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Standard Chartered Plc

Standard Chartered PLC Good progress both financially & stategically

Standard Chartered PLC (LON:STAN) today released its results for the six months ended 30 June 2019. All figures are presented on an underlying basis and comparisons are made to the first half of 2018, unless otherwise stated. A reconciliation between statutory and underlying results is set out on page 82 of the 2019 half year report.

“We made good progress both financially and on our strategic priorities in the first half, growing income 4% and improving profits 13%, at constant currency. We have positioned ourselves to develop and scale innovative new business models, as we support and grow with our clients. We are investing now to create optionality for the future, and I am excited by the opportunities we are already generating.”

Bill Winters, Group Chief Executive

Strategic execution and outlook

  • Primary performance measure return on tangible equity improved 88 basis points to 8.4%
  • Good progress on refreshed strategic priorities

o  Income from corporate and institutional clients using the Group’s international network increased 9%

o  Income from affluent individual clients grew 5%

o  Productivity is improving, with income per full-time employee up 4%

o  Corporate entity restructuring to create capital and liquidity hubs in Hong Kong and Singapore is on track

o  Several innovative digital initiatives underway, including preparations to launch Hong Kong virtual bank

  • Shares worth c.$740m bought and cancelled as at 26 July 2019 as part of $1bn buy-back programme
  • Trade tensions are affecting sentiment and monetary policy normalisation is expected to reverse
  • Global growth projections are supported by solid fundamentals, and are being driven by markets in our footprint
  • Remain confident the strategy will deliver a full-year return on tangible equity greater than 10% in 2021

Financial performance

  • Underlying Profit before tax improved 11% to $2.6bn
  • Statutory profit before tax of $2.4bn is stated after provisions for regulatory matters, restructuring and other items, and increased 3%
  • Operating income of $7.7bn up 1% and up 4% on a constant currency basis
  • Positive income-to-cost jaws of 4% on both a reported and constant currency basis

o  Operating expenses of $5.0bn down 3% and flat on a constant currency basis

o  Pre-provision operating profit up 8% and up 10% on a constant currency basis

o  Expect costs in H2 2019 to be slightly higher than in H1 2019 and full-year costs to grow below the rate of inflation

  • Credit impairment of $254m was 13% lower, and asset quality overall improved year-on-year

o  Stage 3 credit impairment was 44% lower driven by Commercial Banking and a $48m release in Private Banking

o  Stage 1 & 2 credit impairment of $80m compared to a net release of $17m in H1 2018

  • Taxation for the period of $918m includes a $179m charge in relation to corporate entity restructuring

o  Underlying effective tax rate of 28.6% compared to 26.5% in H1 2018

  • Earnings per share up 9% to 49.1 cents; statutory earnings per share impacted by provisions for regulatory matters and higher taxation
  • Interim dividend of 7 cents per share declared; a 17% increase

Balance sheet and capital

  • Average interest-earning assets and interesting-bearing liabilities compared to the same period in 2018 were up 6% and 5% respectively

o  Growth in loans and advances to customers and trading book assets were primarily within Corporate & Institutional Banking

o  Growth in liabilities was driven by higher customer account balances offsetting the run-off of repurchase agreements

  • RWAs up 5% since 31 December 2018 and at a similar level to 30 June 2018; growing slightly below equivalent rates for income

o  ~2/3 of the increase in H1 2019 related to underlying asset growth and ~1/3 related to market risk seasonality and IFRS 16

o  Organic and inorganic optimisation initiatives support expectation that income growth will exceed RWA growth over time

  • CET1 ratio of 13.5% is in the middle of the 13-14% target range

o  In the first half higher RWAs were funded by underlying profit attributable to ordinary shareholders

o  CET1 ratio is stated after deducting 39bps for the full impact of the $1bn share buy-back programme

o  Regulatory provisions and tax in relation to corporate entity restructuring reduced the ratio by 15bps