REG - Standard Chrtrd PLC - Interim Results 2014 Part 1 <Origin Href="QuoteRef">STAN.L</Origin> - Part 3
29/10/2014 10:39
- Part 3: For the preceding part double click ID:nRSF3926Ob
1,780 1,662 118 - -
Foreign Exchange 636 537 99 - -
Rates 371 363 8 - -
Commodities and Equities 262 252 10 - -
Capital Markets 284 280 4 - -
Credit and Other1 227 230 (3) - -
Corporate Finance 1,241 1,227 14 - -
Wealth Management 817 - 64 205 548
Retail Products 2,435 - 2 94 2,339
Cards, Personal Loans and Unsecured Lending (CCPL) 1,315 - - - 1,315
Deposits 598 - 2 65 531
Mortgage and Auto 474 - - 29 445
Other Retail Products 48 - - - 48
Others 1,078 842 116 14 106
Asset and Liability Management 420 278 22 14 106
Lending and Portfolio Management 529 393 136 - -
Principal Finance 129 171 (42) - -
Total Operating income1 9,269 5,334 616 314 3,005
1 Excludes $(15) million relating to an own credit adjustment
6 months ended 30.06.13
Total Corporate & Institutional Commercial Private Banking Retail
$million $million $million $million $million
Transaction Banking 1,964 1,633 322 1 8
Trade 1,042 865 168 1 8
Cash Management and Custody 922 768 154 - -
Financial Markets 2,212 2,043 169 - -
Foreign Exchange 835 687 148 - -
Rates 552 542 10 - -
Commodities and Equities 288 276 12 - -
Capital Markets 283 281 2 - -
Credit and Other1 254 257 (3) - -
Corporate Finance 1,238 1,220 18 - -
Wealth Management 755 - 71 191 493
Retail Products 2,588 - 3 98 2,487
Cards, Personal Loans and Unsecured Lending (CCPL) 1,401 - - - 1,401
Deposits 605 - 3 72 530
Mortgage and Auto 519 - - 25 494
Other Retail Products 63 - - 1 62
Others 994 681 229 11 73
Asset and Liability Management 305 199 22 11 73
Lending and Portfolio Management 522 380 142 - -
Principal Finance 167 102 65 - -
Total Operating income1 9,751 5,577 812 301 3,061
1 Excludes $237 million relating to an own credit adjustment
Operating income by product and segment continued
6 months ended 31.12.13
Total Corporate & Institutional Commercial Private Banking Retail
$million $million $million $million $million
Transaction Banking 1,947 1,620 318 2 7
Trade 1,027 850 168 2 7
Cash Management and Custody 920 770 150 - -
Financial Markets 1,644 1,551 93 - -
Foreign Exchange 578 508 70 - -
Rates 365 358 7 - -
Commodities and Equities 219 216 3 - -
Capital Markets 275 272 3 - -
Credit and Other1 207 197 10 - -
Corporate Finance 1,281 1,266 15 - -
Wealth Management 694 - 69 187 438
Retail Products 2,458 - 2 98 2,358
Cards, Personal Loans and Unsecured Lending (CCPL) 1,387 - - - 1,387
Deposits 588 - 2 68 518
Mortgage and Auto 478 - - 29 449
Other Retail Products 5 - - 1 4
Others 896 642 202 (2) 54
Asset and Liability Management 243 176 15 (2) 54
Lending and Portfolio Management 543 387 156 - -
Principal Finance 110 79 31 - -
Total Operating income1 8,920 5,079 699 285 2,857
1 Excludes $(131) million relating to an own credit adjustment
Product performance
Transaction Banking income fell $46 million, or 2 per cent, to $1,918 million.
Trade income fell 4 per cent with lower margins than the previous year and a decline in fee income offsetting growth in
balances. Growth in balances was lower than the first half of 2013, impacted by balance sheet optimisation actions taken
during the period. Trade margins as a whole have stabilised since the end of 2013.
Cash Management and Custody income was flat, with margins down 4 basis points while average balances increased compared to
H1 2013.
Financial Markets (FM) income was $432 million lower at $1,780 million compared to H1 2013 impacted by challenging
industry-wide conditions and factors specific to Emerging Markets.
FX income fell 24 per cent to $636 million impacted by low levels of volatility across our footprint markets which reduced
spreads although volumes grew strongly. Cash FX notionals rose 24 per cent and FX Option notionals rose 45 per cent. FX
Options income in Hong Kong was impacted by the widening of the RMB trading band by the PBoC, which disrupted revenue
flows.
Rates income fell 33 per cent to $371 million largely reflecting the challenging market conditions in the first half of
2014. Rates flow business remained resilient while the structured business was impacted by market conditions.
Commodities and Equities income fell 9 per cent to $262 million. Client hedging activity declined, as markets were range
bound leading to low levels of volatility across most asset classes.
Equities income increased on the back of new product offerings and improved client connectivity.
Capital Markets income was flat at $284 million, with increased loan syndications volumes on the prior year period.
Credit and other income fell by 11 per cent to $227 million, primarily impacted by rising bonds yields.
Corporate Finance income was flat at $1,241 million as strong growth in M&A advisory income offset lower income from
Strategic Finance, reflecting repayments and timing of deal flow. Structured Trade Finance income up slightly on higher
client activity levels.
Wealth Management income rose 8 per cent to $817 million. Bancassurance income increased overall, benefitting from the
renewal of a multi-country distribution agreement in the current period. Income from managed funds reduced as equity
markets continue to recover, although this was offset by higher income from structured notes and Wealth Management
lending.
Income from Retail products was $153 million lower at $2,435 million.
Income from CCPL fell 6 per cent to $1,315 million as we reduced our exposure to higher risk Personal Loans portfolio in a
number of markets, particularly in Korea. Margins overall were compressed due to regulatory changes across multiple
markets. Korea suffered significant margin decline as we exited the higher risk Personal Loans segment.
Deposits income was down 1 per cent at $598 million as good growth in CASA balances in Korea and Hong Kong was offset by
lower margins in Time Deposits.
Mortgages and Auto Finance income fell 9 per cent to $474 million despite improved margins as property cooling measures
impacted new transaction volumes in our key markets in Hong Kong and Singapore and income in Korea was primarily impacted
by lower levels of origination under the Mortgage Purchase Program.
Other retail income fell 24 per cent to $48 million compared to H1 2013. Income was up $43 million against H2 2013, which
was impacted by a $49 million loss on businesses held for sale in Korea.
ALM income was up 38 per cent to $420 million reflecting improved accrual income which offset lower income from securities
sales.
Lending and Portfolio Management income rose by 1 per cent to $529 million. While average balances fell compared to H1
2013, this was more than offset by improved margins.
Principal Finance income fell 23 per cent to $129 million as gains from portfolio realisations were offset by reduced
market valuations. Income relating to Commercial clients fell sharply largely as a result of reduced realisations and lower
mark-to-market valuations.
Performance by geographic region and key countries
The following tables provide an analysis of operating profit by geographic regions and key countries:
6 months ended 30.06.14
Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total
$million $million $million $million $million $million $million $million $million
Operating income1 2,785 709 959 1,920 951 878 414 653 9,269
Of which - Client income 2,532 672 889 1,746 839 737 400 558 8,373
Operating expenses (1,410) (616) (379) (1,030) (482) (467) (300) (399) (5,083)
Loan impairment (212) (209) (61) (215) (27) (94) - (28) (846)
Other impairment (95) - - (3) - - - (87) (185)
Profit from associates and joint ventures 84 - - 29 - - - - 113
Operating profit/(loss)1 1,152 (116) 519 701 442 317 114 139 3,268
1 Operating income and operating profit excludes $(15) million in respect of own credit adjustment (Greater China $33 million, ASEAN $(27) million and Europe $(21) million)
6 months ended 30.06.13
Greater China North East Asia2 South Asia ASEAN MENAP Africa Americas Europe Total
$million $million $million $million $million $million $million $million $million
Operating income1 2,659 936 1,099 2,086 971 853 443 704 9,751
Of which - Client income 2,498 802 910 1,843 859 762 402 572 8,648
Operating expenses (1,384) (585) (425) (1,069) (493) (421) (278) (379) (5,034)
Loan impairment (127) (193) (117) (172) (34) (75) (7) (5) (730)
Other impairment 6 (19) - 1 - - - 1 (11)
Profit from associates and joint ventures 73 - - 38 - - - 1 112
Operating profit1 1,227 139 557 884 444 357 158 322 4,088
1 Operating income and operating profit excludes $237 million in respect of own credit adjustment (Greater China $7 million, NE Asia $2 million, ASEAN $93 million and Europe $135 million)2 Other impairment excludes $1 billion relating to goodwill impairment charge on Korea business
6 months ended 31.12.13
Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total
$million $million $million $million $million $million $million $million $million
Operating income1 2,539 703 941 1,925 894 898 415 605 8,920
Of which - Client income 2,348 660 860 1,803 804 798 397 554 8,224
Operating expenses (1,388) (601) (398) (1,006) (467) (441) (258) (600) (5,159)
Loan impairment (115) (234) (98) (224) (13) (195) (4) (4) (887)
Other impairment (5) (10) (105) 1 - - - 1 (118)
Profit from associates and joint ventures 73 - - 40 - - - 1 114
Operating profit/(loss)1 1,104 (142) 340 736 414 262 153 3 2,870
1 Operating income and operating profit excludes $(131) million in respect of own credit adjustment (Greater China $(8) million, ASEAN $(48) million and Europe $(75) million)
Geographic performance
Greater China
Income was up $126 million, or 5 per cent, to $2,785 million. Over 90 per cent of the income in this region is from Hong
Kong and China.
Income in Hong Kong rose $63 million, or 3 per cent, to $1,992 million. Client income increased slightly, up 2 per cent.
Lower income from FM was offset by an improved performance in CCPL and Wealth Management. FM income was impacted as
momentum slowed following the widening of the RMB trading band during 2014, reducing income from FX Options. Rates income
also fell as low levels of volatility contributed to reduced client activity. CCPL income increased reflecting growth in
fee income from Cards and higher Personal loan balances although this was partly offset by lower Mortgages income as
property cooling measures impacted new transaction volumes. Wealth Management income grew strongly particularly in
bancassurance. Own
account income rose due to gains from commodities and increased income from ALM reflecting the deployment of surplus CNH
funding.
Income in China rose $67 million, or 15 per cent, to $515 million.Client income rose slightly, up 1 per cent compared to H1
2013. Transaction Banking income grew as margins in Cash and Trade increased coupled with strong growth in Trade volumes.
Income from FM products increased with good flow FX momentum as a result of the wider RMB trading band although Rates
income was impacted by low volatility in the market. Income from Retail products was largely flat as growth in CCPL income
was offset by lower Mortgages income, which was impacted by significant margin compression. Own account income rose, as a
result of the deployment of RMB funds accumulating in from Hong Kong, Taiwan and Singapore as the Group continued to be a
leader in the internationalisation of RMB.
Performance by geographic region and key countries continued
The following tables provide an analysis of operating profit by key countries:
6 months ended 30.06.14
Hong Kong Singapore Korea India UAE China UK
$million $million $million $million $million $million $million
Operating income1 1,992 1,035 669 759 596 515 535
Of which - Client income 1,827 957 643 704 521 441 447
Operating expenses (866) (551) (587) (308) (286) (371) (308)
Loan impairment (163) (28) (209) (56) (21) (35) (26)
Other impairment (95) (1) - - - - (87)
Profit from associates and joint ventures - - - - - 84 -
Operating profit/(loss)1 868 455 (127) 395 289 193 114
1 Operating income and operating profit excludes own credit adjustment (Hong Kong $32 million, Singapore $(20) million, Korea $1 million, China $1 million and UK $(21) million)
6 months ended 30.06.13
Hong Kong Singapore Korea India UAE China UK
$million $million $million $million $million $million $million
Operating income1 1,929 1,123 898 908 631 448 566
Of which - Client income 1,790 952 774 740 547 435 443
Operating expenses (826) (614) (549) (356) (290) (383) (297)
Loan impairment (70) (39) (193) (113) (17) (27) (3)
Other impairment2 (2) 10 (19) - - 6 1
Profit from associates and joint ventures - - - - - 73 1
Operating profit1 1,031 480 137 439 324 117 268
1 Operating income and operating profit excludes own credit adjustment (Hong Kong $2 million, Singapore $64 million, Korea $2 million, China $5 million and UK $135 million)2 Other impairment excludes $1 billion relating to goodwill impairment charge on Korea business
6 months ended 31.12.13
Hong Kong Singapore Korea India UAE China UK
$million $million $million $million $million $million $million
Operating income1 1,796 980 665 755 591 486 484
Of which - Client income 1,659 960 632 685 520 432 440
Operating expenses (840) (515) (571) (328) (283) (370) (515)
Loan impairment (65) (49) (234) (82) (35) (31) (3)
Other impairment (2) - (10) (105) - (2) 1
Profit from associates and joint ventures - - - - - 73 1
Operating profit/(loss)1 889 416 (150) 240 273 156 (32)
1 Operating income and operating profit excludes own credit adjustment (Hong Kong $(2) million, Singapore $(35) million, Korea $(1) million, China $(6) million and UK $(75) million)
Operating expenses across the region rose $26 million, or 2 per cent. Expenses in Hong Kong increased $40 million on the
back of higher depreciation charges relating to our leasing business and investments in front-line technology. Expenses in
China fell $12 million.
Loan impairment in the region was $85 million higher at $212 million and Other impairment rose $101 million to $95 million,
primarily due to provisions relating to commodity financing transactions.
Operating profit fell $75 million, or 6 per cent, to $1,152 million, with Hong Kong down $163 million to $868 million and
China up $76 million to $193 million.
North East Asia
Income was down $227 million, or 24 per cent, to $709 million. Korea represents over 90 per cent of income within this
region.
Income in Korea fell $229 million, or 26 per cent, to $669 million. Income was up 1 per cent against H2 2013, but down 6
per cent excluding the $49 million fair value charge relating to businesses held for sale in that period. Client income
fell 17 per cent compared to H1 2013 due to lower levels of income from FM and Retail products. Income from Rates was
sharply lower, impacted by lower client volumes particularly in respect of structured notes and structured deposits. Lower
levels of client activity also impacted Transaction Banking, where Trade income fell due to lower volumes and Cash
Performance by geographic region and key countries continued
Management income was impacted by a reduction in the size and tenor of balances. CCPL income declined as we continue to
derisk the personal loan portfolio. Mortgages income also fell as Mortgage Purchase Program volumes declined. Own account
income fell sharply primarily due to lower levels of Principal Finance realisations. We continued to generate income from
Korean clients across our network and we opened three Korea desks in other countries to further increase the flow of
cross-border transactions.
Operating expenses in Korea increased $38 million, or 7 per cent, to $587 million and includes a $32 million special
retirement charge. Excluding this, expenses rose 1 per cent as we continued to tightly manage costs.
Loan impairment in Korea increased $16 million to $209 million primarily due to higher provisioning levels under the
Personal Debt Rehabilitation Scheme.
Operating profit in Korea fell by $264 million to a loss of $127 million.
South Asia
Income fell $140 million, or 13 per cent, to $959 million. Around 80 per cent of the income in this region is from India.
Income in India fell by $149 million, or 16 per cent, to $759 million. On a constant currency basis, income fell 9 per
cent. Client income was 5 per cent lower primarily due to reduced income from Transaction Banking and FM products.
Transaction Banking income fell due to a fall in average balances across Trade and Cash Management, as we reduced low
return exposures. The fall in FM income reflected lower spreads on FX products which more than offset higher volumes. This
was partly offset by higher Lending income as margins improved. Income from CCPL fell as margins and balanced declined. Own
account income was also lower due to lower derisking activity in the current period and lower Principal Finance
realisations.
Operating expenses across the region fell $46 million, or 11 per cent, to $379 million. Expenses in India were down 13 per
cent, or 4 per cent on a constant currency basis, as we reduced headcount and continued to manage costs tightly.
Loan impairment in the region fell $56 million, or 48 per cent, to $61 million as the prior period was impacted by charges
on a small number of exposures.
Operating profit fell $38 million to $519 million, with India down $44 million to $395 million.
ASEAN
Income was down $166 million, or 8 per cent, to $1,920 million. While Corporate Finance income increased, difficult market
conditions and regulatory headwinds, together with margin compression, impacted other products.
Income in Singapore fell $88 million, or 8 per cent, to $1,035 million. Client income remained resilient, however,
increasing marginally by 1 percent compared to H1 2013. Transaction Banking income fell largely due to lower Cash
Management and Trade margins which more than offset strong Trade volume momentum on the back of higher RMB assets. FM
income was also down with lower income from Commodities and Equities partly offset by resilient FX flow volumes as we
continued to focus on growing the RMB franchise despite increased competition and reduced client activity. Rates income was
largely flat. Income from Corporate Finance rose and we gained market share, although the number of deals closed fell due
to lower client activity levels. Income from retail products fell as regulatory cooling measures impacted Mortgages & Auto
income, offsetting higher income from Cards reflecting portfolio growth. Own account income fell due to lower volatility,
narrowing trading ranges and lower Principal Finance income.
Operating expenses fell $39 million, or 4 per cent, to $1,030 million. Expenses in Singapore fell $63 million reflecting
lower levels of variable compensation and tight management of discretionary costs.
Loan impairment was up by $43 million, or 25 per cent, to $215 million. Although impairment levels in Singapore fell this
was more than offset by higher provisions in Thailand.
ASEAN delivered an operating profit of $701 million, down 21 per cent, with Singapore down $25 million to $455 million.
Middle East, North Africa and Pakistan (MENAP)
Income fell $20 million, or 2 per cent, to $951 million, reflecting a challenging business environment, margin compression
and heightened competition.
Income in the UAE, which generates over half of the income in this region, was down $35 million, or 6 per cent, to $596
million. Client income was down 5 per cent. Income from FM products fell primarily due to lower income from FX as spreads
compressed and from Rates reflecting reduced client flows. Transaction Banking income was down, as margin compression in
Cash Management offset higher average balances. Income from Corporate Finance was lower, as deal flow slowed, and Lending
income was impacted by repayments and continued balance sheet optimisation. Volumes in CCPL and Mortgages increased as
market conditions improved, offsetting margin compression from competitive pricing and surplus liquidity. Own account
income fell due to lower income from commodities, partly offset by higher income from derisking activities in ALM.
Operating expenses in the region were $11 million, or 2 per cent, lower at $482 million, reflecting headcount
rationalisation in the UAE and good cost discipline across the region.
Loan impairment in MENAP fell by $7 million to $27 million, largely within the UAE.
Operating profit for MENAP was broadly flat at $442 million although profit in the UAE fell $35 million to $289 million.
Africa
Income rose $25 million, or 3 per cent, to $878 million. On a constant currency basis income rose 11 per cent. Client
income, however, fell 3 per cent on a headline basis. Transaction Banking fell due to compressed Cash Management margins
and lower Trade balances, and FM income was impacted by lower FX spreads and reduced Rates volumes. Lending income also
fell due to repayments and exiting low return exposures. This was partly offset by increased income from CCPL income on the
back of higher balances and improved Cards margins. Unsecured lending across the region is primarily driven by
payroll-linked accounts. Income from Mortgages also rose as margins and balances grew. Nigeria continues to be the largest
C&I revenue engine in Africa and Kenya continues to be the largest generator of Retail income. Own account income grew
primarily due to increased Principal Finance income.
Performance by geographic region and key countries continued
Operating expenses in Africa were higher by $46 million, or 11 per cent, to $467 million. On a constant currency basis,
expenses rose 20 per cent primarily due to flow through of prior year investments together with investments in developing
new markets.
Loan impairment increased to $94 million, up $19 million due to a small number of exposures.
Operating profit fell 11 per cent, down $40 million to $317 million. On a constant currency basis, profit fell 4 per cent.
The Americas and Europe regions act as a two-way bridge, leveraging capabilities within these regions to support our
clients' cross-border needs in Asia, Africa and the Middle East
Americas
Income fell $29 million, or 7 per cent, to $414 million. Client income was flat despite increased client activity and
higher volumes in Trade and Cash Management and across FX products in FM. FM income fell as a result of lower income from
Rates, which was affected by low volatility and reduced bid-offer spreads, and Commodities and Equities, reflecting lower
commodity prices. This was partly offset by improved FX income as increased volumes helped offset spread compression. Own
account income fell, primarily as market conditions impacted FX income. This was partly offset by improved ALM income on
higher reinvestment yields.
Operating expenses were $22 million, or 8 per cent, higher at $300 million primarily due to increased compliance and
regulatory costs.
Operating profit fell $44 million, or 28 per cent to $114 million.
Europe
Income was down $51 million, or 7 per cent to $653 million.
Client income fell 2 per cent due to weaker demand for FM products as a result of low levels of market volatility reducing
client hedging requirements and investment opportunities. While volumes in FX and Rates grew strongly, this was more than
offset by significant spread compression. Corporate Finance income also fell on the back of repayments and lower deal
volumes. This was partly offset by a rise in Transaction Banking income as balances grew and margins improved. Lending
income was lower as balances reduced as we managed down low return exposures. Income from Wealth Management and Retail
products provided to Private Banking clients was broadly flat. Own account income fell, impacted by difficult market
conditions, although ALM income rose as we deployed surplus liquidity.
Operating expenses rose $20 million, or 5 per cent, to $399 million partly due to costs incurred to exit our Private
Banking operations in Geneva. Expenses in H2 2013 included the cost of the UK bank levy of $235 million.
Loan Impairment was higher by $23 million to $28 million. Other impairment increased $88 million to $87 million as a result
of impairments on certain strategic and associate investments.
Operating profit fell by $183 million to $139 million.
Group summary consolidated balance sheet
H1 2014 vs H1 2014 vs H1 2014 vs H1 2014 vs
30.06.14 30.06.13 31.12.13 H1 2013 H2 2013 H1 2013 H2 2013
$million $million $million $million $million % %
Assets
Cash and balances at central banks 62,182 57,621 54,534 4,561 7,648 8 14
Loans and advances to banks1 91,420 74,880 86,169 16,540 5,251 22 6
Loans and advances to customers1 305,061 291,793 296,015 13,268 9,046 5 3
Investment securities1 127,456 114,932 124,277 12,524 3,179 11 3
Derivative financial instruments 48,105 54,548 61,802 (6,443) (13,697) (12) (22)
Other assets 55,914 56,183 51,583 (269) 4,331 - 8
Total assets 690,138 649,957 674,380 40,181 15,758 6
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