy
    • Inflation 3.5%1
    • Business growth initiatives include Affluent RMs and CIB capabilities

Fit for Growth programme

  • 10 weeks since launch; mobilised pan-bank project infrastructure
  • Identified >200 projects, currently being scoped and put into execution

Simplification agenda

  • Announced changes to management structure to reduce complexity
  • Simplified the matrix with removal of regional management structure

Operating expenses2 trend ($m)

Overview

Income

▶ Expenses

+4% / +6% ccy

Risk

Balance sheet

2,826

2,786

Capital

2,770

2,754

Segments

2,675

Conclusion

Q1'23

Q2'23

Q3'23

Q4'23

Q1'24

Operating expenses2 Q1'23 vs Q1'24 ($m)

+4% / +6% ccy

79

2,786

2,675

91

(59)

Q1'23

FX

Inflation1

Business growth3

Q1'24

1. Inflation is based upon yearly average CPI rates for our individual presence markets, based on SC Research applied to the cost base in our footprint

2. Excludes UK bank levy

6

3. Business growth net of gross expense savings from 2022-2024 strategic action KPI

Credit quality remains resilient

Credit impairment ($m) / Loan-loss rate

Overview Income

• Q1'24 credit impairment of $176m, up $150m YoY

− CIB net nil charge; China CRE charge of $10m offset

by other releases

− WRB charge in line with recent quarters; lower

charge in Q1'23 due to net releases

− Ventures charge of $28m; down $4m QoQ, with

improved delinquency trend in Mox

CIB

WRB Ventures + C&O

26

62

(8) (28)

Q1'23

294

20

146

115

62

23

36

46

159

131

77

(105)

Q2'23 Q3'23 Q4'23

176

40

136

0

Q1'24

Expenses ▶ Risk Balance sheet Capital Segments Conclusion

Loan-loss rate

7bps

16bps

37bps

8bps

23bps

• High risk assets1 down ~$2bn QoQ

− $1bn reduction in CG12 from reversal of existing

sovereign exposure from reverse repo to investment

securities

− Early alerts decreased by $0.6bn from upgrades

and repayments2

• China CRE exposures of $2.4bn, down $0.2bn QoQ

− $1.5bn stage 3 assets, 90% cover ratio3

− $0.9bn performing book, of which 79% secured

with average LTV <50%

− Management overlay of $129m

Credit quality ($bn)

Early Alerts3

Credit Grade 12

Net Stage 3

$(2.0)bn

10.0

10.6

9.4

8.9

8.5

5.4

5.5

4.45.4

4.9

1.6

1.3

1.1

2.2

1.0

3.0

3.2

2.9

2.9

2.6

31.3.23

30.6.23

30.9.23

31.12.23

31.3.24

  1. High risk assets include exposures classified in Early Alerts Non-Purely Precautionary (NPP), Credit Grade 12 (CG12) and Net Stage 3
  2. Early Alerts NPP are on a net nominal basis
  3. Including collateral

7

Underlying growth in assets

Loans and advances to customers1 ($bn)

Overview

• Underlying L&A to customers up $4bn or 2% since

Income

Expenses

31.12.23

Risk

− Growth in CIB from increases in Trade & Working

+2%

▶ Balance sheet

287

Capital

Capital, Markets and Banking

4

283

Segments

− WRB impacted by mortgage headwinds in Hong

(4)

279

Conclusion

(4)

Kong and Korea

31.12.23

FX

Treasury &

Pro forma

Underlying

31.3.24

Markets SBL

Customer deposits2 ($bn)

  • Underlying customer deposits down $6bn QoQ

− Growth in WRB

469

(1%)

465

− Offset by lower CIB CASA from month-end client

(4)

459

activity, substantially returned post quarter end

(6)

• CASA to TD migration broadly stable in CIB;

slightly higher in WRB

• Stable LCR of 146% as of 31.3.24

31.12.23

FX

Pro forma

Underlying

31.3.24

1.

L&A to customers is on a net basis and excludes fair value through profit and loss

2. Customer deposits exclude fair value through profit and loss and repurchase agreements

8

CET1 ratio remains robust post share buyback

  • Q1'24 RWA up $8bn QoQ
    • Market risk RWA up $4bn; RWA deployed to help clients capture opportunities in Markets
    • Mechanically higher Operational risk RWA of $2bn
    • Offset by $2bn of FX reflecting strengthening USD
  • Market risk RWA expected to reduce in Q2'24
  • Continue to expect low single-digit percentage growth in RWA for FY'24
  • Pro forma CET1 ratio post full $1bn share buyback announced in February 2024 of 13.6%
    • Around two-thirds completed to date
  • CET1 ratio 13.6% as of 31.3.24
    • Profit accretion in Q1'24 offset by higher RWA
  • Accrual of half the foreseeable interim 2024 dividend of 4.5 cents in CET1 capital in Q1'243

Risk-weighted assets ($bn)

Overview

Income

Expenses

Risk

+$8bn

Balance sheet

1.9

1.5

0.2

252.1

▶ Capital

2.1

Segments

4.4

(2.2)

Conclusion

244.2

31.12.23

Market

Asset growth Operational

Others1

Asset

FX

31.3.24

risk

& mix

risk

quality

CET1 ratio (%)

(5)bps

0.6

0.0

14.1

(0.1)

13.6

13.6

(0.4)

(0.6)

31.12.23

Buyback

Pro forma

PAT

FVOCI, FX

AT1/Div3

RWA

31.3.24

& Others2

1. Others include derivatives, model and methodology changes in Credit risk RWA and Treasury credit insurance

2. FVOCI, FX & Others include FVOCI of 4bps, intangibles of 2bps and 5bps in Others, offset by FX of (7)bps

9

3. AT1/Dividend includes foreseeable dividend accrual in respect of the interim 2024 ordinary share dividend. This is calculated formulaically at one-third of the ordinary dividend paid in 2023 or 9 cents a share with half of this amount accrued in Q1'24

CIB: Momentum in high-returning businesses

  • Income up 10% YoY at ccy
    − Markets up 17%
  1. Flow up 5% from higher rates, foreign exchange and commodities volumes
      1. Episodic up 30% partially driven by Market risk RWA deployed to help clients capture opportunities
    • Banking up 17% driven by higher origination and distribution volumes in Lending & Financial Solutions
    • Transaction Services up 4% driven by continued rates benefit in Payments & Liquidity
  • Net nil credit impairment

Profit & Loss items ($m)

Q1'23

Q1'24

YoY

ccy

Transaction Services

1,561

1,603

3%

4%

Markets

922

1,041

13%

17%

Banking

411

472

15%

17%

Other

(2)

(1)

50%

50%

Operating income

2,892

3,115

8%

10%

Operating expenses

(1,415)

(1,423)

(1%)

(3%)

Pre-provision operating profit

1,477

1,692

15%

17%

Credit impairment

8

-

(100%)

n.m.

Other impairment

-

(53)

n.m.

n.m.

Overview

Income

Expenses Risk Balance sheet Capital

  • Segments Conclusion

Markets income - flow and episodic view

Underlying profit before tax

1,485

1,639

10%

13%

Balance sheet items ($bn)

Episodic

Flow

922

292

630

877

288

590

716

152

565

534

13

520

1,041

379

662

Q1'24

YoY

+30%

+5%

31.12.23

31.3.24

L&A to customers1

131

135

RWA

142

151

Customer deposits2

268

253

Q1'23

Q2'23

Q3'23

Q4'23

Q1'24

  1. L&A to customers is on a net basis and excludes fair value through profit and loss
  2. Customer deposits exclude fair value through profit and loss and repurchase agreements

10

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Standard Chartered plc published this content on 02 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 May 2024 11:52:18 UTC.