Standard Chartered PLC (LON:STAN) today released its results for the year ended 31 December 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 246 of the 2018 full year report.
“We have made tremendous progress securing the foundations of the business since 2015, resulting in a third successive year of underlying profit growth. Our refreshed priorities announced today will help realise the true value of the franchise. We will measure this not only in monetary terms with double-digit equity returns and significant shareholder distributions targeted by 2021, but also in the positive impact to our clients, stakeholders and communities. We are determined to drive commerce and help our clients achieve prosperity, while doing everything that we can to make the world a cleaner, safer and more sustainable place”
Bill Winters, Group Chief Executive
Further significant improvement in returns
· Significant improvement in profitability driven by higher quality income growth with cost and asset origination discipline
· Operating income of $15.0bn was up 5%, with RWAs down 8%
o Broad-based by product, with Transaction Banking growing particularly strongly driven by Cash Management
o Wealth Management grew 3% but momentum slowed as sentiment weakened in the second half
o Strong performance in GCNA region; challenging conditions in AME region
o Net interest income increased 8% and the net interest margin improved 3 basis points to 1.58%
· Positive jaws: operating expenses ex-UK bank levy rose 2% to $10.1bn
o The Group has delivered $3.2bn in gross cost efficiencies, exceeding the target set in November 2015
o Cash investments of $1.6bn were up 9%, with the amount allocated to strategic initiatives trebling over the last three years
o The UK bank levy was $324m; in 2021 it will be chargeable on only the Group’s UK balance sheet
· Asset quality improved due to a continued focus on higher quality origination within a more granular risk appetite
o Credit impairment of $740m was 38% lower with significant improvements in CIB and RB
· Underlying profit before tax of $3.9bn was up 28% driven by the Group’s largest segments and regions
· Statutory profit before tax of $2.5bn is stated after provision for regulatory matters and restructuring and other items and was 6% higher
o The Group made a $900m provision in respect of legacy financial crime control matters and FX trading issues
o Restructuring and other items included Q4 charges of $158m following the announcement to sell Principal Finance and $169m related to the refreshed strategic priorities announced today
· RoE improved 110 basis points to 4.6% and RoTE improved 120 basis points to 5.1%
· Basic earnings per share increased 14.2 cents to 61.4 cents
· The Board has recommended a final dividend of 15 cents per ordinary share, up 36% from 11 cents in 2017
Stronger capital and more resilient balance sheet
· The CET1 ratio increased 60 basis points to 14.2%; above the Group’s updated target range of 13-14%
· Broad-based balance sheet growth: average customer assets and customer accounts were up 7% and 5% respectively
· Stronger balance sheet positions the Group for sustainable long-term growth while increasing resilience to shocks
Outlook
· Refreshed priorities announced separately today aimed at delivering significantly and sustainably higher returns
o Return on tangible equity targeted to be at least 10% by 2021
o We intend to distribute to shareholders surplus capital that is not deployed to fund additional growth
· Income compound annual growth rate target remains at 5-7%
o Solid start to 2019, although down slightly compared to 2018 due to stronger USD and buoyant conditions last year in WM and FM
· We are cautiously optimistic on the global macroeconomic environment
o But the range of possible outcomes is wider than it has been in a long time
