Standard Chartered PLC (LON:STAN) has announced its third quarter 2021 performance highlights.
All figures are presented on an underlying basis and comparisons are made to the third quarter 2020 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items excluded from underlying results is set out on pages 25-30.
Bill Winters, Standard Chartered Group Chief Executive, said:
“We delivered a return to top-line growth in the third quarter and achieved further progress against our strategic priorities, with strong performance in our Financial Markets and Trade businesses and ongoing positive momentum in Wealth Management. We continue to transform how we serve our customers in the world’s most dynamic markets through innovation, partnerships and new ventures. Last week, we were also pleased to deliver on our sustainability commitment to set out a clear path to achieve net zero by 2050.”
Update on strategic priorities
• Primary performance measure return on tangible equity improved 270bps to 7.1%
• Continued good progress on strategic priorities
– Network: The proportion of digital transactions in our Corporate, Commercial & Institutional business is up 9%pts in 2021 to 50%
– Sustainability: Year-to-date Sustainable Finance income has more than doubled YoY
– Affluent: Net New Money of $11bn for the first nine months of the year, more than 70% higher YoY,
– Mass retail: Continued growth in sales executed digitally by our clients, up 7%pts in 2021 to 76%
Selected information concerning financial performance (3Q’21 unless otherwise stated)
• Income 7% higher at $3.8bn, up 5% at constant currency (ccy) and excluding normalisation adjustments
– Trade income up 13% at ccy and excluding normalising adjustments, the strongest quarter since 1Q’18
– Strong performance in Financial Markets, up 4% at ccy and excluding normalising adjustments
– Wealth Management ex-Bancassurance up 3% and up 18% YoY for the nine months to September
– Net interest margin (NIM) in 3Q’21 of 1.23%, up 1bp on 2Q’21, benefiting from a 7bps or $96m IFRS9 interest income adjustment
• Expenses increased 5% to $2.6bn, up 3% at ccy, and flat compared to 2Q’21
– Positive income-to-cost jaws of 3% at ccy excluding DVA
• Credit impairment of $107m, down $246m YoY; up $174m QoQ
– CCIB $24m, with no significant new exposures in 3Q’21 and a small reduction in management overlay from $170m to $166m
– CPBB $74m, with no change in management overlay remaining stable at $140m
– High-risk assets: reduced for the fifth consecutive quarter in 3Q’21, down $1.5bn in the quarter and down $6.1bn YoY
• Underlying profit before tax up 44% to $1.1bn; statutory profit before tax up 129% to $1.0bn
• Tax charge of $229m: underlying year-to-date effective tax rate of 23.5% down 7.8%pts due to change in geographic mix and higher profits diluting the impact of non-deductible costs
• Earnings per share increased 9.5 cents or 70% to 23.1 cents
• The Group’s balance sheet continues to grow and remains strong, liquid and well diversified
– Customer loans and advances up 2% or $4bn since 30.06.21 and up 7% since 31.12.20
– Advances-to-deposit ratio 61.9% (30.06.21: 64.0%); liquidity coverage ratio 145% (30.06.21: 146%)
• Risk-weighted assets (RWA) of $268bn down 5% or $13bn since 30.06.21 and broadly flat to 31.12.20
– Credit RWA down $10bn in 3Q’21: asset growth offset by model changes, improvement in asset quality, asset mix changes and FX
– Market risk RWA down $3bn in 3Q’21: reduced charges for Internal Models Approach (IMA) risks not in Value at Risk (VaR)
• The Group remains strongly capitalised
– Common equity tier 1 (CET 1) ratio 14.6% (30.06.21: 14.1%), above the 13-14% target range; includes 34 bps software relief which will cease from 01.01.2022
– An update on capital management actions will be provided at FY’21 results
Outlook
The economic recovery from the COVID-19 pandemic has continued to be uneven and punctuated by supply-chain disruption. However, we are encouraged by robust levels of export growth across many of our markets in Asia. Against this backdrop:
• We continue to expect FY’21 income to be similar to that achieved in FY’20 on a constant currency basis, with 4Q’21 being sequentially lower, reflecting seasonality comparable to prior years, and normalising for the IFRS9 interest income adjustment. Strong underlying business momentum throughout 2021 should enable income growth to return to our 5-7% guidance range from FY’22
• We continue to expect FY’21 operating expenses, including the impact of currency translation and performance-related pay, to be at or below $10.4bn
• Excluding the impact of any unforeseeable events, we expect credit impairment to remain at low levels in 4Q’21
• Standard Chartered expect FY’21 CET1 to be around the top of the 13-14% target range on a pro-forma basis, excluding software relief
