Standard Chartered PLC (STAN) Earnings Call Transcript & Summary

Good afternoon, everybody. Thank you for attending this session. Very happy today to be joined by Bill Winters, CEO of Standard Chartered. Thank you very much.

Nice to be here. Thank you.

Thank you for joining us. We're going to start off with a quick polling question as is traditional. So the question is, what is the biggest risk to Standard Chartered achieving its 2026 12% ROTE target? Is it, one, the impact of lower rates on NIM? Is it, two, delivery of wealth and financial markets revenues, especially on the noninterest income side? Is it, three, an overshoot on expenses? Or is it, four, the lower loan volumes? [Voting]

Delivery on noninterest income targets. Good. That's -- yes, I think as expected.

So thanks very much for joining us, Bill. And I'm going to start off just by asking you about today's or this morning's announcement, actually a bit of a restructuring announcement. So just wondering if you could talk about, from your point of view, what was the logic behind that? How does it fit into the overall structure?

Yes. I promise we didn't time our announcement for the Morgan Stanley conference. But it is something we've been working on and thinking about for some time. And sort of you went back to the questions that we asked ourselves over the past year or so around what are the things that are holding us back in terms of accelerating our growth. We feel that we're fundamentally in growth markets, we delivered good growth, we delivered good improvements in operating performance, but we're nowhere near what we would consider to be our potential or what we should be delivering in these markets. And a lot of what we hear internally, and this is all internal stuff, I will confess. Is it's just a little bit too hard to get things done inside Standard Chartered Bank. This is not unique to Standard Chartered Bank. I can tell you in 25 years, I heard the same thing at J.P. Morgan, but it means a little bit more in Standard Chartered. It actually is too difficult to get some things done. And we kind of broke that down into 3 sources of friction that slow us down. One is the -- call it, front office, back office divide. Do business managers really feel like they can control their own infrastructure? I'd say we've made a huge progress on that, but we're not fully done. And we launched the Fit-for-Growth program transformation. With that fundamental, let's get the front-to-back business process completely ironed out at this point in mind. Second is the first line, second line, or risk and compliance business. We're in a heavily regulated industry. In our distant past, we had -- I'll say distant because we're not talking a decade ago. We had risk and compliance issues. I think we've very substantially addressed those. But are we completely aligned in terms of being able to drive the kind of growth that we want to in our markets? There's always more that we could do. That was the second one. Neither of those are directly addressed through this reorganization. Most of that is addressed through the [ tapered ] growth program that we announced at the time that we announced our full year earnings. The third point of friction is country versus business. So we had a full-fledged matrix -- have had a full-fledged matrix with regional heads and business heads. At the top level, they work excellently together. As you got down into the organization, people got [indiscernible]. Again, you can't magic away a matrix. We will always have a matrix. Many of your organizations that have matrices, I always did. But we can make it less frictionful. And what I said to the team is we are going to set things up so that the people who are running the lines of business are also responsible for the countries. And we're not going to be organized with a big regional infrastructure, but the countries are going to be run by the people who are also running the businesses. And your business heads, and that is out to change the names, so sooner Roberto and Judy running the CCIB business jointly and the retail business, CPBB, you guys are responsible for understanding what goes on in the countries. Understanding what the nuances are, so that you'll adapt your business strategy to our local strategy. And your country heads are going to have to -- you'll be part of the business management teams and you'll influence the allocation of resources, the strategic priorities. You'll all be 1 team. You'll have 1 set of objectives, 1 set of resources, go for it and generate growth. So what -- I mean maybe you haven't seen what we said. Simon Cooper, who had been running our corporate bank, is leaving. He will be replaced by 2 people, Roberto Hoornweg, who has run financial markets, and Sunil Kaushal, who's a long time Standard Chartered professional who's been in many different roles, currently running the African-Middle East region. They'll co-run CCIB. Judy, she will continue to run CPV, which is retail. They will be in Dubai, Singapore and Hong Kong, respectively. Ben Hung, who has been our Head of Asia, will become President of International. He has been my key partner since I joined the bank. He will continue to be my key partner, and he'll make sure that we keep the balance right between the focus on business and the focus on the different countries, in addition to having a more substantial external profile. So that's the change. We did some other stuff, which is less directly impactful, but very important internally, which we could talk about, but I think you probably want to move on.

Perfect. Thank you. Maybe we can start off by talking about net interest income and the rate cycle. So I'd just be interested in your view on where we are in the rate cycle. I mean, obviously, at the top. But how quickly we go down and how far we go that? What are you doing to protect the bank as rates fall? And how confident are you on your ability to grow top line as rates fall?

Yes. My view -- our view on interest rates isn't fundamentally guiding the way that we structure the bank. I'll say, we've had the view for some time that will be higher for longer. I think that obviously, the market has reacted that way. But we clearly seem to be getting to the end of that higher for a longer period. Inflation does seem to be coming under control. In short, some exact in the shock, we would expect rates to sort of falling in the second half of the year. We introduced structural hedging late at Standard Chartered, put our initial structural hedges on a few years back. We topped that up with short-term hedges around the Ukraine war, which, with the benefit of hindsight, were perfectly badly timed, but have now rolled off entirely. So we're able to layer back in structural hedges, which we have been doing and we'll continue to do as we approach the, I think, the inevitable decrease in rates. So we'll have some buffer from our structural hedges. We've been totally transparent about those, and will continue to be. So you can all see the assessment there. But we'll still clearly be sensitive to lower rates. As a bank, we're roughly 50% NII, 50% non-NII. And as rates fall, we would expect that percentage to change as we have higher growth in the non-NII. See, that's the area of biggest skepticism, which is fair enough. And no doubt we'll have a chance to talk about both Wealth Management and FM that the 2 businesses that you called out in your question. But we're very confident that we can grow at the top end of our growth range for the group in FM and Wealth Management or above the top end. And we would expect NII to grow, but obviously less strongly. There's skepticism as well about, although apparently less so from your poll, about whether we can grow NII and decompose that into a few pieces. One is the structural hedges that we had on rolled off finally in the early part of this year, and that's a drag that's remote. So we have a tailwind into 2025 that's simply mathematical. From there, obviously, we'll have some benefit from structural hedge as rates decrease. But the only way for us to keep NII from dropping is to grow assets or to change the mix of assets into higher-yielding pool. There is skepticism, again, not reflected so much in the poll that we can do that because we have not grown assets recently. But we need to unpack that, because there a much more interesting story than that our asset growth has been 0-ish, plus or minus, a couple of percent. And the story is threefold. One is we've very aggressively optimized as the play term, but optimize in some cases, means cut. Lower returning assets in our corporate bank. A total of over $60 billion in the last 5 years, $24 billion in the last 2, against this $22 billion of guidance that we gave over 3 years -- just 2 years ago. So we've been very, very active in reducing low-returning RWAs, which obviously has the impact of reducing assets. It also has the impact of reducing NII. We do it because it increases our return on tangible equity and increases our ability to return capital to shareholders at what is an attractive price to be buying back stock. We've never done with the optimization, but we've gotten our return on risk-weighted assets from below 2% to well above 7%. And that optimization imperative is going to be less acute, but rather we can let the underlying organic growth, which has been there throughout, but it's been swamped by the optimization efforts, will allow the growth to come through. And we've also, I say, shifted the direction of travel in the bank to say, your job is not just to optimize the portfolio. Your job is to find attractive assets and put them on the books and run with them. And it will take some time to fully flesh that out, but we entered into a whole slew of new origination activities on the consumer side over the past 3 or 4 years. This kicked in last year, noticeably for the first time. That will accelerate. We're being very cautious about how we roll that out, but we don't want to overbake unsecured consumer credit. But that should be a steady source of some growth for us. As we sit here today, we're underweight. I'd say we're slightly underweight, China at commercial real estate, although we've marked it down almost completely. Relative to other banks, we're underweight. Relative to where we should have been, we're overweight, and that's a big screw up, that we should not have been in that position. But we've taken our medicine, and we have moved on. It's the only meaningful source of credit loss that we've had in the last 5 years. But no excuses for that one. Otherwise, though in the other hotspots, so commercial real estate in the rest of the world, leveraged finance, we're way underweight. And we're way underweight, in part, because of our natural footprint. In part because we have not been in the asset accumulating business, just trying to buy beta in a market that looks like it might generate returns. And so we're underweight. We've not taken any material losses, and we don't think that we will. Will there be opportunities for us to expand our client franchise in a way that we can offer a suite of services where assets are a part of that? Yes, there is. And we have the latitude to do that, at a time when many other banks don't. And we're taking advantage of that. In some cases, offer on that. In some cases, in partnership with third parties. And as we have on the retail side, we're very excited by the prospects so far. We're beginning to see some decent asset flows coming off those partnerships. We think they're very well positioned from a risk-versus-return trade-off perspective. And we'll continue to find new ways. The whole green space has been a tremendous source of business for us and $720 million of income last year, guiding for $1 billion next year. It's a kind of a commitment we made to ourselves with very little underlying asset growth because there's so much demand for these assets from institutional asset managers that we can just slow them through. Are there structures where we can actually accumulate some interesting assets ourselves? Yes, we think there are. So this is why we think we can get asset growth. Some of it higher yielding, to have the composition and mix offset what we expect to be the interest rate headwinds and grow NII. Sorry, long answer to short question.

Well, just following on from that. I mean, obviously, last year wasn't a great year either for market asset growth in Asia. I mean are you seeing sort of signs about picking up? Or what do you think needs to happen for that?

The other thing I left out of the diagnostic is that our mortgage market share in Hong Kong, in particular, has -- through our own actions, reduced substantially. So we've had negative growth in the Hong Kong mortgage market, which I can tell you, we had a substantial share in Hong Kong mortgages for a long time. We continue to have a very, very strong and relevant presence. The assets are unattractive for us to hold. And as a result, since we're optimizing our returns, we've been very happy to really only service clients where the mortgage is part of the broader client relationship. We're not originating mortgages for the sake of mortgages. Obviously, given the size of that market and the size of those assets on our balance sheet, has the effect of reducing, obviously, reducing loan growth, but also reducing NII. Again, it's absolutely return optimizing, and I think if there's one message that we've gotten very clearly for our shareholders is that you'd like to see our return on tangible equity go up. I would say we fully embrace that. And now the question, is that going to turn around the rate environment? And the answer is it probably will. Is it going to be a sea change overnight? No. I think there's a number of things that are suppressing the returns available on Hong Kong mortgages. One is a lack of demand, which has something to do with interest rates, it also has something to do with the fact that house prices have decompressed not enormously, but they definitely have. And there's some anxiety in the market around housing prices. Not material, certainly nothing close to what would give us credit concerns. But with lower rates and with the Hong Kong economy, that is actually kicking back in, not in a super exciting way but it's growing. And there's a bit of a wealth effect that could come through as equity markets normalize a bit. So I think there's a future in Hong Kong mortgages for sure, but it's probably not going to be the thing that drives our asset growth.

Okay. And Hong Kong corporate, they're now on Asia corporate generally?

Asia corporate, so I mean, trade is picking back up, which is encouraging. So we had really stagnant trade flows for a while, very low growth. Part of that was us. I think we needed to adjust our own mechanisms, including our internal transfer pricing. Part of that was the market, mostly the market. So I think trade will continue to grow. The green investments are growing extremely nicely. Infrastructure is growing very nicely. We've had some good asset growth around Chinese investments into ASEAN. So the whole China Plus One, which, as you know, is the most active capital flows around China Plus One are Chinese companies who are investing mostly in ASEAN, but in South Asia, to some extent; Africa, to a lesser extent; Middle East to an even lesser extent. And that's our sweet spot. When Chinese companies invest in Indonesia to build out their EV supply chain, they're highly likely to involve us because we're dealing with them on both sides and handle the FX. We're onshore and offshore in both markets, all that. So I think we'll see some reasonable asset growth coming in Asia as we have seen. But as I said, it was offset by the optimization efforts -- more than offset. I think the growth itself will become a little bit more apparent.

Okay. Perfect. Obviously, the question, and the polling said that noninterest income was the key point. And I think I'll quote you from the results meeting, which was the start of the year, being somewhere between pretty good and awesome. So now we're further into the quarter through Chinese New Year. Are we still between pretty good and awesome or?

Yes, it's a pretty wide channel. I can tell you, by design, it's a pretty wide channel. No, look, we saw good momentum at the end of last year in wealth. So we saw steady momentum over last year in new client numbers and net new money and implicitly, AUM, but most of the money was parked in deposits. Towards the end of the year, we saw that money being activated, and that has continued up to and including today. So that's a good trend back to what we would consider to be normal in terms of year-on-year growth. The financial markets is again, if you spent a little bit of time with our numbers, you've seen that a few years back, we started separating our FM results, client numbers into flow versus episodic. Flow being about 70% on average and not very volatile and growing at a nice, steady sort of growth rate in line with our overall group growth targets; and the episodic being very volatile between 0 and 50% of the total income. 2022 was a good episodic year. I hate to say that because what made it good was all the disaster around the war in Ukraine. '23 was a less good episodic year, which meant that our overall results were flat, slightly down year-on-year in FM. And as we come into 2023 -- 2024, sorry, we've got ongoing good growth in the flow business. And it's a moderately attractive trading environment as it were. And the deals are happening and events are happening in markets that are advantageous. So I can't narrow the range between pretty good and awesome other than to say that the things that caused me to strike that range in the first place have not changed.

Okay. If we just talk a little bit about some of those longer-term growth rates. I'm not stealing sort of near term, but can we just talk through some of the drivers? And let's start off maybe talking a little bit about the wealth management side. Can you talk a little bit about sort of how you see competition? Your competition in that space. Are we going to see wealth management fees as a percentage of AUM begin to return to pre-COVID levels? I mean, what are going to be the main drivers about that business?

Obviously, there's a few dynamics. On the tailwind side, there's been a steady flow of money that has moved internationally. Mainland China, interest of the region for sure. Hong Kong and Singapore, both benefiting from that. I'd say the rest of the flows have been as individual savers and I'm talking more mass affluent here than the ultrahigh-net worth, but it is mass affluent accumulate savings. They're aggregating into wealth hubs rather than limiting all of their exposure to local markets. So Indonesians, for example. For years, of course, there was a tax arbitrage for Indonesians to keep their money offshore. Post the tax amnesty in Indonesia 5 years back, there's no real tax or -- and of course, if it's dirty money, it was never going to touch our bank in the first place. So that's not what's driving the movement. What's driving the movement is you've got centers of excellence in Singapore, Hong Kong and Dubai that are definitely accumulating. Well, they accumulate talent, they accumulate wealth, they're nice places to visit for people who want to move around, et cetera. So that wealth demographic, the underlying wealth demographic is good itself. The migration of capital suits us very well because we've got strong positions in the big wealth centers. The headwinds have been, obviously, China and the equity market, which is billed over to others in the region, most notably Hong Kong, which has been a big incentive for Chinese savers and investors to keep their money on the sidelines, either because of the wealth effect or because they would have just lost confidence in the market. COVID, obviously, was a big impediment to money movements as well. So over 2022 and 2023, we had great client growth numbers. We had good AUM numbers. As I said, it was going into deposits. Market confidence is coming back. And I can now say I've been -- I mean, you guys know that I ran an investment bank until I came to Standard Chartered, so watched retail businesses a lot. I didn't know much about it. 9 years in, watching this business very carefully, I'd say I know something about retail. I'm not a retail guy, but I know something about it. And we've had 3 sort of major wealth compressions in my time in the bank. The first one was right when I arrived, China devalued the RMB. Everybody -- all of our clients had RMB carry trades on, which the guy carried out on and wealth income dropped by 40% on the back of that wealth effect. And it takes 6 months before clients reengage and 18 months before they're fully reengaged. I would say the clients in this cycle reengaged in the second half of last year. And I think it will be another year before they have fully reengaged. What does that mean? That means we'll go back on the path that we've been on, which is going from deposits to time deposits to bancassurance with low-risk underlyings, to government bonds or other fixed income funds, to slightly riskier credit funds to equity funds, and back into day trading or trading of equities and FX. And then what was just beginning before the music stopped last time, which was a move into alternatives and starting with private credit and then moving into private equity and other structured products. And we have not seen any material pickup in the illiquid reengagement as yet, but I'm pretty sure it will come. And as the third largest wealth manager in Asia, The only one that's of an architecture, we have a very good relationship with the big manufacturers. They like the fact that we don't compete with them on any of the products that they're creating. And they like the fact that we've got a supermarket with heavy curation approach to distribution. So a lot of the private credit, private equity and other large asset managers will co-create product that, obviously, is just a slight variation on their existing product, but suited to our customer base. And we're seeing now at the beginning of some real appetite to reintroduce illiquids, but in a liquid form that isn't something like BREIT, which set the market back a lot as a sensibly liquid product that became illiquid when Blackstone had to get that fund. They've now cleared the entire backlog of gated product, and the performance of the assets has been okay, all things -- given what the underlying is. And so I can see that moving back over the next 12 months into kind of full engagement. I see the medium to long term, I think, will be very, very interesting in Asia for illiquids. But it is a big cultural shift for the investor in Asia to have a meaningful part of their portfolio in illiquid product, and that obviously is the highest margin product for us as it is for the asset managers.

Yes. Okay. And I mean in terms of the financial markets business, that's obviously, there's many elements to that business. But again, what do you see as being the key driver of that noninterest income growth over the next year or 2?

We'll help you guys out a bit over the course of this year and into next year, breaking out the financial markets business. It's quite a large agglomeration right now. It's everything from capital markets to everything that we do in financing, syndicated financing and otherwise, together with all the conventional FICC-type businesses. So there's many strands to that FM growth. I'd say we've done a pretty good but not yet complete job of capturing the internal flows and really positioning ourselves for excellent customer service. So we have a very large cash management business. We have a large trade finance business. We have a large custody business. We have definitely invested in systems to make it easier for customers to execute their transactions in a one-stop shop. It's not complete. So we can continue to generate growth there. We capture a meaningful proportion of our retail customer flow to our own FX desk. We're very -- what's the word, very pure about making sure that we always focus on best execution anywhere where we've got a quasi-fiduciary role, which we treat retail that way. So there's no obligation to deal in house. What we want to do is make it easy and efficient for clients who prefer to execute that way. So we have more to go there. The second is, while we've got a pretty good market share in cash and trade with Asian domicile corporations, MNCs, we still have a relatively low market share with European, Americas and European customers. It's our fastest-growing region. European American customers are 1/3 of the origination, a little bit more than actually now, than 1/3 of the origination of our corporate bank. And this is because whether you're a West Coast company or a German engineering company, you're expanding internationally, and you're probably expanding disproportionately into the markets that we call home. And while we had, I would say, approximately 0 market share in U.S. tech into the rest of the world 10 years ago, we've now got a meaningful share of our income is coming from that client segment. It's still a small wallet share because the city banks and the JPMorgans and the Deutsche Banks or the HSBCs were very well embedded before we ever got around to this. So we can lament the fact that we've got a relatively low market share with American corporations. I don't -- I see that as a pure opportunity. We go to RFP after RFP after RFP. We win a disproportionate share of those RFPs because the products and services are very good. And I think that's a source of long-term growth. Where does that growth show up? Yes, it shows up in cash and trade directly. It shows up disproportionately in FM because that's where -- if you're a large mobile phone manufacturer in the U.S., you're thinking pretty hard about how you manage your currency risk in and out of China, in and out of India. These are our spots. We are really differentiated in those markets. And we don't have to get 100% market share. And of course, we don't get 100% market share. But if we get a meaningful market share, which we do, that is a very material increment to our growth. So when you look at that flow business, it's more clients, it's better penetration, better capture of internal flows, roughly in that order. The episodic, which is the stuff that everybody loves to not love because it's volatile and can't be forecasted, and ranges between 0 and 50% of our FM income, is very diverse. So I mean we talked a bit about this on the earnings call. What does something have to be to qualify as episodic in our definitions? It's got to be a one-off market event. So there have been currencies that have de-pegged or where governments have allowed them to float or allowed them to readjust. These things rarely come by surprise. I mean you see them building up for some time. And as we're managing our customer flows, we make sure that if we have any positions at all, we prefer not to have physicians at all. But if we have any positions at all, that they're skewed to positions that will pay off in a positive way, if that event occurs. And this happens from time to time. We can't predict them. We don't wish them because typically, there's a problem someplace else. The currencies rarely in jump form. They devalue in jump form. As the M&A market picks back up, another source of episodic flows for us has been deals that are linked to M&A transactions, either because the deal itself is contingent on the closing of an M&A transaction or on the achievement of regulatory approval or something like that. Something that a business line that has been around in the market for 30 years, we've been active in for the past 7 or 8 years. We treat those sources episodic because they come and go. So those are the other one-off transactions are episodic. That has grown structurally. It's hard to see because it's quite volatile, but they've grown structurally. I would say that the median line or regression line, as we plot that through time, grows, at least, as fast as the rest of our business. Frankly, not asking for the market to revalue our stock on the back of that because you can't forecast it. We can just demonstrate that over time. And the worst case is incremental profits that we can use to buy back our relatively inexpensive stock. I'm trying to be polite with my choice of words.

We'll come up to that later. I'm just going to break off to see if there's any questions from the audience. I can't see any. So I will talk about ventures. Now I think in the Q4 results, you said that you wanted to be ROE accretive by 2026. So I guess my first question is, does that mean above 12%? My second question is how do you expect to achieve that?

Yes. Yes. Ventures for us is SC Ventures, which is our venture lab, which itself has an allocation of capital for investments, minority investments in fintechs, in every case where we have a strategic partnership with that fintech. And then the 2 big ones outside of SC Ventures, but in what we call ventures, are our 2 digital banks in Hong Kong and Singapore called Mox and Trust. Mox and Trust, it's the bulk of the capital that we deployed into ventures. And it's the bulk of the operating loss that we've incurred over the past several years. We've guided to Mox achieving profitability this year and Trust achieving profitability next year. How is that happening? Obviously, the increase in interest rates over the last year has helped. They started as deposit franchises. We now have an asset base which is consumer lending, consumer and small business. So that we have assets and liabilities of roughly the same, each about $1 billion on all 4 sides there. They're all growing nicely. Deposits are growing, customer numbers are growing, loans are growing. We've added a wealth product line in Mox. This is a purely digital mass market-oriented wealth proposition. And early results are encouraging. The customer engagement is good and the level of customer satisfaction is very high. We'll roll out wealth products in Trust towards the end of this year or into next year. And we'll introduce insurance products as well over time to support the profitability. So the facts are the rating of these banks in the local markets is best-in-class. So #1 NPS score, #1 customer satisfaction, #1 App Store ratings. We have not led with price. The cost to acquire for our 700,000 customers in Trust in Singapore is something like $30. I can tell you the cost to acquire in Standard Charter Bank is closer to $200 per client. At DBS is closer to $300. So $30 is -- we're not giving those customers by offering them 9% interest rates and the 5% environment, as has been the case in other digital banks around the world. We're leading with the user experience and great partners. In Hong Kong, it's Hong Kong Tel and Trip.com. In Singapore, it's NTUC, but really, it's the FairPrice Group, which is the grocery store chain that has about a 50% market share in Singapore. So I think it's just a matter of momentum and getting those things through to profitability. They won't, obviously, as we hit profitability this year or next year, it won't be at a 12% ROTE, but it will be a big gap relative to where we were historically. Other ventures were -- we will be turning much more actively. So we launched 5 new ventures last year. We exited 2. We've got several exited processes in place right now. We've shared in our disclosures the mark to market for an external valuer of the Ventures portfolio is about 1.3x return on invested capital. I would say that those are pretty conservative valuations, because for some of the ventures that we built that have not had any additional funding rounds, we've more or less left them a cost. For those things that we don't think are working out, we've written them off. And typically between 5% and 10% investments in fintech partners, was a really good strategic value for the bank. I mean, we find that we get good value from these fintechs when we have a small ownership stake. Not that they wouldn't be serving us well anyway, but we just find that we get an extra dimension to our ability to work closely with these guys. And the returns on that portfolio have been good. So we'll get to 12% by actively managing that portfolio, generating some capital gains, in addition to achieving profitability in some of the core ventures.

Okay, okay. Just again, if there's any questions from the audience. Maybe I can move on to costs. So there's obviously a $1.5 billion fit for growth expense saves coming through. I guess my question is, what are you doing now that allows you to deliver those versus what you were doing previously? And after 2026, do we see another fit for growth mark to or...

A quick reprise of the expense pictures in the 9 years that I've been at Standard Chartered, basically flat for 8 years. Last year, we grew substantially on the back of inflation, a little bit of performance raise up. And so we're growing about 2% per annum and a 4% inflation environment and keeping in mind where we operate. And we've done that by sort of squeezing the rock continuously, getting the fat out, constant delayering and spends of control as well as some transformational stuff. The bulk of the transformational efforts so far have been taking what had been quite a disconnected end-to-end organization and telling each of the line of business managers, so the Head of Macro trading, the Head of Cash Management, the Head of Wealth Management. You own your business from end-to-end. You own your tech, you own your ops, you own your marketing, you own your legal, make it work. That was a sea change for Standard Chartered Bank that we didn't have people that had that experience. And we didn't have people sort of down the chain that had experienced that either. And we did, I'd say, a reasonably good job, not perfect, but a reasonably good job of getting those vertical alignment. And that's what allowed us to operate with basically no expense growth, while income went from a low of $14 billion, up to $17 billion. What we lost through that process is some of those shared service layers or they call it the horizontal elements. And the best way to explain this might be an example, which is as cash and trade and FM or macro or credit markets or whatever, we're building their vertical processes. We replicated little payment modules inside those vertical processes. So we had one payment platform for the bank in terms of everything outside. But the things that we're building into the feeding of the one external payment platform, while they started in the same place, they diverged. And that's as a consequence of saying, you own your business, optimize your business. And now we think we have the opportunity to take a step back and say, "Okay, maybe we can rip out 8 of those payment modules, consolidate into one, have a fundamentally more productive environment and be mature enough," so that the line of business owner still knows that she or he runs a line of business. But parts of those services that are provided are going to be coming from an internal third party, or maybe in some cases, an external third party if we decide to externalize a particular function. And by ripping those 8 payment engines out, these are assets that are -- they have a carrying value on our balance sheet, they've got a remaining useful life. And that's the $1.5 billion estimate of cost to achieve, which is much more than the cost to achieve from, let's say, for example, the last $1.3 billion productivity program that we had, where the only cost -- the only restructuring charge is really were redundancy, where we had them. A couple of little write-offs, but mostly it was redundancy. This time around, I think we'll probably have relatively light redundancy because there's not huge -- there's just not a lot of fat left in the organization. And this reorg that you asked about the right upfront Nick, there's nothing about cost cutting. We'll be more efficient. We'll streamline some things. It's not a cost-cutting exercise. It's to realign the organization to make things faster and easier to get things done, Fit for Growth, which is the productivity program. It's about organizing things, yes, completing the execution of our end-to-end vertical processes, introducing the horizontal layer and doing that in a really disciplined programmatic way. We should be able to nail all this in the 3 years that we've kind of given ourselves further the [ 1.5 and the 1.5 ]. Will there be a need for another one? I mean, we'll see. If we do an excellent job, that we should be back into a hygiene rather than the need for big programs. But let's just get the first thing done first.

Are there any questions? Come up, Omar.

Omar Keenan at Caxton. Obviously, if we look at the financial market story, it's been very, very positive over the past few years. And I appreciate you've given us some comments around the split between what's going on flow and episodic revenues. I guess if we look at things for the kind of macro trading versus credit market trend, credit has been the bit that has lagged. And I guess if we look at something like financing solutions and issuance, it kind of makes sense that it would have lagged with interest rates going up, corporates or perhaps waiting to get some certainty on levels of interest rates before they execute on various transactions. How good the line of sight do you have on this pipeline of activity to come from corporates, whether it's project finance various sectors. I mean, do you think there's a material recovery to come through there?

Yes. No, I think your diagnosis is right. It's definitely been a macro trading environment for the past 3 years between COVID, which obviously had a very suppressing impact on investment, which then flows through to capital markets activity, worse and more worse, with a spike in inflation and a big move in interest rates. All have been very conducive to the macro environment. I don't think we'll see a repeat of the interest rate hikes of 2022 anytime soon -- 2023, anytime soon. But do I think we'll have the same sort of pace of reduction on the way back down. But I see no prospect at the end of volatility in macro markets given the state of the world. Credit markets have definitely suffered during that time, capital markets issuance is certainly in our footprint, where we have a very, very small Europe -- and Americas capital markets footprint and a large Asia Middle East and Africa footprint. The lease has been booming, and we are a continuous #1 in various league tables, which for the most part, is pretty good business. Asia and South Asia, ASEAN have really lagged in terms of issuance volumes. And in part because the bank market has been relatively strong with relatively liquid local banks for the last part. The pipeline is good. The pipeline is as good as it's been in the last 5 years. There's still a question about the executability of the pipeline right now and it's a slightly, let's call it, a less risk off environment. We're getting some good capital markets business done. But it still feels a little bit tenuous. But the pipeline is very good coming from investments and refinancing bank debt. I wouldn't say the trend is firmly established as yet. But we are quite optimistic that even if we see a slackening of -- a slightly less attractive macro environment, even if it's only for a period of time, that can be more than offset by improvements on the credit side. Commodities is a relatively small business for us but it tended to be uncorrelated to the other two. And so we're able to engage there a little bit more opportunistically but I think there's structural growth in that piece as well.

Thank you. Any more questions? Can I just talk on -- touch on capital. So I mean you've said $5 billion of capital return, I think, in your guidance, which I think is probably a lot less than people are de minimis and certainly less than I have in my numbers. So how should we think about dividends and buybacks and how realistic or how conservative is about $5 billion?

Yes. Look, I mean, we gave ranges of income growth and indications of positive jobs in our guidance. And you could extrapolate from that to the most attractive end of any of those ranges, and you could run it through the calculator, assuming that we can keep our credit discipline as we have. In fact, we got into higher credit costs, although there's no particular sign that that's supported by the tax that we're seeing, but we know the world in which we live. But you're currently set [ off ] at the calculator, you can come up with much bigger numbers than $5 billion, right, and you can consolidate a least attractive end of the range through the calculator and you might get something closer to $5 billion. So what we've tried to say is and what we have said quite clearly is certainly at today's share price and recognizing that we have a pretty full investment program already. We're happy with the pace of investment. We don't feel like we're starving the organization of the opportunities that we see. We don't see a lot of inorganic opportunities in the market and where there are inorganic opportunities, they're not priced at a level that, from our experience, and we looked at all the ones that have come by. They're not priced at a level that we find attractive relative to our other uses of capital, including returning by buybacks. So we're perfectly comfortable operating fluidly through that 13% to 14% CET1 range. We went down to 13% at 1.5 years ago. we are constantly bumping up against the top end of that range, which obviously is a good sign in terms of giving us ability to return capital, if done consistently. If there was ever an opportunity obviously thinking about 2025 when Basel 3.1 kicks in. Well, the impact on us, we said that we could have as much as 5% RWA inflation, it could also be 0. If the rules that come out are -- following the consultation process, are less impactful than the original rules suggested or if we take mitigating actions in areas that could eliminate that gap. So again, top end of the range, bottom end of the range, you can get very different outcomes. We're going to manage it very actively. We have managed our RWA extremely actively, and we'll do that through the Basel 3.1 process whatever comes out of that, and we'll return capital to shareholders, if it is indeed surplus.

Okay. Perfect. We've come up to the end of our time. So Bill, thanks very much for your comments.

Thanks very much.

Thanks very much for attending.