Standard Chartered PLC (LON:STAN) has announces its full-year and fourth quarter 2023 results.
Selected information on 4Q’23 financial performance with comparisons to 4Q’22 unless otherwise stated
• Operating income up 7% to $4.0bn, up 7% at constant currency (‘ccy’)
– Net interest income (‘NII’) up 6% to $2.4bn; Non NII up 8% to $1.6bn
– Net interest margin (‘NIM’) 1.70%, up 3bps quarter-on-quarter (‘QoQ’) (normalised NIM 3Q’23: 1.67%), primarily mix improvements
– Financial Markets (‘FM’) down 8% at ccy from subdued market volatility
– Wealth Management (‘WM’) up 16% at ccy with continued strong Affluent new-to-bank (‘NTB’) client onboarding and net new money (‘NNM’)
• Operating expenses up 2% at ccy to $2.8bn; down $16m QoQ
• Credit impairment charge down $232m QoQ to $62m including CPBB flows of $131m, partly offset by a net release of $105m in CCIB
– High risk assets of $10.6bn, up $1.2bn since 30.9.23 substantially from a change in instrument on an existing sovereign exposure with no increase in risk
• Underlying profit before tax of $1.1bn, up 74% at ccy
• Goodwill and Other impairment of $153m reflects a reduction in the carrying value of the Group’s investment in China Bohai Bank (‘Bohai’)
• Other items of $262m reflect net gain from sale of Aviation Finance business
• The Group’s balance sheet remains strong, liquid and well diversified
– Loans and advances to customers of $287bn, up $6bn or 2% since 30.9.23; down $5bn or 2% on an underlying basis
– Customer deposits of $469bn, up $16bn or 4% since 30.9.23; up $10bn or 2% at ccy
– Liquidity coverage ratio 145% (30.9.23: 156%) back to historical levels; Advances-to-deposit ratio 53.3% (30.9.23: 54.5%)
• Risk-weighted assets (‘RWA’) of $244bn, up $3bn or 1% since 30.9.23
– Credit risk RWA up $3bn; includes change in asset mix and credit migration, partly offset by efficiency actions and Aviation Finance sale
• The Group remains strongly capitalised
– Common equity tier 1 (‘CET1’) ratio 14.1% (30.9.23: 13.9%), above 13-14% target range
– $1bn share buyback starting imminently is expected to reduce CET1 ratio by approximately 40bps
Selected information on FY’23 financial performance with comparisons to FY’22 unless otherwise stated
• Return on Tangible Equity (‘RoTE’) of 10.1%, up 2%pts
• Operating income up 10% to $17.4bn, up 13% at ccy
– NII up 23% at ccy to $9.6bn with NIM up 26bps to 1.67%; Non NII up 2% at ccy to $7.8bn
– FM down 2% at ccy, up 3% excluding non-repeat of $244m gain on mark-to-market liabilities in FY’22
– WM up 10% at ccy supported by robust leading indicators in Affluent NTB client onboarding and NNM
• Operating expenses up 7% to $11bn, up 8% at ccy; increase due to inflation, business growth and targeted investments, partially funded by productivity saves
– Positive 4% income-to-cost jaws in FY’23, with cost-to-income ratio improving 2% pts to 63%
• Credit impairment charge of $528m, down $308m. Annualised loan-loss rate (‘LLR’) of 17bps, down 4bps
• China Commercial Real Estate portfolio: total expected credit loss provisions $1.2bn, stage 3 exposures of $1.4bn with cover ratio including collateral of 88% and a remaining management overlay $141m
• Underlying profit before tax of $5.7bn, up 27% at ccy
• Goodwill and Other impairment of $850m primarily reflects a reduction in the carrying value of Bohai
• Tax charge of $1.6bn: underlying effective tax rate of 29%, reduced by 1%pt
• Proposed final dividend of $560m or 21c per share will result in a full-year dividend of $728m or 27c, up 50%
• Underlying earnings per share (‘EPS’) increased 31.0 cents or 32% to 128.9 cents; Reported EPS increased 22.7 cents or 26% to 108.6 cents
• Tangible net asset value per share increased 144 cents or 12% to 1,393 cents
Update on 2022-2024 strategic actions for FY’23 unless otherwise stated
• Drive improved returns in CCIB: Income return on risk-weighted assets of 7.8%, ahead of 2024 target of 6.5%; $24bn RWA optimised since 1.1.22, exceeding the $22bn target a year ahead of plan
• Transform profitability in CPBB: Cost-to-income ratio of 60%, improved by 9%pts year-on-year (‘YoY’), delivering the target of 60% a year ahead of plan; $0.4bn of gross expense savings since 1.1.22, 2022-2024 target $0.5bn
• Seize China opportunity: China onshore and offshore profit before tax up 3x YoY to $1.3bn, nearly achieving the $1.4bn target a year ahead of plan
• Create operational leverage: $0.9bn gross productivity saves since 1.1.22, 2022-2024 target $1.3bn; Cost-to-income ratio improved by 2%pts YoY to 63%, 2024 target 60%
• Deliver substantial shareholder returns: $5.5bn of total distributions announced since 1.1.22, ahead of >$5bn 2022 to 2024 target
Other updates
• Aviation exit: Sale of the Aviation Finance business completed in November 2023; increased CET1 ratio by 20bps in 4Q’23
• Sustainability: Sustainable Finance income $720m, up 42% YoY; mobilised $87bn in Sustainable Finance from 1.1.21 to 30.9.23
• Africa and Middle East exits: Closed the representative office in Lebanon; completed the sale of the Jordan branch; and signed agreements to sell the remaining 7 businesses
Taking further action to deliver sustainably higher returns
• Deliver strong income growth
– NII expected to grow in 2024 and beyond
– Financial Markets and Wealth Management two engines of Non NII growth
– Improve operational leverage through a programme called Fit for Growth
– Aiming to simplify, standardise and digitise key elements of the Group
– Addressing structural inefficiencies and complexities whilst protecting income
– Improving productivity, client and employee experience
– Creating capacity to reinvest in incremental growth initiatives
• Return substantial capital to shareholders
Guidance
We have updated our guidance for 2024 and have provided additional guidance for 2025 and 2026 as follows:
• Income:
– Operating income to increase 5-7% for 2024-2026; around the top of 5-7% range in 2024
– Net interest income for 2024 of $10bn to $10.25bn, at ccy
• Expenses:
– Operating expenses to be below $12bn in 2026, at ccy
– Expense saves of around $1.5bn and cost to achieve of no more than $1.5bn from 2024 to 2026
– Positive income-to-cost jaws, excluding UK bank levy, at ccy in each year from 2024 to 2026
• Assets and RWA:
– Low single-digit percentage growth in loans and advances to customers and RWA each year from 2024 to 2026 (pre-Basel 3.1 day-1 impact)
– Basel 3.1 day-1 impact, pending clarification of rules no more than 5% incremental RWA
• Continue to expect LLR to normalise towards the historical through the cycle 30 to 35bps range
• Capital:
– Continue to operate dynamically within the full 13-14% CET1 target range
– Plan to return at least $5bn to shareholders cumulative 2024 to 2026
– Continue to increase full-year dividend per share over time
• RoTE increasing steadily from 10%, targeting 12% in 2026 and to progress thereafter
Bill Winters, Standard Chartered Group Chief Executive, said:
” We produced strong results in 2023, continuing to demonstrate the value of our franchise and delivering our financial objective of a 10% RoTE for the year. We will now build on this success, taking action to deliver sustainably higher returns with a focus on driving income growth and improving operational leverage and targeting 12% RoTE in 2026. We have increased full year dividends, up 50%, and have announced a new $1bn share buyback, bringing our total shareholder distributions to $5.5bn since January 2022. We will continue to actively manage the Group’s capital position with a target to return at least $5bn over the next three years”
