Full Year 2023 Standard Chartered PLC Earnings Call

Unnamed Speaker: Diego DiGiorgi, who succeeded Andy Halford at the start of the year. And for the first time since I became CEO in 2015, I'm pleased to say that we've hit our double-digit return on tangible equity target. So, first order of business, a very warm welcome to Diego. With over 30 years of experience in the global financial services sector, Diego brings with him a broad and unique skill set, and I very much look forward to working with him in the years ahead as we deliver the next phase of the group's strategy. As we pass the double-digit ROTE milestone, I also want to recognize the immense contribution that Andy Halford made to that achievement. Andy joined the bank a year before I did and expertly navigated the group's course through some very, very difficult waters early in our partnership. And he's been an invaluable member of the management team and a great partner for me, and has been pivotal in getting the group to where it is today. I wish him the very best for his future.

At the start of the year and.

And for the first time since I became CEO in 2015, I'm pleased to say that we've hit our double digit return on tangible equity target.

So first order of business, a very warm welcome to Diego with over 30 years experience in the global financial services sector Diego brings with him a broad and unique skill set and I very much look forward to working with him in the years ahead as we deliver the next phase of the group strategy.

As we passed the double digit R. O T milestone I also want to recognize the immense contribution that Andy Hallford made to that achievement. Indeed.

Andy joined the bank a year before I did and expertly navigated the group's course through some very very difficult waters early in our partnership.

And he's been an invaluable member of the management team and a great partner for me and that's been pivotal in getting the group two where it is today I wish him the very best for his future.

Unnamed Speaker: As usual, I'll make some opening remarks, and Diego will take you through the numbers before we set out our plans for the next three years. And, as usual, we will then both take your questions. Our strong 2023 results are evidence that our strategy is working, delivering 13% income growth, disciplined cost control in an inflationary environment, and a prudent approach to risk management generated around a 240 basis point improvement in return. This takes us above 10% ROTE for the first time since 2014. We've also made excellent progress on the strategic actions we announced in 2022. I'll talk more about this later, but wanted to highlight a few specifics where delivery has been impactful in getting us to where we are today.

As usual I'll make some opening remarks, and Diego will take you through the numbers before we set out our plans for the next three years.

And as usual I'll be will then both take your questions.

Diego: Our strong 'twenty twenty-three results are evidence that our strategy is working delivering 13% income growth disciplined cost control in an inflationary environment and a prudent approach to risk management generated around a 240 basis point improvement in reverse.

Diego: This takes us above 10% <unk> for the first time since 2014.

Diego: We've also made excellent progress in the strategic actions, we announced in 2022.

Speaker Change: Talk more about this later, but wanted to highlight a few specifics where delivery has been impactful and getting us to where we are today.

Unnamed Speaker: We took a deliberate decision to invest in financial markets and wealth management over the past several years, leveraging what we saw as distinct advantages for us. These investments leave us extremely well positioned, will drive income growth for years to come, and that growth is also somewhat less dependent on the interest rate environment. Whilst overall FM results were slightly down following a very strong 2022, total income was up 7% last year despite lower market volatility.

Speaker Change: We took a deliberate decision to invest in financial markets and wealth management over the past several years, leveraging what we saw as distinct advantages for us.

Speaker Change: These investments leave us extremely well positioned will drive income growth for years to come and that growth is also somewhat less dependent on the interest rate environment.

Speaker Change: Whilst overall F. M results were slightly down following a very strong 2022 total income was up 7% last year, despite lower market volatility.

Unnamed Speaker: This income is supported by our investment in rates and credit products, digital platforms, and cross-selling solutions. In wealth management, we've invested in relationship managers, products, and platforms, building a wealth business of scale, which is the third largest wealth manager in Asia. With the full reopening of some of our main wealth markets at the beginning of 2023, we have seen over a quarter of a million new-to-bank affluent clients. We're monetizing these new relationships at pace, with affluent net new money up $29 billion, which is equivalent to around 11% annualized growth in affluent assets under management. We remain fully focused on disciplined capital management.

Speaker Change: This income is supported by our investment in rates and credit products digital platforms and cross selling solutions.

Speaker Change: In wealth management, we've invested in our relationship managers products and platforms building a wealth business of scale, which is the third largest wealth manager in Asia.

Speaker Change: With full reopening of some of our main wealth markets at the beginning of 2023 we have seen over a quarter of a million of new tabak affluent clients.

Speaker Change: We're monetizing these new relationships at pace with affluent net new money up $29 billion, which is equivalent to around 11% annualized growth in affluent assets under management, we remain fully focused on disciplined capital management.

Unnamed Speaker: CCIB has delivered on its RWA returns and optimization targets a year ahead of plan, and we have successfully embedded this discipline into BAU. Efficient capital management has given us the optionality and capacity to flex the balance sheet in support of an expected acceleration in client assets in a lower rate environment. Our focus on capital-light business has, in part, led to a loan loss rate below our through-the-cycle expectation in recent years. Now, in doing all this, we've created a powerful equity generation engine; a full year dividend of $0.27 per share and a further $1 billion share buyback we're announcing today bring total capital distributions to over $5 billion since the 1st of January 2022, achieving our target almost a year ahead of schedule.

Speaker Change: <unk> has delivered on its R. W. A returns and optimization targets a year ahead of plan and we have successfully embedded this disciplined and to be a U.

Speaker Change: Efficient capital management has given us the optionality and capacity to flex the balance sheet in support of an expected acceleration in client assets.

Speaker Change: In a lower rate environment.

Speaker Change: Our focus on capital light business has in part led to a loan loss rate below our through the cycle expectation in recent years.

Speaker Change: Now in doing all of this we've accreted a powerful equity generation engine, our full year dividend of 27 cents per share and a further $1 billion share buyback. We're announcing today brings total capital distributions to over $5 billion. Since the first of January 2020 to achieving our target almost a year ahead of schedule.

Unnamed Speaker: Lastly, after the usual seasonality in December, we've seen an encouraging start to 2024, particularly in wealth and financial markets, supported by the investments we've made. Looking at the strategic scorecard in more detail, in 2022, we set out five actions that would help accelerate the delivery of double-digit ROTE. We've achieved several of these targets a year ahead of schedule, and most others are well on track. For example, in 2023, CCIB delivered an income return on risk-weighted assets of 7.8 percent, having removed $24 billion of low-returning RWA ahead of target end time. We also grew financial institutions' income to just short of our 50% target. In CPBB, we achieved a 60% cost-to-income target one year ahead of plan as we progressed towards the target $500 million of structural expense savings. Around 85% of retail transactions are now digitized end-to-end.

Speaker Change: Lastly, after the usual seasonality in December we've seen an encouraging start to 2024, particularly in wealth and financial markets supported by the investments we've made looking.

Speaker Change: Looking at the strategic scorecard in more detail in 2022 we set out five actions that would help accelerate the delivery of double digit R. O T E. We've.

Speaker Change: We've achieved several of these targets a year ahead of plan and most others are well on track.

Speaker Change: In 2020 threes. He CIB delivered an income return on risk weighted assets of seven 8%, having removed $24 billion of low returning <unk> W. A ahead of target and time.

Speaker Change: We also grew financial institutions' income to just short of our 50% target and C. P. B B, we achieved a 60% cost to income target. One year ahead of plan as we progress towards the target $500 million of structural expense savings.

Speaker Change: Around 85% of retail transactions are now digitized into it.

Unnamed Speaker: We've done less well in growing the mass retail client base. In large part, this reflects the slower rollout of our Nexus platform in Indonesia. That said, at Nexus, we have created an innovative digital platform which gives us greater flexibility as we explore how best to use this technology to grow our mass market business. Our other digital partnerships, for example, with Ant and JD in China and Daitomi in Singapore, are going from strength to strength. The mass retail business continues to act as a significant feeder for the affluent segment, with around 224,000 clients being upgraded this year. Nearly ahead of plan, China's franchise operating profit is under $100 million short of the target of $1.4 billion.

Speaker Change: We've done less well in growing the mass retail client base in large part this reflects a slower rollout of our Nexus platform in Indonesia that said Nexus, we've created an innovative digital platform, which gives us greater optionality as we explore how best to use this technology to grow our mass market business.

Speaker Change: Our other digital partnerships for example, with ant and J D in China, and I told me and in Singapore are going from strength to strength.

The mass retail business continues to act as a significant feature for the affluent segment with around 224000 clients being upgraded this year.

Nearly ahead of plan, China franchise operating profit just under $100 million short of the target of one $4 billion. This is no mean feat given the material profitability drag in the last two years of higher impairments in the China's CRE sector and speaks to the robust health of our China business.

Unnamed Speaker: This is no mean feat, given the material profitability drag in the last two years of higher impairments in the China CRE sector, and speaks to the robust health of our China business. Our China Franchise is not a proxy for China's domestic economy, but rather a proxy for the opening of China's capital and financial markets. Our strategy is to capture trade, investment, and wealth flows and the financial markets' acuity that derive from this opening of China's economy. Consequently, for every $1 we make in China onshore, we make about $2 offshore.

Speaker Change: Our China franchise is not a proxy for China's domestic economy, but rather a proxy for the opening of China's capital in financial markets. Our strategy is to capture trade investment and well flows and the financial markets activity that derived from this opening of China's economy. Consequently.

Speaker Change: For every one dollar we make in China onshore will make about $2 offshore.

Unnamed Speaker: And this offshore income component is growing at a faster pace and is significantly higher return compared to the domestic Chinese income. Having spent time in China over the past year, it is clear that in our focus areas, cross-border activity and new economy industries, activity levels are very robust and certainly much higher than the headlines in the West would suggest. We continue to invest in our China franchise but have moderated the pace, given COVID impacts and levels of economic activity in some sectors. The group has achieved 4% positive jobs growth in 2023 despite inflationary pressures and while maintaining our investment program. We've achieved over two-thirds of our $1.3 billion cost efficiencies target with one year to go.

Speaker Change: And this offshore income component is growing at a faster pace and is significantly higher returning compared to the domestic China income.

Speaker Change: Having spent time in China over the past year. It is clear that in our focus areas cross border activity and new economy industries activity levels are very robust and certainly much higher than the headlines and the west would suggest.

Speaker Change: We continue to invest in our China franchise, but moderated the pace given COVID-19 impacts in levels of economic activity in some sectors.

The group has achieved 4% positive jaws in 2023, despite inflationary pressures and while maintaining our investment program.

Speaker Change: We've achieved over two thirds of our $1.3 billion cost efficiencies target with one year to go.

Unnamed Speaker: Our 60% cost-income ratio target is within reach, having achieved 63% in 2023. Generating enduring operating leverage is a central pillar of our strategy and at the heart of the productivity program we will discuss shortly. As with all milestones, 10% ROTE is not the limit of our ambitions, but just the most recent point on our progression to returns in excess of our cost of capital and my time at the bank. We've been increasing our ROTE on average by over 100 basis points per year, and we are as well positioned as we have ever been to increase ROTE, targeting 12% in 2026.

Speaker Change: Our 60% cost income ratio target is within reach having achieved 63% in 2023.

Speaker Change: Generating enduring operating leverage is a central pillar of our strategy and at the heart of the productivity program, we will discuss shortly.

Speaker Change: As with all milestones, 10% R. O T. He is not the limit of our ambitions, but just the most recent point on our progression to returns in excess of our cost of capital.

Speaker Change: My time at the bank.

Speaker Change: We've been increasing our R O T on average by over 100 basis points per year, and we are as well positioned as we have ever been to increase our O T E targeting 12% in 2026.

Unnamed Speaker: As in previous years, we will do this through income growth, expense discipline, ongoing transformation, and active capital management. We have the right strategy, in the right markets, and we have momentum. We will now build on that momentum to deliver sustainably higher returns. The financial framework we're presenting today is designed to do that. Through our hard work, focus, and investment, we believe we've arrived at what we see as a virtuous circle.

Speaker Change: As in past years, we will do this through income growth expense discipline ongoing transformation and active capital management.

Speaker Change: We have the right strategy in the right markets and we have momentum we will now build on that momentum to deliver sustainably higher returns the financial framework. We're presenting today is designed to do that too.

Speaker Change: Through our hard work focus and investments. We believe we have arrived at what we see as a virtuous circle, we generate consistent income growth across our markets and products generating operational leverage which allows us to further invest in growth.

Diego: We generate consistent income growth across our markets and products, generating operational leverage which allows us to further invest in growth. We will grow net interest income in 2024 and beyond as hedging, client asset growth, and asset and liability mixed benefits offset the expected reduction in interest rates. Non-NII growth will be powered by the significant investments we've made in wealth and financial markets, which I mentioned earlier. We will accelerate our focus to simplify, standardize, and digitize the group through our $1.5 billion three-year Fit for Growth program, which, combined with a commitment to hold our costs below $12 billion in 2026, will drive further operational leverage. As Diego will elaborate, this is all about streamlining our processes and improving outcomes for our clients, colleagues, and shareholders.

Speaker Change: We will grow net interest income in 'twenty, 'twenty, four and beyond as hedging client asset growth and asset and liability mix benefits offset the expected reduction in interest rates.

Speaker Change: Non NII growth will be powered by the significant investments, we've made in wealth and financial markets, which I mentioned earlier.

Speaker Change: We will accelerate our focus to simplify standardize and digitize the groups, who are 1.5 billion dollar three your fit for growth program, which combined with our commitment to hold our cost below $12 billion in 2026 will drive further operational leverage.

Speaker Change: As Diego will elaborate this is all about streamlining our processes improving outcomes for our clients colleagues and shareholders.

Diego: We expect this to be transformational for the group, building on substantial foundations established in recent years. Taken together, these actions will generate higher returns and attract capital. We will deliver substantial shareholder distributions over the period, targeting at least $5 billion of capital returns by 2026. Consequently, we expect ROTE to increase steadily from 10%, targeting 12% in 2026, and to progress thereafter. Now it's over to Diego to take you through the numbers. Hello everyone. Thank you for joining us today. I have already met some of you, and I'm looking forward to meeting more of you in the weeks ahead.

Speaker Change: We expect this to be transformational for the group building on substantial foundations established in recent years.

Speaker Change: Taken together these actions will generate higher returns and accrete capital.

Speaker Change: We will deliver substantial shareholder distributions over the period targeting at least $5 billion of capital returns by 2026.

Speaker Change: Consequently, we expect our O T E to increase steadily from 10% just targeting 12% in 2026 and to progress thereafter.

Now over to Diego to take you through the numbers.

Diego: Hello, everyone. Thank you for joining today.

Diego: I have already met some of you and I'm looking forward to meeting more of you in the weeks ahead.

Diego: Turning to the financials last year, in my remarks, I will be comparing year-on-year and speaking in constant currency unless stated otherwise. The fourth quarter was robust, with income up 7%. Net interest income was up 6% on further rate rises, and we achieved a net interest margin of 170 basis points. Non-NII grew 8%, but was down 19% quarter on quarter as we saw the usual seasonality in financial markets and wealth management. We managed costs well in the fourth quarter, with operating expenses up 2% year-on-year but lower quarter-on-quarter, delivering 5% positive jobs in the peak. Credit impairment was materially lower, with a charge of just over $60 million, reflecting much lower provisions in China commercial real estate relative to both the prior period and course.

Turning to the financials left here in my remarks, I will be comparing year on year and speaking to constant currency unless stated otherwise.

Diego: The fourth quarter was robust with income up 7% net.

Diego: Net interest income was up 6% on further rate rises and we achieved a net interest margin of 170 basis points.

Diego: Non NII grew 8%, but was down 19% quarter on quarter as we saw the usual seasonality in financial markets and wealth management.

Diego: We managed costs well in the fourth quarter with operating expenses up 2% year on year, but lower quarter on quarter, delivering 5% positive jaws in the period.

Diego: Credit impairment was materially lower with a charge of just over $60 million.

Diego: Collecting much lower provisions in China commercial real estate relative to both the prior period and court.

Diego: We took a further $153 million right down in restructuring relating to our associate investment in China Buhai Bank. All in? A resilient fourth quarter, with profits of $1.1 billion, up 74%, which supported the delivery of our full year 2023 target. Turning to the full year, the headline is that we hit our double-digit return on tangible equity target, delivering 10.1% ROTE in 2023. Total income was up 13%, Adjusted Net Interest Income grew 23%, and Non-NII was up 2% as the Continued Recovering Wealth Management was part of SEPT by Lower Financial Markets. Expenses were up 8%, including further inflationary pressure and ongoing business investment. These were partly funded by cost saves, and overall, we delivered 4% positive jobs for the year. Credit impairments were more than $300 million lower, reflecting reduced charges on our China CRE portfolio.

Diego: We took a further $153 million write down in restructuring relating to our associate investment in China will high bank.

All in a resilient fourth quarter with profits of $1.1 billion up 74%, which supported the delivery of our full year 2023 targets.

Diego: Turning to the full year. The headline is that we hit our double digit return on tangible equity target delivering 10.1% royalty in 2023.

Diego: Total income was up 13%.

Adjusted net interest income grew 23% and non NII was up 2% as the continued recovery in wealth management was part offset by lower financial market.

Diego: Expenses were up 8%, including further inflationary pressure and ongoing business investments.

Diego: These were partly funded by cost saves and overall, we delivered 4% positive jaws for the year.

Credit impairments were more than $300 million, lower reflecting a reduced charges on our China CRE portfolio.

Diego: Together, this generated an underlying operating profit before tax of $5.7 billion, up 27%. Our strong levels of profitability support a further $1 billion share buyback, which will take the pro forma CT1 ratio to 13.6%, back within our 13-14% target range. Looking at trading momentum, as Bill mentioned, we are heading for an encouraging start to the year, especially in wealth management and financial markets. Looking at product income more closely, we see a similar story to recent quarters. Cash Management and Retail Deposits were the standouts, up 83% and 74%, respectively, both benefiting from rising interest rates. In cash management, we maintain pricing discipline and manage pass-through rates well to support margin expansion, notwithstanding a lower average balance. In Retail Deposits, we saw both margin expansion and higher balances, in part due to deposit campaigns across our major markets. Mortgage income was down 62%, reflecting our deliberate step back from new origination given currently unattractive pricing dynamics, with volumes falling by around $6 billion. Trade and working capital income was resilient, down just 1% despite headwinds from lower balances.

Diego: Together these generated underlying operating profit before tax of $5 $7 billion up 27%.

Diego: Our strong levels of profitability support a further $1 billion share buyback, which we will take the pro forma CET one ratio to 13, 6% back within our 13% to 14% target range.

Diego: Looking at trading momentum as Bill mentioned, we are heading an encouraging start to the year, especially in wealth management and financial markets.

Diego: Looking at probably I think in more closely we see a similar story to recent quarters.

Diego: Cash management and retail deposits were the standouts up 83, and 74% respectively, both benefiting from rising interest rates.

Diego: And cash management.

Diego: We maintained pricing discipline and managed pass through rates well to support margin expansion notwithstanding lower average balances.

Diego: Yeah retail deposits, we saw both margin expansion and higher balances in part due to deposit campaigns.

Diego: Our major markets.

Mortgage income was down 62%, reflecting our deliberate step back from new originations given currently Ana practice pricing dynamics with volumes falling by around $6 billion.

Diego: Trading working capital income was resilient down just 1% despite headwinds from lower bonuses.

Diego: This reflected subdued momentum in trade activity in some markets and customer preference for local currency financing in some products. This was partly offset by margin improvement as we focused on higher returns on profit. The Treasury loss of around $900 million was mainly due to the impact of our hedging positions in a higher interest rate environment.

Diego: This reflected subdued momentum in trade activity in some markets and customer preference for local currency financing in some products. This was partly offset by margin improvement as we focused on higher returning products.

Diego: The tragedy lots of around $900 million was mainly due to the impact of our hedging positions in a higher interest rates environment.

Diego: This negative carry is more than offset by a corresponding increase in the net interest market. However, Treasury also saw a drag from the cost of holding surplus liquidity during part of the year rather than it being deployed into client assets. Adjusted net interest income increased 23%, driven by higher rates, with the net interest margin expanding 26 basis points to 167 basis points. Strong price indiscipline, and pass-through rate management ensured the group captured the benefit of rising rates. This was partly offset by headwinds from ongoing casa-to-td migration and an adverse change in the mix between treasury and customer. Average interest earning assets of $573 billion were up 1% or 7% excluding the impact of currency translation and our RWA optimization initiative. Financial markets income of $5.1 billion was down 2%.

These negative carry is more than offset by a corresponding increase in the net interest margin.

Diego: Treasury also saw a drag from the cost of holding surplus liquidity during part of the year rather than it being deployed into client assets.

Diego: Adjusted net interest income increased 23% driven by higher rates with the net interest margin expanding 26 basis points to 167 basis points.

Diego: Strong pricing discipline and pass through rate management to ensure the group captured the benefit of rising rates.

Diego: This was partly offset by headwinds from ongoing <unk> to PD migration, and then adverse change in the mix between treasury and customer assets.

Diego: Average interest, earning assets of $573 billion were up 1% or 7%, excluding the impact of currency translation and our RW a optimization initiatives.

Diego: Financial markets income of $5.1 billion was down 2%. However, adjusting for the non repeat of $244 million of Gainesville structured notes in 2022 income was up 3%.

Diego: However, adjusting for the non-repeat of $244 million of gains on structured notes in 2022, income was up 3%. Product-wise, macro trading was down 1%, as lower effects and commodities income was partly offset by a strong performance in rates, where an expanded product offering allowed us to capture greater client wallet share. Credit markets were up 5% due to strong momentum in structured and project finance. Encouragingly, flow income, which is over two-thirds of FM, was resilient even in less volatile markets, growing 7% in the year. This growth in inflow income was partially offset by lower episodic income due to subdued market volatility and lower issuance levels.

Diego: Product life micro operating was down 1% as lower FX and commodities income was partly offset by a strong performance in rates, what an expanded product offering allowed us to capture greater client wallet share.

Diego: Credit markets was up 5% due to strong momentum in structured and project finance.

Diego: Encouragingly floor income, which is over two thirds of the S. N was resilient even in less volatile markets growing 7% in the year.

These girls inflow income was partially offset by lower episodic income due to subdued market volatility and lower issuance levels.

Diego: We saw similar trends in the fourth quarter, with continued growth in flow income at similar levels, whilst episodic income halved. Nevertheless, despite challenging conditions, we are now ranked number one in Footprint G3 syndicated loan and bond issuance, and we gained significant wallet share in global FIC for financial institutions. Wealth momentum was strong, with income of $1.9 billion up 10%. Treasury products and bank assurance were up 16% and 17%, respectively, while managed investments and secured wealth lending were impacted by client deleveraging and margin compression.

Diego: We saw similar trends in the fourth quarter with continued growth in floor income up similar levels was episodic income hugged.

Diego: Despite challenging conditions. We are now ranked the number one in footprint G III syndicated loan and bond issuance and we gained significant wallet share in global seek for financial institutions was momentum was strong with income of $1.9 billion up 10% Treasury products and bank assurance went up 16%.

Diego: And 17%, respectively, while managing investments in secured wealth lending were impacted by client deleveraging and margin compression.

Diego: Performance was broad-based, as three of our five largest wealth markets, Hong Kong, China, and Taiwan, all grew income at double-digit rates. However, two key leading indicators for future wealth momentum deserve special mention. First, we onboarded over a quarter of a million new-to-bank affluent clients in 2023, which equates to around 10% of our affluent client base. Additionally, new affluent clients doubled in Hong Kong and Korea and grew well in China and Singapore. Second, we have had real success in monetizing these new relationships and can do more as we look ahead. Affluent Net New Money was up 50% to $29 billion, which is equivalent to around an 11% annual growth in affluent assets under management.

Performance was broad based as three of our five largest wealth markets, Hong Kong, China, and Taiwan, All grew income at double digit rates.

Diego: Two key leading indicators for future wealth momentum deserves special mention.

Diego: First we on boarded over a quarter of a million new to bank affluent clients in 2023, which equates to around 10% of our affluent client base.

Diego: New affluent clients doubled in Hong Kong, and Korea, and one in China and Singapore.

Diego: Second we have had the real success in monetizing these new relationships and can do more as we look ahead.

Diego: Affluent than net new money was up 50% to $29 billion, which is equivalent to around an 11% annual growth in affluent assets under management.

Diego: Importantly, around half of net new money was in wealth products as opposed to deposits. As rates fall, we would expect our customers, old and new, to continue to shift assets from deposits into the broader wealth products sector. The very high levels of new-to-bank affluent customers and our success in monetizing these new relationships was a strong tailwind in 2023, and we expect it to continue to excel. Client experience remains at the center of our affluent proposition and is evident in our Net Promoters course, where we are ranked best-in-class in priority banking across nine key markets. Turning to our cross-border business, we see our clients' supply chains and investment flows shifting and changing complexions; cross-border income of nearly $7 billion was up 31% and earns a return on risk-weighted assets of around 13%, which is at a meaningful premium to domestic business. Some corridors deserve special mention.

Diego: Importantly around half of net new money was in wealth products as opposed to deposits.

As rates fall, we would expect our customers all the new to continue to shift the asset from deposits into the broader wealth products set.

Diego: The very high levels of new to bank of affluent customers and our success in monetizing. These new relationships was a strong tailwind in 2023, and we expect it to continue to accelerate.

Diego: I didn't experience remains at the center of our affluent proposition and is evident in our net promoter scores, where we're ranked best in class in priority banking across 90 Mark.

Diego: Turning to our cross border business, we see our clients' supply chains and investment flows shifting and changing complexion.

Diego: Cross border income of nearly $7 billion was up 31% and earns a return on risk weighted assets of around 13%, which is at a meaningful premium to domestic business.

Diego: Some corridors deserves special mention.

Diego: First, West-to-East Flows, where we connect Western multinational corporations and financial institutions to our footprint markets in Asia and AME. This generated $1 billion in income, up 32% in the ASEAN corridor and up 42% in the AME corridor. We're also well-positioned to capture opportunities from supply chain reconfiguration in Asia, which is our biggest network engine overall, with intra-Asia income of $2.2 billion, up 24%. Last but not least, AME was our fastest growing network region, with income up 39% to $0.9 billion, reflecting strong activity levels in the Middle East. We continue to invest across the corridors and are well positioned at both ends of the growing trade flows between our markets. Expenses were broadly flat quarter-on-quarter as we maintained cross-discipline into the end of the year. However, annual expenses of $11 billion increased 8%, reflecting inflationary effects, ongoing investment, and supporting business growth initiatives, such as new frontline staff and market expansion.

Diego: First west to East flows, where we connect the western multinational corporations and financial institutions through our footprint pockets in Asia in A&D.

Diego: This generated $1 billion in income up 32% in the ASEAN corridor and up 42% in the a M E corridor.

Diego: We're also well positioned to capture opportunities from supply chain reconfiguration in Asia, which is our biggest network engine overall with intra Asia income of $2 $2 billion up 24%.

Diego: Last but not least a M. He was our fastest growing network region with income up 39% to zero point $9 billion, reflecting strong activity levels in the middle East.

Diego: We continue to invest across the corridors and are well positioned at both ends of the growing trade flows between our markets expenses were broadly flat quarter on quarter as we maintained cost discipline into the end of the year.

Diego: <unk> expenses of $11 billion increased 8%, reflecting inflationary effects ongoing investment and supporting business growth initiatives, such as new frontline stuff and market expansion.

Diego: We continued investing at pace in FM and WealthManners. These are the two big engines of non-NII income and will deliver sustainable growth in a lower interest rate environment. Investments were part funded by $400 million of gross cost saves under the ongoing $1.3 billion cost program. Overall, we delivered 4% positive jobs in the year. Four-year impairments of $528 million were over $300 million lower. This represented a 17 basis points loan loss rate, well below our through the cycle expectation of between 30 and 35 basis points. China commercial real estate impairments of $282 million were $300 million lower and mostly related to top-ups on defaulted accounts, overlay movements, and a very small number of new downgrades.

Diego: We continued investing at pace in F N and wealth management.

Diego: These are the two big engines of known NII income and will deliver sustainable growth in a lower interest rate environment.

Diego: Investments were part funded by $400 million of gross cost saves and the ongoing $1.3 billion cost program.

Diego: They're all we delivered 4% positive jaws in the year.

Diego: Full year impairments of $528 million were over $300 million lower.

Diego: This represented a 17 basis points loan loss rates are well below our through the cycle expectation of between 30 and 35 basis points.

Diego: China commercial real estate impairments of $282 million were $300 million, lower and mostly related to top up some defaulted accounts overlay movements and a very small number of downgrades.

Diego: We have reduced our exposure to Chinese commercial real estate by around 40% since the end of 2021. The cover levels on defaulted accounts are high, at 88%, and we retain a management overlay of just over $140 million against further downside risk, given that a sustainable recovery in prices and sales is yet to occur. Our sovereign portfolio proved resilient, with a net release of $45 million in the year, reflecting recoveries of prior charges, and we continue to monitor this portfolio closely. Retail impairments of $354 million reflect normal flows into default and a slight uptick in delinquency trends across the year, and 85 million charging ventures were primarily from portfolio growth and increased provisions in MOCs, where we have, as a consequence, tightened credit criteria and control. High-risk assets were up $1.2 billion in the quarter.

Diego: We have reduced our exposure to China commercial real estate by around 40% since the end of 2021 the coverage levels on defaulted accounts are high at 88% and we retain a management overlay of just over $140 million against further downside risk given a sustainable recovery in prices and sales is yet to occur.

Diego: Our sovereign portfolio proved resilient with a net release of $45 million in the year, reflecting our recoveries of prior charges and we continue to monitor this portfolio closely retail impairments of $354 million reflects normal flows into default and a slight uptick in delinquency trends across the year.

Diego: And 85 million charge in ventures was primarily from portfolio growth and increased provisions in box, where we have that as a consequence tightened credit criteria and controls.

Diego: High risk assets were up $1.2 billion in the quarter, the $1 billion, increasing credit grade 12 accounts was substantially from a changing instrument on an existing sovereign exposure with no increase in risk.

Diego: The $1 billion increase in credit grade 12 accounts was substantially from a change in instrument on an existing sovereign exposure with no increase in risk. Early alerts were broadly stable throughout. Touching briefly on the balance sheet, on an underlying basis, customer loans of $287 billion were down 2% in the quarter and 1% in the year. We deliberately pulled back on new mortgage origination due to unfavorable pricing dynamics.

Diego: Early alerts were broadly stable in the quarter.

Diego: Touching briefly on the balance sheet on an underlying basis customer loans of $287 billion were down 2% in the quarter and 1% in the year, we deliberately pulled back on your mortgage origination due to unfavorable pricing dynamics.

Diego: Client demand for borrowing in a high interest rate environment was muted, but we expect asset demand to pick up as rates drift lower. So far this year, for example, the CCIB book has started to see signs of growth as client activity has picked up. Customer deposits were up $10 billion in the quarter, following the success of deposit campaigns in CPBD.

Diego: Client demand for borrowing in a high interest rate environment towards muted, but we expect the acid demand to pick up as rates drift lower so far this year. For example, the CCI book has started to see signs of girls as client activity has picked up.

Diego: Customer deposits were up $10 billion in the quarter. Following the success of deposit campaigns in CPD.

Diego: We were able to run off some more expensive treasury balances as we managed the DLCR down to 145%, more in line with our historical average. Lastly, turning to capital, risk-weighted assets of $244 billion were broadly flat during the year.

Diego: We were able to run off some more expensive treasury balances as we manage the LCR down to 145% more in line with our historical average.

Diego: Lastly, turning to capital risk weighted assets of $244 million were broadly flat in the year.

Diego: Asset growth and mixed changes of $12 billion were offset by optimization actions, of which $10 billion were in CCIB. Negative credit migration, principally related to sovereign downgrades, led to nearly $3 billion of additional RWA. Market RWA increased by just over $4 billion due to portfolio growth and an increase in market volatility. The CET1 ratio increased 10 basis points to 14.1% as we more than funded $2.7 billion of ordinary shareholder distributions from accrued profits. The 20 basis point benefit on completion of the aviation sale was broadly offset by the 23 basis point impact of the Bohai impairments we took in the second half.

Diego: Asset growth and mix changes of $12 billion were offset by optimization actions of which $10 billion, what do you see CIB.

Diego: Negative credit migration, principally related to sovereign downgrades led to nearly $3 billion of additional <unk>.

Diego: Market, our <unk> increased by just over $4 billion due to portfolio growth and an increase in market volatility.

The CET one ratio increased 10 basis points to 14.1% as we more than funded $2 $7 billion of ordinary shareholder distributions from accrued profit.

Diego: The 20 basis points benefit on completion of the aviation sale. It was broadly offset by the 23 basis point impact of the Bohai impairments, we took in the second half.

Diego: We also saw 20 basis points of gain from reserve movements, as the rallying rates reduced losses on the fair value securities portfolio. The new $1 billion share buyback will take the performance CET1 ratio to 13.6% in the first quarter of 2024. So, leaving a successful 2023 behind, let's now turn to the future. Our focus is on building on our double-digit ROT and accelerating from here to deliver sustainably higher returns over the next three years. Let me take you through the financial framework that will guide the delivery of that app. Income will increase in a 5% to 7% range over the next three years, with 2024 income expected to be around the top of that range. In 2024, NII will grow to between $10 and $10.25 billion. Lower interest rates will be mainly offset by an expected low single-digit percentage increase in volumes and tailwinds from our hedging position.

Diego: We also saw 20 basis points gain from reserve movements as the rally in rates reduced losses on the fair valued securities portfolio.

Diego: The new $1 billion share buyback will take the pro forma CET one ratio to 13, 6% in the first quarter of 2024.

Speaker Change: So, leaving a successful 2023 behind let's now turn to the future.

Speaker Change: Our focus is on building on our double digital Realty and accelerating from here to deliver sustainably higher returns over the next three years.

Speaker Change: Let me take you through the financial framework that will guide the delivery of that outcome.

Speaker Change: Income will increase in a 5% to 7% range over the next three years with 2024 income expected to be around the top of that range.

Speaker Change: In 2020 for NII will grow to between 10 and 10 in a quarter billion dollars.

Speaker Change: Lower interest rates will be mainly offset by unexpected low single digit percentage, increasing volumes and tailwind from our hedging positions.

Diego: We are stepping up our focus on improving operational leverage and are committed to delivering positive income-to-cost jobs each year. As Bill mentioned before, we are launching a new $1.5 billion productivity and simplification program we are calling Fit for Growth. This program is designed to simplify, standardize, and digitize the group to ensure we maximize the growth opportunity that is ahead of us. Our loan loss rate guidance is unchanged.

Speaker Change: We are stepping up our focus on improving operational leverage and are committed to delivering positive income to cost shows in each ear.

Speaker Change: As Bill mentioned before we're launching a new $1 $5 billion productivity and simplification program, we are calling fit for growth.

Speaker Change: This program is designed to simplify standardize and digitize the group to ensure we maximize the growth opportunity that is ahead of us.

Speaker Change: Our loan loss rate guidance is unchanged.

Diego: We will maintain our disciplined approach to capital deployment, with low single-digit percentage growth in RWI. We currently expect the day one impact of Basel 3.1 to be no more than 5% of our WA, post-management actions, and pending clarification of the rules. This financial framework will generate sufficient equity to support our plans to return at least $5 billion of capital to shareholders. In terms of returns, as Bill mentioned, our target is to steadily increase our ROTE from 10%, targeting 12% in 2026, and to progress thereafter. Now, to look at some aspects of the new financial framework in a little more detail, beginning with net interest income. We expect net interest income to grow to between $10 and $10.25 billion in 2024 and continue to grow thereafter. This is because of four reasons.

Speaker Change: We will maintain our disciplined approach to capital deployment with low single digit percentage growth in our Wi.

Speaker Change: We currently expect the day, one impact of Basel 3.1 to be no more than 5% of our W. A post management actions and pending clarification of the routes. This financial framework will generate sufficient equity to support our plans to return at least $5 billion of capital to shareholders.

Speaker Change: Those have returns as Bill mentioned.

Speaker Change: Our target is to steadily increase our royalty from 10%.

Speaker Change: Targeting 12% in 2026 and to progress thereafter, now to look at some aspects of the new financial framework in a little more detail beginning with net interest income.

Speaker Change: We expect net interest income to grow to between 10 and 10 in a quarter billion dollars in 2024 and continue to grow thereafter.

Speaker Change: This because of for reasons.

Diego: First, the impact of lower rates. The slide shows the impact of rate movements implied by market-forward curves weighted across our key footprint, current. This reflects market expectations that not all currencies will follow the same path in terms of the magnitude or timing of rate cuts.

Speaker Change: First the impact of lower rates.

This slide shows the impact of rate movements implied by market forward curves weighted across our key footprint currencies.

Speaker Change: This reflects market expectations that not all currencies will follow the same path in terms of the magnitude or timing of rate cuts.

Diego: The IRBB disclosures are not the best way to estimate the impact of interest rate movements on our NII, as they assume an instant parallel shift across all currencies and a static balance sheet, neither of which are realistic assumptions. Instead, the rate we have provided you is more appropriate for our balance sheet and currency mix. On this basis, we expect a 51-basis point cut in currency-weighted forward rates in 2024, based on forward curves from earlier this year. Second, moving to our head.

Speaker Change: The IRB be disclosures are not the best way to estimate the impact of interest rate movements on our NII is they assume an instant parallel shift across all currencies and a static balance sheet, neither of which are realistic assumptions instead.

Speaker Change: Instead the rate we have provided you is more appropriate for our balance sheet and currency mix.

Speaker Change: On this basis, we expect a 51 basis point cut in currency weighted forward rates in 2024 based on forward curves from earlier this year.

Speaker Change: Second moving to our hedges.

Diego: In February 2024, the last $12.5 billion of our short-term income hedges expire and will be reinvested at higher yields. This delivers a mechanical benefit of around $400 million in 2024, with a smaller benefit of $100 million in 2025. Looking further out, our structural hedges continue to provide long-term protection to net interest income, particularly if rates fall further than the market expects. On these first two points, we have included slides in the appendix that cover structural hedging, rate curve assumptions, and the usual IRBB sensitivities. This was so.

Speaker Change: In February 2020 for the last 12, and a half a billion dollars of our short term income hedges expire and will be reinvested at higher yields.

Speaker Change: This delivers a mechanical benefit of around $400 million in 2024, with a smaller benefit of $100 million in 2025.

Speaker Change: Further out our structural hedges continue to provide long term protection to net interest income, particularly if rates fall further than the market expects.

On these first two points we have included slides in the appendix that colbert structural hedging rate curve assumptions and the usual IRB be sensitivities the floor is yours.

Diego: Thirdly, as client asset demand picks up in a lower rate environment, we expect to deliver low single-digit asset growth across our business. In the near term, we expect this mainly in trade and credit markets, with CCPL increasing over time and mortgages growing later in the three-year period. Fourth, there will be benefits deriving from our assets and liability measures. We expect higher-yielding client assets to grow at a faster rate than treasury assets and to be a larger part of the overall mix. On the liability side, in 2025 and 2026, lower rates should drive benefits from TD to Casa migration as the migration trend we have experienced in the recent past reverses. We have built two strong engines of growth for non-NII that will support our 5% to 7% total income target. This year, non-NII accounted for almost half of the group sync; financial markets, and wealth management represented around 70% of non-NIAs.

Speaker Change: Thirdly as client as that demand picks up in a lower rate environment, we expect to deliver low single digit asset growth across our businesses.

Speaker Change: Near term, we expect this mainly in trade in credits pockets with CCP and increasing over time and mortgages growing later in the three year period.

Speaker Change: Fourth there will be benefits deriving from our assets and liability mix.

Speaker Change: We expect higher yielding client assets to grow at a faster rate than treasury assets and to be a larger part of the overall mix on.

Speaker Change: On the liability side in 2025, and 2026 lower rates should drive benefits from TD to CASM migration is the migration trend we have experienced in the recent past reverses.

Speaker Change: We have built two strong engines of growth of non NII that will support our 5% to 7% total income target.

Speaker Change: This year non NII accounted for almost half of the group's income.

Speaker Change: Financial markets and wealth management represent around 70% of non NII.

Diego: Both these businesses have achieved a long-term growth rate of around 8 percent, and we have invested at pace in recent years in both, transforming their complexions, and these investments are paying off. We have scaled these businesses, expanded our product offering, and diversified our client base, making income more resilient across the site. In FM, we now have a diverse business with unrivaled access to and expertise in emerging markets and a very credible G10 capability. Over two-thirds of SME income is from flows, which has continued to grow even in less volatile markets.

Speaker Change: Both these businesses have achieved our long term growth rates of around 8% and we have invested its pace in recent years in both transforming their complexion and these investments are paying off.

Speaker Change: We have scaled these businesses expanded our product offering and diversified our client base, making income more resilient through the cycle.

Speaker Change: In F. N. We now have a diverse business with unrivaled access to an expertise in emerging markets and a very credible jeetan capability.

Speaker Change: Over two thirds of ascending gummies floor, which has continued to grow even in less volatile markets.

Diego: We have increased the velocity of our FM balance sheet to our originate-to-distribute model and built out digital platforms to support an expanded macro trading product set. Our expanded product capability, including carbon trading and structured finance, makes us more relevant to our clients as they search for yield in a lower rate environment. In wealth management, we are now among the top three in Asia, where growth in affluent assets is expected to outpace the rest of the world. We now have a significant opportunity to monetize over a quarter of a million new-to-bank affluent clients onboarded last year. Net new money flows of $29 billion in 2023 were broadly split between wealth products and deposits, and the mix will continue to shift towards wealth products as rates come down.

We have increased the velocity of our ethane balance sheet through our originate to distribute model and the build out of digital platforms to support an expanded macro trading product set.

Speaker Change: Our expanded product capability, including carbon trading and structured finance makes us more relevant to our clients as they search for yield in a lower rate environment.

Speaker Change: In wealth management, we are now top three in Asia, where growth in affluent assets are expected to outpace the rest of the world.

Speaker Change: We now have a significant opportunity to monetize over a quarter of a million new to bank affluent clients on boarded lussier.

Speaker Change: Net new money flows of $29 billion in 2023 were broadly split between wealth product and deposits and the mix will continue to shift towards wealth products as rates come down.

Diego: To improve operational leverage, we are going to address the complexity that slows us down at times to make better, quicker decisions and create capacity to reinvest in our business. We are embarking on a fit for growth program to simplify, standardize, and digitize our business and improve our organizational effectiveness to deliver $1.5 billion in savings. Fit for Growth builds on the foundations of all the work we have done over the years. It will improve productivity and our client and employee experiences while creating future capacity to reinvest and grow in a sustainably profitable way. We will back our ambition with an commitment to keep costs below $12 billion in 2026, implying a cost growth CAGR of 3% over the three years. The cost to achieve such savings will be no more than $1.5 billion, with the largest impact being in 2025.

Speaker Change: To improve our operational leverage we're going to address the complexity that slows us down at times to make better quicker decisions and create capacity to array invest in our business.

We are embarking on our fit for growth program to simplify standardize and digitize, our business and improve our organizational effectiveness to deliver one and a half a billion dollars in savings.

Speaker Change: Fit for growth built on the foundations of all the work we have done over the years, it will improve productivity and our client and employee experiences, while creating future capacity to reinvest and grow in a sustainably profitable way.

Speaker Change: We will back our ambition with a commitment to keep costs below $12 billion in 2026, implying a cost growth CAGR of 3% over the three years.

Speaker Change: The cost to achieve such saves will be no more than one and a half billion dollars with the largest impact being in 2025.

Diego: To further bolster growth, we will reinvest some of the saves into return-accretive opportunities in the later years of the program, but only once the larger part of the saves has been delivered. Lastly, we will aggressively manage the cost base, whatever the income output. We will maintain cost discipline and are targeting positive jobs growth in each year through 2026. As we deliver strong income growth and improved operational leverage, we expect to generate levels of equity that will support substantial capital distribution. We have a demonstrable track record of delivering shareholder returns, including today's new $1 billion share buyback and the 2023 dividend of $0.27 per share. We have returned $5.5 billion to shareholders since January 2022, exceeding our three-year shareholder distribution target in just two years. We are confident we will experience no more than 5% RWA inflation from absorbing the day-one impact of Basel 3.1 in July 2025.

Speaker Change: To further bolster growth, we will reinvest some of the saves into return accretive opportunities in the later years of the program, but only once the larger part of the saves has been delivered.

Speaker Change: Lastly, we will assertively manage the cost base at whatever the income outcome.

Speaker Change: We will maintain cost discipline and are targeting positive jaws in each year through 2026.

Speaker Change: As we deliver strong income growth and improved operational leverage we expect to generate levels of equity that will support substantial capital distributions.

Speaker Change: We have a demonstrable track record of delivering shareholder returns, including today's new $1 billion share buyback and the 2023 dividend of 27 cents per share. We have returned $5 $5 billion to shareholders. Since January 2022, exceeding our three year shareholder distribution target in just two years.

Speaker Change: We are confident we will experience no more than 5% <unk> inflation from absorbing the day, one impact of Basel 3.1 in July 2025.

Diego: The rules here still need to be clarified, and we will increase our mitigating actions as we know more. Looking ahead, we intend to return at least a further $5 billion to shareholders between 2024 and 2026 and continue to increase the full-year dividend per share over time. So to recap, we expect to deliver total income growth over the next three years of between 5% and 7%, with this year around the top of the trend. Our new $1.5 billion Fit4Growth program will help ensure we deliver increased operational leverage, good jobs, and costs below $12 billion in 2026. We expect credit impairments to continue to normalize through the cycle expectation of 30 to 35 basis points, and RWAs will grow at a low single-digit percentage with a continued focus on returns this year. This will result in ROTE increasing steadily from 10 percent, and we are targeting 12 percent in 2026 and for it to progress thereafter. With that, back to Bill. Thanks, Diego.

Speaker Change: And the rules here still need to be clarified and we will increase our mitigating actions as we know more.

Speaker Change: Looking ahead, we intend to return at least a further $5 billion to shareholders between 2024, and 2026 and continue to increase the full year dividends per share overtime. So to recap we expect to deliver total income growth over the next three years of between five and 7%.

Speaker Change: With this year around the top of that range.

Speaker Change: Our new one and a half billion dollars fit for growth program will help ensure we deliver increased operational leverage positive jaws and costs below $12 billion in 2026.

Speaker Change: We expect credit impairments to continue to normalize to a through the cycle expectation of 30 to 35 basis points.

Speaker Change: RW as it will grow at a low single digit percentage with a continued focus on returns discipline.

Speaker Change: This will result in Iot, increasing steadily from 10% and we are targeting 12% in 2026 and for it to progress with.

Speaker Change: With that back to bill.

Speaker Change: Thanks, Diego looking ahead, the structural growth opportunities in our markets are compelling and our strategy is increasingly aligned to these.

Bill: Looking ahead, the structural growth opportunities in our markets are compelling, and our strategy is increasingly aligned to these. Capturing them will deliver value for both our clients and the communities in which we operate. Our footprint is home to some of the fastest-growing markets in the world. GDP growth of around 5% in Asia for the next three years is around double the rate of growth in the U.S. and five times the rate in the Eurozone, contributing two-thirds of global growth.

Bill: Capturing them will deliver value for both our clients and the communities in which we operate.

Our footprint is home to some of the fastest growing markets in the world GDP growth of around 5% in Asia for the next three years is around double the rate of growth in the U S and five times at the rate in the Euro area contributing two thirds of global growth.

Bill: We're seeing a shift of investment flows and global supply chains across our footprint, driven by geopolitical tensions, the search for post-pandemic resilience, and changing patterns of economic production and consumption. These trends will support our business for years to come as our unique global network allows us to capture many of them. We are present in 21 Asian markets and are the only bank with a presence in all ASEAN markets. As one of the largest international banks, we have a significant presence in Africa and across six markets in the Middle East.

Bill: We're seeing a shifting of investment flows in global supply chains across our footprint driven by geopolitical tensions the search for post pandemic resilience and changing patterns of economic production and consumption.

Bill: These trends will support our business for years to come as our unique global network allows us to capture many of them were present in 'twenty, One Asian markets and are the only bank with a presence in all ASEAN markets as.

That's one of the largest international banks, we have a significant presence in Africa and across six markets in the middle East having.

Bill: Having recently launched operations in Egypt, we've reinforced our commitment to the AME region, which is a unique calling card for our global client base. The scale of wealth creation in Asia and the Middle East is compelling, and our Asia wealth franchise is the third largest by AUM. Our three financial hubs in Hong Kong, the UAE, and Singapore are well positioned as super connectors, capturing growth and cross-border wealth flows. And lastly, as climate risks continue to rise, by 2030, there is a $2.5 to $3 trillion per year financing gap, and we are in a position to profitably address those needs. So, with multiple opportunities for growth in our footprint, which our strategy has successfully captured, we're now focused on turbocharging our business to deliver sustainably higher returns. Turning to CCID's plans in more detail, we will continue to increase our focus on two distinct client segments.

Bill: Having recently launched operations in Egypt, we've reinforced our commitment to the a M. A region, which is a unique calling card for our global client base.

Bill: The scale of wealth creation in Asia, and the Middle East is compelling and our Asia wealth franchise is the third largest by a U M. R. Three financial hubs in Hong Kong, UAE, and Singapore are well positioned as superconductors capturing growth in cross border wealth flows and lastly, as climate risks continue to rise by 2030, there's a two five to three trillion.

Bill: Dollar per year financing gap and we are in a position to profitably address those needs.

Bill: So with multiple opportunities for growth of our footprint, which our strategy has successfully captured we're now focused on turbocharging, our business to deliver sustainably higher returns turning to CCI. These plans in more detail. We will continue to increase our focus on two distinct client segments first global multinational clients and their subsidiaries.

Bill: First, global, multinational clients and their subsidiaries, who have significant and expanding operations in our footprint. And second, our financial institutions clients who are looking to invest more in our markets or provide banking and other financial services there. Growth in business and wallet share in these client segments, which are more intensive users of our cross-border and financial markets capabilities, will support 8% to 10% growth in both cross-border and financial institutions income. It's also worth remembering that cross-border income in financial institution clients generates higher returns compared to domestic and corporate clients, respectively. In terms of products, we'll target growing our financing income by 8% to 10% through our originate to distribute model, targeting our sponsor and financial institution clients with a broader product. As part of that, we've entered an initial partnership with a major asset manager to jointly underwrite a global credit product for subsequent distribution.

Bill: Who has significant and expanding operations in our footprint.

Bill: And second our financial institutions clients, who are looking to invest more in our markets or provide banking and other financial services there.

Bill: Growth in business and wallet share in these client segments, which are more intensive users of our cross border and financial markets capabilities will support the 8% to 10% growth in both cross border and financial Institutions' income. It's also worth remembering that cross border income in financial institution clients that generate higher returns compared to domestic and corporate clients respectively.

Bill: In terms of products will target growing our financing income by 8% to 10% through our originate to distribute model targeting our sponsor in financial institutions clients with a broader product set.

Bill: As part of that we've entered an initial partnership with a major asset manager to jointly underwrite global credit product for subsequent distribution.

Bill: We hope to enter further arrangements to leverage our own origination and that of others across key credit market segments around the world. Following the tough market conditions in 2023, we expect to be able to grow trade and working capital financing income between 6% to 8% by capturing market share through strategic partnerships and digital channels. As we deliver on our $300 billion sustainable financing commitment, building on our strengths in carbon markets, adaptation finance, biodiversity, and blended finance, we now expect to grow sustainable finance income to over $1 billion by 2025. The CPBB team will build on the exceptional levels of new-to-bank affluent clients and net new money that we saw last year, with a target of growing affluent net new money flows by more than $80 billion over the We have particular expertise in international wealth clients, including fast-growing examples such as Chinese clients looking to diversify away from domestic property or equity markets. We aim to add over 100,000 international affluent clients, taking this cohort to over 375,000 by 2026.

Bill: We hope to enter further arrangements to leverage our own origination and that of others across key credit market segments around the world.

Following the tough market conditions in 2023, we expect to be able to grow trades in working capital financing income between 6% to 8% by capturing market share through strategic partnerships and digital channels.

As we deliver on our $300 billion of sustainable financing commitment.

Bill: Building on our strengths and carbon markets at a patient finance biodiversity and blended trends, we now expect to grow sustainable finance income to over $1 billion by 2025. The C. P. B b team will build on the exceptional levels of new debate affluent clients and net new money that we saw last year with a target of growing affluent net new money flows by more than <unk>.

Bill: $80 billion over the next three years.

Bill: We have particular expertise in international wealth clients, including fast growing examples such as Chinese clients looking to diversify away from domestic property or equity markets.

Bill: We aim to add over 100000 international affluent clients, taking this cohort to over 375000 by 2026.

Bill: We also expect our mass retail business to continue to provide a robust pipeline of new affluent clients, targeting the up-tiering of a further 800,000 to 1 million clients across the continuum over the next three years. And lastly, we'll continue to grow customer numbers and scale through our partnerships, with partnership assets growing to over $3 billion by 2026. In Ventures, we aim to convert the exceptional momentum in our two main digital banks, Mox and Trust, into sustainable profitability. Mox has grown to over 500,000 customers and is the leading Hong Kong digital bank for digital lending and digital wealth. Trust in Singapore now has around 700,000 customers just over a year after launch, making it one of the fastest growing digital banks globally.

We also expect our mass retail business to continue to provide a robust pipeline of new affluent clients targeting the up tiers of a further 800000 to 1 million clients across the continuum over the next three years.

And lastly, we'll continue to grow customer numbers and scale through our partnerships with partnership assets growing to over $3 billion by 2026.

Bill: And ventures, we aimed to convert the exceptional momentum in our two main digital banks MX entrust into sustainable profitability.

Box has grown to over 500000 customers and is the leading Hong Kong digital bank for digital lending and digital wealth.

Bill: Trust in Singapore now has around 700000 customers just over a year after launch making it one of the fastest growing digital banks globally.

Bill: It has 12% market penetration today, and we aim to become the fourth largest retail bank in Singapore by customer numbers this year. In the rest of the Ventures portfolio, we're making progress. We've launched five new ventures, including a digital assets base in the UAE and Japan, and profitably exited two investments. We're now serving nearly 600,000 new customers.

Bill: It is 12% market penetration today, and we aim to become the fourth largest retail bank in Singapore by customer numbers this year.

Bill: And the rest of the ventures portfolio, we're making progress we've launched five new ventures, including a digital asset space in UAE, and Japan and profitably exited two investments we're now serving nearly 600000 new customers.

Bill: We're targeting for the overall segment to be R. O T accretive by 2026.

Bill: Turning to the fourth pillar of the strategy, we set out in 2021 sustainability.

Bill: We're targeting the overall segment to be ROTE accretive by 2026. Now, turning to the fourth pillar of the strategy we set out in 2021, sustainability. The world will not achieve its net-zero ambition without significant investment in emerging markets, which represent one of the biggest opportunities to move at pace to low-carbon technology. However, that transition needs to be just, allowing those markets to meet global climate objectives without depriving them of their right to grow and prosper. Recognizing that,

Bill: The world will not achieve its not through ambition without a significant investment into emerging markets, which represent one of the biggest opportunities to move at pace to low carbon technologies, however that transition needs to be just allowing those markets to meet global climate objectives without depriving them of their right to grow and prosper.

Bill: Recognizing that we.

Bill: We will mobilize $300 billion of sustainable finance by 2030 and to date have delivered $87 million against this commitment.

In doing so we grown our sustainability ASUR pool by 16% with 85% of our use of proceeds assets located in Asia Middle East and Africa.

Bill: We will mobilize $300 billion of sustainable finance by 2030 and, to date, have delivered $87 billion against this commitment. In doing so, we've grown our sustainability asset pool by 16%, with 85% of our use of proceeds assets located in Asia, the Middle East, and Africa. We continue to progress our broader sustainability agenda, including against our Net Zero Roadmap, having announced absolute emissions reduction targets for the oil and gas sector earlier this year. We've now set out emissions baselines and reduction targets in 11 of 12 high carbon emitting sectors defined by the Net-Zero Banking Alliance.

Bill: We continue to progress our broader sustainability agenda, including against our net zero roadmap, having announced absolute emissions reductions targets for the oil and gas sector earlier this year.

We've now set out emissions baselines and production targets in 11 of 12 high carbon emitting sector as defined by the net zero backyard lives as a result, our sustainable finance business has gone from strength to strength with income of $720 million up 42%. This year well on our way to deliver our 2025 target of above $1 billion.

Bill: As a result, our sustainable finance business has gone from strength to strength, with income of $720 million, up 42% this year, well on our way to delivering our 2025 target of above $1 billion. So, in summary, whilst pleased to have hit our double-digit ROT target in 2023, we will now redouble our focus on the relentless march toward returns in excess of our cost of capital. Our unique franchise in the world's most dynamic markets gives us a strategic advantage and confidence that we can continue to grow even in a lower rate environment. Our objective is to build on our achievements to date and the strong foundations that they have created for delivery of sustainably higher returns. To do that, we have to deliver strong income growth, particularly in higher-returning businesses, improve operational leverage, making the group fit for growth, and continue to grow shareholder distribution.

Speaker Change: So in summary.

Speaker Change: While im pleased to have hit our double digit ROE to your target in 'twenty to 'twenty three we will know redouble our focus on our relentless March towards returns in excess of our cost of capital.

Speaker Change: Our unique franchise in the world's most dynamic markets gives us a strategic advantage and confidence that we can continue to grow even in a lower rate environment.

Speaker Change: Our objective is to build on our achievements to date and the strong foundations that they have created for delivery of sustainably higher returns.

Speaker Change: To do that we have to deliver strong income growth, particularly in higher returning businesses.

Speaker Change: Improve operational leverage, making the group fit for growth and continue to grow shareholder distributions.

Speaker Change: As a result of all this we expect aro to eat to increase steadily from 10% to our target of 12% in 2026 and for it to continue to progress thereafter.

Speaker Change: With that I'll hand back to the operator for some questions.

Bill: As a result of all this, we expect ROTE to increase steadily, from 10% to our target of 12% in 2026, and for it to continue to progress thereafter. With that, I'll hand it back to the operator for some questions. Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced.

Speaker Change: Thank you to ask a question you will need to press star one on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again he wants to ask a question via the webcast. Please type it into the box and click submit please standby, while we compile the Q&A will stop.

Speaker Change: Thank you.

Speaker Change: We will now go to small fast question.

Operator: To withdraw your question, please press star 1 and 1 again. If you wish to ask a question via the webcast, please type it into the box and click submit. Please stand by while we compile the Q&A roster. Thank you. We will now go to our first question. And your first question comes from the line of Joseph Dickerson from Jeffreys. Please go ahead. Hi, good morning.

And your first question.

Speaker Change: Comes from the line of.

Speaker Change: Joseph Dickerson from Jefferies. Please go ahead.

Joseph Dickerson: Hi, Good morning, Thank you for taking my questions and congrats on a very clear set of targets a 426.

Joseph Dickerson: I guess two questions how much of the trajectory to the 12% return on tangible do you believe is idiosyncratic and how much do you believe requires improvement and the market backdrop.

Joseph Dickerson: Thank you for taking my questions, and congratulations on a very clear set of targets for 26. I guess I have two questions. How much of the trajectory to the 12% return on tangible assets do you believe is idiosyncratic, and how much do you believe requires improvement in the market backdrop? Or you could put it another way.

Joseph Dickerson: You could put it another way how do you look at the revenue growth.

Bill: How do you look at revenue growth between idiosyncratic and macro? Maybe that's perhaps the better part of the question. And then just in terms of the shareholder distribution target of greater than $5 billion, I mean, you returned $5.5 billion since 2022 at a lower return. I guess the emphasis on greater than and, you know, what are the constraints there? Is the $1.5 billion cost to achieve plus, you know, 5% RWA inflation on Basel I kind of mitigating some of that, or is it just being conservative? Thanks.

Joseph Dickerson: Between idiosyncratic and macro maybe that's perhaps the better part of the question and then just in terms of the shareholder distribution target of greater than 5 billion. I mean, he returned 5.5 since 2022 at a lower return I guess is the emphasis on greater than.

Joseph Dickerson: And you know what's what what are the constraints. There is the one and a half billion cost to achieve plus 5% art of UA inflation on Basel, one kind of mitigating.

Joseph Dickerson: Some of that or is it is it just being conservative. Thanks.

Bill: Great. Thanks very much, Joseph. Thanks for the question. Thanks for the use of a sex-dysllabic word right up front, trying to throw us on a Friday morning.

Speaker Change: Great. Thanks, very much Joseph Thanks for thanks for the question and thanks for the use of our Sextus 11 court right upfront trying to throw us on a Friday morning, but I get I get the point I think that the trajectory of 12%.

Bill: But I get the point, I think. The trajectory to 12%, what has to happen? We have to continue to do what we've been doing, which is to grow our income. Obviously, we've got it to the top end of the 5% to 7% range in 2024 and then 5% to 7% thereafter.

Speaker Change: Like what has to happen we have to continue to do what we've been doing which is to grow our income obviously, we've guided to top end of the five to seven range and in 'twenty 'twenty, four and then 5% to 7% thereafter.

It's going to be driven by ongoing growth in our in our very strong wealth and F. N businesses. The other non NII businesses and transaction banking and retail and of course, it's going to be driven by what we've gotta do which was which is growing NII.

Bill: And that's going to be driven by ongoing growth in our very strong wealth and NFN businesses, and the other non-NII businesses in transaction banking and retail. And, of course, it's going to be driven by what we've got to do, which is growing NII. How much of that is structural? I mean, I would say it's reasonably structural.

Speaker Change: How much of that is is structural I mean, I would say, it's reasonably structural but of course key elements of of that progression are market sensitive and market sensitive and in particular in financial markets and wealth, but interesting to note that the we had good a resumption of growth in the wealth business in the second half of last year.

Bill: But, of course, key elements of that progression are market sensitive, and market sensitive in particular in financial markets and wealth. But interesting to note that we had a good resumption of growth in the wealth business in the second half of last year and through the fourth quarter. As we've indicated, we've had a good start to this year in wealth, NFM, and other businesses. It's not because the market's been a supermarket.

Speaker Change: Through the fourth quarter.

Speaker Change: As we've indicated we've had a good start to this year in wealth N F. M. In other in other businesses, it's not because the market has been a supermarket right. Now obviously our clients are are probably disproportionately affected by sentiment in the Chinese equity market, China, and Hong Kong, which has not been attractive at all.

Bill: Obviously, our clients are probably disproportionately affected by sentiment in the Chinese equity market, China and Hong Kong, which have not been attractive at all. So it gives me comfort that now, with our diversified wealth platform, meaning bank insurance, fixed income product, credit product, funds, single stocks, some alternatives, etc., we can weather a fair amount of market ups and downs. The NFM business clearly swings around. But, again, it's really important to note that we've been separating for a couple of years now for all of our shareholders the flow income versus the episodic. The flow income has been really good steady growth, 7%, in the most recent period. The episodic income has been more volatile, as we always said it would be. So we had a relatively weak episodic quarter, still positive, but well off the extraordinarily high levels from earlier in the year or in 2022. Is that idiosyncratic?

Speaker Change: So that gives me comfort that now with our diversified wealth platform.

Speaker Change: Meaning bancassurance fixed income product credit product funds single stocks.

Speaker Change: Some alternatives et cetera that we can weather a fair amount of market up and down the FM business.

Speaker Change: Currently swings around but again it really important to note that that we've been separating for a couple of years now for four for all of our shareholders the flow income versus the episodic.

Speaker Change: Total income has been a really good steady growth.

Speaker Change: 7%.

Speaker Change: And in the most recent period the episodic has been more volatile as we always said it would so we had a relatively weak episodic quarter still positive, but well off the extraordinarily high levels from earlier in the year or in 2022.

Speaker Change: Is that idiosyncratic.

Speaker Change: To an extent that make maybe by definition, it's idiosyncratic but.

Have we demonstrated that we can generate good periods of episodic income to complement that really really steady flow income year. After year. After year. Yeah. Yeah. We have so I'd say, it's largely structural but I feel quite good about the income growth that goes to that.

Bill: Yeah, to an extent. I mean, maybe by definition it's idiosyncratic, but have we demonstrated that we can generate good periods of episodic income to complement that really, really steady flow of income year after year after year? Yeah, we have. So I'd say it's largely structural, and I feel quite good about the income growth that goes to that. The cost management, Diego, who I'm going to hand to in a second, will for sure talk about fit for growth and the cost component of getting to a 12% plus, plus, plus ROTE. That's just structural. But that's our structural, not market structural. We have opportunities to accelerate the transformation of our business, and we're going to do that. And finally, you're quite right to point out that we got it to $5 billion, and it was good for capital returns in excess of, right, on the back of a strong set of incremental guidance around returns, income, and job growth. And obviously, like we did last time, we're going to do everything we can to beat that. We got it to five in three years; we hit five and a half and two.

Speaker Change: The the cost management, and your Diego, who I'm gonna entering our second well for her talk about about fit for growth and the growth components are that the cost component of getting to a 12% plus plus plus R. O T. A structural but that's our structural in that market structural Oh, we have opportunities to accelerate the transformation of our business and we're going to do that.

Speaker Change: And finally on the <unk>.

Speaker Change: You're quite right to point out that we've got a $5 billion.

Speaker Change: And it was good a.

Speaker Change: Capital returns in excess of right.

Speaker Change: On the back of of a strong set of incremental guidance around returns and income and job.

Jobs growth and obviously.

Speaker Change: Obviously like we did last time, we're going to do everything we can to beat that.

Speaker Change: We got it to five over three years, we had five and have happened to them.

Speaker Change: And we did that because we we outperformed pretty much in every line of our of our underlying guidance growth cost and capital discipline.

Speaker Change: And but we also know as we go forward that we have had unusually low loan impairments now I know I've been sitting here for five or six years, saying that.

Bill: And we did that because we outperformed pretty much on every line of our underlying guidance, growth, costs, and capital dissolution. But we also know, as we go forward, that we have had unusually low loan impairments. Now, I know I've been sitting here for five or six years saying that.

Speaker Change: It's not always been perfect, but we have consistently.

Speaker Change: Come in below our what we consider to be a through the cycle number.

Speaker Change: Is that structural or is it idiosyncratic to going back to your first question a bit of both I mean, I think we structurally improve the quality of our underwriting position and the market has been benign for credit impairments not in some horrible areas like China commercial real estate, but more broadly yes.

Bill: It's not always been perfect, but we have consistently come in below what we consider to be a through-the-cycle number. Is that structural or is that idiosyncratic? To go back to your first question, a bit of both.

Speaker Change: The.

Speaker Change: So can we and then as you pointed out we got Basel III one coming in.

Speaker Change: I think we've been quite cautious he guided to a 5% inflation in our W. Is we don't know what the rules are we seeing the consultation we kind of mechanically go through the consultation and say if that's what happens and we don't do anything about it or we do just the minimum about it and we'll get to 5%, but obviously once the rules are clear we will do something about it and I would hope that we could come in below five.

Bill: I mean, I think we structurally improved the quality of our underwriting position, and the market has been benign for credit impairments. Not in some horrible areas like China commercial real estate, but more broadly, yes. So can we, and as you point out, we've got Puzzle 3.1 coming in. I think we're quite cautiously guided to a 5% inflation in RWAs. We don't know what the rules are.

Speaker Change: Sent out of your way of inflation and we will have to see what if any impact that that optimization or mitigating actions have unencumbered very manageable in the overall scheme of things as we've indicated throughout this this whole Basel III one progression. So overall I'd say that our 12% as is substantially but not entirely in our control and capital returns if we know it.

Bill: We've seen the consultation. We kind of mechanically go through the consultation and say, if that's what happens, and we don't do anything about it, or we do just the minimum about it, we'll get to 5%. But obviously, once the rules are clear, we will do something about it.

Speaker Change: Then as we have in the past that we could hope to increase that that distribution number.

Speaker Change: Diego I would add just one thing when we talk about using the full range of our C. T. One ranger women. It we've done it in the past with 1922, when we went to 13, 2% pro forma for the share buyback and we intend to use that dynamically as we say.

Bill: And I would hope that we could come in below 5% RWA inflation, and we'll have to see what, if any, impact that optimization or mitigating actions have on income. Very manageable in the overall scheme of things, as we've indicated throughout this whole Basel 3.1 progression. So yeah, overall, I'd say that our 12% is substantially, but not entirely, in our control. And capital returns, if we nail them, then, as we have in the past, we could hope to increase that distribution number. I would add just one thing.

Speaker Change: Sure.

Speaker Change: And thanks again, operator can we have the next question.

Speaker Change: Thank you.

The next question comes from the line of.

Speaker Change: <unk>.

Our main workhorse from Barclays. Please go ahead.

Barclays: Good morning, Bill good morning JJ.

Bill: I had two questions on.

Bill: When we talk about using the full range of our CET1 range, we mean it. We did it in the past, we did it in 2022, we went to 13.2% pro forma for the share buyback, and we intend to use that dynamically, as we said. Huber, thanks again, operator. Can we have the next question? Thank you. The next question comes from the line of: Aman Waqar from Barclays, please go ahead. Good morning, Bill. Good morning, Diego.

On costs. So she won.

Speaker Change: One for each of your festival.

Speaker Change: Do you.

Speaker Change: Give us a bit more detail.

Speaker Change: The fit for growth kind of restructuring program and youre kind of alluding to addressing the various structural inefficiencies.

These inherent in the business. They can you can.

Speaker Change: Can you kind of talk about exactly what they are.

Speaker Change: Is this around head count or are you looking to kind of.

Diego: I had two questions on costs, actually one for each of you. First of all, Diego, could you give us a bit more detail on the Fit4Growth restructuring program? You're referring to addressing the various structural inefficiencies and complexities inherent in the business. Can you talk about exactly what they are and is this around headcount?

Speaker Change: Reverse some of the head count inflation that you guys have seen over the last few years.

Speaker Change: We need I think we need more clarity and color on exactly what you're looking to address in the business.

Speaker Change: And then a second one for Bill I guess a broader reflection.

Speaker Change:

Speaker Change: Interested in your in your and your board a reflection I guess, you know the structural inefficiency and complexities that are inherent in the business. This is a business that you've ever seen.

Diego: Reverse some of the headcount inflation that you guys have overseen over the last few years. You know, I think we need more clarity and color on exactly what you're looking to address in the business. And then a second one for Bill, I guess, a broader reflection. I'm interested in your broader reflection, I guess, you know, the structural inefficiency and complexities that are inherent in the business. You know, this is a business that you've overseen as CEO since 2015.

Speaker Change: Since 2015 so.

Speaker Change: It kind of more what is your reflection on the need to address these inefficiencies and complexities in your business.

Speaker Change: What's new in the approach the human Diego kind of coming out with today and why did we not.

Speaker Change: What did we know actually just do this before.

Speaker Change: Thanks very much.

Speaker Change: Let me take the high level question and pass it to Diego for the question that you directed towards him.

Bill: What is your reflection on the need to address these inefficiencies and complexities in your business? What's new in the approach that you and Diego are kind of coming up with today, and indeed, why haven't we? If you don't, you know, why did we not actually just do this before? Thanks very much.

Diego: So in my time in the bank, we've gone from an initial period of call it cleanup and.

Diego: Part of the cleanup was dealing with really an extraordinarily large technology deficit and meaning that we were we had and we had quite a big obsolescence problem and we had some some really structural foundation there work that needed to be done.

Bill: Let me take the high-level question and pass it to Diego for the question that you directed towards him. In my time at the bank, we've gone from an initial period of clean-up, and part of the cleanup was dealing with, really, an extraordinarily large technology deficit, meaning that we had quite a big obsolescence problem, and we had some really structural foundation layer work that needed to be done. The deficit was closed relatively quickly because it would have been imprudent to do otherwise.

Diego: The deficit was closed relatively quickly because it would have been imprudent to do to do otherwise the the foundation layer, which included things like migrating substantially to a single core banking system across the bank migration of all of our HR and financial systems onto a state of the art a S. A P based S. A pea based.

One that was worth that that are that we did a pretty consistently over the past five or six years, but as we and we've seen the results of that we've been able to grow our expenses well below the rate of inflation are consistently over seven years without major wood that major exit so and we've had gross productivity saves which have been substantial but as we reflect on it.

Bill: The foundation layer, which included things like migrating substantially to a single core banking system across the bank, and migration of all of our HR and now financial systems onto a state-of-the-art SAP-based platform. That was work that we did pretty consistently over the past five or six years. And we've seen the results of that. We've been able to grow our expenses well below the rate of inflation consistently over seven years without major exits.

Diego: And then we have reflected quite a bit on what we need to do now is that its called the final push and I don't want to suggest for a moment that there ever that there's ever an end to to your technology evolution of course, the market has changed a lot. During my time in the bag that we've gone from imagining the cloud to imagining having the bulk of our applications be cloud base I think we were probably.

Bill: And we've had gross productivity saves, which have been substantial. But as we reflect on, and we have reflected quite a bit on, what we need to do now, it's the final push. And I don't want to suggest for a moment that there's ever an end to your technological evolution.

Diego: One of the two or three most active in earliest banks in terms of cloud migration.

Bill: Of course, the market has changed a lot. During my time at the bank, we've gone from imagining the cloud to having the bulk of our applications be cloud-based. I think we were probably one of the two or three most active and earliest banks in terms of cloud migration.

Diego: But now is the time for us to complete that task.

Diego: The next 2345 years.

Diego: We obviously built a few digital banks MX and trust for the two that I commented on earlier, but we got another dozen or so around the world in minority Stakes in some really important ones.

Diego: In Korea, Taiwan, and elsewhere, and we learned a lot about how to create a bank from the bottom up through that process and we're now in a position to deploy some of those learnings into our into into the into the core bank into the into the mothership as it were.

Bill: But now is the time for us to complete that task over the next two, three, four, five years. We've obviously built a few digital banks. Moxon Trust and ING were the two that I commented on earlier. But we've got another dozen or so around the world and minority stakes and some really important ones in Korea, Taiwan, and elsewhere.

Diego: And no we havent dig is going to talk to this at length I know, but we have a real opportunity to drive a fundamental transformation of the way that we look at processes not just endo and.

Diego: Always with the client in mind, but also horizontally well what are the shared services that we can introduce a what are the centers of excellence.

Bill: We learned a lot about how to create a bank from the bottom up through that process, and we're now in a position to deploy some of those learnings into the core bank, into the mothership, as it were. And now we have, and Diego's going to talk about this at length, I know, but we have a real opportunity to drive a fundamental transformation of the way that we look at processes, not just end-to-end, always with the client in mind, but also horizontally. What are the shared services that we can introduce? What are the centers of excellence?

Diego: And we can develop to get that next substantial round of efficiency and of course in many cases that means.

Diego: Taking out existing infrastructure to replace it with something that's more fit for purpose, hence the the cost to achieve.

Diego: But yeah, I'm I'm I'm actually extremely happy with the progress that we've made and I think it's inevitable that whether with me sitting in the seat or somebody else.

Diego: You do take the view that there's more that we can do it let's get at it let's get out of it within and vigor zero.

Diego: So.

Hit for girls addresses the complexities and inefficiencies that bill has been talking about and it's really important that we focus on the fact that it does that without affecting the revenue drivers of the business on the contrary, it's been to really enhance that.

Bill: that we can develop to get that next substantial round of efficiency. Of course, in many cases, that means taking out existing infrastructure to replace it with something that's more fit for purpose, hence the cost to achieve. But yeah, I'm actually extremely happy with the progress that we've made. I think it's inevitable that, whether it's me sitting in the seat or somebody else, you take the view that there's more that we can do, let's get at it, let's get at it with David and Bigger. So,

Diego: And improve the profitability and the sustainable profitability of our businesses.

Diego: The name is a cyclical moniker.

Diego: How did he do that it enhances the experience of our clients. It enhances the experience of our colleagues and it makes doing business with the bank easier.

Diego: Fit4Growth addresses the complexities and inefficiencies that Bill has been talking about, and it's really important that we focus on the fact that it does that without affecting the revenue drivers of the business. On the contrary, it's built to really enhance and improve the profitability and the sustainable profitability of our business. The name is a good moniker. How does it do that?

Three fundamental leavers that and one thing that runs across Thursday reengineering of the core processes of the bank. It's a matter of leveraging the automation opportunities of the digital channels you.

Diego: You have seen in our previous plans to the point that fit for growth is a continuation of all the paths are any an intensification of the path that the bank has taken in the past you've seen targets. We've had targets at times on a straight through processing that we have thought we had targets in terms of automation and all of that will continue in order to do that we need to deliver.

Diego: It enhances the experience of our clients, it enhances the experience of our colleagues, and it makes doing business with the bank easy. Three fundamental levers and one thing that runs through them. First, the re-engineering of the core processes of the bank. It's a matter of leveraging the automation opportunities and the digital channels that you have seen in our previous plans to the point that Feed-for-Growth is a continuation of an intensification of a path that the bank has taken in the past. You've seen targets.

Diego: Our services more efficiently, which is the second pillar of fit for growth.

Diego: This bank has been at the forefront of right shoring when did we established the first.

Diego: We've had targets at times on straight-to-processing. We have targets in terms of automation, and all of that will continue.

Diego: 30 years ago, Okay. So so when people didn't even call it that way, probably but when we created that we didn't know that at a certain point, we would have like 14 unit seen for the foreign countries. We can do more to create share services and enterprise level services that cut across everything and if there is one difference between our previous one point.

Diego: In order to do that, we need to deliver our services more efficiently, which is the second pillar of Feed-for-Growth. This bank has been at the forefront of right-shoring. When did we establish our first branch? 30 years ago. Okay, so when people didn't even call it that, probably.

Diego: <unk> billion that productivity drive during the 22 to 24 plan and the current the one 5 billion fit for growth is exactly as bill alluded to before so the facts are moving from the from looking at our says the silo system to looking at our subs or is amply and that drives some meaningful efficiencies that we're going to be working on in the years to come.

Diego: But when we created that, we didn't know that at a certain point we would have 14 units in four different countries. We can do more to create shared services, enterprise-level services that cut across everything. And if there is one difference between our previous 1.3 billion productivity drive during the 2022-2024 plan and the current 1.5 billion feet of growth, it is, as Bill alluded to before, the fact that we are moving from looking at ourselves as silos to looking at ourselves horizontally. And that drives meaningful efficiencies that we are going to be working on in the years to come. In order to do that, of course, one of the main levers, not the only one, but one of the main levers is technology. And so, technology for us means, in the mantra of Fit for Growth, it means standardization. We have a wide range of activities in a wide range of locations, and the objective is to offer standardized technology products to our people and to our clients in a way that makes us as efficient as possible.

Diego: In order to do that of course, one of the main lever is not the only one but one of the main lever is technology and cell technology for us means a in the mantra of our fit for growth I mean standardization, we have a wide range of activities in a wide range of locations and the objective is to offer a standardized technology product set.

Diego: Our people and to our clients in a way that makes us as efficient as possible now that means reducing the number of technology products and reducing the number of applications. We have some ambitious targets there that over time, we will share with you and it also means improving the productivity of our engineers and make sure that they spend time, where it matters. The most which is called <unk>.

Diego: Hi.

Diego: Throughout all of this.

Diego: There is obviously, an undercurrent of organizational design and the the organ he hits the organizational structures and organizational designs have evolved with time for us the heavy emphasis as always will be on the upskilling and reskilling of our people as the changes in technology lead inevitably to a changing the composition of our work.

Diego: Now that means reducing the number of technology products and reducing the number of applications. We have some ambitious targets there that, over time, we will share with you. And it also means improving the productivity of our engineers and making sure that they spend time where it matters the most, which is coding. Throughout all of this, there is obviously an undercurrent of organizational design, and organizational structures and organizational designs evolve with time.

Speaker Change: I would say.

Speaker Change: Excellent.

Speaker Change: Good.

Speaker Change: I hope that I hope that satisfies a can we operator can we go to the next question. Please.

Speaker Change: Thank you.

Speaker Change: Well now take the next question.

Speaker Change: Next question comes from the line of Alastair Ryan Bank of America. Please go ahead.

Diego: For us, the heavy emphasis, as always, will be on the upskilling and reskilling of our people as the changes in technology lead inevitably to a change in the composition of our workforce, I would say. Good, I hope that satisfies you. Can we, operator, please go to the next question, please? Thank you.

Alastair Ryan: Thank you good morning.

Alastair Ryan: Okay Jos come in.

Alastair Ryan: Thank you for the very clear plans, but of course, you know sort of cultural of analysts so you'd expect us to try and take them apart.

Operator: We'll now take the next question, and your next question comes from the line of Alastair Ryan, Bank of America. Please go ahead. Thank you. Good morning.

Alastair Ryan: 2025, I'm sorry.

Alastair Ryan: Talking about slowing growth, which I appreciate.

Jos: It's a high cost of capital.

Alastair Ryan: And just to echo Joe's comment... Thank you for the very clear plans, but of course, you know, it's on a call full of analysts, so you'd expect us to try and take them apart a bit. So, in 2025.

Jos: More hedging in place, but still your curves a downward sloping so it feels like.

Jos: Unless you're making move out deposit so your high yielding loans net interest income is a bit of a struggle in 'twenty five to get to 5% to 7% revenue growth you'd need to be right at the top of your range is on.

Bill: Very modest loan growth, which I appreciate. You face a high cost of capital, and there is more hedging in place, but still, yield curves are downward sloping. So it feels like unless you're making more out of deposits or you've got higher yield in loans, net interest income is a bit of a struggle in 2025. So to get to five to 7% revenue growth, you'd need to be right at the top of your ranges on non-interest income. So the question really is...

Jos: Non interest income so the question really is.

Jos: Which of those paces.

Jos: Are.

Speaker Change: So you surprised positively to get into that range that you just set today. Thank you yep great. Alastair. Thanks. Thanks for the question. So there's a few moving pieces a little of US just do a quick recap of history.

Bill: Which of those pieces, um..., to be surprised positively to get into that range that you just set today? Thank you. Yeah. Great, Alistair.

Speaker Change: For the past.

Speaker Change: But probably eight years, but certainly.

Alastair Ryan: Specifically for the past five years, we've had a very substantial optimization program.

Bill: Thanks for the question. So there are a few moving pieces. Let's just do a quick recap of history. For the past..., probably eight years, but certainly, very specifically for the past five years, we've had a very substantial optimization program. Optimized means lots of different things.

Alastair Ryan: It means lots of different things, obviously has had the effect of increasing our return on risk weighted assets from under 2% to well over 7%.

Speaker Change: But it has involves a reduction in our loan balances and a reduction in our W. S associated with us.

Speaker Change: Obviously it has to some extent come at the expense of income, but obviously was contributing substantially to the improvement in returns.

Bill: Obviously, it's had the effect of increasing our return on risk-weighted assets from under 2% to well over 7%. But it has involved a reduction in our loan balances and a reduction in RWAs associated with those. Obviously, it has, to some extent, come at the expense of income, but obviously, it was contributing substantially to the improvement in returns. We're never done with the optimization.

Speaker Change: We're never done with the optimization that the team is constantly reviewing every asset in the portfolio every credit on our roster.

Speaker Change: To determine whether we can get an adequate return from those clients for what we need to do to get that return.

<unk> will be ongoing but the balance has clearly shifted from optimization weighing down the aggregate loan balance, hence NII to the growth part of our business.

Bill: The team is constantly reviewing every asset in the portfolio, every credit on our roster, to determine whether we can get an adequate return from those clients or what we need to do to get that return. The optimization will be ongoing, but the balance has clearly shifted from optimization weighing down the aggregate loan balance, hence NII, to the growth part of our business, bolstering the NII, to use that word. So, the first piece is that we're going from down to up in terms of our approach to lending. The fact that it's happening at a time when some markets are actually quite attractive right now gives us an opportunity to shift the mix. And so when we look at some of the higher yielding asset categories that we've substantially avoided, not entirely, you'll quickly point out that we took impairments against our China commercial real estate portfolio, but we're quite underweight commercial real estate in other markets. In fact, we were underweight in China as well, but it doesn't mean it doesn't hurt when it hits, because it did.

Speaker Change: Both bolstering the NII does it to use that word so that's the.

Speaker Change: The first pieces, where we're going from.

Speaker Change: Down two up.

Speaker Change: In terms of of our of our approach to lending the.

Speaker Change: The fact that it's happening at a time when some markets are actually quite attractive right now it gives us an opportunity to shift the mix and so when we look at some of the higher yielding asset categories.

Speaker Change: We've substantially avoided entirely you'll quickly point out that we took impairments against our China commercial real estate portfolio, but where we're quite underweight commercial real estate in in other markets. In fact, we were underweight in China as well, but it doesn't mean it doesn't hurt when it when it when it hits because it did.

Speaker Change: We have been relatively underweight in leveraged finance outside of Asia, Middle East and Africa, we've been relatively underweight in unsecured consumer credit. These are all areas, where we are actively investing to develop our capabilities to grow these are high higher yielding areas at.

Bill: We have been relatively underweight in leveraged finance outside of Asia, the Middle East, and Africa. Additionally, we have been relatively underweight in unsecured consumer credit. These are all areas where we are actively investing to develop our capabilities to grow. These are higher-yielding areas, and they'll contribute to some loan growth on the margin, and that will contribute to NII growth. And then third, obviously, we have the benefit both of the roll-off of our existing short-term hedges but also the opportunity now at higher yield to continue to introduce longer and bigger structural hedges, and that should support the NII even in a relatively well-insulated, the expected falling rate environment. So overall, yeah, we're calling for NII growth because we're just well positioned for that in every way other than falling interest rates, and that was partially mitigated. But Diego, I know you've been thinking about this one a lot.

Speaker Change: Now they'll contribute to some loan growth on the margin and we'll.

It will contribute to NII growth and then obviously, we have the benefit both of the roll off of our of our existing short term hedges, but also the opportunity now at higher yield to continue to introduce.

Lager and bigger structural hedges and that that should support the NII even in a a relatively.

Speaker Change: The expected falling rate environment. So overall, yeah, well, we're calling for for NII growth because we're just well positioned for that in every way other than falling interest rates.

Speaker Change: And that was partially mitigated by Diego I know you've been thinking about this a lot.

So I'll stick to and I think bill has given you a very good total Arizona over the entire period that I'll speak for a second to the 25 and that was part of your question take whatever happens in 'twenty for takeout, the rolling out of the expiry of the larger part of the law of the the effects the positive effects of the structural hedge you we indicate that there is a.

Speaker Change: Additional affecting twenty-five think of our hedges as protection against the ankle wore the increase the decreases in the interest rate environment think about the fact that as.

Diego: So, I'll stick, I think Bill has given you a very good tour d'horizon of the entire period. I'll stick for a second to the 25 that was part of your question. Take whatever happens in 24, take out the rolling out of the expiry of the larger part of the effect, the positive effects of the structural hedge. We indicated there was an additional effect in 25.

Speaker Change: Set classes start fighting at different times in the cycle and so certain of the asset classes will produce volume growth throughout the period certain will come in during later part and you mentioned 25, we'll see whether in 'twenty five we see anything for mortgages and on conga, but later on in the in the interest rate cycle will certainly also end up going there.

Diego: Think of our hedges as protection against untoward increased decreases in the interest rate environment. Think about the fact that asset classes start firing at different times in the cycle. And so certain asset classes will produce volume growth throughout the period. Certain will come in during later parts. And you mentioned 25.

Speaker Change: A liability the asset mix continues to improve as more and more of these asset classes come in we can increase the percentage of commercial assets.

Speaker Change: In our asset mix and reduce the percentage of the treasury lower yielding treasury assets.

Speaker Change: As the as time goes by and twenty-four casualty D TD, causing these case migration the limit there.

Diego: We'll see whether in 25 we see anything from mortgages in Hong Kong. But later on in the interest rate cycle, we'll certainly also end up going there. The liabilities, and asset mix continues to improve as more and more of these asset classes come in. We can increase the percentage of commercial assets in our asset mix and reduce the percentage of Treasury, lower yielding Treasury assets. As time goes by, in 2024, Casa TD, TD Casa in this case, migration limited, we'll see, as time accelerates and interest rates continue to decline, we'll see more of it. And I would say these are really the additional engines.

Speaker Change: We'll see as time accelerating interest rates continue to decline, we see more of it.

Speaker Change: And I would say these are really the the additional engines. How do you think about that obviously always coupled with the fact that if multiple engines of growth I mean, we've been talking about NII, because it's topical but clearly the financial markets and wealth management continue exactly along the lines of what they've said.

Speaker Change: Operator.

Speaker Change: Thanks again, operator can we go to the next question. Please.

Speaker Change: Thank you.

Speaker Change: We will now take the next question.

Diego: How do you think about that? Obviously, always coupled with the fact that it's multiple engines of growth. I mean, we've been talking about NAI because it's topical, but clearly, the financial markets and wealth management continue exactly along the lines of what we said. Operator.

Speaker Change: And your next question comes.

Speaker Change: Comes from the line of Andrew Coombs from Citi. Please go ahead.

Andrew Coombs: Good morning, a couple of questions on slide 52.

Andrew Coombs: And then perhaps a boarder one sale fly to continue to feed the pocket La Paz migration.

Operator: Thanks again, Alastair. Operator, can we go to the next question, please? Thank you. We will now take the next question. And your next question comes from the line of Andrew Coombs from City. Please go ahead. Morning.

Andrew Coombs: The successful deposit campaigns driving the highest balances in St. Pete.

Andrew Coombs: A couple of questions on slide 52 for Diego, please, and then perhaps a broader one for Bill. On slide 52, you give the deposit mark pass-through and migration. You mentioned the successful deposit campaign driving the higher balances in CPBB. I'm curious whether that is a temporary campaign or something you're rolling out throughout this year as well.

Andrew Coombs: Intrigued by that.

Andrew Coombs: Is it temporary campaign or something youre loading out throughout this year as well and then on the VIP side I think in your pack not he was talking about costs and migration to time deposits.

Andrew Coombs: Anything that looks like it's already starting to ramp.

Bill: And then on the CCIB side, I think in your prepared remarks, you were still talking about CASA migration to time deposits, but if anything, it looks like it's already started to reverse, and it's quite a big move. So anything you want to say on that as well would be appreciated. And then my broader question to Bill, if I look at slide 33, the strategic targets for 22 to 24, there's plenty of ticks on the right-hand side, but the two crosses, as it were, are on affluent AUM and the number of mass retail customers. If I fast forward to a 24..., to 26 strategic targets,

Andrew Coombs: Quite a big move.

Speaker Change: Anything you want to say.

Speaker Change: On a GAAP as well would be appreciated.

Speaker Change: And then my broader question.

Bill if I look at slide 33.

Speaker Change: Strategic targets for 'twenty to 'twenty four ticks on the right hand side.

Speaker Change: To cross it.

Speaker Change: Uh huh.

Speaker Change: And the number of mass retail customers.

Speaker Change: If I fast forward to 'twenty four.

Speaker Change: The 26 strategic target do you think that dropped the mass retail target.

Bill: You seem to have dropped the mass retail target. The affluent have switched from being an AUM to a net new money target, but I guess what gives you confidence in achieving that, given what's played out over the past couple of years? Thank you. Good. Thanks very much, Andrew.

Speaker Change: The afternoon.

Speaker Change: Switch from being that you went into a net new money targets, but I guess, what gives you confidence in achieving that.

Speaker Change: Given what's played out.

Speaker Change: Past couple of years. Thank you.

Speaker Change: Good.

Bill: Let me just comment on the scorecard questions, and then we can dive into the details on pass-through and migration, et cetera. The AUM target is... I mean, it's probably the wrong target because, obviously, it's entirely market-sensitive. When markets are down, so the AUM is down. The net new money that we generated over that period has been extraordinarily exciting and positive, and we feel that it sets us up very well for future growth. That's probably a better measure, so we just switched, and so I think that's reasonably self-explanatory. Mass retail, we set up 20 partnerships, one description or another, a bunch of digital banks, and then, obviously, the organic efforts in our own main bank activities, and most of those have gone quite well, so a number of the partnerships that we set up across ASEAN markets have generated good growth.

Speaker Change: Thanks, very much Andrew let me, let me just comment on the on the the scorecard questions and then well then then we can dive into the detail on pasture and migration et cetera.

Speaker Change: The the U N target is.

Speaker Change: I mean, it was probably it was probably the wrong target because obviously, it's entirely market sensitive markets are down so a AUM was down.

Speaker Change: The net new money that we've generated over that period has been extraordinarily exciting positive and we feel sets us up very well for future growth.

Speaker Change: That's probably a better measure so so we just shifted and so are we.

Speaker Change: I think that's reasonably self explanatory.

Speaker Change: The mass retail the we set up a 20 partnerships one description or other a bunch of digital banks and then obviously the organic efforts and our own Ah The main bank activities.

Speaker Change: And most of those have gone have gone quite well so.

Speaker Change: A number of the partnerships that we set up across ASEAN markets have generated good growth. We've had ongoing good growth in China. We've added two new very important partners in China with the with J D and and I wish I Bank.

Bill: We've had ongoing good growth in China. We've added two new very important partners in China with JD and WeChat Bank. The one that hasn't worked as well is Nexus, which is our banking-as-a-service model in Indonesia, which is technically excellent. It's completely embedded into the Bukalapak e-commerce platform, but we haven't had the customer growth on satisfactory terms, so I think we probably had probably unlimited access to. There's always a limit.

Speaker Change: Tencent the are the one that hasn't worked as well as nexus.

Speaker Change: And excess we.

Speaker Change: <unk>, which is our banking as a service model in Indonesia, which technically is excellent it's completely embedded into the book of Lubbock E Commerce platform, but we havent had the customer growth unsatisfactory terms. So I think we had probably unlimited access to well there's always a limit we had access to lots of customers.

Bill: We have access to lots of customers, but not at the credit standards that we thought were appropriate or the return standards. Now, the Nexus platform, because it's working so well technically, we are rolling it out in Malaysia. We're rolling it out to other platforms in Indonesia.

Speaker Change: But but not at the credit centers that we thought were appropriate.

Speaker Change: Our repair centers.

Speaker Change: Now the Nexus platform, because it's working so well technically we are rolling out in Malaysia, We're rolling it out to other platforms in Indonesia.

Bill: And we're focusing as well on wallets as well as e-commerce platforms. So I think that the technology investment that we made in that particular venture is something that I'm quite excited about, but we didn't hit the customer numbers. And we can say about lots of things across not just our venture space but also in the main bank that we have taken a test and learn approach. So we're doing lots of things. I would say most of them have been somewhere between a bit positive and very positive.

Speaker Change: And we're focusing as well on the wallets as well as the e-commerce platforms.

Speaker Change: So I think that the technology investment that we made in that particular venture I'm quite excited about but we didn't have the customer numbers.

Speaker Change: We can say about lots of things across our not just our venture space, but also in the main bank that we have taken a test and learn approach. So we're doing lots of things.

I would say most of them have been somewhere between a bit positive and very positive a few have been a bit negative if you made a few.

Bill: A few have been a bit negative. We made a few, I say big mistakes, but in very small numbers. And I would point to some of the known loss pickup that we had in MOX that we reported last year. Small numbers in the overall context of Standard Chartered learned a huge amount about our own approach to algorithmic credit scoring, especially in a market where digital banking is new and where we're the most effective of them. But this gives me confidence that we know how to grow this business and grow those numbers in a really sound, profitable way. And the fact that our management team and our board are prepared to try some stuff that isn't always going to work but then really double down on the things that are, gives me super confidence about our opportunities to grow that business. Why don't I pass to Diego to get into the other questions that you mentioned?

Speaker Change: I say big mistakes, but on very small very small numbers and I would point to some of the the unknown loss pick up that we had in marks that we reported last year small numbers in the overall context of center chartered learned a huge amount about about our own approach to algorithmic credit, scoring especially in a market where digital banking is new and where we're the most effective of them.

Speaker Change: But this gives me confidence that we know how to grow this business and grow those numbers in a really sound profitable way.

Speaker Change: And the fact that our management team and our board.

Speaker Change: Is prepared to to try some stuff that isn't always going to work.

Speaker Change: But then really double down on the things that are that gives me super confidence about our opportunities to grow that business.

Speaker Change: But why don't I pass to <unk> to Diego to get into the to the other questions that you mentioned alright. So let me, let me paint a little bit of a broad the picture of our of the entire Oh the entire deposit.

Diego: Alright, so let me paint a little bit of a broad picture of the entire deposit environment. So first of all, you're right, we run campaigns at the end of the year. We always do. It's a particularly Hong Kong thing.

Diego: Environment. So first of all you are right. We ran campaigns at the end of the year, we always the Asa, particularly particularly out of Hong Kong thing.

Diego: That is not something that is ongoing. What is ongoing is that, of course, we continue to drive towards an improvement in our liabilities mix because that is fundamental and drives efficiencies all across our numbers and allows us to be more profitable. Having said that, about the campaigns, we are quite happy with the results, in the sense that we ended up growing deposits in CPVV by 12 percent, and in Hong Kong, we gained something like one percentage point of market share. So, all things considered, that is good.

Diego: And that is not something that is ongoing what is ongoing is that of course, we continue to drive towards an improvement of our liabilities makes it because that is fundamentally and drives efficiencies all across our numbers and allows us to be more profitable.

Diego: Having said that about the campaign. So we are quite happy with the results in the sense that we ended up growing deposits are in the C. V V by 12% and a in Hong Kong, we gained something like one percentage point of market share. So all things all things are going to see there that that is good that it's the right direction Nathan the direction of it improve that.

Diego: It's in the right direction; it's in the direction of an improved liabilities mix. Your point on CCIB, I wouldn't read much into it towards the end of the seasonality there. Toward the end of the year, we tend, and this year was a case in point, we tend to have large inflows into those CASAs, so not much change. If I zoom out for a second and think about what the path forward is, and you think about the pass-through rates that we have seen on the way up, I would think of retail as on a similar path on the way down. CCIB, still within probably that range, maybe towards the bottom end of the range, from the point of view simply of increased competition, I would say this would be the key thing. Very helpful. Thank you. Thanks again, Andrew.

Diego: Liabilities mix Youll point, the one C T I D I wouldn't read much into it towards the end of the seasonality there towards the end of the year.

Diego: Tenda and this year was a case in point, we tend to have large inflows into into into those causes.

No not much change if I zoom out for a second and I think about what's the what's the path forward.

Diego: And you think about the pass through rates that we have seen are on the way out the door.

Diego: I would thank all of the retail as on a similar path on the way down CCA be still within probably that range or maybe towards the bottom end of the range from the point of view simply all the increased competition.

Diego: I would say these are the this would be the key things.

Speaker Change: Very helpful. Thank you good.

Diego: Operator, can we take the next question? Thank you. We will now switch to web questions, and we will return to phone questions after that. Greg, over to you.

Speaker Change: Thanks again, Andrew our operator can we take the next question. Thank.

Speaker Change: Thank you we will now switch to web question, and we will return to phone questions off that Greg over to you. Thanks, Sharon first question from Alastair all over its autonomous three part question.

Greg: Thanks Sharon. First question from Alistair Waugh over at Autonomous is a three-part question. First, please could you give a little bit more color on the increase in CG12 exposures quarter on quarter and why there's no effective increase in risk? The second question: FM has slipped over four quarters, while wealth management is about 11% of income; mainland visitation may be plateauing. If these two areas are very important for income growth and JAWS, can you add a little color on what should be improving in these two areas this year? And on the third part of the question, could I just confirm that this is an aim to increase NII in both 2025 and 2026 sequentially? Thank you. Good Thanks very much, Alistair, for the CD12.

Greg: Please could you give a little bit more color on the increase in C. G 12 exposures quarter on quarter, and why Theres no effective increase in risk.

The second question F. M has slipped over four quarters, while wealth management is about 11% of income mainland visitation, maybe plateauing. If these two areas are very important for income growth and Jos can you add a little color on what should be improving in these two areas. This year.

Greg: The third part of the question could I just confirm that this is an aim to increase NII in both 2025 and 2026 sequentially. Thank you.

Speaker Change: Good thanks, very much Alison.

Speaker Change: On the C 12.

Alistair Waugh: Diego can give the rhyme and verse on our accounting treatment, but you know, the same risks sometimes get classified as different things depending on the nature of the underlying risk. Let's just say repos versus loans or securities. So as these things flip around, we get some redesignations, but Diego will give you rhyme and verse on this. But I can tell you I haven't lost any sleep over that particular increase in CD12. The wealth management momentum and FM Solar. Let me take FM first.

Indigo can give the ryman diverse on on our accounting treatment.

Speaker Change: And at the same risk sometimes it gets classified as different things depending on the nature of the underlying risk, let's just say repos versus versus loans or securities.

Speaker Change: So as these things slip around we get some some resignations, but dig a hole will give robin first on this I can tell you I haven't lost any sleep over that particular increase in M. C. D 12.

Speaker Change: The wealth management momentum.

And in F. M. So let me take that first 2022 was a spectacular year for us and recapping several years of strong growth.

Bill: 2022 is a spectacular year for us, and it happened after several years of strong growth. To have it come in more or less flat, I mean slightly down year on year, in a market environment that was less favorable, without the same opportunities for the episodic income that is characterized by the element of 2022. Remind us that, unusually, we share all this with you. I'm not sure most banks do.

Speaker Change: Two have come in more or less flat I mean slightly down year on year is in a market environment that was less favorable with without the same opportunities for the episodic income that is they characterize an element of 2022.

Remind us unusually we share all this with you I'm not sure most banks too.

Bill: I think I'm very happy that the underlying flow in FM continues to grow, and it doesn't grow because the markets are super friendly. It grows because we've got really good operational services, good linkages between transaction banking and FM, good steady underlying customer hedging and flow trading, and very good technical capabilities to connect to our clients digitally and in a customer-friendly way. And then when there are episodic opportunities, we're very good at using them. And they were a bit light in the fourth quarter of 2023.

Speaker Change: I think as I'm very happy that the underlying flow in F M.

Speaker Change: It continues to grow and it doesn't grow because.

Speaker Change: The markets are super friendly it grows because we've got really good operational services good linkages between transaction banking and F M.

Speaker Change: Good steady underlying customer hedging in flow trading.

Speaker Change: And very good technical capabilities to.

Connect to our clients digitally and in a customer friendly way.

Speaker Change: And then when there are episodic opportunities were very good as using them and they were a bit light in the fourth quarter of 2023 or a little bit better in the <unk>.

Bill: They're a little bit better in the early part of 2024. We'll see how that plays out, but I don't see this as anything other than a long-term positive trend. Same for wealth management. The underlying demographics in our markets are just extremely attractive.

Speaker Change: Early part of 'twenty 'twenty four that we'll see how that plays out but I don't see this as a as anything other than in a long term positive trend.

Wealth management, the underlying demographics in our markets are just extremely attractive.

Bill: And whether that's onshore savings in China or offshore savings in China, international banking, so dealing with customers that want to deal with us in markets other than their home market or across borders, these are huge growth opportunities for wealth coming out of India, wealth coming out of China, and wealth coming out of the rest of Asia. And whether it finds its way into Hong Kong or Singapore or Dubai or London or Jersey, we're extremely well positioned to capture it. So I think both those businesses represent really attractive long-term trends. Diego, maybe you can pick up the NII question as well? So I'll take both.

Speaker Change: And whether that's onshore savings in China or offshore savings in China.

Speaker Change: International banking, so dealing with customers that want to deal with us and the markets other than their home market or across worse. These are huge growth opportunities for wealth coming out of India wells coming out of China of what's coming out of the rest of Asia and whether it finds its way into Hong Kong, or Singapore, or or Dubai, or London or Jersey.

Speaker Change: And we're extremely well positioned to capture that so I think both of those businesses represent really attractive long term trends.

Speaker Change: Jacob maybe you can pick up the NII question as well so I think both at first the first on the CG 12 question, we thought of putting everything in the bullet point, but it would've taken half the page. So we thought you would ask it if we thought it would be more efficient it's exactly as bill said and it's part of a sovereign exposure.

Diego: First on the CG12 question, we thought of putting everything in a bullet point, but it would have taken half the page, so we thought you would ask. We thought it would be more efficient. It's exactly as Bill said. It's part of a sovereign disclosure.

Diego: We used to hold it in bonds. We now hold it in reverse repos, shorter duration, with no change in overall exposure in terms of credit. The difference is that bonds are not captured in loans and advances, so they don't show up in the CG12, and reverse repos do, and hence you see them there.

Jacob: We used to hold at the inbounds, we now hold it in reverse repos shorter duration no change in our overall exposure in terms of credit.

The difference is that bonds are not captured in loans and advances so they don't show up in the citric leather Andover Staples and.

Diego: So nothing there, and by the way, just of course, if there's a need to reassure you, but just to state the obvious, whether they're in bonds or in reverse repos, there's ECLs, and there is RWA treatment that takes care of making sure that the risk is equivalent. So that on the CG12 question. Did you have any other CG12 bonds lurking out there that you need to let everybody know about?

Jacob: And hence you'll see them there so nothing nothing there and by the way just though of course the.

Jacob: There is a need to reassure you look just to repeat the obvious whether they are in bonds or any of the other three pillars that theres. The ECS and there is R. W. A treatment that takes care of making sure that the the risk case equivalents, so that the debt on the CD question.

Jacob: And on the Asia, because you do have some of that.

Jacob: C G 12 bonds.

Jacob: Looking out there that not everybody Nova knowing if they were there by the way they would be ECL and RW a property accountant. So it's all it's all good.

Diego: No, and if they were there, by the way, they would be ECL and RWA properly accounted for. So it's all good, but we'll put another bullet point next time if there's a need. On the aim of growing NII in 2025 and 2026, I would say three things. We certainly have the ambition to do it. We have the levers to do it, which are the levers that we showed you in the presentation. I would point out that forecasting out to 2026 on something that is dependent on interest rates at a time when, in the last three and a half months since we last reported results, one-year U.S. rates have gone up 5, 3.8, 4.4 is a little bit of a difficult thing, but within those constraints, yes. Question?

Speaker Change: We'll put another bullet points next time, if there's a need.

Speaker Change: Hum the aim to grow NII in 'twenty, five 'twenty six or I would say three things that we certainly have the ambitious to do it the ambition to do it we have the levers to do it which are the levers that we showed to you in the presentation.

Speaker Change: And I would point out the forecasting out to 2020 six on something that is dependent on interest rates at the time when in the last three and a half months. Since we last reported results one year U S rates have gone five 3.84 point for them is a little bit of a difficult thing, but within those constraints yes.

Diego: Good. The next question from the web comes from Gary Greenwood at Shore Capital. Will the $1.5 billion of cost-to-achieve be taken below the line or with operating costs? And therefore, is it excluded or included in your ROTI guidance? I'm going to take it. Go ahead, Diego.

Speaker Change: Okay that sounds good.

Speaker Change: Okay.

Okay.

Speaker Change: Next question from the web comes from Gary Greenwood at Shore capital moved the 1.5 billion of cost to achieve be taken below the line or the operating costs and therefore is it excluded or included in your royalty guidance.

But I take it the idea that he simple below below the line. It's a discrete program now it's different it's clearly identifiable and it will allow us in that way to report on our underlying business and make very clear what the benefits and the cost of the program are.

Diego: Very simple. Below the line. It's a discrete program. It's different.

Diego: It's clearly identifiable, and it will allow us in that way to report on our underlying business and make very clear what the benefits and the costs of the program are. The final question from the web comes from Robin Down at HSBC. It's a three-part question.

Speaker Change: And a question from the web comes from Robin down HSBC, It's a three part question.

Gary Greenwood: First, could you give a little bit more color on what an encouraging start to the year means? I think you've already alluded to loan growth in CCIB, but does it mean FM and wealth management revenues are up year on year? Second, I appreciate that the restructuring plans may not be fully formed but from a bottom-up perspective, but could you perhaps give us a better idea of how the up to 1.5 billion of CTA may be phased across the three years? And the third part of the question, finally, are there any numbers that you can share with us on your assumptions around the switchback from TD to CASA in 2025 and 2026? As part of this, I'm assuming the bulk of your TDs are less than three months in duration, so you could move quite quickly on lower rates. Thank you. Good. I'll start off.

Speaker Change: Could you give a little bit more color on what an encouraging start to the year means I think you've already alluded to loan growth and CCI b, but does encouraging mean F. M. In wealth management revenues are up year on year.

Robin: Second part I appreciate that the restructuring plans may not be fully formed but from a bottom up perspective, but could you perhaps give us a better idea of how the up to 1.5 billion of Cta maybe feet phased across the three years.

Robin: Third part of the question finally are there any numbers that you can share with us on your assumptions around the switchback from TD to cancer in 2025, and 2026 as part of this I'm assuming the bulk of your T. D's are less than three months duration, so presumably could move quite quickly on lower rates. Thank you.

Speaker Change: Good Oh, sorry, thanks Robin for the question.

Bill: Thanks, Robin, for the question. Encouraging means something between pretty good and awesome. Uh, and as I mentioned earlier, it is across the board, so it's all products. All markets, all regions, have had a good start to the year. I'll turn to Diego for the restructuring assumptions and, obviously, the cost of migration. Yeah, so on the phasing of the cost to achieve, the way to think about it is that 24. We're announcing it today, we're starting it today, and we get going. But clearly, 24 will see the initial part of the investment and almost none of the benefits. The cost will, the bulk of the cost will be incurred in 25, with a tail in 26. You should think of the benefits as ramping up during 25 and 26.

Speaker Change: The encouraging means something between pretty good and awesome.

Speaker Change:

Speaker Change: And as I've mentioned earlier it is across the board. So it's a it's all products.

Speaker Change: All markets all regions have had a good start to the year. So.

Speaker Change: The.

Speaker Change: I'll I'll turn to Diego for the restructuring our assumptions and then obviously to the customer migration.

Diego: So on the on the phasing of the cost to achieve the way to think about it to ease that are 24, where we're announcing it today. We are starting here today, and we get going but clearly 24, we'll see the initial part of the investment and almost none of the benefits of the cost.

Diego: Will the bulk of the costs will be incurred in 25 with a tailor in 'twenty six.

Diego: So think of the benefits is ramping up during 'twenty five and 'twenty six.

Diego: And, of course, a large portion of these benefits will be permanent cost savings. They will be recurrent; they will always be with us. And in terms of what we say, what we think, how we will think about the reinvestment into the business, which is a fundamental part of Fit for Growth because that's one of the objectives, that part we will decide as we bank the savings, and we will update you over time. To your question on Casa2TD, you're right, definitely our corporate time deposits tend to be in the three-month region; retail is a bit longer, it's more three to six.

Diego: And of course that a large portion of these benefits will be permanent cost saves there would be there would be a recovery that will be with us and the in terms of what we say and what we think how we would think about the reinvestment into the business, which is a fundamental part of fit for growth because that's one of the objectives there.

Diego: That part that we will decide that as we bank of the saves and we will update you over time.

Speaker Change: And to your question on casualty Youre right, our definitely our our corporate term deposits tend to be in the three months region retail is a bit longer it's more three to six.

Diego: That is the kind of time for repricing. I think we told you, we don't think there's Casa2TD migration in 24 or not particularly, and we think it accelerates as interest rates continue to decline. Thanks Diego, thanks Bill. That's questions from the web. Can I pass them back to you, Sharon?

Speaker Change: That is the kind of time until the pricing I think we told you. We don't think there's casualty D migration in 'twenty, four or not particularly and we think it accelerates as interest rates continue to decline.

Speaker Change: Thanks, Jay Thanks, Bill that's a question from the web kind of passenger to Sharon.

Sharon: Thank you. We will now take the next phone question. And your next question comes from the line of Rob Noble from Deutsche Bank. Please go ahead. Morning, thanks for taking my questions. Just to follow up on the migration, particularly within the retail part, we saw, I think we spent the whole rate rise cycle seeing beta's low and migration lower than everybody expected. Why is the same inertia not applied in your thinking as rates go down? So why won't retail customers just get lazy at the top of the cycle as well as at the bottom of the cycle as well? And then, secondly, on ESG...

Speaker Change: And key.

Speaker Change: We will now take the next phone question.

Speaker Change: And your next question.

Speaker Change: It comes from the line of Bob Naval from Deutsche Bank. Please go ahead.

Robert Noble: Good morning.

Robert Noble: For taking my questions just to follow up on the.

Robert Noble: Gration, particularly within the retail pop that we saw I think we spent the whole rate rise cycles seeing pizzas.

Robert Noble: Migration lower then.

Robert Noble: And everybody expected why is the are the.

Robert Noble: Same in national apply.

Robert Noble: Thinking as rates go down so why why werent retail customers just yet.

Robert Noble: At the top of the cycle as well as at the bottom of the cycle as well.

Robert Noble: And then secondly, just on.

Speaker Change: Ah, Yes Chi.

Robert Noble: So, I just wanted to ask what your experience of ESG-related activities has been so far in terms of the opportunity, the profitability of those activities returned on RWA, how strict are you in terms of the products that you're lending into for sustainability purposes, and what's the loss? The lost revenue from products that you don't like versus the gained revenue from doing the SEO. Thanks very much, Rob. Let me just take the ESG question and then we'll come back to the migration questions. ESG obviously means a lot of things to us. But it starts with a compelling set of policies. We've tried to position ourselves as a thought and action leader, in terms of working very, very, very proactively with our clients on their own transition plans in the context of net zero, obviously, with a keen focus on other aspects of ESG, including biodiversity, financial inclusion, etc. But I think you're probably thinking more specifically about climate-related ESG.

Speaker Change: So I just wanted to ask what your experience of ESG related activities. So songs.

Speaker Change: That should achieve the profitability of those activities with total.

Speaker Change: How are you.

Speaker Change: Sorry.

Chi: So the products that you're lending into from a sustainability perspective once the loss.

Chi: The lost revenue from products that you don't like the games revenues continued synergies.

Speaker Change: Good thanks, very much Rob.

Speaker Change: We just didn't take the easy question and then we'll come back to the migration questions. The.

Yes, he obviously means a lot of things to us as it starts with a compelling set of policies. We've tried to position ourselves as a thought and action leader in terms of working very very very proactively with our clients.

Speaker Change: On their own transition plans.

Speaker Change: Text of net zero, obviously with a keen focus on other aspects of ESG, including biodiversity financial inclusion et cetera, but I, but I think you're probably I'm thinking more specifically about climate related ESG.

Bill: And that strategy of being a thought leader has put us in a very good position. I think we find ourselves arguably punching above our weight in terms of ability to influence different groups who are setting standards, whether those are disclosure standards or action standards. And we want to continue to maintain that position. Part of the benefit of doing that is that we're quite relevant to our clients. They engage with us early on, and they're much more likely to come to us to find solutions.

Speaker Change: And.

Speaker Change: Our strategy of being a thought leader has put us in a very good position I think where we find ourselves.

Speaker Change: Arguably punching above our weight in terms of our ability to influence that.

Speaker Change: Groups, who are setting standards.

Or whether those are disclosure centers or action centers.

Speaker Change: And we want to continue to me in that position part of the benefit of of doing that is is that we were quite relevant to our clients. They engage with us early on and they're much more likely to come to us to find the solutions and you have to go from zero to $720 million of income.

Bill: And to go from zero to $720 million in income in just a few years through a set of sustainable finance products is super exciting. This is clearly the fastest growing part of our corporate lending activities. And the fact that we have a long history in structured finance, infrastructure finance, blended finance, and ECA finance obviously puts us in a good position. The returns on that income are as good as they are in the rest of the bank, in some cases better, in particular where we're able to demonstrate accelerated velocity of capital in the sector. It's becoming competitive, so like everything else, we can have a great idea at the outset, but it gets copied relatively quickly.

Speaker Change: And just a few years and a set of sustainable products is super exciting. This is clearly the fastest growing.

Speaker Change: Part of our of our of our corporate lending activities and the fact that we have a long history and in structured finance infrastructure finance blended finance ECA finance, obviously puts us in a good position.

Speaker Change: The returns on on that income are as good as they are in the rest of the bank in some cases better in particular, where we're able to to demonstrate accelerated velocity of capital in the sector.

Speaker Change: It's becoming competitive so like everything else, we can have a super idea at the outset. It gets copied relatively quickly and so we have to continue to innovate and we have been able to continue to innovate and we will carbon markets have not kicked in in a major way is something that I've I've focused on quite a bit.

Bill: So we have to continue to innovate. And we have been able to continue to innovate, and we will. Carbon markets have not kicked in in a major way. It's something that I've focused on quite a bit personally, but also on behalf of the firm. It's going to happen.

Speaker Change: Personally, but also on behalf of the firm it's going to happen Here's my forecast carbon markets are going to be big because the integrity household for the voluntary carbon markets have.

Bill: Here's my forecast. Carbon markets are going to be big because the Integrity Council for the Voluntary Carbon Markets has come up with standards that are restoring confidence in that market. When we embed that into our financing capabilities, there's a whole new wave of opportunities to add value and make money. So I'm feeling good about that and good about our positioning. We've been extraordinarily transparent. I don't know anybody else who's setting targets and making disclosures of where we are, and we do that because we're proud and because we want to set targets for ourselves to be ahead of the game.

Speaker Change: Come up with standards, which are restoring confidence in that market. When we embed that into our financing capabilities. There's a whole other wave of of opportunities to add value and make money. So.

Speaker Change: I'm I'm feeling good about that and good about our positioning we've.

Speaker Change: We've been extraordinarily transparent I don't know anybody else's setting targets and making disclosures of where we are and we do that because we're proud.

Speaker Change: Because we want to set a target for ourselves to be ahead of the game.

Diego: I'm happy, as you can probably guess, I can wax lyrical about this stuff forever because I care a lot about it, but it's a good business for us. Diego, back to the real world of banking. On the more boring, mundane part of the question about migration, well, a few things. First of all, history. I mean, we did see it in 1920.

Speaker Change: Happy to.

You can probably guess I can wax lyrical about this saw forever, because I care a lot about it but.

Speaker Change: But it's a good business for us, but the dig of back to the real world of banking.

Speaker Change: On the on the more boring mundane part of the question on the migration well a few things first of all the history I mean, we didn't we didn't see it in 19 and 20 are mean cycles recur.

Diego: I mean, cycles recur. Will this be fundamentally different? Difficult to see. But, more importantly, and driving to the strength of our business, Casa is really the default way that customers put money to work with us. And as yields go down, of course, TVs will become less appealing, even less appealing to them. Let me give you an interesting stat that I think points to this and points also to the strength of the wealth management business that Bill was alluding to before. Of the flows that we are seeing, the very good flows of new to bank and net new money that we have been seeing in the last quarter or two, one of the notable things is that there are two interesting things. One that goes to your point, which is that half of what comes in is deposits, and that half, almost all of it is Casa. It's not TVs.

Speaker Change: Will this be fundamentally different difficult to see I think more importantly, and driving to the strength of our business.

Speaker Change: It's really the default way that customers put money to work with us and as yields go down.

Speaker Change: And of course, certain Tv's will become less appealing to the even less appealing to them I'll give you an interesting stats that I think points to today's endpoints also to the strength of the wealth management business that bill was alluding to before of the flows that we are seeing the very good flows of new to bank and net new money that we had been seeing in the last quarter or two.

Speaker Change: One of the notable thing. So there are two interesting notable things one that goes to your point, which is half of what comes in is deposits and that almost all of it is cancer is not at either end and half of it as well product, which is good because of course, it's better for us it's better for the clients and we think it will continue to grow in that.

Diego: And half of it is wealth products, which is good because, of course, it's better for us, it's better for the clients, and we think it will continue to go in that direction. So that part is good, and in general, our affluent client base is very attuned to this kind of rhythm. We think that that will continue. Operator, another question?

Speaker Change: In the direction. So that's part that that part is good and the in general of our affluent client base is very attuned to this kind of rhythms and we think that that's what continues.

Great.

Speaker Change: Operator another question.

Diego: Thank you. We will now take the next question, and your next question comes from the line of Pearlie Mong from KBW. Please go ahead.

Speaker Change: Thank you.

Speaker Change: We will now take the next question.

Operator: Your next question comes from the line of poorly among from Kb there'll be Pease go ahead.

Diego: Thank you for taking my question. There are just two questions from me. The first one is income growth. So I believe your total income growth target is about 5% to 7% in the next couple of years. I guess just making the observation that two years ago, when you talked to us at a previous strategy update, you also talked about 5% to 7% underlying income growth with 3% additional from rising rates. And, as it turned out, I guess rates probably played more of a part of the income growth story than you might have expected at the time. So I guess just how do you see the underlying growth dynamics now versus two years ago, and what could go better in a falling rate environment? So that's the first one.

Thank you for taking my question.

Kb: Two questions from me the first one is on the income growth.

Kb: So I believe your growth total income growth target is about 5% to 7% in the next couple of years.

Kb: I guess, just making the observation that two years ago and.

Kb: When you talk to us that our previous strategy update you also talked about as much is that there's an underlying income growth with an additional from rising rates and I guess does it cut out.

Kb: I guess right probably take more of a part of the income growth story than you might have expected at the time.

Kb: So I guess, just how do you see them.

Kb: The underlying growth dynamics now that two years ago, and what could go better in a falling rate environment. So that's the first one and the second one is on asset mix. So those are things that in your remarks, and you've talked about growing higher yielding client asset as being one of the support school at NIM.

Diego: And the second one is on asset mix. So, noticing that in your remarks, you've talked about growing higher-yielding client assets as being one of the supports for NIM in the next couple of years. And also noticing that asset mix, especially in the CCIB, is one of the reasons why RWAs came in a bit higher queue on queue. I guess just, again, the observation that in the past couple of years, and again, going back to your previous strategy update, the delivery of lower RWAs, especially in the CCIB, was very noteworthy. And it sounds like you're happy to grow RWAs now to support the top line. Is that a fair characterization?

Kb: The next couple of years.

And also noticing that Tim and as it makes it one of it is actually a nice easy IP is one of the reasons why our debate came in at that higher Q1 P. M.

Kb: I guess, just I gave him the observation that in the past couple of years and again going back to your previous strategy update the delivery of lower RBA, especially in D. C. I P was noteworthy.

Kb: It sounds like you're happy to grow automate now to support the top line is that a factor at times.

Diego: And I guess, in other words, is it fair to say that a lot of the lower-hanging fruit in terms of RWA optimization is now complete? Good. But let me take a first pass at that, and I know Diego will have some color.

Kb: Jose characterization and.

Kb: In other words is it fair to say that you know a lot of the low hanging fruit in terms of auto pay optimization is now complete.

Speaker Change: Good, but let me take a first pass at that and I know Diego will have some color.

Diego: We've never been RWA-averse. We're just very returns-inclined. And the consequence of that was that where we had lower-returning RWAs, one way or the other, we exited them. In very few cases did that involve exiting a client, but it frequently involved exiting RWAs, i.e.

Diego: We've never been our W. Reverse, we're just very returns and client and the consequence of that was that where we had lower returning our debut as one way or the other we exited them and.

Diego: And very few cases does that involve excuse me a client, but it frequently involved exiting our debut as I, reducing our lines or selling assets and and that that was been a major area of focus for us. It was absolutely necessary and has had a super impact in terms of a return on risk weighted assets and where were now.

Diego: reducing our lines of credit or selling assets. And that has been a major area of focus for us. It was absolutely necessary, and it's had a huge impact in terms of our return on risk-weighted assets, and we're now pretty much where we think we should be in aggregate.

Diego: You know pretty much where we think we should be in aggregate as I mentioned earlier always more optimization opportunities and always more invest more investment opportunities for.

Diego: As I mentioned earlier, there are always more optimization opportunities and always more investment opportunities. But for us to have shed the amount of RWAs that we did while continuing to grow income means that we've obviously got some other things right along the way. To the extent that we're optimizing less going forward, and there are less outright reductions, that's relative to years gone by, a key source of growth. We have, I think, built up our confidence quite a bit about our ability to underwrite credit, and when you go back to 2015-16. The confidence wasn't so great that we had all the underwriting capabilities consistently in place. As we scraped off some of the crud, I think we realized that the core machine was actually very good and that we had made some idiosyncratic mistakes, to go back to that big word. And we've demonstrated for many years that we're not inclined to make those big mistakes. But that doesn't mean we don't make mistakes, because we make mistakes all the time.

Diego: For us to have shed the.

Diego: The amount of our Ws that we did while continuing to grow income means that we've obviously got some other things right along the way.

Diego: Except that we're optimizing less going forward and they're less outright reductions that's relative to years gone by a key source of growth.

Diego: We have built our confidence quite a bit.

Diego: About our ability to underwrite credit and when you go back to 2015 and 16.

Diego: The company's wasn't so great that we had all the underwriting capabilities consistently in place as a stripped off some of the crud I think we realized that actually the core machine was actually very good and that we had made some some idiosyncratic mistakes to go back to that big word.

Diego: And in.

Diego: And that.

Diego: And we've demonstrated through many years that the that we're we're not inclined to make those those big big mistakes.

Diego: Not to say, we don't make mistakes because we make mistakes all the time.

Diego: Yes, so are we going to grow RWAs to support the top line? That's the plan. If we can find RWAs that are accretive, in terms of returns?

Speaker Change: Yes, so are we going to grow our W is to support the top line. That's the plan. If we can find other ways that are accretive in terms of returns and if there aren't then we're going to find other ways to use our human capital.

Diego: If there aren't, then we're going to find other ways to use our human capital and financial capital, including, if and when necessary, returning it to shareholders, which we've shown no aversion to doing. I'll turn to Diego to finish off the question. There were a lot of embedded questions about rates as well.

Speaker Change: And financial capital, including if if if as and when necessary returning it to shareholders, which we show no aversion to doing.

Speaker Change: Maybe on the alternative Diego to finish off the question, whether there was a lot of embedded questions about rates as well.

Diego: So why did it go.

Diego: Yeah, so I think to your asset mix, very little to add. I think we've said before today, and I think we are very happy to reiterate that we delivered over 24 billion dollars of optimization in terms of RWAs on a target of 22 with a year to spare. You are right, Perli; I would agree with you. But I'm not so sure that they were all low-hanging fruit. I'm sure people worked very, very hard, but I wasn't here to see it.

Diego: So I think to your yes. It makes very little to add I think we've said that before today and I think we are very happy to reiterate that we delivered over 24 billion dollar of optimization are in terms of our value as a on a target of 22 with a year to spare you are right certainly I would agree with you that the.

Diego: Not so sure that they were all low hanging fruits I'm sure people work very very hard there wasn't here to see that and but what is clear is that there are less of those opportunities going forward that doesn't mean, we're not going to take them.

Diego: But what is clear is that there will be fewer of those opportunities going forward. But that doesn't mean we're not going to take them. But at this level of return on risk-weighted assets, and I would say the organization truly operates thinking that way, we can go for volume in a profitable way. On the income thing, you referred to the presentation a couple of years ago. I would say that the big difference that I observed from two years ago is that we've invested a lot of money in our engines of growth of non-net interest income. We have changed the complexion of the financial market business and the wealth management business in ways that make them more profitable structurally, that address more of the needs of our clients, and that make them better engines of growth in the future. Again, I don't want to be boring on the point of volatility.

Diego: But at this level of return on risk weighted assets.

Diego: I would say the organization to meet operates thinking that way and we can go for volume.

Profitable way.

On the income thing you referred to the to the presentation. A couple of years ago, I would say that the big difference that I observed from three years ago is we've invested a lot of money in our engines of growth of non net interest income.

Diego: We have changed the complexion of the financial markets business in the wealth management business in ways that make them more profitable structurally that addresses more of the needs of our clients and make them better engines of growth from the future again, I don't want to be boring on the point of volatility, we'll see what happens with rates.

Diego: We'll see what happens with rates, but we are not sitting here hoping for rates to go down. We are both working on that, and we're working on our engines of non-net interest income growth. Great. Thanks very much for the opportunity.

Diego: But we're not sitting here, hoping for rates to go down we are both working on that and we're working on our engine. So no net interest income growth.

Diego: Great.

Operator: Can we take the next question? Thank you. Your next question comes from the line of James Invine from Society General. Please go ahead. Good morning, Bill. Good morning, Diego. I've got two, please.

Thanks, very much really a particularly take next question.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of James Inline from Society Generale. Please go ahead.

James Inline: Good morning, Bill Good morning, Diego mm two please the first is just your $12 billion cost target Diego as you said that implies a 3% average growth.

Matt Clark: The first is just your $12 billion cost target. Diego, as you said, that implies a 3% average growth. If you didn't have the $1.5 billion worth of savings, then it would be more like a 7% average growth. So is that kind of what you consider to be the underlying inflation in your cost space in this kind of environment when you're growing loans by a low single-digit amount? And then the second one is on MOX.

James Inline: If you didn't have the one and a half billion dollars' worth of savings and then it would be more like a 7% average growth. So is that kind of what you consider to be the underlying inflation in your cost base in this kind of environment when you're growing loans by a low single digit Amendment and then the second one is on marks I was just wondering if you could.

Bill: I was just wondering if you could say a word more, please, on the change in the credit criteria. So specifically, is that going to affect MOX's growth going forward? And are you still expecting MOX to be profitable in 2024? Thanks.

James Inline: Say a word more please on the change in the credit criteria, so specifically, he's not going to affect Marxist growth's going forwards.

James Inline: Are you still expecting <unk> to be profitable in 'twenty plentiful. Thanks.

Bill: Great. Thanks very much, James. So your answer is yes, we affected your profitability in 2024, so say over the course of 2024. And we've got, I'd say we've had hundreds of, I call them experiments, which sounds scientific, it's more test and learn across our credit markets. In the case of MOX, we allowed a cohort of relatively low-rated credit score customers into the pool.

Speaker Change: Great. Thanks, very much sense.

Speaker Change: So the short answer is yes, we expect to achieve profitability in 2024, so say over the course of 'twenty 'twenty four and that.

Speaker Change: So we we we've got I'd say, we've had hundreds of them.

Speaker Change: I can call them experiments for sound scientific it's you know.

Speaker Change: It's more test and learn.

Speaker Change: Across our our credit markets in the case of box we.

Speaker Change: We are allowed a cohort of a relatively low rented.

Speaker Change: A credit score customers into the pool and either I mean without getting into all the gory detail and then as I say again the number is material for marks in the period is not material for Senate chartered it really in the overall scheme of things, but what we learned is when youre. The first digital bank in our market.

Bill: And I mean, without getting into all the gory detail, and as I say again, the number of materials for MOX in a period is not material per cent of chartered, really, in the overall scheme of things. But what we learned is when you're the first digital bank in a market, and you're leading the way in terms of a digital lending product, you are going to be subject to some sort of adverse selection in terms of, I say, people who are knocking on heaven's door or who are fraudsters. And we realized that after we accumulated some small loan balances but with a high loss rate. And we immediately changed the underwriting standards and learned a lot. We don't think that that customer segment is entirely unattractive, but it was unattractive in the way that we underwrote it.

Speaker Change: And youre, leading the way in terms of a digital lending product.

Speaker Change: You are going to be subject to some sort of adverse selection in terms of of Ah I say people, who are knocking on heaven's door or or who are fraudsters and we realize that after we accumulated some small loan balances, but with idling a high loss rate and.

Speaker Change: And that's and we immediately change the underwriting centers.

Speaker Change: And learned a lot and we don't think that that that customer segment is entirely unattractive, but it was unattractive to the way that we underwrote and so of course, we've taken those lessons learned and applied it not just the marks but to the other markets, where we operate interestingly not relevant for trust because the the the credit Bureau, and that's why this system in.

Bill: And so, of course, we've taken those lessons learned and applied them not just to MOX but to the other markets where we operate. But interestingly, not relevant for trust because the credit bureau and national ID system in Singapore would have precluded us from engaging in the same learning experience in the first place or incurring the loss. More detail than probably the loss is worth, but I think it's important, as Senator Chartered strikes out, to venture into new areas where not just we haven't gone, but where the market hasn't gone yet. We're going to do it in a very cautious and prudent way. We're going to be very transparent about where we get it right and where we get it wrong, and we're going to learn and be better as we go forward. I try to think of a musical reference for your Knocking on Heaven's Door.

Speaker Change: In Singapore.

Speaker Change: Would have precluded us from from making a similar well from engaging in the same learning experience in the first place or incurring a loss there.

Speaker Change: More detailed than probably the losses worth, but it's I think it's important as a center chartered sort of strikes out too.

Speaker Change: To venture into new areas, where not just we haven't gone to where the market hasn't gone yet, but we're going to do it in a very cautious and prudent way, we're going to be very transparent about where we get it right and where we get it wrong and we're going to learn and and be better as we are as we go forward.

Speaker Change: Perfect. Thank you God I try to think of a of a music referenced we are knocking on Heaven's thought I can't think of one that looks like that.

Bill: I can't think of one that applies to the cross-target, unfortunately, so I'll be drier on that. So on the cross-target, thank you for the question, because it offers me the opportunity to elaborate a little bit on that cost cagger. You're right, we are exiting a period of more elevated inflation in terms of general inflation of costs. But I would say that our recovery is different.

Speaker Change: Unfortunately, so I'll be dry here on that and so the answer of course they'll get to thank you for the question because it offered me the opportunity to elaborate a little bit on that cost.

Speaker Change: Cost CAGR and Youre right, we are exiting a period of the more elevated inflation and.

Speaker Change: In terms of general inflation of costs, and I wouldn't say that I would say that our recurrent inflation of costs across our country footprint is more in the 3% to 4%.

Diego: Inflation of costs across our footprint is more in the 3% to 4% level. But more importantly, what I would like you to think about in terms of the cgger is that it is going to be above the top end of the cgger during the first year, during 2024, and then it will moderate, and it will moderate very substantially, of course, to stay inside the 3% cgger and definitely stay inside the $12 billion cost target as the benefits from fee-for-growth, of course, start also showing their very substantial effect. Great Thanks again, James. I think we probably have time for one more question, or two or three, depending on how much patience you have. Diego and I are happy to stay here all day.

Speaker Change: Level.

Speaker Change: But more importantly, what are the what I would like you to think about in terms of the CAGR is that it is going to be above the top end of the CAGR. During the first year. During 2024, and then it will moderate and even bother it very substantially of course sustained side, the 3% CAGR indefinitely stay inside of the 12 billion cost target as the benefits from fits overall so far.

Speaker Change: Start also showing us they're very substantial.

Speaker Change: Perfect.

Speaker Change: Great.

Speaker Change: Thanks again, James I think we probably have time for one more question.

Speaker Change: Or or two or three depending on how much patience you have diego and I are happy to stay here all day.

Diego: So, operator, can we take the next question, please? Thank you. Your next question comes from the line of Matt Clark from Mediobanker. Please go ahead. Good morning.

Speaker Change: So operator can we take the next question. Please thank you.

Speaker Change: Next question comes.

Speaker Change: Comes from the line of Mark Clark from Mediobanca. Please go ahead.

Diego: It's a question of how you categorize your financial markets revenues. So, is it unfair to think of episodic revenues as being an euphemism for prop trading? And if that is unfair, maybe to give some kind of real-world examples of the kind of revenues that get booked in that line.

Mark Clark: Good morning, a question on how you categorize your financial markets revenue.

Mark Clark: Is it unfair to think of the episodic revenues as being a euphemism for prop trading and if that is unfair that maybe you could give some kind of real world. Examples of the kind of revenues that get booked in that line. Thank you.

Diego: Thank you. I know it's not a usefulism for prop trading because we don't do that. We, the episodic, I guess to give some examples, there's an interesting product line called the Deal Contingent Forward, so we'll put on an FX hedge with a client who's engaged in a merger and acquisition transaction. If the M&A deal goes through, the hedge pays off. If the M&A deal doesn't go through, it's terminated. You put hedges in place based on the underlying market risk and a continuous reassessment of the likelihood of completion; call it merger ARP. Obviously, we don't bet the wrench on any of those, but the payoffs when they work are very good. If they don't, you lose a little bit of money, potentially.

Speaker Change: No it's not it's not a euphemism for brokering, because we don't do that.

Speaker Change: We are episodic.

Speaker Change: I guess give some some examples and it is an interesting product line called the deal contingent forward civil will put on an FX hedge with a client who's engaged in our merger acquisition transaction.

Speaker Change: The M&A deal goes through the edge pays off of the M&A deal doesn't go through it's it's it's it's terminated.

Speaker Change: You put hedges in place based on the underlying market risk and a continuous reassessment of likelihood of completion call. It merger arb.

Speaker Change: Obviously, we don't have to bet the ranch on any of those but the but the payoffs are when they work are very good.

Speaker Change: If they don't do this a little bit of money.

Diego: And that we would call episodic because it's not part of our ordinary flow business, although the transactions happen somewhat regularly. When a currency has a major devaluation, if we ever had a breach of a peg, for example, and we have some embedded position, obviously, that could be either a gain or a loss. Is it a prop trade? No.

Speaker Change: Essentially and that that we would call episodic because it's not part of our ordinary flow business although.

Speaker Change: Transactions happen somewhat regularly.

Speaker Change: When a currency has a major devaluation, if we ever had a breach of a pegged for example.

Speaker Change: And we have some embedded position, obviously that could be either a gain or a loss.

Speaker Change: We would treat that as episodic isn't a prop trade no. We're not we're not positioning for for a gain or positioning for a D peg or whatever.

Diego: We're not positioning for a gain or positioning for a de-peg or whatever. But frequently, through our own customer activities, we'll find that we are forced to take a position on one side or the other of a market, and we'll always do that in the way that we think is most prudent. And sometimes we get an, they call it, an accidental gain, and sometimes we get an accidental loss. The fact that our episodic income has been consistently positive means that the combination of those episodic customer deals, which are episodic, combined with those episodic market events that are really somewhat exogenous, not just unbalanced, but consistently positive, It's hard to say we could never lose money in that episodic category, but we just haven't for as long as we've been tracking it. And I hope that gives a bit of a sense of what it is, but it's definitely not prop trading. I can't resist. Can I put in a growth plug into this?

Speaker Change: But frequently through our own customer activities will find that we are are forced to take a position on one side or the other of our market and we'll always do that in a way that we think is most prudent and sometimes we get a call. It an accidental gain and sometimes we get an accidental loss.

Speaker Change: The fact that our episodic income has been consistently positive it means that the combination of those episodic customer deals which.

Our episodic.

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Speaker Change: Combined with those episodic market events that are really somewhat exogenous.

Speaker Change: Batches on balance, but consistently have been positive. So I'll just say, we can never lose money and that episodic category. We just haven't for as long as we've been tracking it and I hope that gives a bit of a sense of what it is but it's definitely not prop trading.

Speaker Change: I can't resist the can I put in a growth plug into this and it's it's it's really low now and its driven by volatility, which we are not seeing a lot of its driven as Bill's first example, perfectly referred to by capital markets activity.

Diego: It's really low now, and it's driven by volatility, which we're not seeing a lot. It's driven, as Bill's first example perfectly referred to, by capital markets activity, which is clearly in the doldrums.

Speaker Change: Capital markets activity is clearly in the doldrums, it will pick up but with the picking up of that you will see it coming through in many ways through our accounts, but including India piece of decline.

Diego: It will pick up. With the picking up of that, you will see it coming through in many ways through our accounts, but including in the episodic line. Okay, thank you very much.

Speaker Change: Okay. Thank you very much thank you.

Diego: Thank you. Next question, please. Thank you. We will now take the next question. One moment, please. And your next question comes from the line of Guy Stemmings from BNP Paribas. Please go ahead. Hi there.

Speaker Change: Next question please.

Speaker Change: Thank you.

Speaker Change: We will now take the next question.

Speaker Change: Well Amendment please.

Speaker Change: And your next question comes from the line of Guy stemming from BNP Paribas. Please go ahead.

Diego: Thanks for taking the questions. I had one on rate sensitivity and one on costs. So thanks for the new disclosure on the hedge rate sensitivity by currency. It's very useful from our side. Can I just check, would it be fair to interpret slide 20 as the 50 basis points decline in rates in 2024 versus Q4 equating to 0.3 billion, meaning we can sort of linearly extrapolate the FY26 and the additional 100 basis points implied move in bended rates that you show on the slide as implying, you know, 600 million or so of pure rate headwinds beyond 2024 embedded in the guidance? And then how do you And then the question on costs was, so we're hoping to unpick statutory costs for 2026 a little bit more. I think in general, all the guidance there is very helpful, but getting a better sense on where statutory costs are coming from would also be useful.

Hi, Thanks for taking the questions I had one on rate sensitivity and one on costs. So thanks for all the new disclosure on the hedged rate sensitivity what currency is probably useful small side can I just check would it be fair to interpret slide 20 in the 60 basis point decline in rates in towards control versus Q4 to $3 three.

Speaker Change: 3 billion, meaning we can sort of linearly extrapolate.

Speaker Change: Why 26, an additional 100 basis points implied mood and blended rates that you show on the slide is implying.

Speaker Change: 600 million also a pure rate headwinds beyond twin to ensure embedded in the guidance and then how do you think about that.

Speaker Change: Relative to future hedge rolled or potential growth in in the notional.

And then the question on costs was started talking to them on pick stock straight costs within 36, a little bit more I think in general we don't say, it's very helpful. We're getting a better sense of what stops you right. Even if it would be also useful so just to check if we take your sub troponin and cleaning costs guides applying modest bank levy it sounds as though we shouldn't be expecting too much in terms of cost to achieve them.

Diego: So just to check, if we take your sub-12 billion clean cost guide, apply a modest bank levy on it, and it sounds as though we shouldn't be expecting too much in terms of costs to achieve in 2026, given the peaks in 25. So should we be thinking about an all-in cost figure of pretty close to 12 zero? Any help there would be useful.

Speaker Change: In 2026, given the peaks and twenty-five so should we be thinking about an all in cost could go or pretty close to 12 volt zero any help there would be useful thanks.

Diego: Thanks. All right, so first on the hedge profile, your question on page 20. So we've given you our measure of the currency weighted forward rates based estimate with all of the caveats that I have already made twice, but I can't resist and make it a third time that these things are very, very volatile. So yes, you can take the differences between 24, 25 and 25, 26 and extrapolate an equivalent type of number. One thing I would caution you about is that the concept of linearity, when we're talking about interest rates, gets trumped by convexity. So be careful, careful about how you do it.

Speaker Change: Hi, Diego.

Diego: So on the first on the hedge for all failure or question on page 20. So we've given you our our measure of the currency weighted the photo of trade space the.

Speaker Change: Estimate with all of the caveats that I have already made twice, but I can't resist that'll make it a third time that these things are very very volatile. So yes, you can take you can take the differences between 'twenty four 'twenty five in 'twenty, five 'twenty, six and extrapolate and equivalent type of number what I would caution you about that is that the concept of linearity when we're talking about the interest.

Speaker Change: Right. So it gets trumped by convexity, so careful careful on how you do it.

Diego: It will require some assumptions from you, but by all means. How does that affect our hedging strategy and our hedge roles? So we see our structural hedge as fundamentally put in place in order to smooth volatility in terms of our net interest income. It protects us from more extreme outcomes.

Speaker Change: Equally require some assumptions for meal and but by all means how does that affect our hedging strategy and our hedge rolls. So we see our structural hedge as a as a fundamentally put on in order to smooth the volatility in terms of our net interest income it protects us from the more extreme.

Diego: We have an intention of continuing to grow it. We grew it by 16 billion last year. We want to grow it further. But we've also pointed out to you that we think it grows slower at this stage because there are some inherent limitations in terms of the availability of instruments. In order to expand on that bullet, to double-click it for a second, there are entire currencies in which we don't have the availability of derivative instruments.

Speaker Change: Outcomes, we have any intention of continuing to grow it with growing by 16 billion left here, we want to grow it further.

And we've also pointed out to you that we think it grows slower at this stage.

Speaker Change: And because there are some inherent limitations in terms of our of the availability of influenza.

Speaker Change: In order to expand on that bullet.

Speaker Change: Click it for a second there are entire currencies in which we don't have availability all the derivative instruments. When we don't until we can still do things, but it requires us to do at toy fair value to OCI and letting that introduces volatility in our capital. So we do it but we do it carefully and considerately.

Diego: When we don't, we can still do things, but it requires us to do it through fair value, through OCI, and that introduces volatility in our capital. So we do it, but we do it carefully and considerably. So yes, we will continue to grow our hedges, just at a slower pace. On the structural costs, I would say that you read it as a 3% cost cagger, higher in the first year, 24, as indicated before in the answers to the previous question, then tempering down, less than 12 billion, and positive Joes every year. That's what we manage for. So with those three things together, those give you the ingredients of where we're going to come out. That's very helpful; thank you.

Speaker Change: So yes, we will continue to grow all of our hedges.

Speaker Change: Adjusted his lower pace on the structural costs.

Speaker Change: I would say that you've you read it you read it as a three per center cost CAGR higher in the first year 'twenty four as indicated before in the ounces in the previous question. Then then tampering down less than 12 billion.

Speaker Change: And positive jaws at every year, that's what we manage four so with those that we those three things together does give you the ingredients of where we're going to come out I think.

Speaker Change: Thanks, that's very helpful. Glenn maybe just check in terms of the cost to achieve in terms of the phasing of it should we expect quite a big step down six versus 25.

Diego: Could I maybe just check in terms of the cost to achieve and the phasing of it, should we expect quite a big step down in 26 versus 25? The bulk is in 25, the vast bulk is in 25, it does step down in 26, I will add, as you would expect the CFO to do, a little note of caution, it's February 24, and the program starts today. So, with that, yes, you are right. Thanks very much, Raul. Thanks, Guy.

Glenn: It is in 'twenty five the vast bulk is in 25. It does step down in 'twenty six I will add a you would expect the CFO to do it a little note of caution that it's February 24 are in the program start today, so with that yes, you are right.

Speaker Change: Understood. Thank you very much ready so thanks Guy operator can we take that question.

Diego: Operator, can we take the next question? Thank you. We will now take our final question for today. And your final question comes from the line of Gopri Sahi from Goldman Sachs. Please go ahead.

Thank you we will now take our final question for today.

Corporate Saha: And your final question comes from the line of corporate Saha from Goldman Sachs. Please go ahead.

Diego: Thank you, Bill. Thank you, Diego, for taking my question. Two, please.

Corporate Saha: Thank you Bill Thank you Diego for taking my question.

Diego: First, the Central and other items. We have quite a big mix of Central and others compared to other regional or global banks. Should we, as part of the program, also expect the P&L and balance sheet here to become smaller as a percent of the overall group? Any thoughts there would be welcome.

Corporate Saha: Two please first is the central and other items, we have it quite a big mix of central and it does.

Corporate Saha: Compared to other regional or global banks should re as part of the program also expected the P&L and balance sheet here to become.

Corporate Saha: Smaller as a percent of overall group any thoughts there would be welcome I know I'm not comparing apples to apples when I do that with other banks and second one is on the wealth management income so with the Hong Kong, Singapore, you a are we seeing with some especially China equity assets finding a bottom if this.

Diego: I know I'm not comparing apples to apples when I do that with other banks. And the second one is on the wealth management income. So with Hong Kong, Singapore, and the UAE, are we seeing some, especially Chinese equity assets, finding a bottom if this is the true bottom? Then are we seeing on the ground any switch to a wealth product from deposits, especially in this one, any early read? And what would then be our expectation for the wealth management income group more for this to lead us into a higher second half higher wealth income versus the first half? Or how would you see it?

Corporate Saha: Is that true bottom, then I'll be seeing underground any switch to a wealth product from deposits, especially in this one any early read and what would be then our expectation for.

Corporate Saha: Wealth management income group more for this to lead us into second half higher.

Corporate Saha: Hum.

Diego: Thank you. Thanks, Ruprit. Diego is the master and owner of Central and others, so I'm going to turn to him shortly. But I will say you're absolutely right.

Corporate Saha: Income versus first half what how would you see it. Thank you good thanks Richard.

Speaker Change: The <unk> is the master and owner of central another so I'm going to turn to him shortly but I will say you're absolutely right. The way, we've we've presented our central and other segment it's large.

Bill: The way we've presented our Central and other segments, it's large. We include, for starters, all of our hedges, as well as lots of other central costs and a fair amount of our capital costs in Central and other. We are piloting internally over the course of 2024, and we've indicated this in the past that this is something that we intend to do, a new financial reporting framework that will allocate a lot of those central and other costs out as appropriate to different lines of business. And when we're comfortable that we've got it right, we'll share that with you as well and it will become a new basis for external reporting at some point, which I think will give a little bit clearer picture around how each of our divisions is actually reporting, actually behaving, and performing.

Speaker Change: Includes for for starters, our all of our hedges as well as lots of other central costs and earn a fair amount of our capital cost in.

Speaker Change: In central and other we are.

Speaker Change: Piloting internally.

Speaker Change: During over the course of 'twenty 'twenty four and we've indicated this in the past this is something that we intend to do.

Speaker Change: A new financial reporting framework that we'll allocate a lot of those central and other costs out as appropriate to different lines of business and when we're comfortable that we've got it right. We will share that with you as well as become a new basis for external reporting that at some point, which I think will we'll give a little bit.

Speaker Change: Clearer picture around how each of our divisions is actually reporting actually behaving in performing and obviously it will have the effect of a significant reduction in what otherwise the central and other than that.

Bill: And obviously, we'll have the effect of a significant reduction in what otherwise would be Central and Other. But that said, we do have a substantial treasury balance sheet, and that has nothing to do with financial reporting. That has to do with the way that we're running our business. But we would also hope that as we get back into growth mode in our loans and advances, that would be funded out of a reduction in our central balance sheet. I know Diego will have thoughts on Central and others, but just quickly on wealth.

Speaker Change: We do have a central treasury balance sheet and.

Speaker Change: And that will.

Speaker Change: That has nothing to do with financial reporting that has to do with the way that we're running our business, but we would also hope that.

Speaker Change: That as we get back into growth mode in our loans and advances.

The.

Speaker Change: That would be funded out of a reduction in our central balance sheet.

Speaker Change: And I know Jacob I'll have thoughts on central in other words quickly on wealth.

Bill: Probably the most encouraging thing about the way that our wealth business has developed over the past several years is that we really have a broad diversity of products that our clients can buy, which is why we were relatively resilient during the very tough times in equity markets and have continued to perform well. So bank insurance is kind of a reentry product. Deposits are the initial reentry product, and we thankfully have had a big growth there. Bank insurance is a good reentry product, so it is well understood and safe and sound.

Speaker Change: Yeah.

Speaker Change: Probably the most encouraging thing about the way that our wealth business has developed over the past. Several years is that we really have a broad diversity of products that our clients can buy.

Speaker Change: Which is why we were relatively resilient during that during the very tough times and in equity markets and have continued to perform well some bank assurance.

Speaker Change: Is that a kind of a reentry product.

Speaker Change: Are the initial reentry products and we think we've got a big big growth. There are bank assurance is a good reentry products, so well understood and.

Speaker Change: And and San Fran sound we.

Bill: We've seen good migration into fixed income and fixed income funds. We've seen the beginnings of migration into equities and equity funds. We have not yet seen a material pickup in less liquid products that were gathering good momentum pre-COVID, but that has not fully reengaged.

Speaker Change: We've seen good migration into fixed income and fixed income funds we.

Speaker Change: We've seen the beginnings of migration into equities and equity funds, we have not yet seen a material pick up in less liquid product that was gathering good momentum pre COVID-19.

Speaker Change: But that has not fully reengage, but I'd say, we're quite optimistic that that will come back in over the next year or two.

Bill: But I'd say we're quite optimistic that that will come back in over the next year or two and provide a good underlying source of growth for us. But we're the third largest wealth manager in Asia, so we are very well positioned to capture a broad range of flows from this mass affluent client base. And we've got a good and substantial private bank, which is right now under leveraged, under invested, and not growing as quickly in terms of income. But the underlying wealth flows, net new money, and net new clients, are performing extremely well.

Speaker Change: And provide a good underlying source of growth for us.

Speaker Change: But where we're extremely as the third largest wealth manager in Asia, we are very well positioned to capture a broad range of flows from this mass affluent client base and we've got a good and meaningful and substantial private bank, which is right.

Speaker Change: Right now under leveraged.

Speaker Change: Underinvested and and not growing as quickly in terms of income, but the the.

Speaker Change: The underlying wealth flows net new money net new clients are performing extremely well so like I say, we remain quite optimistic about that business.

Diego: So I say we remain quite optimistic about that business. So on Central & Others, while echoing Bill's point that we're working on ways to report it slightly differently that, hopefully, will be helpful to this kind of discussion in the future, really two fundamental components. One, asset mix improvement that we have referenced several times before will drive a lower percentage of treasury assets. Our treasury assets live in Central & Others, while our customer assets live elsewhere, live in our businesses. And the second thing is the whole discussion on hedges, etc., as the short-term hedge rolls off and expires, and as rates go lower, we will have lower losses from treasury, and that would be the other driver of Central & Others.

Speaker Change: So on the on central than others.

Speaker Change: While our equaling to Bill's point that were working on ways to report it slightly differently that hopefully would be helpful to these kinds of discussions in the future.

Speaker Change: And really who felt the only to two fundamental components. One after the mix improvement that we have referenced the several times before will drive a lower percentage of treasury assets, our treasury assets leave the in central and others, while our customer assets leave the essilor, leaving our businesses and the second thing is our to the whole.

Discussion on the hedges et cetera, as the short term hedge rolls off and the expire and as rates go lower we would have lower losses from treasury.

Diego: So, I think we're done with the Q&A. Thank you. I think we've probably gone a little bit over the time that we set out in the first place, but thank you very much for the questions. Just a final thought for me is that we're really quite happy with the progress that we're making. That is tempered by the recognition that we have so much further to go, so much further to go in terms of generating incremental returns. Targeting 12% in 2026 is good progress. It's a continuation of this process that we've been on for my entire time at the bank, where we've been increasing ROTE by 1, 1.5% every year.

Speaker Change: That would be the other driver of Samsung and others.

Speaker Change #100: So I think we're done with the Q&A. Thank you I think we've probably gone a little bit over the time that we set out in the first phase of that thank you very much for the questions. Maybe just a final thought for me is that it will work.

Speaker Change #100: We're really quite happy with the progress that we're making.

Speaker Change #100: That's tempered by the the recognition that we have so much further to go.

Speaker Change #100: So much further to go in terms of generating incremental returns are targeting 12%. In 2026 is is good progress. It's a continuation of this this process that we've been on for my entire time in the bank, where we've been increasing our O T. He buy in.

Speaker Change #100: And at one 1.5% every year, obviously there've been a couple of ups and downs in.

Obviously, there have been a couple of ups and downs, particularly around COVID, but it's a good, steady progression, and we're not there yet. And lest you harbor any doubts about whether we're completely committed to driving this thing super hard, I hope we addressed some of those today. And the arrival of Diego, who has just been a great pleasure to have come in and challenged all of us, is the best antidote to any kind of complacency that we could ever have expected or ever feared. And I give you, dear shareholders and analysts, every confidence that we have, every confidence we can deliver, with all the energy that we've put into this over the past several years, for many, many years to come. So thanks again. Sorry for the little lecture at the end, but it's important to show just how committed we are to delivering these returns. Thank you.

Speaker Change #100: Particularly around Covid.

Speaker Change #100: It's a good steady progression and we're not there.

Speaker Change #100: And lest you harbor any any doubts about whether we're completely committed to driving this thing Super hard I hope we addressed some of those today and the arrival of Diego, who has just been a great pleasure to have come in and a challenge a challenge all of us.

Speaker Change #100: Is that is the best antidote to any kind of complacency that we could ever have expected or ever feared.

Speaker Change #100: And give you our dear shareholders and analysts every confidence that we have every confidence we can deliver with all the energy that we've put into this over the past several years for them for many many years ago. So thanks again, sorry for the electric the end, but it's important to to capture just how committed we are to delivering these returns.

Speaker Change #101: Thank you.