Standard Chartered PLC (LON:STAN) today released its results for the six months ended 30 June 2018. All figures are presented on an underlying basis and comparisons are made to the equivalent period in 2017 unless otherwise stated. A reconciliation between statutory and underlying results is set out on page 87 of the 2018 half year report.
Standard Chartered, Bill Winters, Group Chief Executive commented:
“The Group performed steadily in the first half with encouraging progress on several fronts. Income from key areas of focus continues to grow strongly, we are investing in exciting new initiatives, and our strengthened risk discipline is paying off. Our return on equity improved to 6.7 per cent as a result, reinforcing our confidence that we will exceed 8 per cent in the medium term and underpinning the Board’s decision to resume the interim dividend”
Financial performance for the first half of the year
· Significant improvement in profitability reflects further progress on the path to higher returns
o Underlying profit before tax of $2.4bn was up 23% with broad-based improvement by client segment and region
o Statutory profit before tax of $2.3bn is stated after restructuring and other items and was 34% higher
o RoE improved 150 basis points to 6.7% and RoTE improved 170 basis points to 7.5%
· Operating income of $7.6bn was up 6% in line with medium-term guidance of 5-7% CAGR
o Areas of differentiated strength including Wealth Management and Transaction Banking grew 14%
o Income net of impairment was 11% higher driven by a continued focus on higher quality origination
o Net interest income increased 10% and the net interest margin improved 4 basis points to 1.59%
· Operating expenses rose 7% to $5.1bn as the Group prioritised investment to improve the business
o The four-year $2.9bn gross cost efficiency target was achieved six months ahead of plan
o Cash investments of $660m were 10% higher with an increased proportion on strategic initiatives
o Other operating expenses were up 7% reflecting a more even phasing of investments than in 2017
o Regulatory costs were 9% lower half-on-half as several large programmes were implemented in 2017
o Operating expenses ex-UK bank levy in H2 2018 are expected to be similar to H1 2018
· Asset quality improved due to a continued focus on better quality origination within a more granular risk appetite
o Credit impairment of $293m was 50% lower year-on-year and 53% lower half-on-half
o Significant improvements in CIB and RB more than offset higher impairment in CB
· Basic earnings per share increased from 34.4 cents to 44.9 cents
· Interim dividend resumed at 6 cents per share reflecting improved financial performance and strong capital
· The UK bank levy is charged in December and is estimated to be around $310m
Balance sheet and capital
· Capital and liquidity ratios remain strong
o CET1 ratio increased 60 basis points to 14.2%
o Liquidity coverage ratio 151% with a prudent surplus to regulatory requirements
· Strong and broad-based growth in client assets and client liabilities
Summary and outlook
· We are building for the long term to create a differentiated proposition for all our stakeholders
· Income growth was in line with 5-7% medium-term guidance and higher where we have prioritised investments
· We are investing more into exciting new growth and digital initiatives and this investment is more evenly phased
· We continue to expect that expenses will grow below inflation over the medium term
· Organic capital generation and improved credit quality is increasing our resilience to shocks
· Geopolitical uncertainties persist but the macroeconomic environment is supported by solid growth fundamentals
· We remain confident the strategy will deliver a return on equity greater than 8% in the medium term
