Standard Chartered PLC

Good morning and good afternoon, everyone, and welcome to our half-year 2023 results call. We're very happy to present another strong set of results, further building confidence that our differentiated market presence can deliver strong returns to our shareholders and other stakeholders. First up, Andy will take you through the numbers, and then I'll cover progress on our strategic agenda before we join back up again for the usual Q&A session. So, Andy, over to you.

Thanks Bill. Good morning and good afternoon to everybody joining the call. So let's get straight into the numbers and look at the second quarter during which we delivered a very strong performance. The second quarter was our eighth successive quarter of top line growth with total income of $4.6 billion up 24% year on year on a constant currency basis. We delivered margin expansion in deposits and cash management, and our overall NIM was up 36 basis points year on year to 171 basis points. We have also delivered growth in areas into which we have been particularly investing over recent years, namely wealth management and financial markets. Wealth management was up 10% year-on-year, driven by our North Asia markets. Encouragingly, this was the first quarter of year-on-year growth after five quarters of market-driven declines. In financial markets, we delivered a record second quarter with income up 15%. Expenses were up 14%. This unusually high print reflected the phasing of performance-related pay accruals and, of course, underlying inflation. Despite this expense growth, we still delivered 10% positive income-to-cost jaws. This, combined with a low credit impairment charge of $146 million, generated $1.6 billion of underlying profit before tax, up 32% year-on-year, and a return on tangible equity of 12.1%. Turning now to the first half, total income was up 18% to $9 billion, with around three-quarters of the increase coming from interest rate rises. with our NIM increasing 35 basis points year-on-year to 167 basis points. We also saw good growth in the fee-income businesses, with financial markets up 13%, excluding the impact of one-off mark-to-market gains last year, and wealth management up 5%. We also delivered very strong double-digit growth in our China offshore business, which was up around 60% in the first half. Expenses of $5.5 billion were up 12% due to inflation and targeted investments into growth areas. Income to cost shores were a positive 6%. Credit impairment remains low at $172 million and includes a further $82 million charge relating to the China commercial real estate portfolio. Our annualized cost of risk at 11 basis points is well below our medium-term expectation of 30 to 35 basis points. Together, this generated an underlying profit before tax of $3.3 billion, up 29%, our highest half-year profit since 2015. and this resulted in a return on tangible equity of 12.0%, up 3 percentage points year on year. Our balance sheet is strong, well capitalised and highly liquid, and we have chosen to run richer on some liquidity metrics at this time, with a liquidity coverage ratio of 164%, up 3 percentage points on the first quarter. And our disciplined management of capital has resulted in a CET1 ratio of 14.0% at the top of our target range, Hence our decision to announce a further $1 billion share buyback today, taking our pro forma CT1 to 13.6%. Now looking at incomes through the product lens, it is a familiar story. In the first half, both transaction banking cash and retail deposits benefited from higher rates. Pricing discipline and pass-through rates management drove margin expansion, with cash income more than doubling year on year, and deposit income, also supported by volume growth, almost tripling. Both financial markets and wealth management were up around 4% and 5% respectively, and I'll talk more about those products shortly. Trade was flat on the prior year, as lower trade volumes and fees were offset by wider margins as we focused on higher returning products. Mortgage income was down 60 percent as market dynamics, including the prime cap in Hong Kong, led to margin compression. And accordingly, we decided to throttle back on new origination. In some markets, such as Korea, we also saw customers repaying balances. Negative income in Treasury was largely driven by internal transfer pricing mechanics and a negative carry on our short-dated income hedges, which partly offset the materially higher net interest margin in the business. In the materials, we have changed the way we calculate and present underlying NII to now exclude the impact of the trading book funding cost. We have done this to give a more accurate view of the net interest income dynamics across the businesses. Importantly, there is no impact on total income because of this change. We have also included a slide in the presentation to show how this change works. Underlying net interest income was $4.8 billion, up 35% year on year, as the half-year NIM increased 27% to 167 basis points. Our NIM was up eight basis points in the second quarter, with a six basis point increase from rising rates and a four basis point benefit from the expiry of $16 billion of our short-term income hedges in February. This was partly offset by CASA to TD migration, mixed changes and the impact of holding surplus liquidity in Treasury. Our refreshed net interest income sensitivity to further rate movements indicates a higher US dollar sensitivity due to the expiry of these hedges. Accordingly, in the 100 basis point increase scenario, our overall NII sensitivity is up $80 million to $820 million compared with the end of 2022. Rates have been volatile in the first half, but we continue to expect a full-year average NIM of around 170 basis points. The cost of funding the trading book in the first half was $822 million. Given the recent rise in market rate expectations, we now expect the full year trading book funding costs to be closer to $1.9 billion. Turning to financial markets, despite lower levels of market volatility, FM continued to show good momentum driven by higher flow income. Income of $2.8 billion was up 4% year-on-year. However, it was up 13%, excluding the impact of $216 million of mark-to-market gains in the first half of 2022, which will not repeat. Macro trading had a record half as market uncertainty around rates led to higher activity levels and some mark-to-market gains. We saw strong double-digit income growth in rates and high single-digit growth in FX, more than offsetting the non-repeat of the exceptional performance in commodities last year. Credit market income was up 10% as credit trading posted a record first half on higher activity levels. This offset lower financing, solutions and issuance income as issuance markets remained subdued. Around 70% of FM income came from flow income generated by client liquidity and exposure management, including the business flows into FM from transaction banking. Flow income, which tends to be more stable than our episodic income, was up 10%. The momentum we are seeing in financial markets reflects the substantial investment we have made in transforming the business to one which is now progressively taking market share in the Asia thick space. The build-out of our rates and credit capabilities, the investment in digital delivery channels and combining corporate finance origination with the FM distribution platform have all contributed to a more diversified and better balanced business. Turning to wealth management, which returned to year-on-year growth in the second quarter, income was up 5% to $1 billion in the first half. We saw strong growth in Treasury products and bank assurance, with income from managed investments and wealth lending remaining subdued, as investment markets had a mixed start to 2023. Affluent net new money was $13 billion, more than doubling last year's levels, as our Affluent clients re-engaged with their wealth management and planning. New account openings were around triple the levels in Hong Kong and around double in China and Singapore. It takes time to monetize these new relationships, but we are making good progress. In Singapore, around two-thirds, and in Hong Kong, around 80% of new priority accounts are funded within three months of onboarding. We expect these new affluent clients to support wealth income over future quarters. As with financial markets, long-term investment in wealth has built a scale business, and we are now at top three Asia Wealth Manager, advising over 2 million affluent clients. This is across a region where wealth assets are expected to grow over the next few years at around twice the rate of growth expected in the US and Europe. Looking briefly through the business lens, CCIB had a very strong first half income of $5.8 billion up 33% on a strong performance in cash management and financial markets. And the ROTI was 21% up an impressive nine percentage points. CPBB income was up 13% to $3.6 billion on a strong performance in deposits and an ongoing recovery in wealth management. Its ROTI of 28% increased even more, doubling compared with a year ago. Looking at the CCIB network story, cross-border income was up 44% to $3.4 billion, now comprising 59% of CCIB total income with continued growth across all key trade corridors. Notwithstanding lower global trade and a slow China recovery in recent months, cross-border revenues were up around 40% in both Asia and the Europe and America's regions. Asia remains the dominant cross-border region, with intra-regional income up strongly, with the China to ASEAN corridor up 82% and China to Africa and Middle East up 76%. This is high returning business, generating an income return on risk-weighted assets of 11.2%, three percentage points higher than overall CCIB. Ben Hung and his colleagues highlighted the strength of our Asia franchise in May, and it would be no surprise that Asia's performance was a standout. Asia delivered a record first-half income print and a ROTI of 19%, up 8 percentage points year on year. The strong performance in Asia was broad-based. For our Asia markets, 11 produced record income, 7 produced record profits, and 10 produced a ROTI above 12%. The Africa and Middle East region also produced a strong performance, with our retained businesses delivering first-half income up 34% and Roti above 16%, not far behind that of Asia. Sunil Kaushal and his team expertly managed the exit from certain markets, the opening of new businesses, and successfully navigated several tricky sovereign risk challenges. Just looking briefly at our largest markets, Hong Kong, China, and Singapore all delivered record first-half income. India grew slightly more slowly, but this was more a consequence of an exceptionally strong first half last year. The underlying momentum remains very strong. Turning to expenses, costs were up 12%, resulting in 6% positive jaws in the half. The cost-income ratio improved to 3 percentage points year-on-year to 61%. The main elements of the cost increase were inflation of 4% and the College's decision to invest into areas such as financial markets, wealth management, sustainable finance and China, all of which will be integral to delivering strong top-line growth long after the recent period of interest rate volatility settles down. Strategic investment spend was up $189 million for similar reasons. This included the ventures portfolio, with both of our digital banks, Mox and Trust, being on a strong growth trajectory, validating our decision to invest into these businesses some time ago. This investment spend was more than offset by $200 million of productivity savings, and to date we have delivered around half of our three-year $1.3 billion cost efficiency program. We are also upgrading our JAWS guidance for 2023 and now expect to deliver around 4% positive JAWS, with third quarter and fourth quarter expenses expected to be at similar run rates to the second quarter. Turning to credit impairment, the charge of $172 million in the first half was down $92 million year-on-year, reflecting our disciplined and proactive multi-year approach to risk management. This represents a cost of risk of 11 basis points. For China commercial real estate, the portfolio reduced by about $0.4 billion due to client repayments, whilst taking a charge of $82 million mostly on a newly downgraded single name and top-ups on existing Stage 3 exposures. Our provisioning levels on China's CRE are consistent with our cautious outlook on the sector. We retain $136 million of overlay in addition to specific provisions against further deterioration in this portfolio. China property sales softened in the second quarter, and whilst continued policy support for the China CRE sector is helpful, any recovery is likely to remain fragile until buyer confidence improves and sales sustainably recover. There was also a 21 million net release relating to sovereign downgrades. We continue to monitor sovereign risk closely in several markets and have proactively managed our exposures in case further defaults occur. In terms of forward-looking indicators, high-risk assets of $8.9 billion were reduced by over $1 billion in the quarter. Turning now to the balance sheet, on an underlying basis, so excluding FX, CCIB optimizations and some repo activity, customer loans of $290 billion were broadly flat in the second quarter. We have remained disciplined on pricing across products and segments, prioritizing asset returns over volume for volume's sake. and our CCIB business has now optimized most of its three-year target in just under half that time, as Bill will discuss later. We expect assets to grow at a low single-digit rate over the rest of the year. Looking further ahead, we still see good client loan growth opportunities in our footprint by virtue of relatively higher expected levels of forecast GDP growth. Customer deposits of $470 billion were up $11 billion or 2% on an underlying basis since the start of the year. This was mainly due to growth in TB cash and retail time deposits. We have updated some of the new deposit disclosures we gave at the first quarter. Nothing material to report, but just a few key messages to highlight. Our customer deposits are highly diversified by segment, market and industry. Around half our customer deposits are in sticky retail current and savings accounts or corporate operating account balances. Our deposit betas and CASA to TD migration outcomes are in line with our expectations and consistent with what we would expect at this point in the rate cycle. It is also worth remembering that time deposits remain good quality liquidity and are an increasingly important anchor product for deepening our affluent client relationships, particularly in a subdued mortgage market. In Hong Kong and Singapore, time deposit margins are meaningfully higher relative to prior year levels. RWAs of $249 billion were up 2% or $4 billion in the half. Around $8 billion of asset growth and mixed changes, mainly in FM and Treasury, were offset by $7 billion of RWA optimizations, $6 billion of which were in CCIB, mostly relating to the exit of suboptimal RWA relationships. Market RWA was up $3 billion, reflecting higher FM activity levels, but was offset by favorable FX movements. The CET1 ratio of 14% at the top of our target range was flat in the period. First half profits and favorable reserve movements were offset by distributions, including the $1 billion share buyback announced in February, net RWA growth, and FX. In the first half, we also accrued an interim dividend of $168 million, equivalent to 6 cents per share, mechanically calculated as one-third of the full-year 2022 dividend of 18 cents per share. We have also announced today a new $1 billion share buyback to commence imminently and run concurrently with the latter stages of the current program. This will reduce the CET1 ratio in the third quarter by around 40 basis points to 13.6%. including these items our total shareholder distributions over the last 18 months are now 3.9 billion dollars so in conclusion a very strong first half performance in terms of july trading fm is trending in line with july 2022 but slightly lower than june 2023 which saw quite a strong performance we expect u.s rate uncertainty to generate the degree of volatility in the second half In wealth management, we are seeing steady momentum in July in line with the second quarter, with Hong Kong performing particularly well. Encouraged by the first-half performance and the progress on our strategic agenda, we are upgrading elements of our 2023 Forward Guidance. Income is now expected to increase in the range 12% to 14% at constant FX. And we now expect to deliver positive income to cost-yours of around 4% at constant FX. And this will widen further if income outperforms the new target. Accurately forecasting credit impairment is always tricky, especially in a period of more volatile interest rates. But we are not presently seeing anything particular that causes us concern. We are now therefore expecting the full year loan loss rate to be in the 17 to 25 basis point range, barring major unforeseen events. Finally, we have upgraded our 2023 ROTI guidance and now expect our ROTI to reach 10% in 2023, which will be the first time we have crossed this important milestone in a decade. We are not making any changes to our 2024 guidance at this stage. And with that, I'll hand back to Bill.

Thank you, Andy. In the first half of the year, I spent a good part of my time in our markets across Asia, Africa, and the Middle East. The key takeaway was that despite recent challenges, our businesses and clients remain confident in the outlook for and the opportunities in most of our footprint markets. The Asia growth dynamic is compelling, with the region seeing above 5% GDP growth this year and next, with an average GDP growth rate more than four times that expected in either the US or Europe. As we said at our recent Asia investor seminar, we are well positioned through our unparalleled Asian presence to capture the structural growth opportunities in and across Asia. The rest of the world remains underinvested in China, and China remains underinvested in the rest of the world. The ongoing opening of China's economy will increase cross-border financial flows, which we're uniquely positioned to capture. We also expect to see growth in regional trade flows and reconfiguration of supply chains. Asian economies will trade more with each other as regional consumption grows and clients look for diversification and resilience across Asia in addition to their operations in China. India's growth momentum is strong, and the 2020s could well be remembered as India's decade. India presents an opportunity for banks to grow scale and returns as the country moves into the upper middle income bracket and becomes the world's third largest economy by 2030. On the retail side, as the third largest Asian wealth manager, we have a significant opportunity to capture expanding Asia-based wealth flows. These flows will be generated by fast-growing, affluent and middle-class populations with increasingly sophisticated cross-border wealth management needs. And lastly, the rapid expansion of Asia's digital economy is bringing more people into the banking system. This enables us to connect with a broader customer base in a much more cost-effective way through our digital platform and partnership model. Beyond Asia, the Africa and Middle East region is an integral part of global trade and investment corridors whose importance is rising with shifts in global trade dynamics. With our long history and knowledge of these markets, along with our broader global footprint, we can seamlessly support our clients across AME-related corridors where we are seeing strong growth. So turning now to our strategy, let me update you on our progress here. In CCIB, we're making great progress on our 2024 targets. Income return on risk-weighted assets at 8% is well ahead of our target of 6.5%. We've delivered an increase in the proportion of CCIB income generated from our higher returning financial institution clients up to 48%. We've achieved $20 billion of our $22 billion risk-weighted asset optimization target since the start of 2022. We are not limited by our 2024 targets, and where we can do better, I can assure you we will. In CPBV, we're making good strides on the journey to transform our profitability. A key measure, the cost-income ratio, was 58% and on track to achieve our 2024 target of 60%. While strong income growth is the main driver, progress on expenses is also playing its part with delivery of over $300 million of the $500 million three-year gross expense savings target. The level of straight through processing of activities is now 80% from just under 70% in 2021. This is good progress on the way to our target of 90% as we digitize the entire business from end to end. And clients increasingly embrace our digital channels for more of their activities. These efficiencies have also improved customer service quality, and we are now rated best in class for strategic net promoter scores in eight of our nine top markets, a meaningful improvement from 2022. We also continue to grow mass retail client base with over 450,000 new to bank clients and around a further 100,000 clients upgraded from mass retail to affluent in the first half. This reflects our drive to capture the affluent clients of tomorrow earlier in their lifecycle through our digital platforms. The China recovery, after a strong start to the year, has slowed. Despite lowering our 2023 GDP expectations somewhat, we still expect GDP to grow above 5% in China this year and next, supported by measured policy stimulus. However, the larger part of our China business is decoupled from the near-term economic challenges that are impacting domestic China GDP. Our China business is not a proxy for China's economic performance. Instead, our focus is on the flows that derive from longer-term structural opportunities. This includes the further deepening of China's financial markets, greater use of RMB as a global trade reserve and payment currency, increasing client flows in and out of China across our network, and lastly, the flow of mainland wealth from China into the global economy. These trends were evident in the first half of the year, with total China onshore and offshore income up over 30% year on year. This was led by offshore income up nearly 60% to $1.1 billion on strong growth in CCIB cross-border flows and CPBB offshore wealth. Despite the near-term domestic challenges, onshore income was at record levels in the first half, up 5% to $0.6 billion. Reflecting this and lower impairments on our CRE portfolio, China onshore and offshore profits increased in the first half to $0.7 billion, annualizing to our full-year 2024 target of $1.4 billion. Lastly, we said we would return above $5 billion of capital to shareholders between 2022 and 2024. We are well on our way to doing that. Including the $1 billion share buyback announced today and our 2023 interim dividend, we have returned $3.9 billion in capital to shareholders since the start of 2022. As part of the execution of our broader strategic agenda, we are also reshaping our footprint and disposing of non-core businesses. In April 2022, in the AME region, we announced the exit of seven markets and a sole focus on CCIP business and a further two markets. These exits allow us to focus on the regional markets, such as Saudi Arabia and Egypt, where we see greater scale and growth potential. We are making good progress. Following the signing of the agreements for the sale of the Jordan business in March and Zimbabwe in June, we announced in early July the sale of a further five markets – Angola, Cameroon, The Gambia, Sierra Leone, and our CPPB business in Tanzania – In Saudi Arabia, we opened our first branch in June 2021, and since then have seen strong growth in CCIB cross-border income, increasing so far this year by 140%. And in Egypt, we are on track to open an office in the second half of this year, subject to regulatory approval. Our ventures portfolio is now showing real signs of success. Our two virtual banks, Mox in Hong Kong and Trust in Singapore, now have over a million new retail clients between them. This represents around 10% growth in our retail client base in under three years. Mox is targeting profitability in 2024, and Trust, which is one of the fastest growing digital banks in the world since launched just 11 months ago, is expected to be profitable by 2025. Nexus, our banking-as-a-service platform launched in Indonesia in partnership with Bukalapak, a leading Indonesian digital marketplace, has already onboarded over 220,000 customers. We have now also received regulatory approval to launch our Buy Now, Pay Later product, and we anticipate taking Nexus to other markets. Moving to another key area of focus and one of our four main strategic priorities, sustainability. By virtue of our footprint in Asia, Africa, and the Middle East, we have a unique opportunity to make a difference in the markets where it matters most. The world will not achieve its net-zero ambition without significant investment into emerging markets, which represent one of the biggest opportunities to move at pace to low-carbon technologies. However, that transition needs to be just, allowing those markets to meet global climate objectives without depriving them of their right to grow and prosper. Recognizing that need, we have committed to mobilize $300 billion of sustainable finance by 2030. So far, we have delivered $65 billion against this commitment. In doing so, we've grown our sustainable finance asset pool by 8% so far this year, over 90% of which is directed at projects and communities in emerging markets. We continue to make good progress on our broader sustainability agenda, including against our net zero roadmap, having announced absolute emissions reductions targets for the oil and gas sector earlier this year. As a result of our activities in this space, our sustainable finance business has grown from strength to strength, with this year's income up 37%, and we are on track to deliver our sustainable finance income target approaching a billion dollars by 2024. So to wrap up, the group delivered a very strong performance in the first half of 2023, and we continue to expect the structural changes across our footprint to offer significant opportunities in the years ahead. we are making excellent progress on our strategic actions and priorities and are delivering across a broad front of management actions we believe we have the right strategy business model and ambition to deliver our targets our diverse franchise is underpinned by a robust balance sheet which is well capitalized highly liquid and delivering substantial shareholder returns supporting both our growth ambitions and inability to navigate challenges as they arise With our strong start to 2023 and the positive outlook we're upgrading our 2023 earnings guidance, we now expect to deliver 10% ROTE this year in excess of 11% in 2024 with further growth thereafter. We remain focused on delivering these targets by seizing the growth opportunities offered by our unique franchise and in doing so, creating exceptional and sustainable value for the group shareholders. So with that, I will head back to the operator for Q&A.