Standard Chartered PLC (LON:STAN) today released its Interim Management Statement for the quarter ended 31 March 2019. All figures are presented on an underlying basis and comparisons are made to the equivalent period in 2018 unless otherwise stated.
Commenting on the first quarter performance, Bill Winters, Group Chief Executive, said:
“The first quarter demonstrated our determination to deliver the refreshed strategic priorities at pace. We announced a number of digital initiatives across Hong Kong, Africa and India aimed at growing our customer base and enhancing our services. Our first quarter profit supports our belief that we will generate full-year returns of at least 10% by 2021. The resolution of our legacy conduct and control issues means we can now manage our capital position more dynamically. We will maintain our strategic investment programme and start to buy back $1 billion of our shares, reflecting our confidence in our ability to execute the strategy and create long-term shareholder value.”
Strategic execution and outlook
· Regulatory approval received to start buying back shares for up to $1bn
· Majority shareholder in one of the first three consortiums granted a virtual bank license in Hong Kong
· Resolved legacy conduct and control issues including the termination of all compliance monitorships
· Sentiment in our markets is showing signs of improvement
First quarter financial performance highlights
· Underlying profit before tax of $1.4bn up 10%; or up 12% on a constant currency basis
· Statutory profit before tax of $1.2bn up 5%; or up 7% on a constant currency basis
o Further and final charge of $186m to resolve all material legacy conduct and control issues
o Net credit of $44m in restructuring and other items primarily related to Principal Finance revaluations
· Operating income of $3.8bn down 2%; or up 2% on a constant currency basis
o Solid performance in conditions less buoyant than at the start of Q1 2018
o FM income rose 3% despite a $77m negative movement in DVA; excluding DVA income was up 14%
o TB income was 5% higher resulting from a strong performance in Cash Management
o WM income was 14% lower in a less favourable market environment; significant underlying improvement QoQ
o Income in the AME region grew 4%, having contracted by 6% in 2018
o Net interest margin of 1.56% down 1bps QoQ largely as a result of adopting IFRS 16
· Operating expenses down 2% to $2.4bn; or up 1% on a constant currency basis
o Positive income-to-cost jaws on both a reported and a constant currency basis
· Asset quality overall has improved YoY and remained stable in the first quarter
o Credit impairment more than halved to $78m having benefited from a $48m release in Private Banking
o Underlying credit metrics continued to improve and stage 3 assets reduced 1% in the quarter
· RoTE improved 100bps to 9.6%; benefiting from the absence of the UK bank levy that is charged in the fourth quarter
Balance sheet and capital
· Average interest-earning assets were 5% higher
o Growth in loans and advances to customers and increased trading book assets to support client demand
· Average interest-bearing liabilities were 5% higher
o Driven by higher customer account balances and client demand for repurchase agreements
· CET1 ratio down 30bps since 31 December 2018 to 13.9% before the impact of the proposed buy-back
o Profits generated in the period net of dividends were offset by higher RWAs
o Resolution of legacy conduct and control issues reduced retained earnings by $186m; equivalent to 7bps of CET1
o RWAs up $9.9bn: ~2/3 related to underlying asset growth and ~1/3 market risk seasonality and IFRS 16
o The $1bn share buy-back programme is expected to reduce the CET1 ratio in Q2 by ~35bps
