TIDMSTAN
RNS Number : 3853D
Standard Chartered PLC
26 April 2017
26 April 2017
Standard Chartered PLC - Interim Management Statement
Standard Chartered PLC (the Group) today releases its Interim
Management Statement for the quarter ended 31 March 2017. All
figures are presented on an underlying basis unless otherwise
stated.
Commenting on the first quarter performance, Bill Winters, Group
Chief Executive, said:
"We are making good progress improving the performance of the
Group. The significantly increased profit before tax results from
particularly low loan impairment and our focus on cost control.
Competition in our markets remains intense but our investments in
the business and focus on our clients is making us more competitive
and will enable us to deliver sustainable income growth over
time."
First quarter financial performance highlights
-- Income of $3.6 billion was up 8 per cent year-on-year or 4
per cent excluding prior year Principal Finance losses
-- Expenses of $2.4 billion were well controlled and consistent
with the run-rate seen in 2016 as a whole
-- Loan impairment of $198 million was particularly low, down 58 per cent year-on-year
-- Profit before tax of $1.0 billion was up 94 per cent
year-on-year or 26 per cent excluding Principal Finance
-- After restructuring charges of $55 million, statutory profit
before tax was $1.0 billion (Q1 2016: $0.5 billion)
Resilient balance sheet and strong capital
-- Net loans and advances to customers were up 5 per cent from
the end of the year to $270 billion
-- Customer accounts were up 5 per cent in the quarter to $398 billion
-- The advances-to-deposits ratio was 67.8 per cent at the end of the quarter
-- The Group already meets its expected minimum requirement for
own funds and eligible liabilities (MREL) for 2022
-- Common Equity Tier 1 ratio of 13.8 per cent was up 20 basis points since the end of 2016
-- The Group issued $1 billion of Additional Tier 1 capital in January 2017
Summary and outlook
-- Higher profit before tax was the result of particularly low
loan impairment and good cost control
-- Actions are underway to sustainably improve income trends
-- Gross cost efficiencies are continuing to create investment capacity
-- Overall credit quality remained stable though stresses remain
in certain parts of the portfolio
-- Competition in our markets remains intense but the Group
continues to invest to create opportunities for growth
Performance summary Q1 17 Q1 17
vs vs
3 months 3 months 3 months
ended ended ended Q1 Q4 16
31.03.16 31.12.16 31.03.17 16 Better/ Better/
$million $million $million(1) (Worse) (Worse)
------------------------------ --------- --------- ------------ ------------- ---------
Operating income 3,345 3,533 3,608 8% 2%
Other operating expenses (2,006) (2,368) (2,069) (3%) 13%
Regulatory costs (243) (303) (309) (27%) (2%)
UK Bank levy - (383) - nm nm
Operating profit before
impairment and tax 1,096 479 1,230 12% 157%
Impairment losses on
loans and advances and
other credit risk provisions (471) (690) (198) 58% 71%
Other impairment (123) (106) (53) 57% 50%
Profit/(loss) from associates
and joint ventures 37 (42) 66 78% nm
------------------------------ --------- --------- ------------ ------------- ---------
Underlying profit/(loss)
before taxation 539 (359) 1,045 94% nm
Restructuring (123) (599) (55) 55% 91%
Other items 84 87 - nm nm
------------------------------ --------- --------- ------------ ------------- ---------
Statutory profit/(loss)
before taxation 500 (871) 990 98% nm
------------------------------ --------- --------- ------------ ------------- ---------
(1) In 2016 the Group decided to exit Principal Finance and
consequently from 1 January 2017 gains and losses are treated as
restructuring and excluded from the Group's underlying
performance
Income of $3.6 billion was 8 per cent higher year-on-year or 4
per cent higher excluding Principal Finance losses in the first
quarter of 2016. Income was up 2 per cent quarter-on-quarter
reflecting higher income from Asset and Liability Management partly
offset by the timing of Corporate Finance transactions and weaker
Foreign Exchange income.
Other operating expenses were up 3 per cent year-on-year
demonstrating our strong focus on cost control. Regulatory costs
were up 27 per cent year-on-year and 2 per cent quarter-on-quarter.
The Group is on track to deliver an additional $1.1 billion in
planned gross costs efficiencies by the end of 2018 that will fund
further investment to create opportunities for growth with clients
and to enhance the Group's controls and compliance
infrastructure.
Loan impairment of $198 million was 58 per cent lower than in
the same period last year and 71 per cent lower than in the
previous quarter. Lower Corporate & Institutional Banking and
Commercial Banking loan impairment reflected in part the non-repeat
of provisions taken against the diamonds and jewellery sector in
the fourth quarter of 2016. Retail Banking loan impairment was
lower than the run-rate seen in the second half of 2016. While
overall credit quality has improved compared to the same period
last year, loan impairments were unusually low and we remain
cautious about credit conditions in our markets.
Other impairment of $53 million excludes Principal Finance
losses and as a result was lower by $70 million year-on-year and
around half the level seen in the fourth quarter of 2016.
Profit from associates and joint ventures of $66 million was
higher both year-on-year and quarter-on-quarter in part driven by
an improvement in the performance of the Group's joint venture in
Indonesia, reflecting actions taken there to stabilise the
business.
As a result, underlying profit before tax of $1.0 billion was 94
per cent higher year-on-year or 26 per cent higher excluding
Principal Finance.
Statutory profit before tax of $1.0 billion included
restructuring charges of $55 million relating primarily to
Principal Finance losses. This takes total restructuring charges
since the announcement of our strategic review in November 2015 to
$2.8 billion.
Underlying client segment Q1 17
income vs
Q4 16
3 months 3 months 3 months
ended ended ended
31.03.16 31.12.16 31.03.17 Better/
Q1 17
vs Q1
16 Better/
$million $million $million (Worse) (Worse)
---------- --------- --------- ------------ ---------
Corporate & Institutional
Banking 1,554 1,729 1,623 4% (6%)
Retail Banking 1,151 1,167 1,174 2% 1%
Commercial Banking 348 305 327 (6%) 7%
Private Banking 115 110 117 2% 6%
Central & other items 177 222 367 107% 65%
-------------------------- ---------- --------- --------- ------------ ---------
Total operating income 3,345 3,533 3,608 8% 2%
-------------------------- ---------- --------- --------- ------------ ---------
Corporate & Institutional Banking income of $1.6 billion was
4 per cent higher year-on-year and 6 per cent lower
quarter-on-quarter. Excluding Principal Finance losses, income was
4 per cent and 7 per cent lower respectively. Balance sheet
momentum in the first quarter was more than offset by lower
Corporate Finance income and a decline in Foreign Exchange income
that resulted from lower volatility.
Retail Banking income of $1.2 billion was up 2 per cent
year-on-year and 1 per cent quarter-on-quarter. Asset margin
compression and lower income from Credit Cards and Personal Loans
in part due to seasonally lower balances was offset by higher
income from Wealth Management and Deposits, particularly in Hong
Kong, resulting from an increase in the proportion of Priority
clients.
Commercial Banking income of $327 million was 6 per cent lower
year-on-year as increases in liability margins and balances was
offset by lower asset margins and balances and a decline in Foreign
Exchange income. Income was 7 per cent higher compared to the
fourth quarter of 2016 following improvement in Foreign Exchange
income.
Private Banking income of $117 million was 2 per cent higher
year-on-year and 6 per cent higher compared to the fourth quarter
of 2016. Increases in Deposit margins and higher sales of treasury
products in Wealth Management in the first quarter offset lower
lending balances and margins following actions taken to improve the
risk profile of the segment during 2016. There has been early
momentum in 2017 with $0.9 billion of net new money added in the
first quarter.
Included within Central & other items is income from Asset
and Liability Management which was $99 million higher year-on-year
and $176 million higher quarter-on-quarter. This resulted from
gains in favourable market conditions in India and Hong Kong.
Underlying geographic Q1 17
region income vs
3 months 3 months 3 months
ended ended ended
31.03.16 31.12.16 31.03.17 Q4 16
Q1 17
vs Q1
16 Better/ Better/
$million $million $million (Worse) (Worse)
---------- --------- --------- ------------ ---------
Greater China & North
Asia 1,274 1,329 1,381 8% 4%
ASEAN & South Asia 1,043 993 1,002 (4%) 1%
Africa & Middle East 709 653 686 (3%) 5%
Europe & Americas 391 464 435 11% (6%)
Central & other items (72) 94 104 nm 11%
----------------------- ---------- --------- --------- ------------ ---------
Total operating income 3,345 3,533 3,608 8% 2%
----------------------- ---------- --------- --------- ------------ ---------
Income from Greater China & North Asia of $1.4 billion was 8
per cent higher year-on-year and 4 per cent higher
quarter-on-quarter. Growth in Retail Banking and Private Banking
was driven by Hong Kong and continued momentum in Wealth Management
and Deposits, which offset margin compression and seasonally lower
balances in Credit Cards and Personal Loans. In Corporate &
Institutional Banking improvement in Financial Markets and higher
Cash Management margins was offset by lower income from Corporate
Finance. The region benefited from higher quarter-on-quarter income
from Asset and Liability Management in favourable market
conditions.
Income from ASEAN & South Asia of $1 billion declined 4 per
cent year-on-year and was 1 per cent higher quarter-on-quarter.
Corporate & Institutional Banking was impacted by lower
Corporate Finance income and Retail Banking income was lower
following recent and planned business exits in the Philippines and
Thailand. This was offset by higher Asset and Liability Management
income.
Income from Africa & Middle East of $686 million was 3 per
cent lower year-on-year impacted by local currency depreciation in
Africa and lower Financial Markets income in the Middle East, which
was only partly offset by improved margins and higher balances in
Cash Management. Income improved 5 per cent compared to the fourth
quarter of 2016 due to better performance in Wealth Management and
Financial Markets.
Europe & Americas is a significant contributor to the
Group's Corporate & Institutional Banking network business.
Income of $435 million was up 11 per cent year-on-year driven by
higher Cash Management balances and improved margins. Compared to
the fourth quarter of 2016, income was down 6 per cent due to lower
income from Foreign Exchange and Corporate Finance.
Income from Central & other items of $104 million was higher
both year-on-year and quarter-on-quarter benefiting from the
non-repeat of fair valuation losses on private equity investments
that are part of Principal Finance.
Asset quality
31.12.16 31.03.17
Ongoing Liquidation Ongoing Liquidation
business portfolio Total business portfolio Total
$million $million $million $million $million $million
Loans and advances
Gross loans and advances
to customers 258,396 3,854 262,250 272,287 3,768 276,055
Net loans and advances
to customers 254,463 1,433 255,896 268,349 1,391 269,740
---------------------------- ---------- ------------ ----------- --------- ----------- ----------
Credit quality
Gross non-performing
loans 5,880 3,807 9,687 6,145 3,724 9,869
Individual impairment
provisions (3,355) (2,421) (5,776) (3,354) (2,377) (5,731)
---------------------------- ---------- ------------ ----------- --------- ----------- ----------
Net non performing
loans 2,525 1,386 3,911 2,791 1,347 4,138
---------------------------- ---------- ------------ ----------- --------- ----------- ----------
Credit grade 12 accounts(1) 1,499 22 1,521 1,164 20 1,184
Cover ratio(2) 69% 64% 67% 66% 64% 65%
Cover ratio (after
collateral)(3) 73% 80% 76% 72% 79% 75%
Risk-weighted assets 265,637 3,808 269,445 269,536 3,767 273,303
---------------------------- ---------- ------------ ----------- --------- ----------- ----------
(1) Includes Corporate & Institutional Banking, Commercial
Banking and Central & other items
(2) Including portfolio impairment provision
(3) Excluding portfolio impairment provision
Credit quality for the Group overall has remained broadly stable
though stresses remain in certain parts of the portfolio.
Gross non-performing loans in the ongoing business increased by
$265 million since 31 December 2016 to $6.1 billion while credit
grade 12 accounts were lower by $335 million. This followed the
downgrade of a small number of Corporate & Institutional
Banking clients and reflects continued challenging conditions. The
cover ratio of non-performing loans fell from 69 per cent to 66 per
cent but remained broadly stable after including collateral.
The credit quality of exposures in the liquidation portfolio
remained stable.
Balance sheet, capital and leverage 31.12.16 31.03.17
Increase
$million $million / (Decrease)
--------- --------------
Balance sheet
Net loans and advances to customers 255,896 269,740 13,844
Customer accounts 378,302 397,564 19,262
Advances-to-deposits ratio 67.6 67.8
Capital
Common equity tier 1 ratio 13.6% 13.8% 20bps
Risk-weighted assets 269,445 273,303 3,858
Leverage
Leverage ratio 6.0% 5.9% (10)bps
Further details on Capital and Leverage are contained in the
Group's Pillar 3 Disclosures
The Group's balance sheet remains strong, liquid and is becoming
increasingly diverse.
Net loans and advances to customers were up 5 per cent since 31
December 2016 to $270 billion driven mostly by momentum in
Corporate Finance and Mortgages. Customer deposits of $398 billion
were also up 5 per cent as the Group continued to focus on
gathering high quality client operating accounts.
As a result, the Group's advances-to-deposits ratio was 67.8 per
cent at the end of the first quarter compared to 67.6 per cent as
at 31 December 2016.
The Group's Common Equity Tier 1 ratio of 13.8 per cent was 20
basis points higher than at 31 December 2016 largely reflecting
profits for the period and currency translation. There remain a
number of capital uncertainties including the eventual outcome of
regulatory reforms to finalise banks' capital requirements.
The Group remains active in debt capital markets having issued
$1 billion of Additional Tier 1 capital in the quarter.
The Bank of England has confirmed the Group's non-binding
indicative minimum requirement for own funds and eligible
liabilities (MREL) will be 21.6 per cent of risk-weighted assets
(RWA) from 1 January 2022. The combined buffer is expected to be
additive. The Group estimated its MREL position to be over 26 per
cent of RWA as at 31 December 2016.
Summary and outlook
The Group's improved profitability in the first quarter is the
result of particularly low loan impairment and a continuing focus
on cost control. Competition remains intense in many of our markets
but the Group continues to see opportunities with its clients, is
investing in areas of competitive strength, and remains focused on
delivering sustainable growth in income.
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 for the last seven
quarters
By client segment Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2015 2016 2016 2016 2016 2017
-------------------------- --------- -------- ----------- ----------- --------- --------- ---------
$million $million $million(1) $million(1) $million $million $million
-------------------------- --------- -------- ----------- ----------- --------- --------- ---------
Corporate & Institutional
Banking 1,725 1,513 1,554 1,593 1,596 1,729 1,623
Retail Banking 1,199 1,166 1,151 1,165 1,186 1,167 1,174
Commercial Banking 377 309 348 319 323 305 327
Private Banking 127 117 115 146 125 110 117
Central & other items 254 157 177 242 235 222 367
---------
Total operating income 3,682 3,262 3,345 3,465 3,465 3,533 3,608
-------------------------- --------- -------- ----------- ----------- --------- --------- ---------
(1) Corporate & Institutional Banking and Commercial Banking
income has been restated by $30 million to correctly reflect the
allocation of Principal Finance losses in Q1 2016
By geographic region Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2015 2016 2016 2016 2016 2017
----------------------- --------- -------- -------- -------- --------- --------- ---------
$million $million $million $million $million $million $million
----------------------- --------- -------- -------- -------- --------- --------- ---------
Greater China & North
Asia 1,391 1,298 1,274 1,277 1,310 1,329 1,381
ASEAN & South Asia 1,116 937 1,043 1,011 1,005 993 1,002
Africa & Middle East 667 638 709 711 669 653 686
Europe & Americas 439 452 391 426 383 464 435
Central & other items 69 (63) (72) 40 98 94 104
---------
Total operating income 3,682 3,262 3,345 3,465 3,465 3,533 3,608
----------------------- --------- -------- -------- -------- --------- --------- ---------
By product Q4 Q1 Q2 Q3 Q4 Q1
Q3 2015 2015 2016 2016 2016 2016 2017
-------------------------- -------- -------- -------- -------- --------- --------- ---------
$million $million $million $million $million $million $million
-------------------------- -------- -------- -------- -------- --------- --------- ---------
Transaction Banking 800 733 716 702 722 744 785
-------- -------- -------- -------- --------- --------- ---------
Trade 363 314 305 299 300 295 297
Cash Management
and Custody 437 419 411 403 422 449 488
-------- -------- -------- -------- --------- --------- ---------
Financial Markets 622 582 697 642 714 676 626
-------- -------- -------- -------- --------- --------- ---------
Foreign Exchange 361 281 365 264 249 272 225
Rates 180 106 169 174 187 147 162
Commodities 61 50 44 34 59 53 48
Credit and Capital
Markets 72 81 75 80 112 97 119
Other Financial
Markets (52) 64 44 90 107 107 72
-------- -------- -------- -------- --------- --------- ---------
Corporate Finance 517 459 470 474 421 532 447
Wealth Management 375 364 349 370 387 377 421
Retail Products 952 915 915 918 925 900 871
-------- -------- -------- -------- --------- --------- ---------
CCPL and other unsecured
lending 443 417 403 390 394 370 344
Deposits 291 283 301 327 333 326 346
Mortgage and Auto 199 197 193 183 178 185 164
Other Retail Products 19 18 18 18 20 19 17
-------- -------- -------- -------- --------- --------- ---------
Asset and Liability
Management 78 45 105 112 63 28 204
Lending and Portfolio
Management 180 134 150 130 93 103 95
Principal Finance(2) (17) (88) (130) (37) (30) (20) -
Other 175 118 73 154 170 193 159
-------------------------- -------- -------- -------- -------- --------- --------- ---------
Total operating income 3,682 3,262 3,345 3,465 3,465 3,533 3,608
-------------------------- -------- -------- -------- -------- --------- --------- ---------
(2) In 2016 the Group disclosed its decision to exit Principal
Finance and from 1 January 2017 gains and losses are treated as
restructuring and excluded from the Group's underlying
performance
Basis of presentation
This interim management statement covers the results of Standard
Chartered PLC together with its subsidiaries (the Group) as at and
for the three months ended 31 March 2017. Following the Group's
adoption of the IFRS 9 Financial Instruments requirement to reflect
changes in the value attributable to own credit on fair value
elected liabilities in other comprehensive income, the performance
summary table has been restated to remove OCA from the three months
ended 31 March 2016 and three months ended 31 December 2016.
The Group uses a number of alternative performance measures
including underlying earnings, credit grade 12 and cover ratio in
the discussion of its business performance and financial position.
These are defined as follows:
Restructuring and other items
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 performance period-by-period. These
adjustments are set out below.
3 months ended 3 months ended 3 months ended
31.03.16 31.12.16 31.03.17
Other Other Other
Restructuring items Restructuring items Restructuring items
$million $million $million $million $million $million
------------------------ ------------- ---------- ------------- ---------- ------------- ----------
Operating income - 84 (207) 253 (28) -
Operating expenses - - (211) - (40) -
Operating profit before
impairment and tax - 84 (418) 253 (68) -
Impairment losses
on loans and advances
and other credit risk
provisions (107) - (102) - (5) -
Other impairment (16) - (17) (166) - -
(Loss)/profit from
associates and joint
ventures - - (62) - 18 -
------------------------ ------------- ---------- ------------- ---------- ------------- ----------
(Loss)/profit before
taxation (123) 84 (599) 87 (55) -
------------------------ ------------- ---------- ------------- ---------- ------------- ----------
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 loss of
principal or interest, and therefore interest on credit grade 12
accounts is taken to income. Further credit rating details are
provided on pages 142 to 143 and a credit quality mapping table is
provided on page 152 of the 2016 Annual Report.
Cover ratio
The cover ratio represents the extent to which non-performing
loans are covered by impairment allowances.
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.
Standard Chartered PLC LEI: U4LOSYZ7YG4W3S5F2G91
This information is provided by RNS
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END
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