- Income: $4.8 billion, up 7% in constant currency.
- Expenses: Up 4% year on year.
- Underlying Profit Before Tax: $1.8 billion, up 15%.
- Net Interest Income (NII): $2.6 billion, up 6%.
- Non-NII: Up 9%, driven by Wealth Solutions.
- Credit Impairment Provisions: $73 million.
- Other Impairment Charges: $83 million, primarily related to software asset write-offs.
- Restructuring and Other Charges: $250 million, including $174 million from Zimbabwe business disposal.
- Effective Tax Rate: 30% for the first six months, expected to remain around this level for full year 2024.
- CET1 Ratio: 14.6%, with a pro forma ratio of 14% after a $1.5 billion share buyback.
- Wealth Solutions Income: Up 27%, with Investment Products income up 32%.
- Global Markets Income: Down 7%, with credit trading up 46%.
- Global Banking Income: Up 11%.
- Customer Loans: Marginal growth of $1 billion in the quarter.
- Customer Deposits: Up $10 billion on an underlying basis in the quarter.
- Risk-Weighted Assets (RWA): $242 billion, down $10 billion or 4% quarter on quarter.
- Shareholder Distributions: $2.7 billion announced since full year 2023 results, including $2.5 billion in share buybacks and a $230 million interim dividend.
- Return on Tangible Equity (ROTE): 14% for the first half of the year.
- Affluent AUM: $294 billion, up 5% versus Q1.
- New Affluent Clients: 65,000 added in the second quarter.
- Sustainable Finance Income: Up 18% in the first six months, with a target of over $1 billion by 2025.
Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Standard Chartered PLC (SCBFF, Financial) reported a 7% increase in income to $4.8 billion in constant currency.
- The company announced its largest ever share buyback of $1.5 billion, reflecting a strong capital position.
- Wealth Solutions saw a 27% increase in income, with Investment Products income growing by 32%.
- Credit impairment provisions were modest at $73 million, with net releases from sovereign upgrades.
- The company upgraded its income guidance for 2024 to above 7% growth, indicating confidence in future performance.
Negative Points
- Operating expenses increased by 4% due to inflation and continued investment into business growth initiatives.
- Global Markets income was down 7% year-on-year, impacted by a strong comparator in the previous year.
- Restructuring and other charges amounted to $250 million, primarily related to the disposal of the Zimbabwe business.
- The effective tax rate for the first six months was 30%, with expectations for the full year to remain around this level.
- The company noted a potential $100 million NII headwind from U.S. dollar appreciation in 2024 versus 2023.
Q & A Highlights
Q: Can you provide more color on the income target of greater than 7% for 2024?
A: We have a 10% growth of income excluding notable items in the first half. If we maintain our metabolic rate of 5% to 7% in the second half, we'll land north of 7%. Non-net interest income is not expected to be down year on year in the second half, driven by strong performance in Wealth Management and flow business in markets. (Diego De Giorgi, CFO)
Q: Why are you maintaining the $5 billion cumulative distribution guidance despite a large buyback this year?
A: We operate dynamically within our 13% to 14% CET1 range and return surplus capital above that range. If we outperform in profit or RWA optimization, we will return surplus capital. The current buyback reflects ongoing optimization and some tailwinds, but we will continue to assess each quarter. (William Winters, CEO)
Q: What happened in the Markets segment in Q2, and how are you responding to the operating environment?
A: The 7% year-on-year decline in Markets was due to a lack of episodic income. The flow business continues to perform well with a 9% CAGR over the past five years. Trading assets grew due to attractive opportunities, not to massage numbers. July has started fine, with no adverse trends. (William Winters, CEO)
Q: Can you provide an update on the Bohai Bank investment given recent news?
A: We are comfortable with the carrying value of Bohai Bank. The recent asset swap provides clarity on the bank's financial footing. We continue to participate and contribute to Bohai Bank's stability. (William Winters, CEO)
Q: What is the outlook for Wealth Solutions growth post-lockdowns?
A: Wealth Solutions has grown at a high single-digit rate for a decade. The current growth is not supernormal but reflects a benign market environment and our investments. We expect to outperform the market due to our strong position and innovative offerings. (William Winters, CEO)
Q: What are the key catalysts for regenerating excitement in Hong Kong's market?
A: Hong Kong remains a strong profit growth center, driven by China opening up and cross-border activities. The domestic market may be sluggish, but our business is more influenced by China's offshore financial activities. (William Winters, CEO)
Q: How confident are you in Ventures becoming ROTE accretive by 2026?
A: We remain confident in Ventures becoming ROTE accretive by 2026 through increasing profitability and asset sales. We have a strategic advantage in building ventures and will continue to monetize them at attractive valuations. (William Winters, CEO)
Q: What is the outlook for credit charges in the second half of the year?
A: The credit environment remains benign, with no material losses in CIB and retail in line with expectations. We do not see any concerning trends and maintain our through-the-cycle guidance of 30-35 basis points. (William Winters, CEO)
Q: What are the major moving parts in the cost line for the second half of the year?
A: We expect some phasing of investment spend in the second half, but no major moving parts. Positive cost-income jaws remain a priority, and we aim to maintain them on a yearly basis. (Diego De Giorgi, CFO)
Q: What is the outlook for loan growth, particularly in mortgages?
A: Conditions are improving in Hong Kong, but we are not yet writing significant new business. We use mortgages to lead into wealth management relationships and have other ways to attract customers. Credit risk is not a concern; it's all about margin. (Diego De Giorgi, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
