Standard Chartered (LON:STAN) released 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.
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%
o Underlying profit before tax up 16% to $1.2bn
o Statutory profit before tax up 4% to $1.1bn
· Income up 7% to $4.0bn; up 8% on a constant currency basis
o Broad-based growth across all segments and regions
o Particularly strong performance in Corporate & Institutional Banking up 13% and Private Banking up 14%
o Europe & Americas grew 19% and ASEAN & South Asia was up 13%
o 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
o Significantly positive income-to-cost jaws both in 3Q’19 and year-to-date
o Costs in 2H’19 will be slightly higher than in 1H’19 due to investment phasing; so 4Q’19 will exceed 3Q’19
o Costs in FY’19 excluding the UK bank levy are expected to grow below the rate of inflation
· Capital
o Completed $1bn buy-back: 116m shares acquired and cancelled reducing total issued share capital by 3.5%
o 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%
o 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
o Higher stage 3 credit impairment from a small number of unconnected corporate exposures
o 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.
“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.”
Bill Winters, Standard Chartered Chief Executive
