Standard Chartered PLC

Good morning and good afternoon, everybody, and welcome to our full year 2023 results presentation. Today we have two firsts. For the first time in my career at Standard Chartered, I'm joined by a new CFO, Diego DiGiorgi, who succeeded Andy Halford at the start of the year. And for the first time since I became CEO in 2015, I'm pleased to say that we've hit our double-digit return on tangible equity target. So, first order of business, a very warm welcome to Diego. With over 30 years' experience in the global financial services sector, Diego brings with him a broad and unique skill set, and I very much look forward to working with him in the years ahead as we deliver the next phase of the group strategy. As we pass the double-digit ROTE milestone, I also want to recognize the immense contribution that Andy Halford made to that achievement. Andy joined the bank a year before I did and expertly navigated the group's course through some very, very difficult waters early in our partnership. Andy has been an invaluable member of the management team and a great partner for me and has been pivotal in getting the group to where it is today. I wish him the very best for his future. As usual, I'll make some opening remarks and Diego will take you through the numbers before we set out our plans for the next three years. And as usual, We will then both take your questions. I'll talk more about this later, but wanted to highlight a few specifics where delivery has been impactful in getting us to where we are today. We took a deliberate decision to invest in financial markets and wealth management over the past several years, leveraging what we saw as distinct advantages for us. These investments leave us extremely well positioned. We'll drive income growth for years to come, and that growth is also somewhat less dependent on the interest rate environment. Whilst overall FM results were slightly down following a very strong 2022, flow income was up 7% last year, despite lower market volatility. This income is supported by our investment in rates and credit products, digital platforms, and cross-selling solutions. In wealth management, we've invested in relationship managers, products, and platforms, building a wealth business of scale, which is the third largest wealth manager in Asia. With full reopening of some of our main wealth markets at the beginning of 2023, we have seen over a quarter of a million of new to bank affluent clients. We're monetizing these new relationships at pace with affluent net new money up $29 billion, which is equivalent to around 11% annualized growth in affluent assets under management. We remain fully focused on disciplined capital management. CCIB has delivered on its RWA returns and optimization targets a year ahead of plan, and we have successfully embedded this discipline into BAU. Efficient capital management has given us the optionality and capacity to flex the balance sheet in support of an expected acceleration in client assets in a lower-rate environment. Our focus on capital-light business has in part led to a loan loss rate below our through-the-cycle expectation in recent years. Now, in doing all this, we've created a powerful equity generation engine. A full-year dividend of 27 cents per share and a further $1 billion share buyback we're announcing today brings total capital distributions to over $5 billion since the 1st of January 2022, achieving our target almost a year ahead of schedule. Lastly, after the usual seasonality in December, we've seen an encouraging start to 2024, particularly in wealth and financial markets, supported by the investments we've made. Looking at the strategic scorecard in more detail, in 2022, we set out five actions that would help accelerate the delivery of double-digit ROTE. We've achieved several of these targets a year ahead of plan, and most others are well on track. In 2023, CCIB delivered an income return on risk-weighted assets of 7.8%, having removed $24 billion of low-returning RWA ahead of target end time. We also grew financial institutions income to just short of our 50% target. In CPBB, we achieved a 60% cost-to-income target one year ahead of plan as we progressed towards the target $500 million of structural expense savings. Around 85% of retail transactions are now digitized end-to-end. We've done less well in growing the mass retail client base. In large part, this reflects the slower rollout of our Nexus platform in Indonesia. That said, in Nexus, we have created an innovative digital platform, which gives us greater optionality as we explore how best to use this technology to grow our mass market business. Our other digital partnerships, for example, with Ant and JD in China and Atomi in Singapore, are going from strength to strength. The mass retail business continues to act as a significant feeder for the affluent segment, with around 224,000 clients being upgraded this year. Nearly ahead of plan, China franchise operating profit is under $100 million, short of the target of $1.4 billion. This is no mean feat, given the material profitability drag in the last two years of higher impairments in the China CRE sector, and speaks to the robust health of our China business. Thank you very much. And this offshore income component is growing at a faster pace and is significantly higher returning compared to the domestic China income. Having spent time in China over the past year, it is clear that in our focus areas, cross-border activity and new economy industries, activity levels are very robust and certainly much higher than the headlines in the West would suggest. We continue to invest in our China franchise, but moderate the pace given COVID impacts and levels of economic activity in some sectors. The group has achieved 4% positive jobs in 2023 despite inflationary pressures and while maintaining our investment program. We've achieved over two-thirds of our $1.3 billion cost efficiencies target with one year to go. Our 60% cost-income ratio target is within reach, having achieved 63% in 2023. Generating enduring operating leverage is a central pillar of our strategy, and at the heart of the productivity program we will discuss shortly. As with all milestones, 10% ROTE is not the limit of our ambitions, but just the most recent point on our progression to returns in excess of our cost of capital. In my time at the bank... We've been increasing our ROTE on average by over 100 basis points per year, and we are as well positioned as we have ever been to increase ROTE, targeting 12% in 2026. As in past years, we will do this through income growth, expense discipline, ongoing transformation, and active capital management. We have the right strategy in the right markets, and we have momentum. We will now build on that momentum to deliver sustainably higher returns. The financial framework we're presenting today is designed to do that. Through our hard work, focus, and investment, we believe we've arrived at what we see as a virtuous circle. We generate consistent income growth across our markets and products, generating operational leverage, which allows us to further invest in growth. We will grow net interest income in 2024 and beyond as hedging, client asset growth, and asset and liability mixed benefits offset the expected reduction in interest rates. Non-NAI growth will be powered by the significant investments we've made in wealth and financial markets, which I mentioned earlier. We will accelerate our focus to simplify, standardize, and digitize the group through our $1.5 billion three-year Fit for Growth program, which, combined with a commitment to hold our cost below $12 billion in 2026, will drive further operational leverage. As Diego will elaborate, this is all about streamlining our processes, improving outcomes for our clients, colleagues, and shareholders. We expect this to be transformational for the group, building on substantial foundations established in recent years. Taken together, these actions will generate higher returns and accrete capital. We will deliver substantial shareholder distributions over the period, targeting at least $5 billion of capital returns by 2026. Consequently, we expect ROTE to increase steadily from 10%, targeting 12% in 2026, and to progress thereafter. Now over to Diego to take you through the numbers.

Hello, everyone. Thank you for joining today. I have already met some of you, and I'm looking forward to meeting more of you in the weeks ahead. Turning to the financials last year. In my remarks, I will be comparing year on year and speaking to constant currency unless stated otherwise. The fourth quarter was robust, with income up 7%. Net interest income was up 6% on further rate rises, and we achieved a net interest margin of 170 basis points. Non-NII grew 8%, but was down 19% quarter-on-quarter, as we saw the usual seasonality in financial markets and wealth management. We managed costs well in the fourth quarter, with operating expenses up 2% year-on-year, but lower quarter-on-quarter, delivering 5% positive jobs in the period. Credit impairment was materially lower, with a charge of just over $60 million, reflecting much lower provisions in China commercial real estate relative to both the prior period and quarter. We took a further $153 million write-down in restructuring relating to our associate investment in China Bohai Bank. All in? A resilient fourth quarter, with profits of $1.1 billion, up 74%, which supported the delivery of our full-year 2023 targets. Turning to the full year, the headline is that we hit our double-digit return on tangible equity target, delivering 10.1% ROTE in 2023. Total income was up 13%. Adjusted net interest income grew 23%, and non-NII was up 2% as the continued recovery in wealth management was part of set by lower financial markets. Expenses were up 8%, including further inflationary pressure and ongoing business investments. These were partly funded by cost saves, and overall we delivered 4% positive jobs for the year. credit impairments were more than $300 million lower, reflecting reduced charges on our China CRE portfolio. Together, this generated underlying operating profit before tax of $5.7 billion, up 27%. Our strong levels of profitability support a further $1 billion share buyback, which we will take the pro forma CET1 ratio to 13.6%, back within our 13% to 14% target range. Looking at trading momentum, as Bill mentioned, we are having an encouraging start to the year, especially in wealth management and financial markets. Looking at product income more closely, we see a similar story to recent quarters. Cash management and retail deposits were the standouts, up 83% and 74% respectively, both benefiting from rising interest rates. In cash management... we maintained pricing discipline and managed pass-through rates well to support margin expansion, notwithstanding lower average balances. In retail deposits, we saw both margin expansion and higher balances in part due to deposit campaigns across our major markets. Mortgage income was down 62%, reflecting our deliberate step back from new origination given currently unattractive pricing dynamics, with volumes falling by around $6 billion. trade and working capital income was resilient, down just 1% despite headwinds from lower balances. This reflected subdued momentum in trade activity in some markets and customer preference for local currency financing in some products. This was partly offset by margin improvement as we focused on higher return in products. The Treasury loss of around $900 million was mainly due to the impact of our hedging positions in a higher interest rates environment. This negative carry is more than offset by a corresponding increase in the net interest margin. Treasury also saw a drag from the cost of holding surplus liquidity during part of the year rather than it being deployed into client assets. Adjusted net interest income increased 23%, driven by higher rates, with the net interest margin expanding 26 basis points to 167 basis points. Strong pricing discipline and pass-through rate management ensured the group captured the benefit of rising rates. This was partly offset by headwinds from ongoing CASA to TD migration and an adverse change in the mix between treasury and customer assets. Average interest earning assets of $573 billion were up 1% or 7% excluding the impact of currency translation in our RWA optimization initiatives. financial markets income of $5.1 billion was down 2%. However, adjusting for the non-repeat of $244 million of gains on structured notes in 2022 income was up 3%. Product-wise, macro trading was down 1%, as lower FX and commodities income was partly offset by a strong performance in rates, where an expanded product offering allowed us to capture greater client wallet share. credit markets was up 5% due to strong momentum in structured and project finance. Encouragingly, flow income, which is over two-thirds of FM, was resilient even in less volatile markets, growing 7% in the year. This growth in flow income was partially offset by lower episodic income due to subdued market volatility and lower issuance levels. We saw similar trends in the fourth quarter, with continued growth in flow income up similar levels, whilst episodic income halved. Despite challenging conditions, we are now ranked number one in footprint G3 syndicated loan and bond issuance, and we gained significant wallet share in global FIC for financial institutions. Wealth momentum was strong, with income of $1.9 billion up 10%. Treasury products and bank assurance were up 16% and 17% respectively, while managed investments and secured wealth lending were impacted by client deleveraging and margin compression. Performance was broad-based, as three of our five largest wealth markets, Hong Kong, China, and Taiwan, all grew income at double-digit rates. Two key leading indicators for future wealth momentum deserve special mention. First, we onboarded over a quarter of a million new-to-bank affluent clients in 2023, which equates to around 10% of our affluent client base. New affluent clients doubled in Hong Kong and Korea and grew well in China and Singapore. Second, we have had real success in monetizing these new relationships and can do more as we look ahead. Affluent net new money was up 50% to $29 billion, which is equivalent to around an 11% annual growth in affluent assets under management. Importantly, around half of net new money was in wealth products as opposed to deposits. As rates fall, we would expect our customers old and new to continue to shift assets from deposits into the broader wealth products set. The very high levels of new-to-bank affluent customers and our success in monetizing these new relationships was a strong tailwind in 2023, and we expect it to continue to accelerate. Client experience remains at the center of our affluent proposition and is evident in our net promoter scores, where we are ranked best in class in priority banking across nine key markets. Turning to our cross-border business, we see our client supply chains and investment flows shifting and changing complexion. Cross-border income of nearly $7 billion was up 31% and earns a return on risk-weighted assets of around 13%, which is at a meaningful premium to domestic business. Some corridors deserve special mention. First, west-to-east flows, where we connect western multinational corporations and financial institutions to our footprint markets in Asia and AME. This generated $1 billion in income, up 31%. 32% in the ASEAN corridor and up 42% in the AME corridor. We are also well positioned to capture opportunities from supply chain reconfiguration in Asia, which is our biggest network engine overall, with intra-Asia income of $2.2 billion, up 24%. Last but not least, AME was our fastest-growing network region, with income up 39% to $0.9 billion, reflecting strong activity levels in the Middle East. We continue to invest across the corridors and are well positioned at both ends of the growing trade flows between our markets. Expenses were broadly flat quarter-on-quarter as we maintained cost discipline into the end of the year. Annual expenses of $11 billion increased 8% reflecting inflationary effects, ongoing investment, and supporting business growth initiatives such as new frontline staff and market expansion. We continued investing at pace in FM and wealth management. These are the two big engines of non-NII income and will deliver sustainable growth in a lower interest rate environment. Investments were part funded by $400 million of gross cost saves under the ongoing $1.3 billion cost program. Overall, we delivered 4% positive jobs in the year. Full year impairments of $528 million were over $300 million lower. This represented a 17 basis points loan loss rate, well below our through the cycle expectation of between 30 and 35 basis points. China commercial real estate impairments of $282 million were $300 million lower and mostly related to top-ups on defaulted accounts, overlay movements, and a very small number of new downgrades. we have reduced our exposure to China commercial real estate by around 40% since the end of 2021. The cover levels on defaulted accounts are high, at 88%, and we retain a management overlay of just over $140 million against further downside risk, given a sustainable recovery in prices and sales is yet to occur. Our sovereign portfolio proved resilient, with a net release of $45 million in the year, reflecting recoveries of prior charges, and we continue to monitor this portfolio closely. Retail impairments of $354 million reflects normal flows into default and a slight uptick in delinquency trends across the year. An $85 million charge in ventures was primarily from portfolio growth and increased provisions in MOCs, where we have, as a consequence, tightened credit criteria and controls. High-risk assets were up $1.2 billion in the quarter. The $1 billion increase in credit-grade 12 accounts was substantially from a change in instrument on an existing sovereign exposure with no increase in risk. Early alerts were broadly stable in the quarter. Touching briefly on the balance sheet, on an underlying basis, customer loans of $287 billion were down 2% in the quarter and 1% in the year. we deliberately pulled back on new mortgage origination due to unfavorable pricing dynamics. Client demand for borrowing in a high interest rate environment was muted, but we expect asset demand to pick up as rates drift lower. So far this year, for example, the CCIB book has started to see signs of growth as client activity has picked up. Customer deposits were up $10 billion in the quarter following the success of deposit campaigns in CPBB. We were able to run off some more expensive treasury balances as we managed the LCR down to 145%, more in line with our historical average. Lastly, turning to capital. Risk-weighted assets of $244 billion were broadly flat in the year. Asset growth and mixed changes of $12 billion were offset by optimization actions, of which $10 billion were in CCIB. Negative credit migration, principally related to sovereign downgrades, led to nearly $3 billion of additional RWA. Market RWA increased by just over $4 billion due to portfolio growth and an increase in market volatility. The CET1 ratio increased 10 basis points to 14.1% as we more than funded $2.7 billion of ordinary shareholder distributions from accrued profits. The 20 basis points benefit on completion of the aviation sale was broadly offset by the 23 basis point impact of the Buhai impairments we took in the second half. We also saw 20 basis points gain from reserve movements as the rallying rates reduced losses on the fair-valued securities portfolio. The new $1 billion share buyback will take the pro forma CET1 ratio to 13.6% in the first quarter of 2024. So, leaving a successful 2023 behind, let's now turn to the future. Our focus is on building on our double-digit ROTE and accelerating from here to deliver sustainably higher returns over the next three years. Let me take you through the financial framework that will guide the delivery of that outcome. Income will increase in a 5% to 7% range over the next three years, with 2024 income expected to be around the top of that range. In 2024, NII will grow to between $10 and $10.25 billion. Lower interest rates will be mainly offset by an expected low single-digit percentage increase in volumes and tailwinds from our hedging positions. We are stepping up our focus on improving operational leverage and are committed to delivering positive income-to-cost jobs in each year. As Bill mentioned before, we are launching a new $1.5 billion productivity and simplification program we are calling Fit for Growth. This program is designed to simplify, standardize, and digitize the group to ensure we maximize the growth opportunity that is ahead of us. Our loan loss rate guidance is unchanged. We will maintain our disciplined approach to capital deployment with low single-digit percentage growth in our WA. We currently expect the day one impact of Basel 3.1 to be no more than 5% of RWA, post-management actions and pending clarification of the rules. This financial framework will generate sufficient equity to support our plans to return at least $5 billion of capital to shareholders. In terms of returns, as Bill mentioned, our target is to steadily increase our OTE from 10%, targeting 12% in 2026 and to progress thereafter. Now to look at some aspects of the new financial framework in a little more detail, beginning with net interest income. We expect net interest income to grow to between $10 and $10.25 billion in 2024 and continue to grow thereafter. This because of four reasons. First, the impact of lower rates. The slide shows the impact of rate movements implied by market forward curves weighted across our key footprint currencies. This reflects market expectations that not all currencies will follow the same path in terms of the magnitude or timing of rate cuts. The IRBB disclosures are not the best way to estimate the impact of interest rate movements on our NII, as they assume an instant parallel shift across all currencies and a static balance sheet, neither of which are realistic assumptions. Instead, the rate we have provided you is more appropriate for our balance sheet and currency mix. On this basis, we expect a 51 basis point cut in currency-weighted forward rates in 2024, based on forward curves from earlier this year. Second, moving to our hedges. In February 2024, the last $12.5 billion of our short-term income hedges expire and will be reinvested at higher yields. This delivers a mechanical benefit of around $400 million in 2024, with a smaller benefit of $100 million in 2025. Looking further out, our structural hedges continue to provide long-term protection to net interest income, particularly if rates fall further than the market expects. On these first two points, we have included slides in the appendix that cover structural hedging, rate curve assumptions, and the usual IRBB sensitivities disclosures. Thirdly, as client asset demand picks up in a lower-rate environment, we expect to deliver low single-digit asset growth across our businesses. Near-term, we expect this mainly in trade and credit markets, with CCPL increasing over time and mortgages growing later in the three-year period. Fourth, there will be benefits deriving from our assets and liability mix. We expect higher-yielding client assets to grow at a faster rate than Treasury assets and to be a larger part of the overall mix. On the liability side, in 2025 and 2026, lower rates should drive benefits from TD to Casa migration, as the migration trend we have experienced in the recent past reverses. We have built two strong engines of growth of non-NII that will support our 5% to 7% total income target. This year, non-NII accounted for almost half of the group's income. Financial markets and wealth management represent around 70% of non-NII. Both these businesses have achieved a long-term growth rate of around 8%, and we have invested at pace in recent years in both, transforming their complexion, and these investments are paying off. We have scaled these businesses, expanded our product offering, and diversified our client base, making income more resilient through the cycle. In FM, we now have a diverse business with unrivaled access to and expertise in emerging markets and a very credible G10 capability. Over two-thirds of FM income is flow, which has continued to grow even in less volatile markets. We have increased the velocity of our FM balance sheet through our originate-to-distribute model and the build-out of digital platforms to support an expanded macro-trading product set. Our expanded product capability, including carbon trading and structured finance, makes us more relevant to our clients as they search for yield in a lower-rate environment. In wealth management, we are now top three in Asia, where growth in affluent assets are expected to outpace the rest of the world. We now have a significant opportunity to monetize over a quarter of a million new-to-bank affluent clients onboarded last year. Net new money flows of $29 billion in 2023 were broadly split between wealth products and deposits, and the mix will continue to shift towards wealth products as rates come down. To improve our operational leverage, we are going to address the complexity that slows us down at times to make better, quicker decisions and create capacity to reinvest in our business. We are embarking on a Fit for Growth program to simplify, standardize, and digitize our business and improve our organizational effectiveness to deliver $1.5 billion in savings. Fit for Growth builds on the foundations of all the work we have done over the years. It will improve productivity and our client and employee experiences while creating future capacity to reinvest and grow in a sustainably profitable way. we will back our ambition with a commitment to keep costs below $12 billion in 2026, implying a cost growth CAGR of 3% over the three years. The costs to achieve such saves will be no more than $1.5 billion, with the largest impact being in 2025. To further bolster growth, we will reinvest some of the saves into return accretive opportunities in the later years of the program, but only once the larger part of the saves has been delivered. Lastly, we will assertively manage the cost base, whatever the income outcome. We will maintain cost discipline and are targeting positive jobs in each year through 2026. As we deliver strong income growth and improved operational leverage, we expect to generate levels of equity that will support substantial capital distributions. We have a demonstrable track record of delivering shareholder returns, including today's new $1 billion share buyback and the 2023 dividend of $0.27 per share. We have returned $5.5 billion to shareholders since January 2022, exceeding our three-year shareholder distribution target in just two years. We are confident we will experience no more than 5% RWA inflation from absorbing the day-one impact of Basel 3.1 in July 2025. The rules here still need to be clarified and we will increase our mitigating actions as we know more. Looking ahead, we intend to return at least a further $5 billion to shareholders between 2024 and 2026 and continue to increase the full-year dividend per share over time. So, to recap... We expect to deliver total income growth over the next three years of between 5% and 7%, with this year around the top of that range. Our new $1.5 billion Fit for Growth program will help ensure we deliver increased operational leverage, positive jobs, and costs below $12 billion in 2026. We expect credit impairments to continue to normalize to a through-the-cycle expectation of 30 to 35 basis points. and RWAs will grow at a low single-digit percentage with a continued focus on returns discipline. This will result in ROTE increasing steadily from 10%, and we are targeting 12% in 2026, and for it to progress thereafter. With that, back to Bill.

Thanks, Diego. Looking ahead, the structural growth opportunities in our markets are compelling, and our strategy is increasingly aligned to these. Capturing them will deliver value for both our clients and the communities in which we operate. Our footprint is home to some of the fastest-growing markets in the world. GDP growth of around 5% in Asia for the next three years is around double the rate of growth in the U.S. and five times the rate in the Euro area, contributing two-thirds of global growth. We're seeing a shifting of investment flows and global supply chains across our footprint, driven by geopolitical tensions, the search for post-pandemic resilience, and changing patterns of economic production and consumption. These trends will support our business for years to come, as our unique global network allows us to capture many of them. We're present in 21 Asian markets and are the only bank with a presence in all ASEAN markets. As one of the largest international banks, we have a significant presence in Africa and across six markets in the Middle East. Having recently launched operations in Egypt, we've reinforced our commitment to the AME region, which is a unique calling card for our global client base. The scale of wealth creation in Asia and the Middle East is compelling, and our Asia wealth franchise is the third largest by AUM. Our three financial hubs in Hong Kong, UAE, and Singapore are well positioned as super connectors, capturing growth and cross-border wealth flows. And lastly, as climate risks continue to rise, by 2030, there is a $2.5 to $3 trillion per year financing gap, and we are in a position to profitably address those needs. So, with multiple opportunities for growth in our footprint, which our strategy has successfully captured, we're now focused on turbocharging our business to deliver sustainably higher returns. Turning to CCID's plans in more detail, we will continue to increase our focus on two distinct client segments. First, global multinational clients and their subsidiaries who have significant and expanding operations in our footprint. And second, our financial institutions clients who are looking to invest more in our markets or provide banking and other financial services there. Growth in business and wallet share in these client segments, which are more intensive users of our cross-border and financial markets capabilities, will support 8% to 10% growth in both cross-border and financial institutions income. It's also worth remembering that cross-border income and financial institution clients generate higher returns compared to domestic and corporate clients, respectively. In terms of products, we'll target growing our financing income by 8% to 10% through our originate to distribute model, targeting our sponsor and financial institutions clients with a broader product set. As part of that, we've entered an initial partnership with a major asset manager to jointly underwrite global credit product for subsequent distribution. We hope to enter further arrangements to leverage our own origination and that of others across key credit market segments around the world. Following the tough market conditions in 2023, we expect to be able to grow trade and working capital financing income between 6 to 8 percent by capturing market share through strategic partnerships and digital channels. As we deliver on our $300 billion of sustainable financing commitment, building on our strengths in carbon markets, adaptation finance, biodiversity, and blended finance, we now expect to grow sustainable finance income to over $1 billion by 2025. The CPBB team will build on the exceptional levels of new-to-bank affluent clients and net new money that we saw last year, with a target of growing affluent net new money flows by more than $80 billion over the next three years. We have particular expertise in international wealth clients, including fast growing examples, such as Chinese clients looking to diversify away from domestic property or equity markets. We aim to add over 100,000 international affluent clients, taking this cohort to over 375,000 by 2026. We also expect our mass retail business to continue to provide a robust pipeline of new affluent clients, targeting the up-tearing of a further 800,000 to 1 million clients across the continuum over the next three years. And lastly, we'll continue to grow customer numbers and scale through our partnerships, with partnership assets growing to over $3 billion by 2026. In ventures, We aim to convert the exceptional momentum in our two main digital banks, Mox and Trust, into sustainable profitability. Mox has grown to over 500,000 customers and is the leading Hong Kong digital bank for digital lending and digital wealth. Trust in Singapore now has around 700,000 customers just over a year after launch, making it one of the fastest growing digital banks globally. It has 12% market penetration today, and we aim to become the fourth largest retail bank in Singapore by customer numbers this year. In the rest of the venture's portfolio, we're making progress. We've launched five new ventures, including a digital assets base in UAE and Japan, and profitably exited two investments. We're now serving nearly 600,000 new customers. We're targeting for the overall segment to be ROTE accretive by 2026. Turning to the fourth pillar of the strategy we set out in 2021, sustainability. The world will not achieve its net zero ambition without a 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, we will mobilize $300 billion of sustainable finance by 2030 and to date have delivered $87 billion against this commitment. In doing so, we've grown our sustainability asset pool by 16%, with 85% of our use of proceeds assets located in Asia, Middle East, and Africa. We continue to progress 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. We've now set out emissions baselines and production targets in 11 of 12 high-carbon emitting sectors defined by the Net Zero Banking Alliance. As a result, our sustainable finance business has gone from strength to strength with income of $720 million, up 42% this year, well on our way to deliver our 2025 target of above $1 billion. So in summary, whilst pleased to have hit our double-digit ROTE target in 2023, we will now redouble our focus on the relentless march towards returns in excess of our cost of capital. Our unique franchise in the world's most dynamic markets gives us a strategic advantage and confidence that we can continue to grow, even in a lower-rate environment. Thank you very much. Thank you. As a result of all this, we expect ROTE to increase steadily from 10% to our target of 12% in 2026 and for it to continue to progress thereafter. With that, I'll hand back to the operator for some questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. If you wish to ask a question via the webcast, please type it into the box and click submit. Please stand by while we compile the Q&A roster. Thank you. We will now go to our first question. And your first question. comes from the line of Joseph Dickerson from Jefferies. Please go ahead.

Joseph Dickerson Hi, good morning. Thank you for taking my questions and congrats on a very clear set of targets for 26. I guess two questions. How much of the trajectory to the 12% return on tangible do you believe is idiosyncratic and how much do you believe requires improvement in the market backdrop Or you could put it another way. How do you look at the revenue growth between idiosyncratic and macro? Maybe that's perhaps the better part of the question. And then just in terms of the shareholder distribution target of greater than $5 billion, I mean, you returned $5.5 since 2022 at a lower return. I guess there's the emphasis on greater than and What are the constraints there? Is it the $1.5 billion cost to achieve plus 5% RWA inflation on Basel I, kind of mitigating some of that, or is it just being conservative? Thanks.

Great. Thanks very much, Joseph. Thanks. Thanks for the question. Thanks for the use of a sex to syllabic word right up front. Trying to throw us on a Friday morning. But I get I get the point. I think the trajectory to 12 percent. What has to happen? We have to continue to do what we've been doing, which is to grow our income. Obviously, we've got it to top end of the five to seven range in in 2024 and then five to seven percent thereafter. It's going to be driven by ongoing growth in our very strong wealth and FM businesses, the other non-NII businesses in transaction banking and retail. And, of course, it's going to be driven by what we've got to do, which is growing NII. How much of that is structural? I mean, I would say it's reasonably structural. But, of course, key elements of that progression are market sensitive and market sensitive in particular in financial markets and wealth. But interesting to note that we had good resumption of growth in the wealth business in the second half of last year and through the fourth quarter. As we've indicated, we've had a good start to this year in wealth, NFM and other businesses. It's not because the market's been a supermarket. Obviously, our clients are probably disproportionately affected by sentiment in the Chinese equity market, China and Hong Kong, which has not been attractive at all. So it gives me comfort that now with our diversified wealth platform, meaning bank assurance, fixed income product, credit product, funds, single stocks, some alternatives, et cetera, that we can weather a fair amount of market up and down. The FM business clearly swings around. But, again, really important to note that we've been separating for a couple of years now for all of our shareholders the flow income versus the episodic. The flow income has been a really good, steady growth, 7%. In the most recent period, the episodic has been more volatile, as we always said it would. So we had a relatively weak episodic quarter, still positive, but but well off the the extraordinarily high levels from earlier in the year or in 2022. Is that idiosyncratic? Yeah, to an extent. I mean, maybe by definition, it's idiosyncratic. But have we demonstrated that we can generate good periods of episodic income to complement that really, really steady flow income? Year after year after year, yeah, we have. So I'd say it's largely structural, and I feel quite good about the income growth that goes to that. The cost management, and Diego, who I'm going to hand to in a second, will for sure talk about fit for growth and the cost component of getting to a 12% plus, plus, plus, ROTE, that's just structural, but that's our structural, not market structural. We have opportunities to accelerate the transformation of our business, and we're going to do that. And finally, you're quite right to point out that we've guided to $5 billion of capital returns, in excess of, right, on the back of a strong set of incremental guidance around returns and income and JAWS growth. And obviously, like we did last time, we're going to do everything we can to beat that. We got it to five over three years. We had five and a half and two. And we did that because we we outperformed pretty much on every line of our of our underlying guidance, growth costs and capital discipline. And but we also know as we go forward that we have had unusually low loan impairments. Now. I know I've been sitting here for five or six years saying that it's not always been perfect, but we have consistently come in below our what we consider to be a through the cycle number. Is that structural or is that idiosyncratic to going back to your first question? A bit of both. I mean, I think we structurally improved the quality of our underwriting position and the market has been benign for credit impairments, not in some horrible areas like China commercial real estate, but more broadly, yes. The So can we – and as you point out, we've got Basel 3.1 coming in. I think we quite cautiously guided to a 5% inflation in RWAs. We don't know what the rules are. We've seen the consultation. We kind of mechanically go through the consultation and say if that's what happens and we don't do anything about it or we do just the minimum about it, it will get to 5%. But obviously, once the rules are clear, we will do something about it, and I would hope – that we could come in below 5% RWA inflation. And we'll have to see what, if any, impact that optimization or mitigating actions have on income. Very manageable in the overall scheme of things, as we've indicated throughout this whole Basel 3.1 progression. So, yeah, overall, I'd say that our 12% is substantially, but not entirely, in our control. And capital returns, if we nail it, then, as we have in the past, we could hope to increase that distribution number.

Diego. I would add just one thing. When we talk about using the full range of our CET1 range, we mean it. We've done it in the past. We've done it in 22. We went to 13.2% pro forma for the share buyback, and we intend to use that dynamically, as we say.

Super. Thanks again, Joe. Operator, can we have the next question?

Thank you. The next question comes from the line of Aman Wakar from Barclays. Please go ahead.

Good morning, Bill. Good morning, Diego. I had two questions on costs, actually one for each of you. First of all, Diego, could you give us a bit more detail on the Fit for Growth kind of restructuring program. And you're kind of alluding to addressing the various structural inefficiencies and complexities inherent in the business. So can you kind of talk about exactly what they are? And is this around headcount? Are you looking to kind of reverse some of the headcount inflation that you guys have overseen over the last few years? I think we need – I think we need more clarity and color on exactly what you're looking to address in the business. And then a second one for Bill, I guess, a broader reflection. Interested in your broader reflection, I guess, you know, the structural inefficiency and complexities that are inherent in the business. You know, this is a business that you've overseen as CEO since 2015. So kind of what is your reflection on that? the need to address these inefficiencies and complexities in your business. What's new in the approach that you and Diego are kind of coming up with today? And indeed, why did we not actually just do this before?

Thanks very much. And let me take the high level question and pass it to Diego for the question that you directed towards him. The so in my time in the bank, we've we've gone from an initial period of cleanup and. Part of the cleanup was dealing with really an extraordinarily large technology deficit, meaning that we had quite a big obsolescence problem and we had some really structural foundation layer work that needed to be done. The deficit was closed relatively quickly because it would have been imprudent to do otherwise. The foundation layer, which included things like migrating substantially to a single core banking system across the bank, migration of all of our HR and now financial systems onto a state-of-the-art SAP-based platform. That was work that we did pretty consistently over the past five or six years. But as we and we've seen the results of that, we've been able to grow our expenses well below the rate of inflation consistently over seven years without major without major exits. So and we've had gross productivity saves, which has been substantial. But as we reflect on and we have reflected quite a bit on what we need to do now, it's that it's called the final push. And I don't want to suggest for a moment that there ever that there's ever an end to to your technology evolution. Of course, the market has changed a lot. During my time in the bank, we've gone from imagining the cloud to imagining having the bulk of our applications be cloud-based. I think we were probably one of the two or three most active and earliest banks in terms of cloud migration. But now is the time for us to complete that task over the next two, three, four, five years. We obviously built a few digital banks. Moxon Trust were the two that I commented on earlier. But We got another dozen or so around the world and minority stakes and some really important ones in Korea, Taiwan and elsewhere. And we learned a lot about how to create a bank from the bottom up through that process. And we're now in a position to deploy some of those earnings into into into the into the core bank, into the into the mothership, as it were. And now we have, and Diego's going to talk to this at length, I know, but we have a real opportunity to drive a fundamental transformation of the way that we look at processes, not just end-to-end, always with the client in mind, but also horizontally. What are the shared services that we can introduce? What are the centers of excellence that we can develop to get that next substantial round of efficiency? Of course, in many cases, that means... taking out existing infrastructure to replace it with something that's more fit for purpose, hence the cost to achieve. But, yeah, I'm actually extremely happy with the progress that we've made. I think it's inevitable that whether it's me sitting in the seat or somebody else, you take the view that there's more that we can do. Let's get at it. Let's get at it with dim and vigor.

Diego. Fit for Growth addresses the complexities and inefficiencies that Bill has been talking about, and it's really important that we focus on the fact that it does that without affecting the revenue drivers of the business. On the contrary, it's built to really enhance and improve the profitability and the sustainable profitability of our businesses. The name is a good moniker. How does it do that? It enhances the experience of our clients, it enhances the experience of our colleagues, and it makes doing business with the bank easier. three fundamental levers and one thing that runs across. First, the re-engineering of the core processes of the bank. It's a matter of leveraging the automation opportunities, the digital channels. You have seen in our previous plans to the point that Fit for Growth is a continuation of a path, an intensification of a path that the bank has taken in the past. You've seen targets. We've had targets at times on straight-to-processing. We had targets in terms of automation. And all of that will continue. In order to do that, we need to deliver our services more efficiently, which is the second pillar of Fit4Growth. This bank has been at the forefront of rightshoring. When did we establish the first... 30 years ago. Okay, so when people didn't even call it that way, probably. But when we created that, we didn't know that at a certain point we would have like 14 units in four different countries. We can do more to create shared services, enterprise-level services that cut across everything. And if there is one difference between our previous 1.3 billion services, Productivity drive during the 22 to 24 plan and the current 1.5 billion feet for growth is exactly as Bill alluded to before, to the fact of moving from looking at ourselves as siloes to looking at ourselves horizontally. And that drives meaningful efficiencies that we are going to be working on in the years to come. In order to do that, of course, one of the main levers, not the only one, but one of the main levers is technology. And so technology for us means, in the mantra of Fit for Growth, means standardization. We have a wide range of activities in a wide range of locations, and the objective is to offer standardized technology products to our people and to our clients in a way that makes us as efficient as possible. Now, that means reducing the number of technology products and reducing the number of applications. We have some ambitious targets there that over time we will share with you. And it also means improving the productivity of our engineers and make sure that they spend time where it matters the most, which is coding time. Throughout all of this, there is obviously an undercurrent of organizational design and the organizational structures and organizational designs evolve with time. For us, the heavy emphasis, as always, will be on the upskilling and reskilling of our people as the changes in technology lead inevitably to a change in the composition of our workforce, I would say. Excellent.

Good. I hope that satisfies. Operator, can we go to the next question, please?

Thank you. We'll now take the next question. And your next question comes from the line of Alistair Ryan, Bank of America. Please go ahead.

Thank you. Good morning. And just to echo Joe's comment, Thank you for the very clear plans, but of course, you know, it's on a call full of analysts, so you'd expect us to try and take them apart a bit. So into 2025, very modest loan growth, which I appreciate. You face a high cost of capital and more hedging in place, but still yield curves are downward sloping. So it feels like unless you're making more out of deposits or you've got higher yield in loans, net interest income is a bit of a struggle in 2025. So to get to 5% to 7% revenue growth, you'd need to be right at the top of your ranges on non-interest income. So the question really is, which of those pieces do you surprise positively to get into that range that you just set today? Thank you.

Yeah. Great, Alistair. Thanks for the question. So there's a few moving pieces. Let's just do a quick recap of history. For the past... well, probably eight years, but certainly very specifically for the past five years, we've had a very substantial optimization program. Optimized means lots of different things. Obviously, it's had the effect of increasing our return on risk-weighted assets from under 2% to well over 7%. But it has involved a reduction in our loan balances and a reduction in RWAs associated with those. obviously has to some extent come at the expense of income, but obviously was contributing substantially to the improvement in returns. We're never done with the optimization. The team is constantly reviewing every asset in the portfolio, every credit on our roster to determine whether we can get an adequate return from those clients or what we need to do to get that return. The optimization will be ongoing, but the balance has clearly shifted. from optimization weighing down the aggregate loan balance, hence NII, to the growth part of our business, bolstering the NII, to use that word. And yes, the first piece is we're going from down to up in terms of our approach to lending. The fact that it's happening at a time when some markets are actually quite attractive right now gives us an opportunity to shift the mix. And so when we look at some of the higher-yielding asset categories that we've substantially avoided, not entirely, you'll quickly point out that we took impairments against our China commercial real estate portfolio. But we're quite underweight commercial real estate in other markets. In fact, we were underweight in China as well, but it doesn't mean it doesn't hurt when it hits, because it did. We have been relatively underweight in leveraged finance outside of Asia, Middle East and Africa. We've been relatively underweight in unsecured consumer credit. These are all areas where we are. actively investing to develop our capabilities to grow. These are higher yielding areas, and they'll contribute to some loan growth on the margin, and will contribute to NII growth. And then, third, obviously, we have the benefit both of the roll-off of our existing short-term hedges, but also the opportunity now at higher yields to continue to introduce longer and bigger structural hedges. And that should support the NII even in a relatively, well, the expected falling rate environment. So overall, yeah, we're calling for NII growth because we're just well positioned for that in every way other than falling interest rates. And that would partially mitigate it. But Diego, I know you've been thinking about this one a lot.

So I think Bill has given you a very good tour de raison of the entire period. I'll stick for a second to the 25 that was part of your question. Take whatever happens in 24. Take out the rolling out of the expiry of the larger part of the positive effects of the structural hedge. We indicate there is an additional effect in 25. Think of our hedges as protection against untoward increased decreases in the interest rate environment. Think about the fact that asset classes start firing at different times in the cycle. And so certain of the asset classes will produce volume growth throughout the period. Certain will come in during later parts. And you mentioned 25. We'll see whether in 25 we see anything from mortgages in Hong Kong. But later on in the interest rate cycle, we'll certainly also end up going there. The asset mix continues to improve. As more and more of these asset classes come in, we can increase the percentage of commercial assets in our asset mix and reduce the percentage of lower-yielding treasury assets. As time goes by, in 2024, Casa TD, TD Casa in this case, migration limited, we'll see. As time accelerates and interest rates continue to decline, we'll see more of it. And I would say these are really the additional engines. How do you think about that? Obviously, always coupled with the fact that it's multiple engines of growth. I mean, we've been talking about NII because it's topical. But clearly, the financial markets and wealth management continue exactly along the lines of what Bill said.

Operator, thanks again, Alistair. Operator, can we go to the next question, please?

Thank you. We will now take the next question. And your next question comes from the line of Andrew Coombs from Citi. Please go ahead.

Morning. A couple of questions on slide 52 for Diego, please, and then perhaps a broader one for Bill. Slide 52, you give the deposit mark pass-through and migration. You mentioned the successful deposit campaign driving the higher balances in CPBB. Intrigued whether that is a temporary campaign or something you're rolling out throughout this year as well. And then on the CCIB side, I think in your prepared remarks, you were still talking about CASA migration to time deposits. But if anything, it looks like it's already started to reverse and it's quite a big move. So anything you want to say on that as well would be appreciated. And then my broader question to Bill, if I look at slide 33, the strategic targets for 22 to 24, there's plenty of ticks on the right-hand side, but the two crosses, as it were, are on affluent AUM and the number of mass retail customers. If I fast-forward to your 24 targets, to 26 strategic targets. You seem to have dropped the mass retail target. The applicant switched from being an AUM to a net new money target. But I guess what gives you confidence in achieving that, given what's played out over the past couple of years? Thank you.

Good. Thanks very much, Andrew. Let me just comment on the scorecard questions, and then we can dive into the detail on pass-through and migration, et cetera. The The AUM target is probably the wrong target because, obviously, it's entirely market-sensitive. Markets are down, so AUM is down. The net new money that we've generated over that period has been extraordinarily exciting, positive, and we feel sets us up very well for future growth. That's probably a better measure, so we just shifted. I think that's reasonably self-explanatory. Mass retail. We set up 20 partnerships, one description or other, a bunch of digital banks, and then obviously the organic efforts in our own main bank activities. And most of those have gone quite well. So a number of the partnerships that we set up across ASEAN markets have generated good growth. We've had ongoing good growth in China. We've added two new very important partners in China with JD and WeChat Bank. Tencent. The one that hasn't worked as well is Nexus. In Nexus, which is our banking as a service model in Indonesia, which technically is excellent, it's completely embedded into the Bukalapak e-commerce platform, but we haven't had the customer growth Unsatisfactory terms. So I think we had probably unlimited access to as long as a limit. We had access to lots of customers, but but not at the credit centers that we thought were appropriate or the return centers. Now, the Nexus platform, because it's working so well, technically, we are rolling out in Malaysia. We're rolling it out to other platforms in Indonesia. And we're focusing as well on wallets as well as e-commerce platforms. So I think that the technology investment that we made in that particular venture, I'm quite excited about, but we didn't hit the customer numbers. And we can say about lots of things across our not just our venture space, but also in the main bank that we have taken a test and learn approach. So we're doing lots of things. I would say most of them have been somewhere between a bit positive and very positive. A few have been a bit negative. A few, we made a few, I say big mistakes, but on very small, very small numbers. And I would point to some of the loan loss pickup that we had in MOX that we reported last year. Small numbers in the overall context of standard chartered learned a huge amount about about our own approach to algorithmic credit scoring, especially in a market where digital banking is new and where we're the most effective of them. But this gives me confidence that we know how to grow this business and grow those numbers in a really sound, profitable way. And the fact that our management team and our board is prepared to try some stuff that isn't always going to work, but then really double down on the things that are, gives me super confidence about our opportunities to grow that business. Why don't I pass to Diego to get into the other questions that you mentioned.

All right. So let me paint a little bit of a broad picture of the entire deposit environment. So first of all, you're right. We run campaigns at the end of the year. We always do. It's particularly a Hong Kong thing. That is not something that is ongoing. What is ongoing is that, of course, we continue to drive towards an improvement of our liabilities mix because that is fundamental and drives efficiencies all across our numbers and allows us to be more profitable. Having said that about the campaigns, we are quite happy with the results in the sense that we ended up growing deposits in CPVV by 12% and in Hong Kong we gained something like one percentage point of market share. So all things considered, that is good, it's right direction, it's in the direction of an improved liabilities mix. Your point on CCIB, I wouldn't read much into it towards the end of the seasonality there. Towards the end of the year, we tend, and this year was a case in point, we tend to have large inflows into those CASA, so not much change. If I zoom out for a second and I think about what's the path forward, and you think about the pass-through rates that we have seen on the way up, I would think of retail as on a similar path on the way down. CCIB, still within probably that range, maybe towards the bottom end of the range from the point of view simply of increased competition. I would say these would be the key things.

Thank you. Thanks again, Andrew. Operator, can we take the next question?

Thank you. We will now switch to web questions and we will return to phone questions after. Greg, over to you.

Thanks, Sharon. First question from Alistair Waugh over at Autonomous. Three part question. First, please, could you give a little bit more colour on the increase in CG12 exposures quarter on quarter and why there's no effective increase in risk? The second question, FM has slipped over four quarters while wealth management is about 11% of income. Mainland visitation may be plateauing. If these two areas are very important for income growth and JAWS, can you add a little color on what should be improving in these two areas this year? And the third part of the question, could I just confirm that this is an aim to increase NII in both 2025 and 2026 sequentially? Thank you.

Good. Thanks very much, Alistair. On the CD12, Diego can give the rhyme and verse on our accounting treatment, but same risk sometimes gets classified as different things depending on the nature of the underlying risk. Let's just say repos versus loans or securities. So as these things slip around, we get some redesignations, but Diego will give rhyme and verse on this. I can tell you I haven't lost any sleep over that particular increase in CD12. The wealth management momentum and FM Solar, let me take FM first. 2022 is a spectacular year for us and capping several years of strong growth to have come in more or less flat. I mean, slightly down year on year is in a market environment that was less favorable with without the same opportunities for the episodic income that is that they characterized in the element of 2022. Remind us, unusually, we share all this with you. I'm not sure most banks do. I think I'm very happy. The underlying flow in FM continues to grow. And it doesn't grow because the markets are super friendly. It grows because we've got really good operational services, good linkages between transaction banking and FM, good, steady underlying customer hedging and flow trading. And very good technical capabilities to connect to our clients digitally and in a customer-friendly way. And then when there are episodic opportunities, we're very good at seizing them. And they were a bit late in the fourth quarter of 2023. They're a little bit better in the early part of 2024. Yeah, we'll see how that plays out. But I don't see this as anything other than a long-term positive trend. Same with wealth management. The underlying demographics in our markets are just extremely attractive. And whether that's onshore savings in China or or offshore savings in China, international banking, so dealing with customers that want to deal with us in markets other than their home market or across borders. These are huge growth opportunities for wealth coming out of India, wealth coming out of China, wealth coming out of the rest of Asia. And whether it finds its way into Hong Kong or Singapore or Dubai or London or Jersey, And we're extremely well positioned to capture that. So I think both those businesses represent really attractive long-term trends. Diego, maybe you can pick up the NII question as well.

So I'll take both. First on the CG12 question, we thought of putting everything in the bullet point, but it would have taken half the page, so we thought you would ask, and we thought it would be more efficient. It's exactly as Bill said. It's part of a sovereign exposure. We used to hold it in bonds. We now hold it in reverse repos, shorter duration, no change in overall exposure in terms of credit. The difference is that bonds are not captured in loans and advances, so they don't show up in the CG-12, and reverse repos do, and hence you see them there. So nothing there, and by the way, just of course, if there's a need to reassure you, but just to state the obvious, whether they're in bonds or in reverse repos, there's ECLs and there is RWA treatment that takes care of making sure that the risk is equivalent. So that on the CG-12 question.

Diego, did you have any other CG12 bonds lurking out there that you need to let everybody know about?

No, and if they were there, by the way, they would be ECL and RWA properly accounted. So it's all good. But we'll put another bullet point next time if there's a need. On the aim to grow NII in 2025 and 2026, I would say three things. We certainly have the ambition to do it. We have the levers to do it, which are the levers that we showed to you in the presentation. I would point out that forecasting out to 2026 on something that is dependent on interest rates at a time when in the last three and a half months since we last reported results, one year U.S. rates have gone 5, 3.8, 4.4 is a little bit of a difficult thing. But within those constraints, yes. Good question.

Next question from the web comes from Gary Greenwood at Shore Capital. Will the $1.5 billion of cost to achieve be taken below the line or with the operating costs, and therefore is it excluded or included in your ROTI guidance?

Can I take it? Go ahead, Diego. Very simple, below the line. It's a discrete program. It's different. It's clearly identifiable, and it will allow us in that way to report on our underlying business and make very clear what the benefits and the costs of the program are.

Final question from the web comes from Robin Down at HSBC. It's a three-part question. First, could you give a little bit more colour on what an encouraging start to the year means? I think you've already alluded to loan growth in CCIB, but does encouraging mean FM and wealth management revenues are up year on year? Second part, I appreciate that the restructuring plans may not be fully formed, but from a bottom-up perspective, but could you perhaps give us a better idea of how the up to 1.5 billion of CTA may be phased across the three years? And the third part of the question, finally, are there any numbers that you can share with us on your assumptions around the switchback from TD to CASA in 2025 and 2026? As part of this, I'm assuming the bulk of your TDs are less than three months duration, so presumably could move quite quickly on lower rates. Thank you.

Good. I'll start off. Thanks, Robin, for the question. Encouraging means something between pretty good and awesome. And as I mentioned earlier, it is across the board. So it's all products, all markets, all regions have had a good start to the year. I'll turn to Diego for the restructuring assumptions and the novice ATD council migration.

Yeah, so on the phasing of the cost to achieve, the way to think about it is that 24, we're announcing it today, we're starting it today, and we get going, but clearly 24 will see the initial part of the investment and almost none of the benefits. The costs will, the bulk of the costs will be incurred in 25 with a tail in 26. you should think of the benefits as ramping up during 25 and 26 and of course a large portion of these benefits will be permanent cost saves they will be they will be recurrent they will be with us and the in terms of what we say what we think how we will think about the reinvestment into the business which is a fundamental part of fit for growth because that's one of the objectives that part we will decide as we bank the saves and we will update you over time To your question on Casa2TD, you're right. Definitely our corporate time deposits tend to be in the three months region. Retail is a bit longer. It's more three to six. That is the kind of time to repricing. I think we told you we don't think there's Casa2TD migration in 24 or not particularly. And we think it accelerates as interest rates continue to decline.

Thanks, Diego. Thanks, Bill. That's questions from the web. Can I pass back to you, Sharon?

Thank you. We will now take the next phone question. And your next question comes from the line of Rob Noble from Deutsche Bank. Please go ahead.

Morning. Thanks for taking my questions. Just to follow up on the migration, particularly within the retail part, we saw, I think we spent the whole rate rise cycle seeing beta's lower, migration lower than retail. than everybody expected. Why is the same inertia not applied in your thinking as rates go down? So why won't retail customers just get lazy at the top of the cycle as well as at the bottom of the cycle as well? And then secondly, just on ESG, So I just wanted to ask what your experience of ESG-related activities have been so far in terms of the opportunity, the profitability of those activities, return on RWA. How strict are you in terms of the products that you're lending into from a sustainability perspective? And what's the lost revenue from products that you don't like versus the gained revenue from doing ESG activities?

Good. Thanks very much, Rob. Let me just take the ESG question, and then we'll come back to the migration questions. ESG obviously means a lot of things to us. It starts with a compelling set of policies. We've tried to position ourselves as a thought and action leader in terms of working very, very, very proactively with our clients on their own transition plans in the context of net zero. Obviously, with a keen focus on other aspects of ESG, including biodiversity, financial inclusion, et cetera. But I think you're probably right. I'm thinking more specifically about climate related ESG. And that strategy of being a thought leader has put us in a very good position. I think we find ourselves arguably punching above our weight in terms of ability to influence different groups who are setting standards or whether those are disclosure standards or action standards. And we want to continue to maintain that position. Part of the benefit of doing that is that we were quite relevant to our clients. They engaged with us early on, and they're much more likely to come to us to find the solutions. And to go from zero to $720 million of income in just a few years in a set of sustainable finance products is super exciting. This is clearly the fastest-growing industry. part of our corporate lending activities. And the fact that we have a long history in structured finance, infrastructure finance, blended finance, ECA finance, obviously puts us in a good position. The returns on that income are as good as they are in the rest of the bank, in some cases better, in particular where we're able to demonstrate accelerated velocity of capital in the sector. It's becoming competitive. So like everything else, we can have a super idea at the outset. It gets copied relatively quickly. So we have to continue to innovate and we have been able to continue to innovate and we will. Carbon markets have not kicked in in a major way. It's something that I've focused on quite a bit personally, but also on behalf of the firm. It's going to happen. Here's my forecast. Carbon markets are going to be big. because the Integrity Council for the Voluntary Carbon Markets have come up with standards which are restoring confidence in that market. When we embed that into our financing capabilities, there's a whole other wave of opportunities to add value and make money. So I'm feeling good about that and good about our positioning. We've been extraordinarily transparent. I don't know anybody else that's setting targets and making disclosures of where we are. And we do that because we're proud and because we want to set the target for ourselves to be ahead of the game. Happy to, as you can probably guess, I can wax lyrical about this stuff forever because I care a lot about it. But, you know, it's a good business for us. But, Diego, back to the real world of banking.

On the more boring, mundane part of the question on the migration, well, a few things. First of all, history. I mean, we did see it in 1920. I mean, cycles recur. Will this be fundamentally different? Difficult to see. I think more importantly and driving to the strength of our business, Casa is really the default way that customers put money to work with us. And as yields go down, of course, TDs will become less appealing, even less appealing to them. I'll give you an interesting stat that I think points to this and points also to the strength of the wealth management business. that Bill was alluding to before, of the flows that we are seeing, the very good flows of new-to-bank and net new money that we have been seeing in the last quarter or two, one of the notable things, there are two interesting notable things, one that goes to your point, which is half of what comes in is deposits, and almost all of it is CASA, it's not TDs, and half of it is wealth products. which is good because, of course, it's better for us, it's better for the clients, and we think it will continue to go in that direction. So that part is good. And in general, our affluent client base is very attuned to this kind of rhythms. We think that that's what continues.

Great. Operator, another question?

Thank you. We will now take the next question. And your next question comes from the line of Pearlie Mong from KBW. Please go ahead.

Thank you for taking my question. Just two questions from me. The first one is on the income growth. So I believe your growth total income growth target is about 5% to 7% in the next couple of years. I guess just making the observation that two years ago when you talked to us at a previous strategy update, you also talked about 5% to 7% underlying income growth with a 3% additional from rising rates. And I guess as it turned out, I guess rates probably played more of a part of the income growth story than you might have expected at the time. So I guess just how do you see the underlying growth dynamics now versus two years ago and what could go better in a falling rate environment? So that's the first one. And the second one is on asset mix. So noticing that in your remarks, you've talked about growing higher, yielding client assets as being one of the supports for NIMS. in the next couple of years. And also noticing that asset mix is one of, especially in the CCIB, is one of the reasons why RWA's came in a bit higher Q1Q. I guess just, again, the observation that in the past couple of years, and again, going back to your previous strategy update, the delivery of lower RWA's, especially in CCIB, was very noteworthy. And It sounds like you're happy to grow RWA now to support the top line. Is that a fair characterization? And I guess in other words, is it fair to say that a lot of the lower hanging fruit in terms of RWA optimization is now complete?

Good. Let me take a first pass at that, and I know Diego will have some color. We've never been RWA-averse. We're just very returns-inclined. And the consequence of that was that where we had lower returning RWAs, one way or the other, we exited them. Now, obviously, in very few cases did that involve exiting a client, but it frequently involved exiting RWAs, i.e., reducing our lines or selling assets. And that has been a major area of focus for us. It was absolutely necessary. And it's had a super impact in terms of our return on risk weighted assets. We're now pretty much where we think we should be in aggregate. As I mentioned earlier, always more optimization opportunities and always more investment opportunities. But for us to have shed The amount of RWAs that we did while continuing to grow income means that we've obviously got some other things right along the way. To the extent that we're optimizing less going forward and there are less outright reductions, that's relative to years gone by a key source of growth. We, I think, have built our confidence quite a bit about our ability to underwrite credit. And when you go back to 2015-16, the confidence wasn't so great that we had all the underwriting capabilities consistently in place. As we scraped off some of the crud, I think we realized that actually the core machine was actually very good and that we had made some idiosyncratic mistakes, to go back to that big word. And we've demonstrated through many years that we're not inclined to make those big mistakes, which is not to say we don't make mistakes because we make mistakes all the time. Yes, so are we going to grow RWAs to support the top line? That's the plan. If we can find RWAs that are accretive in terms of returns. And if there aren't, then we're going to find other ways to use our human capital and financial capital, including if, as when necessary, returning it to shareholders, which we've shown no aversion to doing. Maybe I'll turn to Diego to finish off the question. There was a lot of embedded questions about rates as well. So why don't you take it?

Yeah. So I think on the asset mix, very little to add. I think we've said before today, and I think we are very happy to reiterate, we deliver over $24 billion of optimization in terms of RWAs on a target of 22 with a year to spare. You are right, Pearlie. I would agree with you. I'm not so sure that they were all low-hanging fruits. I'm sure people worked very, very hard. I wasn't here to see it. But what is clear is that there are less of those opportunities going forward. That doesn't mean we're not going to take them. But at this level of return on risk-weighted assets, and I would say the organization truly operates thinking that way, we can go for volume in a profitable way. On the income thing, you referred to the presentation a couple of years ago. I would say that the big difference that I observed from two years ago is we've invested a lot of money in our engines of growth of non-net interest income. We have changed the complexion of the financial markets business and the wealth management business in ways that make them more profitable structurally, that addresses more of the needs of our clients, and makes them better engines of growth from the future. Again, I don't want to be boring on the point of volatility. We'll see what happens with rates. But we are not sitting here hoping for rates to go down. We are both working on that, and we are working on our engines of non-ethnic interest income growth.

Great. Thanks very much, Farili. Operator, can we take the next question?

Thank you. Your next question comes from the line of James Invine from Societe Generale. Please go ahead.

Good morning, Bill. Good morning, Diego. I've got two, please. The first is just your $12 billion cost target. Diego, as you said, that implies a 3% average growth. If you didn't have the $1.5 billion worth of savings, then it would be more like a 7% average growth. So is that kind of what you consider to be the underlying inflation in your cost base in this kind of environment when you're growing loans by a low single digit amount? And then the second one is on MOX. I was just wondering if you could say a word more, please, on the change in the credit criteria. So specifically, is that going to affect MOX's growth going forward? And are you still expecting MOCs to be profitable in 2024? Thanks.

Great. Thanks very much, James. So the straight answer is yes, we expect to achieve profitability in 2024, so to say over the course of 2024. And we've got, I'd say we've had hundreds of, I call them experiments, which sounds scientific. It's more test and learn across our credit markets. In the case of MOX, we allowed a cohort of relatively low rated credit score customers. into the pool. And without getting into all the gory detail, as I say again, the number is material for mocks in a period. It's not material for center chartered, really, in the overall scheme of things. But what we learned is when you're the first digital bank in a market, and you're leading the way in terms of a digital lending product, you are going to be subject to some sort of adverse selection in terms of, I say, people who are knocking on heaven's door or who are fraudsters. And we realized that after we accumulated some small loan balances, but with a high loss rate. And we immediately changed the underwriting standards and learned a lot. We don't think that that customer segment is entirely unattractive, but it was unattractive the way that we underwrote. And so, of course, we've taken those lessons learned and applied it not just to MOX, but to the other markets where we operate. Interestingly, not relevant for trust because the credit bureau and national ID system in Singapore would have precluded us from making a similar, well, from engaging in the same learning experience in the first place or incurring the loss. More detail than probably the loss is worth, but I think it's important as Standard Chartered sort of strikes out to venture into new areas where not just we haven't gone, but where the market hasn't gone yet We're going to do it in a very cautious and prudent way. We're going to be very transparent about where we get it right and where we get it wrong. And we're going to learn and be better as we go forward.

Cost target? Perfect. Thank you. Go ahead. I try to think of a music reference to your knocking on heaven's door. I can't think of one that applies to the cost target, unfortunately. So I'll be drier on that. So on the cost target, thank you for the question because it offers me the opportunity to elaborate a little bit on that topic. You're right, we are exiting a period of more elevated inflation in terms of general inflation of costs. I would say that our recurrent inflation of costs across our footprint is more in the 3% to 4% level. But more importantly, what I would like you to think about in terms of the CAGR is that it is going to be above the top end of the CAGR during the first year, during 2024. And then it will moderate and it will moderate very substantially, of course, to stay inside the 3% CAGR and definitely stay inside the 12 billion cost target as the benefits from fit for growth, of course, start also showing their very substantial effects.

Great. Thanks again, James. I think we probably have time for one more question or two or three, depending on how much patience you have. Diego and I are happy to stay here all day. So, operator, can we take the next question, please?

Thank you. Your next question comes from the line of Matt Clark from Mediobanker. Please go ahead.

Good morning. It's a question on how you categorize your financial markets revenues. So is it unfair to think of the episodic revenues as being a euphemism for prop trading? And if that is unfair, maybe to give some kind of real world examples of the kind of revenues that get booked in that line. Thank you.

No, it's not a euphemism for prop trading because we don't do that. The episodic, I guess, gives some examples. There's an interesting product line called the deal contingent forward. So we'll put on an FX hedge with a client who's engaged in a merger acquisition transaction. If the M&A deal goes through, the hedge pays off. If the M&A deal doesn't go through, it's terminated. You put hedges in place based on the underlying market risk and a continuous reassessment of likelihood of completion. Call it merger ARB. Obviously, we don't bet the ranch on any of those, but the payoffs when they work are very good. If they don't, you lose a little bit of money potentially. And that we would call episodic because it's not part of our ordinary flow business, although the transactions happen somewhat regularly. When a currency has a major devaluation, if we ever had a breach of a peg, for example, and we have some embedded position, obviously that could be either a gain or a loss, we would treat that as episodic. Is it a prop trade? No. We're not positioning for a gain or positioning for a DPEG or whatever. But frequently, through our own customer activities, we'll find that we are forced to take a position on one side or the other of a market, and we'll always do that in the way that we think is most prudent. And sometimes we get a call it an accidental gain and sometimes we get an accidental loss. Now, the fact that our episodic income has been consistently positive means that the combination of those episodic customer deals, which are episodic. combined with those episodic market events that are really somewhat exogenous, not just on balance, but consistently have been positive. It's hard to say we can never lose money in that episodic category. We just haven't for as long as we've been tracking it. And I hope that gives a bit of a sense of what it is. Definitely not prop trading.

I can't resist. Can I put in a growth plug into this? It's really low now, and it's driven by volatility, which we're not seeing a lot. It's driven, as Bill's first example perfectly referred to, by capital markets activity. Capital markets activity is clearly in the doldrums. It will pick up. With the picking up of that, you will see it coming through in many ways through our accounts, but including in the episodic line.

Very clear. Thank you very much.

Thank you. Next question, please.

Thank you. We will now take the next question. One moment, please. And your next question comes from the line of Guy Stebbings from BNP Paribas. Please go ahead.

Hi there. Thanks for taking the questions. I had one on rate sensitivity and one on costs. So thanks for all the new disclosure on the hedge and rate sensitivity by currency. It's very useful from our side. Can I just check, would it be fair to interpret slide 20 in the 50 basis points decline in rates in 2024 versus Q4 equating to 0.3 billion, meaning we can sort of linearly extrapolate The FY26 and additional 100 base points implied move in vendor rates that you show on the slide is implying, you know, 600 million or so of pure rate headwinds beyond 2024 embedded in the guidance. And then how do you think about that relative to future hedge role or potential growth in the notional? And then the question on cost was really hoping to unpick statutory costs for 2026 a little bit more. I think in general, all the guidance is very helpful, but getting a better sense on where statutory would be also useful. So just to check, if we take your sub 12 billion clean cost guides, apply a modest bank living, and it sounds as though we shouldn't be expecting too much in terms of cost achieving in 2026, given the peaks in 25. So should we be thinking about an all-in cost figure of pretty close to 12 spot zero? Any help there would be useful.

Thanks. All right. So on the first on the hedge profile, your question on page 20. So we've given you our our measure of the currency weighted forward rates based estimate with all of the caveats that I have already made twice. But I can't resist. I'll make it a third time that these things are very, very volatile. So, yes, you can take the differences between 24-25 and 25-26 and extrapolate an equivalent type of number. What I would caution you about is that the concept of linearity, when we're talking about interest rates, gets trumped by convexity. Careful on how you do it. It will require some assumptions from you, but by all means. How does that affect our hedging strategy and our hedge rolls? So we see our structural hedge as fundamentally put on in order to smooth volatility in terms of our net interest income. It protects us from more extreme outcomes. We have an intention of continuing to grow it. We grew it by $16 billion last year. We want to grow it further. We've also pointed out to you that we think it grows slower at this stage because there are some inherent limitations in terms of availability of instruments. In order to expand on that bullet, to double-click it for a second, there are entire currencies in which we don't have availability of derivative instruments. When we don't, we can still do things, but it requires us to do it through fair value, through OCI, and that introduces volatility in our capital. So we do it, but we do it carefully and considerately. So, yes, we will continue to grow our hedges, just at a slower pace. On the structural costs, I would say that you read it as 3% cost CAGR, higher in the first year, 24, as indicated before in the answer to the previous question, then tempering down, less than $12 billion. and positive jaws every year. That's what we manage for. So with those three things together, those give you the ingredients of where we're going to come out, I think.

Thanks. That's very helpful. Thank you. Could I maybe just check in terms of the cost to achieve in terms of the phasing of it? Should we expect quite a big step down in 26 versus 25?

The bulk is in 25. The vast bulk is in 25. It does step down in 26. I will add, you would expect the CFO to do it. A little note of caution. It's February 24 and the program starts today. So with that, yes, you are right.

Understood. Thank you very much.

Thanks, Guy. Operator, can we take the next question?

Thank you. We will now take our final question for today. And your final question comes from the line of Gopri Sahi from Goldman Sachs. Please go ahead.

Thank you, Bill. Thank you, Diego, for taking my question. Two, please. First is the central and other items. We have quite a big mix of central and others. compared to other regional or global banks. Should we, as part of the program, also expect the P&L and balance sheet here to become smaller as a percent of overall group? Any thoughts there would be welcome. I know I'm not comparing apples to apples when I do that with other banks. And second one is on the wealth management income. So with Hong Kong, Singapore, UAE, are we seeing with some, especially China, equity assets finding a bottom, if this is the true bottom, then are we seeing on the ground any switch to wealth products from deposits, especially in this one, any early read? And what would be then our expectation for wealth management income group more for this to lead us into second half, higher wealth income versus first half? Or how would you see it? Thank you.

Good. Thanks, Jeffrey. Diego is the master and owner of Central and Other, so I'm going to turn to him shortly. But I will say you're absolutely right. The way we've presented our Central and Other segment, it's large. We include, for starters, all of our hedges as well as lots of other central costs and a fair amount of our capital costs in Central and Other. We are... piloting internally over the course of 2024, and we've indicated this in the past, that this is something that we intend to do, a new financial reporting framework that will allocate a lot of those central and other costs out as appropriate to different lines of business. And when we're comfortable that we've got it right, we'll share that with you as well and become a new basis for external reporting at some point, which I think will give a little bit clearer picture around how each of our divisions is actually reporting, actually behaving and performing and obviously will have the effect of a significant reduction in what otherwise is central and other. That said, we do have a substantial Treasury balance sheet, and that has nothing to do with financial reporting. That has to do with the way that we're running our business. But we would also hope that as we get back into growth mode in our loans and advances, that that would be funded out of a reduction in our central balance sheet. I know Diego will have thoughts on Central and others, but just quickly on wealth. Probably the most encouraging thing about the way that our wealth business has developed over the past several years is that we really have a broad diversity of products that our clients can buy. which is why we were relatively resilient during the very tough times in equity markets and have continued to perform well. So bank insurance is kind of a reentry product. Deposits are the initial reentry product, and we're thankful we've had a big growth there. Bank insurance is a good reentry product, so well understood and safe and sound. We've seen good migration into fixed income and fixed income funds. We've seen the beginnings of migration into equities and equity funds. We have not yet seen a material pickup in less liquid product that was gathering good momentum pre-COVID. But that that that has not fully reengaged. But I say we're quite optimistic that that will come back in over the next year or two and provide a good underlying source of growth for us. But we're we're extremely as the third largest wealth manager in Asia. We are very well positioned to capture a broad range of flows from this mass affluent client base. And we've got a good and meaningful and substantial private bank, which is right now under leveraged. underinvested and not growing as quickly in terms of income, but the underlying wealth flows, net new money, net new clients, are performing extremely well. So I say we remain quite optimistic about that business.

So on Central and others, while echoing Bill's point that we're working on ways to report it slightly differently, that hopefully will be helpful to this kind of discussions in the future, really two thoughts, really two fundamental components. Asset mix improvement that we have referenced several times before will drive a lower percentage of Treasury assets. Our Treasury assets live in Central and others while our customer assets live elsewhere, live in our businesses. And the second thing is to the whole discussion on hedges, et cetera, as the short-term hedge rolls off, expires, and as rates go lower, we will have lower losses from Treasury, and that will be the other driver of Central and others.

So I think we're done with the Q&A. Thank you. I think we've probably gone a little bit over the time that we set out in the first place. But thank you very much for the questions. Just a final thought for me is that we're really quite happy with the progress that we're making. That's tempered by the recognition that we have so much further to go, so much further to go in terms of generating incremental returns. Targeting 12% in 2026 is good progress. It's a continuation of this process that we've been on for my entire time in the bank, where we've been increasing ROTE by... You know, one, one and a half percent every year. Obviously, there have been a couple of ups and downs in particular around COVID. But it's a good, steady progression. And we're not there. And lest you harbor any any doubts about whether we're completely committed to driving this thing super hard. I hope we addressed some of those today. And the arrival of Diego, who has just been a great pleasure to have come in and challenge, challenge all of us. is the best antidote to any kind of complacency that we could ever have expected or ever feared, and give you, dear shareholders and analysts, every confidence that we have, every confidence we can deliver with all the energy that we've put into this over the past several years for many, many years to come. So thanks again. Sorry for the little lecture at the end, but it's important to capture just how committed we are to delivering these returns.