Standard Chartered PLC

Good morning and good afternoon, everyone, and welcome to our second quarter 2024 results call. We are very pleased to have delivered a strong financial performance and are very encouraged by the progress on our established strategy. We're delivering exceptional cross-border services to the world's most sophisticated entities and individuals across our corporate and investment banking and wealth businesses. Income of $4.8 billion was up 7% in constant currency. Reflecting confidence in our performance, we're upgrading our income guidance, and we now expect growth for 2024 to be above 7%. We're maintaining strong discipline on costs with expenses up 4%, while asset quality has remained resilient. This has resulted in underlying profit before tax of $1.8 billion, which was up 15%. Our financial momentum, together with progress on key strategic drivers, leaves us confident that we can consistently and sustainably drive towards higher returns. With our strong capital position, we're delighted to announce our largest ever share buyback of $1.5 billion, which will start imminently. Diego will now take you through the numbers in more detail and I will cover the progress our businesses are making before we come back for the usual Q&A. So Diego, over to you.

Thanks, Bill. Good morning and good afternoon to everyone on the call. In my remarks, I will be comparing year on year on an underlying basis and speaking to constant currency unless stated otherwise. The group delivered top-line growth of 7%, with operating income of $4.8 billion in the second quarter, as the dynamics we saw at work in the last quarter continued into Q2. NII was $2.6 billion, up 6%. Wealth Solutions continues to drive the strong growth in non-NII, which was up 9%. Operating expenses were up 4% due to inflation and continued investment into business growth initiatives. Pre-provision operating profit was up 13% in the second quarter and was up 26% in the first half, demonstrating our strong progress towards sustainably higher profitability. Credit impairment provisions were just $73 million in the quarter, with the wealth and retail banking charge broadly in line with the recent run rate, offset by net releases elsewhere, mainly from sovereign upgrades. The $83 million charge in other impairment is primarily related to the write-off of software assets, which has no impact on capital. With modest credit impairments, pre-tax profits of $1.8 billion was up 15%. Restructuring and other charges of $250 million included $174 million primarily related to the disposal of our Zimbabwe business. The Zimbabwe charge relates to recycling of FX translation losses from reserves into the P&L, and so it has no impact on our capital, Ortinav. It is possible there could be similar losses, albeit smaller, as we complete our market exits in the coming quarters. Taxes for the first six months of the year reflect an underlying effective tax rate of 30%, and we now expect the full-year 2024 underlying effective tax rate to be around this level. Our CET1 ratio is well above the target range, and as a result, we are today announcing our largest ever share buyback of $1.5 billion, which takes our performance CET1 ratio to 14%. Turning now to look at our performance in more detail. Looking at the various components of income, NII was up 6% quarter on quarter to $2.6 billion, driven by a number of factors. There was an $84 million additional benefit from the expiry of the short-term hedge in February. There was also a $112 million increase from improvement in Treasury asset and liability mix, offset by higher pass-throughs in CIB and lower volumes. Average interest-earning assets were down 4% in the quarter, primarily due to a reduction in Treasury. Looking forward to the remainder of the year, we continue to expect NII of 10 to 10.25 billion dollars in 2024. Whilst the higher for longer environment has reduced headwinds from rates since the start of the year, lower volumes and higher deposit pass-through rates in CIB have held back NII. We show our latest currency weighted forward curves in the appendices on slide 27. It is worth noting that we expect an NII headwind from US dollar appreciation of around $100 million in 2024 versus 2023, but we are not adjusting our guidance for this. Now, turning to our engines of non-NII growth. Wealth Solutions had a very strong second quarter, up 27%. You will see that we are now disclosing our wealth solutions income broken down into investment products and bank assurance, with investment products income growing strongly in the second quarter, up 32%. Global markets was down 7% given the comparison with a particularly strong second quarter last year in macro trading, whilst credit trading was up 46%. Global banking was up 11%, driven by higher origination and distribution volumes, continuing from the strong performance in the first quarter. We have continued to maintain discipline in managing expenses, which were up 4% year on year. This was driven by inflation of around 3% and investment into growth initiatives, primarily to support our higher returning businesses in CIB and our affluent wealth proposition. This included hiring relationship managers for affluent clients in WRB and sector-focused expertise in our coverage teams in CIB. We expect the quarterly cost-run rate to tick up slightly in the remainder of the year following our investment spend profile, which, as usual, is weighted towards the second half of the year. We remain committed to delivering on the absolute cost cap of $12 billion in 2026, which implies a 3% CAGR from the 2023 level. The targeted savings from the Fit for Growth program are expected to be realized through 2025 and 2026. As a result, cost growth will be higher in 2024, but lower in the next two years. We expect a small part of the cost to achieve of around $200 million to be incurred in 2024, with the majority of the $1.5 billion to fall into next year and a meaningful tail into 2026. I'll now give you some more color on the progress we are making in our Fit for Growth program. Our colleagues at all levels are embracing the opportunity to transform the bank. We have identified over 200 individual projects so far, and these projects deliver benefits ranging from a few hundred thousand dollars all the way to tens of millions of dollars. 80% of the projects individually deliver less than $10 million in estimated annual benefits, which reduces execution risk. The program will simplify, standardize, and digitize the bank in four different ways. Process simplification, organizational design, service delivery enhancement, and technology simplification. Let me give you a few examples of what is happening on the ground. We will remove over 100 applications across the group in a massive technology simplification drive. We are building and enhancing our digital client service experience in WRB, which we expect will meaningfully reduce average call handling time. And back in April, we announced the removal of the regional dimension of the organization, leading to more streamlined decision-making. Through these projects, we will fundamentally improve our productivity, make the organization a better place to work for our employees, and enhance our clients' experience. Turning now to credit impairment, which was down $73 million year-on-year. CIB had a net release of $35 million, benefiting from sovereign upgrades and low levels of new impairments. In the China commercial real estate portfolio, there was a reduction in management overlay and total exposure in the second quarter, primarily due to repayments. In WRB, the impairment charge of $146 million remains broadly in line with recent run rates. The action we have taken in MOX has led to a further reduction in the provisions for ventures, which halved to $15 million. Our high-risk assets were broadly flat in the quarter. And whilst we have been in a period of higher for longer rates for some time, we are not seeing any new significant signs of stress emerging across the group. Touching briefly now on the balance sheet. We have seen marginal underlying growth in loans and advances to customers in the quarter, up $1 billion. The positive momentum that we saw in global banking in the first quarter continued. Our price discipline in mortgages led to a reduction in WRB assets of $1 billion. We continue to expect low single-digit percentage growth in underlying customer loans this year. Customer deposits were up $10 billion on an underlying basis in the quarter. CIB and others increased $4 billion mainly in Casa balances, in part reversing the temporary outflows that we saw at the end of the first quarter. and WRB deposits increased $6 billion, with CASA balances broadly unchanged. Turning to capital, risk-weighted assets of $242 billion declined $10 billion, or 4% quarter-on-quarter. Underlying asset growth in CIB was offset by a reduction in WRB and the impact of treasury-related activities. Improvement in asset quality, mainly from sovereign upgrades, led to a $3 billion reduction. As previously guided, market risk RWA were down $2 billion in the quarter. Looking forward, we continue to guide to low single digit percentage growth in overall RWA for full year 2024, as we expect client activity to continue to improve. Our CET1 ratio for the quarter of 14.6% is well above the target range, driven by profit accretion and the positive impact of lower RWA. The $1.5 billion share buyback we announced today will take our performance CET1 ratio to 14%. We remain committed to sharing the group's success with our shareholders. And as you can see on slide 12, since the full year 2023 results, we have announced $2.7 billion of shareholder distributions. This includes $2.5 billion in share buybacks and a 2024 interim dividend of $230 million, with an interim dividend per share of 9 cents, up 50% year on year. As a result of the series of share buybacks we have executed, our share count is down 17% since 2021. The tangible net asset value per share is up 54 cents in the quarter, and we have provided a more detailed breakdown of the TNAV walk in the appendices on slide 30. Lastly, turning to our guidance. As Bill mentioned at the beginning of the call, we are upgrading our income guidance for 2024 to above 7% growth. All other key points of guidance remain unchanged. We still expect our OTE to increase steadily, targeting 12% in 2026, and to progress thereafter. With that, I'll hand back to Bill to give you an update on the performance of our business segments.

Let's first take a look at performance at each business in turn, starting with corporate and investment banking. CIP income was down 1% overall. Within this, transaction services was flat year on year, but global banking delivered a strong performance, up 11%. This was driven by higher origination and distribution volumes. Global markets was down 7% in the face of a particularly strong comparator in the second quarter of last year, especially in episodic income. What's important, however, is that flow income continues to grow and was up 8% in the quarter from higher rates and credit trading. One of the great strengths of our global markets business is that it is largely comprised of recurring income. Over recent years, we've expanded the product offering across fixed income currencies and commodities, becoming more important to key clients and counterparties. As you can see on slide 16, such recurring flow income has been growing strongly since 2019 with a 9% CAGR. This has been driven by a combination of platform enhancements, improved product capability, and strategic focus across clients and geographies, examples of which you can see plotted on the chart. The next slide looks at our CIB cross-border business in more detail. Cross-border income now accounts for the largest part of CIB at 62% compared to 50% in 2019. It's also been growing at a faster pace than the rest of CIB with an 11% CAGR since 2019. It delivers premium returns with an income RORWA of 9.7% in the first half of the year, 160 basis points higher than the overall CIB. and it is broad-based in terms of product mix. Transaction services is the largest part, but the network also drives cross-border global markets, as well as global banking income. Moreover, our cross-border business is uniquely positioned to capture the opportunities arising from increasing fragmentation of supply, trade, and investment flows. For example, almost a third of our cross-border income is intra-Asian, and we've seen particularly strong growth in income from China to ASEAN, up 11% in the first half. Turning now to wealth and retail banking income, which was up 11%, driven by a very strong performance in wealth solutions. Investment products income was 32%, with broad-based growth across products and markets. Affluent AUM of $294 billion was up 5% versus Q1, driven by wealth, net new sales of $6 billion, and $7 billion of new deposits. Our Wealth Solutions product line is almost all non-net interest income, with just a small amount of NII from wealth lending products. I'd remind you that the substantial NII generated from Affluent Deposits is reported in the Deposits product line. When considered in aggregate, the Affluent client franchise is extraordinarily valuable. We continue to onboard high levels of affluent new to bank clients with a further 65,000 added in the second quarter equivalent to around 10% annualized growth. Now let's take a longer term perspective on our Wealth Solutions business. Since 2016, Wealth AUM has grown at a 9% CAGR. We saw strong growth up to 2021 followed by a slowdown during the COVID years. We've now accelerated growth once more driven by several factors. We're investing in new relationship managers, which are up 9% year on year, and at the same time, improving RM productivity. We're continuing to innovate new product offerings across our footprint with best in class capital market solutions for our clients. And we're also providing a fully integrated digital wealth platform with personalized advice. We know that our wealth and affluent offerings are of interest to investors, and we plan to host a seminar later this year to provide you with more color on this business. Turning now to the progress we've made in the venture segment, we continue to see strong growth in customer numbers in MOX and Trust. We currently have around 600,000 customers in MOX and around 800,000 in Trust. It's on track to be the fourth largest domestic retail bank in Singapore by customer numbers by the end of this year. Both MOX and Trust are rated as the top digital banking apps in the Apple Store in their respective markets. In SE Ventures, we've raised $55 million of external funds across two ventures in one fund and attracted multiples to our original cost in what continues to be a challenging environment. Lastly, we continue to see strong momentum in our sustainable finance franchise. Income in the first six months of the year was up 18% and we remain on track to deliver over $1 billion of income by 2025. We've mobilized more than $105 billion of sustainable finance since the beginning of 2021, making good progress as we advance towards our $300 billion target by 2030. On the broader sustainability agenda, we continue to make progress on our net zero emissions, and in May, we announced the commitment that by 2025, we'll set a methane emission baseline and interim 2030 target. In the first six months of the year, we also launched an innovative adaptation trade finance facility to protect businesses against extreme weather events. So, to conclude, the group delivered a strong performance in the first half of the year, with income up 13%, generating an ROTE of 14%. We've been executing well on our strategy of being a cross-border corporate investment bank and leading wealth manager for affluent clients. The Fit for Growth program is progressing well, with the benefits expected through 2025 and 2026. Our capital position remains strong, and today we've announced our largest ever share buyback of $1.5 billion. With this strong start to the year and confidence in our diverse franchise, we're upgrading our income guidance and now expect to grow above 7% in 2024. We have the right strategy, business model, and ambition to deliver our 2026 target of 12% ROTE and to progress thereafter. So with that, I'll hand back to the operator and Diego and I will be happy to take questions.