Full Year 2022 Standard Chartered PLC Earnings Call

We delivered a strong set of results for 2022, and what has been another difficult year for the world on many fronts.

We posted full year income of over $16 billion, our highest since 2014 up 15% on a constant currency basis, excluding DVA.

And we exited 2022 strongly with the fourth quarter income up 26% operating profit before tax of $4 $8 billion for the year. It was up 15% and our return on tangible equity of 8% was our best since 2014.

And this solid growth was despite the challenges related to sovereign downgrades in China real estate, we're increasing the total full year dividend by 50% to 18 cents per share and announcing a new share buyback of $1 billion to start imminently. This takes the total of our shareholder distributions announced in the last 12 months to over $2 $8 billion with the aim of returning an X.

A $5 billion to shareholders by 2024, even after the distributions we're announcing today, we retain a very healthy capital ratio, allowing us to invest in offering protection against any ongoing challenges looking forward into 2023, while uncertainties remain we see reasons for continued optimism for the markets in our footprint.

We are encouraged by the recent change in time this approach to managing Covid and the result and pick up in economic activity, we expect to see over the coming months for 2023 and 2024, we expect the rate of GDP growth in Asia to be more than double that which is expected in the U S and Europe . So against this improving backdrop, we remain confident in achieving the financial and strategic targets we laid.

Back in February of last year, and we're upgrading our guidance as we continue to improve our returns.

We now think our O T. He will be approaching 10% in 2023 and greater than 11% in 2024.

And these are O T. Eagle's are of course, just the first step we intend to deliver further improvement beyond these levels and to do so sustainably.

I'll come back and provide more detailed update on the encouraging progress, we're making against the five strategic actions as well as our strategic priorities.

After Andy has talked to through the fourth quarter and full year results. We'll then both be back for the Q&A as usual Andy over to you.

Thank you Bill and good morning, and good afternoon, everybody I'll start with the fourth quarter highlights before providing more color almost as being a strong financial performance for the full year.

Fourth quarter income, excluding DVA and only constant currency basis was up 26% year on year, providing good momentum as we enter 2023.

This growth was broad based with net interest income up 28% the fourth quarter NIM expand it from the third quarter by 15 basis points to 158 basis points.

The income was also up 23% notwithstanding wealth management still be somewhat subdued fourth quarter expenses of $2 $7 billion were up 14% year on year, excluding the bank Levy just under half of this growth was from increased performance related pay.

The fourth quarter loan impairment charge includes a $162 million relating to China commercial real estate exposures together with $110 million for the sulfur and downgrades of Pakistan, and Ghana, and Sri Lanka below the line in restructuring and other items, we have taken a $308 million impairment charge against our.

Investment in China, Boe High Bank and for consistency, we have repositioned the prior year 300 million dollar impairment charge and restated the 2021 group ROE T. O. W. E was down 8 billion also 3% in the fourth quarter. This reduction included the $5 billion decrease in derivative.

Council policy credit risk driven by a seasonal roll off imbalances and mark to market movements influencing our asset mix. We expect some of this $5 billion reduction to reverse in the first quarter of 2023.

Turning to the full year picture full year income of $16 $2 billion, excluding DVA and on a constant currency basis without pristine percent year on year and was our highest income print since 2014.

Importantly, this increase was not all about rights much of this was driven by the investments we have made into the business. In recent years for example financial markets delivered another record performance this year with income of $5 $7 billion.

Expenses of $10 $6 billion were up 9% and in line with our guidance.

Joel So the full year, we're opposed to 6% benefiting from both the strong income growth and a continuing cost discipline.

Credit impairment to point $8 billion was up from the low level of 2021, but almost exclusively due to China commercial real estate and sulfur and risks.

The results in full year underlying operating profit of $4 $8 billion was up 15% compared with 2021, delivering a routine of 8% up 120 basis points. This is our highest priority since 2014 and gives us confidence that our strategy is working and the opportunities of our Ma.

Market footprint, we can further improve returns.

Combination of capital discipline and strong profitability.

CET, one ratio close to 14% the top of our target range. This.

This enables us to announce a new $1 billion share buyback, starting imminently and to increase the annual dividend by 50% and still be left with a healthy pro forma capital ratio in the middle of our target CET one right.

Now looking at income in more detail.

Income increased by $2.2 billion or 15%.

Retail deposits income increased one point to 2 billion more than doubling year on year as rising interest rates improved liability margins.

Likewise transaction banking cash management income was up 1.1 billion or 85%.

Turning to products that generate non funded income macro trading FX and rates started a record year in financial markets with income up 21%, excluding DVA to $5 7 billion, which is about a third of the total group income.

The flow components of total F. M income was broadly stable at around 65% in 2022 compared to 70% in the previous year.

As one would expect the asset products had a more challenging year as funding costs increased.

Lending and portfolio management was down 22% impacted by the execution of the art W. Ay optimization initiatives in CCI P.

The two C. P b b asset products' retail mortgages and credit cards, and personal lending were down 15%, reflecting increased funding costs.

Treasury and other income was down 67%, primarily as a result of the cost of the structural hedges, we put in place earlier in 2022, and finally wealth management was down 17% or $364 million.

<unk> investor sentiment remained weak throughout 2022, and the easing of Covid containment restrictions in China came too late in the year to have any impact.

Looking at current trading momentum.

The first few weeks of 2023 has seen a continuation of the themes we saw in late 2022.

CIB has started the year well with solely prototypes in macro and credit trading and transaction banking.

Capital markets has benefited from bond issuance volumes, increasing as the pace of interest rate rises slows CPB has also started the year well deposits continued to tick up in unsecured lending continues to be strong with credit card spend now at pre Covid levels. We also see strong new well cells.

Mentum led by FX structured notes and fixed income with encouraging early signs of a pickup in Hong Kong.

So in summary, so far so good but it is still very early days and the comparative period in 2022 was quite strong now turning to the components of income starting with net interest income in 2022 statutory net interest income was $8 billion still a little shy of pre pandemic levels.

The most significant driver of this year on year increase what's the adjusted NIM, which was up 20 basis points to 141 basis points, a 17% increase we continue to refine our methodology for calculating the adjusted NIM and related trading book funding costs in the light of this we have.

He stopped boost our NIM and funding cost estimates and we have provided details of this in a slide in the presentation.

There is no impact from this change on net interest income nor totaling simply an increase in the adjusted NIM and the offsetting trading book funding cost.

Looking at NIM progression from our current levels supposedly Peter's I've picked up towards the end of the year in both C. P. B b cancer and in transaction banking. We have also seen further migration from current accounts to time deposits changes, which will continue into 2023 IH program remains at 44.

$4 billion.

28 billion is this a short term, 60% of which roll off by the end of this month, helping reduce the drag from hedge losses and providing support to the NIM.

The lag effect of rate increases will also continues to support the NIM as we go into 2023.

So whilst we have seen a change in deposit betas and liability mixes offsetting this will be the benefit of hatred loss and so the sensitivity to interest rate rises.

Our NIM should therefore continues to increase through 2023 with the full year average of around 175 basis points on its way to greater than 180 basis points in 2024, now turning briefly to the balance sheet.

Loans and advances to customers on a headline basis were up 4% for the full year.

After stripping out the impact of currency translation, our balance sheet optimization activities and treasury reverse repo movements. The underlying growth was 3% in line with our expectations. However loans and advances were broadly flat in the fourth quarter impacted by cyclical factors.

We did see positive momentum in lending and transaction banking. This is offset by the seasonal decline in the F M balance sheet.

Looking forward, we believe that we should be able to achieve around a little.

<unk> percentage growth rate for customer assets. Finally on income just a brief look at how the network performed.

Cross border income has grown 24% to $5.7 billion and now represents around 57% of the total CCI fee income.

Asia is the biggest network contributor with $2 5 billion of cross border income a 24% in 2022, followed closely by Europe , and Americas with $2 3 billion up 20%.

The Africa and the Middle East region continue to be our fastest growing network with cross border and come out 50% to North point 7 billion.

The various headwinds China Cross border income has grown 25% in 2022 and is now around $1 billion.

There has been very strong growth from China to the west and China into Singapore, both at around 70%.

We've also seen significant growth because of cross border income from the network into Africa, which now totals over half a billion dollars.

Lastly, Singapore continues to grow as a global financial center in the key international hub with cross border income into Singapore up 44% to over $6 billion.

Moving onto how all client segments performed I'll keep this reasonably high level <unk>.

<unk> income after a shade over $10 billion was up 24% net.

Net interest income grew 16%, reflecting widening margins in the cash business and other income was up 30% driven by the record performance in financial markets.

Rotate improved 410 basis points.

<unk> income was up 10% to just over $6 billion driven by net interest income up 30% as strong deposit income offset a weak wealth management performance.

<unk> improved 420 basis points and just under 16% is now two percentage points higher than our CCI business Bill will cover the ventures segment later now looking briefly that's all top six markets.

Our largest market Hong Kong.

<unk> economic environment with GDP contracting around 3% in 2022, but despite that we grew income 9% to just over $3 $7 billion back to around 2019 levels in Singapore. The business performed strongly with income up 23% with five.

And that market's cash under pulse, it's doing very well, we had a net recovery in loan impairment driving profits up almost 50% and <unk> was up over seven percentage points to a shade under 20% our India business grew income, 5% with wealth management growing strongly and posted erosive, 10.8% is strong.

Since we started repositioning the business Korea also continues to progress well with income up 17% and expenses down 4%, reflecting the restructuring action we took in late 2021.

And it's worth noting that if you exclude one large property sale gain in 2012.

Korean business delivered its best operating profit since we acquired <unk> Bank in 2005.

Our China business posted record full year income up 10% year on year financial markets was up 18% more than offsetting a shortfall in wealth management income.

And finally, the UAE had a very good year with strong F N performance and impairment recoveries, helping drive profit to the highest level in seven years with Rosie almost 600 basis points to 15, 9%.

Now turning to expenses as I said earlier total operating expenses were in line with our guidance of $10 $6 billion up 9%, resulting in strong positive jaws of six percentage points, our cost efficiency program, which is one of our five strategic actions reduced costs by North point 4 billion.

On track to deliver a 1.3 billion dollar target by 2024.

Offsetting this there were five drivers of cost growth.

North point $3 billion was due to higher performance related pay.

Inflation added <unk> 3 billion or about 3% with most of this being staff salary costs.

We also incurred about $1 billion of increased expenses relating to costs, which had been subdued during the pandemic for example travel.

Our investment spend including that into the venture segment increased by upper out point 2 billion.

The remainder of the increase of half a billion dollars is equally split between the two main business segments and see CIB. We made further investments into emerging areas, such as sustainable finance and strategic initiatives such as the opening of our new Securities business in China, which was announced earlier this month.

And C. P. BP the increases were driven by investments into the frontline, including relationship managers and also digital investments in the wealth management, an affluent area.

Looking forward, we now expect around 3% positive income to cost tools in 2023 and in 2024 looking now a credit impairment.

Charges for the year of <unk> 8 billion compared to <unk> 3 billion for 2021 an increase of half a billion.

It also increases proportionate divulge. It is also very low 2021 days in the 2022 loan loss rate of 21 basis points is still below the historic through the cycle guidance range of 30 to 35 basis points.

The way to think about the year on year increase is that most of it can be attributed to China commercial real estate and sulfur and downgrades the other items, which relate to recover as underlying ECL charges and overlay movement more or less net out.

The North point 6 billion commercial real estate charge in China on top with the North point 2 billion booked in 2021, mostly relates to five individual names.

We have increased our management team for light to just under $2 billion to reflect uncertainty on developers in early alert.

Calling the bottom on China's CRE, but from what we know of the situation stay we feel adequately provided.

For sulfur ins, we have taken a charge of <unk> $3 billion in $2022 2 billion of this relates to the default with Ghana.

The remainder relates to Sri Lanka, Pakistan, which we're watching closely given the low level of foreign reserves high inflation and recent rupee devaluation.

Even if Pakistan worthy further down to.

The financial consequences for us would be manageable.

High risk assets are up <unk> $8 billion in the fourth quarter, reflecting sulfur and downgrades year.

Year on year high risk assets are down point $8 billion.

Turning now to capital.

I'll talk to you guys were down a net $27 billion or 10% to $245 billion in 2022 the.

The most material components this improvement, while our optimization and efficiency actions, which drove $25 billion and part of the rate reductions.

Optimization efforts, such as loan sales reduce startup by $14 billion in CCI P.

Efficiency actions, such as credit insurance and Treasury multiple changes and data accuracy enhancements saved a further $11 billion 7 billion of which was also in CCI b.

Ultimately he was driven higher by $7 billion for regulatory changes. However, this was more than offset by a $10 billion reduction from FX.

We have been focused on out of Dubai efficiency for quite some time at the end of 2022 odd of your identity was 30%, which compares with 47% back in 2014, reflecting the relentless focus we have placed on improving the quality of our portfolios and improving return.

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Looking at the capital position. The key point here is that the group is generating equity returning it to shareholders and using the <unk> target range to do so.

We closed 2022 of the CET, one ratio of 14% and with the new share buyback, we will now take our pro forma CET, one down to around 13, 6%.

So finally, turning to the outlook.

We are making a number of changes to the group that should complete in 2023. For example, the review of our aviation finance business and the exit of some of our Ami markets.

We also plan to change the way, we present and TVA going forwards taking it out of the reported numbers.

We have shown in the appendix the 'twenty to 'twenty two results adjusted for these items as it is from this pro forma view that one should model our updated guidance.

Whilst recessionary and inflationary pressures will continue to impact many parts of the world, particularly in the first half of 'twenty to 'twenty three we expect most of the markets in which we operate to continue their recent momentum with GDP growth in the Asian economies at above 5% over the next two years being pivotal to progressive global recovery.

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The recent tightening up of China, and the generally receding impacts of Covid should help in that regard.

Albeit we will continue to monitor closely the sulfur and risks in markets that are most exposed to tightening liquidity.

Overall, the markets in which we operate the third the benefits of rising interest rates and the evidence showed improvement in many of our operating metrics causes to be optimistic about the period ahead.

We therefore upgrading our earnings outlook and we now anticipate that income in those 2023 and 'twenty 'twenty four excluding DVA and on a constant currency basis will increase in the 8% to 10% range.

As I highlighted earlier, the NIM will continue to progress to a full year average of around 175 basis points in 2023, and above 180 basis points in 2024.

We will continue to tightly manage costs and expect to deliver around 3% positive income to cost tools in 2023 and in 2024.

We're expecting both assets and I'll talk to you I used to grow in the low single digit percentage range.

Credit impairments is expected to normalize over time towards the historic through the cycle loan loss rate range of 30 to 35 basis points.

And we will continue to operate dynamically within the 13% to 14% CET. One range. Finally, we expect to approach, 10% rote in 2023 to achieve greater than 11% in 2024 and to continue to increase it thereafter.

So with that I'll hand back to bill to update on our strategic progress.

Thanks, Andy 2022 turned out to be more challenging than many would have expected, but despite that and as Andy has covered the group delivered a strong financial and strategic performance.

As we enter 2023, we feel sufficiently optimistic and confident to raise our targets why can we do this.

First the strategy that we set out in 2021 with our four pillars of network mass retail sustainability and affluent is clearly working I'll cover these in turn.

Second we're ever more confident in the opportunity presented by the group's footprint the growth that is good and the interconnections within our footprint are growing stronger this growth will not only come from the large markets, such as China, and India, but also new and fast growing economies such as Vietnam.

And finally, we're confident in our ability to execute on our strategy in February last year, we highlighted five key strategic actions to help us accelerate the delivery of our 2024 targets. Our progress on these actions have contributed hugely to the improvement in performance we have seen in 2022.

If you take a few minutes to go through the progress on each of these in turn.

Firstly in CIB, we committed to drive improved returns and targeting an improvement in income return on risk weighted assets of 160 basis points to around six 5% by 2020 for Simon team managed to hit this target in 2022.

Using our <unk> by $20 billion or 12% was a huge contributory factor to the success.

Similarly, the record performance in financial markets and the interest rate tailwind in cash management also helped to drive up returns CCI be art of UA is likely to increase from current levels. However, we remain confident of sustaining this improved level of return our second action was to improve profitability in CPD. The team has made steady progress with our cost to income ratio.

Show down five percentage points since the end of last year to 69% strong double digit income growth was supported by low single digit expense growth delivering 7% positive jaws of <unk> $500 million three year gross expense savings target Judy and team have delivered $233 million in 2022 alone.

This included 85 net branch reductions significant process reengineering work, a 4% reduction in head count and optimizing through Digitization.

The straight through processing rate has increased eight percentage points year on year to 76% and the business is on track to achieve 90% by 2020 for CPD has also added almost 600000, new clients through our partnerships in 2022.

This is a key means of driving growth in number of mass retail clients and moves us closer to returns above the cost of capital for that segment.

As we go into 2023, CPD will see tailwind from both interest rates and we expect an improving wealth management outlook, which will help reduce the cost income ratio further.

Third action was to seize the China opportunity.

China presents the group with one of the biggest strategic opportunities over the coming years.

Whilst there will be challenges along the way China will continue to become more important to the global economy, while we did not call out the exciting opportunity in India last year, it's worth noting the outstanding progress we've made across our business lines with profits up one third in the last two years to $400 million nicely complementing our China growth.

Now back to China, we set ourselves the target of doubling China onshore and offshore profit before tax by 2024 and that is still our intent.

2022 reflects what we expect to see in China growth, but with occasional challenges. Our onshore franchise has made strong progress with record income in 2022, but we've also recognized close to $900 million of impairments on China related risk provisions for both high end commercial real estate.

We're clearly unhappy with the losses that we've taken on CRE.

And have taken the lessons on board however, stepping back China's CRE has not been a driver of our growth and will not be one of the future the areas in which we are investing including financial markets wealth management partnerships, such as that with and have been and will continue to be drivers of value and value growth from our China business.

We see this clearly in the performance of our China Network income. This is growing at an even faster rate than the onshore income up 25% in 2022 and is now contributing almost $1 billion to the group. These strategic investments together with the long term prospects from the structural shifts relating to China opening its financial and capital markets are as attractive now as ever.

And we remain comfortable that we will achieve our 2024 goal of doubling our profits in China.

Our fourth action.

To drive operational leverage in and he has already talked about the $400 million of gross savings made so far on our way to $1 $3 billion of gross savings of course, we think that objective is very much in hand, finally, we committed to delivering substantial shareholder distributions of more than $5 billion by 2024, we're on track.

Up to and including the latest $1 billion share buyback and the full year 2022 dividend. We have already delivered $2 8 billion of distributions and are well set to meet our target.

<unk> significantly reduced the number of shares in issue down 9% since 2019, and we're increasing our dividend per share and payout ratios.

So just summarizing on the five strategic actions, we've done exceptionally well in some areas a little less on China, but are confident that we will meet the targets we set for ourselves.

I'd now like to look at another key area of focus which is sustainability.

The sustainability agenda continues to gather pace. This is an area, where we seek to play a leading role for positive change while also delivering shareholder value. We've made strong progress and sustainable finance with income around $500 million in 2022.

We have a growing suite of market, leading sustainable finance products and services and together with the scale of the opportunity in our markets. We will approach $1 billion of sustainable finance income by 2024, whilst we still have a long way to go we're proud of the impact that we're making with 90% of our sustainable finance assets located in our footprint markets.

In Asia Africa, and the Middle East, where the impact of a dollar invested is greatest we've advanced our net zero roadmap and delivered on our 2022 commitments as outlined at our last AGM.

We've always said that the measurement and management of our net zero transition and target setting will evolve over time as methodologies are enhanced and data becomes more refined and available.

Today, we announced the expansion of our financed emissions coverage to include 2030 targets for three transportation sectors.

We will also move to production intensity based targets for steel and power for which we set revenue intensity targets back in 2021.

In line with our earlier commitment we will also provide an absolute emission target for oil and gas at our 2023 AGM as a testament to the progress we're making our sustainability ratings were elevated and included achieving leader status by the carbon disclosure project.

Finally, we've enhanced our sustainability disclosures and for the first time also integrated the recommendations of the Tcf deep into our annual report.

So I'll now turn to ventures as he ventures crosses its fifth year anniversary in 2023, and this is the first full year, where we have reported our ventures results separately some of the key achievements, including building a diverse portfolio of over 30 ventures in over 20 equity investments across the group's footprint in 2022, we saw further progress from ventures across our new.

At work.

I'd like to briefly highlight the progress of three investments in three different markets in Indonesia, We have soft launched nexis, our banking as a service offering with our partner book of Lubbock.

It's been well received so far our app has been downloaded over 250000 times and we have 70000 customers.

We hope to on board a second partner, Indonesia later, this year and our plans for a second market entry beyond that turning to Hong Kong and our first virtual bank MX, which is also progressing well in 2022 MX focused on expanding as card and digital lending services, its customer base and product offerings. It.

It now has more than 400000 customers more than double that of a year ago and each holding on average more than three products with the bank. We expect that the opening of Hong Kong and China will help further drive customer acquisition and card usage generally we think that at current course and speed Marx will become profitable in 2024, maybe even in 2023 given the challenges.

Hong Kong since <unk> started this would be a solid achievement.

And in September last year in Singapore, leveraging the knowledge and experience gained from building marks we successfully launched our second digital Bank Trust with our partner retailer and Tuc fair price.

Within four months of launch trusted scaled rapidly to over 450000 customers equating to around 8% of the addressable market in Singapore, and making it one of the worlds fastest growing digital banks.

Customer engagement was strong with over 7 million transactions made more than 400000 digital coupons redeemed through the app.

We've invested materially over the past five years and we believe we have created substantial value from these investments income is still immaterial to the group, but as the more.

Tour ventures reach profitability over the coming two years, we expect to notice a positive impact to our profitability. This will be supplemented by partial or full sale of ventures, which we believe can maximize value with a different ownership structure.

So to sum up with Andy and I have just covered firstly, we've delivered a strong financial performance in 2022 and have delivered an improved R. O T.

We've today announced over $1 $4 billion of distributions to our shareholders via buybacks and dividends and we go into 2023 with optimism bolstered by a promising start to the year so far.

Secondly, the majority of our growth is coming from areas of strategic focus bolstering our confidence that we will meet our financial targets on or ahead of time.

We've made very encouraging progress on the five strategic actions, we set out last year, the impact of which can be clearly seen in the results. We've just delivered.

We set ourselves stretching targets for 2024, and clearly are on track to meet them, we're making good progress in the critical area of sustainability in our ventures portfolio is offering us exciting new opportunities and avenues for growth.

Finally, looking forward, we are optimistic for 2023 and the markets within our footprint, where we see superior prospects for growth. This opportunity together with the progress we're making on our strategy and the strong start we've made to 2023 gives us confidence to raise our earnings guidance.

We now expect to deliver an improving <unk> outcome approaching 10% in 2023 and at least 11% in 2024 with further growth thereafter.

With that I'll hand over to our operator, so Andy and I can take your questions.

Thank you we will now begin the question answer session. If you wish to ask a question via audio Please press star one on your telephone.

Then here an automated message advising Johan does raise alternatively, please use the question box available on your webcast page to submit your question.

We will now go to our first question.

And your first question.

So that's from the line of Joseph Dickerson from Jefferies. Please go ahead. Your line is open.

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

Just a couple of quick things please.

And your.

ROE guidance, there's been up to greater than 11% for.

2024, how should we think about capital distributions relative to.

Your capital targets.

On our math to get to greater than 11% you'd probably get to keep up the pace of buybacks. So I guess, what I'm getting at is how should we think about buybacks as the.

I know you've counselled, you've been able to eliminate about 9% of your your share count already.

How do we think about that going forward and then secondly, just on the NIM guidance what have you assumed in terms of.

Cost of total deposits. So currently at 58% back to the us.

You noted the pre pandemic level do you assume that this mix continues to.

'cause it continues to decline in.

In the mix over time or how should we think about that in terms of just.

Trying to assess the NIM outlook many thanks.

I'm going to let Andy take both those questions, but I'll, just say upfront clearly the overarching.

Pathway to a 11% plus <unk> in 2020 for US is to grow our topline and we're really very encouraged by the progress that we've been making of course, we've had the interest rate uplift, which is about half of what we've experienced in some of that.

Is reasonably likely going forward, which obviously, we can get into in some detail, but the other half is coming from those things that we've been focusing on for years now.

The four strategic areas, obviously, we set out five specific actions a year ago, all of which is outdated and the discussion. We just had our momentum is good the progress has been good the market positioning is good the market environment is good and that all gives us confidence that we can drive the top line, obviously, maintaining our expense discipline capital discipline et cetera.

Well, we'll get into all the details but.

I want to start with the Big picture themes, which is at the bank is in pretty good shape.

Yes, so just on the <unk> guidance and the impact on the distributions. This time last year, we said over a three year period in excess of $5 billion and as you have seen over the last 14 months I guess.

Our preparedness to both increase dividend, so a 50% increase proposed for last year.

US do buybacks, we will be about $2 8 billion of the way through the 5 billion.

I agree with you that with the uplift in the rotation would and should therefore be thinking conceptually that 5 billion number should be a bit higher and we did put in excess of 5 billion into offering LNG previously now how much in excess time will tell but youre right there should be some upside to a pure.

Five number if we hit that 11% number but again, we'll monitor that but I do think you've seen that we are quite prepared to return and we have so far the buybacks last year I think we're just below six pounds on average.

Compared with the current price that looks good and hopefully buyback could say it's priced in a few years' time, we'll look to make a good decision as well.

On the name there are obviously as they have a lot of moving parts here something else about the rates themselves and those vary by currency.

<unk> about how that how quickly that reflects into our customer base. Some of that happens immediately some as time lagged but to your question. We have assumed the capsule mix in that 50 565 range.

That is probably similar to what we have most recently experienced its back to roughly where we were pre COVID-19 I think we did peak at about 80% in the middle of Covid settle down a little bit since then.

So yes, we're broadly assuming that over the two year period in that NIM assumption that we'll be operating at or around the sort of levels repaying at recently.

Okay. Operator can we take the next question please.

Thank you.

Well now go to your next question.

And your next question comes from the line of Andrew Coombs from Citi. Please go ahead. Your line is open.

Maybe if I could.

One short term question and then two longer term questions.

Short term question, but just your comments at the start of 2023 I think.

You talked about the prospect for <unk> D and C E D de stocking Wow.

You said in the past few weeks 2023, you've got still a continuation of the trends in late 2020 to say one thing when you think you might see an uptick in Wow.

China, Vietnam, and subsequent market rally and when that might change the.

First question is short term and longer term given the commentary.

Around 11% in 2024.

Great laughter.

Be interested in what you think the drivers of that.

Thereafter.

Particularly as we start to reach peak in 2024.

Can you drive it above and beyond that especially given the boycott in flight.

It didn't come down in 2024.

And then final question to that.

Thank you to the slide.

Wow.

Slide 59 to 60 I think in your commentary you talked about some of those more mature benches, reaching profitability in the next two years. So anything more you can elaborate on that which benches in particular, how much profitability it could be and whether that's part of the dry that are grabbing miata.

Beyond the 11%.

<unk> 25 of them.

Great. Thanks, Andrew for all those questions.

Give us a bit more color on the on the start to the year, we had a solid start across the board.

There are signs of life in wealth management in particular in Hong Kong and China, No surprise, obviously, China, having gone through a pretty wrenching period at the end of last year, and then and then even more so in the very early days of this year.

But the signs of life are clearly there obviously is how much of that is post COVID-19 and how much of that is the fact that Hong Kong in Chinese equity markets have begun to recover and bond prices have stabilized to improved.

It's a combination of the two but.

Yes, the rest of our markets have continued to perform pretty well and so I'm I'm.

I would say I'm encouraged by the start to the year in wealth management, but it's very early days in terms of recovery back to what we would consider to be normal and keeping in mind that that was a business that's been growing for us.

For years now at the 910, 11% sort of range.

<unk>.

We absolutely see a return to those kinds of levels on average, but its going to take awhile to get there as market confidence is bedded down.

The.

And he's going to comment on all three of these questions I'm sure.

But the.

Where does the growth come after 2020 for what's going to come from where it's coming from now as I just mentioned I think that the outlook medium term outlook for wealth is very good.

We have had a couple of record years in financial markets, but we've fundamentally strengthened the value of that franchise.

We think we're very attractively positioned in particular in China, which will which is continuing to and will continue to open up. So I think the opportunities for continued FM growth are good although we would expect that to be a little bit bumpy.

But as I said again decent start to the year.

The.

Picking up market share in pretty much all of our other areas wealth has been has been good the mass market, where we languished for quite a while is definitely come back to life with a with good customer growth.

Range of partnerships that are really very encouraging which should lead to some good asset growth in that segment as well and and in transaction banking.

We've got a very very strong cash and trade proposition very strong customer proposition and look across the board. All of these are capable of delivering real growth.

In the years to come and we've demonstrated that we can do that with keeping expenses.

Growing well below our income growth and we think we can sustain that for quite a bit of time and we'd love to say that we're perfectly efficient today, we're not we're still making some pretty substantial investments in our core infrastructure and those investments will flow through into productivity gains over time.

We see plenty of opportunity to continue to grow from 11%.

And on the venture side.

And we made specific comments about marks that we thought <unk> would.

Would achieve profitability in 2024.

Keeping in mind that when you grow a de novo credit business, you're taking hills upfront so the credit provisions upfront.

And the income obviously comes overtime.

We are growing that business, where we've added close to $1 billion of assets and marks matching the liability base broadly.

That's very very encouraging for the early days of the Neo bank.

Our strongest growing fastest growing credit card in and Hong Kong and amongst the fastest in the world.

Trust is obviously a couple of years behind by growing even faster and similarly, we're getting a good mix of assets and liabilities.

Which should get it to likewise to profitability in the not too distant future.

Is that part of the over the next two to three years four years five years, an important part of our OTT accretion sorry, absolutely.

We said that that these ventures together with the others Nexus.

Which is now live in Indonesia, Although we're making a big marketing push in another couple of months when all the final approvals are in place.

We've already got to something like 80000 customers that have that are signed up that we have marketed it yet.

250000 downloads.

It will also be a driver of of income.

After we obviously build build the appropriate ecl's lets you know that the future of building that kind of a business. So.

Very encouraged that the ventures portfolio broadly defined can be an important contributor to our growth in the years to come youre not going to notice it in 2023 or 2024 as a practical matter, but beyond that I think you'll start to notice it.

Just maybe supplement, particularly on the on the middle of the question on the 11% rote.

I think it's interesting looking back at 2022.

The 15% growth we had there over all while it's not all about right. So about half of that was underlying business growth feel a half was right. So there is a natural growth in the business and that happened despite wealth management being challenged during the year as a sector.

And despite quite a number of the market is still pulling through COVID-19. So I do think the underlying momentum in the business in a post rate increase environment.

It's still going to be potentially powerful.

Also I'd observe that last year, we had record all time record income in a number of countries, China, Vietnam U S et cetera, and that was despite the fact that for the group. The NIM at one four is still lower than we had pre COVID-19. So it was one six pre COVID-19. So we've got another year before.

We've not to the NIM levels and despite that we've been setting records on income.

If you sort of factor those in.

345 year time period, and so natural momentum the GDP, obviously as many of the markets in which we operate is also forecast to be growing stronger than our average for the rest of the world.

Plus the ventures moving from loss to profit ventures, all of drank a royalty at this point in time, and then efficiencies as Bill mentioned I think if you put those together this can be a growth story irrespective of rates and that is certainly what we are setting our stall out to achieve.

With that I think probably next question.

Thank you.

We will now take the next question.

And your next question comes from the line of Alastair Ryan from Bank of America. Please go ahead. Your line is open.

Yes. Thank you good morning.

Yes.

<unk> revenues for this year 3.7, I'm sorry.

Thanks its revenues.

Number.

17 point secondly, the quarterly numbers do you expect that number to get up or down.

All of them today, it feels like the X.

Businesses weren't quite captured in there.

And second on the exit businesses. So the wedge that Gary I mean, do you end up with.

And actually it's in the met a trophy.

Hello loss do they just get rid off and you get the capital back.

And then finally on bug Holly.

So it seems to go about $900 million more invested in the market broadly.

Do we have to get another couple of days here and write downs before that before that thank.

Thank you.

Thanks Alastair.

Shall I pick that up.

17, seven sounds a better number than the three seven for full year.

Let's not to say we've guided to.

10% for this year and for next year.

Clearly a lot of support for that this year from rates alone.

So time will tell wealth management as bill has referred to.

So you're sort of picking up.

Would it be higher than last year levels, but possibly not as high as the year before that.

So I guess people will form a view just as to where they want to go with the consensus but eight 7% as a range in there.

On the exit.

And then sorry.

The starting point for the eight to 10 a M.

I'll now you've understood this correctly, but just to clarify if I exclude the businesses you actually said.

The starting point isn't last year's revenues were $17 seven correct.

And to show you how much we X out because of the Africa markets and the aviation business. So youre quite right that is the base point of which that comparison that should be done.

So on the exit businesses in terms of premiums book et cetera.

On the aviation business is just very early days, we've just marketed business, we've had quite a lot of interest there. So hopefully we'll see a premium.

We are midway through the process I think on the African business is probably we are more advanced on those.

You'd see a small premium on that if.

If we can then the endeavor is that we would reinvest.

For the free up into areas, where we can add to returns to the business overall and that will certainly be the focus in both the region and in the CCI business for the aviation business, if we call it to that and then obviously that the surplus capital that we can return at the point in time.

Although high so we have a carrying value. We obviously have to have half an hour to walk market values, albeit accounting is very clear that it has to carry essentially adult accumulated share of profits.

Half this year 22, and the year before had to be a bit cautious about the overall economy.

Commercial real estate sector is in part exposed to just as to what the sort of growth prospects look like the sector wide sort of prospects and we just said in both years, we need to trim that back I don't know that it is necessarily a given that we will need to take further impairments that is not a given that that is the case it's possible.

But these all provisions, which if the prospects for the sector and particularly for the boat high business do improve they all reversible. So if over a period of time as China moves through the current phase the situation the outlook for the bank by high Bank actually improves then there is the capability to reverse the provisions.

Taken what does not lose side I told this was 175 million also share of profit that we are booking from our stake in the very high business. Overall it has been a good profit stream for us over that period of time, it's just a slightly different.

More difficult place for that sector at this particular juncture and that's why we've taken the provision.

With that I think the next question. Please.

Thank you.

Well now that's the next question.

And your next question comes from the line of <unk> from Credit Suisse. Please go ahead. Your line is open.

Good morning, everybody.

You very much for making the time to take the questions.

Thank you very much for your disclosure on the cost and time deposit mix assumptions.

And where we are today versus 2019.

I was just one during what youll views would be on rates having moved quickly.

And above post Dfc highs.

That migration might continue and.

Beyond 2019 levels.

Oh the <unk>.

That you're seeing your customers liquidity need means that it's very likely whatever the rate environment.

The mix of time deposits will be will be capped at these current levels.

And just on a related question.

I was just wondering within the Cassa, whether you could help us a little bit with the share of interest bearing and noninterest bearing deposits.

How we should you think about mix assumptions between current accounts and savings deposits.

Within that.

And then my final question was just on financial markets revenues.

2022 was obviously a very strong performance.

Just wondering what your assumptions are for financials market's performance in 2023, Thank you very much.

Yeah, Let me, let me pick those up clearly we have been through a period of uniquely fast moving writings and when you get fast movement not just the absolute right itself over a period being higher but the false movement. It does create different dynamics in terms of how long people are.

So it's not a.

Savings account or in a current account versus at what point is the price differential which they all persuaded that they should move into time deposits.

We saw in the period prior to Covid, we were sort of in the consumer side, probably about 80% current account saving account.

And then as we went through this COVID-19 period, and then the rate started to change over the last year, we found that mix change over to see more to the time deposit. So we were down there at 56%, 60% sort of range now we do see and it's a difficult one to judge because it does depend upon not just auto.

Pricing, but competitive pricing et cetera.

Over 50, 565% range, we think on the average over the next two years is where we think things should settle down now we'll monitor that but at the moment that is.

It's why we see things.

Yeah.

On the SME side.

<unk> had two very very strong years from the financial markets business both of them sequentially records on each other.

Paul It's all market. So I think we are being well positioned I think the product has been good.

And the moment the momentum as Bill has said coming into this year is strong on that front.

So we will see just where the.

Yes sort of pans out, but overall, a very encouraging last two or three years in that part of our franchise and clearly having that strong at the periods. When wealth management was maybe a bit weaker has been a very good sort of offsetting evidence I think of the diversification of the portfolio. We've got so continued very much the focus upon financial markets and we will monitor.

The coming months, just whether we can get another record year for <unk>, but certainly a very strong performance.

<unk> had some benefit some structured notes benefit that we got last year, which one should take into account when thinking about forward forecast of about $200 million, which will not recur, but that aside the underlying business performing very strongly.

Yes.

A bit of color on the on the FM business than maybe I think you asked a question on noninterest bearing deposits, which we have a fair amount of detail in the back of our pack.

After the financials. So you can get up if you've got more questions of course, we can we can go through that.

But the FM business.

If we just go back a few years, we had a very strong FX business that was a.

Reasonably but not very well connected through to our transaction banking business and retail business.

In the meantime, we've established good connections between the operating units. So they were picking up at a higher and higher proportion of the flows that come out of our own.

Our own in house, and as businesses and the businesses with our clients and transaction banking and in retail. That's obviously helpful. We've built a very good rates business to complement the FX business. We've also reinvigorated essentially our credit business and that's partly on the back of just.

Strong investment, but also.

On the back of our own more active management of our credit portfolio, which of course is part of the story behind the <unk> optimization that we've set out in the earlier parts of this discussion so.

Add to that a really solid commodity business.

Which has performed particularly well over the past couple of years, given the volatility there and we say we don't have a good broad based business, that's growing nicely with increasing customer penetration.

And what clearly has been a benevolent market given the volatility, but when the benevolence goes away or is reduced and I must say there is no immediate signs of that given ongoing volatility in both interest rates currencies commodity prices and credit spreads, but when it does come down a bit.

We will be left with a much much better business that we think can continue to grow.

As we as we continue to sort of press the offensive on all fronts and.

It's always difficult to forecast financial markets from quarter to quarter.

At the same time, we can look at the underlying strength of that business and just say, it's orders of magnitude different than it was three or four years ago.

So operator can we take the next question please.

Thank you.

We will now go to the next question.

And your next question comes from the line of <unk> Kumar from Redburn. Please go ahead. Your line is open.

Hi, Bill Hi, Andy Thanks for taking the questions I just wanted to quickly follow up on the point around the.

The pro forma 22 base when.

When we think about the operating leverage just to confirm I'm, assuming that's also off.

The expense base of $10 3 billion pro forma rather than the 10 six four I assume that's the case, but I just wanted to make sure that was right.

My Ah.

Two questions one when I look at kind of loan growth you did underlying 3% year on year, but the AIA growth year on year was flat so when you're giving guidance of low single digit asset growth should we assume kind of 2% to 3% growth from the I think it was 565 billion that you took this year was.

The reason that actually loan growth in AIA growth will be a little bit different they seem to have been in fall to 22 year on year.

And then my next question or second question was when I think about the operating leverage.

If you do manage to hit the 10% for example of your range should we assume the costs will be 7%.

8% of the cost will be kind of.

5%.

Or is there kind of like as you hit the higher end of the range actually we should expect more of that drop through or well costs go up and sympathy.

If that is the case thank you.

Yes, I am sorry, let me take that so I think the answer.

Yes, yes, and yes to the latter.

Okay.

The pro forma is the base off which we.

We will be measured so the jaws et cetera expenses all of that.

10 30 number.

Loan growth versus AIE I look.

They move around broadly.

In symmetry with each other but just not always exactly but I think you should take all of those single digit is applying to the AI AI as well.

Basis forward forecasting.

Operating leverage we've put.

Simpson income, 3% jaws I think it is fair to say that the higher we go on the income we would hope that the duals would open out commence shortly I think if you look at last year, we clearly had well above the 10% income we got well above the 3% until the jewels.

We are a relatively fixed cost business, some variable pay but other than that fairly fixed costs. So the higher we can go on the income scale I think.

With that you should see reflected in the in the jewels.

Okay. Thank you.

We take the next question please.

Thank you we will now go to the next question.

And your next question.

Comes from the line of Bob Naval Deutsche Bank. Please go ahead. Your line is open.

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

Expanding.

Most chemical breakdown.

Realistically.

Daniel slight positive.

Positive contributions from its initial rates.

<unk>.

Hum.

Two questions as well.

Presumably.

<unk>.

The longer.

Guidance.

And the average team.

Excluding.

And then.

The impacts of.

The trading the funding costs.

You've got to be highly sought after.

<unk>.

Does that come down.

As rates fall as well and then similarly.

<unk>.

Thanks.

It's a capsule.

Right.

Change.

Yes.

We got very few questions.

So.

The 'twenty 'twenty four right, Scott and some of US who are assuming that there would be a reduction in rates overall and that is factored into the forward forecast, we've given on overall NIM and overall income.

There are again as I said, a record number of moving parts. So it doesn't price immediately.

So we get some of the roll forward benefit from the previous year still coming through towards production.

We get the short term hedges coming off some of those come off this February some of those come off.

In the February afterwards.

We have taken all of those.

Into account.

The funding cost adjustment, yes. It is safe to say that in 24 with a rate reduction of moment expect the size of that adjustment to be lower than 24, then in 'twenty three.

Sorry, I'm not quite sure I got the last part of your question on the OCI.

You see chicken.

You took a lot of negative impact to capital.

Why did they do you get them back as rates fall.

California is already priced to the CPUC.

Yes.

Sort of pull to par eventually so.

Studies, Yes, one would expect to see some reversal over time from those.

Probably also important to note, we do manage that position dynamically so.

It's not necessarily symmetrical in each direction because of the nature of the book changes.

Yeah, Okay, and then just last one on the rate is.

The 40% of your rate sensitivity in hours.

Other category given the right kind of changed quite a bit can you just remind us what is actually in the other category once the big accomplishment.

How much of it.

I mean I.

Personally would be more guided by the NIM guidance, we have given and the income guidance. We have given the sensitivity is really quite theoretical soon simultaneous changes in rates across countries same point in time et cetera.

Whereas the NIM guidance is trying to actually look market by market individual rights differentials.

The lag in the book et cetera, So overall.

I would say a much more to the NIM guidance than the sensitivity guidance I think it is.

What is going to be more of a driver of the business.

Okay. Thanks very much.

Next question please.

Thank you.

We will now go to the next question.

One moment please.

And your next question comes from the line of Tom Rayner from Numis. Please go ahead your line is <unk>.

Yes. Thank you good morning, good morning, Andy.

Thanks for the updates on your sort of five strategic actions I'm just wondering.

Pinpoint.

Exactly what sort of changed that's giving you the confidence now to increase the guidance for the 2024.

<unk>.

Your NIM guidance doesn't really seem to have changed a lot from what we were looking at previously if I adjust for the trading that changes.

I can't even say that it was slightly softer than in 2024.

Sure.

No change in your ECL.

Guidance and no real update on the costs for the $1 3 billion.

So the cost efficiency target in place.

My question is really is it non interest income is that way you are now feeling much more positive or maybe it's more that youll see on balance sheet management that you can do I'm, just trying to get it spend and stuff.

Why now to sort of push that.

<unk> attorneys pretty cool thank you.

Let me take a high level of pass at that and then I know Andy will have a view as well.

Overall.

As we finished the year with this very strong momentum.

I would say a bit more confident in everything that we've got so yes non financing income trends look good we're encouraged by the early opening up of China.

Hurt by the business trends that we see on the back of that.

Probably the first first and foremost we're encouraged by the ongoing strong growth in India and the strength of our franchise there.

We're encouraged by the resilience of the African markets in South Asia markets. Despite the obvious credit stresses for which we've provided in which no doubt.

We can talk about some more if you'd like.

Interest rates have continued to increase in AR.

So we can look at the forward curve and form a view.

So we haven't we've just included the.

The market as it exists, but I think we're very.

Aware of the fact that the U S economy has been relatively resilient as has the European economy relative to expectations.

Probably probably suggests a little bit lower sorry, a little bit higher for longer.

On the interest rate outlook, so putting that together and then looking at the number of levers that we have to pull over the $23 24 period. If it turns out that any of those slightly more optimistic assessments turns out not to be correct. We do have lots of levers that we can pull and we have pulled them in the past and will continue to.

I'd say it just.

On the margin increases our confidence that we can that we can deliver a higher level of returns than we had indicated just a few months ago.

Just to build on that.

The sum of many smallpox rates outlook is a little bit higher.

It does help.

What the <unk> business has done in terms of getting its income return on risk weighted asset itself in one year to achieve the three year target already.

Is significant both in terms of the fee income generation, but also what it's done to our up delays.

Let's not forget we've had a 15% increase in income year last year, and a 10% reduction in <unk> is a pretty positive dimension for the capabilities rigs through certain capital, which clearly is a big contributor to the royalty.

At the moment, albeit it was difficult to indicate going forwards the credit environment with the exception of the China commercial real estate and the sulfur and <unk> has actually been extremely well behaved. So at the moment things seem to be going well on that front.

I think a year ago I talked about above.

<unk>, 2% jaws with today, so it's 3% jaws for each of the next two years. So you put all of those together and.

What was a sort of an above 10, but we think now should be above that number.

We will see time will tell but that is certainly now where we're setting our sights.

Okay. Thank you for that.

And I'm, assuming that the reclassification that the disposal businesses doesn't have a big impact on auto team.

No. It has a small impact I think by memory 20 basis points or something of that order.

So it's.

She has a slight impact, but not a huge impact.

Okay. Thanks, a lot.

Thank you.

We will now go to our next question.

And your next question comes from the line of poorly long from KWE. Please go ahead. Your line is open.

Hey, good morning. Once you also do have a question.

On hydro.

It's quite sharp in electrical Monday, now over 2% below U S. Despite it being a peg currency. So just wondering what your thoughts on what's driving that.

Our euro assumption regarding hype or whether they will come back later on.

And so that's the question and the second question is can you give us a sense of.

The Hong Kong dollar exposure.

Just trying to gauge what the impact would be if the pack breaks and obviously I know the Hong Kong Monetary authority at Feltl and company.

The Paragon.

The defendant, but nevertheless, it would just be helpful. If you have thought it could give us a sense of your dollar exposure and then certainly on the Hong Kong property market. So housewife dropped quite sharply last year.

15%.

It means that you argue days have you seen them towards the class commentary coming through yet.

Saying that we will see more of this year and do you have to say.

And whether this is sort of talked about yet.

Great. Thanks, very much for the questions.

You are quite right <unk> is trading at a historic historically widespread to U S. LIBOR I think it's largely a technical and the technical it's probably a good news story, which is that money.

Has flooded into Hong Kong to Reengage with the Hong Kong in Chinese equity markets and we've seen the capital market flows.

Really do skew the.

The need for the HMA to operate within their within their bad at all.

Also clear that the Hong Kong dollar is trading it has traded at the lower end of its range. So that the HMA has intervened.

Reasonably this essentially is there as they automatically do.

So.

Will it return to parity over some period of time, yes, we would expect it will answer it in a way it sort of has to.

<unk>.

To your pay question.

The.

We've provided a ton of detail on the size of our Hong Kong balance sheet, So I won't get into that.

The pig is extremely well supported and we see no risk to the peg, we see no inclination to adjust the peg or to allow any any variation around the pace. So that's not something that we're that we're particularly focused on if.

Circumstances were to change in some fundamental way, we take a look but the fact that that money is flowing into Hong Kong at the moment.

Certainly doesn't suggest that that the peg is there any risk.

And the Hong Kong property market.

Has of course had an adjustment.

That market is coming back to life again mainland visitors are are returning and some numbers and.

In terms of our mortgage book.

Either on the residential or on the commercial side.

It's a it's very well protected with very low loan to values, even with the modest price correction. So there is no material <unk> impact and would expect that market to stabilize over the course of this year as Hong Kong re normalizes.

Comments on any of the above.

Just Greg I mean, particularly on the last point I'll loan to values are very good in Hong Kong and say, we can absorb quite significant price correction should they occur without having major consequence, but.

Overall, we are I think well positioned in Hong Kong.

With that next question Im sorry.

Thank you.

Yeah.

Thank you.

We will now go to the next question.

And your next question comes from the line of <unk> from Barclays. Please go ahead. Your line is open.

Hi, Bill Hi, Andy Thanks for taking.

The questions.

There's one thing I'm kind of struggling a little bit I think as alluded to earlier on in the questioning.

I'm just trying to reconcile.

Guidance around income and costs with some of your 2024 target. So I'm not sure that I can exactly reconcile them I think there is some.

I think I think ultimately you need to outperform your own cost.

The 3% in each of 'twenty three 'twenty four to get the cost income ratio.

60%.

Deliver the greater than 11% rate.

Okay I guess the first part of it the question became for some kind of response as to whether I'm wide of the Mark there.

The second and then related question is around the income growth dynamic.

You're guiding for kind of 8% to 10% income growth and 23, but your net interest income guidance piecing together from NIM and.

And the consensus average interest, earning assets suggests net interest income is going to grow.

Some 20% year on year I think in 'twenty three.

So for that to manifest in a 10%.

The title income growth and 23.

There's a couple of things that potentially going on there one is that it's a very very conservative or there's something about fee income.

I understand.

So do you expect noninterest income to be a big.

Yes, some kind of headwind other night that'd be interesting and then I guess relatedly if I'm correct. In this kind of line of questioning but just fee income growth was to substantially outperform the eight to 10 this year.

Well what happens to cost then is it.

We count that was 6% and we've just been banking the benefit and you deliver the outperformance and you also how can you help us think about that please.

Again I guess.

High level rationale all good questions.

We've got a number of things that how I'll state the obvious the drive our R. A T.

Income costs and capital.

Together with impairments and.

We're pretty comfortable in the short term income outlook.

We're pretty comfortable that the investments that we've made the momentum that we've got that takes us through those sorts of gross levels into 2000, and 2024 with ongoing growth beyond that.

We demonstrated very good cost management and we continue to expect the same.

Impairments, obviously ticked up a bit in 2022 for the reasons that we've discussed and.

There are problems out there, but we're very comfortable with the quality of our asset portfolio.

And of course, you have guidance that that will continue to.

Creep over some period of time towards what is a more normal medium term range 30 to 35 basis points.

We're not there now and we're very comfortable with the quality of the book So there's opportunities for for outperformance there and I think we've been quite disciplined on capital both in terms of optimizing the existing uses of capital and seeing that the CCI be reductions in just the first year of our three year program.

But also in our willingness to return that to shareholders. So adding those things together if you take the cautious end of all of our guidance across all three of those you've got the one answer if you take the less cautious end of the guidance across all of those areas. When you get to a different number I can only tell you that we're very very focused on every one of those lines and we'll pull the levers that we.

Need to pull to the extent that we possibly can to hit that 11% plus target and if we werent confident that we could get there of course, we wouldn't be standing up here talking to you about it.

Got it.

Yes.

All good questions.

What we've tried to do is to give directional guidance here and as Bill says it depends a little bit on where you go in the ranges.

So to your Middle point, if you take the year on year NIM, you get to sort of almost 10% on its own but do remember.

But we've got the trading book funding adjustment.

Which as you need to normalize because it doesn't affect the actual income for the business overall.

Those are actually slightly moderate that number.

Not to play out on this down and to also remember that we've got the $200 million.

The valuation guidance, which will not recur in the 2023 period.

But that having been said if we can get to the top end of the age 10% range. In 2023, you can get above it we are not going to stop at the point, where we are getting there if that is how it pans out and as you say and as I said earlier, the jewels should be higher the higher we get on the income. So there is all sorts of leverage covenants through with that.

Again, it could come back to your cost income ratio I know if you've type mid points in ranges, you're probably just slightly shy of 11.

In 2024, but there are other moving parts where credit.

Impairment go well the effects of tax rate go how many buybacks, where we do in the periods of time. So I think if you put it together and certainly in the current year, we will absolutely be leaning into this and the momentum is very good going into the year, we will see where the year ends up but we do think that that sort of circa 11% number the 60% cost to income ratio if you publish.

Altogether, they should develop to the possible.

Thank you so much.

Can I just ask on the.

Why.

Alright.

Why are we able to talk a bit more consistently around the distribution probably fall off because.

Quite clearly going to substantially outperform year greater than $5 billion.

Distribution guidance 24, given that you've already done more than off in one year.

So what exactly is holding us back from just being a bit more.

Volition.

Direct around the distribution profile.

There is nothing that is holding us back.

We have said in excess of $5 billion, we remain of the view that we should be in excess this is firmed up our confidence that shouldn't be the case.

The only thing we haven't done is quantified sort of how much in excess of old, but I do think the track record that you can see over credit occurs I saw on that particularly last 15 months as if there is excess we do get it back and also I really do think one of the highlights for last year is at the right management, we have been very very focused upon that.

Chart, showing how we've got the income return on risk weighted assets over a period of time not really substantially how the density of RW ice has improved over periods of time, we are going to push on both of those so do not think we sold from returns of 5 billion. We if we can we will be doing more than 5 billion.

We take the next question how much thanks, so much.

Next question. Thank you.

I will now hand back for questions.

Thank you we've got a few questions from the web the first is madness Costello autonomous.

Arguably a density continues to fall precipitously, how much lower can you drive this.

Well I would say, it's fallen commendably, whether it's fallen precipitously as well as Commendably is an interesting one.

But we have a <unk>.

Slide in there that shows that we have come from I think 47% density to 30% now we're the first guys I don't know exactly because what we're really trying to do here is to get the returns on a risk weighted asset itself. It is not as you well know.

Purely about the dentist if there is the return there then we will take on a higher density of exposure, but it is driven by our returns and at the end of it.

Focus here is upon the rotating the royalty up if that results in that tends to be coming down a little bit further than fine, but it will be some rotate going off and if the rate goes up and this curve actually slows down that does not work, we just need to get make sure we get the royalty going up.

Thinking minutes for the question, it's probably worth taking a step back and kind of Reappraising what has happened to our business model over the same period that RWD density has decreased.

We've improved the overall credit quality of our portfolio, we have reduced concentrations.

Much more actively managing that portfolio. So we've got a very active credit portfolio management function that is continually optimizing for four return versus risk.

We've engaged in a set of activities that are structurally lower part of your identity, including a number of areas in our financial markets area. We've manage the market risk components of our financial markets area extremely dynamically. So we've had very substantial increases in income in our <unk> business that far out strip.

The <unk> growth in that business. So these are not incidental things and its not finding some some some quirky ways to refine models. Although we are continually refining models as well obviously the approval of our regulators.

But it's rather it's a systematic business market shift.

This is model shift that is allowing us to generate a higher return on the capital that we deploy is there more of that to go yeah, but as always.

You pick the low hanging fruit first and getting to that higher hanging fruit and it takes a bit more time, but we will continue to focus on.

Reducing the density, but as Andy said, our overarching focus is on just on <unk>.

Creasing, our risk adjusted returns.

Thank you Phil next question from Robin down HSBC, two part question I'll read it.

Could you, perhaps talk a little more about the outlook for the cost of risk I can see the normalized to 30 to 35 basis points guidance, but in 2022. The cost of risk was just 21 basis points and that was mainly around China's CRE, where I assume you expect charges to reduce in 2023 is policy initiatives kick in does that leave the third.

<unk> to 35 basis point guidance looking reasonably conservative or could you highlight where you see potential uplift coming from second part of the question the outlook for hard to believe that you're guiding for both assets and <unk> to grow at low single digit percentage rates is the suggestion that the current phase of our <unk> optimization is now largely.

<unk> complete.

Okay.

Cost question.

It's one that we struggle with it because we obviously we have had.

Call It one off.

No one offs or a feature in our business I tend to real estate kind of by definition took us a little bit by surprise were not very happy with our performance in that sector and we could argue that it's not so that relatively but that doesn't matter to us.

And we can do better on that.

But if we're operating in the markets, where we operate we're going to be hit by these things from time to time as we were in China real estate. This year and as we were with a number of sovereign default and we all understand the backdrop to those sovereign downgrades and defaults in a very few number of cases. So the one offs will come from time to time.

We look at the rest of our book, we look at the quality of the portfolio. We look at the fundamentally improved underwriting standards.

Fundamentally improved concentration proportionate.

Investment grade et cetera, and say, yes, we feel very comfortable with with our credit portfolio and with the nature of that book and I can tell you if I'm standing up here at some point talking about 30 or 35 basis points of cost of risk would be quite disappointed at that time that said.

Each of our business and we have to expect that through an economic cycle and we're going to have periods of peak in periods of trough and we must truly have been through a period of trough.

And is it cautious to say, we're going to go back to what feels like a normal long term range I don't know, we think it's appropriate to indicated in that direction, but that's certainly not something that we're targeting.

Yes, no. It was actually the second question on <unk>.

Yes.

<unk> is not to be suggesting that we will ever give up on the pursuit of optimization.

Difficult to forward forecast exactly to the composition of it we do have some things occasionally the implementation of Basel III. We have said previously we will be a slight uptick possibly on auto view is if we can get relatively rate growth to be below the asset growth. We will continue to focus upon that but it comes back to the previous point. It is about the return on the asset.

King or upon non asset based business and that is what will continue to focus upon.

And then maybe make one other comment back to the business model shifts I think we've historically if you went back quite a way.

We look at assets and that's a growth largely through the lens of income growth. We didn't have quite the risk adjusted return discipline that we might have wanted to have it's part of what got the bank into trouble a decade ago.

When you.

I think we shifted that decidedly we're very focused on risk adjusted returns.

But as we more actively manage that that asset portfolio.

Now and this is going back a couple of years out, but I think we're getting into full swing, we given our bankers. So they need to go out and find attractive risk adjusted assets right, which is different than taking on risk adjusted assets because our clients have asked us to take to finance something or other and we've looked at whether we can get a decent return in aggregate across that relationship. So yes, there is an optimization.

Graham that's ongoing not every one of our clients is crossing our threshold for returns right now.

So there will be ongoing optimization, but again, we picked the lower hanging fruit, but theres a ton of opportunity for us to grow our <unk> by selectively going after those those opportunities that exist, where we can get good risk adjusted return to where we think we've got a differentiated approach to assessing the underlying asset and that's what sort of a change in mindset in the bank that is taking hold and we.

I'll make a difference so.

Optimization, yes, but also opportunities for growth.

Okay next question from <unk> in Goldman Sachs question on India, how is risk appetite for growth that we see that U K loan book is falling 25% year on year, how much of offshore India is booked.

Any risk that we are concerned about around India.

Yes, we did take a step back on.

Obviously with going back to the $2014 $15 16 period, we have some big concentrations in India and other markets and.

And we've pretty thoroughly revised the way that we're approaching credit risk in those.

Across our group.

We are far less concentration.

In those days.

Far lower single borrower limits than we had in those days.

A dramatic downsizing of any promoter type financing or or financing at holdco level.

The vast majority of our exposure is it operating companies.

Good underlying cash flow.

Production so.

Quality of our book overall is.

Is dramatically better than it was and better risk manage so of course, we also are looking at single names.

To a much more much.

Much more skeptical in critical high and I think Thats a citizen good stead I think our aggregate credit provisions over the past five years in India, and something like $70 million in aggregate.

Corporate side of the business.

This is a very good a very good and that's against the backdrop of substantial increases in income and return on risk weighted assets. So.

We feel good about our portfolio broadly we feel very good about our portfolio in India.

It's the economic backdrop is strong.

And our competitive positioning is very good so.

Overall, good and.

The drop in any way that you want to comment on how we book Indian assets in London versus elsewhere, but the.

We've been optimizing our corporate portfolio pretty aggressively in London is our biggest corporate booking center for loans, obviously, not limited to India from from across the group.

So I wouldn't read anything into into from an Indian perspective into our London loan bookings.

Now each individual booking decision has tightened separately it'll depend upon client.

Request.

Balance sheet capability at a time, but.

Absolutely reiterate what Bill has just said the credit and payment history in India recently has been just completely different to what we've experienced before.

The Indian market, we love the growth GDP growth is very strong our.

Corporate business, which is <unk>.

<unk>, a little bit more focus from multinationals and locals the most while ago, but is servicing both sectors is very diverse it's very spread.

And we've been very very happy with the performance there and you can see its profitability increasing quite significantly over recent periods of time.

Okay. Thank you last question for the day from Jason Napier UBS two part question.

Confirmation of expectation of marks breakeven in 2020 is helpful.

Should we think about the nurse.

Excuse me how should we think about the net loss to ventures overall, which we should see in 2023 and 2020 for the full Q annualized loss is material at around about half a billion per annum second part of the question capital discipline and return has been very strong to date buybacks, especially given valuation of Papa.

Is it right to keep balance sheet growth at a low single digit level, given the double digit roti expectation shouldnt be thinking about using more balance sheet growth to drive positive operating leverage.

Okay.

Yeah, let me pick those up.

Obviously, we have invested heavily in both Moocs and trust and also Vascepa business sorry for the last two to three years.

<unk> more established trust more young and debentures coming on and there has been some P&L drag that has come through as a consequence as you would expect with any early stage business.

We do.

Can get to the breakeven point, whether it's 'twenty four or 'twenty, three we will see but that certainly will in the overall group P&L terms that will be helpful. Trust OTC was somewhat later, so that will forward. It over a period of time, but I think what we're trying to do is to get a balance here between the future growth engines for the business exploring more water.

Digital bank can do and making sure we're getting the returns for the business overall up to the levels that we want so we.

We will see a progressive reduction in the Bottomline drag on those businesses over a period of time.

On the balance sheet growth look again, it really just come back to this what is going to optimize the returns overall for the bank. If there is the ability to grow the roti through that we will not hesitate to invest more in the assets, but we do need to get both the P&L side of the royalty and the capital side is the royalty to work in <unk>.

<unk> to be able to get to the 11% number and we are constantly fine tuning that we're not in a sort of like a business. If there is good business with good returns we will have to go after it. If there is not then you will see the returns coming through so we are walking that tight rope I think pretty well at the moment and we will continue to be as funny, because supporting that as we can be going forward.

But let me just give you a little bit of color as well.

For the question, Jason, Let's remember MX Trust and Nexus. So those are the three biggest invested invested in items in our ventures portfolio.

And we had we.

We have some really good ideas and all three of those and then cover did intervene.

So building a neo bank is always going to involve a couple of years of losses upfront. If you compound that with zero interest rates and.

Lockdowns, which which obviously suppressed travel completely given that FX is one source of income for these new IMAX, especially in cities States who are.

Young people travel a lot.

That was a pretty bad economic backdrop to start with thankfully that's behind US. So we spent a couple of years getting those ventures fully up and running and embedded there extremely well regarded in the local market. So and these are these are now top tier brands in their own rights totally independent of center Charter Bank.

With that with Super recognition from from customers' growing customer bases market doubled last year Trust, obviously infinite growth.

But reaching the size of the box and just a half year.

And we've layered in credit products, so credit cards, and personal loans and loans against card, which are growing very nicely and obviously, that's profitable business taking deposits of zero interest rates I'm afraid, it's not a profitable business. The credit business is profitable, we're beginning to get the travel related.

<unk>, that's kicking in to the FX line, we're layering in wealth management products in each of those cases in.

In the case of Nexus much more credit driven proposition just getting started now.

No matter, but we've been spending on it for the past two years so.

Not surprising to us that at this juncture, we're hitting sort of peak operating profit impact, but very strong value uplift at least as we market to market in our own minds, obviously, not mark to market through our books. So very encouraged about the prospects for <unk> from here.

And then we've got a whole slew of smaller ventures.

And the digital asset business and wealth management, some sustainability related ventures, and some consumer and lifestyle related ventures.

SME platforms, which we've had strategic partners, who have come in and bought stakes at between 10 and 20% in those centers all of which we've announced at <unk>.

Substantial multiple to our invested capital and sort of between two and five plus times, our invested capital doesn't mean everything in the portfolio as a five X winter, it's not but we feel it plenty of things along the way as well, but they've been very small and so overall.

The profit picture is absolutely correct and it has been a meaningful drag, but we think we've created real value there and we're going to push now as we get into the to the attractive part of the development cycle and the macroeconomic cycle to generate real profits and then just underscore what Andy's point on the R. W. A growth.

Shouldnt, we be growing <unk> faster in this environment. The answer is we're taking every bit of <unk>, that's accretive to our return targets that we possibly can and part of the reason that we upgrade our guidance to 11% is that that's what we're using internally, so doing 10% business or investing in something in one of our retail partnerships for example, with a target of achieving it.

10, 5% <unk> is value destructive from our perspective today.

And so it does indicate a real shift in the way that we're operating to generating higher and higher returns and demanding those returns from our colleagues and ourselves on every incremental investments that we make and that gives us confidence that we cannot just hit 11% and then kick back and relax, but just keep ongoing because we do think that there's a ton more potential in this franchise.

But with that I think we've wrapped up the questions. Thank you very much excellent questions as always thanks for your time and attention and look forward to following up.

And whatever four or we can have a good rest of week.