Third Quarter 2019 Results

RNS Number : 5893R
Standard Chartered PLC
30 October 2019
 

30 October 2019

Standard Chartered PLC - third quarter 2019 results

Standard Chartered PLC (the Group) today releases its results for the third quarter ended 30 September 2019. All figures are presented on an underlying basis and comparisons are made to the third quarter of 2018, unless otherwise stated. A reconciliation of restructuring and other items that have been excluded from underlying results is set out on page 8 below.

"Our strategy of the last few years has progressively created a stronger and more resilient business as evidenced by a 16% increase in underlying profits in the third quarter. The continuing execution of that strategy remains our priority, enabling us to face the more challenging external environment confidently, determined to continuously enhance our service to our clients, our performance-oriented culture and our profitability."

Progress year-to-date on strategic priorities

·      Deliver our network: income from corporate and institutional clients using our international network grew 7% 

·      Grow our affluent business: income from Premium, Priority and Private Banking clients increased 5%

·      Optimise low-returning markets: aggregate profit in India, Indonesia, Korea and UAE improved 16%

·      Improve productivity: income per full-time employee increased 5%

·      Transform and disrupt with digital: key client digital adoption measures continued to improve

·      Drive sustainability: adopted Principles for Responsible Banking; issued Asia's first sustainable deposit

Progress in 3Q'19 on financial framework

·      Return on tangible equity up 160bps to 8.9%

Underlying profit before tax up 16% to $1.2bn

Statutory profit before tax up 4% to $1.1bn

·      Income up 7% to $4.0bn; up 8% on a constant currency basis

Broad-based growth across all segments and regions

Particularly strong performance in Corporate & Institutional Banking up 13% and Private Banking up 14%

Europe & Americas grew 19% and ASEAN & South Asia was up 13%

Income year-to-date up 3%; up 5% on a constant currency basis

·      Costs flat at $2.5bn; up 1% on a constant currency basis

Significantly positive income-to-cost jaws both in 3Q'19 and year-to-date

Costs in 2H'19 will be slightly higher than in 1H'19 due to investment phasing; so 4Q'19 will exceed 3Q'19

Costs in FY'19 excluding the UK bank levy are expected to grow below the rate of inflation

·      Capital

Completed $1bn buy-back: 116m shares acquired and cancelled reducing total issued share capital by 3.5%

Common equity tier 1 ratio remains within 13-14% target range at 13.5%: up 6bps since 30 June 2019

Changes to Pillar 2A and HK counter-cyclical buffers increased the CET1 requirement by 21bps to 10.2%

Risk-weighted assets (RWA) down $2bn since 30 June 2019 to $269bn

Credit risk RWA reduced by $2bn whilst total assets grew by 3% in the same period

RWA grew broadly in line with income year-to-date

Other 3Q'19 financial highlights

·      Pre-provision operating profit up 22% to $1.5bn

·      Asset quality remains stable despite higher credit impairment driven partly by IFRS 9 expected credit losses

Higher stage 3 credit impairment from a small number of unconnected corporate exposures

Stage 1 and 2 credit impairment of $54m compared to a net release of $35m in 3Q'18

·      Average interest-earning assets up 8% to $603bn; yield up 19bps to 3.28%

·      Average interest-bearing liabilities up 11% to $530bn; rate paid up 18bps to 1.96%

·      Net interest margin year-to-date flat at 1.58%

Outlook

We continue to focus on executing our strategy with the objective of delivering a 10% return on tangible equity by 2021 but there are growing headwinds from the combination of continuing geopolitical tensions and expectations of declining near-term global growth and interest rates.

Standard Chartered PLC - Summary of results

 

 

 

For the three months ended 30 September 2019

 

 

 

 

3 months ended

3 months ended

3 months ended

 

30.09.19

30.06.19

30.09.18

 

$m

$m

$m

Underlying performance

 

 

 

Operating income

3,978

3,883

3,724

Operating expenses

(2,501)

(2,554)

(2,511)

Credit impairment

(279)

(176)

(115)

Other impairment

(5)

(19)

(76)

Profit from associates and joint ventures

45

91

47

Profit before taxation

1,238

1,225

1,069

Return on ordinary shareholders' tangible equity (%)

8.9

7.3

7.3

Cost to income ratio (%)

62.9

65.8

67.4

Statutory performance

 

 

 

Operating income

3,959

3,912

3,751

Operating expenses

(2,567)

(2,642)

(2,566)

Credit impairment

(280)

(176)

(94)

Other impairment

(60)

(24)

(76)

Profit from associates and joint ventures

53

102

47

Profit before taxation

1,105

1,172

1,062

Profit attributable to parent company shareholders

761

669

741

Profit attributable to ordinary shareholders1

725

482

707

Return on ordinary shareholders' tangible equity (%)

7.5

5.0

7.0

Net interest margin (%)

1.56

1.62

1.56

Cost to income ratio (%)

64.8

67.5

68.4

Balance sheet and capital

 

 

 

Total assets

734,800

712,504

684,605

Total equity

50,696

50,439

51,643

Loans and advances to customers

269,703

263,595

254,798

Customer accounts

387,857

401,597

371,493

Risk-weighted assets

268,668

270,739

265,245

Total capital

54,940

54,957

57,576

Advances-to-deposits ratio (%)2

65.6

63.7

65.6

Liquidity coverage ratio (%)

133

139

154

Common Equity Tier 1 ratio (%)

13.5

13.5

14.5

Total capital (%)

20.4

20.3

21.7

UK leverage ratio (%)

5.1

5.3

5.8

Information per ordinary share

Cents

Cents

Cents

Basic earnings per ordinary share   - underlying3

26.6

21.4

22.2

                       - statutory3

22.5

14.6

21.4

Ordinary dividend per share4

-

7.0

-

Net asset value per share5

1,358

1,339

1,358

Tangible net asset value per share5

1,199

1,182

1,207

Number of ordinary shares at period end (m)

3,195

3,255

3,305

Profit 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

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

Represents the recommended ordinary dividend per share

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

Table of Contents

Summary of financial performance                                                                                              4

Analysis of operating income by

Product                                                                                                                           5

Client segment                                                                                                               6

Geographic region                                                                                                         6

Statutory net interest income and margin                                                                                    7

Credit risk summary                                                                                                                    7

Restructuring and other items                                                                                                      8

Balance sheet and liquidity                                                                                                          8

Risk-weighted assets                                                                                                                    9

Capital base and ratios                                                                                                                  9

Additional information                                                                                                               

            Quarterly underlying operating income by segment, region and product                       11

            Basis of preparation                                                                                                         12

            IFRS 16                                                                                                                            12

            Credit grade 12 accounts                                                                                                 12

Cover ratio                                                                                                                      12        

 

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

 

Summary of financial performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q'19

 

3Q'18

Change

Constant Currency Change1

 

2Q'19

Change

 

YTD'19

YTD'18

Change

Constant Currency Change1

 

$m

 

$m

%

%

 

$m

%

 

$m

$m

%

%

Net Interest income

2,385

 

2,190

9

 

 

2,371

1

 

7,028

6,577

7

 

Other income

1,593

 

1,534

4

 

 

1,512

5

 

4,646

4,796

(3)

 

Operating income

3,978

 

3,724

7

8

 

3,883

2

 

11,674

11,373

3

5

Operating expenses

(2,501)

 

(2,511)

-

(1)

 

(2,554)

2

 

(7,470)

(7,628)

2

(1)

Operating profit before impairment and taxation

1,477

 

1,213

22

22

 

1,329

11

 

4,204

3,745

12

14

Credit impairment

(279)

 

(115)

(143)

 

 

(176)

(59)

 

(533)

(408)

(31)

 

Other impairment

(5)

 

(76)

93

 

 

(19)

74

 

(26)

(127)

80

 

Profit from associates and joint ventures

45

 

47

(4)

 

 

91

(51)

 

202

215

(6)

 

Underlying profit before taxation

1,238

 

1,069

16

16

 

1,225

1

 

3,847

3,425

12

14

Restructuring

(123)

 

(7)

n.m.2

 

 

(46)

(167)

 

(137)

(86)

(59)

 

Other items

(10)

 

-

n.m.2

 

 

(7)

(43)

 

(191)

69

n.m.2

 

Statutory profit before taxation

1,105

 

1,062

4

4

 

1,172

(6)

 

3,519

3,408

3

5

Taxation

(333)

 

(310)

(7)

 

 

(494)

33

 

(1,251)

(1,063)

(18)

 

Profit for the period

772

 

752

3

 

 

678

14

 

2,268

2,345

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (%)3

1.56

 

1.56

 

 

 

1.62

 

 

1.58

1.58

 

 

Underlying return on tangible equity (%)

8.9

 

7.3

 

 

 

7.3

 

 

8.6

7.5

 

 

Underlying basic earnings per share (cents)4

26.6

 

22.2

 

 

 

21.4

 

 

75.7

67.1

 

 

Statutory return on tangible equity (%)

7.5

 

7.0

 

 

 

5.0

 

 

6.8

6.9

 

 

Statutory basic earnings per share (cents)4

22.5

 

21.4

 

 

 

14.6

 

 

60.5

62.0

 

 

Comparisons presented on the basis of the current period's functional currency rate

2  Not meaningful

Statutory net interest income divided by average interest earning assets, annualised

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

 

The Group delivered an encouraging and resilient performance in the third quarter of 2019. Income grew at the top end of the medium-term guidance range of 5-7 per cent and at a significantly faster rate than costs; profitability improved despite an increase in impairments; capital and liquidity levels remain strong; and the balance sheet is growing.

All commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2018 where the percentage change is better / (worse) unless otherwise stated.

·    Operating income grew 7 per cent or 8 per cent on a constant currency basis. Net interest income grew 9 per cent with increased contribution from trading book assets in Financial Markets and increased volumes and margins within Cash Management and Retail Deposits whilst Other income increased 4 per cent

·    Operating expenses were flat or up 1 per cent on a constant currency basis, with tight control of costs generating positive cost-to-income jaws of 7 per cent. The Group has clear strategic priorities and continues to invest behind them. As previously guided: excluding the UK bank levy, costs in the second half of 2019 are expected to be slightly higher than in the first half. That means that costs in the fourth quarter will be higher than in the third quarter due to investment phasing but for full-year 2019 are expected to grow below the rate of inflation

·    Credit impairment increased by $164 million to $279 million driven mainly by higher stage 3 credit impairment relating to a small number of unconnected single-name exposures within Corporate & Institutional Banking. Expected credit losses relating to stage 1 and 2 exposures of $54 million in the quarter were $89 million higher compared to a net release of $35 million in 3Q'18, and included $24 million related to the impact of changes to macroeconomic forecasts during the period. Credit impairment of $533 million year-to-date represents a loan-loss rate of 23 basis points, an increase of 2 basis points year-on-year

·    Other impairment reduced by $71 million to $5 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 down 4 per cent with the exclusion from underlying performance of the Group's non-core share of PT Bank Permata Tbk's earnings offsetting an increase in profit from the Group's other associates and joint ventures

·    Profit before tax improved 16 per cent on both a reported and a constant currency basis. Charges relating to restructuring and other items totalled $133 million, an increase of $126 million. Including these items statutory profit before tax improved 4 per cent 

·    Taxation was $333 million on a statutory basis. The underlying effective tax rate was 27.1 per cent (3Q'18: 27.2 per cent)

·    Return on tangible equity improved by 160 basis points to 8.9 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

·    Basic earnings per share (EPS) increased 4.4 cents to 26.6 cents and statutory EPS increased 1.1 cents to 22.5 cents

 

Operating income by product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q'19

 

3Q'18

Change

 

2Q'19

Change

 

 

YTD'19

YTD'18

Change

 

 

$m

 

$m

%

 

$m

%

 

 

$m

$m

%

 

Transaction Banking

976

 

936

4

 

990

(1)

 

 

2,928

2,776

5

 

     Trade

282

 

277

2

 

282

-

 

 

841

866

(3)

 

     Cash Management

606

 

577

5

 

621

(2)

 

 

1,829

1,658

10

 

     Securities Services

88

 

82

7

 

87

1

 

 

258

252

2

 

Financial Markets

789

 

631

25

 

747

6

 

 

2,285

2,032

12

 

     Foreign Exchange

261

 

239

9

 

304

(14)

 

 

864

769

12

 

     Rates1

176

 

194

(9)

 

136

29

 

 

533

492

8

 

     Commodities

39

 

38

3

 

44

(11)

 

 

128

142

(10)

 

     Credit and Capital Markets1

167

 

48

n.m.2

 

145

15

 

 

452

241

88

 

     Capital Structuring Distribution Group

87

 

71

23

 

74

18

 

 

243

218

11

 

     Other Financial Markets

59

 

41

44

 

44

34

 

 

65

170

(62)

 

Corporate Finance3

340

 

324

5

 

330

3

 

 

991

989

-

 

Lending and Portfolio Management

145

 

123

18

 

140

4

 

 

414

401

3

 

Wealth Management

488

 

465

5

 

511

(5)

 

 

1,463

1,456

-

 

Retail Products

971

 

929

5

 

973

-

 

 

2,892

2,825

2

 

     CCPL and other unsecured lending

315

 

320

(2)

 

320

(2)

 

 

940

1,016

(7)

 

     Deposits

508

 

476

7

 

499

2

 

 

1,499

1,301

15

 

     Mortgage and Auto

123

 

114

8

 

128

(4)

 

 

379

446

(15)

 

     Other Retail Products

25

 

19

32

 

26

(4)

 

 

74

62

19

 

Treasury

335

 

342

(2)

 

251

33

 

 

894

970

(8)

 

Others

(66)

 

(26)

(154)

 

(59)

(12)

 

 

(193)

(76)

(154)

 

Total operating income

3,978

 

3,724

7

 

3,883

2

 

 

11,674

11,373

3

 

Following a reorganisation of certain product teams within Financial Markets, $46 million of income that in 1H 2018 was reported within Credit and Capital Markets was  transferred to Rates during 3Q 2018. Prior periods have not been restated

2  Not meaningful

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

 

Transaction Banking income grew 4 per cent with continued strong performance in Cash Management and growth in Trade and Securities Services. Corporate & Institutional Banking clients generated 78 per cent of this income with the remainder generated by Commercial Banking clients.

Financial Markets income grew 25 per cent benefiting from market volatility and increased hedging and investment activity by clients. Credit and Capital Markets income more than trebled and there was double-digit growth in the Capital Structuring Distribution Group and Other Financial Markets and a positive $11m movement in the Debit Valuation Adjustment.

Corporate Finance income increased 5 per cent despite the Group's decision to discontinue its ship leasing business, with the related income now recorded as a restructuring charge and excluded from underlying results. Excluding the impact of discontinuing ship leasing, Corporate Finance income was up 10 per cent driven by asset origination.

Lending and Portfolio Management income was up 18 per cent from improved margins in Corporate Lending and lower costs from collateralised loan obligation initiatives to optimise risk-weighted assets.

Wealth Management income grew 5 per cent - despite the more challenging market conditions - primarily from growth in equity and fixed income investment products partially offset by lower bancassurance income as a result of an accelerated recognition of an annual bancassurance bonus within Retail Banking into the prior quarter. Retail Banking clients generated 81 per cent of this income with the remainder generated by Private Banking clients.

Retail Products income grew 5 per cent or 7 per cent on a constant currency basis with continued growth from Deposits as well as an 8 per cent increase in Mortgages and Auto.

Treasury income reduced 2 per cent with a $12 million favourable movement in hedge ineffectiveness offset by the impact of interest rate movements within the Treasury Markets portfolio.

 

Operating income by client segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q'19

 

3Q'18

Change

 

2Q'19

Change

 

YTD'19

YTD'18

Change

 

 

$m

 

$m

%

 

$m

%

 

$m

$m

%

 

Corporate & Institutional Banking

1,868

 

1,646

13

 

1,817

3

 

5,475

5,097

7

 

Retail Banking

1,319

 

1,268

4

 

1,330

(1)

 

3,914

3,888

1

 

Commercial Banking

372

 

346

8

 

375

(1)

 

1,118

1,052

6

 

Private Banking

145

 

127

14

 

157

(8)

 

451

398

13

 

Central & other items

274

 

337

(19)

 

204

34

 

716

938

(24)

 

Total operating income

3,978

 

3,724

7

 

3,883

2

 

11,674

11,373

3

 

 

Corporate & Institutional Banking income grew 13 per cent with double digit growth in Financial Markets and continued growth in Cash Management.

Retail Banking income grew 4 per cent or 6 per cent on a constant currency basis driven primarily by Retail Products, and Deposits in particular, with Wealth Management income broadly stable.

Commercial Banking income grew 8 per cent or 9 per cent on a constant currency basis with broad-based growth across multiple products.

Private Banking income grew 14 per cent primarily driven by Wealth Management, with positive contributions from all products.

Central & other items income reduced 19 per cent with lower Other income from the impact on fixed assets of adopting IFRS 16 and increased funding charges, and lower Treasury income.

 

Operating income by geographic region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q'19

 

3Q'18

Change

 

2Q'19

Change

 

YTD'19

YTD'18

Change

 

 

$m

 

$m

%

 

$m

%

 

$m

$m

%

 

Greater China & North Asia

1,578

 

1,550

2

 

1,553

2

 

4,658

4,647

-

 

ASEAN & South Asia

1,085

 

958

13

 

1,090

-

 

3,221

3,031

6

 

Africa & Middle East

617

 

604

2

 

632

(2)

 

1,957

1,980

(1)

 

Europe & Americas

467

 

391

19

 

435

7

 

1,261

1,261

-

 

Central & other items

231

 

221

5

 

173

34

 

577

454

27

 

Total operating income

3,978

 

3,724

7

 

3,883

2

 

11,674

11,373

3

 

 

Greater China & North Asia income grew 2 per cent with growth in Financial Markets, Lending and Portfolio Management, Retail Products and Wealth Management offsetting a lower contribution from Treasury and Corporate Finance. Income grew in Hong Kong, Korea and China.

ASEAN & South Asia income grew 13 per cent with broad-based growth across all products. There was double-digit income growth in India, Bangladesh and Indonesia as well as high single-digit growth in Singapore.

Africa & Middle East income grew 2 per cent or 8 per cent on a constant currency basis, with double-digit growth in Financial Markets partly offset by reduced contribution from Retail Products and Treasury. Income grew in Pakistan and Ghana, partly offset by marginally lower income in UAE and Nigeria.

Europe & Americas income grew 19 per cent with strong double-digit growth across Treasury, Corporate Finance and Financial Markets.

Central & other items income grew 5 per cent with favourable movements in hedge ineffectiveness within Treasury and lower costs from collateralised loan obligation programmes. 

 

Statutory net interest income and margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q'19

 

3Q'18

Change1

 

2Q'19

Change1

 

YTD'19

YTD'18

Change1

 

$m

 

$m

%

 

$m

%

 

$m

$m

%

Statutory net interest income

2,369

 

2,188

8

 

2,362

-

 

6,987

6,549

7

Average interest earning assets

602,798

 

555,787

8

 

584,135

3

 

590,844

554,744

7

Average interest bearing liabilities

529,764

 

479,412

11

 

507,657

4

 

515,821

484,157

7

 

 

 

 

 

 

 

 

 

 

 

 

Gross yield (%)2

3.28

 

3.09

19

 

3.42

(14)

 

3.36

3.03

33

Rate paid (%)2

1.96

 

1.78

18

 

2.07

(11)

 

2.03

1.66

37

Net yield (%)2

1.32

 

1.31

1

 

1.35

(3)

 

1.33

1.37

(4)

Net interest margin (%)2, 3

1.56

 

1.56

-

 

1.62

(6)

 

1.58

1.58

-

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

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

3  Statutory net interest income divided by average interest earning assets, annualised

 

Compared to the third quarter of 2018 statutory net interest income grew 8 per cent while the net interest margin was flat at 156 basis points.

·      Average interest-earning assets increased 8 per cent driven by higher loans and advances to customers and increased trading book assets to support client demand for emerging market bonds and reverse repurchase agreements. Gross yields increased 19 basis points compared to the average in the third quarter of 2018 and predominantly reflected the rises in global interest rates that occurred through last year

 

·      Average interest-bearing liabilities increased 11 per cent driven by growth in customer accounts and client demand for repurchase agreements. The rate paid on liabilities increased 18 basis points compared to the average in the third quarter of 2018 reflecting the same historical rises in interest rates

 

Credit risk summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.09.19

30.06.19

Change1

31.12.18

Change1

30.09.18

Change1

 

$m

$m

%

$m

%

$m

%

Gross loans and advances to customers2

274,240

268,055

2

261,455

5

259,849

6

  Of which stage 1 and 2

268,051

261,837

2

254,531

5

252,628

6

  Of which stage 3

6,189

6,218

-

6,924

(11)

7,221

(14)

 

 

 

 

 

 

 

 

Expected credit loss provisions

(4,537)

(4,460)

2

(4,898)

(7)

(5,051)

(10)

  Of which stage 1 and 2

(746)

(757)

(1)

(842)

(11)

(853)

(13)

  Of which stage 3

(3,791)

(3,703)

2

(4,056)

(7)

(4,198)

(10)

 

 

 

 

 

 

 

 

Net loans and advances to customers

269,703

263,595

2

256,557

5

254,798

6

  Of which stage 1 and 2

267,305

261,080

2

253,689

5

251,775

6

  Of which stage 3

2,398

2,515

(5)

2,868

(16)

3,023

(21)

 

 

 

 

 

 

 

 

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

61/82

60/81

1/1

59/81

2/1

58/79

3/3

Credit grade 12 accounts ($million)

1,556

1,416

10

1,523

2

992

57

Early alerts ($million)

4,468

4,068

10

4,767

(6)

6,871

(35)

Investment grade corporate exposures (%)3

63

57

6

62

1

62

1

1  Variance is increase/(decrease)

2  Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $6,132 million at 30 September 2019, $2,704 million at 30 June 2019, $3,151 million at 31 December 2018 and $3,597 million at 30 September 2018

Change is the percentage points difference between two points rather than percentage change

Asset quality overall was broadly stable in the quarter with no new areas of stress identified. The Group remains vigilant considering continuing geopolitical uncertainty and performs regular reviews and stress tests of its portfolio to help identify then mitigate any risks that may arise.

Gross Stage 3 loans and advances to customers of $6.2 billion were flat compared to 30 June 2019. These credit-impaired loans represented 2.3 per cent of gross loans and advances, the same proportion as at 30 June 2019. They are 61 per cent covered before collateral and 82 per cent covered after collateral, an improvement of 1 percentage point for both measures compared to 30 June 2019.

Credit grade 12 balances grew 10 per cent since 30 June 2019 reflecting a combination of upgrades from Stage 3 and new inflows. Early alert accounts increased 10 per cent in the quarter due to a few material exposures but are lower year-on-year and on a year-to-date basis.

The proportion of investment grade corporate exposures has increased to 63 per cent due to growth in repurchase agreements. This is back to broadly the same levels as at 31 December 2018 following a drop as at 30 June 2019.

 

Restructuring and other items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q'19

 

2Q'19

 

3Q'18

 

Restructuring

Other items

 

Restructuring

Other items

 

Restructuring

Other items

 

$m

$m

 

$m

$m

 

$m

$m

Operating income

(19)

-

 

29

-

 

27

-

Operating expenses

(44)

(22)

 

(70)

(18)

 

(55)

-

Credit impairment

(1)

-

 

-

-

 

21

-

Other impairment

(55)

-

 

(5)

-

 

-

-

Profit/(loss) from associates and joint ventures

(4)

12

 

-

11

 

-

-

Profit/(loss) before taxation

(123)

(10)

 

(46)

(7)

 

(7)

-

 

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. These adjustments are set out below.

Restructuring charges of $123 million primarily related to the run-down of the Group's Principal Finance exposures together with impairments related to the Group's discontinued ship leasing business. Other items of $10 million included profits from the Group's joint venture investment in Indonesia which is no longer considered core as well as provisions for regulatory matters.

 

Balance sheet and liquidity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.09.19

30.06.19

Change1

31.12.18

Change1

30.09.18

Change1

 

$m

$m

%

$m

%

$m

%

Assets

 

 

 

 

 

 

 

Loans and advances to banks

60,743

59,210

3

61,414

(1)

60,789

-

Loans and advances to customers

269,703

263,595

2

256,557

5

254,798

6

Other assets

404,354

389,699

4

370,791

9

369,018

10

Total assets

734,800

712,504

3

688,762

7

684,605

7

Liabilities

 

 

 

 

 

 

 

Deposits by banks

32,603

30,783

6

29,715

10

31,337

4

Customer accounts

387,857

401,597

(3)

391,013

(1)

371,493

4

Other liabilities

263,644

229,685

15

217,682

21

230,132

15

Total liabilities

684,104

662,065

3

638,410

7

632,962

8

Equity

50,696

50,439

1

50,352

1

51,643

(2)

Total equity and liabilities

734,800

712,504

3

688,762

7

684,605

7

 

 

 

 

 

 

 

 

Advances-to-deposits ratio (%)2,3

65.6

63.7

2

63.1

3

65.6

-

Liquidity coverage ratio (%)3

133

139

(6)

154

(21)

154

(21)

1  Variance is increase/(decrease)

2  The Group now excludes $10,632 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

3  Change is percentage points difference between two points rather than percentage change

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

·      Loans and advances to customers increased 2 per cent since 30 June 2019 to $270 billion driven in particular by Financial Markets and Corporate Finance

·      Customer accounts of $388 billion reduced 3 per cent since 30 June 2019 with an increase in operating account balances within Cash Management balances offset by a run-off in Corporate Term Deposits. As a result, the Group's advances-to-deposits ratio rose to 65.6 per cent from 63.7 per cent in the prior quarter

·      Other assets and other liabilities since 30 June 2019 were 4 per cent and 15 per cent higher respectively. The growth in other assets was driven by increased trading book assets 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

 

Risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.09.19

30.06.19

Change1

31.12.18

Change1

30.09.18

Change1

 

$m

$m

%

$m

%

$m

%

By risk type

 

 

 

 

 

 

 

Credit risk

218,198

220,010

(1)

211,138

3

219,095

-

Operational risk

27,620

27,620

-

28,050

(2)

28,050

 (2)

Market risk

22,850

23,109

(1)

19,109

20

18,100

26

Total RWAs

268,668

270,739

(1)

258,297

4

265,245

1

1 Variance is increase/(decrease)

 

Total risk-weighted assets (RWA) reduced $2 billion since 30 June 2019 to $269 billion.

·      Credit risk RWA reduced $1.8 billion, with asset growth offset by favourable foreign exchange movements and efficiency actions including model changes and the partial sale of the Group's Principal Finance portfolio

·      Market risk RWA reduced slightly, to $23 billion

·      Operational risk RWA are calculated annually so are unchanged

On a year-to-date constant currency basis total RWA increased at broadly the same rate as income growth. The execution of organic and inorganic RWA optimisation initiatives support the expectation that income growth will exceed RWA growth in the medium-term.

 

Capital base and ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.09.19

 

30.06.19

Change

1

31.12.18

Change1

 

30.09.18

Change1

 

$m

 

$m

%

 

$m

%

 

$m

%

CET1 capital

36,386

 

36,511

-

 

36,717

(1)

 

38,340

(5)

Additional Tier 1 capital (AT1)

7,153

 

6,612

8

 

6,684

7

 

6,689

7

Tier 1 capital

43,539

 

43,123

1

 

43,401

-

 

45,029

(3)

Tier 2 capital

11,401

 

11,834

(4)

 

12,295

(7)

 

12,547

(9)

Total capital

54,940

 

54,957

-

 

55,696

(1)

 

57,576

(5)

CET1 capital ratio end point (%)2

13.5

 

13.5

-

 

14.2

(0.7)

 

14.5

(1.0)

Total capital ratio transitional (%)2

20.4

 

20.3

0.1

 

21.6

(1.2)

 

21.7

(1.3)

UK leverage ratio (%)2

5.1

 

5.3

(0.2)

 

5.6

(0.5)

 

5.8

(0.7)

1 Variance is increase/(decrease)

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

 

The Group's common equity tier 1 (CET1) ratio of 13.5 per cent was up 6 basis points compared to 30 June 2019 due to profits generated in the quarter and lower RWA partly offset by adverse foreign exchange movements on reserves and an increase in the foreseeable dividend. The Group's formulaic approach to setting the ordinary dividend results in a higher foreseeable dividend in the second half of the year.

The Group repurchased 116,103,483 ordinary shares for an aggregate consideration of approximately $1 billion between 2 May 2019 and 25 September 2019 at a volume-weighted average price of 686.3p per ordinary share. The shares were subsequently cancelled, reducing the total issued share capital by 3.5 per cent.

The Group was advised during the period that its Pillar 2A requirement as reviewed regularly by the Prudential Regulation Authority has increased. After the period end, the Hong Kong Monetary Authority announced that the countercyclical buffer rate for Hong Kong would reduce from 2.5 to 2 per cent. The net effect of these changes (applied to the period-end balance sheet) is to increase the Group's CET1 requirement by 21 basis points to 10.2 per cent and its expected 2022 minimum requirement for own funds and eligible liabilities (MREL) including the combined buffer by 90 basis points to 26.6 per cent. The Group continues to operate above its minimum capital requirements and remains well positioned relative to expected MREL.

 

 

 

For further information, please contact:

Mark Stride, Head of Investor Relations    +44 (0) 20 7885 8596

Julie Gibson, Head of Media Relations      +44 (0) 20 7885 2434

 

Additional information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly underlying operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By client segment

 

 

 

 

 

 

 

 

 

3Q'19

2Q'19

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

4Q'17

 

$m

$m

$m

$m

$m

$m

$m

$m

Corporate & Institutional Banking

1,868

1,817

1,790

1,763

1,646

1,709

1,742

1,649

Retail Banking

1,319

1,330

1,265

1,153

1,268

1,281

1,339

1,186

Commercial Banking

372

375

371

339

346

355

351

335

Private Banking

145

157

149

118

127

127

144

130

Central & other items

274

204

238

222

337

304

297

178

Total operating income

3,978

3,883

3,813

3,595

3,724

3,776

3,873

3,478

 

 

 

 

 

 

 

 

 

By geographic region

 

 

 

 

 

 

 

 

 

3Q'19

2Q'19

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

4Q'17

 

$m

$m

$m

$m

$m

$m

$m

$m

Greater China & North Asia

1,578

1,553

1,527

1,510

1,550

1,533

1,564

1,411

ASEAN & South Asia

1,085

1,090

1,046

940

958

998

1,075

932

Africa & Middle East

617

632

708

624

604

692

684

677

Europe & Americas

467

435

359

409

391

429

441

414

Central & other items

231

173

173

112

221

124

109

44

Total operating income

3,978

3,883

3,813

3,595

3,724

3,776

3,873

3,478

 

 

 

 

 

 

 

 

 

By product

 

 

 

 

 

 

 

 

 

3Q'19

2Q'19

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

4Q'17

 

$m

$m

$m

$m

$m

$m

$m

$m

Transaction Banking

976

990

962

942

936

924

916

876

     Trade

282

282

277

257

277

285

304

298

     Cash Management

606

621

602

604

577

553

528

506

     Securities Services

88

87

83

81

82

86

84

72

Financial Markets

789

747

749

580

631

677

724

536

     Foreign Exchange

261

304

299

232

239

280

250

208

     Rates1

176

136

221

63

194

121

177

74

     Commodities

39

44

45

50

38

53

51

35

     Credit and Capital Markets1

167

145

140

83

48

87

106

85

     Capital Structuring Distribution Group

87

74

82

91

71

92

55

51

     Other Financial Markets

59

44

(38)

61

41

44

85

83

Corporate Finance2

340

330

321

434

324

334

331

466

Lending and Portfolio Management

145

140

129

117

123

141

137

111

Wealth Management

488

511

464

343

465

452

539

397

Retail Products

971

973

948

925

929

953

943

916

     CCPL and other unsecured lending

315

320

305

294

320

345

351

334

     Deposits

508

499

492

481

476

431

394

366

     Mortgage and Auto

123

128

128

127

114

156

176

196

     Other Retail Products

25

26

23

23

19

21

22

20

Treasury

335

251

308

253

342

338

290

200

Others

(66)

(59)

(68)

1

(26)

(43)

(7)

(24)

Total operating income

3,978

3,883

3,813

3,595

3,724

3,776

3,873

3,478

1  Following a reorganisation of certain product teams within Financial Markets, $46 million of income that in 1H 2018 was reported within Credit and Capital Markets was transferred to Rates during 3Q 2018. Prior periods have not been restated

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

Basis of presentation

This interim management statement covers the results of Standard Chartered PLC together with its subsidiaries and equity accounted interest in associates and jointly controlled entities (the Group) for the three months ended 30 September 2019. The financial information on which this statement is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with Standard Chartered's significant accounting policies as described in the Annual Report 2018, except for IFRS 16 as described below.

The information in this announcement does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018, which contained an unqualified audit report under Section 495 of the Companies Act 2006 (which did not make any statements under Section 498 of the Companies Act 2006) have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

IFRS 16

IFRS 16 Leases became effective on 1 January 2019 and introduced a single lessee accounting model that requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

The impact on the Group of adopting IFRS 16 is primarily where the Group is a lessee in property lease contracts. The Group has elected to adopt the simplified approach of transition and has not restated comparative information. On 1 January 2019 the Group recognised a lease liability, being the remaining lease payments including extensions options where renewal is reasonably certain, discounted using the Group's incremental borrowing rate at the date of initial application in the economic environment of the lease. The corresponding right-of-use asset recognised is the amount of the lease liability adjusted by prepaid or accrued lease payments related to those leases. The balance sheet increase as a result of recognition of the lease liability and right-of-use asset as of 1 January 2019 was approximately $1.4 billion, with no adjustment to retained earnings. The asset is presented in 'Property, plant and equipment' and the liability is presented in 'Other liabilities'.

The Group uses a number of alternative performance measures in addition to underlying earnings including credit grade 12 and cover ratio in the discussion of its business performance and financial position. These are defined as follows:

Credit grade 12 accounts

These are customer accounts that while performing at present exhibit potential credit weaknesses and could become impaired in the future. There is however, currently, no expectation of specific loss of principal or interest, and therefore interest on credit grade 12 accounts is taken to income.

Cover ratio

The cover ratio under IFRS 9 represents the extent to which stage 3 loans are covered by stage 3 impairment allowances.

 

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

 


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 rns@lseg.com or visit www.rns.com.
 
END
 
 
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