Standard Chartered PLC (STAN) Earnings Call Transcript & Summary

Good morning to everyone. So welcome to our 2024 Annual General Meeting. 2023 was a strong year for the bank, producing our best performance in 10 years. I am pleased that we achieved our objective of delivering a double-digit return on tangible equity of 10.1%. Income of $17.4 billion was up 13% on a constant currency basis. We successfully controlled costs while maintaining investment to reach an underlying profit before tax of $5.7 billion. We remained highly liquid and our capital position was robust with a common equity Tier 1 of 14.1%. As a result, we have proposed a 50% increase in the dividend per share to $0.27 and started a further share buyback of $1 billion. This brings total distributions to shareholders since the beginning of 2022 to $5.5 billion. As profitability continues to improve, we expect the dividend per share to increase further. We have just announced another strong performance in the first quarter of this year as our strategy continues to deliver. We maintain our focus on high-growth markets and have made significant progress across our priority areas of network, affluent, mass retail and sustainability. However, the Board and the management team are acutely aware that the share price is not where we want it to be, and we continue to work hard to deliver greater value for shareholders. This is why we announced our Fit for Growth program in February. This is a 3-year plan to make us simpler, more efficient and increasingly agile so that we can achieve stronger, sustained profitable growth. By simplifying our structure and processes and increasing automation, we will deliver $1.5 billion in cost savings in 3 years. This will give us capacity to invest more in client capabilities. Fit for Growth will leave the bank better equipped to seize the opportunities within our footprint, the dynamism of our markets across Asia, Africa and the Middle East, the expansion of trade corridors within and between these regions and the connections to Europe and the Americas. At the same time, we will place our clients at the very heart of everything we do while further enhancing our strong risk management and compliance. Bill will provide more detail on Fit for Growth and our new internal structure which delivers greater simplicity and accountability for our business teams while preserving the vital role of our local expertise. The Board recognizes that strong leadership is critical for the successful execution of the program. As you know, we have appointed a new Chief Financial Officer since our last AGM. I would like to welcome Diego De Giorgi, who took over from Halford in January. Diego has more than 30 years of experience in financial services and has held a number of senior roles at Goldman Sachs and Bank of America Merrill Lynch. He has also led client-facing businesses in advanced economies and emerging markets. We are very pleased that Diego has joined the team, and he has made an excellent start. Andy has made a very significant contribution to Standard Chartered, and I would like to extend my deep thanks to him. Since his arrival in 2014, he has been a much valued colleague and has helped steer the business alongside Bill through a challenging external environment. He remains at the bank in an advisory role until his expected retirement in August. Moving now to governance. Over the past year, the Board has overseen the delivery of stronger business performance together with enhanced risk management and compliance. There have been also some changes in Board membership. I would like to extend a warm welcome to Diane Jurgens. Welcome, Diane. She joined in March. Diane brings significant technology and transformation expertise and has a depth of operational experience across a range of sectors as well as many of the group's key markets. I would also like to thank Gay Huey Evans and Carlson Tong, who have both left the Board for their substantial contribution to the bank. Gay left in March after serving 9 years and was especially impactful as Chair of the former Financial Crime Risk Committee. Carlson, another much valued colleague, left this week after 5 years, having been an active member of the Audit and Risk Committees. We wish them all the best for their future. The Board, Bill and I remain committed to firmly embedding a culture of excellence across the organization. When I speak to colleagues in many different markets about how we can perform better as a bank, I often hear the same things. We are too complex, too fragmented, too siloed. Fit for Growth and the internal reorganization address many of these challenges, but a true culture of excellence has to be supported by an improved mindset across the bank, one that helps us collaborate even more across business lines and geographies to deliver a better experience for clients and colleagues and more value for shareholders, one that harnesses the full potential of the markets in which we operate and the talent of our people. And critically one that delivers high performance but preserves the human face of the bank. We are keenly aware of our role in supporting our clients and communities as they respond to economic and social challenges. This is why we are taking a stand in 3 areas, which give us a framework for positive impact across our footprint. First, Accelerating Zero. A just transition to net zero is key to protecting our environment and represents a huge opportunity for innovation and growth. Second, lifting participation. We want to promote economic inclusion by expanding the accessibility of financial services. And third, resetting globalization. We advocate for a more inclusive model based on trust and fairness. Let me look at Accelerating Zero for a second. We are deeply aware of our responsibility as an international financial institution to help facilitate a greener, more sustainable economy. The Board and the management team are committed to maintaining progress on the net zero transition with a target of 2025 for our own operations and 2050 for our client portfolio. The Net Zero Banking Alliance has identified 12 priority sectors for decarbonization. We have just disclosed interim 2030 targets and science-based methodologies for our financed emissions in 11 of them in our annual report. This demonstrates our commitment to supporting the transition of the real-world economy. But we continue to raise our own level of ambition. This week, actually yesterday, we announced our intention to set a baseline and identify a science-based target for the methane emissions of clients in the oil and gas sector by 2025. By taking this action, we will work alongside our clients in transition to address a broader base of greenhouse gas emissions. This commitment supports those clients who are demonstrating leadership in this area, encourages the adoption of this best practice by others and supplements our established efforts on decarbonization. We recognize that the majority of our markets already face the impact of climate change today. With this in mind, we are working to deploy capital to help people and businesses become more resilient. We have published a guide for adaptation and resilience finance, which provides a framework to deliver on adaptation. Given that we operate in some of the most complex and biodiverse habitats in the world, working to preserve, restore and enhance nature and biodiversity is critically important. That is why we recently announced our decision to become an early adopter of the guidelines underpinning the Taskforce of Nature-related Financial Disclosures. I'd like to conclude with some brief comments on the outlook. Despite rising geopolitical tension and continuing economic uncertainties across the world, I am cautiously optimistic about growth in 2024. We expect to see a soft landing for the global economy this year. Activity remains resilient with Asia continuing to take the lead on growth amid expansion of cross-border and cross-regional trade corridors. I have frequently spoken in support of open rule-based trade as a linchpin of global economic growth. Protecting and improving international trade requires constant vigilance and cooperation from policymakers and the private sector. This year, especially, the challenges are powerful with the risk of further fragmentation. In this environment, Standard Chartered has a more vital role to play than ever as a connector bank, as a bridge bank, facilitating trade and capital flows across our markets. We draw on our deep experience of these geographies to be a trusted partner for clients as they look to seize opportunities across our footprint. Our recent performance shows we are on the right growth track, and I am highly confident about the future of the bank. Finally, I would like to extend my deepest thanks to you, our shareholders, for your ongoing support and to our colleagues for their dedication and hard work. Thank you.

Thank you very much, Jose, and good morning, everyone. Let me just pick up on a few of the themes that Jose has mentioned. Very strong performance in 2023. That's continued into 2024. The headline profit numbers we've discussed, you've seen those. We have a very strong capital position, good profitability, ongoing good, strong discipline with a very clear plan to maintain that discipline. A few interesting numbers like cost-to-income ratio steadily improving jaws, which is the spread between our income growth and our cost growth at over 4%. And we've done all that while maintaining a very strong capital position, but also a very clean loan book. So loan impairments extraordinarily low. All of these trends have continued and in fact, improved in the first quarter. It was important for us to have achieved a double-digit return on tangible equity in 2023. By no means is that the end state, but it's an important milestone, and we're very proud to have accomplished that. And we're now targeting a 12% return on tangible equity by 2026 and intending and expecting and hoping to continue to improve that in the subsequent years. Apart from the financial performance, we set out a series of very specific strategic objectives back in 2022 and then have repeated those regularly. And I'm very happy to report that we made extraordinarily strong progress in the first 2 years of what were 3-year plans for strategic improvement. Our network income, so that's cross-border activities, grew 31% with particular strength in all things related to China. So the cross-border flows in and out of China and in particular, the trading corridors between China and ASEAN, China and the Middle East, which, of course, are our key areas of focus. And these have each been up over 50%. Second is the service we provide to our affluent customers, Wealth Management service, advice and other things. Total client numbers are up to 2.3 million. We had net inflows, so net new money of $29 billion, which is a 50% increase. So those 2 key strategic areas for us, very good underlying performance. Within our mass retail business, our client base is now over 9.5 million customers. That's about 10% increase. That's come through a number of different channels, our digital banks in Hong Kong, Mox; and Singapore, Trust, as well as a number of partnerships that we've entered into with various tech and other e-commerce companies across our footprint. Importantly, we've added materially to our younger client population to refresh the demographic and to reflect the demographic in the markets in which we operate. Sustainability, picking up on the theme that both Jose and I mentioned earlier, it's also a business for us. Franchise income in our sustainable finance business grew 42% last year. This is on the back of several strong years of growth. We've mobilized about $87 billion of sustainable finance since 2021. You'll recall that we've committed to deliver $300 billion of sustainability-related financing by 2030. So we're obviously very well on track to accomplish that. I'll note parenthetically that the financing that we provide in -- primarily in Asia, Africa and the Middle East are where that financing can have the greatest impact. These are the countries that have the highest intensity of carbon emissions of regions of the world, both because of the industrial base, but also because of the population growth. And the fact that we can deliver this financing into those markets is extremely high impact relative to what we might have been able to do in Europe or the United States, which are much more mature. So huge thanks go out to my colleagues on the Board and the management for this really impressive set of accomplishments and -- but don't rest on any laurels because we have much more to do. Jose mentioned Fit for Growth, a very important program that we've launched to accelerate the transformation of our bank, to simplify everything that we do, to automate as much as we possibly can and to digitize for the benefit of our customers, for the benefit of our control environment and of course, to create efficiency. This $1.5 billion that we intend to spend in order to accomplish $1.5 billion per annum of savings at [ Infinite item ] is freeing up capacity for us to grow. Now I mentioned the areas of strategic focus around our cross-border business, our affluent customer business, our business in and around sustainability and climate change. All of this will be funded incrementally by the savings that we can generate by making it an easier place to get things done. We're off to a great start, but we've got much, much, much more that we can do. I'm very pleased with the pace of change that we're delivering. In Fit for Growth, we've got over 200 initiatives. We just announced this program a couple of months ago. To have 200 things that are well on the way is a great start. The level of engagement across the organization is very strong. I think we're all very confident that we can deliver this. In addition to Fit for Growth, as Jose mentioned, we've reconfigured the management organization of the group with a couple of things in mind. One, keeping with the theme of making it easier to get things done. Historically, like many organizations, we have a matrix regional dimension to our matrix and a business dimension to the matrix. We've consolidated those 2 things at the top level of my management structure to make sure that we've got very strong alignment between the strategy for our business and the strategy for each of the countries in which we operate. There's still a matrix, but it's a matrix that comes together with a much higher and more aligned set of objectives than has been the case historically. As part of that, we have new heads of our Corporate and Investment Bank, Sunil Kaushal and Roberto Hoornweg, both long-term insiders in the bank. Sunil is based in Singapore, and Roberto will be based in Dubai. This is a co-head structure, not unusual in the market but somewhat unusual at Standard Chartered. I'm very happy with the early outings by those 2. Judy Hsu continues to head up our wealth -- now renamed Wealth & Retail Banking Group. She will be based in Hong Kong, alongside Ben Hung, who is our newly appointed President of International. Both Judy and Ben have been with the bank for many years. Tanuj Kapilashrami, our previously Head of HR, has picked up a number of other pieces of her portfolio, including communication, strategy and property. So we have a somewhat reconfigured team in addition, of course, to Diego's arrival, but bringing tremendous energy to the group, fresh perspective and a very clear set of objectives for how we're going to take our bank from being a good performing and improving bank to an excellently performing and an outstanding bank, clearly, the objective and well within our [ agreement ]. I'd like to thank Simon Cooper, who's chosen to leave to pursue other interests for his 8 years in the bank running our CCIB business. Simon has been instrumental in executing the strategy that has substantially improved the returns in our Corporate Bank and has created the very fertile ground for us to continue to develop our cross-border business. I mentioned already Diego and as did Jose, it's fantastic to have the perspective coming from outside, but with very deep banking experience. Diego is a package of energy together with outstanding brainpower, who's bringing both an internal perspective and an external perspective to our group to help really drive this change. And I'd, of course, like to thank Andy for the contributions that he made. Andy had arrived at the bank shortly before I did, he was absolutely instrumental in getting us through the more challenging times and has set the bank up very well for the recent improvement and the further improvement that we know we can expect. But we're not done. We know that. We've told the market as part of our full year results that we will continue to improve our returns. That's going to happen first by growing our CIB business. targeting 8% to 10% growth over the next 3 years. We're building on our strengths in the affluent segment. We're aiming to attract $80 billion of net new money over the next 3 years. We're building our digital bank and partnership momentum through our broadly defined ventures arm. We intend for that set of activities to be RoTE accretive i.e., more than 12% by 2026. And our first quarter results demonstrate that we're on track to deliver on these underlying commitments. Profit before tax was $2.1 billion. That's up 27% year-over-year on a constant currency basis. We reported a profit before tax of $1.9 billion, which is up 8%. Cost-to-income jaws has remained positive and very positive. And each of our business lines and regions continues to deliver strong results. Noteworthy are the 17% improvement in our Markets business year-over-year and the 23% increase in our Wealth Solutions product line as part of our affluent client segment. So I share Jose's confidence about our outlook for 2024 and beyond. The global economic environment is always tricky, but at the moment, quite supportive. And we think that there's a reasonable prospect that continues to be the case, and we're prepared to capitalize on that. I have never been more optimistic about the prospects for our bank. And I think in this environment, we have a particularly unique role to play, and we'll continue to play that. We're positioned in high-growth markets. We are positioned with customer segments that are both growing and where we have a real competitive advantage in terms of delivering the products and services our bank -- of our bank to those clients and that client segment is growing. So thank you again to my colleagues on the Board. Thank you to my colleagues and management. I will now hand back to Jose.