Third Quarter 2022 Results
Standard Chartered PLC – third quarter 2022 Results
All figures are presented on an underlying basis and comparisons are made to 2021 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items excluded from underlying results is set out on pages 27-30.
Bill Winters, Group Chief Executive, said:
“We have posted a strong set of results in the third quarter, with income up 22 per cent on a normalised basis and profit before tax up 35 per cent year on year. We also continue to make significant progress against the five strategic actions outlined in February, including the completion of the $500m share buy-back announced at the 2Q’22 results, taking total shareholder distributions announced this year to $1.4bn. We remain confident in the delivery of our 2024 financial targets”
Update on strategic actions
• CCIB: drive improved returns: Income RoRWA of 6.3% year-to-date (YTD), up 140bps on FY’21; $10.5bn of RWA optimisation initiatives delivered so far this year
• CPBB: transform profitability: Cost-to-income ratio of 69% YTD, down 4%pts from FY’21; $173m of gross expense savings delivered YTD; well on track to deliver $200m target in 2022
• Seize China opportunity: China YTD on-shore income up 11% YoY at constant currency (ccy); off-shore income up 16% YoY
• Cost discipline to create operational leverage: $330m of total gross structural cost savings delivered YTD
• Substantial shareholder distributions: $1.4bn of total shareholder distributions announced so far this year
Other highlights
• Ventures: Launched the Singapore digital bank, Trust, in partnership with FairPrice Group; ~200k accounts already opened
• Sustainability: Sustainable Finance income up 33% YoY; leading in product innovation with >30 product variants live
Selected information concerning 3Q’22 financial performance
• Return on tangible equity of 10.1%, up 380bps year-on-year (YoY)
• Income up 15% to $4.3bn, up 22% at ccy, on a normalised basis (excluding the debit valuation adjustment (DVA) and the 2021 IFRS9 interest income adjustment)
– Net interest income up 24% at ccy on a normalised basis
– Record third quarter in Financial Markets up 21%, at ccy on a normalised basis
– Wealth Management down 15% at ccy, with the largest market, Hong Kong also down 15% at ccy
– Net interest margin (NIM) up 8bps QoQ to 1.43%, due to rising interest rates partly offset by product mix change and hedges
• Expenses increased 3% YoY to $2.7bn, or up 9% at ccy
– Increased investment spend, salary inflation and performance-related pay accruals
– Positive 10% income-to-cost jaws at ccy and excluding DVA; cost-to-income ratio down to 62% (3Q’21: 69%)
• Credit impairment charge of $227m, up $120m YoY; up $160m QoQ
– Includes $130m for China CRE exposures and $96m from sovereign downgrades relating to Pakistan and Ghana
– Total management overlay now $204m; COVID-19 overlay down $39m to $51m and China CRE overlay up $27m to $153m
– High-risk assets down $2.0bn QoQ, mainly driven by a reduction in Early Alert accounts
– Loan-loss rate of 18bps year-to-date annualised
• Underlying profit before tax up 35% at ccy to $1.4bn; statutory profit before tax up 43% at ccy to $1.4bn
• The Group’s balance sheet remains strong, highly liquid and well diversified
– Customer loans and advances up $5bn or 2% since 30.06.22; up 1% on an underlying basis
– Advances-to-deposit ratio 58.1% (30.06.22: 59.6%); liquidity coverage ratio 156% (30.06.22:142%)
• Risk-weighted assets (RWA) of $252bn down $3bn since 30.06.22
– Credit RWA down $3bn, Market risk RWA broadly flat and no change to Operational risk RWA
• The Group remains strongly capitalised
– CET1 ratio 13.7% (30.06.22: 13.9%); in the upper half of the 13 to 14% target
• Earnings per share increased 10 cents or 43% to 33.1 cents
Outlook
Our performance this year has been strong, and the pace of economic recovery in many of our footprint markets is encouraging, notwithstanding increasing recessionary pressures in certain western markets. Consequently, for full year 2022:
• Income (ex-DVA at ccy) is now expected to grow around 13%, in-line with the year-to-date growth
• Full year average NIM is expected to be around 140bps
• Expenses ex-UK bank levy are expected to be around $10.6bn
• Credit impairment is expected to be slightly above the year-to-date annualised loan-loss rate of 18bps
• We intend to operate dynamically within the full 13-14% CET1 target range
We now expect greater NIM progression to average around 165bps in 2023, which combined with continued strong business momentum and positive income-to-cost jaws, means we remain on-track to deliver our 10% RoTE target in 2024, if not earlier.