Q1 2021 Standard Chartered PLC Earnings Call

Welcome to standard chartered Plc's first quarter 'twenty 'twenty. One results today's presentation is being hosted by Bill Winters Group Chief Executive on on behalf at group Chief Financial Officer.

They're opening remarks, a Finnish there'll be an opportunity for question and on it says to ask a question over the phone. Please press star one on your telephone keypad at any point join the presentation.

Our attorney Tuesday piece use the question box available on your webcast page to submit your questions at this point I'd like to hand over to Bill to begin. Please go ahead.

Thanks, very much and thanks, everybody for joining us good morning, good afternoon, I'll make a couple comments upfront on the page two of the slide deck that you probably have and it will take us through the package and then we'll both be available for Q&A.

So that's going on in the in the first quarter.

The interest rate headwinds that were well flagged had been largely offset by growth in our other key strategic areas, which is encouraging leading to it.

Wrong quarter overall, we had a record quarter in wealth management.

Important as the income number is the is the new client numbers, so 100000 additional clients into our priority segments.

Tell me about two thirds from the from our mass segment and the other is new today.

So as we've always pointed out growing client numbers on SSAT indicators.

I think that the outlook for.

Sure.

The strong wells and a strong quarter in wealth.

Should continue to be pretty strong and a good strong quarter international markets, obviously, consistent with the market continuing to two.

To advance on that front.

Parents were unusually low we remained well reserves in the face of some remaining uncertainties.

In in India, and the rest of South Asia.

Comfortable with that with our reserve positioning.

And with our capital strength.

Apart from those net numbers in the first quarter. There were number of notable so I think that are going the right direction, but good solid growth in loans and advances.

Our mass market efforts are on our gathering pace and that is progressing well and particular the digitization efforts.

In the in the main bank are going extremely well on that of course allows us to continue to rationalize expenses on that business day, including references that you see on the statements due on <unk>.

<unk> to reduce the number of branches and our discrete digital ventures with Nox crossing the 100000 client margin.

This is actually in production now in Indonesia, which is all very encouraging on the sustainability front made very good progress both on the.

On the business of sustainable finance.

The early stages of preparing for a much more robust carbon market.

So in terms of forming our own policy to use which will be coming back on later in the year.

Finally, I'd like to extend my extraordinary sympathies, and most heartfelt thoughts too.

The entire population of India, Bangladesh and other other parts of the world that are experiencing particularly bad.

Outcomes right now I'm very grateful to our own in place for for holding the Fort.

Very difficult times and.

We've not had any challenges from a resiliency perspective, as yet but of course, we're watching it very closely.

<unk>.

So many people.

And the markets these days.

And then a relative.

With that I'll hand over to Andy.

They come back day here for Q&A. Thank you.

Thank you Phil.

Thank you all for joining the call.

Let me start on slide three with the usual financial snapshot and I'll cover the component parts. Shortly so just a few comments on this page starting of the toll income on a constant currency net excluding the large CVA credit in the previous year was down just $130 million on three per se.

And with business momentum, helping us to claw back nearly two thirds of the $380 million of income loss into low interest rates.

As Bill mentioned the momentum we saw building in some of our larger businesses last year continued leading to a store on the salt. So this year well.

Wealth management had a record quarter.

20% year on year on in financial markets income, excluding DVA was up 7% year on year, which is an encouraging signs on the underlying improvements in that business given the massively elevated market volatility. We saw this time last year.

And finally on income the net interest margin Hasbro will do cycles as we anticipated.

Underlying momentum has continued in our fee businesses.

Supporting our view that the full.

Income Asia country volume.

Should be similar to last year only constant currency basis.

Moving down the page to expenses, which were up 4% at constant currency, mainly normalizing the level of accruals for performance related.

We also creates the capacity through our ongoing productivity initiatives some of the <unk>.

6% increase in the amounts expense remote there is digital and other investment projects.

Chris impairment 20 million was exceptionally low and was achieved whilst full day, maintaining the overall level of both the management phase of life.

Although global economic prospects improved in all our main risk indicators are all day trying to get the right direction. It's unlikely we'll see such a low quarterly charge. This is again quite some time, so I'll cover that in more detail shortly.

Altogether and notwithstanding the DVA benefit in the prior year. This led to an 18% improvement in reported underlying profit before tax of $1 4 billion. This was all price.

Quarterly profit credit for several years and I'm sure resulted in already see nudging into double digits.

And finally on this slide on our capital and liquidity.

Tom.

I'll see if you wanted to talk about target range, despite responding to strong client demand with loans and advances to customers up 4% in the quarter. This gives us capacity to grow the business.

Funds shareholder returns.

So let's start looking in more detail on income on slide four.

This is the usual view of income byproduct, excluding DVA and with currency fluctuations stripped helps to highlight the underlying momentum.

The COVID-19 from the left shows Q on 2020 income on a constant currency basis, and we've shown on the impact on net interest margin headwinds I mentioned $380 million on those.

I will call on this year's NIM last year's balance sheet.

Moving then to the right wealth management income was very strong as I mentioned already our record performance was underpinned by the continued improvement in sentiment and some of our larger markets in Asia, particularly Singapore Korea, China and Hong Kong.

It is into context income of $640 million was $100 million clients on a year ago and 200.

But it is higher than our low point in Q2 last year.

Financial markets is up again this year on those.

For what was a strong first quarter last year.

Youll recall the rates business in particular are not surprised that they did pretty well in the aftermath of the announcements on the global interest rate reduction this year through a better conditions for our commodity business, but much less volatility in rates and FX, mainly in the macro trading April was down year on year on the other non credit trading which posted a 25 billion loss in <unk>.

On <unk> the extraordinary back into profit this year with credit markets, including credit trading also growing up 6%.

The coldest in gray on the right hand side represent deposits those taking the brunt of lowered interest rates a retail products, we see a familiar story with interest rates move low positive income has fallen sharply offset to some extent but growth in both.

It's a similar picture in transaction banking as Bill said, we are seeing good signs of economic recovery in our markets on trade income as a result is up 7% year on year. Thanks to the levels will also start with 2019 with balance sheet price of just under 8% during the same period.

The cash business focuses on two year low this quarter with margin compression more than wiping out the beneficial impact of 11% volume growth year on year.

Treasury and other income was down 69 million.

Recall, we generated unusually large realization gains from Q1 last year given the market dislocation, we made some gains this year, but not as much given the less conducive conditions.

So all in all as I said income down 3%.

It's a theoretical exercise on all those things wouldn't be equal, but if you simply rebase Q on 2020 income so the impacts of the NIM compression that needs to be incurred net income would have been up 7%.

Now turning to slide five to spend a bit more time for net interest income on margin.

First quarter net interest margin principal of 122 basis points is in line with the guidance we gave in February.

Net interest income was slightly down on Q4 2020, but after adjusting for the <unk>.

<unk> to day count and the one off.

Sure Chris tax receipt net interest income was actually up quarter on quarter by 3% in line with the growth in average interest earning assets.

Interest rate picture has not changed materially in the first quarter <unk> has continued to drift lower by about 12 basis points, which is continued.

On NIM in Hong Kong. So this has been partially offset by improvements in pricing and on <unk>.

<unk> focus on the mix of our liability base on.

And speaking of interest rates, although we don't expect off with heightened state tons. Soon some investors have asked if we can at least lately from the tenor of our treasury take advantage of the steep yield curve Logan on the simple answer is yes to some extent, we can and we will selectively do so over time.

I don't volumes, we all seen healthy client led demand and some of that low chip market in Asia as I mentioned loans and advances to customers grew by $10 billion for full percentage in the quarter with lending volumes up on the back of the short term IPO growth in Hong Kong transaction banking trade on wealth management growth certain blood.

Hi on secured lending and retail mortgages, partially offset by declines in the unsecured credit card and personal loans.

We expect to generate decent loan growth for the remainder of the year.

Albeit probably not at the rate we saw in the first quarter.

Turning to slide six.

More capital efficient non funded income, which comprises net fees and commissions and net trading on other income is growing 4% year on year. It now constitutes place 60% of our total fee income.

Wealth management is the largest engine, but net fees and commissions is up 23%.

I will focus on driving client growth, adding new products and investing to improve upfront and back office capabilities continuing to pay off.

We're adding affluent clients faster right now than we were before the pandemic two thirds of which migrated from the mass retail segment. One of the many reasons why we are keen to grow that pipeline.

Our product portfolio was expanded with new wealth management funds focused on retirement, China's new cultivate and sustainability.

Our other big fee generating engine as financial markets as I said, we believe the improvements made by our team in recent years will underpin healthy long term price that is much less correlated volatility on that in the past.

Net fees and commissions from cash and trace both recorded the highest quarterly print since the start of the pandemic and low still below pre pandemic levels. This all evidence as the signs of recovery that we are seeing in our markets.

I already mentioned that the Treasury income is lower year on year, primarily due to low realization guidance grocery markets.

With that but before moving to expenses a few is on income outlook on Q1 performance supported by the broader macroeconomic outlook reinforces our confidence in the previously cited income guidance with.

With the NIM, having broadly stabilized we expect income to start growing again in the second half of this year on a year on year basis. After the year overall, we had a similar level to try and try and take on constant currency.

On that we see plenty of reasons to expect income growth or return to allegiant sort of range of 5% to 7% growth starting next year.

Now on to slide seven on costs.

Mentioned earlier the reason for the small increase in cost in Q1, clearly the plan is to get back to generating significant positive jaws as soon as possible I would like to say, we will do so in the second half of the year.

Earlier about the productivity initiatives that we are increasing capacity to continue to invest.

We have accelerated some of the opportunities, particularly as we implement new ways of working to speed up the rate of innovation and process improvements along.

Aligned with this many colleagues across the clients are just moving on to new contracts, which allow working from home from one to five days per week.

Moving to the success of this program.

<unk> office space Accordingly.

Suffice it to say the benefits from our multiyear digitalization program on other initiatives such as this should isn't that should enable us to roughly half the number of physical branches to around 400 and reduce our overall real estate footprint by about a third over the next five years or so.

As we said in February expenses to increase slightly in 'twenty, one as we invest in digital capabilities. We continue to target full year below $10 billion at constant currency, excluding the UK Bank Levy.

What was related party could not just slightly outcome.

The points on cost before we move to the next slide Firstly as you may have seen the UK budget confirms our expectation that the UK bank Levy will reduce to around $100 million. This year, realizing an annual savings of $200 million.

Secondly, you'll recall, we said in February that we.

Likely to incur restructuring costs of about <unk> billion dollars as we continue to transform the business to drive productivity most of which could lap. This year. There was a small charge booked in Q1, but those efforts will naturally build.

The remainder of the year. So you should expect the quarterly run rate to pick up.

Turning now to Christian pounced on asset quality on slide eight.

Impairments of $20 million was exceptionally low low first quarter is not unusual the $20 million.

So as I said earlier, all the main indicators a whole day moving in the right direction.

We saw a small net release the stage, one and two charges and a small stage three charge and retained a management overlay all $339 million.

Silke as high risk assets in our corporate commercial and institutional banking portfolio across the three indicators in the fulsome middle graph continue to trend down.

Clearly the full year impairment charge is going to be significant this year.

Probably answer to give you a very precise guidance and as usual I will refrain from doing so however, the outlook is on sales to the more positive because the <unk>.

As fall from Health of awards when it comes to COVID-19, we have seen good progress on some of the markets. Whilst others are facing challenges has been has referred to what I will say based on a Q on experience is that we may get back to or even slightly below our normalized low loss rate of around 35% 40 basis.

Points, possibly this year.

So to complete the financially view on slide nine for risk weighted assets and capital starting with the chart of the top risk weighted assets were up $8 billion or 3% in the quarter driven mainly by strong client demand.

As has often been the case before the first quarter, usually sees financial markets business very active those pumps return after the seasonal slowdown in quarter four.

How does the financial markets business books assets and take some price positions that bad.

Credit and market risk weighted tends to increase the pace. However, this pace it typically not repeated later in the year.

In Q1 customer demand that asset growth, partially offset by an improvement in asset mix added 8 billion. So part of the rate increase was due to credit deterioration of about $6 billion on $1 billion from market positively right were offset by similar reductions from FX movements.

We've consistently guided that all of you.

Should grow below the rate of asset growth and that very much remains our expectation built in every quarter, obviously, but over time I expect mid single digit year on year also beauty growth for this full financial year.

As you know I'll focus on returns in recent years has driven discipline around cash.

So we are confident we can capture console juices without calling up the auto EBIT intensity during the remainder of the year.

Turning to the chart on the bottom we remain strongly capitalized on the CTO on ratio of 14% with topical on target range and four percentage points above already tremendously.

Profit accretion of 40 basis points allows us to reinvest into conflict asset growth.

Roughly 10 basis points cannot CET one upon completion of the share buyback, we announced in February and the accrual of an interim dividend at <unk> 80 on coupons, FX and others increased nine basis points on a breakthrough reductions and 10 basis points to the OCI reserve movements.

I think whether it's the worst depends I think going forward, we will be happy operating within relative than above 30.

10, 40% target CET, one Brian <unk>, we believe we will see significant profitable opportunities to put capital to work supporting our clients in the coming quarters, and we will seek approval to useful surplus we have often cite pay dividends and buybacks.

And I'm also the funding on slide four if we could flow into questions.

I won't repeat the outlook comments at the top of the slide summarizes how we think the rest might pan out. The key point is the underlying momentum remains strong as the year on year interest rate right now starts to reduce pretty quickly.

The Boston showed some examples of trends we are seeing in the drivers of our underlying business momentum.

Taken together they reinforce our confidence in our outlook both for this year, hence getting back to five 7% topline growth next year and deal.

And with that I'll hand back to the operator, so built on volume can take your questions.

Thank you we will now begin the question and answer session. If you wish to ask a question <unk> would you. Please press star one on your telephone keypad on like for your name to be announced to come to your request. Please press the hash key Alternatively. Please use the question box available on your webcast page. Please submit your questions.

Start on one to ask your question.

Your first question comes from the line of Yafei Tian of Citi. Please ask your question.

Hi, Thank you for taking your questions on at that time.

Question is on the first one is looking at asset quality for this quarter, it's a very good quarter compared to some of your peers.

So it seems to be much more modest particularly on any.

Taking into account that the NPL stage three loans actually falling does that mean, there is a very long runway for standard chartered to deliver very low non luxury it's not just for this year. Okay. Full featured yes. So thats. The first one second one you mentioned.

With half the number of banks and that was for.

Going forward and then construction costs related to that just wanted to have a bit of understanding what markets are you looking at.

Optimize the branch network. Thank you.

Okay. So low.

Let me take it.

On asset quality.

I would point to a few things and we've got to sitting on slide eight.

We saw a significant increase in early on the ones that we're watching very carefully that peaked at over $14 billion on that.

It has been coming down progressively quarter by quarter.

So we're now about a third less for that and we're actually back below the levels that we had at March 2020 at the very start of the pandemic that tends to be the best indicator as to what is happening.

The forward period.

We have got on stage.

Stage, one and two on stage three so credit tightened so sorry, the phase III on the credit grade 12, all staying fairly constant at <unk> 6 billion level.

806 billion needs to be seen in the context of an overall portfolio of nearly 300 billion.

Relatively small pulp vehicle portfolio. It is stable we are monitoring it quite a lot of activity. There is actually better collateralized now than we have had in the cost. So we are not worried about that.

Perspective of the overall of the business clearly that could yet be also seen events, but we think that the portfolio is behaving well and then find the others, but last year was the 2 billion charge. It was about 1 billion higher than might otherwise have been the case takes off this year, we seem to be now normalizing back to the long term averages.

I think if we take about 1 billion of excess charge on a $300 billion book through the how did the course COVID-19 I do not think net will be a bad outcome.

And on the branches.

Have been investing in digitalization and mobile applications regularly for the last several years, we have been greatly reducing the number of branches over that period of time as customer move but behavior moves from attending physical problems touched on doing more and more things on mobile devices.

I think four or five years ago, we had about 200 branches were about 800 to day, what we're seeing sales stays that we continue to expect that trend cooker and the type of repair at the time that we think will settle somewhere around the 400 branch level, but on the culmination of digital combination of mobile access for customers.

He told his concluding but we think that that will be a sensible target to go forward.

On the short comment on on the Brent side.

Within the 800 branches, we've been steadily reconfiguring a number of those branches from Maine transaction branches into our wealth and Advisory Register.

On the upgrading facilities and making them more suitable for affluent customers who are looking for advice.

Transaction processing, rather than on than day to day banking.

So the rent isn't going away by any means but that will be essentially reconfigured as we already have in a number of cases.

Thank you.

Thank you.

Our next question comes from the line of on Nebraska with Barclays. Please ask your question.

Good morning Gents.

Just wanted a quick question on wealth management, obviously, you can print in Q1 interested in kind of.

What kind of reached we take for the full year.

In regards to wealth management, and I guess, you're kind of calling out again.

The difference in performance between.

The bank assurance component.

Of wealth management.

I mean can can you help us understand the kind of moving parts.

Behind the bank assurance component versus the non bank assurance component.

And to what extent is activity subdued and can we expect some kind of rebound.

Potentially.

The Hong Kong, China border reactance placed on the ship.

Yes so.

We've seen very focused upon what the punishment for a number of years now and what else is really good to see such a strong start to this year just sort of a build on what those being progressively happening over periods of time as we all know a lot of Wil has moved into the Asia region.

And I think we have available sales force that appeared to selling well.

The new systems, we've got better insights with supporting costs that seem as strong.

And it's just really good to see that having come through.

As we have said today, we have goals, but smaller increase in the bank or insurance the bigger increase in the rest of the product sets that will vary from period to period, but remember lots of the bank assurance product is sold place to face.

On a period when it's a slightly more difficult to get face to face co pack is not consolidated surprised but thats.

It is slightly being handsets. So we come into this year feeling pretty good about wealth management, obviously, how it plays out over the remainder of this year will depend a lot on sentiment and how there is markets around the world moving.

But it could be but federal to the business on something that we are proud of.

I mean.

Thanks, very much if I could just follow up quickly.

Youre, demonstrating some really strong growth in that.

On things up, but you've got a decent chunk of that business not firing on all cylinders.

Is there any reason to think that next year.

Wealth management title it doesn't kind of takeoff.

Is that something we should be thinking about in terms of you've overrun in Q1 on.

Some other thing.

Well I tried.

Percentage of April I think is reasonable.

But the concerns but.

Within any product Brian sure was going to have some slightly drunk on sort of the slightly lighter even occurred.

We've also towards the Bancassurance proposal vessel, we see a lot of potential but.

We are doing a lot now that we have got CPP business area to look more cohesively asphalt. So this whole accurately customers, including the wealth management product.

Hope that actually as we start to get a more consistent approach across markets, but that also will provide us with opportunity and we've also been very encouraged by the growth in the absolute customer segment on more customers.

It is to put as much coming from this market segment, and hence reinforcing hopefully, but actually having a bigger presence in the mass market as a free to talk fluids fueled by will punch on products.

It's a very potent combination for us because we are moving forwards.

Maybe if I could just add I think we see a tremendous amount of runway in this product line.

When we look at Q1, but also over the past few quarters we've.

We've seen some of the markets that are smaller contributors to our overall business, but nevertheless businesses China Korea.

In addition to the day.

Businesses that had been the bulk of our wealth business to Hong Kong, Singapore, Taiwan et cetera.

New markets are really firing and when we look for secondly, yet the Chinese market opening up we will give specific things like well connects.

Area in China, then, perhaps expanding to the rest of the country over time.

Building on some really good strength in our wealth business in China.

Over the past quarter on over the past couple of years and we're very encouraged by the fact, the ability to sustain these relatively high growth rates and perhaps out of 20% every quarter.

As you know that to decide has been growing at high single digits low double digits for many years.

Yes.

And we think that the runway goes tour for quite a long time.

And we're investing in that.

I would call out specifically.

China, India and in other markets that will will move up and down from quarter to quarter, but are establishing a very nice trends for long term growth in this key strategic area of focus for us.

Thank you very much.

Thank you.

Our next question comes from the line of Joseph Dickerson of Jefferies. Please ask your question.

Hi, Good morning, Thank you for taking my question.

Just had a quick one really one of your competitors not abide by them on the.

The competitive on a large global bank.

He is looking to sell off some of its consumer businesses in your footprint.

Just wondering if you think on any of those portfolios would be a good use of excess capital or comment on portfolio acquisitions more generally would also be helpful. Thank you.

So I think we're always looking for opportunities to to fill ups in our network.

Tell me looking for things that play to our core strength or where we think we have some value add.

There could be easily parts of the Citibank portfolio that day.

With our business, we will look at them.

We know that business is reasonably well.

None of it is without competition.

Early stages of the process, but we will look and we will determine whether it's the virtues of the shareholder capital that we've got relative to get leases.

Recognizing that we have the opportunity.

The opportunity before too long to buy back shares and interest.

Okay.

Look at those acquisitions in the context of our.

Our whole portfolio.

Thanks, so much.

Thank you. Our next question comes from the line of Tom Rayner from Numis. Please ask your question.

Good morning Bryce.

Just wanted to stick firstly just on.

On the sort of revenue sustainability question.

Net it's about wealth management.

Yeah.

Realized on the.

First quarter was very strong in Hong Kong, particularly intend to stop market, neither which I think is meaningful.

On the sales and retail sort of equities trading I just wonder how much of your Q1 performance was driven by that rather than some of the other things you mentioned mix I think in April that has dropped off quite notably so it's just a question about the sustainability of that aspect.

The wealth management performance.

Also just on revenue can I, just sort of check with the expected currency impact. This year is still around $400 million because obviously the impact is quite small in Q1 relative to that full year guidance. That's the first question I have a second one on costs. Please.

Okay.

On the.

As you know.

Management business lines is is quite volatile and it's really driven by market sentiment exactly as you call. It.

So the outperformance in Q1, clearly driven in part by.

The cash.

The extremely favorable conditions in the.

The equity markets.

Net unfavorable on fixed income markets as well.

Yes.

In addition to the resumption of activity in the back on line.

So we will see that bump around from quarter to quarter for sure as we have I think for every year in the past decade.

Our business is relatively less market sensitive than some other businesses because we've got a relatively higher proportion in banca and other savings products.

That are a bit less market sensitive, but it doesn't it doesn't rigorous harmless to to market volatility.

That's.

But the minute that they're going to call. It specifically in terms of sustainability is the consistent growth in client numbers.

Which in its on an accident that we have a growth in client numbers. We focus on this quite a bit we've been focusing on on reorienting, our mass market to identify those clients that can elevate themselves in terms of their status on site standard chartered to two premium on that priority. The premium segment that we've added in most of our markets over the past couple of years is going very well.

And we've made big investments in customer service, and which has led to this in the call that the full year results led to a number one net promoter score in six of our top nine markets and top tier in the other three.

So thats net.

That's an accident these have been very very deliberate investments in improving customer service.

On digital marketing.

Moving on digital offering.

Improving the quality of branches that are that are ever more suitable for for that priority client segment.

And those are translating through to gross and customer numbers and consistent growth in customer numbers.

Which we think bodes very well for the sustainability of earnings down the road, but none of that has to take away from that.

Observation that in a 20% year over year growth.

Quarter on we're not going to sustain that every quarter and every market environment.

And then Tom on your second question currency impacts.

Eight separate with the rates as we sold on pad.

We put a pilot before depending on.

On whether this is place to income on to cost net neutral on propane. If you took todays rates it might be near a 304 hundred but it obviously does move around over time and rather than give you a sort of political enchilada accountable not threaten spool up to somewhere in that range.

What we would see it as of Tonight.

Okay. Thank you.

Moving on to costs.

Can you have a bit of color around this sort of normalizing of the performance related pay because we had the same thing from HSBC a couple of days ago.

I don't know if there has been a directive sort of determines how you have to accrue performance.

Performance related pay but just wanted to get a better understanding you are signaling as well.

It might have an impact on the full year.

Again, I suspect if that's going to be higher does that mean that revenue will offset the higher than sort of the expectations, but just sort of trying to get my head around this and PLP issue, a little bit better than and also on the restructuring charge most of that will be taken in 2021.

What's the likelihood that we get another restructuring charge top up say for 2022, because you may not want to move into a situation, where we have low link restructuring charges going on and on so I just wanted to get your thoughts around the restructuring charge as well please.

Yeah sure. So this time last year, when we were doing the Q1 numbers, which.

This is a very very start to COVID-19, we've said quite explicitly but the business performance was likely to be adverse impact to that we will be looking at what levers we could pull to.

Flicks.

The coal space Accordingly, and as we did at the end of the as I spoke to the end of the year.

Clearly, we had a lower level of payout full performance related pay as a consequence of what happened last year.

We said this year is with have any have they could start to the year, but we see that situation being unlikely to prevail through this year as well.

If we continue the momentum we have built and remember that because rates you pay is a mixture of factors some of which were income of late in some appropriate related somewhat digitalization related.

It is possible that we may see a little bit of an extra cost in the current year not big on the overall scheme of things, but we just wanted to mark it down.

At this point in the year, but that could be possible outcome.

On the restructuring, we said about half a billion dollars.

So we're facing side I think the majority of that will be correct. Yes, I do think we will have a say.

<unk> elements hope on sort of flip through two years subsequent to that so I would think about that big majority this year or two that are off.

Yeah. So Andy it was more about whether it's likely to be another one of similar size when we get to sort of them.

And this year and looking into next year.

How specific let me structuring is too.

Specific things Youre doing a lot of them, becoming on sort of again.

Ken will be structuring of banks getting on the on on that.

Thanks for the question.

Yes.

Listen we all continue to people to think we're going to continue to refresh on that ratio as you would expect on any of the stage of alignment I think the biggest challenge will be this year.

Excluding HCA typically is biggest volume behind next year, but I think with everything that we can see most of the volume is most likely the big charge will be this year.

Okay. Okay. Thank you.

Thank you. Your next question comes from the line of Rod.

Morgan Stanley. Please ask your question.

Thanks, very much and thanks for taking the question.

Two questions actually if I may 1st is just to push you a little bit more on this revenue point. So I mean, if I look at what you've just delivered in terms of revenue relative to the consensus Youre just about 25%.

Consensus expectation.

Sound, but you're changing your full year target, but then youre, saying second half will be higher than first half. So I'm just trying to marry that I mean are you actually saying look actually the outcome as we are probably going to beat the target.

And we're just going to hold back because obviously, there's some market of wealth revenues on that so I'm just trying to get a feel for what you're actually trying to say that some of the drivers of what some of the uncertainties might be about revenue line and then the second is just on tax it seems to be quite late in the first quarter I just wonder if you could tell us what happened on that.

Yes.

So.

Listen you print full force.

I think is just slightly ahead of consensus on what he's a 25 billion, 25%, but we all we all just slightly ahead.

Clearly as we move forward into the balance of the year, two or three things to take into account. The Q1 had some treasury realization gains.

Certainly that will happen every single quarter.

Secondly, the normalization of the NIM.

Starts to normalize much more in the second quarter, but it still has some way to travel on there.

We are much closer to like for like costs for the latter two quarters of the year.

Hence why I would say that in the second half.

<unk> solid that this plus the fee income should be.

Actually what is driving the growth should not be held back by the.

On the NIM effects will.

Well were calculated on that side. So you put all that together.

And you get on a constant currency basis, notwithstanding sort on the fourth of it didn't comment earlier.

It is similar to ours.

Now halfway probably at the margin has slightly because it starts to add the.

Yes, I think the margin we happy because it changes the world similar for the full year not materially so.

We clearly have still got three quarters to go.

Gross sit in some markets is good the India situation, obviously less goods.

I think we're just being thoughtful about where we.

We are in terms of balance of yet, but overall I'd say, we are comfortable with what we have started the year and.

And we look forward to continuing as much should we kind of underlying momentum through the balance of the year.

On the tax yes, it is a prince.

Right about eight percentage points low equivalent period last year.

There are a number of moving parts, but the single biggest.

As well two single biggest one with increased profitability the proportion of non allowable tax expenses as a lesser drag.

It's the case when we have a low.

Perhaps those two curves and secondly, it is a question on mix of profits between different countries and we have golf that's what the hut portion. It puts the first year result, or is it low tax rate countries on holds the case a year ago. So those two together.

On the full year, we've said over a medium term period, we'd expect to see the tax rate full year basis to be sort of progressively moving to slightly below the 30% level I think we will probably be somewhere around 30% level on a full year basis. This year.

Thank you thanks very much.

Thank you. Your next question comes from the line of Manav Costello of Autonomous Please ask your question.

Good morning, I just wanted to question on NII. Please on the you made some comments about increasing the tenure of hedges I Wonder if you could give us some more color on that and in addition, you put a new slide.

2015, which gives some more information about why do you think you'll actually more rate sensitive than you told us last quarter can.

Can you just elaborate a bit on on that as well please.

Yeah.

So.

On net interest income we have states that we see the overall margin but are continuing to.

Stapler approval, a big lever on.

Little bit of downward pressure because of the type of product. We think we can work through that through mix and other things.

One of the things we have obviously been focused on analyst day in a number of questions on is whether we can benefit more from the low end of the interest rate curve.

Now clearly the majority of our activity is on the short end of the curve on duration.

It's more the 18 month period, but in the call. If you have heard of it but we do believe.

Some things, we can do with hedging which will be the <unk>.

So it's a balancing this reward risk side of things.

I think that will be somewhat slightly over periods of time as weak global sales of Vas.

Secondly, slide 16 to which you have referred upon us.

We just showed in that.

Sort of mathematical calculation on the interest rate sensitivity.

Comes to $419 million uplift 100 basis points of increase.

We are also better.

I think we sort of put this in goods, but we didn't put it in charts.

February is actually.

All of those things, which fall on the pulpwood.

Actually benefit them.

Some of that is related to management actions that we can take some of it relates to the risk sensitivity of the trading book assets, though the pump deposit banking book I think you put those two together on your sort of get numbers that are roughly double that for 18 on let's say north of a billion now I think that makes sense.

In the context of what we actually saw last year with the reduction in rates on this.

Is it essentially saying that we think actually on the upside it would rules late March what happened on the downside, but therefore, obviously if we can keep the cost in the business low increase in the cost flow.

This should give us good operational leverage as and when we do see those rates increases starting to happen.

Thank you and just on the <unk>.

<unk> in hedging policy when was that stuff.

How quickly will that flow through to NII and on how much of a benefit are we talking about if youre putting stuff on the curve.

And we've been looking on in recent weeks, we will be starting it sort of pretty imminently.

I think it will be on a full year basis, it will be high tens of millions rather.

Significantly bigger than that and we will see slightly sustained over periods of time.

Thank you very much.

Thank you.

Your next question comes from the line of Martin.

Li of Goldman Sachs. Please ask your question.

Yes, good morning.

For taking my question I, just wanted to follow up on on <unk>.

Revenue guidance.

Not trying to.

<unk>.

To revise.

Your guidance here or comment on consensus, but I was just wondering how conservative it is just given.

What we have seen in the first quarter. So loan balance is up 4% and I think the notion that margins might be close to have stabilized.

So 4% absolute growth in a single quarter rather than annualized.

Census, foreseeing revenues splitting up by roughly 4% in 2022 and that scenario, where we have a.

On a fairly strong recovery.

In Asia globally.

And then they can snapback in activity.

Is that meaningful upside risk to that number so that low growth could be.

Over and above the 5% to 7% kind of goalpost, you et cetera.

Is that a fair assumption.

Elements, which should make us more cautious.

And the second question.

Related to.

So the USB announcement in terms of retrenchment.

On its Asia footprint I was just wondering is there a similar exercise on thinking begin that they can buy some thoughts just to evaluate some of the smaller retail footprint, where we're way to move might look.

Phil.

You are ways to addressing this essentially to reduce in <unk>.

The branch footprint that looks at essentially address some of the issues of the lack of scale. Thank you.

Yes, Martin so on the revenue guidance.

So two to three settings walnut.

The NIM and.

The adjusted net numbers clearly why do we focus on those things. So I felt like we've got a 128 quarter.

For Q2.

There is hope to see some drive relative to what we've indicated where we think the balance of year, we will pay and then Q3 Q4 eight a flex up.

A 122 on 24 GAAP to the central whatever.

So there is still some price come through on the NIM, but it's mainly in the second quarter.

The increase we have seen so far has been strong now.

It is also stronger than the first quarter.

I didn't think we could just sort of take that number. It's on slide four we are guiding forward, but nonetheless. It is a good start we have goals as we all know and increased so there is nervousness about what is happening.

And one or two of the adjacent markets, but particularly in Europe. At this point in time, which is slightly difficult to call on a full year sales.

So you put that altogether.

Say as I said early on.

To sort of come out similar to last year overall.

On the margin on site, we've come out in the quarter, probably a little bit strong GAAP.

Two months ago, we might have like I wouldn't say, it's not so significant that we changed the wording.

But let's let's just see where we go as we as we get into the into the second quarter.

On.

Your second question I think was on retail and sort of market share at low market shares in some countries.

Listen I think that the way we are approaching that is to say many of those countries.

On through.

Digital reach mobile.

Mobile payments, we can reach more customers, but we have him to avail ourselves of.

We believe that we don't need such a large number of branches and hence we can moderate the coal space Accordingly, and through a focus on Paul on digital marketing.

Potentially using platforms like.

The multi platform in Hong Kong, we wanted to take that into other markets. We have now got back was to improve the capability. We have actually had already in Africa. The last two years, a very very significant drives digital all new customers are now signed up digitally and we will continue to push on that front.

There are opportunities to bulk up on Scott on some of those markets as well on previous questions. Obviously, we will look at that and look at the economics of doing that.

Our sense is that actually with the ability to look at these markets more digitally with a good brand reputation and many of these markets.

But there is still an interesting future in them all.

Very volume did to returns and everyone of our markets obviously needs to be.

<unk> achieved our returns criteria, but were working to halt the accretion on the <unk> business unit flow Blake.

<unk> is very much aligned with this and making sure we have a consistent approach across the pool.

Perfect. Thank you very much.

Thank you. Your next question comes from the line of Omar Keenan with credit Suisse. Please ask them.

Hi, Good morning, Thank you very much for taking the questions.

Wanted to ask.

How you felt activity was on.

Thanks, Paul.

Do you think that post spin.

Can carry through.

The momentum in the code activity levels in the third quarter. Thank you.

So your question sorry, it was on the momentum from the first quarter on how we think that will carry forwards.

Especially in international markets and wealth management.

Good luck into wealth management okay.

I mean, let me spell until that I think that.

The financial on a longer its activity.

Clearly, we have seen a slightly different set of products to be strong this year as last year, but overall as I said inventories what we characterize the last period of time is to rebalance our activity makes it a little less volatility dependent on and our view is that the sort of maintaining the income statement of recent quarters.

We do see continuing the exact shape of it will vary from quarter to quarter.

We are feeling good about the performance of that business unit and I think you would need to find out is there a number of tools construction phase.

This has now been progressively building up on.

The first quarter of this year was just the revenue and sold it.

Wealth management, obviously, we've had a very strong quarter or that youre going to see necessarily.

Growth rates through the COVID-19 this year, but nonetheless.

But still there's no reason to believe that we will continue to kind of a net.

And sentiment will play a part in this.

The India situation was until the country's entitlement change the importance of that.

The Chinese sales.

On the AG situation, hopefully so self balances without major reported.

I think that should be conducive to continued progress in the wealth management space.

Yes.

Great. Thank you very much.

Thank you. Your final question comes from the line of Guy Stebbins of Exxon BNP Paribas. Please ask your question.

Hi, Good morning, all day.

I'll turn the call over the life.

I'm not repeating a question to adopt.

So firstly could you give a bit more color on what you're seeing in India, and perhaps beyond asset quality is having any impact on operationally there on any sort of associated cost implications.

Can I just check on slide 14, the macro assumptions am I interpreting correctly, you've been pretty assumptions for India, and that's with some sort of reassurance that was that just the timing of the need to wait till H one.

Updates on macro assumptions.

And then the second question was just on <unk> came in a little bit hard to consensus in Q1, but I know the guidance for the full year was broadly consistent with consensus.

We obviously havent get good volume indications in Q1 and beyond especially on the check you are happy with with market expectations price this year.

Beyond core risk weighted assets.

And then just a final point of clarification on.

On the day rate sensitivity at this space and you can be able to give any sense on which currency that would be in there.

Additional uplift.

We also benefit from thank you.

Let me think a Saturday any question I did comment that from a Brazilians perspective, we are seeing signs of stress as yet.

But we have material Keith.

Case counts amongst our population both on our service center and ended the bank itself.

Consistent with what we're seeing across the country.

We've kept most of our of our branches open.

Are considered essential services. So we have had a disproportionate share of the cases in the branch staff.

Unfortunately.

But.

We've had everybody working at home and Chennai and Bangalore for most of the last year that has continued to pace and we've not seen any any signs of stress on the back of the increased pace.

We're watching that extremely carefully we're looking to also carefully at how we can rebalance loans like we have re balance.

Between our service centers in Chennai, and Bangalore, but then through to follow them for Tianjin in Warsaw.

Where there are particular, Kuala Lumpur are also problems, but nothing nothing like the scale of India. So overall looks good the economic activity will certainly be subdued.

State by state.

Net restrictions our repos have been or are we on post.

We don't see it taking the underlying wind sales of economic recovery in India.

While we expect that there will be an impact we are quite hopeful that the Indian economy will recover quickly once they are through this it's very difficult to place.

In any case, we think we're very well provided for and reserved against the possibility of extended mortara or consumer and small business default.

Again, that's something that we're watching quite carefully given the dynamic situation on the ground.

And on your second question on risk weighted assets.

Yes, we had good growth in the first quarter is quite doable with colleges to keeping the rates for both opioid gross it down below the rate of asset growth.

We've said that we sort of see a path to mid single digit growth.

On the health of the audience I think consensus is there or thereabouts on that.

A question on consensus.

So it's all come at Sabine It took sales I think had been interpreted in Vaca <unk>.

Yes.

And in terms of rate sensitivity numbers based upon.

Parallel shifts.

The accrual spool occurrences, but we've tried to the best we can do balances across all of our markets.

Expressed in dollars.

We hope to see report outs.

Okay. Thank you very much.

I think thats it for free.

And we are at a time so thank you all for the attention.

And look forward to seeing you at the half year.

Thank you. Thank you that concludes the presentation for today. Thank you all for participating you may all disconnect.

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