Standard Chartered PLCFollow sc.com

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Standard Chartered PLC Earnings - Analysis & Highlights for Q4 2024

Overview

PositivesNegativesOutlook

The company is announcing a 37% increase in full-year dividend per share and a new share buyback of $1.5 billion.
Underlying loans and advances to customers were up 2% in Q4, mainly from the execution of pipeline deals in Global Banking, bringing the full-year underlying growth to 4% and in line with low-single-digit percentage growth guidance.
Non-NII continues to be a strong driver of growth and is around half of the group's total income.
The company expects to grow very gently with growth in earnings.

Q4 2024 Earnings Call

The company is in the hands of the volatility of rates.
The company has been cautious in recognizing episodes of instability, first in China, more recently in Hong Kong.
The company is concerned about the level of uncertainty out there.
The company has been delayed by a year, but there are ups and downs within the overall mix.

Q4 2024 Earnings Call

The company is targeting its 2026 total expenses to be below $12.3 billion, including the deposit insurance cost, and around $100 million of UK bank levy.
The company expects to grow very gently with growth in earnings.
The company expects to generate gains on sales or mergers of ventures and will increasingly obtain third-party funding for expansion of ventures, demonstrating the economic value it is creating.
The company is committed to delivering positive jaws each year.
The company has had a good run operationally and in terms of capital management and is prepared to go down into the 13% to 14% range.

Q4 2024 Earnings Call

Q&A Highlights from Standard Chartered PLC Earnings Call Q4 2024

Analyst asked about the company's comment regarding a good start to 2025.
- The company's comment about a good start to 2025 refers to the positive momentum that the company has experienced in the first few weeks of the year, particularly in CIB and Wealth. The company has seen a strong start in both CIB and Wealth, with good performance in Global Banking as well. The company attributes this momentum to the uncertainty in markets and the client profile that is increasingly coming their way.
Analyst asked about the software write-downs and their impact on the company's ability to grow its business and return capital to shareholders.
- The company explained that the software write-downs were a matter of documentation of decisions to be taken in the context of software capitalization, which has been completed. The cost to achieve FFG is largely a cash expense, with a de minimis impact on capitalization. The company expects a few other things, including deduplication of double occupancy costs and market exits, but the impact of these will be relatively small compared to the 50% of FFG, $1.5 billion cost to achieve. The company has finished the software write-downs related to documentation of decisions on capitalization and does not expect any impact on their ability to grow their business or return capital to shareholders.
Analyst asked about the $153 million improvement in NII and how much of it relates to the big step-down in term CIB deposits that is not likely to continue.
- The company explained that the $153 million improvement in NII is due to a shift in the mix of assets from treasury assets to commercial assets, with a focus on funding the trading book to capture volatility or other opportunities. The company has been able to deploy capital in other ways while still facilitating client activity, and has also improved the quality of their funding by reducing corporate time deposits and substituting them with cheaper ways of funding. The company does not expect the big step-down in term CIB deposits to continue and does not see any significant impact on their business.
Analyst asked about the notable items in non-interest income, specifically the $300 million related to Ghana and Egypt.
- Diego De Giorgi, Chief Financial Officer, explained that the company does not think about restructuring as a run rate, and that they do not guide on restructuring going forward. He also clarified that the notable items in non-interest income are not part of their guidance, which is ex notables.
Analyst asked about the supply chain shifts and how clients are adjusting to the tariff changes, and how Standard Chartered Bank is advising clients on the shifts.
- William Thomas Winters, Group CEO, explained that the company has seen a significant shift of manufacturing from China to other markets, including Vietnam, Indonesia, and Malaysia. He also mentioned that the company has a higher market share outside of Mainland China than inside, and that these shifts have been beneficial for the company as it has helped them expand their presence in core markets. He also stated that the company is focused on helping their clients with the financing and currency risk management end of their supply chain shifts.
Analyst asked about the CASA TD ratios and how the company is optimizing its liability stack.
- Diego De Giorgi, Chief Financial Officer, explained that the company is focused on optimizing its liability stack, and that they have three sources for funding themselves, including retail CASA and time deposits. He also mentioned that the company wants to continue to push all of its funding bases in retail, and that they want to deemphasize corporate time deposits as an expensive source of funding.
Analyst asked about the company's rate sensitivity disclosure and whether they can provide any numbers to help understand how they are modeling it.
- The company's rate sensitivity disclosure includes ranges for both the CIB and WRB through the cycle, with PTRs being above the range on the CIB side and within the range on the WRB side. The company uses the mid to lower end of the ranges in their models, and they expect to return within the range.
Analyst asked about the company's deposit growth and demand for loans.
- The company's demand for loans has been subdued, but it's better than expected, with growth of 4% in 2024. The company is good at attracting deposits through wealth management, particularly in markets like Hong Kong and Singapore, and they use time deposits for wealth management to capture inexpensive CASA. The company is cautious about the level of uncertainty in the market and is conservative in their forecasts, but they are optimistic about their performance.
Analyst asked about the useful life of software that the company uses in their models and whether that has changed with the charge.
- The company has not changed the useful life of the software they use in their models, but they have reviewed the documentation for the initial capitalization decisions. The company's overall investment level has been steady, and they continue to invest in everything they need to achieve their plan and position them well for the future. They don't expect any material increase in the software they are capitalizing, but a few tens of millions of dollars of costs they incurred will not be incurred, which will have a slightly flattering effect.
Analyst asked about the reasonable underlying cost growth for Standard Chartered PLC to capture opportunities without underinvesting.
- The company is investing substantially in its wealth business, and the Asian markets are very competitive. The company has announced a $1.5 billion further step-up in investment in its wealth business, which is intended to drive income growth. However, to remain competitive and take market share, the company will have to invest. The guidance for the company includes optimizing the rest of the business and repositioning key parts of the mass market business across the network. The company has been an employer of choice, attracting talented employees and paying the market price for them. The competitive environment has been working in the company's favor, and it feels well-positioned for the future.
Analyst asked about the possibility of seeing cost growth materially pick up after the Fit for Growth program ends, i.e. after 2026.
- Diego De Giorgi, Chief Financial Officer, explained that Fit for Growth is intended to transform the way the bank does things, including investments in technology, process simplification, and service delivery. The company has flagged that 50% of the Fit for Growth cost to achieve will happen this year, and capital returns should be factored into thoughts on this. The company's engines of profit growth are working well, enabling a $1.5 billion share buyback, but it shouldn't be extrapolated. The company is guiding to over $8 billion between 2024 and 2026, and it is their objective to go over that if they can.

Q4 2024 Earnings Call