Q3 2023 Standard Chartered PLC Earnings Call

October 26, 2023

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Speaker 1: transcript

Speaker 1: Please wait, the conference will begin shortly.

[music].

Operator: Good day, and welcome to the Standard Chartered Q3 2023 Results Presentation Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question by phone, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero, and alternatively, if you wish to ask a question via the webcast, please use the question box available on your webcast page to submit your questions. Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Bill Winters, Chief Executive, to begin the conference. Bill, over to you.

Good day and welcome to the standard chartered third quarter 2023 results presentation call.

Speaker 2: transcript

Speaker 2: Good day and welcome to the standard charted third quarter 2023 results presentation call all lines have been placed on mute to prevent.

All lines have been placed on mute to prevent any background noise.

Speaker 2: transcript

Speaker 2: After the speakers remarks, there will be a question and answer session.

After the Speakers' remarks, there will be a question and answer session.

Speaker 2: transcript

Speaker 2: If you would like to ask a question by phone, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question press...

If you would like to ask a question by fund simply press Star followed by the number one on your telephone keypad.

If you would like to withdraw your question press the star one again.

Speaker 2: transcript

Speaker 2: For operator assistance throughout the call, please press star zero. And alternatively, if you wish to ask a question via the webcast, please use the question box available on your webcast page to submit your question.

For operator assistance throughout the call. Please press star zero.

And Alternatively, if you wish to ask a question via the webcast. Please use the question box available on your webcast page to submit your questions.

Speaker 2: transcript

Speaker 2: And finally I would like to advise all participants that this call is being recorded.

Finally, I would like to advise all participants this call is being recorded.

Speaker 2: transcript

Speaker 2: I'd now like to welcome Bill Winters, Chief Executive to begin the conference. Bill, over to you.

Now I'd like to welcome Bill Winters, Chief Executive to begin the conference Bill over to you.

Bill Winters: Good morning and good afternoon, and welcome to our Q3 2023 results call. I'll make some opening comments, and Andy will dive in deeper before the usual Q&A. We have continued to make strong progress against the five strategic actions outlined last year, delivering a solid set of results. We remain highly liquid, well capitalized, and we are confident in the delivery of our 2023 financial targets, including an ROTE of 10%. We're pleased with the progress we are making in our strategy. Our cross-border network business remains strong. Our affluent business has returned to excellent growth, both in customer numbers and income. Our digital banking strategy is working well and our sustainable finance strategy is on track. The macro picture is more mixed. Markets remain volatile as the global economy remains resilient, leading to shifting inflation and interest rate expectations.

Good morning, and good afternoon, and welcome to our third quarter 2022 results call.

Speaker 2: transcript

Speaker 2: Good morning and good afternoon and welcome to our third quarter of 2022 results call.

I'll make some opening comments and Andy will dive in deeper before the usual Q&A.

Speaker 3: transcript

Speaker 3: I'll make some opening comments and Andy will dive in deeper before the usual Q&A.

Speaker 3: transcript

Speaker 3: We have continued to make strong progress against the five strategic actions outlined last year, delivering a solid set of results.

We've continued to make strong progress against the five strategic actions outlined last year, delivering a solid set of results.

Speaker 3: transcript

Speaker 3: We remain highly liquid, well capitalized, and we are confident in the delivery of our 2023 financial targets, including an ROTE of 10%.

We remain highly liquid well capitalized and we are confident in the delivery of our 2023 financial targets, including <unk> of 10%.

We're pleased with the progress we are making in our strategy our cross border network business remains strong.

Speaker 3: transcript

Speaker 3: We're pleased with the progress we are making in our strategy. Our cross-border network business remains strong.

Speaker 3: transcript

Speaker 3: Our affluent business has returned to excellent growth, both in customer numbers and income.

Our affluent business has returned to excellent growth.

Customer numbers and income.

Speaker 3: transcript

Speaker 3: Our digital banking strategy is working well, and our sustainable finance strategy is on track.

Digital banking strategy is working well and our sustainable finance strategy is on track.

The macro picture is more mixed.

Bill Winters: Markets remain volatile as the global economy remains resilient, leading to shifting inflation and interest rate expectations.

Speaker 3: transcript

Speaker 3: Markets remain volatile as the global economy remains resilient, leading to shifting inflation and interest rate expectations.

Markets remain volatile as the global economy remains resilient meeting to shifting inflation and interest rate expectations.

Bill Winters: This is particularly the case in the US, where we have seen significant rises in long-term rates and an increasing conviction that we will be higher for longer. While we believe we are near the top of the current rate cycle, the higher for longer expectation has led to extended dollar strength, pressuring borrowers reliant on dollar funding. Now we're encouraged by the recent economic data coming from China. Manufacturing and consumption are returning to normal levels, and confidence is slowly rebuilding. We continue to expect GDP growth of around 5%, reassuring given some of the narrative. That said, the commercial real estate sector has only barely stabilized, and companies are succumbing to the extended period of weak property sales.

This is particularly the case in the U S, where we have seen significant rises in long term rates and an increasing conviction that we will be higher for longer.

Speaker 3: transcript

Speaker 3: This is particularly the case in the US where we have seen significant rises in long-term rates and an increasing conviction that we will be higher for longer.

Whilst we believe we are near the top of the current rate cycle the higher for longer expectation has led to extended dollar strength.

Speaker 3: transcript

Pressuring borrowers reliant on dollar funding.

We are.

Speaker 3: transcript

Speaker 3: Now we're encouraged by the recent economic data coming from China. Manufacturing and consumption are returning to normal levels, and confidence is slowly rebuilding.

The recent economic data coming from China manufacturing and consumption are returning to normal levels and confidence is slowly rebuilding.

Speaker 3: transcript

Speaker 3: we continue to expect GDP growth of around 5%, reassuring given some of the narrative.

We continue to expect GDP growth of around 5% reassuring given some of the narrative.

Speaker 3: transcript

Speaker 3: That said, the commercial real estate sector has only barely stabilized, and companies are succumbing to the extended period of weak property sales. This continues to...

That said the commercial real estate sector has only barely stabilized and companies are succumbing to the extended period of weak property sales. This.

Bill Winters: This continues to impact our results. The Chinese authorities seem keen to deflate the property bubble without materially impairing the local financial system, something that they have managed well so far, but this policy is not without risk. That, together with lower NIMs across the banking sector in China, have led to weaker results for local banks and the resultant impairment of the carrying value of our stake in China Bohai Bank. On the flip side, our business in China is thriving. The offshore business, largely cross-border transactions driven by China's actions to further open its economy and capital markets, is growing very strongly, up nearly 50% this year. The onshore business is resilient, up 2% so far in what's been a challenging year for China's domestic economy.

This continues to impact our results.

Speaker 3: transcript

Speaker 3: the Chinese authorities seem keen to deflate the property bubble without materially impairing the local financials.

The Chinese authorities seem keen to deplete the property bubble without materially impairing the local financial system.

Speaker 3: transcript

Speaker 3: something that they have managed well so far, but this policy is not without.

It's something that they have managed well so far but this policy is not without risk.

Speaker 3: transcript

Speaker 3: that, together with lower names across the banking sector in China, have led to weaker results for local banks and the resultant impairment of the carrying value of our stake in Boha.

That together with lower nims across the banking sector in China have led to weaker results for local banks and the resulting impairment of the carrying value of our stake in buyback.

Speaker 3: transcript

Speaker 3: On the flip side, our business in China is thriving. The offshore business, largely cross-border transactions driven by China's actions to further open its economy and capital markets, is growing very strongly.

On the flip side, our business in China is thriving the offshore business largely cross border transactions driven by China's actions to further open its economy and capital markets.

Knowing very strongly up nearly 50% this year.

Speaker 3: transcript

Speaker 3: The entrepreneur business is resilient, up 2% so far, and what's been a challenging year for China's domestic economy.

The onshore business is resilient up 2% so far in what's been a challenging year for China's domestic economy.

Bill Winters: Despite some material setbacks, we remain very confident that we will grow profits for years to come in and around our China franchise. Our strategy is to capture the trade, investment, and wealth flows, as well as financial markets activity in and out of China that derive from this ongoing opening of China's economy. I recently returned from China, and it's clear to me that in our focus areas, activity levels are booming, such as in cross-border flows and the new economy industries, especially those concentrated in the Greater Bay Area, such as electric vehicles, clean tech, and high tech. Looking more broadly, we expect Asia GDP to be above 5% this year or next, making it the highest growth region globally.

Speaker 3: transcript

Speaker 3: So despite some material setbacks, we remain very confident that we will grow profits for years to come in and around our China franchise.

So despite some material setbacks, we remain very confident that we will grow profits for years to come in and around our China franchise.

Speaker 3: transcript

Speaker 3: Our strategy is to capture the trade, invest in the well flows, as well as financial markets activity in and out of China, that derive from this ongoing opening of China's economy. I recently returned from China, and it's clear to me that in our focus areas, activity levels are booming, such as in cross-fourter flows and the new economy industries, especially those concentrated in the greater Bay Area, such as electric vehicles, clean tech and high tech. Looking more broadly, we expect HGDP to be above 5% this year and next making it the highest growth region global.

Our strategy is to capture the trade investment and wealth flows as well as financial markets activity in and out of China. The derived from this ongoing opening of China's economy.

I recently returned from China, and it's clear to me that in our focus areas activity levels are booming such as in cross border flows in the new economy industries, especially those concentrated in the greater Bay area, such as electric vehicles clean Tech and high Tech looking more broadly, we expect Asia GDP to be above 5% this year and next making it the highest growth region globally.

Bill Winters: In our recent global trade report, increasing south-south or intra emerging markets trade and growing services trade are expected to help offset the drag to trade from higher geopolitical tensions. Our unique regional footprint with presence in China, India, the Middle East, Africa, and across ASEAN, allows us to capture the opportunities from shifting supply chains and growing trade and investment flows within and between our regions. Beyond the stress in China's CRE and some sovereigns, corporate and consumer balance sheets, particularly in our markets, are in good shape, often better than those of some governments, and have so far been resilient to higher rates. Now, on a more somber note, we've watched the events unfold in Israel and Gaza for the past weeks with shock and sorrow.

Speaker 3: transcript

Speaker 3: In our recent global trade report, increasing South-South or Intra-Emergy Market Strait and growing services trade are expected to help offset the drag to trade from higher geophysical panches.

Our recent global trade reports, increasing south south or intra emerging markets trade and growing services trades are expected to help offset the drag to trade from higher geopolitical tensions.

Our unique regional footprint with presence in China, India, The Middle East Africa, and across ASEAN allows us to capture the opportunities from shifting supply chains, and growing trade and investment flows within and between our regions.

Speaker 3: transcript

Speaker 3: Our unique regional footprint with President China, India, the Middle East, Africa, and across ASEAN allows us to capture the opportunities from shifting supply chains and growing trade and investment flows within and between our region.

Speaker 3: transcript

Speaker 3: The on the stress in China, CRE and some sovereigns, corporate and consumer balance sheets, particularly in our markets, aren't good shapes.

Given the stress in China's CRE and some sovereigns.

And consumer balance sheets, particularly in our markets are in good shape.

Speaker 3: transcript

Speaker 3: often better than those of some governments, and have so far been resilient to higher rates.

Often better than doses, some governments and if so far been resilient to higher rates.

Speaker 3: transcript

Speaker 3: On a more somber note, we've watched the events unfold in Israel and Gaza for the past weeks with shock and sorrow. We're hoping for a speedy resolution to the situation and that the tragic loss of life is brought to an end quickly.

On a more somber note we've watched the events unfold in Israel in Gaza.

Over the past weeks with shock and sorrow, we're hoping for a speedy resolution to the situation and that the tragic loss of life is brought to an end quickly.

Bill Winters: We're hoping for a speedy resolution to the situation and that the tragic loss of life is brought to an end quickly. We have very limited presence in the currently impacted part of the Middle East. The principal transmission mechanism to our business would be a broader escalation of the conflict across the region, which results in higher oil prices, which in turn would put further pressure on the global economy and particularly on oil importing sovereigns. We made encouraging progress on our five strategic actions, and you can increasingly see that come through in the numbers. Our franchise offers superior growth prospects, and our investments are creating the platforms to ensure we capture that growth. We're convinced that we're in the right markets with the right strategy and are firmly on track to achieve our full year 2023 financial targets.

Speaker 3: transcript

Speaker 3: We have very limited presence in the currently impacted part of the Middle East. The principle transmission mechanism to our business would be a broader escalation of the conflict across the region, which results in higher oil prices, which in turn would put further pressure on the global economy and particularly on oil importing sovereigns.

We have very limited presence in the currently impacted part of the Middle East the principal transmission mechanism to our business would be a broader escalation of the conflict across the region, which results in higher oil prices, which in turn would put further pressure on the global economy, and particularly on oil importing sovereigns.

Speaker 3: transcript

Speaker 3: We made encouraging progress on our five strategic actions, and you can increasingly see that come through in the numbers. Our franchise offers superior growth prospects, and our investments are creating the platforms to ensure we capture that.

We made encouraging progress on our five strategic actions and you can increasingly see that come through in the numbers are franchise offer superior growth prospects and our investments are creating the platforms to ensure we capture that growth.

Bill Winters: We're convinced that we're in the right markets with the right strategy and are firmly on track to achieve our full year 2023 financial targets.

We're convinced that we're in the right markets with the right strategy and are firmly on track to achieve our full year 2023 financial targets.

Speaker 3: transcript

Speaker 3: We convinced that we're in the right markets with the right strategy and are firmly on track to achieve our full year 2023 financial.

Bill Winters: With that, I'll hand over to Andy to take you through the numbers and then rejoin for the usual Q&A.

Speaker 3: transcript

Speaker 3: With that, I'll hand over to Andy to take you through the numbers and then rejoin for the usual Q&A.

With that I'll hand over to Andy to take you through the numbers and then rejoined for the usual Q&A.

Andy Halford: Thanks, Bill. Good morning and good afternoon, everyone. Remembering that unless I say otherwise, the comparisons I will give will be on a year-on-year and constant currency basis. Let's get straight into the numbers. Q3 income of $4.4 billion was up 7% compared with a strong Q3 in 2022, mainly due to higher interest rates. Net interest income of $2.4 billion was up 20% on strong performances in both cash management and retail deposits. The normalized net interest margin was up 24 basis points to 167 basis points after adjusting for 4 basis points of one-offs. Other income of $2 billion was down 5% as the continuing recovery in wealth management was offset by a lower financial markets performance relative to a very strong prior year comparator.

Speaker 4: transcript

Speaker 4: Thanks, Bill. Good morning and good afternoon, everyone.

Thanks, Bill good morning, and good afternoon, everyone.

Speaker 4: transcript

Speaker 4: So, remembering that unless I say otherwise, the comparisons I will give will be on a year-on-year and constant currency basis, let's get straight into the numbers.

Remembering that unless I say, otherwise the comparisons I will give will be on a year on year and constant currency basis, let's get straight into the numbers.

Speaker 4: transcript

Speaker 4: Third quarter income of $4.4 billion was up 7% compared with a strong third quarter in 2022, mainly due to higher interest rates.

Third quarter income of $4 4 billion was up 7% compared with a strong third quarter in 2022, mainly due to higher interest rates.

Speaker 4: transcript

Speaker 4: That interesting income with $2.4 billion was up 20% on strong performances in both cash management and retail deposits. The normalized net interest margin was up 24 basis points to 167 basis points after adjusting for four basis points of one off. Other income of $2 billion was down 5%, that the continuing recovery and wealth management was offset by a lower financial markets performance relative to a very strong prior year comparison.

Net interest income was $2 $4 billion was up 20% on strong performances in both cash management and retail deposits. The normalized net interest margin was up 24 basis points to 167 basis points. After adjusting for four basis points of one offs, although income too.

<unk> was down 5% as the continuing recovery in wealth management was offset by lower financial market performance relative to a very strong prior year comparator.

Andy Halford: Expenses of $2.8 billion were up 8% due to inflation, investment, and initiatives supporting business growth. As guided, we were in line with, in fact, slightly lower than the prior quarter's run rate. Credit impairments remained relatively low by historic standards, but were up $62 million to $294 million, mainly because of further charges relating to our China commercial real estate exposures. Overall, we generated $1.3 billion of underlying profit before tax. ROTI of 7% was depressed by a higher than normal effective tax rate, mainly caused by increased rates-driven losses, largely in the UK, where we have insufficient profits to shelter these losses.

Expenses of $2 8 billion were up 8% due to inflation investment and initiatives supporting business growth thoughts as guided we were in line with in fact slightly lower than the prior quarter's run rate.

Speaker 4: transcript

Speaker 4: Expenses of $2.8 billion were up 8% due to inflation, investment and initiatives supporting business growth. But as guided, we were in line with, in fact slightly lower than, the prior quarter's run run rate.

Credit impairments remained relatively low by historical standards, but were up $62 million to $294 million, mainly because of further charges relating to our China commercial real estate exposures.

Speaker 4: transcript

Speaker 4: Credit impairments remained relatively low by historic standards, but were up $62 million to $294 million mainly because of further charges relating to our China commercial real estate exposure. The

Speaker 4: transcript

Overall, we generated $1 3 billion of underlying profit before tax.

Speaker 4: transcript

Speaker 4: ROTE of 7% was depressed by a higher than normal effective tax rate, mainly caused by increased rates of driven losses, largely in the UK, where we have insufficient profits to shelter these loss.

Rocchio, 7% was depressed by a higher than normal effective tax rate, mainly caused by increased rates driven losses largely in the U K, while we have insufficient profits to shelter these losses.

Andy Halford: Effective tax rate can move around materially on a quarterly basis, so I focus on the full year outcome, and we are taking various actions to ensure that the full year effective tax rate will be around 30%. Now, let me cover Bohai for a moment. We took a $697 million below-the-line impairment charge relating to our Bohai investment, the details of which we've included in the slide in the appendices. Bohai's H1 results were published in August and showed a meaningful reduction in net interest income, which accounts for most of their total revenue. This reduction, combined with a materially lower domestic interest rate outlook, resulted in the impairment.

Speaker 4: transcript

Speaker 4: effective tax rate can move around materially on a quarterly basis. So I focus on the full year outcome and we are taking various actions to ensure the full year effective tax rate will be around 30%

The effective tax rate can move around materially on a quarterly basis. So I'll focus on the full year outcome and we are taking various actions to ensure full year effective tax rate will be around 13%.

Operator: Please wait, the conference will begin shortly. The conference will begin shortly.

Speaker 4: transcript

Speaker 4: Now, let me cover bow high for a moment. We took a $697 million below the line in payment charge relating to our bow high investment, the details which we've included in the slide in the Appendus Zoo.

Now, let me cover both high for a moment.

We took a $697 million below the line impairment charge relating to all by the high investment the details, which we've included in the slide in the appendices.

Speaker 4: transcript

Speaker 4: Though highest half year results were published in August , then showed a meaningful reduction in net interest income, which accounts for most of their total revenue. This reduction combined with a material of lower domestic interest rate outlook resulted in the impairment. It is important to remember that Bo Ha-Hai is a largely domestic China business, which is very different to our own China franchise, where we now generate more of our income outside China than within it.

So highest half year results were published in August and showed a meaningful reduction in net interest income, which accounts for most of their total revenue. This reduction combined with a materially lower domestic interest rate outlook resulted in the impairment.

Andy Halford: It is important to remember that Bohai is a largely domestic China business, which is very different to our own China franchise, where we now generate more of our income outside China than within it. Moving to the year-to-date view, we are on track to meet our full year 2023 targets. Income is up 15% year to date. We continue to expect full year income growth to be in the 12% to 14% range. Costs are up 11% to date, resulting in 4% positive jaws. We remain on track for the around 4% jaws target for the full year and are willing and able to take more cost actions to protect that outcome. Credit impairment of $466 million represents an annualized cost of risk of 20 basis points. Within our expected 17 to 25 basis point range.

It is important to remember that <unk> is a largely domestic China business, which is very different to our China franchise, where we now generate more orange county outside China.

Within it.

Speaker 4: transcript

Speaker 4: Moving to the year to date view, we are on track to meet our full year 2023 target.

Moving to the year to date to you we are on track to meet our full year 2023 targets.

Speaker 4: transcript

Speaker 4: Income is up 15% year to date. We continue to expect full year income growth to be in the 12% to 14% range.

It's up 15% year to date, we continue to expect full year income growth to be in the 12% to 14% range.

Speaker 4: transcript

Speaker 4: POs are up 11% to date, resulting in 4% positive Jaws.

Costs are up 11% to date, resulting in 4% positive jaws when.

Operator: Good day and welcome to the standard chart at 3rd quarter 2023 results presentation call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question by phone, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero.

Speaker 4: transcript

Speaker 4: We remain on track for the around 4% JAWS target for the full year and are willing and able to take more cost actions to protect that outcome.

We remain on track to be around 4% jaws target for the full year and are willing and able to take more cost actions to protect that outcome.

Speaker 4: transcript

Speaker 4: Credit impairment of $466 million represents an annualized cost of risk of 20 basis points within our expected 17 to 25 basis point range.

This impairment of $466 million represents an annualized cost of risk of 20 basis points within our expected 2017 to 25 basis point range we.

Andy Halford: We are not seeing any new areas of credit pressure emerging. Year-to-date ROTCE of 10.4% positions us well to achieve 10% ROTCE overall in 2023. Looking at NII and NIM in more detail, the headline here is that our NII was up 20% compared with the same quarter last year, albeit was 2% lower quarter-on-quarter. The decline from Q2 reflects the normalized NIM being 4 basis points lower at 167 basis points. We believe that this quarter-on-quarter dip is temporary and does not reflect a more fundamental change in structural pricing dynamics. There are several moving parts which explain the reduction.

Speaker 4: transcript

Speaker 4: We are not seeing any new areas of credit pressure emerge.

We are not seeing any new areas of credit pressure emerging.

Operator: And alternatively, if you wish to ask a question via the webcast, please use the question box available on your webcast page to submit your questions. And finally, I would like to advise all participants that this call is being recorded. Thank you.

Year to date <unk> of 10, 4% positions us well to achieve 10% royalty overall in 2023.

Speaker 4: transcript

Speaker 4: year-to-date RO-T of 10.4% positions as well to achieve 10% RO-T overall in 2023.

Speaker 4: transcript

Speaker 4: Looking at NII and NIM in more detail, the headline here is that our NII was up 20% compared with the same quarter last year, albeit was 2% lower quarter on quarter.

Looking at the NII and NIM in more detail. The headline here is that our NII was up 20% compared with the same quarter last year.

Operator: I'd now like to welcome Bill Winters, Chief Executive, to begin the conference. Bill, over to you.

Bill Winters: Good morning and good afternoon and welcome to our 3rd quarter 2023 results call. I'll make some opening comments and Andy will dive in deeper before the usual Q&A. We have continued to make strong progress against the five strategic actions outlined last year, delivering a solid set of results. We remain highly liquid, well capitalized, and we are confident in the delivery of our 2023 financial targets, including an ROTE of 10%. We're pleased with the progress we are making in our strategy.

It was 2% lower quarter on quarter the.

Speaker 4: transcript

Speaker 4: The decline from the second quarter reflects the normalized NIM being four basis points lower at 167 basis points.

The decline from the second quarter reflects the normalized NIM being four basis points lower at 106 to seven basis points.

Speaker 4: transcript

Speaker 4: We believe that this quarter on quarter dip is temporary and does not reflect a more fundamental change in structural pricing dynamics. There are several moving parts which...

We believe in this quarter on quarter. It is temporary and does not reflect a more fundamental change in structural pricing dynamics.

There are several moving parts, which explains the reduction.

Andy Halford: The 2 basis points benefit from higher interest rates, which was net of higher pass-through rates in the quarter, was broadly offset by the impact on our hedging positions of the higher for longer rate environment. Adverse mix changes of 3 basis points were driven by three things, muted demand for client assets in a volatile rate environment, holding a higher level of treasury balances for most of the quarter as part of managing our elevated LCR, and some further CASA to TD migration in line with our expectations. We also saw 1 basis point impact from asset margin compression in corporate lending. Taken together, this gets you to the Q3 normalized NIM of 167 basis points.

Speaker 4: transcript

Speaker 4: The two basis point benefit from higher interest rates, which was net of higher pass-through rates in the quarter, was broadly offset by the impact on our hedging positions of the higher for longer rate environment.

The two basis point benefit from higher interest rates, which was net of higher pass through rates in the quarter was broadly offset by the impact on our hedging positions of the higher for longer rate environment.

Bill Winters: Our cross-border network business remains strong. Our affluent business has returned to excellent growth, both in customer numbers and income. Our digital banking strategy is working well, and our sustainable finance strategy is on track. The macro picture is more mixed. Markets remain volatile as the global economy remains resilient, leading to shifting inflation and interest rate expectations. This is particularly the case in the U.S, where we have seen significant rises in long-term rates and an increasing conviction that we will be higher for longer.

Speaker 4: transcript

Speaker 4: Adverse mix changes three basis points were driven by three things.

Adverse mix changes three basis points were driven by three things <unk> demand for client assets in a volatile rate environment.

Speaker 4: transcript

Speaker 4: Muted demand for client assets in a volatile race environment.

Speaker 4: transcript

Speaker 4: holding a higher level of treasury balances for most of the quarter as part of managing our elevated LCR and some further CASA to TD migration in line with our expectations.

Holding a higher level of treasury balances for most of the quarter as part of managing our elevated LCR.

And some further cancer to TD migration in line with our expectations.

Speaker 4: transcript

Speaker 4: We also saw one basis point impact from asset margin compression in corporate lending.

We also saw one basis point impact from asset margin compression and corporate lending.

Speaker 4: transcript

Taken together this gets you to the third quarter normalized NIM of 167 basis points.

Bill Winters: Whilst we believe we are near the top of the current rate cycle, the higher for longer expectation has led to extended dollar strength, ensuring borrowers reliant on dollar funding. Now we're encouraged by the recent economic data coming from China. Manufacturing and consumption are returning to normal levels, and confidence is slowly rebuilding. We continue to expect GDP growth of around 5%, reassuring given some of the narrative. That said, the commercial real estate sector has only barely stabilized and companies are succumbing to the extended period of weak property sales.

Andy Halford: We now think the 2023 average NIM will be approaching 170 basis points, a slight detuning from our previous language of around 170 basis points. We do not expect further NIM erosion in Q4. In fact, we see NIM expansion, and there are four primary reasons why this is the case. Firstly, we have taken a conscious decision to normalize our LCR ratio, some of which occurred in Q3, with more to follow in Q4. This has the effect of reducing lower returning treasury balances. Secondly, we expect negligible rate changes in Q4, so we do not expect an incremental drag from our hedges. Thirdly, we are progressively reducing our lower returning mortgage book. Fourthly, we see opportunities for further margin upside in treasury from reinvestment of some balances at higher yields.

Speaker 4: transcript

Speaker 4: We now think the 2023 average NIM will be approaching 170 basis points, a slight detuning from our previous language of around 170 basis points.

We now think the 2023 average NIM will be approaching 170 basis points.

Slides T chewning from all previous language of around 170 basis points we.

Speaker 4: transcript

Speaker 4: We do not expect further numeration in the fourth quarter. In fact, we see them expansion. And there are four primary reasons why this is the case.

We do not expect further NIM erosion in the fourth quarter. In fact, we see NIM expansion and there are four primary reasons why this is the case.

Speaker 4: transcript

Speaker 4: Firstly, we have taken a conscious decision to normalize our LCR ratio, some of which occurred in the third quarter with more to follow in Q4. This has the effect of reducing lower returning treasury balance.

Firstly, we have taken a conscious decision to normalize our LCR ratio some of which occurred in the third quarter with more to follow in Q4. This has the effect of reducing low returning treasury balances.

Speaker 4: transcript

Speaker 4: Secondly, we expect negligible rate changes in the fourth quarter, so we do not expect an incremental drag from our head.

Secondly, we expect negligible rates changes in the fourth quarter. So we do not expect an incremental drag from our hedges.

Speaker 4: transcript

Speaker 4: Thirdly, we are progressively reducing our lower returning mortgage book. And fourthly, we see opportunities for further margin upside intrasury from reinvestment of some bounces at higher yield.

Firstly, we are progressively reducing our low returning mortgage book and fourthly, we see opportunities for further margin upside in treasury from reinvestment of some balances at higher yields.

Bill Winters: The offshore business, largely across border transactions driven by China's actions to further open its economy and capital markets, is growing very strongly up nearly 50% this year. The entrepreneur business is resilient up 2% so far and what's been a challenging year for China's domestic economy. So despite some material setbacks, we remain very confident that we will grow profits for years to come in and around our China franchise. Our strategy is to capture the trade, invest in the well flows, as well as financial markets activity in and out of China that derive from this ongoing opening of China's economy.

Andy Halford: These actions should more than offset any underlying movements in pass-through rates or CASA to TD migration. For 2024, we are not changing our NIM guidance. We continue to expect the average NIM to be around 175 basis points. There are a number of reasons for this. Regarding our hedge positions, we see a material, a mechanical tailwind of 9 basis points, 8 of which come from expiry of our short-term income hedges, and 1 of which is due to part of our existing structural hedge maturing and being reinvested at higher yields. Furthermore, in both a more stable or lower rate environment, we expect client asset demands to increase. We expect momentum to return across trade, lending, and capital markets and see ongoing growth in unsecured lending in retail driven by our new digital platforms and partnerships.

Speaker 4: transcript

Speaker 4: These actions should more than offset any underlying movements in pass-through rates or CASA to TD migration. For 2024, charging economic chilluu-

These actions should more than offset any underlying movements impulse through rights all cancer to TD migration.

In 2024, we are not changing our NIM guidance we.

Speaker 4: transcript

Speaker 4: we continue to expect the average NIM to be around 175 basis points.

We continue to expect the average NIM to be around 175 basis points.

There are a number of reasons for this.

Speaker 4: transcript

Speaker 4: Regarding our hedge positions, we see a material and mechanical tailwind of nine basis points.

Regarding our hedge positions, we see a material and mechanical tailwind of nine basis points.

Speaker 4: transcript

Speaker 4: eight of which come from expiry of our short-term income hedges and one of which is due to part of our existing structural hedge from insuring and being reinvested at higher yield.

Each of which come from expiry of our short term income hedges and one of which is due to part of our existing structural hedge maturing and being reinvested at higher yields.

Bill Winters: I recently returned from China and it's clear to me that in our focus areas, activity levels are booming, such as across border flows and the new economy industries, especially those concentrated in the greater Bay Area such as electric vehicles, clean tech and high tech. Looking more broadly, we expect HGDP to be above 5% this year and next, making it the highest growth region globally. In our recent global trade report, increasing South-South or intra-emergy markets trade and growing services trade are expected to help offset the drag to trade from higher geopolitical tensions.

Speaker 4: transcript

Speaker 4: Furthermore, in those are more stable or lower rate environments, we expect client asset demands to increase.

Anymore in those are more stable rate environment, we expect client asset demands to increase.

Speaker 4: transcript

Speaker 4: We expect momentum to return across trade, lending and capital markets and see ongoing growth in unsecured lending in retail, driven by our new digital platforms and partners.

We expect momentum to return across trade lending and capital markets and see ongoing growth in unsecured lending in retail.

Our new digital platforms and partnerships.

Andy Halford: In a lower rate environment, we would also look to increase our mortgage origination. We also expect to see some mix benefit as higher yielding client assets increase as a proportion of total assets relative to lower yielding treasury assets. These benefits will be part offset by ongoing CASA to TD migration and higher pass-through rates. To date, deposit pass-through rates and migration have broadly performed in line with our expectations. In our top four retail markets in Asia, deposit betas have been broadly stable for much of the year, so appear to be performing better than some Western markets. All else equal, if interest rates decline, we would expect some moderation in both deposit pass-through rates and migration led initially by retail. NIM is complex to forecast.

Speaker 4: transcript

Speaker 4: In a low rate environment, we would also look to increase our mortgage origination.

In a low rate environment, we would also look to increase our mortgage origination.

Bill Winters: Our unique regional footprint with President and China, India, the Middle East, Africa, and across ASEAN allows us to capture the opportunities from shifting supply chains and growing trade and investment flows within and between our regions. Beyond the stress and China's CRE and some sovereigns, corporate and consumer balance sheets, particularly in our markets, are in good shape, often better than those of some governments and have so far been resilient to higher rates.

Speaker 4: transcript

Speaker 4: We also expect to see some mixed benefit as higher yielding client assets increase as a proportion of total assets relative to lower yielding treasury assets.

We also expect to see some mixed benefit as higher yielding client assets increased as a proportion of total assets relative to low yielding treasury assets.

Speaker 4: transcript

Speaker 4: These benefits will be part offset by ongoing catheter TB migration and higher pass-through rates.

These benefits will be part offset by ongoing cost its TV migration and higher pass through rates.

Speaker 4: transcript

Speaker 4: date, deposit pass rates and migration are broadly performed in line with our expectations.

Deposit costs through rates and migration of broth and performed in line with our expectations.

Bill Winters: On a more somber note, we've watched the events unfold in Israel and Gaza for the past weeks with Shaqintaro. We're hoping for a speedy resolution to the situation and that the tragic loss of life is brought to an end quickly. We have very limited presence in the currently impacted part of the Middle East. The principal transmission mechanism to our business would be a broader escalation of the conflict across the region, which results in higher oil prices, which in turn would put further pressure on the global economy and particularly on oil importing sovereigns.

Speaker 4: transcript

Speaker 4: In our top four retail markets in Asia, deposit betas have been broadest able for much of the year. So appear to be performing better than some Western markets.

In our top four retail markets in Asia deposit beta has been broadly stable for much of the year. So it appears to be performing better in some western markets.

Speaker 4: transcript

Speaker 4: All else equal, if interest rates decline, we would expect some moderation in both deposit pass-through rates and migration led initially by retail.

All else equal if interest rates decline, we would expect some moderation in both deposit pass through rates and migration led initially by retail.

Speaker 4: transcript

Speaker 4: Nim is complex to forecast. It is dependent on many moving parts and assumptions, more so for us than for others. And includes things beyond our control, such as rates, curves and customer behavior. We keep it under review and will update you if any of those factors or our assumptions change.

And then as complex to forecast it is dependent on many moving parts and assumptions more for us than for others.

Andy Halford: It is dependent on many moving parts and assumptions, more so for us than for others, and includes things beyond our control, such as rate curves and customer behavior. We keep it under review and we'll update you if any of those factors or our assumptions change. As we approach the peak of the rate cycle, we're also looking to take further duration positions to dampen income volatility and mitigate the potential impact of a lower rate environment. We plan to build out our existing structural hedge position, mainly through increased use of hedge accounted swaps, which are efficient from a capital and leverage perspective. This hedge build out should also support NIM if rates fall. More on this at the full year results. Turning now to products.

Please things beyond our control such as rates and customer behavior.

Bill Winters: We made encouraging progress on our five strategic actions, and you can increasingly see that come through in the numbers. Our franchise offers superior growth prospects, and our investments are creating the platforms to ensure we capture that growth. We're convinced that we're in the right markets with the right strategy and are firmly on track to achieve our full year 2023 financial targets.

We keep it under review and we'll update you if any of those factors for our assumptions change.

Speaker 4: transcript

Speaker 4: As we approach the peak of the rate cycle, we're also looking to take further duration positions to dampen inculvallatility and mitigate the potential impact of a lower rate environment.

As we approach the peak of the rate cycle. We are also looking to take further duration positions could dampen income volatility and mitigate the potential impact of a lower rate environment.

Andy: With that, I'll hand over to Andy to take you to the numbers and then rejoin for the usual Q&A. Thanks Bill. Good morning and good afternoon, everyone. So, remembering that unless I say otherwise, the comparisons I will give will be on a year on year and constant currency basis. Let's get straight into the numbers. Third quarter income at $4.4 billion was up 7% compared with a strong third quarter in 2022, mainly due to higher interest rates.

Speaker 4: transcript

Speaker 4: We plan to build out our existing structural hedge position may need to increase use of hedge accounted swaps, which are efficient from a capital and leverage perspective.

We plan to build out our existing structural hedge position, mainly through increased use of hedge accounting swaps, which are efficient from a capital and leverage perspective.

Speaker 4: transcript

Speaker 4: This hedge buildout should also support them if rates fall. More on this at the full year results.

This hedge Buildout should also support NIM if rates fall Moreland.

More on this at the full year results.

Speaker 4: transcript

Speaker 4: Turning out to products. Third quarter cash management income was up 61%, and deposits were up 50% as both businesses benefited from higher interest rates. This was supported by strong discipline on pricing and pass through rate management.

Turning now to products third quarter cash management income was up 61% and deposits were up 50% as both businesses benefited from higher interest rates. This was supported by strong discipline on pricing and pass through rate management.

Andy Halford: Q3 cash management income was up 61% and deposits were up 50% as both businesses benefited from higher interest rates. This was supported by strong discipline on pricing and pass-through rate management. Trade was down 2% on lower volumes as trade activity was subdued, particularly in China and Hong Kong, as clients preferred local currency financing. Lending was down 26%, principally due to lower origination volumes in challenging markets. Mortgage income was down 78%, reflecting market dynamics, including the prime cap in Hong Kong, which led to margin compression and accordingly, our decision to limit new origination. CCPL income was up 2% on higher volumes, in part due to momentum in our mass retail partnerships despite lower margins.

Andy: Net interest income at $2.4 billion was up 20% on strong performances in both cash management and retail deposits. The normalized net interest margin was up 24 basis points to 167 basis points after adjusting for 4 basis points of one off. Other income at $2 billion was down 5% as the continuing recovery and wealth management was offset by a lower financial markets performance relative to a very strong prior year comparator. Expenses at $2.8 billion were up 8% due to inflation, investment and initiatives supporting business growth.

<unk> was down 2% on lower volumes as trade actions to subdued, particularly in China, and Hong Kong as clients prefer at local currency financing.

Speaker 4: transcript

Speaker 4: Trade was down 2% on lower volumes as trade activity was subdued, particularly in China and Hong Kong, as clients preferred local currency financing.

Lending was down 26%, principally due to lower origination volumes and challenging markets.

Speaker 4: transcript

Speaker 4: Lending was down 26% principally due to lower origination volumes in challenging markets.

Speaker 4: transcript

Speaker 4: Vorgging income was down 78% reflecting market dynamics, including the prime cap in Hong Kong, which led to margin compression and accordingly our decision to limit new origination.

Mortgage income was down 78%, reflecting market dynamics, including the prime capped in Hong Kong, which led to margin compression and accordingly, our decision to limit new origination.

Speaker 4: transcript

Speaker 4: CCPL income was up 2% on higher volumes in part due to momentum in our mass retail partnerships, despite lower margins.

<unk> income was up 2% on higher volumes in part due to momentum in our mass retail partnerships despite lower margins.

Andy: But as guided, we were in line with, in fact slightly lower than the prior quarter's run rate. Credit impairments remained relatively low by historic standards, but were up 62 million dollars to $2904 million, mainly because of further charges relating to our China commercial real estate exposures. Overall, we generated $1.3 billion of underlying profit before tax. Roti of 7% was depressed by our higher than normal effective tax rate, mainly caused by increased rates driven losses, largely in the UK, where we have insufficient profits to shelter these losses.

Andy Halford: The treasury loss of $274 million was mainly driven by the impact of a higher rate environment on our hedge positions and a higher drag from deployment of the commercial surplus. Moving to other income. In financial markets, market volatility was lower, and 2022 was a strong comparator period. As a result, income of $1.3 billion was 8% lower year on year or 6% lower after adjusting for $28 million of one-off gains in 2022. Year to date, FM was flat or up 7% adjusting for $244 million of one-off gains in the prior period. Macro trading was down 11% as FX rates and quantities saw lower income on reduced flows in a less volatile market.

Speaker 4: transcript

Speaker 4: The Treasury loss of $274 million was mainly driven by the impact of a higher rate environment on our hedge positions and a higher drain from deployment of the commercial...

The treasury loss of $274 million was mainly driven by the impact of a higher rate environment on our hedge positions and a higher drive from deployment of the commercial surplus.

Speaker 4: transcript

Speaker 4: moving to other income. In financial markets, market volatility was lower and 2022 was a strong comparative period.

Moving to other income.

In financial markets market volatility was low and 2022 was a strong comparator period.

Andy: Effective tax rate can move around materially on a quarterly basis, so I've focused on the full year outcome, and we are taking various actions to ensure that the full year effective tax rate will be around 30%.

Speaker 4: transcript

Speaker 4: As a result, income of $1.3 billion with 8% per year on year or 6% per year after adjusting for $28 million of one off gains in 2022.

As a result income of $1 $3 billion was 8% lower year on year or 6% lower after adjusting for $28 million of one off gains in 2022.

Speaker 4: transcript

Speaker 4: Year-to-date FM was flat, or up to 7% adjusting for $244 million of one-half gains in the prior period.

Year to date, <unk> was flat or up 7% adjusting for $244 million of one off gains in the prior period.

Andy: Now, let me cover bow high for a moment. We took a $697 million below the line in payment charge relating to our bow high investment, details which we've included in the slide in the appendices. Bow high as half year results were published in August, and showed a meaningful reduction in net interest income, which accounts for most of their total revenue. This reduction, combined with a material lower domestic interest rate outlook, resulted in the impairment. It is important to remember that bow high is a largely domestic China business, which is very different to our own China franchise, where we now generate more of our income outside China than within it.

Speaker 4: transcript

Speaker 4: Macro trading was down 11% as FX, rates and corridors sought lower income on reduced flows in less volatile markets.

Macro trading was down 11% as FX rates and commodities, so lower income on reduced flows in less volatile market.

Andy Halford: Credit markets was up 4% as lower credit trading income on lower volatility was offset by stronger financing revenues from good deal execution. We also saw market share gains in G3 bond and loan markets despite declining footprint market volumes overall. FM derives about 70% of its income from ongoing client liquidity and exposure management, including the business flows into FM from transaction banking. This flow income of $910 million was up 3% on a reported basis, reflecting our past investment in digital platforms and cross-selling solutions. Conversely, the more episodic income of $343 million, which is more event and mark-to-market driven, was down 28% on a reported basis on subdued market volumes. Wealth management momentum was encouraging as the recovery here gained pace.

Speaker 4: transcript

Speaker 4: Credit markets was up 4% as lower credit trading income on lower volatility was offset by stronger financing revenues from good deal execution.

Credit markets was up 4% as lower credit trading income on lower volatility was offset by stronger financing revenues from good deal execution.

Speaker 4: transcript

Speaker 4: We also saw market share gains in G3 bond and low markets, despite declining footprint market volumes overall.

Also saw market share gains and G III bond and loan markets, despite declining footprint market volumes overall.

Speaker 4: transcript

Speaker 4: FM derives about 70% of its income from ongoing client liquidity and exposure management, including the business flows into FM from transaction banking.

FM derives about 70% of its income from ongoing client liquidity and exposure management, including the business flows into FM from transaction banking.

Andy: Moving to the year to date view, we are on track to meet our full year 2023 targets. Income is up 15% year to date, we continue to expect full year income growth to be in the 12 to 14% range. Oss are up 11% to date, resulting in 4% positive jaws. We remain on track for the around 4% jaws target for the full year, and are willing and able to take more cost actions to protect that outcome.

Speaker 4: transcript

Speaker 4: This flowing cut of $910 million was up 3% on a reported basis, reflecting our past investment in digital platforms and cross-selling solutions.

This flow income was $910 million was up 3% on a reported basis, reflecting our past investments in digital platforms and cross selling solutions.

Speaker 4: transcript

Speaker 4: Conversely, the more episodic income for $343 million, which is more event and marked market rhythm, with down 28% on a reported basis on subdued market volume.

Conversely, the more episodic income of $343 million, which is more event and mark to market Dritten was down 28% on a reported basis or the subdued market volumes.

Speaker 4: transcript

Speaker 4: Wealth management momentum was encouraging as the recovery here gained pace. Income of $526 million was up 18% on last year and up 7% quarter on quarter. Our best quarter in wealth since the first quarter of 2022.

Wealth management momentum was encouraging as the recovery here gained pace income of $526 million was up 18% to last year and up 7% quarter on quarter, our best quarter in wealth since the first quarter of 2022.

Andy Halford: Income of $526 million was up 18% on last year and up 7% quarter-on-quarter. Our best quarter in wealth since Q1 2022. Performance was broad-based, with all main wealth management product lines growing income year-on-year and quarter-on-quarter. Our 7 largest wealth markets grew income at double-digit rates. Treasury products and bank assurance were up 14% and 30% respectively. Encouragingly, both managed investments and secured wealth lending also picked up. Affluent net new money more than doubled to nearly $18 billion, which is equivalent to around 9% of affluent AUM on an annualized basis. The addition of new to bank affluent customers continued at pace with account openings in Q3 at their highest level since 2021.

Andy: Credit impairment of $466 million represents an annualised cost of risk of 20 basis points within our expected 17 to 25 basis point range. We are not seeing any new areas of credit pressure emerging. Year to date, row seat of 10.4% positions as well to achieve 10% row seat overall in 2023. Looking at NII and NIM in more detail, the headline here is that our NII was up 20% compared with the same quarter last year, or be it was 2% lower quarter on quarter.

Speaker 4: transcript

Speaker 4: Performance was broad-based with all main wealth management product lines growing in come year on year and quarter on court.

Performance was broad based with all main wealth management product lines growing income year on year and quarter on quarter.

Speaker 4: transcript

Speaker 4: Our seven largest wealth markets grew in come a double digit rate.

Our seven largest wealth markets grew income of double digit rates.

Speaker 4: transcript

Speaker 4: Pressure reports and bank assurance were up 14% and 30% respectively.

Treasury products and bank assurance were up 14% and 30% respectively.

Speaker 4: transcript

Speaker 4: Encouragingly, both managed investments and secured wealth lending also picked up Affluent net new money more than doubled to nearly 18 billion dollars Which is equivalent to around 9% of affluent AUM on an annualized base

Encouragingly, both managed investments and secured wealth lending also picked up.

Excellent net new money more than doubled to nearly $18 billion, which is equivalent to around 9% of affluent AUM on an annualized basis.

Andy: Carter, the decline from the second quarter reflects the normalized name being four basis points lower at 167 basis points. We believe that this quarter on quarter depth is temporary and does not reflect a more fundamental change in structural pricing dynamics. There are several moving parts which explain the reduction. The two basis point benefits from higher interest rates, which was net of higher pass-through rates in the quarter, was broadly offset by the impact on our hedging position.

Speaker 4: transcript

Speaker 4: The addition of new to bank affluent customers continued at pace, with account openings in the third quarter at that highest level since 2021. Our success in monetising these new affluent relationships has driven the strong performance in wealth, year to date, and is expected to underpin performance in future courts.

The addition of new to bank affluent customers continued at pace with account openings in the third quarter the highest level since 2021, our success in monetizing these new affluent relationships has driven the strong performance in wealth year to date and is expected to underpin performance in future quarters.

Andy Halford: Our success in monetizing these new affluent relationships has driven the strong performance in wealth year to date and is expected to underpin performance in future quarters. Turning now to the market view. Most of our main markets saw good momentum, albeit with strong rates tailwinds. Singapore and Hong Kong were standouts, with year-to-date income up 31% and 25% respectively, delivering ROTI of 22% in Hong Kong and nearly 30% in Singapore. Across Asia, our income was up 18% and our underlying profit's up 37% year to date. The performance is broad-based, with 8 markets delivering record Q3 income on a year to date basis, and 11 of 17 markets achieving a year to date ROTI above 12%.

Turning now to the marketing most of our main markets saw good momentum, albeit with strong rates tailwind.

Speaker 4: transcript

Speaker 4: Turning now to the market view, most of our main markets saw good momentum, albeit with strong rates tailwind.

Andy: We believe that the reduction of the higher for longer rate environment, adverse mix changes, three basis points were driven by three things, muted demand for client assets in a volatile rate environment, holding a higher level of treasury balances for most of the quarter as part of managing our elevated LCR and some further casser to TD migration in line with our expectations. We also saw one basis point impact from asset margin compression in corporate lending.

Speaker 4: transcript

Speaker 4: Singapore and Hong Kong were standouts, with year-to-date income up 31%, and 25% respectively, delivering roti of 22% in Hong Kong, and nearly 30% in Singapore.

Singapore, and Hong Kong were standouts with year to date income up, 31% and 25%, respectively, delivering rotate a 22% in Hong Kong and nearly 30% in Singapore.

Across Asia, our income was up 18% and our underlying profits up 37% year to date.

Speaker 4: transcript

Speaker 4: Across Asia, our income was up 18% and our underlying profits up 37% year to date.

Speaker 4: transcript

Speaker 4: The performance is broad-based with eight markets delivering record for the quarter income on a year-to-date basis and 11 of 17 markets achieving a year-to-date row-tie above 12%.

The performance was broad based with eight markets delivering record third quarter income on a year to date basis, and 11 of 17 markets achieving a year to date rose above 12%.

Andy: Taken together, this gets you to the third quarter normalized name of 167 basis points. We now think the 2023 average name will be approaching 170 basis points, a slight detuning from our previous language of around 170 basis points. We do not expect further nim erosion in the fourth quarter. In fact, we've seen an expansion and there are four primary reasons why this is the case. Firstly, we have taken a conscious decision to normalize our LCR ratio, some of which occurred in the third quarter with more to follow in Q4.

Andy Halford: In Africa and the Middle East, our income was up 30% and our operating profit up 54% year to date, which was particularly commendable given the number of sovereign challenges in the region. The UAE was a particular standout, with year-to-date income of $612 million, up nearly 40% and a ROTI approaching 25%. Looking at China, as Bill said earlier, notwithstanding a difficult domestic environment, our China franchise continues to do very well. Our China franchise is not a proxy for China's domestic economic performance, but is instead a proxy for the ongoing opening up of China's economy. Our strategy is to capture the trade, investment, financial market, and wealth flows in and out to China that derive from this opening and China's greater participation in the global economy.

Speaker 4: transcript

Speaker 4: In Africa and the Middle East, our income was up 30% and our operating profit up 54% year to date, which was particularly commendable given the number of sovereign challenges in the region.

In Africa, and the Middle East our income was up 30% and our operating profit up 64% year to date, which is particularly commendable given the number of sulfur and challenges in the region.

Speaker 4: transcript

Speaker 4: The UAE was a particular standout with the year 2018 come of $612 million up nearly 40% and a ROTE approaching 25%.

The UAE was a particular standout with year to date income of $612 million up nearly 40% and a routine approaching 25%.

Speaker 4: transcript

Speaker 4: Looking at China, as Bill said earlier, notwithstanding a difficult domestic environment, our China franchise continues to do very well.

Looking at China, as Bill said earlier, notwithstanding a difficult domestic environment, our China franchise continues to do very well.

Speaker 4: transcript

Speaker 4: Our China franchise is not a proxy for China's domestic economic performance, but is instead a proxy for the ongoing opening up of China's economy. Our strategy is to capture the trade, investment, financial market, and wealth flows in and out of China that derive from this opening and China's greater participation in the global economy.

Our China franchise is not a proxy for China's domestic economic performance, but is instead, a proxy to the ongoing opening up of China's economy or.

Andy: This has the effect of reducing lower returning treasury balances. Secondly, we expect negligible rate changes in the fourth quarter, so we do not expect an incremental drag from our hedges. Thirdly, we are progressively reducing our lower returning mortgage book. And fourthly, we see opportunities for further margin upside in treasury from reinvestment of some balances at higher yields. These actions should more than offset any underlying movements in pass-through rates or casser to TD migration.

Our strategy is to capture the trade investment financial markets and wealth flows in and out of China that derived from this evening and China's greater participation in the global economy.

Andy Halford: On a year-to-date basis, our overall income from our China business of $2.5 billion was up 25%, comprising 2% growth inside, and nearly 50% growth outside China. Our focus on the new economy is paying off as the revenue contribution from clients in this sector is increasing at a faster rate than traditional sectors and is now approaching half of new corporate origination. Year to date, China-related profits are up threefold, notwithstanding taking further impairment charges in connection with the CRE sector. We're therefore making good progress on our aspiration to deliver $1.4 billion of profit from China in 2024, compared with the $0.7 billion that we delivered in 2021. Turning to expenses, costs of $2.8 billion were up 8%, resulting in -1% jaws in the quarter.

Speaker 4: transcript

Speaker 4: On a year-to-date basis, our overall income from our China business of $2.5 billion was up 25%. Comprising 2% growth inside and nearly 50% growth outside China.

On a year to date basis, our overall income from our China business, a $2 $5 billion was up 25% comprising 2% growth inside a nearly 50% growth outside China.

Speaker 4: transcript

Speaker 4: Our focus on the new economy is paying off. As the revenue contribution from clients in this sector is increasing at a faster rate than traditional sectors and is now approaching half of new corporate origination.

Our focus on the new economy is paying off as the revenue contribution from clients. In this sector is increasing at a faster rate than traditional sectors and is now approaching half of new corporate origination.

Andy: For 2024, we are not changing our nim guidance. We continue to expect the average nim to be around 175 basis points. There are a number of reasons for this. Regarding our hedge positions, we see a material and mechanical tailwind of nine basis points, eight of which come from expiry of our short-term income hedges, and one of which is due to part of our existing structural hedge maturing and being reinvested at higher yields.

Year to date, China related profits are up threefold, notwithstanding taking further impairment charges in connection with the CRE sector.

Speaker 4: transcript

Speaker 4: Yet today China-related profits are up threefold, notwithstanding taking further impairment charges in connection with the CRE sector.

Speaker 4: transcript

Speaker 4: We're therefore making good progress on our aspiration to live up $1.4 billion of profit from China in 2024, compared with the $0.7 billion that we delivered in 2021.

Were they for making good progress on our aspiration to live at $1 $4 billion of profit from China in 2024, compared with the $7 billion that we delivered in 2021.

Andy: Furthermore, in both a more stable or lower rate environment, we expect client asset demands to increase. We expect momentum to return across trade, lending, and capital markets and see ongoing growth in unsecured lending in retail driven by our new digital platforms and partnerships. In a lower rate environment, we would also look to increase our mortgage origination. We also expect to see some mixed benefit as higher yielding client assets increase as a proportion of total assets relative to lower yielding treasury assets.

Speaker 4: transcript

Speaker 4: 22 expenses cost of $2.8 billion were up 8% resulting in 1% negative due in the court.

Turning to expenses cost of $2 $8 billion were up 8%, resulting in 1% negative jaws in the quarter.

Andy Halford: Importantly, as guided, costs came in below the Q2 run rate. We said we wouldn't necessarily deliver positive jaws in every reporting period, albeit on a year-to-date basis, we have delivered around 4% positive jaws, which remains our full-year target. The main drivers of the cost increase continue to be inflation of around 4% and investments into business growth in FM, wealth, sustainable finance, and China, all of which will help deliver sustainable top-line growth, reducing reliance on interest rate increases to grow income. For similar reasons, we continue to invest at pace in our digital initiatives with strong momentum in Trust and Mox, justifying our decision to invest into these businesses some time ago.

Speaker 4: transcript

Speaker 4: Importantly, as guided, cost came in below the second quarter run rate.

Importantly, and as guided cost came in below the second quarter run rate.

Speaker 4: transcript

Speaker 4: We said we wouldn't necessarily deliver positive jewels in every reporting period. Or be it on a year-to-date basis, we have delivered around 4% positive jewels, which remains our full-year target.

We said, we wouldn't necessarily deliver positive jaws in every reporting period, albeit on a year to date basis, we have delivered around 4% close to Jules which remains our full year target.

Speaker 4: transcript

Speaker 4: The main drivers of the cost increase continue to be inflation of around 4% and investments into business growth in FM, wealth, sustainable finance and China, all of which will help deliver sustainable top-line growth, reducing reliance on interest rate increases to growing income.

The main drivers of the cost increase continued to be inflation of around 4% and investments into business growth in FM wealth sustainable finance in China, all of which will help deliver sustainable topline growth, reducing reliance on interest rate increases to grow income.

Andy: These benefits will be part of said by ongoing cassettes of TV migration and higher pass-through rates. To date, deposit pass-through rates and migration are broadly performed in line with our expectations. In our top four retail markets in Asia, deposit beaters have been broadly stable for much of the year, so appear to be performing better than some Western markets. All else equal, if interest rates decline, we would expect some moderation in both deposit pass-through rates and migration led initially by retail.

Speaker 4: transcript

Speaker 4: For similar reasons, we continue to invest at pace in our digital initiatives with strong momentum in trust and mocks justifying our decision to invest into these businesses some time ago.

For similar reasons, we continue to invest at pace and our digital initiatives with strong momentum in trust and marks justifying a decision to invest into these businesses some time ago.

Andy Halford: Investment spend was part offset by a further $67 million of cost efficiencies, and we are now over halfway to our 2024 cost save target of $1.3 billion. In retail, we are closing in on our 2024 $500 million cost save aspiration, having delivered two-thirds so far. The credit impairment charge of $294 million was up $62 million, demonstrating the resilience of our portfolios, notwithstanding further pressure in China CRE. Retail impairment of $115 million was driven by expected portfolio flows into default, and we saw an additional $30 million charge in ventures, mainly due to Mox growth. We do not expect the policy pressures in China CRE to ease in the near term, and with investor confidence at very low levels in China, we are not expecting a swift recovery.

Speaker 4: transcript

Speaker 4: Investment spend was part of set by a further $67 million of cost efficiencies and we are now over halfway to our 2024 cost save target of $1.3 billion.

Investment spend was part offset by a $67 million of cost efficiencies and we are now over halfway to our 2024 cost save target of $1 $3 billion.

Speaker 4: transcript

Speaker 4: In retail, we are closing in on our 2024 $500 million cost save aspiration, having delivered two thirds so far.

Andy: Nim is complex to forecast, it is dependent on many moving parts and assumptions, more so for us than for others, and includes things beyond our control, such as rates curves and customer behaviour. We keep it under review and will update you if any of those factors or our assumptions change. As we approach the peak of the rate cycle, we are also looking to take further duration positions to dampen income volatility and mitigate the potential impact of a lower rate environment.

In retail we are closing in on our 2020 for $500 million cost save aspiration, having delivered two thirds so far.

Speaker 4: transcript

Speaker 4: The credit impairment charged $294 million was up $62 million, demonstrating the resilience of our portfolios notwithstanding further pressure in China's CRE.

The credit impairment charge of $294 million was up $62 million demonstrating the resilience of our portfolio is notwithstanding further pressure in China CRE.

Speaker 4: transcript

Speaker 4: Retail impairment of $115 million was driven by expected portfolio flows into default and we saw an additional $30 million charge in ventures mainly due to mocks growth.

Retail impairments of $115 million was driven by expected portfolio flows into default and we sold an additional $30 million charge inventions magnitude some marks growth.

Andy: We plan to build out our existing structural hedge position, may need to increase use of hedge accounted swaps, which are efficient from a capital and leverage perspective. This hedge build out should also support them, if rates fall. More on this, at the full year results.

Speaker 4: transcript

Speaker 4: We do not expect the policy pressures in China's CRE to ease in the near term. And with investor confidence at very low levels in China, we are not expecting a swift recovery. We have proactively managed this portfolio through very difficult conditions for the sector. And our exposures have reduced by more than 30% since the end of 2021 to $2.7 billion today.

We do not expect the policy pressures in China CRE to ease in the near term and with investor confidence at very low levels in China, we are not expecting a swift recovery.

Andy Halford: We have proactively managed this portfolio through very difficult conditions for the sector, and our exposures have reduced by more than 30% since the end of 2021 to $2.7 billion today. We continue to take a conservative approach and mark our books accordingly. We took a $186 million charge on China CRE, mostly through top ups on already defaulted accounts. Within this, we increased the management overlay by $42 million to $178 million to reflect further downside risk. We are not seeing contagion from the property sector into other parts of the Chinese economy. This suggests that the idiosyncratic policy pressures in China CRE have so far been contained by the authorities. Our China book outside CRE is performing well, and we have provided further disclosure in the materials.

We have proactively managed this portfolio through very difficult conditions for the sector and our exposures have reduced by more than 30% since the end of 2021 to $2 $7 billion.

Andy: Turning now to products. Third quarter cash management income was up 61%, and deposits were up 50%, as both businesses benefited from higher interest rates. This was supported by strong discipline on pricing and pass-through rate management. Trade was down 2%, on lower volumes, as trade active to a subdued, particularly in China and Hong Kong, as clients preferred local currency financing. Lending was down 26%, principally due to lower origination volumes in challenging markets.

Hi.

Speaker 4: transcript

Speaker 4: We continue to take a conservative approach and mark our books accordingly.

We continue to take a conservative approach and not all books accordingly.

Speaker 4: transcript

Speaker 4: We took a $186 million charge on China's CRE, mostly through top-ups on already defaulted account.

A $186 million charge on China, CRE nicely through top ups on already defaulted accounts.

Speaker 4: transcript

Speaker 4: Within this, we increase the management overlay by $42 million to $178 million to reflect further down side risks.

Within this we increased the management overlay by $42 million to a $178 million to reflect further downside risk.

Speaker 4: transcript

Speaker 4: We are not seeing contagion from the property sector into other parts of the Chinese economy. This suggests that the idiosyncratic policy pressures in China's CRE have so far been contained by the authorities.

We are not seeing contagion from the property sector into other parts of the Chinese economy. This suggests that the idiosyncratic policy pressures in China, CRE, so far being contained by the authorities.

Andy: Mortgage income was down 78%, reflecting market dynamics, including the prime cap in Hong Kong, which led to margin compression and accordingly, our decision to limit new origination. CCPL income was up 2% on higher volumes in part due to momentum in our mass retail partnerships, despite lower margins. The Treasury loss of $274 million was mainly driven by the impact of a higher rate environment on our hedge positions and a higher drought from deployment of the commercial surplus.

Speaker 4: transcript

Speaker 4: Our China Book Outside CRE is performing well and we have provided further disclosure in the material.

Our China book outside CRE is performing well and we have provided further disclosure in the materials.

Andy Halford: Turning to sovereign pressures, assuming higher rates for longer, a consequent further period of US dollar strength and more discerning capital markets, we are not out of the woods yet, notwithstanding the commendable efforts of affected markets and the IMF to improve the situation. In part due to proactive management of our sovereign exposures, we saw a net recovery of $7 million in Q3 as additional provisions in Nigeria were offset by recoveries in Pakistan and Sri Lanka. Exposures in Pakistan, Ghana, and Sri Lanka have reduced by more than half, about $5 billion since the end of 2021, and we continue to actively manage our position in other vulnerable markets. High-risk assets were up half a billion dollars in the quarter.

Turning to silver and pressures assuming higher rates for longer the cons.

Speaker 4: transcript

Speaker 4: turning the silver in pressures, assuming higher rates for longer, a consequent further period of US dollar strength, and more discerning capital markets. We are not out in the woods yet, not responding to the commendable efforts of affected markets and the IMF to improve the situation.

Conferred the periods of U S dollar strength and more to certainly in capital markets. We are not out of the woods, yet notwithstanding the commendable efforts of affected markets and the IMF to improve the situation.

Andy: Moving to other income. In financial markets, market volatility was lower, and 2022 was a strong comparator period. As a result, income of $1.3 billion with 8% lower year on year, or 6% lower, after adjusting for $28 million of one-off gains in 2022. Yet to date, FAM was flat, or up 7%, adjusting for $244 million of one-off gains in the prior period. Macro trading was down 11%, as FX, rates, and chordities saw lower income on reduced flows in less volatile market.

Speaker 4: transcript

Speaker 4: In part due to proactive management of our sovereign exposures, we saw a net recovery of $7 million in the third quarter. As additional provisions in Nigeria were offset by recoverers in Pakistan and Sri Lanka.

In part due to proactive management of our sovereign exposures, we saw a net recovery of $7 million in the third quarter as additional provisions in Nigeria were offset by recoveries in Pakistan and sort of anchor.

Exposures in Pakistan, and Ghana, and Sir Lanka have reduced by more than half about $5 billion. Since the end of 2021, and we continue to actively manage our position and other vulnerable markets.

Speaker 4: transcript

Speaker 4: The exposures in Pakistan, Ghana and Sri Lanka have reduced by more than half about $5 billion since the end of 2021, and we continue to actively manage our position in other vulnerable markets.

Speaker 4: transcript

Speaker 4: High-risk assets were up half a billion dollars in the quarter. The early alerts were up a billion dollars on new downgrades, including sovereigns, but this was partly offset by a half billion dollar reduction in credit grade 12 accounts and net stage 3 loans.

High risk assets were up half a billion dollars in the quarter early alerts were off $1 billion on new downgrades, including sovereigns, but this was partly offset by a half billion dollar reduction in credit grade 12 accounts and net stage three loans.

Andy Halford: Early alerts were up $1 billion on new downgrades, including sovereigns, but this was partly offset by a half billion dollar reduction in credit grade 12 accounts and net stage three loans. On an underlying basis, customer loans were up $2 billion or 1% to $281 billion. Higher trade loans, in part due to higher oil prices, offset small reductions in retail and wealth management. In retail, we continue to limit new origination in mortgages, which comprise about two-thirds of our total retail balance sheet due to unfavorable pricing dynamics. For the full year, we expect assets to grow on an underlying basis at a low double-digit rate. Overall, customer deposits were down 3% or $14 billion to $453 billion. Lower balances in cash management reflected business as usual or expected movements.

Andy: Credit markets was up 4%, as lower credit trading income on lower volatility was offset by stronger financing revenues from good deal execution. We also saw market share gains in G3 bond and loan markets, despite declining footprint market volumes overall. FM derives about 70% of its income from ongoing client liquidity and exposure management, including the business flows into FM from transaction banking. This flowing cut of $910 million was up 3% on a reported basis, reflecting our past investment in digital platforms and cross selling solutions. Conversely, the more episodic income of $343 million, which is more event and market market driven, was down 28% on a reported basis on subdued market volumes.

Speaker 4: transcript

Speaker 4: On an underlying basis, customer loans are up $2 billion or 1% to $281 billion.

On an underlying basis customer loans were up $2 million or 1% to $281 billion.

Speaker 4: transcript

Speaker 4: Higher trade loans in part due to higher oil crisis offsets more reductions in retail and wealth management.

Higher trade loans in part due to high oil prices offset small reductions in retail and wealth management and.

Speaker 4: transcript

Speaker 4: In retail, we continue to limit new origination mortgages, which comprise about two thirds of our total retail balance sheet, due to unfavorable pricing dynamics.

In retail we continue to limit new origination in mortgages, which comprise about two thirds of our total retail balance sheet due to unfavorable pricing dynamics.

Speaker 4: transcript

Speaker 4: but the full year we expect assets to go on an underlying basis at a low single digit rate.

So the fully we expect assets to go on an underlying basis at a low single digit rate.

Overall customer deposits were down 3% or $14 billion to $463 billion.

Speaker 4: transcript

Speaker 4: Overall, customer deposits were down 3% or $14 billion to $453 billion.

Lower balances in cash management reflected business as usual or expected movements.

Speaker 4: transcript

Speaker 4: low-abounces in cash management, reflected businesses usual, or expected move.

Andy Halford: The decline in financial markets and treasury is mainly due to the decision to manage our LCR down towards more usual levels. As a result, the LCR ended up at 156%, down 8 percentage points in the quarter. These CCIB outflows were in part offset by an increase in retail time deposits. Time deposits are a high-quality source of liquidity, and in our major retail markets are particularly return accretive when used as an anchor product for affluent relationships. Risk-weighted assets of $242 billion were down 3% or $8 billion in the quarter. Optimizations in CCIB and treasury model benefits, the Bohai impairment and favorable FX movements more than offset higher market RWA asset growth and mix changes and a small amount of credit migration.

Speaker 4: transcript

Speaker 4: The decline in financial markets and treasury is made due to the decision to manage RLCR down towards more usual levels.

The decline in financial markets and Treasury is mainly due to the decision to manage our LCR down towards more usual levels. As a result, the LCR ended up at 156% down eight percentage points in the quarter.

Andy: Wealth management momentum was encouraging, as the recovery here gained pace. Income of $526 million was up 18% on last year and up 7% quarter on quarter, our best quarter in wealth since the first quarter of 2022. Performance was broad based with all main wealth management product lines growing income year on year and quarter on quarter. Our seven largest wealth markets grew income at double digit rates. Treasure products and bank assurance were up 14% and 30% respectively.

Speaker 4: transcript

Speaker 4: As a result, the LCR ended up at 156% down 8 percentage points in the quarter.

Speaker 4: transcript

Speaker 4: These CCIB outflows were in partals fed by an increase in retail time deposit.

<unk> outflows were in part offset by an increase in retail time deposits.

Speaker 4: transcript

Speaker 4: The 90-folds are a high-quality source of liquidity, and in our major retail markets are particular return accretive when used as an anchor product for affluent relationships.

Time deposits are a high quality source of liquidity and in our major retail markets. A particular return accretive when used as an anchor product for affluent relationships.

Speaker 4: transcript

Speaker 4: Risk weighted assets of $242 billion were down 3% or $8 billion in the court.

Risk weighted assets of $242 billion were down 3% or $8 billion in the quarter.

Andy: Encouragingly, both managed investments and secured wealth lending also picked up. Affluent net new money more than doubled to nearly $18 billion, which is equivalent to around 9% of affluent AUM on an annualized basis. The addition of new to bank affluent customers continued at pace, with account openings in the third quarter at the highest level since 2021. Our success in monetizing these new affluent relationships has driven the strong performance in wealth, year to paid, and is expected to underpin performance in future quarters.

Speaker 4: transcript

Speaker 4: optimizations in CCIB and Treasury, model benefits, the Boehme Pairment, and favourable FX movements, more than offset higher market RWA, asset growth and mix changes and a small amount of the credit migration.

Optimizations in CIB and treasury multiple benefits to both high impairment and favorable FX movements more than offset higher market <unk> asset price and mix changes and a small amount of credit migration.

Andy Halford: Around $2 billion of further CCIB optimizations means we have nearly hit our 2024 optimization target of $22 billion. As we said at H1, if we can do more here, we will. Looking ahead, we think RWA will be broadly stable this year, so around $245 billion at year-end. The CET1 ratio of 13.9% was down 11 basis points in the period. In Q3, profits and lower RWA were more than offset by distributions, including the full impact of the $1 billion share buyback announced at H1 and a larger accrual for the final dividend for 2023.

Speaker 4: transcript

Speaker 4: Around $2 billion of further CCIB optimizations, means we have nearly hit our 2024 optimization target of $22 billion. As we said at a half year, if we can do more...

Around $2 billion of servicing CIB optimizations means we have nearly hit our 2020 for optimization target of 22 billion as.

As we said at the half year, if we can do more here we will.

Speaker 4: transcript

Speaker 4: Looking ahead, we think RWA will be broadly stable this year, so around $245 billion of year-end.

Looking ahead, we think <unk> will be broadly stable this year, so around $245 billion at year end.

Andy: Turning now to the market view, most of our main markets saw good momentum, albeit with strong rate tailwinds. Singapore and Hong Kong were standouts, with year to date income up 31% and 25% respectively, delivering ROTE of 22% in Hong Kong and nearly 30% in Singapore. Across Asia, our income was up 18% and our underlying profits up 37% year to date. The performance was broad based with eight markets delivering record third quarter income on a year to date basis, and 11 of 17 markets achieving a year to date ROTE above 12%.

Speaker 4: transcript

Speaker 4: The CT1 ratio of 13.9% was down 11 basis points in the perit.

CET one ratio of 13, 9% was down 11 basis points in the parrot.

Speaker 4: transcript

Speaker 4: In the third quarter, profits and lower RWA were more than offset by distributions, including the full impact of the 1 billion share-by-back announced at the half-year and a larger approval for the final dividend for 2023.

In the third quarter profits and lower auto V VI will more than offset by distributions, including the full impact of the $1 billion share buyback announced at the half year and a larger accrual for the final dividend for 2023.

Andy Halford: The China Bohai Bank impairment was a net 18 basis points impact to CET1 as the $697 million impairment was partly offset by an RWA release of $1.7 billion. Since H1, we have completed the $1 billion buyback announced in February and have completed around $800 million of the $1 billion buyback announced in July. Several factors could move the CET1 as we approach the year-end, including RWA inflation from credit migration, business growth, and the completion of the sale of the aviation business. In the light of these factors, we will reflect on further distributions at the year-end, balancing our investment and return aspiration with the need to maintain a robust capital position. Just turning for a moment to what we are seeing since the end of Q3.

Speaker 4: transcript

Speaker 4: The Bohyne Pairment was a net 18 basis point impact to CT1 as the $697 million in Pairment with partly offset by an RWA release of $1.7 billion.

The boho impairment was a net 18 basis point impact to CET one as the.

$697 million impairment was partly offset by an all time due to a release of $1 $7 billion.

Speaker 4: transcript

Speaker 4: Since the half year, we have completed the $1 billion buyback announced in February and have completed around $800 million of the $1 billion buyback announced in July .

Since the half year, we have completed the $1 billion buyback announced in February and have completed around $800 million of the $1 billion buyback announced in July.

Andy: In Africa and the Middle East, our income was up 30% and our operating profit up 54% year to date, which was particularly commendable, given the number of sovereign challenges in the region. The UAE was a particular standout, with year to date income of $612 million, up nearly 40% and a ROTE approaching 25%.

Speaker 4: transcript

Several factors could lead to see too honest when we approached the year end, including <unk> inflation from credit migration and business growth and the completion of the sale at the aviation business.

Speaker 4: transcript

Speaker 4: In the light of these factors, we will reflect on further distributions at the R&B balancing our investment and return aspiration with the need to maintain a robust capital position. Just turning for a moment to what we are seeing since the end of the third quarter.

In the light that these factors will reflect on sort of the distributions at the year and balancing our investments and return exploration with the need to maintain a robust capital position just turning for a moment to what we are seeing since the end of the third quarter.

Andy: Looking at China, as Bill said earlier, notwithstanding a difficult domestic environment, our China franchise continues to do very well. Our China franchise is not a proxy for China's domestic economic performance, but is instead a proxy to the ongoing opening up of China's economy. Our strategy is to capture the trade, investment, financial market and wealth flows in and out to China that derive from this opening, and China's greater participation in the global economy.

Andy Halford: In October, FM trading momentum improved as volatility has risen, although new deal financing and primary issuance levels are currently subdued. FM is a diverse business which can generate sustainable growth through the cycle. The trading business does better in more volatile markets, whereas the financing and capital markets businesses tend to do better in more stable markets. Trade exposures remain resilient, with further growth in working capital trade loans. In Wealth Management, market sentiment has become more challenging recently. However, October momentum is broadly in line with September, although do remember that we usually see some seasonality in wealth in the Q4 as we close out the year. Our guidance for 2023 is for the most part unchanged. We still expect 2023 income to increase in the 12% to 14% range at constant currency.

Speaker 4: transcript

Speaker 4: In October , FM trading momentum improved as volatility has risen. Although new deal financing and primary issue levels are currently subdued.

They don't tell you Bob FM trading momentum improved as volatility has risen.

Although new deal financing I'm primary issuance levels are currently subdued.

Speaker 4: transcript

Speaker 4: FAM is a diverse business which can generate sustainable growth through the site.

FM is a diverse business, which can generate sustainable growth through the cycle.

Andy: On a year-to-date basis, our overall income from our China business, the $2.5 billion, was up 25%, comprising 2% growth inside and nearly 50% growth outside China. Our focus on the new economy is paying off, as the revenue contribution from clients in this sector is increasing at a faster rate than traditional sectors and is now approaching half a new corporate origination. Year-to-date China-related profits are up threefold, notwithstanding taking further impairment charges in connection with the CRE sector. We're therefore making good progress on our aspiration to deliver $1.4 billion of profit from China in 2024 compared with the $0.7 billion but we delivered in 2021.

Speaker 4: transcript

Speaker 4: Trading business does better in more volatile markets, whereas the financing and capital markets businesses tend to do better in more stable markets.

Trading business does better in more volatile markets, whereas the financing and capital markets businesses tend to do better and more stable markets trade exposures remained resilient with further growth in working capital trade loans.

Speaker 4: transcript

Speaker 4: Trade exposures remain resilient, with further grace in working capital trade loans.

Speaker 4: transcript

Speaker 4: In-wealth management, market sentiment has become more challenging recently. However, October Momentum is broadly in line with September , although do remember that we usually see some seasonality in-wealth in the fourth quarter as we close out the year. Our guidance for 2023 is...

In wealth management market sentiment has become more challenging recently, however October momentum is broadly in line with September although you do remember that we usually see some seasonality in wealth in the fourth quarter as we close out the year.

Our guidance for 'twenty to 'twenty three is for the most part unchanged. We still expect 2023 income to increase in the 12% to 14% range at constant currency.

Speaker 4: transcript

Speaker 4: We still expect a 20-23 income to increase in the 12-14% range at constant current.

Andy Halford: We now expect a full year 2023 average NIM approaching 170 basis points. Our jaws guidance remains around 4% for 2023, excluding the levy at constant currency and with the Q4 cost run rate expected to be similar to the Q2. We continue to expect credit impairment to land within our 17 to 25 basis point range. We now expect an underlying effective tax rate of around 30% in 2023. We will continue to operate dynamically within the full 13% to 14% CET1 target range. With one quarter to go, we remain on track to deliver 10% ROTCE in 2023. In conclusion, we have delivered a solid Q3 performance with strong progress on our five strategic actions. Our liquidity profile remains strong and our capital levels remain robust.

Speaker 4: transcript

Speaker 4: We now expect to fool the 2023 average new approaching 170 basis points.

We now expect full year 2023 average NIM approaching 170 basis points.

Speaker 4: transcript

Speaker 4: Our George guidance remains around 4% for 2023, excluding the levee at constant currency, and with the fourth quarter cost-rom rate expected to be similar to the second quarter.

Our jaws guidance remains around 4% for 2023, excluding levy at constant currency and with the fourth quarter cost run rate expected to be similar to the second quarter.

Andy: 22 expenses, costs of $2.8 billion were up 8% resulting in 1% negative jewels in the quarter. Importantly, as guided, costs came in below the second quarter run rate. We said we wouldn't necessarily deliver positive jewels in every reporting period, albeit on a year-to-date basis we have delivered around 4% positive jewels which remains our full-year target. The main drivers of the cost increase continue to be inflation of around 4% and investments into business growth in FM, wealth, sustainable finance and China, all of which will help deliver sustainable top-line growth, reducing reliance on interest rate increases to growing income.

Speaker 4: transcript

Speaker 4: We continue to expect cruise impairment to land within our 17 to 25 basis point range.

We continue to expect credit impairment to land within our 17th 25 basis point range.

Speaker 4: transcript

Speaker 4: We now expect an underlying effect to tax rate of around 30% in 2023.

We now expect an underlying effective tax rate of around 30% in 2023.

Speaker 4: transcript

Speaker 4: We will continue to operate dynamically within the full 13 to 14% CET1 target range.

We'll continue to operate dynamically within the full 13%, 14% CET one target range.

Speaker 4: transcript

Speaker 4: With one quarter to go, we remain on track for the deliver 10% road to in 2023.

With one quarter to go we remain on track to deliver 10% rote in 2023.

In conclusion, we have delivered a solid third quarter performance with strong progress on our five strategic actions.

Speaker 4: transcript

Speaker 4: In conclusion, we have delivered a solid third quarter performance with strong progress on our five strategic action.

Speaker 4: transcript

Speaker 4: Our liquidity profile remains strong, and our capital evils remain horrified.

Andy: For similar reasons, we continue to invest at pace in our digital initiatives with strong momentum in trust and mocks, justifying our decision to invest into these businesses some time ago. Investment spend was part offset by a further $67 million of cost efficiencies and we are now over halfway to our 2024 cost save target of $1.3 billion. In retail, we are closing in on our 2024 $500 million cost save aspiration, having delivered two-thirds so far.

Our liquidity profile remains strong and our capital levels remain robust.

Andy Halford: As Bill said, we remain optimistic on the outlook for our markets, which we expect to continue to grow at attractive rates, notwithstanding some near-term pressures in China CRE and some weaker sovereign markets. As we look ahead, we're confident that the investments we have made in China, wealth, financial markets, and our digital platforms will support future top line growth in a lower rate environment. Standing back, this is a business that has performed well through challenging markets in recent years. After 16% income growth last year and assuming per our guidance 12% to 14% this year and 8% to 10% next year, we are feeling positive about the outlook as we push through the 10% ROTCE level for the first time in many years and on to 11% and above thereafter. With that, I will hand back to the operator for Q&A.

Speaker 4: transcript

Speaker 4: Bill said, we remain optimistic on the outlook for our markets, which we expect to continue to grow at attractive rates, notwithstanding some near-term pressures in China's CRE and some weaker sovereign markets.

As Bill said, we remain optimistic on the outlook for our markets, which we expect to continue to grow at attractive rates notwithstanding some near term pressures in China, CRE, and some weak sulfur and markets as.

Speaker 4: transcript

Speaker 4: As we look ahead, we're confident that the investments we have made in China, wealth, financial markets and the digital platforms will support future top line growth in a lower rate environment.

As we look ahead, we are confident that the investments we have made in China wealth financial markets and our digital platforms will support future top line growth in a lower rate environment.

Speaker 4: transcript

Speaker 4: Standing back, this is a business that has performed well through challenging markets in recent years.

Standing back. This is the business has performed well through challenging markets in recent years.

Andy: The credit impairment charge at $294 million was up $62 million, demonstrating the resilience of our portfolios notwithstanding further pressure in China's CRE. Retail impairment of $115 million was driven by expected portfolio flows into default and we saw an additional $30 million charge in ventures mainly due to mocks growth. We did not expect the policy pressures in China's CRE to ease in the near term and with investor confidence at very low levels in China, we are not expecting a swift recovery.

Speaker 4: transcript

Speaker 4: After 16% income growth last year, and assuming per our guidance 12 to 14% this year and 8 to 10% next year, we are feeling positive about the outlook. As we push through the 10% roti level for the first time in many years, and on to 11% and above thereafter. With that, I will hand back to the operator for Q&A.

After 16% income growth last year, and assuming our guidance, 12% to 14% this year and 8% to 10% next year, we are feeling positive about the outlook as we push through the 10% royalty level for the first time in many years and almost 11% and above thereafter with.

That I will hand back to the operator for Q&A.

Operator: Thank you both for the presentation. As a reminder, please submit your questions via the webcast or by pressing star one on your telephone keypad to join the queue. We will begin by taking phone questions and your first question comes from the line of Jason Napier from UBS. Your line is open.

Speaker 2: transcript

Speaker 2: Thank you both for the presentation and as a reminder, please submit your questions via the webcast or by pressing star one on your telephone keypad to join the queue.

Thank you both for the presentation and as a reminder, please submit your questions via the webcast or by pressing star one on your telephone keypad to join the queue.

Andy: We have proactively managed this portfolio through very difficult conditions for the sector and our exposures have reduced by more than 30% since the end of 2021 to $2.7 billion today. We continue to take a conservative approach and mark our books accordingly. We took a $186 million charge on China's CRE mostly through top-ups on already defaulted accounts. Within this, we increase the management overlay by $42 million to $178 million to reflect further down side route.

Speaker 2: transcript

Speaker 2: We will begin by taking phone questions and your first question comes from the line of Jason Napier from UBS. Your line is open.

We will begin by taking final questions and your first question comes from the line of Jason Napier from UBS. Your line is open.

Jason Napier: Good morning. Thank you for taking my questions. Two on net interest margins. The first around LCR management. I wonder whether you might just expand a little bit on what we've been told so far, and in particular focusing on what it is you're looking to do in Q4. Is it a matter of mix of HQLA? Is it level? You know, how low do you think the LCR ought to drift to optimize that piece of the equation? And then second, perhaps a question for Bill, just taking a step back. You know, as you say, markets quite clearly are coming home to the view that we're gonna have rates that are higher for longer.

Speaker 5: transcript

Speaker 5: Good morning, thank you for taking my question. Two on net interest margins.

Good morning, Thank you for taking my questions two on net interest margins.

Speaker 5: transcript

Speaker 5: The first, around LCR management, I wonder whether you might just expand a little bit on what we've been told so far, and in particular, focusing on what it is you're looking to do in the fourth quarter. Is it a matter of mix of HQLA? Is it level? How low do you think the LCR ought to drift to optimize that piece of the equation? And then second, perhaps a question for Bill, just taking a step back.

First around LCR management I Wonder if you might just expand a little bit on what we've been told.

So far.

Particular, focusing on what it is youre looking to do in the fourth quarter is it is it a metro mix HLA is it level.

How low do you think the LCR or to drift to optimize that piece of the equation.

Andy: We are not seeing contagion from the property sector into other parts of the Chinese economy. This suggests that the idiosyncratic policy pressures in China's CRE has so far been contained by the authorities. Our China book outside CRE is performing well and we have provided further disclosure in the materials. We are not out of the woods yet, not responding to the commendable efforts of affected markets and the IMF to improve the situation.

And then second perhaps a question for Bill just taking a step back and.

Speaker 5: transcript

Speaker 5: As you say, markets quite clearly are coming home to the view that we're going to have great to the higher for longer. If most of the asset base, other than the treasury holdings are swapped back to floating,

As you say markets quite clearly.

Coming home to the fees that we're going to have great to the highest Colombia, if most of the asset base other than the Treasury holdings are swapped back to floating.

Jason Napier: If most of the asset base other than the Treasury holdings are swapped back to floating, I just wonder, is there a tailwind into next year from asset yields, you know, 5.1% yield in Q3? You know, certainly for developed markets is a pretty good income yield. Where does that go absent changes in pricing over the next twelve months in terms of just asset yield on its own? Thank you.

Speaker 5: transcript

Speaker 5: Is there a tailwind that's next year from asset yields? 5.1% yield in Q3. So if you're to develop markets, is it a pretty good income yield? Where does that go? Add up some changes in pricing over the next 12 months in terms of just asset yield on the phone. Thank you.

Just wondering is there a tailwind into next year from asset yields five 1% yield in Q3.

Sydney for the developed markets is a pretty good income yield with is that good.

Absent changes in pricing over the next 12 months in terms of just exit deals on that side. Thank you.

Andy: In part due to proactive management of our sovereign exposures, we saw a net recovery of $7 million in the third quarter as additional provisions in Nigeria were offset by recoverers in Pakistan and Sri Lanka. Exposures in Pakistan, Ghana and Sri Lanka have reduced by more than half about $5 billion since the end of 2021 and we continue to actively manage our position in other vulnerable markets. High risk assets were up half a billion dollars in the quarter.

Andy Halford: Okay, Jason, let me take the first one and then Bill the second. On the LCR, if you go back in time, we've been operating more in the mid-140% range. Earlier this year with other events going on, we bolstered that up to the 165 or thereabout level. As you can see from this print, we have slightly reduced that down to about 156%, I think it was, at the end of Q3. I think our intent will be to continue to normalize that over the next quarter in particular. Now what we typically do in LCR obviously has many moving parts.

Speaker 4: transcript

Speaker 4: Okay, Jason, let me take the first one and then fill the second. So on the LCR, if you go back in time, we've been operating more in the mid 140% range.

Okay, Jason Let me, let me take the first one and then the second.

So on the LLC.

If you go back in time, we've been operating more in the mid 40% range.

Speaker 4: transcript

Speaker 4: Earlier this year with other events going on, we bolstered that up to the 165 or thereabouts level. And as you can see from this print, we have slightly reduced that down to about 156. I think it was at the end of Q3. And I think our intent will be to continue to normalise that over the next quarter in particular.

Earlier this year with other events going on we both stood that up to $1 65.

<unk> level.

As you can see from this print we have slightly reduced that.

Down to about 156, I think it was at the end of Q3, and I think our intent will be to continue to normalize that.

Andy: The early alerts were up a billion dollars on new downgrades including sovereigns, but this was partly offset by a half billion dollar reduction in credit grade 12 accounts and net stage 3 loans. On an underlying basis, customer loans were up 2 billion dollars or 1% to $281 billion. Higher trade loans, in part due to higher oil prices, offsets more reductions in retail and wealth management. In retail, we continue to limit new origination and mortgages which comprise about two thirds of our total retail balance sheet due to unfavorable pricing dynamics.

Over the next quarter in particular now we typically youll see obviously has many moving parts at this point I don't play base difficulty about the assets themselves.

Speaker 4: transcript

Speaker 4: Now what we typically do, you also obviously have many moving pots, it is pot, the net outflow base, it is pot the about the assets themselves, but where we can do, we are taking out the lower returning of the Treasury assets.

Andy Halford: It is partly net outflow based, it is partly about the assets themselves, but where we can do, we are taking out the lower returning of the treasury assets. That was something that happened probably later in Q3. To some of the NIM support for Q4, we will see more benefit of that coming through for the whole of Q4 from the Q3 actions plus the Q4 actions. Overall, we are moderating the LCR back nearer to the sorts of levels that we have historically been at. Bill, did you want to pick up on the asset side?

We can do we are taking the low returning.

The treasury assets.

Speaker 4: transcript

Speaker 4: That was something that happened probably later in the third quarter, so to some of the NIMS support for the fourth quarter, we will see more benefit of that coming through for the whole of the fourth quarter from the third quarter actions plus the fourth quarter actions. But overall, we are moderating the LCR back nearer to the sorts of levels that we have historically been at.

That was something that happened probably late in the third quarter.

The NIM support for the fourth quarter, we will see more benefit of that coming through for the whole of the fourth quarter from the third quarter actions plus the fourth quarter actions, but overall we are moderating.

Andy: For the full year, we expect assets to go on an underlying basis at a low single digit rate. Overall, customer deposits were down 3% or $14 billion to $453 billion. Lower balances in cash management reflected business as usual or expected movements. The decline in financial markets and treasury is mainly due to the decision to manage our LCR down towards more usual levels. As a result, the LCR ended up at 156% down 8 percentage points in the quarter.

The LCR back nearer to the sorts of levels that we have historically been at.

Speaker 4: transcript

Speaker 4: Bill, did you want to pick up on the asset side? Yeah, thanks for the question.

Bill could you want to pick up on the asset side.

Bill Winters: Yeah, Jason, thanks for the question. Obviously, there's lots of follow-through from the idea of higher for longer. Andy and I both commented on the pressures that this puts on, in particular, dollar borrowings for our sovereign clients and some corporations. We would also expect that this would keep the credit spreads on the assets across our portfolio at relatively high levels. As we both pointed out, the credit portfolio itself is in very good shape, with the obvious exception of China real estate, which is not interest rate driven. It's obviously price, volume, and policy driven.

Yes, Jason Thanks for the question.

Speaker 3: transcript

Speaker 3: Obviously, there's lots of follow-through from the idea of higher for longer. Andy and I both commented on the pressures of this foot in particular dollar borrowings for our sovereign clients and some corporations.

Obviously, there is lots of follow through from from the idea of higher for longer.

Andy and I, both commented on the pressures that this puts.

In particular dollar dollar borrowings for our sovereign clients and some corporations.

Speaker 3: transcript

Speaker 3: We would also expect that this would keep the credit threads on the assets across our portfolio at relatively high levels. And as we both pointed out, the credit portfolio itself is a very good shape with the obvious exception of China Real Estate, which is not just right driven. It's obviously price and volume and policy driven. So we would expect that there would be some reasonably interesting opportunities.

We would also expect that this.

Andy: These CCIB outflows were in part all set by an increase in retail time deposits. Time deposits are a high quality source of liquidity and in our major retail markets are particular return accretive when used as an anchor product for affluent relationships. Risk-related assets of $242 billion were down 3% or $8 billion in the quarter. Optimizations in CCIB and treasury, model benefits, the bow-high impairment and favourable FX movements, more than offset higher market RWA, asset growth and mix changes and a small amount of the credit migration.

Keep the credit spreads on the assets across our portfolio at relatively high levels.

As we both pointed out the credit portfolio itself isn't very good shape with the obvious exception of China real estate, which is not interest rate driven.

Obviously price.

Price and volume and policy driven.

Bill Winters: We would expect that there would be some reasonably interesting opportunities to take advantage of higher yields in asset markets, in particular in areas where we've been relatively underweight. Andy mentioned the continued build-out of our consumer credit portfolio, where certainly in the personal lending space, we would expect to see more attractive yields on our assets as we grow that book. I would point to other areas in the corporate space where we think we'll be able to take advantage of higher yields. Again, benefiting from the fact that we've got a very clean book going into what feels like a period of slightly more stress in markets ranging from leveraged finance to general corporate credit.

So.

We would expect that there will be some some reasonably interesting opportunities.

Speaker 3: transcript

Speaker 3: to take advantage of higher yields in asset markets, in particular in areas where we've been relatively underway. And you mentioned the

To take advantage of higher yields and asset markets in particular in areas, where we've been relatively underweight Andy mentioned the.

Speaker 3: transcript

Speaker 3: The continued build out of our consumer credit portfolio where certainly in the personal lending space, we would expect to see more attractive yields on our assets as we draw that book. And I would point to other areas in the corporate space where we think we'll be able to take advantage of higher yield.

The continued build out of our consumer credit portfolio. We're certainly in the personal lending space, we would expect to see more attractive yields on our assets as.

Andy: Around $2 billion of further CCIB optimizations means we have nearly hit our 2024 optimization target of $22 billion. As we said at half year, if we can do more here, we will. Looking ahead, we think RWA will be broadly stable this year, so around $245 billion of year end. The CT1 ratio of 13.9% was down 11 basis points in the period. In the third quarter, profits and lower RWA were more than offset by distributions, including the full impact of the 1 billion share buyback announced at the half year, and a larger approval for the final dividend for 2023.

As we grow that book and I would point to other areas in the corporate space, where we think we'll be able to take advantage of higher yields.

Speaker 3: transcript

Speaker 3: Again, benefiting from the fact that we've got a very clean book going into what feels like a period of slightly more stress in markets ranging from leverage for an advocacy to general corporate credit. I think I'm addressing the question you asked, but that

Again benefiting from the fact that we've got a very clean books going into what feels like a period of <unk>.

The more stress and in markets ranging from leveraged finance to general corporate credit I think I'm addressing the question that you asked.

Bill Winters: I think I'm addressing the question that you asked, but that, on balance, I think we see the higher for longer as a positive thing, but are fully aware of the pressures that come with it.

Speaker 3: transcript

Speaker 3: It unknowns. I think we see there higher prolongers as a positive thing, but we're fully aware of the pressures that come with it.

So on balance I think we see there are higher for longer as a positive thing but.

Fully aware of the pressures that come with it.

Jason Napier: Thank you, Bill. Just to check that I understand. Aside from sort of mix change, you know, we should really think about the loan book as a fully floating artifact, and it's kind of done its thing for now. Is that right?

Thank you Bill so just to just to check that I understand aside from sort of mix change.

Speaker 5: transcript

Speaker 5: Thank you Bill. So just to check that I understand, aside from sort of mixed change, we should really think about the loan book as a fully floating artifact, and it's kind of done a thing for now.

Really think about the loan book is a fully floating artifact.

The other thing pronounced that right.

Bill Winters: If you're talking about interest rates, yes. I mean, the duration we're taking are clearly affected by the hedges and the composition of our treasury portfolio.

Speaker 5: transcript

Speaker 5: But if you're talking about intruly case, yes, I mean, the duration of taking our all clearly affected by the edges and the composition of our tertiary portfolio. Got it.

But if youre talking about interest rates.

Andy: The Bohine payment was a net 18 basis point impact for CT1, as the $697 million in payment was partly offset by an RWA release of $1.7 billion. Since the half year, we have completed the $1 billion buyback announced in February, and have completed around $800 million of the $1 billion buyback announced in July.

The duration.

Our clear.

Clearly affected by the hedges.

The composition of our Treasury portfolio.

Jason Napier: Got it. Thanks very much. That's helpful.

Got it thanks very much that's helpful.

Operator: Your next question comes from the line of Joseph Dickerson from Jefferies. Your line is open.

Your next question comes from the line of Joseph Dickerson from Jefferies. Your line is open.

Speaker 6: transcript

Speaker 6: Your next question comes from the line. Have Joseph Dickerson from Jeffries? Your line is open. Hi, good morning. Thanks for taking my question. Can you just explain in layman's terms what the system migration is the four basis points of NEM? Just we...

Joseph Dickerson: Hi, good morning. Thanks for taking my question. Can you just explain in layman's terms what the system migration is, the four basis points of NIM, just so we can understand why it's a one-off. I've not really come across that. Staying on the NIM, you had EIR adjustment in Singapore. Is that something that you would expect to repeat? Or is that just a slow grind? Then I guess overlaying all of this, you know, you've alluded to putting hedges on later in the year. Can you just elaborate on what your hedging policy actually is? Just so we can have some clarity. Many thanks.

Hi, Good morning. Thanks for taking my question can you just explain in layman's terms, what the system migration.

Andy: Several factors could move the CT1s. We approach the year end, including RWA inflation from credit migration and business growth and the completion of the sale of the aviation business. In the light of these factors, we will reflect on further distributions at the year end, balancing our investment and return aspiration with the need to maintain a robust capital position.

Is the four basis points of NIM.

Just so we can understand why why it's the run off one off I'm not really come across that staying on the NIM.

You had <unk> adjustment and Singapore is that something that you would expect to repeat.

Or is that just a slow growing.

Andy: Just turning for a moment to what we are seeing since the end of the third quarter. In October, FAM trading momentum improved, as volatility has risen, although new deal financing and primary issuance levels are currently subdued. FAM is a diverse business, which can generate sustainable growth through the cycle. The trading business does better in more volatile markets, whereas the financing and capital markets businesses tend to do better in more stable markets.

And then I guess overlaying all of this you've alluded to putting hedges on.

Later in the year can you just elaborate on what your hedging policy actually is just so we can have some clarity many thanks.

Andy Halford: Okay, Joseph. Let me pick those up. The one-off adjustment in NIM, the origin of that was changing out a system. The system made visible a data feed that we had not been previously taking into account in the NIM calculation, which if we had done, we would have made a small adjustment in several prior quarters. We picked that up, and therefore we had a several quarter correction to make in the one quarter, and therefore we have pulled it out as being a one-off because its impact actually is not unique to the single quarter. It is correcting for several quarters prior. That is by far the biggest component. On the hedges, we, as I think we've talked about previously, a couple of years ago, we put in place essentially one longer term structural hedge and two shorter term hedges.

Yes. Thank you Joseph So let me let me pick the so the one off adjustment in the origin of that was changing out eight system.

Speaker 4: transcript

Speaker 4: Yep, okay, Joseph, so let me pick those up. So the one off adjustment in them, the origin of that was changing out a system. The system made visible a data feed that we had not been previously taking into account in the name calculation, which if we had done, we would have made a small adjustment in several prior quarters.

Just made visible data feeds that we have not been previously taking into account in the NIM calculation, which if we had done we would have made a small adjustment in several prior quarters.

Andy: Trade exposures remain resilient with further growth in working capital trade loans. In-wealth management, market sentiment has become more challenging recently. However, October momentum is broadly in line with September, although do remember that we usually see some seasonality in-wealth in the fourth quarter as we close out the year.

Speaker 4: transcript

Speaker 4: We picked that up and therefore we had a several quarter correction to make in the one quarter and therefore we have pulled it out as being a one-off because its impact actually is not unique to the single quarter. It is correcting for several quarters prior.

Pick that up and therefore, we had a several quarter correction to make in the one quarter and therefore, we have pulled it out as being a one off because its impact actually is not unique to the single quarter. It is correcting for several quarters.

Andy: Our guidance for 2023 is for the most part unchanged. We still expect a 20-23 income to increase in the 12-14% range at constant currency. We now expect a full year 2023 average name approaching 170 basis points. Our Jaws guidance remains around 4%, for 2023, excluding the levy at constant currency, and with the fourth quarter cost-run rate expected to be similar to the second quarter. We continue to expect cruise impairment to land within our 17-25 basis point range.

Speaker 4: transcript

Speaker 4: That is by far the biggest component. On the hedges, we, as I think we thought about previously, a couple of years ago, we put in place essentially one longer term structural hedge and two shorter term hedges.

That is the biggest component.

Andy Halford: On the hedges, we, as I think we've talked about previously, a couple of years ago, we put in place essentially one longer term structural hedge and two shorter term hedges.

On the hedges we.

I think we've talked about previously a couple of years ago, we put in place.

One longer term structural hedge and two shorter term.

Andy Halford: Of the shorter term hedges, one retired in February, and the other one retires in the coming February. Our intent is at least one of those we will be building up to replace given that rates now are so much higher, and that will provide more robustness in the event that the rates do peak and reduce. We'll get the benefit of the drag being reduced, and that will be part of the reason why we're comfortable with the income growth projections we've got for next year, and we'll lock in to the higher rates that are in the market at the moment.

Both the shorter term hedges one Richard.

Speaker 4: transcript

Speaker 4: Of the shorter term hitches, one retired in February and the other one retires in the February coming and our intent is at least one of those we will be building up to replace given that rates now are so much higher and that will provide more robustness in the events that their rates do peak and reduce.

February and the other one was in the February coming and our intent is at least one of the things we will be building to replace given that rates now so much higher and that will provide more robustness in the event.

Andy: We now expect an underlying effective tax rate of around 30% in 2023. We will continue to operate dynamically within the full 13-14% CET-1 target range. With one quarter to go, we remain on track for the deliver 10% row T in 2023.

But rates do peak and reduce so we'll get the benefit of the.

Speaker 4: transcript

Speaker 4: So we'll get the benefit of the drag being reduced and that will be part of the reason why we're comfortable with the income growth projections we've got for next year and we're locking to the higher rates that are in the market at the moment.

Drank being reduced and that will be part of the reason why we're comfortable with the income growth projections, we've got for next year and will relocate.

The high rates that are in the market.

Movement.

Andy: In conclusion, we have delivered a solid third quarter performance with strong progress on our five strategic actions. Our liquidity profile remains strong, and our capital evils remain horrified. First, as Bill said, we remain optimistic on the outlook for our markets, which we expect to continue to grow at attractive rates, notwithstanding some near-term pressures in China's CRE and some weaker, sovereign markets. As we look ahead, we are confident that the investments we have made in China, wealth, financial markets and our digital platforms will support future top-line growth in a lower rate environment.

Joseph Dickerson: Many thanks. Just on the EIR adjustment in Singapore, is that something that you see? It wasn't that meaningful, but nevertheless, would be helpful to have any clarification there as to if that's something that's gonna, you know, create a modest headwind to the margin going forward in other jurisdictions or also Singapore.

Many thanks, and just on the <unk> adjustment in Singapore, that's something that you see it wasn't that meaningful.

Speaker 6: transcript

Speaker 6: and just on the EIR adjustment in Singapore, do you think that's something that you see?

Nevertheless.

Would be helpful to have any any clarification, there is that something thats going up.

Some modest headwind to the margin going forward in other jurisdictions are also Singapore.

Andy Halford: Yeah. I mean, the EIR is an adjustment that is made off a sort of actuarial valuation from time to time. It was slightly bigger this time around, and it is a correction that is done that affects prior quarters. Again, because it was otherwise gonna be hitting the one quarter when it actually represents more than one quarter. That is why we pulled it out.

Speaker 4: transcript

Speaker 4: Yeah, I mean the EIR is an adjustment that is made of a sort of actuarial valuation from time to time. It was slightly bigger this time around and it is a correction that is done. There's effects prior quarters, so again, because it was otherwise going to be hitting the one quarter when it actually represents more than one quarter, that is why we pulled it out.

Yes.

He.

Is an adjustment that is made up of sort of actuarial valuation.

Two time it was slightly bigger this time around.

Correction that he has done this effects prior quarters. So again, because it was otherwise going to be hitting the one quarter. When it's actually represents more than one quarter and that is why we pulled it out.

Andy: Standing back, this is a business that has performed well through challenging markets in recent years. After 16% income growth last year, and assuming per our guidance 12 to 14% this year and 8 to 10% next year, we are feeling positive about the outlook as we push through the 10% roti level for the first time in many years and on to 11% and above thereafter.

Joseph Dickerson: Thank you.

Thank you.

Operator: Your next question comes from the line of Matthew Clark from Mediobanca. Your line is open.

Your next question comes from the line of Matthew Clark from Mediobanca. Your line is open.

Speaker 2: transcript

Speaker 2: Your next question comes from the line of Matthew Clark from MedioBanca. Your line is a-

Bill Winters: Good morning. A couple of questions on loan growth, please. Firstly, the decline this quarter seems to be mainly coming from the corporate center. I was wondering if you could just remind us what are this kind of $30 billion of

Speaker 4: transcript

Speaker 4: Good morning, a couple of questions on loan growth, please. So firstly, the decline this course has seemed to be mainly coming from the corporate centre. So I was wondering if you could just remind us what are this kind of 30 billion of

Good morning.

A question on loan growth.

Firstly the decline this quarter seems to be mainly coming from the corporate center.

Operator: With that, I will hand back to the operator for Q&A. Thank you both for the presentation and as a reminder, please submit your questions via the webcast or by pressing star one on your telephone keypad to join the queue.

Wondering if you could just remind us what this kind of $30 billion.

Matthew Clark: Loans in the corporate center, and whether the decline quarter-on-quarter is real, or whether it's kind of repos, or accounting noise. Secondly, if you could give us some outlook for loan growth next year or the moving parts, how you see loan growth developing from here, that would be helpful. Thank you.

Speaker 7: transcript

Speaker 7: loans in the corporate centre and whether the decline quarter and quarter is real or whether it's a kind of repose or accounting noise. And then secondly, if you could give us some outlook for for loan growth next year or the moving parts how you see loan growth developing from here, that would be helpful. Thank you.

Loans in the corporate center.

And whether the decline quarter over quarter as rail or whether it kind of repos.

Jason Napier: We will begin by taking phone questions and your first question comes from the line of Jason Napier from UBS, your line is open.

Our accounting noise and then secondly, if you could give us some outlook for loan growth next year with all the moving parts. How you see loan growth developing from here that would be helpful. Thank you.

Andy: Good morning. Thank you for taking my question to on interest margins. The first around LCR management, I wonder whether you might just expand a little bit on what we've been told so far and in particular focusing on what it is you're looking to do in the fourth quarter. Is it a matter of mix of HQLA? Is it level? How low do you think the LCR ought to drift to optimize that piece of the of the equation?

Andy Halford: Yeah. Slide fifteen has got the loans and advances to customers data on it, and you can see from that the $290 billion at the start of the quarter becoming $281 billion. The majority of the change was in treasury positions, which links back to some of the comments earlier about the LCR management. If you strip those and the optimization and FX out, then the underlying was a growth of $2 billion. Two in one quarter annualizing at 8 for a full year on $281 billion is about 3% per annum underlying loan growth on an annualized basis. Now, next year we'll obviously see where that sort of 3% goes to. I think there are a number of areas where we are feeling good about the prospects of the business. Clearly, wealth management side is growing at a clip.

Yes so.

Speaker 4: transcript

Speaker 4: Yeah, so slide 15 has got the loans and advances to customers data on it.

Slide 15 shows the loans and advances to customers all right.

Speaker 4: transcript

Speaker 4: and you can see from that the 290 billion that start the quarter becoming 281 and the majority of the change was in Treasury positions which blinks back to some of the comments earlier about the LCR management.

And you can see from that the 290 billion the quarter, becoming $2 81.

Majority of the change was in treasury positions, which brings back too.

Some of the comments about the LCR management, if you strip those and the optimization and ethics.

Speaker 4: transcript

Speaker 4: if you strip those and the optimization and FX out.

Bill Winters: And then second, perhaps a question for Bill. Just taking a step back, as you said, markets quite clearly are coming home to the view that we're going to have great to the higher for longer. If most of the asset base, other than the treasury holdings are swapped back to floating, I just wonder, is there a tailwind that's next year from asset yields? 5.1% yield in Q3. Certainly for developed markets is a pretty good income yield. Where does that go? Apps and changes in pricing over the next 12 months in terms of just asset yield on the phone.

Speaker 4: transcript

Speaker 4: then the underlying was a growth of two. So two in one quarter annualising at eight for a full year on 281 is about 3% per annum underlying loan growth on an annualised basis.

And then the underlying growth of two so two enrolled and cool it's annualizing at eight for full year on <unk> is about 3% per annum underlying loan growth on an annualized basis now next year, we'll obviously see.

Speaker 4: transcript

Speaker 4: Now next year we'll obviously see where that sort of 3% goes to. I think there are a number of areas where we are feeling good about the prospects of the business clearly. Well management side is going to the clip.

Of the 3% goes to.

There are a number of areas, where we are feeling good about the profit to the business clearly wealth management. So it is growing at a clip and financial markets, albeit it moves around a bit.

Andy Halford: The financial markets, albeit it moves around a bit by quarter, has been growing nicely. We have got the Mox and Trust businesses growing at a pace. We'll see, and we'll guide in February on where we see the asset growth side of things next year. Certainly our sense is that, we should be seeing a bit more demand for credit from clients over the period of the next 15 months or so.

Speaker 4: transcript

Speaker 4: financial markets albeit it moves around a bit by quarter has been growing nicely we have got the mocks and trust businesses growing at a pace

By quarter, that's been growing nicely, we have got the Moocs and trust businesses growing at a pace.

Speaker 4: So we'll see and we'll guide in February on where we see the asset growth slides of things next year, but certainly our senses that we should be seeing a bit more demand for credit from client.

Andy: Thank you. Okay, Jason, let me take the first one and then Bill, the second. So on the LCR, if you go back in time, we've been operating more in the mid 140% range. Earlier this year with other events going on, we bolstered that up to the 165 or thereabouts level. And as you can see from this print, we have slightly reduced that down to about 156. I think it was at the end of Q3.

So we'll see and we'll guide in February where we see the asset growth side of things next year, but certainly our senses.

We shouldn't be seeing a bit more demand for credit from clients.

Speaker 4: transcript

Speaker 4: over the period of the next 15 months or so.

Period over the next 15 months or so.

Matthew Clark: Thanks very much.

Thanks very much.

Operator: We will take a short break from phone questions. I'd now like to hand over to Greg for webcast questions.

We will take a short break from <unk> questions I'll now like to hand over to Greg for webcast questions.

Speaker 2: transcript

Speaker 2: We will take a short break from phone questions on now. Like to hand over to Greg for webcast questions.

Greg Powell: Thank you. A question from Manus Costello at Autonomous Research. Why is SC Ventures generating negative deposit income, and do you expect this to be the case in the future? Over the long term, will this business rely on revenue from unsecured consumer lending?

Gregg J. Powell: Thank you. A question from Manus Costello at Autonomous Research. Why is SC Ventures generating negative deposit income, and do you expect this to be the case in the future? Over the long term, will this business rely on revenue from unsecured consumer lending?

Speaker 5: transcript

Speaker 5: Thank you. A question from Manus Costello and Autonomous. Why is venture generating negative deposit income and do you expect this to be the case in the future? Over the long term, will this business rely on revenue from unsecured consumer lens?

Thank you question from modest Costello autonomous wireless ventures generating negative deposit income, but do you expect this to be the case in the future over the long term will this business rely on revenue from unsecured consumer lending.

Andy: And I think our intent will be to continue to normalize that over the next quarter in particular. Now what we typically do, LCR obviously has many moving parts, it is partly net outflow base, it is partly about the assets themselves, but where we can do, we are taking out the lower returning of the treasury assets. That was something that happened probably later in the third quarter, so to some of the nim support for the fourth quarter, we will see more benefit of that coming through for the whole of the fourth quarter from the third quarter actions plus the fourth quarter actions. But overall, we are moderating the LCR back nearer to the sorts of levels that we have historically been at.

Andy Halford: Yeah. Overall, the Mox and the Trust businesses, we've been very happy with the performance of them. It is still really fairly nascent in the development of both businesses, but the growth in customers, the feedback we've got from customers, market shares, et cetera, have been very strong. Where you see negative is in part about promotions that we're doing to generate deposits, and that will play a bigger part in the business in its early days as it gets up and running and as it attracts the customer base. It is a conscious decision we are taking, particularly in the CCPL area, to make sure that we are stimulating enough demand and over a period of time would expect the proportion of promotion to income to change in a favorable way. Yes, there will be a bit more unsecured in there.

Speaker 4: transcript

Speaker 4: Yeah, so overall, the mocks and the trust businesses, we've been very happy with the performance of them. It is still really fairly nascent in the development of both businesses, but the growth in customers, the feedback we've got from customers, market shares, etc, have been very strong.

Yes, so overall.

The <unk> and the trust businesses, we've been very happy with the performance.

It is still a really fairly nascent in the development space businesses.

Growth in customers.

Feedback from customers market shares et cetera have been very strong.

Speaker 4: transcript

Speaker 4: Where you see negative is in part about promotions that we are doing to generate deposit.

Where do you see negative is in call about promotions that we had to generate deposits and that will play a bigger part in the business.

Speaker 4: transcript

Speaker 4: and that will play a bigger part in the business in its early days.

Early days as it gets up and running and as it attracts the customer base. So it is a conscious decision we are taking particularly in the CPL area to make sure that we are stimulating enough demand and over a period of time, we would expect the proportion of promotion to income to change in the fair.

Speaker 8: transcript

Speaker 8: So it is a conscious decision we are taking, particularly in the CCPL area, to make sure that we are stimulating enough demand and over a period of time, we'd expect the proportion of promotion to income to change in a favourable way. So yes, there will be a bit more unsecured in there. It all goes through very careful credit vetting, but over a period of time, we would see that negativity reducing and the two of those businesses continuing to grow strongly. Can we go back to the phone lines, please?

Bill Winters: Bill, did you want to pick up on the asset side? Yeah, Jason, thanks for the question. Obviously, there's lots of follow-through from the idea of higher for longer. Andy and I both commented on the pressures of this foot on a particular dollar borrowing for our sovereign clients and some corporations. We would also expect that this would keep the credit threads on the assets across our portfolio and relatively high levels. As we both pointed out, the credit portfolio itself is a very good shape, with the obvious exception of China Real Estate, which is not just right driven.

Okay.

Andy Halford: Yes, there will be a bit more unsecured in there. It all goes through very careful credit vetting. Over a period of time we would see that negativity reducing and the two of those businesses continuing to grow strongly.

So, yes, there will be a bit more unsecured and that it all goes through very careful credit.

Andy Halford: It all goes through very careful credit vetting. Over a period of time we would see that negativity reducing and the two of those businesses continuing to grow strongly.

But over periods of time, we would see that negativity, reducing and the two of those businesses continuing to grow strongly.

Greg Powell: Can we go back to the phone lines, please?

Gregg J. Powell: Can we go back to the phone lines, please?

Speaker 8: transcript

Speaker 8: Can we go back to the phone line, please?

Can we go back to the phone line space.

Operator: Of course. Your next question comes from the line of Andrew Coombs from Citi. Your line is open.

Speaker 2: transcript

Speaker 2: And your next question comes from the line of Andrew Coons from City your line is open

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

Andrew Coombs: Good morning. One just a point of clarification on the increase in the early alerts you mentioned sovereign, but perhaps you can just go into a bit more detail on what's driving that $1 billion increase, Q on Q. Secondly, just on NIM trajectory, you've talked about some of the moving parts. Obviously you've changed your definition to now approaching 170, so it gives quite a wide band, I think for Q4 and the exit run rate. Given that you've got the 9 basis points hedge roll-off coming in February, and yet you're still guiding to 175 for the full year next year, do you expect the NIM to trend down throughout 2024 underlying ex that hedge roll off? Thank you.

Bill Winters: It's obviously price and volume and policy driven. We would expect that there would be some reasonably interesting opportunities to take advantage of higher yields in asset markets, in particular in areas where we've been relatively underway. Andy mentioned the continued build-out of our consumer credit portfolio, we're certainly in the personal lending space. We would expect to see more attractive yields on our assets. As we draw that book, and I would point to other areas in the corporate space where we think we'll be able to take advantage of higher yield.

Speaker 9: transcript

Speaker 9: Good morning. One point of clarification on the increase in the area alerts you mentioned over and that perhaps you could just go into a bit more detail on what's driving that billion increase Q and Q. Second, which is on NIM trajectory. You've talked about some of the moving parts.

Good morning.

Point of clarification on any increase in the area that you mentioned.

Working capital and what's driving that big increase Q on Q.

Secondly, just on NIM trajectory, you've talked kind of amazing part obviously you've changed your definitions now approaching one <unk>, it's quite a wide band I think for Q4 and the exit run rate.

Speaker 9: transcript

Speaker 9: Obviously you change your definitions now approaching 170. So it gives quite a wide band, I think for the P4 and the exit run rate.

Speaker 9: transcript

Speaker 9: But given that you've got the nine basis points head roll off coming in February , and yet you're still going to one, seven, five, for the full year next year.

Given that you've got the nine basis point hedge roll off coming.

In February.

Bill Winters: Again, benefiting from the fact that we've got a very clean book going into what feels like a period of slightly more stress in markets ranging from leverage from advocacy to general corporate credit. I think I'm addressing the question you asked, but that's it. On balance, I think we see very higher alongers as a positive thing, but fully aware of the pressures that come with it.

If they were guiding to $1 75 for the full year next year.

Speaker 9: transcript

Speaker 9: Do you expect the nim to trend down throughout 24 underlying X that head roll of?

Do you expect the NIM kicked down throughout 24 on the line.

That hedge roll off.

Thank you.

Andy Halford: Okay. You can see again on the slides, the total of the credit quality is up about $ half a billion. Although if you go back to same period last year, it's up a little bit less than that. What we have got is an increase in the early alerts, and we have got a reduction in credit rate hold and net stage three. The latter actually are good, in the sense that they are, you know, known issues but have reduced. The early alerts are more a warning that things, you know, could be a bit more difficult. Particularly within that there is a sovereign that we have put on early alert, as they move through the various phases of their restructuring.

Speaker 4: transcript

Speaker 4: And the case, so you can see again on the side, the total of the credit quality is up about half a billion. Although if you go back to the same period last year, it's up a little bit less than that. What we have got is an increase in the earlier look.

So you can see again on this slide the two calls the credit quality is about half a billion.

Jason Napier: Thank you Bill. Just to check that I understand, aside from sort of mixed change, we should really think about the loan book as a fully floating artifact, and it's kind of done a thing for now, is that right? If you're talking about interest rates, I mean, the duration of taking are clearly affected by the hedges and the composition of our Treasury portfolio.

Although if you go back to the same period last year, it's up a little bit less than that.

What we have is an increase in the early alerts and we have got a reduction in credit grateful and stage three.

Speaker 4: transcript

Speaker 4: and we have got a reduction in the credit rate 12 and next stage 3. So the latter actually are good in the sense that they are known issues that have reduced.

The latter actually all good in the <unk>.

They all known issues that have reduced.

Unknown Executive: Thanks very much, it's helpful.

Speaker 4: transcript

Speaker 4: The early alerts are more a warning that things could be a bit more difficult and particularly within that there is a sovereign that we have put on early alert as they move through the various phases of their restructuring.

Or more a warning things there could be a bit more difficult and particularly within that there is a silver ends up we have put on earlier.

Joseph Dickerson: Your next question comes from the line.

Andy: Have Joseph Dickerson from Gaffrey's? Your line is open. Hi, good morning. Thanks for taking my question. Can you just explain in layman's terms what this system migration is, the four basis points of NIMT, just so we can understand why it's a runoff and not really come across that and staying on the NIMT. The EIR adjustment and Singapore, is that something that you would expect to repeat, or is that just a slow grind?

Alert.

As they move through the various phases of that restructuring.

Andy Halford: On the NIM, we have said that we expect Q4 to be slightly higher than Q3. We have not put a specific number, so there is some interpretation or room for maneuver, I guess, on the word approaching, but limited to one quarter. It is not huge. So I think if you take a sort of reasonable estimate of a slightly higher Q4 than Q3, and you add 9 basis points to it from the hedge alone, you know, you get to around 175 or thereabout. Phasing of the 175 within quarters by year, I'm sorry, we're not going to give you the phasing of it at this stage by quarter.

Speaker 4: transcript

Speaker 4: And on the NIM, we have said that we expect Q4 to be slightly higher than Q3.

On the NIM, we have said that we expect Q4 to be slightly higher in Q3, we have not put a specific number. So there is some in.

Speaker 4: transcript

Speaker 4: We have not put a specific number, so there is some interpretation or room for manoeuvre, I guess, on the word approaching, but limited to one quarter, it is not huge. So I think if you take a sort of reasonable estimate of a slightly higher Q4 than Q3, and you add nine basis points to it from the hedge alone, you know, you'd get to around 175 or thereabout.

Interpreted showroom familiar I guess on the word approaching but limited to one quarter. It is not huge.

I think if you take sort of.

Andy: Then I just overlaying all of this. You've alluded to putting hedges on later in the year. Can you just elaborate on what your hedging policy actually is? Just so we can have some clarity. Many, many thanks.

A reasonable estimate of a slightly higher Q4 than Q3, and you're at nine basis points from the hedge alone.

Get to around 175 or thereabouts.

Speaker 4: transcript

Speaker 4: Facing of the 175 within quarters by year, I'm sorry, we're not going to give you the facing of it at this stage by quarter, but we are saying on the average, we think that the NIMC law next year should be around that 175 number, which remains our previous view, notwithstanding the slightly lower Q3 NIM itself. So, 2020 for NIMC as we had previously in the

So you think of the 175 within the quarters, but yes I'm sorry.

All right, we're not going to give you the phasing of it at this stage, but like quarter.

Andy: Yeah, okay, Joseph, so let me pick those up. So the one off adjustment in NIMT, the origin of that was changing out a system. The system made visible a data feed that we had not been previously taking into account in the NIMT calculation, which if we had done, we would have made a small adjustment in several prior quarters. We picked that up and therefore we had a several quarter correction to make in the one quarter and therefore we have pulled it out as being a one off because its impact actually is not unique to the single quarter.

Andy Halford: We are saying on the average, we think that the NIM core next year should be around that 175 number, which remains our previous view, notwithstanding the slightly lower Q3 NIM itself. 2024 NIM, as we had previously envisaged.

But we all think on the average.

The NIM for next year, it should be around that 75 number which remains our previous view notwithstanding the slightly lower Q3, NIM. So 2020 full nib as we had previously envisaged.

Andrew Coombs: I guess the broader question is the-

Andrew Coombs: I guess the broader question is the if you look at the Fed curve, that's clearly moved up since you last gave that 1.75 guidance. Presumably there's offsetting factors elsewhere, such as what's played out in Q3 that have been dragging your NIM guidance back to that 1.75.

Speaker 10: transcript

Speaker 10: I guess the broader question is that if you look at the Fed curve, that's clearly moved up since you last gave that 175 guidance. So, could you read there's offsetting back to the elsewhere, such as what's played out in Q3, that's been dragging your NIM guidance back to that 175? Yes, I think that's a fair way to look at it. OK, thank you.

And I guess the broader question is that.

Aman Rakkar: If you look at the Fed curve, that's clearly moved up since you last gave that 1.75 guidance. Presumably there's offsetting factors elsewhere, such as what's played out in Q3 that have been dragging your NIM guidance back to that 1.75.

If you look at the fed cause that's clearly moved up since you last gave that 175 guidance safety hearing thats offsetting factors elsewhere, such as what's played out in Q3 than dragging your NIM guidance back at about 175.

Andy: It is correcting for several quarters prior. That is by far the biggest component. On the hedges, we as I think we thought about previously a couple of years ago we put in place essentially one longer term structural hedge and two shorter term hedges. Of the shorter term hedges one retired in February and the other one retires in the February coming and are intent is at least one of those we will be building up to replace.

Andy Halford: Yes, I think that's a fair way to look at it.

Yes, I think Thats, a fair way to look at it.

Aman Rakkar: Okay. Thank you.

Andrew Coombs: Okay. Thank you.

Thank you.

Operator: Your next question comes from the line of Robert Noble from Deutsche Bank. Your line is open.

Your next question comes from the line of Robert Noble from Deutsche Bank. Your line is open.

Robert Noble: Morning, all. Thanks for taking my question. Just a quick one. Your stated EPS has been hit by the Bohai impairment, tax rate. Does it affect how you think about capital distributions at the end of the year, or is it purely capital ratio within the target base?

Good morning, all thanks for taking my questions just a quick one.

Speaker 11: transcript

Speaker 11: all those little questions just a quick one. If stated, DPS has been hit by the Ohio impairment.

As stated EPS has been hit by.

Hi impairment.

Tax rate does it affect how you think about capital distributions at the end of the year with a capital ratio within the target.

<unk>.

Andy Halford: Yeah, I mean, the decision on distributions will be very, very driven by the capital print, number one, and number two, the demand within the business for using capital to grow assets. I wouldn't say that. Well, the Bohai has had an impact on the capital, but we still printed a very high capital print. That's probably a better way of putting it. When we come to the end of the year, we obviously start the 13.9 after taking that hit. We've got a bit of an uplift coming through from the aircraft disposal, which will help. On the other hand, Q4 profits tend to be a little bit lower, but I'm sure in February we'll take a view where we see asset growth needing funding. We will reserve capital for it.

Speaker 4: transcript

Speaker 4: Yeah, I mean, the decision on distributions will be very, very driven by the capital print number one and number two, the demands within the business.

Yes.

Andy: Given that rates now are so much higher and that will provide more robustness in the events that their rates do peak and reduce. So we'll get the benefit of the drag being reduced and that will be part of the reason why we're comfortable with the income growth projections we've got for next year and we'll lock in to the higher rates that are in the market at the moment. Many thanks and and just on the EIR adjustment in Singapore that's something that you see that wasn't that meaningful that nevertheless would be helpful to have any clarification there if that's something that's going to reach a modest headwind of the margin going forward in other jurisdictions are also Singapore.

The decision on distributions will be very very driven by the capital point.

Number one and number two the demand within the business for using capital to grow asset.

Speaker 4: transcript

Speaker 4: for using capital to grow assets. So I wouldn't say that, well, the bow-high has had an impact upon the capital, but we still printed a very high capital print, that's probably better way of putting it.

I wouldn't say that.

Well the client has had an impact both the capital, but we still prints at a very high capital, that's probably a better way of putting it.

Speaker 4: transcript

Speaker 4: So when we come to the end of the year, we obviously start the 13.9 after taking that hit. We've got a bit of an uplift coming through from the aircraft disposal, which will help on the other hand, for the course of process, it tends to be a little bit lower. But I'm sure in February we'll take a view where we see asset growth needing funding. We will reserve capital for it, where we think we have got excess over and above that, and we can look at whether we do further returns.

So let me come to the end of the year, we obviously start with 13 nine after taking that hit.

We've got a bit of an uplift coming through from the aircrafts disposal, which will help.

On the other hand fourth profits typically a little bit.

But I am sure in separate we will take a view, where we see asset growth funding. We will reserve report, where we think vehicle excess over and above that then we can look at whether we do further returns.

Andy Halford: Where we think we have got excess over and above that, then we can look at whether we do further returns.

Robert Noble: All right. Thank you.

Alright, thank you.

Andy: Yeah, I mean the EIR is an adjustment that is made of the sort of actuarial valuation from time to time it was slightly bigger this time around and it is a correction that is done that affects prior quarters so again because it was otherwise going to be hitting the one quarter when it actually represents more than one quarter that is why we pulled it out. Thank you.

Operator: Your next question comes from the line of Perlie Mong from KBW. Your line is open.

Speaker 2: transcript

Speaker 2: Your next question comes from the line of Perlimong from KVW. Your line is a

Your next question comes from the line of Kelly Mark from <unk>. Your line is open.

Perlie Mong: Hello. Can I just come back to the previous question? I guess, well, I mean, part of the reason why capital was probably better than expected, despite the Bohai writedown, was because RWAs came in lower. When I look at the slide, it looks like the biggest benefit comes from optimization and efficiency. What actions have you taken specifically? Are they things that you are already working towards anyway, or have you taken further action to ensure that the RWA movement broadly offset the Bohai writedown, as it were? Because those are consensus, the RWA reduction for the year end, so I think that's flat to previous year. It's like $7 billion and if you translate it to sort of free equity, it, I guess, broadly absorbs the Bohai charges.

Speaker 12: transcript

Speaker 12: Hello, can I just come back to the previous question? So I guess what I mean, part of the reason why capital was probably better than expected.

Hello.

Can I just come back to the previous question. So I guess, well I mean part of the reason why capital with probably better.

Speaker 12: transcript

Speaker 12: and despite the bow high right down with because our rays came in lower and and when I look at the slide it looks like the biggest benefit comes from Oxidization and efficiency. So what actions have you taken specifically and are these things that you're already working towards anyway or have you taken further action?

<unk>.

Despite the boho write down with because <unk> came in lower.

And when I look at the slide it looks like the biggest benefit comes from optimization and efficiency.

Matthew Clark: Your next question comes from the line of Matthew Clark from media bunker your line is open.

What actions have you taken specifically.

Youre already working towards any way or have you taken further action to ensure that the otway movement broadly offset the slight down as well because.

Andy: Good morning couple of questions on loan grocery so firstly the decline this quarter seems to be mainly coming from the corporate centre so it was wondering if you could just remind us what are this kind of 30 billion of loans in the corporate centre and whether the decline quarter and quarter is real or whether it's kind of repose or accounting noise and then secondly if you could give us some outlook for for loan growth next year or the moving parts how you see loan growth developing from here that would be helpful thank you. So slide 15 has got the loans and advances to customers data on it and you can see from that the 2 90 billion start the quarter becoming 281 and the majority of the change was in Treasury positions which links back to some of the comments earlier about the LCR management.

Speaker 12: transcript

Speaker 12: to ensure that the hardware movement broadly offset the both right-downs at work. Because those are the content that the hardware has been for the year end. And so I think it's a slap to previous year. It's about $7 billion. And if you translate it to sort of pre-equity, I guess, broadly absorbs the box of the project. So is that how you're thinking about it?

Does a consensus and I'll, David and for the year at flat to previous year.

11 billion.

If you translate it to sort of react.

Broadly absorbed.

Perlie Mong: Is that how you're thinking about it? That's the first question. The second one is on Mox again. Just noticing that the impairment is very high this quarter at $30 million versus $4 million last quarter. Just wondering what's happening there because it's not as high as the income this quarter, and loan growth, I mean, did grow, but it's only 5% to 6% loan growth. Just wondering why it is that the impairment charge is so high this quarter.

So how are you.

Are you thinking about it.

Speaker 12: transcript

Speaker 12: That was the first question and the second one is on Mox again. Just noticing that impairment is very high this quarter at 30 million versus 4 million last quarter. Just wondering what's happening there because it's higher the income is quarter and loan growth, I mean, it grows, but it's only a 5, 6% loan growth. So just wondering why it is that impairment charges is so high this quarter.

The first question and the second one is on marks.

Noticing that the impairment is very high this quarter at 13 million, that's 4 million last quarter.

I'm wondering what's happening Debbie.

As high as the income this quarter.

On loan growth I mean did grow but it's only five 6% loan growth. So.

So just wondering why it takes that Tim didn't haven't charges. So high this quarter.

Andy Halford: Yeah. Yeah. Okay. On RWAs, Bohai has clearly had some effect. The biggest effect, as you say, really though, is on the optimization initiatives that we have been undertaking. Those are not new. At the start of 2022, we said that over a three-year period, we expected the CCIB business to take out $22 billion of low returning RWAs, and they are essentially at that $22 billion number already. They have delivered that well ahead of time. Now, that is very helpful to the ROTI improvement because obviously the capital being lower, it helps on that front. It is a big focus upon profitability of customers, and that has helped the overall returns for the bank.

Andy Halford: Yeah. Okay. On RWAs, Bohai has clearly had some effect. The biggest effect, as you say, really though, is on the optimization initiatives that we have been undertaking. Those are not new. At the start of 2022, we said that over a three-year period, we expected the CCIB business to take out $22 billion of low returning RWAs, and they are essentially at that $22 billion number already. They have delivered that well ahead of time. Now, that is very helpful to the ROTI improvement because obviously the capital being lower, it helps on that front. It is a big focus upon profitability of customers, and that has helped the overall returns for the bank.

Speaker 4: transcript

Speaker 4: Yes, OK. So on RWAs...

Yes, okay.

Oh no.

Yes.

So it is clearly.

Speaker 4: transcript

Speaker 4: So Hai has clearly had some effect.

Andy: If you strip those and the optimization and ethics out then the underlying was a growth of two so to in one quarter annualizing at eight for a full year on 281 is about 3% per annum underlying loan growth on an annualized basis. Next year we will obviously see where that sort of 3% goes to I think there are a number of areas where we are feeling good about the prospects of the business clearly wealth management side is going to the clip financial markets albeit it moves around a bit by quarter has been growing nicely we have got the mocks and trust businesses growing at a pace so we'll see and we'll guide in February on where we see the asset growth side of things next year. But certainly our senses that we should be seeing a bit more demand for credit from clients over the period of the next 15 months also. Thank you very much.

So.

Speaker 4: transcript

Speaker 4: The biggest effect, as you say, really though, is on the optimization initiatives that we have been undertaking. Those are not new. At the start of 2022, we said that over a three-year period, we expected the CCIB business to take out $22 billion of low-returning RWAs, as they are essentially at about 22 billion number already. So they have delivered that well ahead of time.

The biggest effects as you say it really is on the optimization initiatives that we have been undertaking.

Those are not new.

<unk> to 2022 we said that over three year period, we expected the CIB business to take out $22 billion of Leu returning OWS.

Operator: We will take a short break from phone questions.

Essentially at that $22 billion number already so they have delivered that well ahead of time now that is very helpful to the routine improvement because of the capital but it.

Speaker 4: transcript

Speaker 4: Now that is very helpful to the routine improvement because of the capital being lower. It helps on that front.

It helps on that front.

Speaker 4: transcript

Speaker 4: It is a big focus upon profitability of customers and that has helped the overall return to the bank.

It is.

A big focus on profitability of customers.

Has helped the overall returns.

Andy Halford: We're not going to give up just because we got to the $22 billion number, but obviously we have made a lot of progress there, and that has been the major reason why we have had the RWAs behaving so well. On Mox and the impairment, the accounting rules require us to accrue for the sort of twelve-month forecast impairment charge at inception of new client relationship, and therefore, you do tend to have this sort of slightly strange effect that one is building up quite a lot of reserving in the very early days ahead of some of the income coming through. Having done that, thereafter, then the income comes through for that customer. It's a sort of early days phenomenon.

Speaker 4: transcript

Speaker 4: So we're not going to give up just because you got to the 22 billion number, but obviously we have made a law of progress there

The bank.

We're not going to give up just because we got to the 22 billion number.

We have made a lot of progress that and that has been the major reason why we have had to be at the values.

Speaker 4: transcript

Speaker 4: And that has been the major reason why we have had the RWAs behaving so well.

So well.

Speaker 4: transcript

Speaker 4: On Mox and the impairment, the accounting rules require us to approve for the 12-month forecast impairment charge at inception of new client relationship. And therefore, you do tend to have this slightly strange effect that one is building up quite a lot of reserving in the very early days, ahead of some of the income coming through. But having done that, they're after then the income for that customer. So it's a sort of early days phenomenon. It's more visible in the Mox business because he's separated out from the rest of our reporting. But the largest part of that is a sort of formulaic application of accounting policy.

On marks and the impairment the accounting rules require us to accrue for the 12 month forecast impairment charge.

Greg: I'll now like to hand over to Greg for webcast questions. Thank you.

Manus Costello: Question from Manus Costello, Antle Autonomous. Why is ventures generating negative deposit income? And do you expect this to be the case in the future?

Section of new client relationship and therefore, you do tend to have slightly strange effect that one is building up quite a lot of reserving in the very early days ahead of some of the income coming through.

Andy: Over the long term, will this business rely on revenue from unsecured consumer lending? Yeah, so overall, the mocks and the trust businesses, we've been very happy with the performance of them. It is still really fairly neat in the development of both businesses, but the growth in customers, the feedback we've got from customers, market shares, etc have been very strong. Where you see negative is in part about promotions that we're doing to generate deposits, and that will play a bigger part in the business in its early days as it gets up and running and as it attracts the customer base.

Having done that thereafter, then the income come through for that customer. So it's sort of early days for normal it's more visible.

Andy Halford: It's more visible in the Mox's business because it is separated out from the rest of our reporting, but the largest part of that is a sort of formulaic application of accounting policy.

<unk> business because it was separated out from the rest of our reporting but the largest cost is that is the sort of formulaic application of accounting policy.

Perlie Mong: I just want to clarify, but your loan growth is only about 5%. Have you just, you know, got a lot of new customers on board, et cetera, but haven't really extended the loans? Is that what it is?

Speaker 12: transcript

Speaker 12: So just to clarify, but your loan price only about 5%. So what, so I have you just, you know, got a lot of new customers on board, et cetera, but having really expanded the loan, is that what it is?

So just to clarify.

No longer it's only 5% so.

So what have you just.

Got lots of new customers on board et cetera that happened with Candida alone.

Yes.

Andy Halford: Sorry, you're going back to Mox, are you?

Speaker 4: transcript

Speaker 4: Sorry, you're going back to mocks, are you? Yeah.

So youre getting back to Mark.

Perlie Mong: Yeah.

Andy Halford: Yeah. Yeah, as we take a new customer on day one, we have to accrue for an expected loss from that customer, accounting-wise. It's one of the accounting rules, not just for Mox, but we do it more generally. Yeah.

Andy Halford: Yeah, as we take a new customer on day one, we have to accrue for an expected loss from that customer, accounting-wise. It's one of the accounting rules, not just for Mox, but we do it more generally. Yeah.

Yes.

Andy: So it is a conscious position we are taking, particularly in the CCPL area to make sure that we are stimulating enough demand. And over a period of time, we expect the proportion of promotion to income to change in a favorable way. So yes, there will be a bit more unsecured in there. It all goes through very careful credit vetting, but over a period of time, we would see that negativity reducing and the two of those businesses continuing to grow strongly.

Speaker 4: transcript

Speaker 4: Yep. Yeah, so as we take a new customer on, on day one, we have to recruit for an expected loss from that customer account, who wise it's one of the accounting rules, not just some ox, but we do it more generally. Yeah.

Yes, yes, so as we take a new customer roll in on day, one we have to recruit for an expected loss from that customer accounts. It was its one of the accounting rules not just <unk>.

Generally yes.

Okay.

Yeah.

Okay.

Speaker 2: transcript

Speaker 2: And before we move to the next question, a reminder for those of us joining online to please submit your questions via the question box on the webcast or by pressing star 1 on your telephone keypad if you are joining us by phone.

Operator: Before we move to the next question, a reminder for those of us joining online to please submit your questions via the question box on the webcast or by pressing star one on your telephone keypad if you are joining us by phone. Your next question comes from the line of Aman Rakkar from Barclays. Your line is open.

And before we move to the next question a reminder, for those of US joining online to please submit your questions via the question box on the webcast or by pressing star one on your telephone keypad. If you are joining us by phone.

Operator: Can we go back to the phone lines, please?

Speaker 2: transcript

Speaker 2: And your next question comes from the line of Aman Rekha from Barclays, your line is open.

And your next question comes from the line of I'm on record from Barclays. Your line is open.

Andrew Coombs: Of course, and your next question comes from the line of Andrew Coons from City. Your line is open. Good morning.

Aman Rakkar: Morning, Bill. Morning, Andy. Two questions. Around your 8% to 10% revenue expectations next year, I think you're possibly pointing to expectations of a kind of mid- to high-single-digit NII growth next year, predicated on some NIM expansion and some volume growth, and some double-digit fee income next year. I guess the first part of it is could you just tell me, you know, roughly, does that sound sensible or is there anything you'd push back against there? I guess related to that then, when you set out, you know, your cost envelope for 2024, is predicated on some fee income businesses that there must be an element of uncertainty around. I guess, you know, we can't be sure exactly on loan growth. We can't be sure about financial markets.

Good morning, good morning, Andy.

Two questions.

Speaker 5: transcript

Speaker 5: around your 8 to 10 to the revenue expectations next year.

Andy: One point of clarification on the increase in the earlier alerts you mentioned sovereign that perhaps you could just get into a bit more detail on what was driving that brilliant increase Q and Q. Secondly, just on nim trajectory, you took some of the moving part, obviously you changed your definition now approaching 170. So it gives quite a wide band, I think for the Q4 and the exit run rate. But given that you've got the nine basis points head roll off coming in February, and yet you're still going to 175 for the full year next year. Do you expect the nim to swing down throughout 24 underlying extra head roll off?

Around 8% to 10% revenue expectations next year.

Speaker 5: transcript

Speaker 5: I think you're possibly point.

And.

Alright, thank you.

Possibly pointing to.

Expectations of the kind of mid to high single digit.

Speaker 5: transcript

Speaker 5: Expectations of a kind of mid to high single digit and eye-i-grows.

Yes.

Speaker 5: transcript

Speaker 5: next year, predicated on to mimic expansion and volume growth.

Next year predicated on some NIM expansion and volume growth.

Speaker 5: transcript

Speaker 5: and some double-digit fee income.

Double digit fee income.

Speaker 5: transcript

Speaker 5: uh next year so I guess the first part of it is kijuu

Next year.

I guess the first part of it is could you.

Speaker 5: transcript

Speaker 5: just tell me, you know, roughly does that sound sensible? Or is there anything you push back against there? I guess related to that then, when you sit out.

Just tell me roughly does that sounds sensible is there anything you've pushed back against that.

I guess related to that then.

Speaker 5: transcript

Speaker 5: You know, your cost envelopes are 24.

Your cost envelope for 24.

Speaker 5: transcript

Speaker 5: is predicated on some fee income businesses that there must be an element of uncertainty around, I guess, we can't be sure exactly on loan growth. We can't be sure that financial, we can't be sure that wealth management has been in 24, because so many moving parts are non-sirty. So, what's your approach to setting the cost space or the cost envelope for next year?

Is predicated on some fee income businesses.

Andy: Thank you. Okay, so you can see again on the side, the total of the credit quality is up about half a billion. Although if you go back to the same period last year, it's up a little bit less than that. What we have got is an increase in the earlier alerts, and we have got a reduction in the credit rate 12 and next stage three. So the latter actually are good in the sense that they are known issues that have reduced the early alerts are more a warning that things could be a bit more difficult.

Must be an element of uncertainty around I guess, we can't be sure.

Great we can't be sure that financial model, we cannot be sure that wealth management.

Aman Rakkar: We can't be sure about wealth management in 2024 because so many moving parts and uncertainty. Kind of what's your approach to setting the cost base or, you know, the cost envelope for next year given that uncertainty? That's kind of, you know, a big question one. The second one was a smaller one actually. I was just noting slide 31, the deposit dynamic, particularly within transaction banking. I noted that you actually seem to have seen a step up in the proportion of deposits that are CASA in Q3. You know, is there anything you can call out then? Is that a reflection of some of the optimization efforts that you're doing?

Then in 2000 and focus that many moving parts and uncertainties.

What's your approach to setting the cost space.

Cost envelope for next year.

Speaker 5: transcript

Speaker 5: given that uncertainty. That's kind of a big question one. The second one was a smaller one actually. I was just noting, 531.

Even though uncertainty.

That's kind of.

Question on the <unk>.

Second one was <unk>.

Well actually I was just noting on slide 31.

Speaker 5: transcript

Speaker 5: the deposit dynamic, particularly in transaction banking, I noticed that you actually have seen a step up in the proportion of deposits that are casso.

The deposit dynamic, particularly with <unk> and transaction banking.

Andy: And particularly within that there is a sovereign that we have put on early alert as they move through the various basis of their restructuring. On the nymph, we have said that we expect Q4 to be slightly higher than Q3. We have not put a specific number, so there is some interpretation room for me, but I guess on the word approaching, but limited to one quarter, it is not huge. So I think if you take a sort of reasonable estimate of eight slightly higher Q4, thank you three, and you had nine basis points to it from the hedge alone.

Yeah Chi.

Seems has seen a step up in the proportion of deposits the caps.

Speaker 5: transcript

In.

Q3.

Hey.

Is there anything you can call out that is that is that reflection of some of the optimization efforts that you're doing or is this the start of a trend we've kind of peaked out.

Aman Rakkar: Is this the start of a trend if we've kind of peaked out on, you know, the, you know, US dollar rate cycle and maybe the, you know, the betas on CASA look more attractive than TD? Can you give us any color there on whether that's the kind of start of a trend or not?

Speaker 5: transcript

Speaker 5: you know the US dollar rate cycle and maybe the beaters on capsule are more attractive than...

The U S dollar rate cycle and maybe the debate is on capstone look more attractive than <unk>.

Speaker 5: transcript

Speaker 5: Key days, can you give us any colour there on whether that's the kind of start of the trend or not?

Dave can you give us any color there on whether that's the start of a trend or not.

Okay.

Andy Halford: Yeah. Okay. Quite a wide range of questions there. Let's take those in order. 8% to 10% on income for next year. I guess you can put various parts of this jigsaw together. A 1.75 NIM versus a 1.70 is whatever that is, 2.5, 3% increase. Take a view on what you think the volume growth on the balance sheet will be, and, you know, you can probably get that to probably, you know, half that range or thereabout. Fee income obviously being the rest. I mean, I could cut this a different way and say 8% to 10%, 9% midpoint. The hedge benefit of 9 basis points on NIM, if you turn that into numbers, is about 3 percentage points of income growth.

Speaker 4: transcript

Yes, okay.

Andy: You know, you get to around 175 or all they're about. Facing of the 175 within quarters by year, I'm sorry, we're not going to give you the facing of it at this stage by quarter, but we are saying on the average. We think that the nymph core next year should be around that one 75 number, which remains our previous view, notwithstanding the slightly lower Q3 nymph itself. So 2024 nymph as we had previously envisioned.

Right right well into your questions.

So let's take those in order.

8% to 10% on income for next year.

I guess, you can put various pulse the sticks altogether.

70, <unk> NIM versus a 170 is whatever that is two and a half 3% increase.

Speaker 4: transcript

Speaker 4: Take a view on what you think the volume growth on the balance sheet will be and, you know, you can probably get that to probably, you know, half that range or thereabout.

Take a view on what you think volume growth in the balance sheet will be and you can probably get back to probably half of that range or thereabouts.

Andy: And I guess the broader question is that if you look at the Fed curves, I've clearly moved up since you last gave that 175 guidance, so could you read there's offsetting back to the elsewhere, such as what's played out in Q3, it's been dragging your Nim guy back to that 175? Yes, I think that's a fair way to look at it.

Speaker 4: transcript

Speaker 4: and then fee income obviously being the rest.

And then fee income obviously being the rest.

Speaker 4: transcript

Speaker 4: I mean, I could cut this a different way and say 8 to 10% 9% midpoint, the hedge benefit of 9 basis points on NIM, if you turn that into NOM, that is about 3% of points of income growth.

I mean, I could tell this a different way and say, 8% to 10%, 9% mid point the hedge benefit nine basis points. So if you turn that into normal that theres about three percentage points of income growth. So for things other than the hedges, we have to get 6% growth I think 6% to the context of what we have done recently.

Rob Noble: Thank you.

Andy Halford: From things other than hedges, we have to get 6% growth. I think 6% in the context of what we have done recently, the growth we've got in wealth management over a long period of time, in wealth management in FM as well over quite a long period of time. The fact we've got China onshore quite low at the moment and Mox and Trust building up, you know, I think the 8% to 10% sort of for me feels to be in a sensible range.

Speaker 4: transcript

Speaker 4: So from things other than hedges, we have to get 6% growth.

Speaker 4: transcript

Speaker 4: I think 6% of the context of what we have done recently, the growth we've got in the wealth management over a longer time, wealth management in FM as well over quite a long period of time, this act we've got China on, sure, quite below at the moment and mocks and trusts building up, I think the 8 to 10 sort of for me feels to be in a sensible from Europe , and North America, reporter for personal servis on what I think?

Andy: The next question comes from the line of Rob Noble, from Deutsche Bank. Your line is open.

The growth we've got in the wealth management over a long period of time.

Perlie Mong: Morning, all those different questions, just a quick one, if stated, EPS has been hit by a high impairment, tax rate, does it affect how you think about capital distributions at the end of the year, or is it a pure capital ratio within the target, based? Yeah, I mean, the decision on distributions will be very, very driven by the capital of print, number one, and number two, the demands within the business for using capital to grow assets, so I wouldn't say that, well, the bow high has had an impact upon the capital, but we still printed a very high capital print, that's probably a better way of putting it.

Wealth management, and FM is well over quite a long time.

Got China onshore quite low at the moment and marks and trust building up.

The eight to 10 sort of familiar feels to be in a sensible range.

Andy Halford: 2024 on the cost front, as ever, this is a balance between driving efficiency into the business, opening up the jaws, but making sure we are investing into the areas that will be higher income generating in the future, so that post the period of rates rises, we have got as good an engine running, on volume growth. 3 percentage points of jaws, you know, opening up again next year on top of what we've done this year, on top of what we've done last year, is opening up certainly, the profitability of the business very significantly. Slide 31 and the TB CASA, which I think you're referring to there, up slightly, 59%, 61%. We have consciously reduced some of our CTDs, and that is a significant component of that.

Speaker 4: transcript

Speaker 4: 2024 and the cost front, as ever, this is a balance between driving efficiency into business, opening up the jaws, but making sure we are investing into the areas that will be higher income generating in the future so that post-the period of rates rises. We have got as good an engine running on volume growth.

2024 on the cost front.

It is a balance between driving efficiency into the business opening up the jewels, but making sure we are investing into the areas that will be higher income generating in the future. So post the periods of rates rises we have as good an engine running.

Volume growth.

Speaker 4: transcript

Speaker 4: And three percentage points of draws opening up again next year on top of what we've done this year on top of what we've done last year is opening up. Certainly the profitability of the business very significantly.

And three percentage points. So jaws opening up again next year on top of what we've done this year on top of what we've done last year is opening up certainly the profitability of the business very significantly.

Perlie Mong: So when we come to the end of the year, we obviously start at 13.9 after taking that hit. We've got a bit of an uplift coming through from the aircraft disposal, which will help, on the other hand, fourth quarter profits tend to be a little bit lower, but I'm sure in February, we'll take a few where we see asset growth needing funding. We will reserve capital for it, where we think we have got excess open above that, and we can look at whether we do further returns.

Andy: All right, thank you.

Speaker 10: transcript

Speaker 10: Slide 31 and the TB CAS, which I think you're referring to there, up slightly 59% to 61%. We have consciously reduced some of our CTDs, and that is a significant component of that. Although I would have served that over the course as we've got in here, we've been in a 59-61 range over the whole of that period, so I haven't moved around particularly markedly over that period.

Slide 31, and the TB costs, which I think you're referring to they're up slightly.

61%, we have consciously reduced some of our Cts and that is a significant component of that although I would observe.

Andy Halford: Although I would observe that over the quarters we've got in here, you know, we've been in a 59-61 range over the whole of that period, so haven't moved around particularly markedly over that period.

Since we've gotten here, we'd be near the 59 to 61 range over the whole of that period, so haven't moved around particularly markedly over that period.

Gurpreet Sahi: Your next question comes from the line of Perley Monk, from KVW. Your line is open. Hello.

Nick Lord: Can I just come back to the previous question? So, I guess, well, I mean, part of the reason why capital was probably better than expected despite the bow high write down was because Ardrey's came in lower, and when I look at the slide, it looks like the biggest benefit comes from optimization and efficiency. So what actions have you taken specifically, and are there things that you're already working towards anyway, or have you taken further action to ensure that the Ardrey movement broadly offset the bow write down as it were, because those are consensus, the Ardrey reduction for the year end. So I think it's flat to previous year, it's $7 billion, and if you translate it to sort of pre equity, I guess broadly absorbs the budget, so is that how you're thinking about it?

Aman Rakkar: Thank you. Mark?

Thank you.

Bill Winters: Andy, maybe I could just come in just to amplify a little bit in particular on the growth front. You know, there's a question we ask ourselves and our board asks us is, you know, what do we need to believe to think that we can deliver an 8% to 10% growth in income next year? Andy took you through some of the mechanics, and some of that is very clear in terms of hedges. From our perspective, you need to believe that the momentum that's gathering on the wealth side will continue. Obviously we can construct the scenarios where the market sentiment sours badly, you know, for any number of reasons.

Speaker 3: transcript

Speaker 3: And maybe I could just come in just to amplify a little bit and predict it on the growth front. And there's a question we ask ourselves in our board as such is what do we need to believe so think that we can deliver a night to 10%.

Yes.

And then maybe I can just come in.

So to amplify a little bit.

Particularly on the growth front and yes. There is a question we ask ourselves within our board assesses what do we need to believe that we can deliver in 8% to 10% growth in income next year.

Speaker 3: transcript

Speaker 3: I brought an income mixture and I'm standing to cut you to some of the mechanics and some of that is

Got to give you some of the mechanics and some of that is very clear in terms of hedges.

Speaker 3: transcript

Speaker 3: Yes, very clear in terms of hedges. But from our perspective, you need to believe that the momentum that's gathering on the wealth side will continue. And obviously we can construct the scenarios for the market sentiment as ours badly for any number of reasons. But everything that we're seeing underlying is that underlying growth rate and growth potential is very much there. And of course, we're feeling it right now. And we're reported on.

But from our perspective, you need to believe that the momentum that's gathering on the wealth side will continue.

And obviously, if we can if we can construct the scenarios for the market sentiment sours badly for any number of reasons, but everything that we're seeing underlying isn't that underlying growth rate.

Bill Winters: Everything that we're seeing underlying is that underlying growth rate and growth potential is very much there. Of course, we're feeling it right now, and we've reported on that basis. Second, you need to believe that we can get back to a little bit of growth in FM. Let's just remind ourselves where we've been in FM over the past few years. We had, you know, solid growth for several years, and by our measure, outperforming our peer group. We had a very strong performance in 2022. We've maintained that level of performance broadly in 2023, but obviously no growth.

And growth potential is very much there and of course, we're feeling it right now.

On that basis.

Speaker 3: transcript

Speaker 3: Second, you need to believe that we can get back to a little bit of growth in FM. Now, let's just remind ourselves where we've been in FM over the past few years. We had, you know, solid growth for several years.

Second you need to believe that we can get back to a little bit of growth in that then, let's just remind ourselves where we've been in FM over the past few years.

Andy: That was the first question, and the second one is on Mox again. Just noticing that then Perley Monk is very high this quarter at 30 million versus 4 million last quarter, just wondering what's happening there, because it's higher than income this quarter, and loan growth, I mean, did grow, but it's only a five, six percent loan growth, so just wondering why it is that the impairment charge is so high this quarter?

We had solid growth for several years.

But by any measure outperforming our peer group.

Speaker 3: transcript

Speaker 3: But by our measure outperforming our peer group, we had a very strong performance in 2022. We've maintained that level of performance broadly in 23, but obviously no growth. And again, as Andy said, given that 70% of our income is low income, the remainder being these episodic things, which have been quite low this year, we can continue to grow that core slow income. And what we can't predict the episodic flows, our history has suggested that they fluctuate between zero percent. And...

We had a very strong performance in 'twenty two we've maintained that level of performance broadly in 'twenty, three but obviously no no growth.

Bill Winters: Again, as Andy said, given that 70% of our income is flow income, the remainder being these episodic things, which have been quite low this year, we think we can continue to grow that core flow income. While we can't predict the episodic flows, our history has suggested that they fluctuate between 0% and 40% or 50% of income, and we're at closer to 0% right now. That feels like a good source of growth. We've got underlying momentum in terms of building out our CCPL business, obviously slightly higher yielding, addressing some of the mix issues that we've had, as well as the asset growth issues.

As Andy said, given that 70% of our income is going to come the remainder being this these episodic things which have been quite low. This year. We think we can continue to grow that that core income and while we can't predict the episodic close our history has suggested.

Andy: Yep. Okay. So, on Ardrey's bow high has clearly, has had some effect. The biggest effect, as you say, really though, is on the optimization initiatives that we have been undertaking, those are not new at the start of 2022. We said that over three year period, we expected the CCIB business to take out $22 billion of low returning Ardrey's, as they are essentially at that 22 billion number already, so they have delivered that well ahead of time.

Fluctuate between zero percent.

Speaker 3: transcript

Speaker 3: 40 or 50% of income and we're at closer to 0% right now. So that feels like a good source of growth. We've got underlying momentum in terms of building out our CCPL business. Obviously slightly higher yielding, addressing some of the mixed issues that we've had as well as the other growth issues. The digital partnerships that we set up and are operating in addition to the digital bank.

40, or 50% of income and we're at closer to zero percent right now so that feels like a good.

Source of growth.

Andy: Now, that is very helpful to the routine improvement, because obviously the capital being lower, it helps on that front, it is a big focus upon profitability of customers, and that has helped the overall returns for the bank. So, we're not going to give up just because we've got to the 22 billion number, but obviously we have made a lower progress there, and that has been the major reason why we have had the RWA's behaving so well.

Underlying momentum in terms of building out our CCP emphasis.

Obviously slightly higher yielding addressing some of the mix issues that we've had as well as asset growth issues.

Bill Winters: The digital partnerships that we set up, and are operating in addition to the digital banks, notwithstanding the ECL discussion that Andy just responded to, feel like it's a good source of growth. We haven't talked about sustainable finance, but we're on track to, you know, broadly hit.

Digital partnerships that we set up and are operating in addition to the digital banks notwithstanding the ECL discussion that they didn't just responded to feel like it's a good source of growth and we haven't talked about sustainable finance, but we're on track to.

Speaker 3: transcript

Speaker 3: notwithstanding the ECL discussion that that that end just responded to. I feel like it's a good source of growth.

Speaker 3: transcript

Speaker 3: And we haven't talked about sustainable finance, but we're on track to broadly hit.

Nick Lord: Our targets this year and then into next year, which is another incremental source of growth. Yeah, what do you have to believe? We have to believe that a bunch of things that we've delivered on consistently for several years, that we can continue that or pick up where there's been a bit of a lull in 2023. You can ask all the questions and put all the challenges on the table around all the things that could go wrong. We're very well aware of those, which is why we're sitting with a 13.9 CET1 ratio and a 150+ LCR. But that's, on balance, we feel very good about the growth target, and we think that bodes well for us hitting our return targets through 2024 and beyond. Sorry, Andy, back to you.

Speaker 3: transcript

Speaker 3: our targets this year and then into next year, which is another incremental source of growth. So yeah, what do you have to believe? We have to believe that there's a bunch of things that we've delivered on consistently for several years that we can continue that or pick up where there's been a bit of a low in 23.

Bill Winters: Our targets this year and then into next year, which is another incremental source of growth. Yeah, what do you have to believe? We have to believe that a bunch of things that we've delivered on consistently for several years, that we can continue that or pick up where there's been a bit of a lull in 2023. You can ask all the questions and put all the challenges on the table around all the things that could go wrong. We're very well aware of those, which is why we're sitting with a 13.9 CET1 ratio and a 150+ LCR. But that's, on balance, we feel very good about the growth target, and we think that bodes well for us hitting our return targets through 2024 and beyond. Sorry, Andy, back to you.

Broadly hit.

Our targets this year and then into next year, which is another incremental source of growth. So what do you have to believe we have to believe that a bunch of things that we've delivered on consistently for several years.

That we can continue that or pick up where theres been a bit of a lull in 'twenty three.

Speaker 3: transcript

Speaker 3: Now you can ask all the questions and put all the challenges on the table around all the things that you could go wrong We're very well aware of those which is why we're sitting with a 13 9 ct1 ratio

You can ask all the questions and put all the challenges on the table around all the things that could go wrong, we're very well aware of those which is why we're sitting with a 13 nine CET one ratio.

Andy: On Mox and the impairment, the accounting rules require us to approve for the 12-month forecast impairment charge at inception of new client relationship, and therefore you do tend to have this slightly strange effect that one is building up quite a lot of reserving in the very early days ahead of some of the income coming through, but having done that, thereafter, then the income comes through for that customer. So, it's a sort of early days phenomenon, it's more visible in the Mox business because it is separated out from the rest of our reporting, but the largest part of that is a sort of formulaic application of accounting policy.

Speaker 3: transcript

Speaker 3: and 150 plus LCR. But that's a unbalanced. We feel very good about the growth target. And we think that both well for us hitting our return targets through 2024 and beyond. Sorry, Andy.

<unk> hundred 50, plus LCR.

But that's.

On balance we feel very good about the growth target that we think that bodes well for us hitting our return targets through 2024 and beyond.

Sorry, Andy back to you.

Andy Halford: Nothing more from me.

Alright.

Aman Rakkar: Thanks very much, Clive. Andy, I just wanted to say, if this is your last conf call, I don't know, but on the off chance that it is, thanks for your help and wish you the best of luck going forward.

Speaker 5: transcript

Speaker 5: Thank you very much, Frost. And I just wanted to say if this is your last, I don't know if this is your last obstacle, but on the off-shorts there is, thank you for your help and wish you the best of luck going forward. Thank you.

Thank you very much.

Wanted to say if this is your last.

But.

On the offshore facilities.

Thanks for your help and wish you the best of luck going forward.

Andy Halford: Thank you. That is kind.

Thank you that is correct.

Okay.

Operator: Your next question comes from the line of Gurpreet Sahi from Goldman Sachs. Your line is open.

Speaker 2: transcript

Speaker 2: Your next question comes from the line of Gapritzai from Goldman Sachs. Your line is open.

Your next question comes from the line of <unk> <unk> from Goldman Sachs. Your line is open.

Andy: So, just to clarify, but your loan price is only about 5%. So, what have you just, you know, got a lot of new customers on board, et cetera, having reached the end of the loan? Is that what it is?

Gurpreet Sahi: Hi, Bill. Hi, Andy. Good morning. Thank you for taking my question. It's regarding mortgages in Hong Kong and Singapore. As I understand, we are not particularly interested in growing in this area for now, given the ROTEs that they promise on the new book. At what point will that be different? In Hong Kong, we have the spread on new book now for the system at around 140, 150 bps. Is that interesting enough? Related to that, how important is it for new client acquisition? We see some good numbers on the wealth that you shared today, regarding new client acquisition in these financial centers. These wealthy do need some mortgage advice and balance sheet. Share with us how that plays into. Thank you.

Hi, Ben Hi, Andy.

Speaker 13: transcript

Speaker 13: Good morning. Thank you for taking my question. It's regarding mortgages in Hong Kong and Singapore. As I understand, we are not...

Good morning. Thank you for taking my question, it's regarding mortgages in Hong Kong and Singapore.

As I understand we are not.

Andy: So you're going back to Mox, are you? Yeah. So, as we take a new customer on, on day one, we have to recruit for an expected loss from that customer accounting wise. It's one of the accounting rules, not just Mox, but we do it more generally.

Speaker 13: transcript

Speaker 13: particularly interested in growing in this area for now, given the rotis that they promise on the new book. At what point will that be different? In Hong Kong, we have the spread on new book now for the system at around 141.50 Bips. Is that interesting enough? And then related to that, how important is for new client acquisition, we see some good numbers on the wealth.

Particularly interested in growing in this area for now given the royalties that they promise on the new book at what point will that be different in Hong Kong, we have the spread on new book now for the systemic around 140 150 bps is that interesting enough and then related to that how in.

Barton.

For new client acquisition, we see some good numbers on the wells that you shared today.

Operator: And before we move to the next question, a reminder, for those of us joining online, to please admit your questions via the question box on the webcast, or by pressing star one on your telephone keypad, if you were joining us by phone.

Speaker 13: transcript

Speaker 13: that you share today regarding new client acquisition in these financial centers, but then these will do need some mortgage advice and balance sheet. So share with us how that plays into. Thank you.

Regarding new client acquisition and these financial centers, but then these weldie do need some mortgage advice and balance sheet, so share with us how that plays into thank you.

Aman Rakkar: And your next question comes from the line of Aman Rakkar from Barclays, your line is open. Morning, good morning, Andy. A few questions. Around your eight to ten percent revenue expectations next year. I think you're possibly pointing to expectations of a kind of mid to high single digit and eye growth. Next year, predicated on some mimic expansion and some volume growth. And some double digit fee income. Next year, so I guess the first part of it is, could you just tell me, you know, roughly does that sound sensible or anything you push back against there?

Andy Halford: Yeah. The margins on mortgages in Hong Kong at the moment have been very low, and therefore we have throttled back. We have seen, however, as you can see from some of the slides, good growth in affluent and in wealth. The point you're making about the linkage between those two, we are obviously cognizant of. We keep monitoring the mortgage situation. We will make sure that the more affluent of the clients we have got are able to get what they need on a fuller product front. We will not pursue standalone mortgages that are uneconomic on their own. We will keep that under review.

Speaker 4: transcript

Speaker 4: Yeah, so the margins on launches in Hong Kong at the moment have been very low and therefore we have throttled back.

Yeah, so the margins on launches in Hong Kong at the moment.

<unk> has been very low and therefore, we have throttled back.

Speaker 4: transcript

Speaker 4: We have seen, however, as you can see, some of the slides, good growth in affluent and in wealth. And the point you're making about the linkage between those two, we are obviously cognizant of. So we're keeping monitoring the mortgage situation. And we will make sure that the more affluent of the clients we have got are able to get what they need on a fuller product front that we will not pursue standalone mortgages that are uneconomic on their own. But we will keep that under review.

We have seen however, as you can see from some of the slides good growth in affluent and in wealth and to the point you were making about the linkage between those two we all OTC cognizant of so we're keeping monitoring the mortgage situation.

We will make sure that the more absolute of the clients. We have are able to get what they need almost a lot.

But we will not pursue standalone mortgages on that kind of like on the road, but we will keep that under review.

Aman Rakkar: I guess related to that then when you're about, you know, your cost envelope for 24 is predicated on some fee income businesses that there must be an element of uncertainty around, I guess, you know, we can't be sure exactly on loan growth, we can't be sure that financial, we can't be sure that wealth management. And then in 24, because so many moving parts and uncertainty. So kind of what's your approach to setting the cost space for, you know, the cost envelope for next year, given that uncertainty.

Operator: Your next question comes from the line of Guy Stebbings from BNP Paribas. Your line is open.

Speaker 2: transcript

Speaker 2: Your next question comes from the line of guy stepings from BNP Padderba. Your line is open.

Your next question comes from the line of <unk> from BNP Paribas. Your line is open.

Speaker 17: Hi. Morning, afternoon, everyone. Thanks for taking the questions, a couple. Firstly, just on the Bohai change to carrying value, I don't suppose you could elaborate any further on the assumption changes there which impact the value and use and, sort of by association, how confident you are that these are sufficiently conservative now that you won't have any repeat. And then on the loan book, it sounds like you're making a sort of concerted effort to prioritize growth in high yield lending, such as unsecured. Does that have any impact on your expectations for cost of risk in the medium term, or we're not really talking about sufficient moving the dial and generally you're very comfortable with credit risk, so it doesn't change expectations? Thank you.

Guy Stebbings: Hi. Morning, afternoon, everyone. Thanks for taking the questions, a couple. Firstly, just on the Bohai change to carrying value, I don't suppose you could elaborate any further on the assumption changes there which impact the value and use and, sort of by association, how confident you are that these are sufficiently conservative now that you won't have any repeat. And then on the loan book, it sounds like you're making a sort of concerted effort to prioritize growth in high yield lending, such as unsecured. Does that have any impact on your expectations for cost of risk in the medium term, or we're not really talking about sufficient moving the dial and generally you're very comfortable with credit risk, so it doesn't change expectations? Thank you.

Speaker 4: transcript

Speaker 4: Hi, morning, everyone. Thanks for taking the questions a couple. First, you just thought the bow-high changed the carrying value. I think suppose you could elaborate any further on the assumption changes there, which impact the value in use and sort of by association how confident you are, but these are sufficiently conservative now that you won't have any repeat.

Hi morning afternoon, everyone. Thanks for taking the questions. A couple firstly just on the change to carrying value I think as best you can elaborate any further on the assumption changes, there which impact the value in use.

Association, how confident you all these sufficiently conservative now that you won't have any repeat.

Speaker 4: transcript

Speaker 4: And then on the loan book, it sounds like you're making a sort of incited effort to prioritise growth in high-yield lending such as unsecured. Does that have any impact on your expectations for cost of risk in the medium term? Or are we not really talking about sufficient moving the dial and generally you're very comfortable with credit risk so it doesn't change expectations? Thank you.

And then on the loan book It sounds like you are making a concerted effort to prioritize growth in high yield lending such unsecured does that have any impact on your expectations for cost of risk in the medium term are we talking about sufficient move in the dollar and generally youre very comfortable with credit risk. So it doesn't change.

Andy: That's kind of, you know, a big question one. The second one was a smaller one, actually, I was just noting by 31, the deposit dynamic, particularly when transaction banking, I noted that you actually seems to have seen a step up in the proportion of deposits that a caps are in Q3. So, you know, is there anything you can call out there, is that is that a reflection of some of the optimization efforts that you're doing, or is this a start of a trend?

Expectations. Thank you.

Andy Halford: Yeah. So the change in our view on the value of Bohai is very largely driven by its most recent published net interest margin numbers, which have been lower than we had previously estimated. When we run that through the models, one comes out with a lower carrying value, and hence we have written it down to that. You know, hopefully, we have now got it to a point where those numbers will be delivered. Time will tell on that front, but we believe we have been appropriately conservative on that. On your second question, over a period of time, we will probably do a little bit more on unsecured, particularly Mox and Trust. Not huge in terms of overall proportions of our business, therefore is not gonna hugely move the dial on the cost of credit.

Yes.

Speaker 4: transcript

Speaker 4: Yep, so the change in our view on the value of low of high is very largely driven by its most recent published net interest margin numbers, which have been a lot than we had previously estimated. And when we run that through the models, one comes out with a lot of carrying value and hence we have written it down to that.

The change in our view on the value of failure is.

Is very largely driven by its most recent published net interest margin numbers.

Which have been lower than we had previously estimated and when we run that through the multiples will it comes out with.

Our carrying value and hence we have written it down to that.

Andy: We've kind of peaked out on, you know, the US dollar rate cycle and maybe the beaters on capsule are more attractive than key days. Can you give us any color down whether that's the kind of start of the trend or not? Yeah, okay. So right, right, where are your questions there? So let's take those in order. Eight to 10% on income for next year. I guess you can put various parts of the sticks altogether.

Speaker 4: transcript

Speaker 4: Hopefully we have now got it to a point where those nimbums will be delivered. Time will tell on that front, but we believe we have been appropriately conservative on that.

Hopefully we have now got to a point, where those numbers will be delivered time will tell on that front, but we believe we have been appropriately conservative on that.

Speaker 4: transcript

Speaker 4: On your second question, over a period of time, we will probably do a little bit more on unsecured, particularly Mox trust, not huge in terms of overall proportions of our business, therefore is not going to hugely move the dial on the cost of credit, but obviously we will factor that in when we do any further guidance on credit costs, but I'd just say, you know, it's at the perimeter in terms of the overall business, not an HR issue.

On your second question over a period of time, we will probably do a little bit more of an unsecured, particularly amongst trust not huge in terms of overall proportion of our business. Therefore is not going to hugely move the dial on the cost of credit, but obviously, we will factor that in when.

Andy Halford: Obviously we will factor that in when we do any further guidance on credit costs. I'd just say, you know, it's at the perimeter in terms of the overall business, not a major issue.

When we do any further guidance on credit costs, but I would just say.

Andy: So, 175 NIM versus 170 is whatever that is, two and a half, three percent increase. Take a view on what you think of volume growth on the balance sheet will be. And, you know, you can probably get that to probably, you know, half that range will thereabouts. And then see income obviously being the rest. I mean, I could cut this a different way and say eight to 10%, nine percent midpoint. The hedge benefit of nine basis points on NIM.

Perimeter in terms of the overall business not our nature issue.

Speaker 17: Okay, thank you.

Guy Stebbings: Okay, thank you.

Okay. Thank you.

Operator: Your next question comes from the line of Nick Lord from Morgan Stanley. Your line is open.

Your next question comes from the line of Nick <unk> from Morgan Stanley. Your line is open.

Speaker 2: transcript

Speaker 2: Your next question comes from the line of Nick Lord from Morgan Stanley . Your line is open.

Nick Lord: Hi. Good afternoon, and thank you for taking the question. Just really a question on Hong Kong commercial real estate. Thank you very much for the disclosure. I know you provided for a couple of months now on the LTVs and everything. Just in terms of, you note that on the office space, but it's not yet office rental softness hasn't yet had any material impact on LTVs. I'm just wondering, if we did get to the stage where that began to happen, would we have to start putting aside some provisioning to take into account lower collateral values? I just wonder if you could give us an indication as to whether or not you've got that in management overlay or whether it's something we should be overly concerned about.

Hi, good afternoon, and thank you for taking the question.

Speaker 8: transcript

Speaker 14: Hi, good afternoon, and thank you for taking the question. Just really a question on Hong Kong commercial real estate. And thank you very much for the disclosure. I know you provided.

Just a question on Hong Kong.

Commercial real estate and then thank you very much for the.

The disclosure I know you've provided for it.

Speaker 8: transcript

Speaker 14: a couple of months now on the LTVs and everything but just in terms of the um you note that on the office space that it's not yet uh office rental softness hasn't yet had any material impact on LTVs um I'm just wondering if we did get to the stage where that began to

A couple of months now and the Ltvs and everything.

Andy: If you turn that into non, this is about three percentage points of income growth. So from things other than hedges, we have to get six percent growth. I think six percent of the context of what we have done recently. The growth we've got in wealth management over a long period of time in wealth management in FM as well over quite long period of time. The fact we've got China on sure quite below at the moment and mocks and trusts building up. You know, I think the eight to 10 sort of for me feels to be in a sensible range.

Just in terms of.

On the office space, but it is not yet office rental softness hasnt, yet had any material impact on ltvs.

I'm just wondering if we did get to the stage where that begun to happen.

Speaker 8: transcript

Speaker 14: Would we have to start putting aside some provisioning taken to account lower collateral values? And I just wonder if you could give us an indication as to whether or not you've got that in management overlay or whether it's something we should be overlooking.

Would we have to stop putting aside some provisioning is taken into account lower collateral values and I was just wondering if you could give us an indication as to whether or not you've got the other management overlay all or whether it's something we should be overly concerned about.

Bill Winters: 2024 on the cost front, as ever, this is a balance between driving efficiency into business, opening up the jaws, but making sure we are investing into the areas that will be higher income generating in the future, so that post the period of rates rises, we have got as good an engine running on volume growth and three percentage points of jaws opening up again next year on top of what we've done this year on top of what we've done last year, is opening up, certainly, the profitability of the business very significantly. Slide 31 and the TB CASA, which I think you're referring to there, slightly 59% to 61%, we have consciously reduced some of our CTDs, and that is a significant component of that, although I would have served that over the course as we've got in here, we've been in a 59-61 range over the whole of that period, so I haven't moved around, particularly markedly over that period.

Andy Halford: Yeah. So overall, Nick, I'd say I don't think there is too much to be concerned about here. Slide 24 has got some more detail, but essentially, if you look at our CRE and mortgages in Hong Kong, notwithstanding property prices having come down a bit over a period of time, we're still at around 52, 53% loan to value, so a lot of headroom sitting in there. The office rental part of the portfolio, by memory, is not particularly big. When we do go through it, we do look at realizable collateral or we do make sure we are being thoughtful about those. I don't think in the overall scheme of things that you should be concerned by that.

Yes.

Speaker 4: transcript

Speaker 4: Yeah, so overall Nick, I'd say I don't think there is too much to be concerned about here. So I 24 has got some more detail, but essentially if you look at our CRE and mortgages in Hong Kong, notwithstanding probably prices, I think come down a bit over a period of time. We're still at around 52, 53% blown to value, so a lot of headroom sitting in there.

Yes.

So overall I'd say I don't think there is too much to be concerned about here slide 24 has got some more detail, but essentially if you look at CRE.

CRE and mortgages in Hong Kong, notwithstanding property prices, having come down a bit over periods of time, we're still around 52% to 53% loan to value. So a lot of headroom sitting in there.

Speaker 4: transcript

Speaker 4: The office rental part of the portfolio, by memory, is not particularly big. When we do go through it, we do look at realizable collateral and we do make sure we are being thoughtful about those. But I don't think in the overall scheme of things that you should be concerned by that.

The office rental particle tell if my memory is not particularly big when we do you guys sort of it we do look at realizable collateral we do make sure we are being thoughtful about.

But I don't think in the overall scheme of things that you should be concerned by that.

Nick Lord: Okay, perfect. Thank you.

Okay perfect. Thank you.

Operator: Your final question today comes from the line of Rahul Sinha from JP Morgan, your line is open.

Operator: Your final question today comes from the line of Rahul Sinha from JPMorgan, your line is open.

Speaker 2: transcript

Speaker 2: And your final question today comes from the line of Role Sinhar from JP Morgan. Your line is open.

And your final question today comes from the line of <unk> Sinha from J P. Morgan Your line is open.

Speaker 18: Morning, Bill. Morning, Andy. Thanks very much for squeezing me in at the end. A couple of follow-ups please, if I may. The first one is just coming back to the risk appetite for lending growth going forward. You know, I guess one of the things investors have struggled with in the past is changing loan growth for the sake of it, you know, wherever it's happened in the sector. Could you perhaps outline for us, you know, whether or not any structural changes in risk appetite are kind of being planned? If we were to be in a situation where loan growth continued to be lower than your expectations, I guess that probably means lower RWAs as well, probably more capital.

Rahul Sinha: Morning, Bill. Morning, Andy. Thanks very much for squeezing me in at the end. A couple of follow-ups please, if I may. The first one is just coming back to the risk appetite for lending growth going forward. You know, I guess one of the things investors have struggled with in the past is changing loan growth for the sake of it, you know, wherever it's happened in the sector. Could you perhaps outline for us, you know, whether or not any structural changes in risk appetite are kind of being planned? If we were to be in a situation where loan growth continued to be lower than your expectations, I guess that probably means lower RWAs as well, probably more capital.

Good morning, Bill Thanks, very much for squeezing me in again, a couple of follow ups if I can.

Speaker 14: transcript

Speaker 15: Morning Bill, Morning Andy. Thanks very much for squeezing me in at the end. A couple of follow-ups please, if I may. The first one is just coming back to the risk appetite for lending growth, going forward. You know, I guess one of the things investors have struggled with in the past is...

No.

The first one is just coming back to the risk appetite.

Lending growth.

Forward.

Bill Winters: And maybe I could just come in just to amplify a little bit, in particular on the growth front, and the question we ask ourselves in our board asks us is, what do we need to believe, to think that we can deliver an 8-10% growth and income next year? And Danny took to do some of the mechanics, and some of that is very clear in terms of hedges. But from our perspective, you need to believe that the momentum that's gathering on the wealth side will continue, and obviously we can construct the scenarios for the market sentiment as ours badly for any number of reasons.

I guess one of the things investors have struggled within the past as well.

Speaker 14: transcript

Speaker 15: and the other for the sake of, you know, that it's happening in the sector. And so, could you perhaps...

Loan growth for the sake of it.

It's happened in the sector and so could you perhaps.

Speaker 14: transcript

Speaker 15: Outline for us, you know, whether or not any structural changes in risk appetites are kind of planned. If we were to be in a situation where lo and go continue to be lower and your expectations, I guess that probably means lower out of the ways as well. Probably more capital.

Outline for us whether or not any structural changes in risk appetite.

I'll kind of coupon.

If we want to be in a situation, where <unk> continued to be lower.

Your expectation.

That probably was lower <unk> as well.

Both capital sure.

Speaker 18: Should we then think about a scenario where investors can get perhaps higher capital returns, if there isn't any loan growth? Or do you think that your markets offer you enough underlying loan growth potential anyway, that you don't see yourself getting into a situation where CET1 is perhaps above 14%? That's the first one. The second one is just on credit quality. I guess you've called out very clearly some of the challenging areas within the book. Outside of the book things are pretty resilient. You're obviously reiterating the guidance on loan loss provisioning. Moving into next year, are there any other areas that you would flag that you would be monitoring very closely from a credit quality perspective?

Rahul Sinha: Should we then think about a scenario where investors can get perhaps higher capital returns, if there isn't any loan growth? Or do you think that your markets offer you enough underlying loan growth potential anyway, that you don't see yourself getting into a situation where CET1 is perhaps above 14%? That's the first one. The second one is just on credit quality. I guess you've called out very clearly some of the challenging areas within the book. Outside of the book things are pretty resilient. You're obviously reiterating the guidance on loan loss provisioning. Moving into next year, are there any other areas that you would flag that you would be monitoring very closely from a credit quality perspective?

Speaker 14: transcript

Speaker 15: Should we then think of how to scenario where investors can get that high cap with returns if there isn't any long growth? Or do you think that your market's offer you enough underlying longer potential anyway that you don't see yourself getting into a situation where the CQ1 is perhaps about 14%.

We then think about the familiar where investors can get higher.

Bill Winters: But everything that we're seeing underlying is that underlying growth rate and growth potential is very much there, and of course we're feeling it right now, and we've reported on that basis. Second, you need to believe that we can get back to a little bit of growth in FM, and let's just remind ourselves where we've been in FM over the past few years. We had solid growth for several years, but by our measure outperforming our peer group, we had a very strong performance in 2022.

Higher capital returns.

If there isn't any loan growth.

Or do you think that your markets offer you enough underlying potential anyway.

You don't see yourself getting into a situation, where it's in Q1 as perhaps above 14%.

Speaker 14: transcript

Speaker 15: That's the first one. And the second one is just on credit quality. I guess you called out very clearly some of the challenging areas within the book. Outside of the book, things are pretty resilient. And you're obviously reiterating that.

That's the first one and the second one is just on.

On credit quality, I guess, you called out some of the challenging areas within the book outside of the bookings are pretty rescinded.

Bill Winters: We've maintained that level of performance broadly in 23, but obviously no growth. And again, as Danny said, given the 70% of our income, this is growth income, the remainder being these episodic things, which have been quite low this year, we think we can continue to grow that core flow income. And while we can't predict the episodic flows, our history has suggested that they fluctuate between 0% and 40 or 50% of income, and we're at closer to 0% right now.

And you're obviously reiterating.

Speaker 14: transcript

Speaker 15: the guidance on loan loss provisioning. Moving into next year, are there any other areas that you would flag that you would be monitoring very closely from a credit quality perspective? I guess that's one of the things that's perhaps weighing in the mind of investors as well.

The guidance on loan loss provisions.

Moving into next year are there any other areas that you would flag.

But we'll be monitoring very closely from a credit quality perspective, I guess, that's one of the things that's perhaps weighing on the mind of investors as well. Thank you.

Speaker 18: I guess that's one of the things that's perhaps weighing on the mind of investors as well. Thank you.

Rahul Sinha: I guess that's one of the things that's perhaps weighing on the mind of investors as well. Thank you.

Andy Halford: Yeah. Okay. Thanks, Rahul. On the risk appetite, no significant changes in the risk appetite. You know, I think quality of the balance sheet we've got now is a consequence of actually being very, very consistent with our risk appetite over a number of years. It doesn't just happen overnight. Clearly within that risk appetite, there are areas that we have got more focused upon, and we've shown the reduction in the exposures to some of the sovereign challenged countries that are quite significant. We've shown the exposure overall to China over a period of time has come down about 30%. In fact, over two years, has come down about 30%. You know, we do move quickly within that to address issues where we have got them.

Yes, okay. Thanks Roe.

Speaker 4: transcript

Speaker 4: Yep, okay, thanks, Role. So on the risk appetite, no significant changes in the risk appetite. You know, I think quality of the balance sheet we've got now is a consequence of actually being very, very consistent with our risk appetite over a number of years. It doesn't just happen overnight.

Bill Winters: So that feels like a good source of growth. We've got underlying momentum in terms of building out our CCPL business, obviously slightly higher yielding, addressing some of the mixed issues that we've had as well as the answer growth issues. The digital partnerships that we set up and are operating in addition to the digital banks, notwithstanding the ECL discussion that end just responded to, feel like it's a good source of growth. And we haven't talked about sustainable finance, but we're on track to broadly hit our targets this year and then into next year, which is another incremental source of growth.

So on the risk appetite no significant changes in the risk appetite.

I think quality of the balance sheet, we've got now.

Consequent to actually being very very consistent with our risk appetite over a number of years it doesn't just happen overnight.

Speaker 4: transcript

Speaker 4: Clearly, within that risk appetite, there are areas that we have got more focused upon and we've shown the reduction in the exposures to some of the sovereign challenge countries that are quite significant. We've shown the exposure overall to China over a period of time has come down about 30, been over two years has come down about 30%. So, you know, we do move quickly within that to address issues where we have got them.

Clearly within that risk appetite there or is that we have got more focused upon and we've shown.

<unk> in the exposures to some of the sulfur and challenged countries quite significant.

And the exposure overall to China over a periods of times has come down about 32 years, it's come down about 30%. So we do move quickly.

Bill Winters: So what do you have to believe? We have to believe that there's a bunch of things that we've delivered on consistently for several years that we can continue that or pick up where there's been a bit of a low in 23. Now, you can ask all the questions and put all the challenges on the table around all the things that could go wrong. We're very well aware of those, which is why we're sitting with a 13.9 CET-1 ratio and a 150 plus LCR. But that's a imbalance. We feel very good about the growth target, and we think that both well for us hitting our return targets through 2024 and beyond. Sorry Andy, back to you. Thank you very much.

Quickly within that to address issues, where we have got them.

Andy Halford: If the growth on the asset side is lower, the RWAs are lower, then obviously it bodes well for returns. On the other hand, I think we'd probably like to get a bit more growth in the business as we go through next year. As Bill has outlined and I outlined, there are various reasons why, you know, we think that is realistic. We'll get a balance there. We'll make sure the returns are holding up. We've announced just under $4 billion of the $5 billion. We've in fact executed nearly $4 billion of the $5 billion, just slightly under that. We're very mindful of returns. If the growth's not there, then we will return to the extent that we can possibly do. On credit quality, I don't think there's anything as I sit here today that particularly concerns me.

Speaker 4: transcript

Speaker 4: If the growth on the asset side is low, the RWA is low, then obviously it boasts well for returns. On the other hand, I think we're probably like to get a bit more growth in the business as we go through next year. And as Bill has outlined and I outlined, there are various reasons why we think that is realistic. So we'll get about there. We'll make sure the returns are holding up. We've announced just under 4 billion of the 5 billion. We've in fact executed nearly 4 billion of the 5 billion just slightly under that. So we're very mindful of returns. If the growth is not there, then we will return to the extent that we can possibly do.

The growth on the asset side, although that is lower than obviously bodes well for returns on the other hand, I think we probably like to get a bit more growth in the business as we go through next year and as Bill has outlined and I outlined there are various reasons why we think that is realistic. So we will get a balance that we will make sure the returns.

Holding up.

Announced just under $4 billion 5 billion, we've executed nearly $4 billion 5 billion just slightly under that.

So we're very mindful of returns if the credit is not there then we will return to the extent, we can possibly do.

Unknown Executive: I just wanted to say if this is your last, I don't know if this is your last conference call, but on the off-shorts it is thanks for your help and wish you the best of luck going forward. Thank you very much.

Speaker 4: transcript

Speaker 4: On credit quality, I don't think there's anything as I sit here today that particularly concerns me.

On credit quality I don't think Theres anything as I sit here today is that particularly concerns me.

Andy Halford: We did try on the slides just to sort of draw out the fact that if you put the China commercial real estate on one side, which clearly is a lot, you know, $1.2 billion, and some of the sovereigns, we actually haven't been taking particularly large charges on the whole of the rest of the portfolio, which is the vast majority. In fact, the loan loss rates, if you X those two out, are in single digits, high single digits. I think at this point in time, we are pretty comfortable with the quality of the overall book. It would be nice to be able to draw a line under the China commercial real estate, but we have to just monitor that as we go through.

Speaker 4: transcript

Speaker 4: We did try and slice just to sort of draw out the fact that if you put the China commercial real estate on one side, which clearly is a lot, you know, 1.2 billion and some of the sovereigns, we actually haven't been taking particularly large charges on the whole of the rest of the portfolio, which is the vast majority. And in fact, the loan loss rates, if you exit those two out, are in single digits, high single digits. So I think at this point in time, we are pretty comfortable with the quality of the overall book. It would be nice to be able to draw a line under the China commercial real estate, but we have to just monitor that as we go through. But overall, I'd say quality balance sheet, we are comfortable with.

We did try on the slides just to draw out. The fact that if you put the China commercial real estate Beaumont side, which clearly is a $1 2 billion.

Gurpreet Sahi: Your next question comes from the line of Gurpreet Sahi from Goldman Sachs, your line is open. Hi, Bill. Hi, Andy. Good morning. Thank you for taking my question. It's regarding mortgages in Hong Kong and Singapore. As I understand, we are not particularly interested in growing in this area for now given the rotees that they promise on the new book. At what point will that be different? In Hong Kong, we have the spread on new book now for the system at round 141-55. [inaudible] Okay, thank you.

And some of the sovereigns.

I actually havent been taking particularly large charges on the whole of the rest of the portfolio, which is the vast majority.

And in fact, the loan loss rates. If you ex those two out are in the single digits high single digits. So I think at this point in time, we are pretty comfortable with the quality of.

The overall book.

It would be nice to be able to draw a line under the China commercial real estate, but we have to just monitor that as we go through.

Andy Halford: Overall, I'd say the quality of the balance sheet we are comfortable with. Okay. Operator, I think we will hand back to you, please.

But overall I'd say quality of balance sheet. We are we are comfortable with.

Okay.

Speaker 4: transcript

Speaker 4: Okay, operator, I think we will hand back to you, please.

Okay, Operator, I think we will hand back to you. Please.

Operator: Thank you. That does bring us to the end of our Q&A session for today, and I would like to hand back over to Andy for closing remarks.

Speaker 2: transcript

Speaker 2: Thank you and that does bring us to the end of our Q&A session for today and I would like to hand back over to Andy for closing remarks.

Thank you and that does bring us to the end of our Q&A session for today and I would like to hand back over to Andy for closing remarks.

Andy Halford: Okay. Well, thank you all for joining today. Hopefully, that has provided a little bit more color. I think the key takeaways to my mind would be that the top line growth, we are absolutely still targeting the 8% to 10% next year and the 12% to 14% this year. The ROTCE 10% this year, 11% next year, and the overall momentum within the business, I think is very, very strong. Let me just hand over Bill and see whether you've got any other comments.

Andy Halford: Okay. Well, thank you all for joining today. Hopefully, that has provided a little bit more color. I think the key takeaways to my mind would be that the top line growth, we are absolutely still targeting the 8% to 10% next year and the 12% to 14% this year. The ROTCE 10% this year, 11% next year, and the overall momentum within the business, I think is very strong. Let me just hand over Bill and see whether you've got any other comments.

Speaker 4: transcript

Speaker 4: Okay, well thank you all for joining today. Hopefully that has provided a little bit more colour and I think the key takeaways to my mind would be that the top line growth we are absolutely still targeting the 8-10% and next year in the 12-14% this year.

Okay, well. Thank you all for joining today, hopefully that has provided a little bit more color.

The key takeaways to my mind would be.

On growth we are.

Absolutely still targeting.

8%, 10% and next year in that 12% to 14% this year.

Speaker 4: transcript

Speaker 4: The Rotary 10% this year, 11% next year and the overall momentum within the business I think is very, very strong.

The <unk>, 10% this year, 11% next year and the overall momentum within the business I think is very very strong.

Speaker 4: transcript

Speaker 4: Let me just hand over Bill and see whether you've got any other comments.

Let me just hand over bill to see whether <unk> got any other comments.

Bill Winters: Yeah. I'm gonna apologize. My line in from Saudi Arabia dropped briefly there, so I'm not sure exactly what Andy said. I would note a few things in terms of risk appetite. First is we're operating well within our risk appetite today. You may say, "Yeah, go out and take some more risks, please." Or you may say, "That's quite prudent." You'll form your own view on that. We think we're about where we wanna be. The clearly good news about that going forward is that we have plenty of appetite to step up our risk if as and when we choose to do so. That's gonna come in a number of different forms.

Speaker 3: transcript

Speaker 3: Yeah, I'm going to apologize. My line from Saudi Arabia dropped briefly there. I'm not sure exactly what Andy said, but I would note a few things in terms of risk appetite. First is we're operating well within our risk appetite. Okay, you may say, yeah, go ahead and take some more risks, please. Or you may say, that's quite prudent. You'll form your own view on that. We think we're about where we want to be.

Yes, I mean I apologize my line.

Saudi Arabia dropped briefly there so I'm not sure exactly what Andy said.

I would note a few things in terms of risk appetite.

We're operating well.

All right.

You May say, yes go ahead and take some more rich please.

You may say, that's quite prudent.

Form your own view on that we think we're about where we want to be.

Speaker 3: transcript

Speaker 3: The good news about that going forward is that we have plenty of appetite to step up our risk, as and when we choose to do so, and that's going to come in a number of different forms. One that probably isn't what you had in mind, Roel, when you asked the question, is reintroducing some risk on the structural hedge side, which obviously we're happier doing it.

<unk>.

The good news about that going forward is that we have plenty of that step up.

<unk>.

If as and when we choose to do so and that's going to come in in our numbers from forms that one that probably isn't what you had in mind. When you ask the question is.

Bill Winters: Now, one that probably isn't what you had in mind, Rahul, when you asked the question is, you know, reintroducing some risk on the structural hedge side, which obviously we're happier doing it 5% than at the earlier levels. Second is to continue to grow some of the risky asset pools in our portfolio, including the CCPL markets, as I mentioned, including in and around the leveraged finance market. Of course, we've learned a lot about how we can interact with borrowers.

Reintroducing some risks on the structural hedge side, which obviously.

Happy Youre doing at 5% and then at the earlier levels and.

Speaker 3: transcript

Speaker 3: 5% than at the earlier levels. And the second is to continue to grow some of the risky asset pools in our portfolio, including the CCPL markets, as I mentioned, including.

Second is to continue to grow.

Some of the risk asset pools in our portfolio, including the <unk> the markets as I mentioned, including.

Speaker 3: transcript

Speaker 3: in and around the leverage finance market. Of course, we've learned a lot about how we can interact with borrowers.

In and around the leveraged finance market.

We've learned a lot about how we can interact with with borrowers.

Bill Winters: In particular, when I look at the way that we have been quite dynamic in terms of managing our exposure to sovereigns. Just in my time in the bank, we've increased and decreased many times. We've commented on some of the very substantial reductions we made in a number of countries that subsequently restructured or could face some pressures going forward. At the appropriate time, we're very happy to move those numbers back up. That obviously those are higher-yielding assets that, among other things, would contribute to income growth and NIM. We're perfectly aware of the fact that acquiring higher-yielding assets brings some risk with it.

Speaker 3: transcript

Speaker 3: And, in particular, when I look at the way that we have been quite dynamic in terms of managing our exposure to cyber.

And in particular, when I look at the way that we have been quite dynamic in terms of managing our exposure to <unk>.

Speaker 3: transcript

Speaker 3: just in my time in the bank, we've increased and decreased and increased and decreased many times.

In my time in the back we have increased and decreased an increase or decrease many times.

Speaker 3: transcript

Speaker 3: We've commented on some of the very substantial reductions we made in a number of countries that subsequently restructured or could face some.

We've commented on some of the very substantial reductions we made in.

And a number of countries that subsequently restructured or could face some pressures going forward.

Speaker 3: transcript

Speaker 3: At the appropriate time, we're very happy to move those numbers back up. And that obviously is that those are higher yielding assets than amongst other things would contribute to income growth and new. But we're perfectly aware of the fact that acquiring higher yielding assets brings some risk with it. I think we managed that quite well so far. And I would hope that we've, that we all have the confidence for us to continue to deploy capital into those situations as we see fit. And we've got plenty of capacity to do so.

Perfect time, we're very happy to move those numbers back up and that obviously is those are high yielding at higher yielding assets.

Amongst other things would contribute to income growth and NIM.

We are perfectly aware of the fact that the acquiring higher yielding assets. It brings some risk with it.

Bill Winters: I think we managed that quite well so far, and I would hope that we all have the confidence for us to continue to deploy capital into those situations as we see fit. We've got plenty of capacity to do so. We're only gonna do it if we think its returns are attractive and better than the alternative use of capital, one of which is returning capital to shareholders.

We manage that quite well, so far and I would hope that we have.

Sure.

We all have the confidence for us to continue to deploy capital into those situations as we see fit.

Nick Lord: Your next question comes from the line of Nick Lord from Morgan Stanley. Your line is open. Hi, good afternoon and thank you for taking the question. Just really a question on Hong Kong commercial real estate, and thank you very much for the disclosure that I know you provided for a couple of months now on the LTVs and everything, but just in terms of the you know that on the office space, but it's not yet office rental softness hasn't yet had any material impact on LTVs.

We've got plenty of capacity to do so.

Speaker 3: transcript

Speaker 3: We're only going to do it if we think its returns are creative and better than the alternative use of capital, one of which is returning capital to shareholders.

We're only going to do it if we think its returns accretive and better than the alternative use of capital.

Nick Lord: I'm just wondering if we did get to the stage where that began to happen. Would we have to start putting aside some provisioning taken to account lower collateral values? And I just wonder if you could give us an indication as to whether or not you've got that in management overlay, or whether it's something we should be overly concerned about.

To which is returning capital to shareholders.

Yes.

Andy Halford: Okay. I think we are there. Thank you all very much for joining.

Speaker 4: transcript

Speaker 4: Okay, I think we are there. Thank you all very much for joining.

Okay I think we are there.

Thank you all very much for joining.

Bill Winters: Thank you, everybody.

Thank you everybody.

Operator: Thank you all for joining us. This does conclude today's conference call. Enjoy the rest of your day. You may now disconnect.

Speaker 2: transcript

Speaker 2: Thank you all for joining us. This does conclude today's conference call. Enjoy the rest of your day. You may now disconnect.

Thank you all for joining US. This does conclude today's conference call enjoy the rest of your day you may now disconnect.

Perlie Mong: Please wait. The conference will begin shortly.

Operator: Please wait. The conference will begin shortly.

Please wait the conference will begin shortly.

Speaker 1: transcript

Speaker 1: Please wait, the conference will begin shortly.

[music].

Okay.

Yes.

Okay.

Sure.

Andy: Yeah, so overall Nick, I'd say I don't think there is too much to be concerned about here. So I 24 has got some more detail, but essentially, if you look at our CRE and mortgages in Hong Kong, not expanding probably prices haven't come down a bit over a period of time. We're still at around 52, 53% loan to value, so a lot of headroom sitting in there. The office rental particle failure by memory is not particularly big.

[music].

Yes.

[music].

Yes.

Sure.

Andy: When we do go through it, we do look at the realizable collateral and we do make sure we are being thoughtful about those, but I don't think in the overall scheme the things that you should be concerned by that.

Yes.

Nick Lord: Okay, thank you.

Yes.

Rob Noble: And your final question today comes from the line of roles in half from JP Morgan. Your line is open. Morning Bill. Morning Andy. Thanks very much for squeezing me in at the end. A couple of follow-ups please if I may. The first one is just coming back to the risk appetite for lending growth going forward. You know, I guess one of the things investors have struggled with in the past is changing the laundry for the sake of it, you know, wherever it's happened in the sector.

Yes.

Okay.

[music].

Okay.

[music].

Rob Noble: And so could you perhaps outline for us, you know, whether or not any structural changes in risk appetite are kind of planned. If we were to be in a situation where loan will continue to be lower than your expectations, I guess that probably means lower out of the ways as well. Probably more capital should we then think about is now you're where investors can get that has higher capital returns. If there isn't any longer, or do you think that your market offer you enough underlying longer potential anyway that you don't see yourself getting into a situation where you see if you want to perhaps about 14%.

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Tom.

[music].

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Andy: And that's the first one. And the second one is just on on on code quality. I guess you called out very clearly some of the challenging areas within the book outside of the book things are pretty resilient. And you obviously reiterating the guidance on low loss provisioning moving into next year. Are there any other areas that you would flag that you would be monitoring very closely from a kind of quality perspective.

Okay.

Yes.

[music].

Andy: I guess that's one of the things that perhaps ring in the mind of investors as well. Thank you. Yeah, okay, thanks, Role. So, on the risk appetite, no significant changes in the risk appetite, you know, I think quality of the balance sheet we've got now is a consequence of actually being very, very consistent with our risk appetite over a number of years. It doesn't just happen overnight. Clearly within that risk appetite, there are areas that we have got more focused upon and we've shown the reduction in the exposures to some of the sovereign challenge countries that are quite significant.

Yes.

Okay.

Sure.

[music].

Andy: We've shown the exposure overall to China over a period of time has come down about 30. In fact, over two years has come down about 30%. So, you know, we do move quickly within that to address issues where we have got them. If the growth on the asset side is low, the RWA is low, then obviously it boasts well for returns. On the other hand, I think we're probably likely to get a bit more growth in the business as we go through next year and as Bill has outlined and I outlined, there are various reasons why, you know, we think that is realistic.

Thank you.

[music].

Sure.

[music].

Andy: So, we'll get about there. We'll make sure the returns are holding up. We've announced just under four billion of the five billion. We've in fact executed nearly four billion of the five billion just slightly under that. So, we're very mindful of returns. If the growth is not there, then we will return to the extent that we can possibly do. On credit quality, I don't think there's anything as I sit here today that particularly concerns me.

Okay.

[music].

Okay.

[music].

Andy: We did try and slice just to sort of draw out the fact that if you put the China commercial real estate on one side, which clearly is a lot, you know, 1.2 billion and some of the sovereigns, we actually haven't been taking particularly large charges on the whole of the rest of the portfolio, which is the vast majority. And in fact, the loan loss rates, if you exit those two out, are in single digits, high-tingle digits.

Okay.

Sure.

Yes.

Sure.

[music].

Andy: So, I think at this point in time, we are pretty comfortable with the quality of the overall book. It would be nice to be able to draw a line under the China commercial real estate, but we have to just monitor that as we go through. But overall, I'd say, quality of balance sheet we are comfortable with.

Okay.

[music].

Yes.

Operator: Okay. Operator, I think we will hand back to you, please. Thank you. And that does bring us to the end of our Q&A session for today. And I would like to hand back over to Andy for closing remarks. Okay. Well, thank you all for joining today. Hopefully, my mind would be that the top-line growth we are absolutely still targeting the 8 to 10 percent and next year and the 12 to 14 percent this year, the road to 10 percent this year, 11 percent next year, and the overall momentum within the business, I think is very, very strong.

[music].

Sure.

Okay.

[music].

Operator: Let me just hand over, Bill, and see whether you've got any other comments. Yeah, I'm going to apologize my line from Saudi Arabia dropped briefly there. Not sure exactly what Andy said, but I would note a few things in terms of risk appetite. First is we're operating well within our risk appetite. Okay. You may say, yeah, go ahead and take some more risks, please. Or you may say, that's quite prudent. You'll form your own view on that.

Okay.

Sure.

[music].

Operator: We think we're about where we want to be. The good news about that going forward is that we have plenty of appetite to step up our risk if, as in when we choose to do so, and that's going to come in in a number of different forms. Now one that probably isn't what you had in mind when you asked the question is re-introducing some risk on the structural head side, which I was super, we're happy you're doing it 5 percent than at the earlier levels.

Yes.

Okay.

[music].

Okay.

Yes.

[music].

Operator: And the second is to continue to grow some of the risk asset pools in our portfolio, including the CC bill of markets, as I mentioned, including in and around the leverage finance market. Of course, we've learned a lot about how we can interact with borrowers. And in particular, when I look at the way that we have been quite dynamic in terms of managing our exposure to solvents, just in my time in the bank, we've increased and decreased and increased and decreased many times.

Yes.

Okay.

Sure.

Okay.

[music].

Okay.

[music].

Sure.

[music].

Operator: We've commented on some of the very substantial reductions we made in a number of countries that subsequently were structured, or could face some pressures going forward. At the appropriate time, we're very happy to move those numbers back up. And that obviously is that those are higher yielding assets that amongst other things would contribute to income growth and new. But we're perfectly aware of the fact that acquiring higher yielding assets brings some risk with it.

Okay.

[music].

Okay.

[music].

Operator: I think we managed that quite well so far. And I would hope that we've, that we all have the confidence for us to continue to deploy capital into those situations as we see fit. And we've got plenty of capacity to do so. We're only going to do it if we think it's returns accretive and better than the alternative, use of capital, one of which is returning capital to shareholders. Okay, I think we are there.

Okay.

Yes.

Okay.

[music].

Yes.

Okay.

Yes.

Bill Winters: Thank you all very much for joining. Thank you everybody. Thank you all for joining us. This does conclude today's conference call. Enjoy the rest of your day. You may now disconnect. Please wait. The conference will begin shortly. [inaudible] us. Thank you all very much for joining us. . Joseph Dickerson, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, James Invine, Aman Rakkar, Manus Costello, William Winters, Joseph Dickerson, James Invine, Aman Rakkar, Edward Firth, Guy Stebbings Joseph Dickerson, James Invine, Aman Rakkar, Edward Firth, Guy Stebbings Joseph Dickerson, James Invine, Aman Rakkar, Edward Firth, Guy Stebbings, Guy Stebbings, Guy Stebbings Joseph Dickerson, James Invine, Aman Rakkar, Edward Firth, Guy Stebbings

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Q3 2023 Standard Chartered PLC Earnings Call

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