Q1 2022 Standard Chartered PLC Earnings Call
Welcome to the standard chartered Plc's first quarter 'twenty to 'twenty two results today's.
Patient is being boosted by Bill Winters group, Chief Executive and I'm, The Halfords group Chief Financial Officer. Once the opening remarks, I finished there'll be an opportunity for questions and answers to ask a question over the phone. Please press star one on your telephone keypad at any point enjoying the presentation. Alternatively, please use the question.
Books available on your webcast page to submit your questions at this point I would like to hand over to bill to begin.
Good morning, and good afternoon, everybody and thanks very much for joining us for today's first quarter results presentation. So I'm going to ask a few introductory comments and then Andy will talk through the results in some detail I will then pass it back for Q&A as usual.
We posted a really strong set of results for the first quarter and what's been a very volatile and challenging environment.
Profit before tax grew 5% year on year with strong business momentum driving topline growth at 9%.
With record financial markets performance and double digit growth in net interest income.
Along with an 11, 1% return on tangible equity.
During this period, we actively supported our clients our customers and communities in navigating these challenging conditions, obviously something that we hold most closely near and Dear to our heart I'm also very encouraged by the early progress we've made against the five strategic focus areas. We outlined in February on our path to deliver at least 10% return on tangible.
By 2024, if not are there just a few highlights in our corporate commercial and institutional banking segment. The income return on risk weighted assets has improved over 1% to six 4% in the first quarter. If you remember.
We said back in February was that we set ourselves a target of getting to six 5% by 2024. So obviously very good very good progress in the first quarter.
It is only one quarter and we know that it's been very very favorably impacted by a record financial markets performance.
It's still showing good underlying progress.
During the quarter. We also successfully executed a program of optimization initiatives that delivered a reduction in our credit risk weighted assets of $6 billion.
Again this is a significant chunk of progress against the target that we set ourselves back in February to take out $22 billion.
Suboptimal <unk> over three years.
Now moving to our consumer private and business banking segment. We've also made good progress as we look to improve productivity drive efficiency.
Recognizing that our goal is to bring our cost income ratio down below 60% and.
We added more than 98000, new mass retail partnership clients, but the outlook for acceleration of growth is good.
We feel like Thats strategic program is very much on track.
Now moving to China. Despite some of the obvious challenges we continue to make good progress in the offshore China business. For example, we've grown the income on our China US trade corridor with network income up 35% year on year.
We've never been better positioned in China, and the opportunities never greater and this is despite the current challenges that we all see the challenges are substantial but we know that we are building a business for the medium to long term and have no reduced confidence that we can deliver on the objectives that we set a doubling of our profit in China.
We're also off to a very strong start with our three year $1 3 billion expense reduction program, we delivered $72 million of growth gross structural savings in the first quarter.
And then finally on shareholder distributions, we are about 80% of the way through our $750 million share buyback program.
Which we announced back in February .
Target delivering total shareholder returns in excess of $5 billion over the next three years again, it looks very much on track.
Now as we said earlier.
Earlier in the year, we're sharpening our focus on the most significant opportunities for growth within our group, while also simplifying our business.
<unk> seen a couple of weeks ago, we announced that we are refocusing resources, and our Africa and Middle East region into new markets, like Saudi Arabia, and Egypt, as well as ongoing investments in several of our larger markets in sub Saharan Africa.
We're exiting certain markets and focusing solely on the <unk> segment in two more redirecting resources to areas with the greatest scale and growth potential.
We remain excited by a number of opportunities we see in the EMEA region, but remain disciplined in our assessment of where we can deliver significantly improved shareholder returns and this is a theme I think youll see us coming back to your refocusing at every opportunity into those areas that can have the biggest impact on our progression.
Progression towards and then through a 10% return on tangible equity.
And we've also changed our reporting structure. This quarter to include a third client segments, which is ventures.
This is the consolidation of Etsy ventures, and its related entities as well as the group's two majority owned digital banks with remarks and trust.
We continue to make positive progress with various ventures already launched and have an exciting pipeline of new ventures, including the launch of trust in Singapore, which is planned for the second half of this year.
We've included a section in the appendix.
Our results presentation on venture suffice to provide you with further details on the various digital initiatives and expect to provide a more fulsome update.
On the full range of ventures, and the way that we're thinking about them at the half year.
And finally on sustainability and further to the announcement of our net zero roadmap in October we have updated our approach and enhanced our net zero pathway. Following extensive engagement with shareholders clients and Ngos, we remain committed to achieving net zero and are financed emissions by 2050, and our enhancements give further clarity on how we will go about this.
<unk> ending legacy direct co financing globally by 2032, developing a timeline to move from an intensity based to an absolute financed emissions target for oil and gas and expanding our coverage to include facilitated emissions from capital markets activities.
So just to wrap up having successfully navigated obstacles in a very challenging environment, we remain vigilant given the high levels of uncertainty in the external environment, particularly the challenges to the global economic recovery and ongoing geopolitical tensions, but we remain confident in the delivery of our financial and strategic targets laid out back in February .
With that I'll hand over to Andy and then we will both be back for Q&A.
Thank you Bill.
We've presented.
Q1 results.
Our 2022 guidance in February the week before the start of the Russia, Ukraine conflict.
It appears to spend has been difficult to navigate for everybody.
And once we have the experience.
The order impact the second order repercussions unlikely to affect over time.
We have kind of a thought.
Doing well and our financial performance. So far this year has been very strong.
Turning to the numbers starting on slide three I will cover the first quarter highlights before providing more color.
It's nothing of the top income at constant currency and excluding DVA was up.
9% with strong growth in both net interest income and other income.
This growth was largely driven by a record quarter for financial markets offset by more challenging wealth management environment.
Expenses were up 8% at constant currency due mainly to the timing of performance related pay accruals inflation of around 4% and increased investment spend which was funded by the cost efficiency savings.
Too early.
Taken together the group delivered positive cost income tools for the quarter.
Critics impairments of $200 million was principally made up of three major items 160 million relating to China commercial real estate exposures.
7 million relating to software and found great all right.
Offset by releases from our management type lives of a shade above $100 million.
The associate level income was up 37%, which was due mainly to the improved performance in China.
In the fourth quarter of that year.
Having seen this most recent results we remain comfortable with the carrying value ultimate investment on our books.
Well again Frank.
The increase in underlying profit before tax at constant currency to one 5 billion tons.
And finally on this slide our capital and liquidity positions remained strong.
We took tough action on risk weighted assets driving attendance billions.
In the quarter.
This was led by <unk> as a core part of the strategic action plan.
You will see some reductions in other areas such as treasury.
Our CET 113, 9% is near the top end of 13% to 14% target range. Despite absorbing the full impact of our $750 million share buyback program and the impact on central App to the frequency changes, which we highlighted at the full year 2020.
One presentation.
This is a quarterly results update not strategic refresh, but nonetheless, I wanted to draw your attention to a couple of slides.
Dependencies.
The first slide slide 14 summarizes the strategic actions, we sent out in February .
And our tangible progress in delivering against some snowfall we will keep this helped thank you regularly going forwards.
The second slide 19 shows the strong performance, while Africa, and Middle East region, and the positive impact of the actions taken during the quarter to refocus the region on a lesser number the bigger markets.
So let's start looking in more detail at our income performance on slide four.
This is the usual view of income byproduct, excluding DVA and with currency fluctuations stripped out to highlight the underlying momentum showing growth was 9%, which I referred to earlier.
This reflects outperformance relative to our previous guidance, mainly due to an extremely strong increase in financial markets trading in March.
You can see in the chart on the bottom left income for the quarter $350 million or 27% at constant currency excluding DVA.
In the chart you can see the strong performance in macro trading which benefited from higher levels of volatility increased customer size and I don't think.
Due to commodity prices.
In financing and Securities services, we have $94 million on a mark to market gain on module, which is driven by the current market volatility.
You should read this out over the coming quarters as conditions stabilize and spreads narrow.
But even excluding this item financial market, so still up 20% year on year.
Tertiary and other income was up 24% year on year. This was mainly due to the structural hedges we put in place over the past few quarters in which we generated around $60 million and net interest income in the first quarter.
Sent by realization guidance.
It's a similar picture in transaction banking to the previous quarter, reflecting encouraging signs of economic recovery in our markets with trade income up 6% year on yet and trade assets now with both the levels we had.
<unk> 2019.
Cash management fee income was up 5% year on year supported by the current rising rate environment.
With its high proportion of corporate operating accounts cash management remains well positioned to benefit from further increases in interest rates.
Wealth management income was down around $100 million or 17% impacted by weak investor sentiment, which affected market sensitive promos and also expenses.
Covid restrictions to them price across China, Hong Kong Korea, and Taiwan.
Noticeably bancassurance income was up in the first quarter with a strong performance in Singapore as it continues to open up from earlier restrictions.
Lastly, it is also worth remembering that this is against a difficult comparison.
First quarter income last year was a record performance for wealth management.
Retail products income was flat year on year with increased volumes, particularly in mortgages and deposits and improving retail deposit margins.
<unk> got a drag on income.
We're expected to turn into a tailwind in the coming months as interest rates rise as flow through.
Lastly, lending and portfolio management was down 14% as new loans and the completion of a few M&A deals were offset by accelerated loan sales as our <unk> segment executed only startup Dubai optimization initiatives as highlighted by Bill earlier.
Looking at the early trading numbers straight pool and financial markets, we're unlikely to see a repeat of the exceptionally blend March performance.
It is holding up well against the comparative period last year.
In wealth management, we remain cautious given the challenging market conditions, particularly with Lockdowns continue in China will be the situation in Hong Kong starting to ease.
So all in all income growth for 2022 is now expected to slightly exceed the previously guided 5% to 7% range given the strong first quarter performance and the progressive benefit from increasing interest rates as we go through the remainder of the year.
I'm now turning to slide five to talk.
Net interest income and margin.
Net interest income was up 10% or about $140 million on the first quarter 2021.
This is driven by 2% growth in average income, earning assets and a seven basis point improvement in our net interest margin.
The first quarter net interest margin of 129 basis points with 10 basis points compared with the fourth quarter of last year.
Our structural hedge program drove about three basis points of this increase and generated around an incremental $40 million of net interest income.
The other seven basis points was attributable to the interest rate picture generally turning more positive with the fed increase and would you say is the knife rate by 25 basis points in mid March.
We have already started to see some benefit flowing through in our U S dollar book.
Similarly, three months cycle has also started making a recovery increasing by 29 basis points to 55 basis points at quarter end.
And just finally on interest rate sensitivity remember, having seen the near term curve increase not just by 100 basis points, but narrowed to 200 basis points. The second 100 doesn't yield as much as before as deposit basis will increase Hong Kong mortgage margins reached the prime rate cap.
Treasury hedges have already captured some rate benefit we will provide an update of sensitivity at the half year results in July .
Lastly, taking into account the effects of the alcohol.
Optimization actions, we expect loan growth in 2022 to be in the low to mid single digit range.
Turning to slide six.
More capital efficient non funded income, which comprises net fees and commissions and trading into other income has grown 8% year on year now constitution close to 60% leading count net.
Net fees and commissions were down 8% year on year, driven mainly by declining wealth management income, which as I already mentioned was down due to negative investor sentiment and the impact of Covid related restrictions across large parts of our North Asia region.
The real story on this slide just the growth in net trading and other income, which you can see in the Blue bar up 21%. This was driven by record financial market is trading to folding in what were particularly favorable market conditions.
This strong financial markets performance was partially offset by lower realization gains in tertiary markets.
I'll now move on to cover costs on slide seven.
At the headline level, excluding currency impacts expenses were up 8%. However, this is not symptomatic because the rates of growth, we would expect to the school yet.
The first quarter growth reflects both unusually low performance related pay accruals in 2021, given the uncertainties at that time.
Accrual in the first quarter this year, given the improved outlook and the quarterly phasing of our profits.
Adjusting for these items operating expenses were up 4%, which is in line with our stated 2022 full year guidance and in line with the current economic forecast of inflation for the Asian market of around 4%.
We have also delivered $72 million of the $1 $3 billion three year cost efficiency target in the first quarter, creating capacity to some the equivalents increased investment spend, particularly as we position ourselves for little treat trucks.
Digital bank in Singapore, and as soon as we expand on initial success in Hong Kong with the launch with new products.
Taken together, we delivered positive income close tools.
1%.
Looking forward to the rest of the year.
Higher income growth expectation, we will have an impact on performance related pay so with that format.
<unk> operating expenses to be slightly higher and the previously guided 10 $7 billion, whilst we continue to expect to deliver positive income to cost tools.
Yeah.
Turning now to credit impairments and asset quality in slide eight.
Credit impairment was $200 million to the quarter slightly lower than the fourth quarter of last year.
As I mentioned earlier, there were three major items.
There is a $160 million charge relating to increased provisions for exposures to China commercial real estate.
The second is a $107 million charge, resulting from the sovereign rating downgrade.
Yes.
The final item is $104 million release from our management study somebody's, taking them down to $239 million.
The remaining overlays comprised of 153 million against Covid and $86 million on the China commercial real estate portfolio.
As we do every quarter. We've also updated the macroeconomic variables to the stage, one and two expected credit loss calculation, but the impact has been minimal as they have been upgrades as well as downgrades in our footprint.
Turning to the Boston chart, the stock as high risk assets in our CIP pool pricing across the three indicators is down slightly.
<unk> quarter of decline.
The early alerts have ticked up mainly in the China commercial real estate sector.
And then our CPB business.
<unk> pulse do you continue to improve across all these measures.
We are not changing our previous guidance for this year as impairment charge and that we continue to expect it to start normalizing towards the medium term range of 30 to 35 basis points.
And finally to complete the financial <unk> risk weighted assets and capital on slide nine.
Starting with the chart at the top overall <unk> was down just over $10 billion in the quarter.
This movement reflects the $12 billion increase in <unk> through asset growth and regulation changes offset by huge at $22 billion reduction in other <unk>.
The $22 billion reduction has three main components.
Firstly, CIB delivered a $6 billion reduction through a variety of actions, including the sell down the suboptimal returning assets Securitizations and trade distributions.
These are part of our earlier announced target to take out $22 billion with suboptimal parts of <unk>.
In the next three years.
The net impact on first quarter profit from these actions was not material.
Secondly, we also executed a further $7 billion reduction from other efficiency actions across the group, including in Treasury, while we put in place sovereign credit insurance improved portfolio mix and.
Reduce the commercial surplus all of which helped reduce our <unk> by more than $5 billion.
Finally, we also saw positive credit migration across our portfolios and improvements in asset basis, delivering a six.
6 billion reduction.
Looking forward, we expect 2022 full year on a few days to be similar to those at the end of 2021 .
Turning to the charts at the bottom we remain strongly capitalized with CET one ratio of 13, 9%, which is the top end from our target range and over three percentage points above.
Minimum.
Strong profit accretion and also the optimization was offset by a 70 basis point reduction from regulatory headwinds as flagged in February .
As well as the 30 basis points impact from the $750 million share buyback.
We also recognized a 30 basis point movement in Spo Cri, driven by the impact of rising rates on the Treasury Securities portfolio.
Looking forward, we intend to continue to operate dynamically within the full 30%, 40% CET one target range using the capacity, we've created to fund profitable growth supporting our clients in the coming quarters.
Whilst at the same time, returning in excess of $5 billion to shareholders in the next three years.
And now onto the final slides before we will open the line to questions.
As I said in my opening a lot has happened in the world since we set out for 2022 guidance.
Annual results presentation in February as.
As you can see from the financials, we've had a strong start to the year. There is increased confidence in meaningful near term interest rate increases, but there are many uncertainties relating to the consequential impact on pone, but if global GDP growth and GDP growth in the regions in which we operate.
Taking all these into account we now expect that we will slightly exceed decides to 7% full year income growth range that we set out in February .
This would bring with it some increase in performance related pay expenses, but overall it should be positive for our bottom line and our income cost jaws progression.
While not without some sentences, we remained resolute in our aspiration to deliver 10% rote by 2024, if not earlier.
So with that I'll hand back to the off price say bill and I can take your questions.
Thank you.
We'll now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced to cancel your request. Please press the husky alternatives.
Question Bulks available on your webcast page to submit your questions.
Your first question today comes from the line of Joseph Dickerson from Jefferies. Please go ahead. Your line is open.
Yes. Good morning. Thank you for taking my question and congrats on the good set of results in.
In the first quarter I guess given that you have.
Largely completed the buyback that you announced at the full year.
And given the capital strength and also your <unk> guide.
For the full year I mean is it is it safe to assume on that path too.
Five in excess of 5 billion capital return that we could see a reload on the buyback at half year or what's your thoughts on the timing of that.
Any help I appreciate it thanks.
Okay. Thank you for that question.
I mean, just couldnt take us well, we've clearly pushed very very hard on risk weighted assets during the quarter and very very pleased the progress we've made on.
And that has been a significant underpinning for the high print that we've had the CET one.
Now it gives us license to two things one where that.
Opportunities with clients to do more profitably than we will do it and it's good to actually be in that position. So if the balance of the year. We can make the most of any of those opportunities as they arise and secondly to the extent that there is still sort of at the last study, but then obviously.
We will have a look at whether there is a capability to return more at some point in time.
It's entirely consistent with what we said in February that $5 billion et cetera. So we alluded to that we will see where we get to and outs and when or if there is anything more to update all of you will be the first hear about it.
Thanks, guys.
Thank you.
Next question comes from the line of Jeff <unk> from Citi. Please go ahead. Your line is open.
Thank you my question is around the revenue guidance as far as our net interest margin guidance you put out.
So looking at the margin guidance of $1 four per phone and wanted to confirm.
Yes.
That implies probably actually 600, maybe and also the net interest income.
Great.
And then the <unk>.
Revenue.
Thanks.
Alright, Thanks Robert.
Isn't it.
Which only implies probably 200 media.
Confronted upgrades on revenue, so just making sure.
Cool.
Guidance.
Revenue for these.
And then secondly is that when you think about that margin guidance to be in those full year average.
Yes, even higher margin for next year can you confirm that you are actually expecting most of the interest rate benefits.
Our margin expansion to happen this year.
The poster next year. Thank you.
Great. Thanks, very much for the question I'm going to turn around in a moment.
If you could dig into the specifics around interest rate guidance and impact on NII et cetera are directionally I'm sure Youre correct, which is why we that we indicated that we thought we'd be slightly above the top end of our indicated range for.
For 2022, but on the.
In the broader context in terms of revenue guidance.
Of course, we've had a good start to the year, we're very happy with the financial markets results.
Interest rates have moved even further and helpful direction relative to the last time, we spoke to you.
That's all that's all quite clear.
We're also very aware that there is quite a bit of uncertainty in the world as we sit here today and.
While our business has been very resilient both from an income perspective, but also from a credit perspective in the face of higher inflation in the peso. So thats rising geopolitical tensions obviously the award.
Ukraine et cetera.
We sit here today and say I mean, there are plenty of things to keep a very close eye on as well so.
It's not clear exactly how that will flow through to the income flows that are not interest rate dependent.
Interest rate dependent flows obviously.
Income impact is relatively closer to Matt the other items are not.
So we look at that and say, let's maintain a.
Relatively cautious outlook and say, yes of course, we're going to bank that there.
Our relative outperformance in the first quarter and we think the business is strong and resilient from here, we think the underlying strategic drivers are very much in place.
Focus on affluent customers as difficult as the first quarter was there are plenty of sites.
That business is strengthening for us.
The corporate business has performed very well beyond FM. So we sit here thinking yet.
We've been resilient in the first quarter. The outlook is as good as we've seen but theres a ton of uncertainty out there.
To calibrate the enthusiasm around that reality.
There are a bunch of specific questions, which I know, we've got a strong view on as well.
Yes, So let me just paint a bit newer picture.
Difficult from the outside looking in to convert the sort of interest rate sensitivity guidance that we give but with what's actually happening within the business in part because the rate changes are happening at different points in time in different currencies in part because we have such a big mix of currencies.
We've put a chart in the appendices to the state on the forward rate curves comparing what we saw Tommy stood update in February with what is happening now and it is quite clear.
Bill has just said the very near term codes of speed, putting quite a lot.
Let's say by 2024, but certainly the 'twenty to 'twenty two 'twenty three curve steepened alone.
Now if you look at what we just publish to pull the quarter with the 1000, knowing them you can extrapolate from that that there was about $100 million of Reits benefit that we've seen in the first quarter, but the steepness of the curve goes through this year will mean that the pace on that picks up through the course of the year. So if you is that something.
Approaching the <unk> level.
As a whole on the NIM is entirely feasible.
Now slightly caution, but not massively we.
We do need to be reflective of the fact that the wealth management space is still somewhat sluggish Hong Kong, which is a major market that clearly has had a slow first quarter for reasons, which we understand it will take a while for that.
To come back so wealth management saw it probably will take a bit of time to get back into its rhythm.
Secondly that we have taken some guidance for most markets in the period that could well with us over the balance of the year. So I think there'll be a couple of things, albeit I think thats slightly more trends Troy.
It could happen in the balance of the year.
Your question also and I think importantly, what it is.
So sort of what do we see beyond that because of the curve. Rising then clearly there is a momentum that takes the current rates through into next year and then builds beyond that.
The way I'd look at this is if the current forward rates to hold true.
It's impossible to see the sort of level of NIM that we had in 2019 being something we get back to in 2023.
Put another way as we came down the NIM could.
<unk>.
'twenty one period, we probably dropped about $2 billion of income.
I think it is quite reasonable to think that the vast majority of that we couldn't pick up with the current rates curve.
The 2023 year, all else being equal.
So I hope that gives you a little bit more clarity on where often.
Yeah.
Yes. Thank you so much.
Thank you.
Our next question comes from the line of Oman.
From Barclays. Please go ahead your line is open.
Yeah, Good morning, Tim.
I guess one.
One follow up on <unk> actually.
Well, let me looking at the revenue expectations for 2000.
Should we be carboxy adjusting.
<unk>.
Instead of the 2020, while I guess currency that move around.
Could you help us with.
With revenues on a currency adjusted.
Stop.
So if you could be the same for <unk> as well that would be really helpful.
And then on the cost point.
Paul.
Looking to manage.
The 2022 cost base, clearly you're talking about greater than $14 $7 billion for performance related pay I mean could you help us a range.
I'll, let you talk about positive jaws. This year could you could you kind of tightened up for us.
In terms of what the.
<unk> 14, seven continuing for exactly what kind of tools you might want to target next year. Please.
Yes, okay.
So obviously currency moves around little bit argue for all in this business we tend to fall in the income effect of the cost effect on currency broadly offset each other and therefore, the overall property affected.
Particularly significant.
So that's why most of US talk to there is broad scale, Minnesota cozza currency basis, but profit wise it would be net neutral in trying to predict the currency of the balance of this year.
It is tricky to do.
On the cost front I think Tim.
<unk> <unk> 47.
On the performance related pay listen to it all depends on how much the top line does exceed the range, but I think we'll be talking a 100 million maybe if it really really was stronger than maybe it could be two under but something in that sort of range I think is appropriate.
Okay. Thanks for that sorry, just to be clear on the first part of my question is should we just be taking the.
As the income start point should we just be taking the $14 7 billion.
That you printed in 'twenty, one and Greg that by slightly in excess of five to seven.
To encourage us to think about it.
Yes.
Certainly you're right to look at it what I'm, saying is the extent of that proves to be slightly inaccurate youll find that the inaccuracy offsetting the coal slide so it will come down to roughly the same thing.
Okay. Thank you.
Thank you. Your next question comes from the line of <unk> Kumar from Redburn. Please go ahead. Your line is open.
Hi, Good morning morning, Andy morning, Thanks for taking the questions.
Just one rate actually my question is on NII of an onset on the risk weighted asset gains thanks for the.
Disclosure on.
Strong print.
I was just wondering about the permanence of the risk weight gains I know you talk about FY 2022, being flat versus FY 'twenty, one that's kind of whatever it was $6 7 billion and therefore, a positive risk migration.
And other model changes could you give some color on exactly what those two moves were outside the CIB.
Optimization.
Follow up on that really is given the struggles we're seeing in China on the property side of things and I appreciate you've given full disclosure on the CRE could we start to see some negative migration.
<unk> the risk weight as we move through the course of the year. Thank you.
Yes, so we highlighted in February that the focus on risk weighted assets, particularly in the corporate side business was going to be a primary focus and very integral to getting our income so the risk weighted assets.
Which as you will see the CCI business has made amazing progress in there.
The space of one quarter.
I think really we have sort of pulled to leave the total number from some of the risk weighted asset side. Most of those I think are in jewelry.
Now clearly the overall.
The economic outlook and the quality of the book and solve there were some things like that which is difficult to forecast accurately but many of the things we've done here.
Been about sort of gently in some instances exiting some arrangements. It has been about securitization. It's just been about taking up credit insurance has been about looking at all multiples.
But I would say that this is not generally speaking is sort of a one quarter bus and then youre going to see it flip back the other white I think it is enduring and I think the changes we have made and the focus we put all of this has been it's been very very strong and very very encouraging.
Asset quality improvement.
Coming off the back obviously of the period when Covid has impacted a lot of rating assessments over periods of time now will go forward just needs to be a little bit thoughtful all that because the whole Russia, Ukraine situation on what that's doing for global economic growth. We obviously cannot ignore will not be immune from it but I think substantive took actions we've taken that you should see as being <unk>.
Jewelry and that is why we have said that we think the risk weighted assets for the full year will end up somewhat close to where we started the year.
Thank you.
Can I, just get a little bit of color.
Because it's the central question, yes.
Andy and I together with assignment and then Judy set up in February and talked about the <unk> optimization program. We obviously hadn't started thinking about it that this is something that we've been working on.
We very deliberately for a few years, but we agreed in the latter part of last year, we committed ourselves to and then committed to you was to be much more aggressive in terms of the implementation of that so the tools, we've been putting in place for some time.
And we pulled those levers in the first quarter and we will continue to pull those levers system, but what are those things. It's it's all of the optimization tools that Andy talked about in terms of.
Various forms of distributing credits in a more effective way. It's also a much more aggressive origination machine with a view to giving the market what it wants at a point in time not just what we want.
And we're also setting a much higher bar for what we consider to be a good use of capital I think we were very clear about that in February and what you've seen in the early part of this year as the early stage manifestation of it. So while of course handy is completely correct and you are correct in the way that you framed the question that there will be things that come and go and you ask specifically about <unk>.
The increases as a result of CRE, China CRE credit migration.
Those things could happen I will note that we think we're pretty cautiously provided against the China's CRE exposures that we've got.
Both on an absolute basis and relative to others.
And that's the way, we'd like to be and I think in everything that we do but of course, there could be some further migration it would be pretty small in the overall scheme of things just given the size of that portfolio.
But there will be other things that could.
Come in and out of the portfolio, but the structural change that Andy referred to in that I'm, commenting on our structural and as Andy said not a flash in the Pan.
Thanks, Bob.
Thank.
Your next question comes from the line of Nick Lord Morgan Stanley . Please go ahead. Your line is open.
Thank you very much and good afternoon.
Questions from me.
Firstly just to go back onto this other REO and loan growth question I mean.
The Euro <unk> controller has been so good in <unk> and Youre sort of targeting flat for the.
The year that would suggest something like 4% growth in the last three quarters, and obviously I mean, I know you have an asset growth target, which is mid single digit but given the loans are down a percent.
In Q1.
Growth is going to mature asset growth and again that would suggest.
Quite a decent rate of quarterly growth for the next three quarters. So I just wonder if you could comment on whether I'm thinking about bottom of the right way.
Or whether at the end of the day it will be that you end up.
<unk> targeted a full yet.
And if I am right anything about what sort of areas do you think about loan growth.
We'll come in.
I have a second question on credit quality.
Okay. Let me, let me take that question Nick.
We've done I think is core to sort of capacity capital wise to be heavily involved with thoughts since there is good business opportunity to go for it.
<unk> growth and the ultimate relates a little bit confused sort of in the recent period, because you've got the two opposite effects. So the optimization actions versus the growth that we've got.
If you strip out the actual loan growth has been pretty good during this period.
We've said over the balance of the year is that sort of low to mid single digit growth in loans and exposures.
<unk> staying fairly flat to the start of this year. So by implication two things, we'll still see.
Opportunities to client activity.
But secondly, we will do that either white cap.
Capital and risk weighted asset efficient.
Now, it's just nine months ago, obviously, the stuff can move around in that period.
Directionally, where our minds are in terms of our thinking over the balance of this year.
Maybe just a bit more color and particularly your second point where might that growth come from.
In the early part of the year and then looking at our pipeline. The pipeline is healthy for sure while capital markets activity has been done across the world has been a little bit more robust in our markets and loan activity has been good.
And the outlook I would say that the pipeline is relatively robust sustainable finance.
Obviously, an enormous area of focus for us has been strong and in the.
Pipeline is good.
<unk> has been strong and we think that with the I V.
Don't say the geopolitical tensions are likely to recede, but I think people are finding ways to work around them.
We can look forward to obviously Hong Kong opening up.
Relatively soon and while China show the China News from day to day is terrible it really is focused on Shanghai and the.
More recently Beijing, but the bulk of the population in China is still operating relatively normally and while the economic growth impact is meaningful we think it will be meaningful in the second quarter, maybe into the third quarter.
The overall trade volume so I think we will.
Well proved relatively resilient so.
Looking across the piece, we see a decent economic backdrop, a good pipeline for which we are well positioned and.
And as.
As yet where I would say remaining relatively strong consumer.
Profile across across the markets. We're operating so as Andy said plenty of opportunities to get that low to mid single digit loan growth is going to be reduced as it was in the first quarter from time to time by the optimization efforts.
But net net the underlying opportunity to grow profitable business as it feels pretty good right now.
Okay. Thank.
Thank you and my second question is just on credit quality I mean.
Obviously.
It looks like a very benign environments apart from one or two pockets of environment.
So really sort of three questions I mean first of all on China CRA.
I'm trying to remember your numbers from <unk>, but if I'm right you haven't released any of the overlay from <unk> <unk>.
So those are all sort of specific provision that you put through on the 160, just sort of your thoughts on any further risk we have that.
Secondly, I noticed you haven't made any more overlays for sort of inflation risk.
So it is quite high and some of the markets you operate on so sort of any thoughts or comments.
On that especially given what's happening in composite Jayson on the disruptions we're seeing.
And then thirdly, you just mentioned in one of your slides about watch list on the commodity traders that just wondering if there's anything we need to be sensitive to and aware of on that commodity trade cycle Prophage just watch list at this stage.
Yes.
Yes.
So on China.
Some specific provisions against.
Two.
Operations.
We have less the overlay there it's about the $90 million level that we had.
The end of last year, we're obviously keeping an eye on the situation that I mean, it's sort of mid slow I guess in terms of resolving itself, but to this point in time, we still see a way are appropriately marks on the exposures as we see them.
There is slight.
Could you give more detail on the quality of the China book in the appendices, which.
Maybe we'll look at some stage.
Those delays for inflation risks.
I think what we're trying to do is to be thoughtful about the situation that we're at a point in time.
Clearly, they're all situations going forward quite things could become slightly more risky there are some situations in some countries, where the opposite could be the case, but again, we've gone through this individually component by component.
We think we're appropriately marked on this.
Commodity traders commodity trading and trading.
Trading clients.
Is clearly a part of our activity commodity income has been very good in the SLM business in the first quarter.
Again in the appendices, we show some of the exposures we've got in that area.
Overall, we're keeping a close on it we think the quality of the book is good.
Also showed on one of the slides.
<unk>.
Risk sort of client situations and well.
The mix within its changed a little bit overall, it continues to be slightly down but sort of fairly static.
Monitoring it, but we feel pretty comfortable with the book at this point in time.
Okay. Thanks very much.
Thank you. Your next question comes from the line of Brian Stebbins from <unk>. Please go ahead. Your line is open.
Hi, Good morning, good morning, Andy.
I had a couple of questions first one was on costs and then the second one around the decision to exit certain markets in Africa.
On costs. Thanks for the color that you gave in terms of sizing the potential uplift to assess the previous guidance on costs and the sort of linked to revenue I was just wondering whether we should be thinking about certain revenue line items that you would place more weight to.
In terms of.
That being passed onto the costal lineup as you know things like box.
Mark to market moves on funding spreads to be able to say, we appreciate kind of ignore.
Except as otherwise strong performance financial markets, you would reward employees I'm not sure if that all set guys in terms of the extent to which right tailwind speech on NOI, whether that also gets back on.
Rates paid on that.
And then on an exiting certain market extension sort of what's changed I think in the past you've talked about the importance of the retail presence in some markets have banking licenses.
We're positive about the digitalization improving efficiency in these markets. So I guess whats changed there.
You gave some some numbers around that new NPD being modest.
In terms of comp contribution that is anything else you can say around exit costs or capital allocation today's market that might be helpful. Thank you.
Okay.
<unk>.
On the cost side.
The potential for slightly upward pressure on that I mean listen it's quite difficult to say I think with nine months ago, exactly which products, which are going to abate.
Who knows we've got good momentum in financial markets.
March was particularly strong first quarter as a run rate.
April is good against the comparable period last year.
If management is a little sluggish and I think that will take a period of time because of course via to pick up again.
But to try to associate cost increase with particular product areas I think is probably.
A degree of precision, which is tricky, but as I said.
That 100, maybe 200 range just depending upon how strong the top line I think would be the right way to look at it.
Gordon you a second question.
Africa Middle East.
The way we should look at this is the.
The repositioning of the region into big market speak of growth. There is we have got one new license. We've now started with a branch.
In the whole thing, but we've equally said some of the smaller markets will come out sold.
Put this into context, the GDP of the markets. We're getting into is about three times the market becoming alto.
<unk> business. So it was very strong in the first quarter, we saw double digit growth in income and we saw the XI operating profit up over 50%. So this is really going on with strengthening the franchise as we as we move it forward.
And the businesses that we will be exiting theyre not huge in the overall scheme of things I think it's about 1% of the group taking a couple of percent the group profit.
Not big numbers that we will exit those out I think next quarter, probably and reporting.
Then finally, the Africa Middle East region as a great cap.
Capital return generate 13% royalty in the first quarter.
Very very strong business in a very strong differentiator for us from some of our competitors.
Statistically a couple of the additional bits of color for me on that.
Back on the cost point.
You pointed out that the.
Financial markets areas, you could say the same thing about wealth and in an environment, where we're actually performing better which we hope we will expect we will.
Are they are the most direct connections between results in.
In variable pay.
We've had strong performance across the board and in periods, where we've had weaker performance across the board the whole bank is paid for it.
In periods, where we had solid performance across the board the whole banks can benefit from it so.
Which I think is part of part of the reason, it's tough to be very precise about the weightings of different revenue lines in terms of cost impact as Andy said, it's relatively.
A relatively small in the overall scheme of things and we really hope we have to explain further.
Our very very strong revenue performance is driving an increase in performance related pay.
Hey types until the opposite story.
For the time being it feels pretty good.
And then on the.
And it's a couple of things I think we've been clear in our public disclosures about this but we will continue to serve the countries that we've exited from offshore.
In terms of the sovereign level in large corporate related support and capital raising and alike, and we will continue to be as involved as we have been and that's a meaningful proportion of the income in those markets.
We've exited as the onshore the onshore businesses in those countries and then specifically the onto our retail business in two others and these are areas, where we looked and said there's meaningful technology spend there is meaningful compliance and other related expense just to stay relevant and some of these cases, there may be other people who are better at providing that service.
And we're much better off taking our resources and focusing on the areas, where we can have the biggest impact on clients and therefore, obviously the biggest benefit to our shareholders as well.
It's not about if anything any of these countries at all rather it's about focusing on getting the most value from the center trader franchise into those markets, which we have a high degree of confidence will result in the most value for us and our shareholders.
Okay. Thank you.
Thank you. Your next question comes from the line of.
<unk> from Goldman Sachs. Please go ahead your line is open.
Thanks for taking my question. My question is on margin can you help us.
<unk> quantified the margin increase from Hong Kong and then secondly.
And they started on the mortgage margin being capped around prime rate can I ask what is the assumption regarding when will the prime rate.
In Greece, and with the Prime rate then.
Move as much as the increase in cost of deposit rates.
Yes.
<unk> all the move on the net interest margin.
In the first quarter. So we've had about 10 basis points of increase from fourth quarter to first quarter.
We've got about three basis points from Treasury hedges and the rest is coming from a variety of different currencies right.
I'd say, probably a third holdco methods in the foot the hedging it directionally, that's probably sort of way that you should think about that.
On the Hong Kong mortgages.
Slightly complex.
You Shouldnt because theres a prime rate there is a cap that is a certain percentage below the prime rate.
And then obviously we have a margin also the borrowing cost on what we learned there.
But.
I think the round, the two and a half to sense right. So in the mortgages than we are.
Starting to get close to the capital deployment.
Hence at that point in time, we get less great sense to the system, we do believe that level.
Yeah. Thanks, So I guess following up so.
They initiated first 100 basis points as you say is quite sweet and you get a big beat on the margin so.
This year, we could have 20 basis points higher group margins, but then once the prime rate move in Hong Kong.
But the biggest markets for the group then.
Ken we had the same kind of group.
NIM increase next year because.
On the call you referenced that 2023 margins can be as good as 2019 margins, which are $1 six and again, we're looking at 20 basis points and that includes so.
Yes, trying to square that guidance.
Yes, no what you just said the backend of that is right.
You said the full year. So this year, we think we could be near a 140 I said earlier on the 2023 being the sort of levels of 2019, we're getting close to those chartered six state is still feasible. The program is under the well sort of see some things.
So that and.
And the Hong Kong primary clearly is goldman's, but the other thing you need to factor in is that when we get the rate increase we don't reprice the whole of the book immediately and some of that book will reprice up to 12 to 18 months et cetera. So there is a buildup in the benefit that the rates increases we get in other parts of the business. So the helicopter level.
So it's near a 140 and this is all on the assumption that current forward right because they'll told a stress.
160 days of 2023.
It would be I think the best proxy to have taking accountable.
The pluses and minuses under the surface.
Great. Thank you very much.
Thank you. Your next question comes from the line of Tom Rayner from Numis. Please go ahead. Your line is open.
Thank you good morning Bill.
And well done on the figures.
I think.
So the general soft I'm sort of picking up from the questions is yes.
People may be thinking youll being too cautious perhaps on some of your guidance here.
Consensus is currently 6%.
Yeah.
So I mean, the 114 NIM guidance I think it's 4%.
So that's clearly a very strong Q1 financial market sees in the bag and I think Andy you said April was holding up well compared to prior year as well some nice signs that that is just getting into it.
I was just wondering is this just a general level of caution, which I think is to be expected maybe given the environment at least not anything specific that youll seen has markedly deteriorated the stay.
That makes you expect Hong Kong to the IPO or anything like that and I guess, we could not sell into Europe .
LTE guidance as well.
Youll, saying, 10%.
2024 or earlier I'm, just wondering how confident you are that maybe 10% can be achieved in 2020 is that something that.
Comment is meant to.
Sort of hidden tax thank you.
Yes, Tom.
A good set of questions.
We are obviously I think hoping to be thoughtful about what we do and not taking out to be overly cautious but then.
Forgive me for saying this but February we stood up and within a week of doing that there was a huge situation arose in though to come through.
So.
It does it tell us about doing things with confidence here tricky.
We've used the word slightly exceed the previous slides to 7% range, whether that's <unk>, whether it's nine or 10, I think events will unfold over the course of the year, which will which will make that clear.
There is in Tennessee.
A big drag here that we have such a good sheltering from you.
The mark to market could reverse the heightened clearer about that wealth management.
So a little bit sluggish and that will take a period of time for that to pick up again, so its not that theres been this thing under the bonus.
Its causing us big alarm.
And if not earlier words on the 10% very deliberately but from a previous point. If you look at where the forward curves are at the moment.
The potential to get the name is back in 2003 to where they were in 2019.
You can do the numbers or not.
It could be actually very close to the 10% is not yet exposed because hold.
Equally we would need to be a max.
<unk>, all confidence globally, gdp's might be moderated a little bit, but not dramatically in order for that to happen.
Just trying to be thoughtful I think the way the rights to coast move just recently those strengths in the 'twenty four.
The post between support and it is possible that 'twenty three if not yet.
Okay. Thank you then.
Alright.
This is the right point to make.
Comment you'd probably expect from me, which is that while we're very sensitive to interest rates, we're not running this business for <unk>.
Just to wait for interest rates, we're driving on every single line.
The income statement and the balance sheet to get to blow through the 10% return on tangible equity that's the objective and that's what we're doing is what we've done in the first quarter, we're delivering on that.
And if we get the tailwind from interest rates that the market is suggesting right now obviously it becomes easier.
If we don't get that for whatever reason and we cannot speculate what could what could lead to that.
On the further stiffen, our resolve to take the operational steps that need to take to make this place say a structurally cost of capital plus plus plus delivering bank.
Thank you.
Thank you. Your next question comes from the line of Parlay, among some K B W. <unk>. Please go ahead. Your line is open.
Alright.
Zero revenue again, so thank you for what you said already.
My understanding is correct because.
Yeah, I think you talked about five to seven with an underlying 3% impact addition of a rising rate. So it's actually 8% to 10% CAGR. So when you said, it's a little bit better than 7% is that overall or is that just the underlying call. It because it is just on the line card than we actually get into something more like at 11% which is.
It seems that if you take into the NIM guidance of exactly what that would actually drop down to where we're.
People seem to think it is so that's number one.
Number two is.
Alright.
So at the OCI losses, so it's about 30 basis points.
We won this quarter would you say that sort of that.
Level of sensitivity.
So again, if we see similar rate movement is that it's something that we might expect to repeat next quarter.
Yes, Okay. So let me take those two so almost of the small and in February what we said it was over a three year period, we would expect the underlying to be 5% to 7% plus potentially three percentage points of growth because of interest rates, but we importantly said pull the 2022 year.
The slides to 7% would be inclusive of interest rate effects. So we did actually described the two slightly differently, but what we're saying is the last of the 5% to 7%, including interest rate effect is likely to be slightly higher than that again, including interest rate effects.
On the second <unk> is about 30 basis points.
In the first quarter.
I think in the month of April we probably moved about another seven basis points further than that but that is the sort of order of magnitude.
Sure.
Okay, great. Thank you sorry, if I'm missing your 'twenty two guidance.
Uh huh.
Thank you.
Our next question comes from the line of Manus Costello from Autonomous. Please go ahead. Your line is open.
Hi, Good morning, I wanted to just come back to the Africa correct.
Firstly, if you will.
Guidance adjusted for removing the African businesses.
This year.
It doesn't really matter.
This includes the rate.
Secondly, more fundamentally I wonder if you could give us an update on the UAE.
Which I think is still the biggest market in the region.
And thats been a bit of a headache for a while so I wondered if you could give us some color on what's going on there. Please.
And then the first part of the question Matt is first thanks, yes.
Africa exits are included in our guidance that we're giving but youre also right that it's small.
On revenue and operating profit in any case, we will be running these things through the course of this year.
Certainly because.
Whether we ultimately divest <unk> or or wind to some parts of those businesses down it's going to take some time.
<unk>.
We will extend through this year.
On the UAE.
<unk> performance has continued to be good and we've refocused the retail business.
Very substantially.
Into a healthy zona growth credit conditions have remained good economic activity has picked up.
The resilience through the Covid period was particularly strong.
So we feel our business in the UAE.
I think you mentioned, there's a bit of a headache, I think that where the terms are used.
Been bumpy for sure, but it feels very good right now.
Yes, I mean, we still are seeing.
Mid teens percentage growth in income year on year profitability up quite a lot. So.
It should be good.
Good quarter.
And this is still the biggest market within the region.
Yes.
It is.
Okay. Thank you.
Thank you. Your next question comes from the line of Mark <unk> from Credit Suisse. Please go ahead. Your line is open.
Hello, Omar is your line on mute.
Good morning, everybody congratulations on a good set of numbers.
I just had three questions. Please.
So firstly on financial markets I, just want to talk to your thoughts about.
On the trading environment, and whether you see that.
<unk> that we've seen is something thats.
Likely to be sustained.
Clearly there were also geopolitical events in particular.
Events in the commodity market that we're very volatile, but I think beyond that.
An environment of central banks hiking, it's been suggested that that might be too.
<unk> outperformance of financial market could you just help us perhaps.
<unk>.
What was potentially this exceptional and what can be sustained going forward.
My second question on capital.
I was hoping that you could give a little bit more color on the six and a half billion dollars of efficiency measures.
Charging to see that.
That was that do you think there's potential for.
Efficiency measures beyond this year kind of over and above the CEC IP optimization that you were talking about and I just wanted to.
Whether it says something about maybe collateral policies or something that were in place I just want to get an idea of how much potential there is for further efficiency measures.
And then just lastly, I want to talk to you a bit more.
So it's a big picture question on Central Bank rates going up and Hey, you that Nims can go back to 2019.
But what kind of <unk>.
Level of Central Bank policy rates do you think higher rates become problematic to things like asset quality.
If you look at corporate debt positions and so on so I was just curious to hear your thoughts on what you think the inflection point is when the higher rates become.
Become multi accretive to <unk>, rather not accretive thank you.
Thanks, very much Marty good set of <unk>.
<unk>.
The first quarter from it from a financial markets protective was exceptional.
And it was exceptional both in terms of the volume of client related flows that we saw.
And the nature of those close the underlying volatility so.
I'd love to say that we could repeat that quarter after quarter that would be very very very good outcome and not one that we could forecast.
But the.
The shift in <unk>.
The nature of volatility in these markets I think is structural so we're into a a rate hiking cycle at a time when the market is also expecting to economic pressures and thats.
It does it manifests itself ultimately.
And a recession is one of the huge questions on everybody's mind at the moment. It feels like that question is sort of in the balance.
But those those types of situations typically lend themselves to reasonably good trading environment.
And once where our clients are very very focused on.
Underscoring their own books.
As we've indicated we're going to have a deep dive on the financial markets business in June and I don't want to give too much of a trailing for what we will be covering there.
But I think what are the clear messages that we've been delivering for quite a while is that our financial markets business.
A bit different than some of the others that you look at it is fundamentally more client anchored.
And then certainly some of the other places that I've come across in my mind.
Working right.
And.
It's fundamentally more so driven.
It doesn't mean that those flows themselves aren't volatile they are structurally higher quality business than I think we're probably there's probably recognized externally and I think that will that will hold us in good stead through this period of almost inevitably ongoing volatility, albeit we're not forecasting or suggesting that we can match the first quarter regularly.
So it will be two metrics.
Yeah.
And your second question.
Are there more efficiency opportunities beyond <unk> and the optimization program I'm going to I'm going to let Andy.
<unk> take that question, but.
Andy and team have done a really good job over the past five years and continually optimizing.
The way that we're that we're positioning <unk> and obviously incorporating models and alike.
There is always more of that to come but I would say the low hanging fruit is always pick first so from here it gets a little bit harder, but as you will have more color on that.
And then where do where do where do rates become problematic from a credit perspective or in some cases. They already are obviously looking at markets like Sri Lanka, and we took a material provision in the first quarter on the back of <unk>.
Foreign currency defaults and downgrade.
It's not exclusively the result of higher interest rates, but it's not helped by the prospect of higher interest rates at all and certainly that higher interest rates had a direct effect on the currency.
And flowed through to domestic financial crisis.
Obviously, adding to a political crisis, Sri Lanka is not the only country thats going through a very difficult patch right now.
While we've seen some really important turnarounds and a few other markets, who actually hit difficult.
<unk> earlier.
With or without IMF assistance that come through and look to be in pretty good shape right now in some cases supported by higher commodity prices.
But to get to your direct question. When does this become a problem that already has a problem in a number of cases.
We've got a very high quality book that we manage very actively and we think we've had an increase in impairments and we guided to a return to.
What we think is probably a more normal through the cycle credit cost of 30 to 35 basis points, we're not there yet.
We think we will we are on the way to get there over some period of time it through some route.
And that will that will obviously be accelerated if rates go up much higher than the market is forecasting today.
Well in the quarter.
Quarter answered that the optimization question, yes.
Yes, we are.
We are continuously looking at areas of efficiency opportunity I think this has been particularly bumper quarter. So I wouldn't get to these numbers going forward, but looking at models look at credit insurers look at collateral management, we continue to face.
There will be some further opportunity without that but just just penciled lease numbers in every call that you would not get to the right place.
Thank you very much.
Thank you. Your next question comes from the line of Jason Napier from UBS. Please go ahead. Your line is open.
Good morning, Thank you for taking my question.
And again fantastic Fantastic numbers to then very significant indicated upgrades I wonder whether I could just ask one question around the mix of the expansion in net interest margin.
I think quarter on quarter dynamics.
Interesting in the sense that there was quite a substantial improvements in gross asset yield.
And I wonder, whether you might talk a little bit to competitive dynamics and assumptions assumptions going forward on the lending side of the business.
Expansion in the market, mostly driven by policy rates.
Or are there areas in.
Competitive terms.
Make a bigger difference to the walk forward on rates just starting that.
Attending to one 6% NIM.
Much the same loan deposit ratio as you head into 2019 I'm just wondering whether there are any shifts in the book or the staff to the business that we should be thinking in terms of the way asset yields and funding costs to behave in that process. Thank you.
Yes, I mean, we have goldman's through sort of country by country asset class biotech product liability caused by liability clause trying as best we can.
To work out what the sensitivities are.
Based on the income on the cost side of things and the.
The summation of that I guess is the sort of NIM guidance that we've given you today.
<unk>.
Any thoughts.
As you say there is also sort of how to competitors react to things.
How much of the forward curve actually manifest itself in actual rates at the time.
So I just think it's a high level sort of the direction of travel is what we paid today there'll be many moving parts below the surface, but if you aggregated sort of where we think we can see at the moment things Pan.
Pan out.
And then kind of follow up and just ask I guess, you can spin it doesn't questions on UK mortgages, which I'm sure you're quite grateful.
But one would one would expect I guess credit spreads in your forward planning to be allowed to narrow somewhat as liability spreads do better can you confirm that that is the way that you think about things the liability side of the balance sheet does much better credit spreads to narrow.
For borrowers.
Yes, I mean generally yes.
He is right and yes, I am glad.
UK mortgages as well.
But yes, there's a site we've gone through country Garden Street, because every country dynamics are a little bit different but as a generality yes.
Thank you.
Thank you we will now take the last question and the question comes from the line of Robert Noble from Deutsche Bank. Please go ahead. Your line is open.
Good morning, all thanks for taking my questions.
And that's been answered I just wanted to touch on how you see yourself.
Got it.
What we can expect.
Revenue contribution from these thank.
Thank you.
Good thanks for the question Robert.
The debentures are going well so were.
Mark says is cross the digital make in Hong Kong has crossed two important milestones over 300000 customers, 60% now active users of our credit card, where the fastest growing credit card in Hong Kong.
Which.
It is a key part to delivering profitability, obviously with the proposition that up until the launch of our credit card product last year, and then personal loans later this year.
The source of profitability as deposits.
And the low rate environment that wasn't so helpful that will obviously improve so we see a substantial uptick in in the profitability of market going forward.
We're on track to launch our Trust Bank, which is the Singapore Bank using the same tech stack, obviously adapted as necessary to the Singapore market together with our partner <unk> in Singapore in the second half of the year very excited about that I think thats it.
We'll be leading with the credit proposition there.
Honestly those are the two important ventures as the shift from from being net drags in and consumers of expansion capital into revenue contributors, obviously is going to take some time to fully ramp up in both cases.
Salt is going extremely well.
Get the numbers wrong here because they go up so quickly but over 300000 SMB is on the platform in India.
We've launched in Kenya, we've got a very interesting and important partnership that we're that we're working on another large populated country.
In the ASEAN region.
And.
More and more we're getting interest from from third parties.
With us in one form or another in those ventures.
I think recognizing that we created something that's very very valuable.
The custody business for digital assets going well.
We're continuing to add customers and ramp up revenues that should be a revenue contributor.
That noticeable.
The coming quarters, so yes.
<unk> is on track or maybe even slightly better relative to what we talked about that.
Back in October of last year, and will give us vindicated will get a little bit more but maybe quite a bit more color on that on this whole topic at the half year earnings.
We didn't want to distract too much from this extremely volatile first quarter.
All of this happening.
To give a general update on other things, but please don't take that as any indication of anything other than we're very comfortable with the progress there as well.
Alright, thanks very much.
So I think that's it for the questions. Thank you. Thank you very much for as always for spending the time with us and trying to understand and for some really good questions.
Look forward to continued continuing to update as.
Our situation evolves. Thanks again.
Thank you Scott.
The presentation for today. Thank you all for participating you may now disconnect.
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