Standard Chartered PLC (LON:STAN) today released its results for the year and quarter ended 31 December 2019. All figures are presented on an underlying basis and comparisons are made to the full-year 2018 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items that have been excluded from underlying results is set out on page 59 of the Annual Report.
Progress in 2019 on strategic priorities
· Deliver our network: income from corporate and institutional clients using our international network grew 6%
· Grow our affluent business: income from Premium, Priority and Private Banking clients increased 6%
· Optimise low-returning markets: aggregate profit before tax in India, Indonesia, Korea and UAE improved 10%
· Improve productivity: income per full-time employee increased 5%; Hong Kong liquidity hub is delivering benefits
· Transform and disrupt with digital: beta-testing virtual bank in Hong Kong; digital banks in nine African markets
· Drive sustainability: taking bold and ambitious actions to lead the way on global sustainability issues
Progress in 2019 on financial framework
· Return on tangible equity up 130bps to 6.4%
o Underlying profit before tax up 8% to $4.2bn
o Statutory profit before tax up 46% to $3.7bn
· Income up 2% to $15.3bn; up 4% on a constant currency basis
o Up 5% at constant currency excluding $(177)m movement in Debit Valuation Adjustment (DVA)
o 4Q’19 income flat YoY; up 1% at constant currency and up 4% excluding $(118)m movement in DVA
o 4Q’19 momentum continued into January 2020
· Costs (excluding the UK bank levy) down 1% at $10.1bn; up 1% on a constant currency basis
o Positive income-to-cost jaws of 3%; cost-to-income ratio (excluding UK bank levy) improved 2% to 66%
· Capital
o Common equity tier 1 ratio remains within 13-14% target range at 13.8%: up 28bps since 3Q’19
o Proposed $0.5bn share buy-back will reduce the CET1 ratio by ~20bps
o Proposed final ordinary dividend per share of 20c will result in full-year dividend of 27c, up 29%
o Risk-weighted assets of $264bn up $6bn or 2%; down $5bn since 3Q’19
Other financial highlights in 2019
· Pre-provision operating profit up 8% to $4.9bn
· Earnings per share up 14c or 23% to 75.7c
· Asset quality remains stable; credit impairment up $166m remains at an historically low level:
o Stage 1 and 2 impairment increase of $275m including impact of deteriorating macroeconomic variables
o Stage 3 impairment reduction of $109m: stage 3 loans down 50bps to 2.7% of total, lowest level since 2014
· Average interest-earning assets up 4% to $495bn; gross yield up 16bps to 3.34%
· Average interest-bearing liabilities up 3% to $445bn; rate paid up 27bps to 1.92%
· Net interest margin down 7bps to 1.62%
Outlook
The underlying momentum in the fourth quarter of 2019 continued in the opening weeks of 2020 but lower interest rates, slower global economic growth, a softer Hong Kong economy and the impact of the recent novel coronavirus outbreak will likely result in income growth in 2020 below our medium-term 5-7% target range. These headwinds are expected to be transitory, but we now believe it will take longer to achieve our RoTE target of 10% than we previously envisaged.
We have improved our RoTE every year since 2015 and we are focused on doing so again in 2020 through a combination of positive income-to-cost jaws and continued discipline on returning surplus capital to shareholders. The Board has authorised the purchase and cancellation of up to $0.5bn worth of shares starting shortly and will review the potential for making a further capital return upon the completion of the Permata sale.
“Discipline on the things we control and a sharp focus on where we are differentiated enabled us to grow underlying profit 8% and improve earnings per share by 23% in 2019, despite an increasingly challenging external environment. We are in the right markets guided by the right strategy and united through our purpose to drive commerce and prosperity. I am confident that we have set ourselves up for lasting success.”
Bill Winters, Standard Chartered Group Chief Executive
