Standard Chartered PLC – first 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 26-30.
Bill Winters, Group Chief Executive, said:
“Our first quarter performance was strong despite the volatile macro environment. Our profit before tax grew 4% year on year, with strong underlying business momentum. I am also pleased by the early progress we have made against the five strategic actions we outlined in February and we are on track to deliver 10% return on tangible equity by 2024, if not earlier.”
Update on strategic actions
- CCIB: drive improved returns: Income RoRWA up 1.1%pts to 6.4%; $6bn of $22bn targeted RWA optimisation initiatives executed
- CPBB: transform profitability: Added 98k mass retail partnership clients
- Seize China opportunity: China-ASEAN corridor network income up 35% YoY
- Cost discipline to create operational leverage: $72m of gross structural cost savings delivered
- Substantial shareholder distributions: $750m share buy-back ~80% completed to date
- Refocusing resources in the AME region into existing and new markets which have the greatest scale and growth potential
- Sustainability: Enhanced roadmap providing further clarity on how we will achieve net zero in our financed emissions by 2050
Selected information concerning 1Q'22 financial performance
- Return on tangible equity of 11.1%, up 30bps year-on-year
- Income up 9% to $4.3bn, or 11% YoY at constant currency (ccy); up 9% at ccy excluding debit valuation adjustment (DVA)
– Net interest income up 10% at ccy
– Financial Markets up $0.4bn or 27%, at ccy and excluding DVA
– Continued positive momentum in Transaction Banking with income up 6% at ccy
– Wealth Management down $0.1bn or 17% at ccy, with the largest market, Hong Kong, down 26% at ccy
– Net interest margin up 10bps QoQ to 1.29%, due to the impact of the structural hedge programme and rising interest rates
- Expenses increased 6% YoY to $2.6bn, or up 8% at ccy
– Higher performance related pay accruals and increased investment spend in strategic initiatives and in Ventures
– Positive 1% income-to-cost jaws at ccy and excluding DVA
- Credit impairment charge of $200m, up $180m YoY; down $3m QoQ
– Includes $160m relating to China CRE exposures and $107m for the Sri Lanka sovereign rating downgrade to Stage 3.
– Total management overlays down $104m QoQ to $239m; COVID-19 overlay $153m and China CRE overlay $86m
– High-risk assets are down slightly in 1Q'22, the seventh consecutive quarter of improvement
- Underlying profit before tax up 5% at ccy to $1.5bn; statutory profit before tax up 7% at ccy to $1.5bn
- Tax charge of $313m: underlying effective tax rate of 21.1% down 1.1%pts due to a change in the geographic mix of profits
- The Group's balance sheet remains strong, liquid and well diversified
– Customer loans and advances down $3bn or 1% since 31.12.21; up $4bn excluding impact of RWA optimisation initiatives and FX
– Advances-to-deposit ratio 60.0% (31.12.21: 59.1%); liquidity coverage ratio 140% (31.12.21:143%)
- Risk-weighted assets (RWA) of $261bn down $10bn since 31.12.21
– Credit risk RWA down $9bn: $6bn adverse regulatory changes offset by $6bn CCIB optimisation actions, $7bn other efficiency actions
– Market risk RWA down $1.5bn to $23bn; no change to Operational risk RWA
- The Group remains strongly capitalised and highly liquid
– CET1 ratio 13.9% (31.12.21 14.1%): Profits and lower RWAs offset by 100bps of regulatory changes and share buy-back programme
- Earnings per share increased 1.3 cents or 4% to 34.8 cents
Outlook
The start to 2022 has been strong and recent geopolitical events have strengthened the outlook for rates albeit making the outlook for the pace of economic recovery less predictable. Consequently for FY'22:
- Income growth is expected to slightly exceed the previously guided 5-7% range
- Operating expenses are expected to be slightly higher than the previously guided $10.7bn as a consequence of the impact of the higher income growth expectations on performance related pay; we continue to expect to deliver positive income-to-cost jaws
- Credit impairment is expected to start to normalise towards the medium-term loan-loss rate range of 30-35bps.
- We intend to operate dynamically within the full CET1 13-14% target range
We are on track to deliver 10% return on tangible equity by 2024, if not earlier.