Q4 2024 Standard Chartered PLC Earnings Call
We delivered a strong performance in 2024 with a return on tangible equity of 11, 7% up 160 basis points year on year.
We achieved record income of $19 $7 billion, including a very strong performance in wealth solutions and double digit growth in global markets and banking.
Our first quarter performance continued at a consistent delivery of previous quarters at.
These results demonstrate that our strategy of combining cross border capabilities with leading wealth management expertise is firing on all cylinders.
We've remained disciplined on cost delivering positive income to cost jaws in 'twenty 'twenty four and we're now one year into our fit for growth program, which is progressing at pace.
We continue to return capital to our shareholders and today, we're announcing a 37% increase in full year dividend per share and a new share buyback of one $5 billion. This will take our total shareholder distributions announced since our full year 2022 results of $4 $9 billion and well on the way to delivering our target of at least $8 billion by two.
26.
We made a positive start to 2025, and we're tracking to the upper end of our 5% to 7% CAGR target for 2023 to 2026 before I hand over to Diego to talk through our performance in more detail I'd like to thank our much valued colleague because they've now who will step down as group Chairman later this year.
He's been a great partner to me and to the members of the board during his tenure as chairman.
Speaker Change: He's helped steer the group and has made tremendous contributions to the results we're delivering today.
I wish him the very best in his future endeavors.
Speaker Change: I also want to extend my congratulations to Maria Ramos, who will succeed Jose as a group share.
Speaker Change: Maria is a seasoned leader with a wealth of experience in leadership positions within the private and public sectors and look forward to working with Maria and her new capacity as we continued to deliver on our group strategy.
Speaker Change: Ah Gagan will now take you through the performance after which I'll come back to update you on our strategy and we will then both come back for the Q&A session. So diego over to you.
Thank you Bill good morning, and good afternoon to everyone on the call in my remarks, I will be comparing year on year on an underlying basis and speaking to constant currency unless otherwise stated.
Speaker Change: The group delivered headline income growth of 14% with operating income of $19 $7 billion in 'twenty 'twenty four.
Speaker Change: Adjusting for deposit insurance reclassification in the notable items 'twenty 'twenty four income was up 12% and above our income guidance all toward 10%.
Speaker Change: We have spoken about the notable items in previous earning calls, but let me give you the background on the deposit insurance reclassification, which I just mentioned.
Historically, our deposit insurance was recognized within NII, whether to align with industry standards. We decided that these payments you shouldn't be recorded as operating expenses.
Speaker Change: As a result, we have reclassified the 'twenty 'twenty four coastal the deposit insurance of $147 million in Q4, adjusting this from NII input expenses to.
Speaker Change: To be clear the impact of this reclassification is net neutral to operating profit.
Speaker Change: And for the year was $10 $4 billion up 10% and non NII was up 20% driven by a record performance in wealth solutions and double digit growth in global markets.
Speaker Change: Operating expenses were up 7% for the year and credit impairment of $557 million was up 5%.
Speaker Change: Other impairment, including $561 million relating to the write off of software assets as the group conducted a proactive review of its software accounting treatment as discussed in previous quarters.
Speaker Change: This review is now completed with NEC nil impact on capital.
Speaker Change: Restructuring charges of $441 million are primarily from the impact of organizational transformation actions, including $156 million relating to cost to achieve it.
Speaker Change: Our growth program.
Speaker Change: 2020 for a profit before tax was up 21% and return on tangible equity was 11, 7% up 160 basis points.
Speaker Change: Now, let's turn to each component in detail 2020 for NII of $10 $4 billion was up 10% or 8%, excluding the deposit insurance with vacation and slightly above our guidance range of 10 to 10 in a quarter billion dollars.
Luc: Before Luc.
Speaker Change: Looking into expectations for 2025, there are several elements at play.
Speaker Change: First NII in Q4 was particularly strong benefiting from assertive management of pass through rates as well as the impact of the reclassification.
Speaker Change: So the Q4 baseline is higher than anticipated and we think there could be some reduction in deposit pass through rates in 2025.
Speaker Change: Second as you will see on slide 29 independent the currency weighted average interest rate outlook for 2025 is 76 basis points lower than 2024.
Speaker Change: This has improved the around 12 basis points since we last spoke to you.
Speaker Change: You will see from the same slide that our exposure is to a broad range of currencies and the rate outlook Ken body between these different currencies.
Third there is the headwind of around 1% to NII in 2025 from the W or be transformation actions, we announced in Q3 as a result of all these factors, we still think that the NII may be challenging to grow, albeit this will be of course from a higher 2024 base and hence the overall the outcome in 2025.
Speaker Change: It will be somewhat above what we anticipated a few months ago.
Speaker Change: Our hedging program has continued to build at a rapid pace with our structural hedge of $64 billion at the end of 2024, which we expect to grow to $75 billion by the end of 2025.
Speaker Change: Speaking at our disclosed the interest rate sensitivity is now around 3% of income for 100 basis point reduction in rates much lower than around 10% back in.
Speaker Change: In 2021.
Speaker Change: Non NII continues to be a strong and diverse growth and he is around the half of the group's total income west.
What solutions global markets and global banking make up over 70% of our non NII.
Speaker Change: And all delivered double digit growth in 2024 with a record performance in wealth solutions.
Speaker Change: I talked to these products in more detail when I cover the performance of our business segments.
Speaker Change: Now turning to expenses.
Speaker Change: Operating expenses were up 6% in 2024, excluding the deposit insurance with the syndication which was booked in Q4.
<unk> expenses in Q4 were due to this reclassification. In addition to investment spend timing, which we highlighted in previous quarters and around $65 million impact from the review of software capitalization.
Speaker Change: The deposit insurance costs is expected to be around $200 million each year going forward.
Speaker Change: As a result, we are now targeting our 2026 corporate expenses to be below $12 $3 billion, including the deposit insurance costs and around $100 million of U K Bank Levy. There is no change to the previous 12 billion dollar cost cut guidance on a like for like basis, and we remain committed to delivering positive.
Speaker Change: Jos each year.
Speaker Change: We're now one year into our fit for growth program, which has over 200 projects in train.
Speaker Change: We have achieved the equivalent of around $200 million of annualized savings from projects executed in 2024, which is slightly ahead of the base, we had set for ourselves.
Speaker Change: Let me give you a few examples of the different initiatives we are working on.
Speaker Change: We removed complexity from decision, making by simplifying our organization on matrix.
Speaker Change: Forming from a regional to a business centric model this will deliver around $60 million in savings.
Speaker Change: In Abu Dhabi, we are improving client experience by simplifying and digitizing key processes in onboarding and servicing including client due diligence asset transfers corporate actions processing and card dispute resolution, we should deliver around $40 million in savings.
Speaker Change: We're also implementing a technology platform that will optimize workflows within our operations and will significantly reduce turnaround times to deliver quality services to clients.
Speaker Change: This went live in December 2024, and the first wave of use cases will be deployed this year.
Speaker Change: Lastly on vendor sourcing we are automating our end to end procurement process, which should deliver around $20 million in savings.
We're off to a good start with it for growth and likely ahead of plan and we expect the majority of the one $5 billion of savings to ramp up from this year total next year with tail effects continuing post 2026.
Speaker Change: And we expect to have incurred around 60% of the cost to achieve by the end of this year.
Speaker Change: Moving now to credit impairment.
Speaker Change: We benefited from significant recoveries throughout the year with a net release of $106 million in 2024.
Speaker Change: This was partly offset by a precautionary $58 million overlay for clients with exposure to Hong Kong commercial real estate, including $24 million taken in Q4.
Speaker Change: Slide 32 provide some more details on our $2 6 billion dollar exposure to the sector, which is focused on a limited number of top tier clients.
Speaker Change: In Abu Dhabi impairment increased $219 million in 2024, mainly driven by the high interest rate environment impacting repayments on some unsecured credit card and personal loan portfolios as well as the growth and maturity of our digital partnership portfolios.
Speaker Change: Impairments in the venture segment was down 13% mainly from reduced delinquency rates in marks.
Speaker Change: Our 2024 loan loss rate was 19 basis points benefiting from the net release in CIB, which we do not expect to be repeated in the coming years. We are therefore, maintaining our guidance that we expect the loan loss rates to normalize.
Speaker Change: The historical through the cycle 30 to 35 basis points.
Speaker Change: Our high risk assets were down $1 $8 billion in 2024, the increase in early alerts in Q4 were mainly due to a limited number of Hong Kong commercial real estate exposures.
Speaker Change: Other than this we are not seeing any new significant signs of stress emerging across the group.
Speaker Change: Underlying loans and advances to customers were up 2% in the quarter, mainly from the execution of pipeline deals in global banking, bringing the full year underlying growth to 4% and in line with our low single digit percentage growth guidance.
Speaker Change: W. B loan growth remains subdued during the year, but we saw some growth in mortgages in Korea in Q4 as pricing conditions improved.
Speaker Change: Underlying customer deposits were up 1% in 2024 as growth in W or because that was partially offset by outflows in CIB deposits, particularly at year end, which have largely reverse.
Speaker Change: Turning now to <unk> and capital.
Speaker Change: Our risk weighted assets were down around $2 billion in the quarter. This was driven by a 5 million dollar increase in asset growth and mix more than offset by lower market risk <unk> as well as the impact of FX.
Speaker Change: We continue to generate strong levels of capital with a CET one ratio of 14, 2% and 20% before.
Speaker Change: And as Bill mentioned, we are announcing today, a new $1 $5 billion share buyback, which will take our pro forma CET one ratio to 13, 6% as we continue to operate dynamically within our 13% to 14% target range.
Speaker Change: Since our full year 2023 results, we have now announced around $4 $9 billion of shareholder distributions, including $4 million in share buybacks as well as the 2024 interim dividend of $230 million and a proposed final dividend of $679 million.
Speaker Change: Our share count is down 9% in 2024, and 21% since 2021, which has helped fuel growth in our per share metrics.
Our full year dividend per share is up 37% year on year, our underlying earnings per share has increased 30% and our peanuts per share is up 11%.
Speaker Change: We are maintaining our distribution target of at least $8 billion between 2024 and 2026.
Speaker Change: We will also continue to target increasing our full year dividend per share over time.
Speaker Change: Now, let's take a look at our business segments performance CIB income for the year was $11 8 billion up 6% driven by double digit growth in global markets and global banking with a particularly strong Q4 up 15%.
Speaker Change: Global markets income was up 15% with flow income up 12% driven by higher effects and credit rating.
Speaker Change: Q4 was strong for episodic income compared to the same quarter last year as we saw higher levels of volatility across our footprint.
Global banking income was also up 15% and up 26% in Q4, driven by favorable market conditions and capital markets and higher origination volumes.
Speaker Change: Transactional services income was flat, mainly due to margin compression or down 1%, but excluding the impact of deposit insurance reclassification.
Speaker Change: 2025 has started strongly in global markets and global banking and we're seeing a broad based pickup in client activity across asset classes, all beat the environment remains uncertain.
Speaker Change: We will be hosting our CIB investor seminar on the 15th of May This year, where we will provide a deep dive into our distinctive value proposition and how the business is benefiting from the new corridors of globalization.
Speaker Change: Turning to wealth of retail banking income was up 11% to seven point that billion dollars in 2020 for.
Speaker Change: This was driven by a record performance in wealth solutions with investment products income up 36% from broad based growth across products and many of our top markets.
Speaker Change: We continued to see steady growth across our key leading indicators, including Onboarding 265000, new to bank affluent clients in 2024, having consistently on boarded more than 65000, new clients every quarter over the past six quarters. We also had $44 billion in affluent than net new money in 2024.
Speaker Change: Equivalent to a strong 16% girls, who both joined the AUM coming from net new money.
Speaker Change: This included $21 billion of wealth net new sales up 73% driven by strong international close.
Q4 remained strong delivering $10 billion of net new money in 2025 has started well forward solutions.
Speaker Change: Now onto ventures.
Speaker Change: Marx has grown to around 650000 customers with an average of three products per customer as a result income was up 15% and customer deposits have grown by 57%, whilst we remain disciplined in our approach to lending.
Speaker Change: For trust income more than doubled and we ended the year with close to a million clients and have since surpassed this level.
Speaker Change: Matson thruster are each expected to be profitable in 2026.
Speaker Change: We launched four new ventures in the year and raised $60 million of funds in a challenging environment.
Speaker Change: As our portfolio matures, we expect to generate gains on sales or mergers of our ventures and will increasingly obtain third party funding for expansion on ventures, demonstrating the economic value we are creating.
We continue to guide that underlying losses in our venture segment will not exceed the $200 million across 2025 and 2026.
Speaker Change: Lastly, we will be making some changes to our financial disclosures effective in Q1 2025 by allocating some of the items currently held in central and others. So the underlying business segment.
Speaker Change: These include the allocation of some of the income 81, caster and risk weighted assets currently held centrally in treasury as well as some corporate center costs and the U K Bank Levy.
Speaker Change: Main purpose of this is to improve resource allocation as well as to show a more accurate view of the returns generated by the businesses also.
Speaker Change: Also note that there is no impact to the group's consolidated financials, resulting from these changes.
Speaker Change: We will publish data pack show in the representation of financial data prior to our Q1 results.
Speaker Change: I will now hand back to bill to take us through the strategic optics over to you Bill.
Bill: Thank you Diego.
Bill: As I mentioned in my opening remarks, we've been successfully executing on our strategy of combining differentiated cross border capabilities with leading bulk management expertise.
We managed our portfolio of products clients and markets dynamically over the years and have taken actions across our businesses to reallocate capital to higher returning areas.
Bill: This has helped us to deliver sustainably higher returns with 2024 <unk> of 11, 7%.
Our T. NAV per share has also increased significantly in recent years and is up around 25% since 2022.
Bill: Let's now take a look at the actions, we're taking to drive improving returns over the medium term.
Bill: In CIB, we said we will further sharpen the focus on serving the cross border needs of our large global corporate and financial institution clients.
Bill: We're already seeing this in our results.
Bill: We set ourselves a target to increase cross border network income to around 70% of total CIB income over the medium term and this is now 61% in 2024.
Bill: The proportion of CIB income from our financial institution clients increased by two percentage points in 2024% to 51%.
Bill: Our target is to resist to around 60% over the medium term, having increased by eight percentage points since 2019.
Bill: These targets supersede the ones, we previously announced with our 2020 through results in February last year.
Bill: As part of our continued investment into improving our product offering earlier this year, we announced a strategic partnership with Apollo to support and accelerate financing for infrastructure clean transition and renewable energy globally.
Bill: Of course, the world in 2025 is illustrative change with regards to geopolitical trends and potentially and as patterns of global trade.
Bill: So now let's look at our cross border network strategy and why we believe we are well positioned.
Bill: Our cross border network income of $7 $3 billion in 2024 has been growing strongly with an 11% CAGR since 2019 and it is delivering attractive returns.
Bill: Our network income is not just trade it is highly diversified across a range of products from transaction services to global markets and global banking.
Bill: Geographically it is not overly reliant on a single bilateral trade relationship and only seven individual market quarters generate net income greater than $109 per annum.
Bill: This is demonstrated by the chart on this slide.
Bill: On the left is the originated market, where the client is domiciled in the line flow from left to right.
Bill: The width of the lines, reflecting the network income for that cross border corridor.
Bill: It shows why we expect it to continue to benefit from the structural reconfiguration of trade flows in our footprint.
Bill: Around one third of our total network income is intra Asia and is growing at a fast pace as a whole Asia is our largest generator of network income and we are uniquely positioned with a presence in 21 markets.
Bill: I think it is increasingly important in capturing supply chain diversification shifts and around 20% of our network income is inbound into ASEAN.
Bill: In addition, we are well positioned to capitalize on the growth of the middle East, which is one of our fastest growing corridors.
Bill: Up at around 17% CAGR since 2019.
Bill: Lastly, it's worth reminding you that our U S. China Cross border income is relatively small and only around 1% of our total CIB income.
Bill: That's not to say that we're complacent and we will continue to be nimble in how we help our clients capture future market opportunities.
Bill: Turning now to wealth and retail banking and.
Bill: W. R. B, we continued to build on our strengths of being a leading wealth manager for affluent clients in Asia Africa, and the Middle East.
At the affluent Investor seminar, we held back in December we committed to a set of ambitious targets of $200 billion of net new money from 2025 to 2029.
Bill: And double digit income CAGR and wall solutions from 2024 to 2029.
Bill: We delivered $44 billion of net new money in 2024, and achieved strong double digit growth of 28% and wealth solutions income.
Bill: Our affluent clients share of W. RV income is now 68%. This is up three percentage points year on year.
Bill: We're targeting for this to reach 75% by 2029.
Bill: Our ability to service the full client continuum and international clients in our core markets remains a powerful growth engine for us in.
Bill: In 2024, we upped here 295000 individual clients and increase the number of international clients by 18% year on year.
Bill: We've also continued to execute on our actions of reshaping our mass retail business by announcing the potential sale of W. RV businesses in Botswana, Uganda and Zambia.
Bill: Remember last year.
Bill: We will invest $1 $5 billion and our excellent business over the next five years to accelerate growth in this incremental investment will be funded by the reshaping of our mass retail business.
Bill: Now into sustainable finance.
Bill: In 2024, our sustainable finance income was $982 million up 36% year on year, and very close to our 2025 target of over $1 billion.
Bill: The growth in our sustainable finance income has significantly outpaced that of global renewables investments since 2019 and has delivered an attractive return on risk weighted assets of 100 basis points compared to 2023.
Bill: We've also mobilized $121 billion of sustainable finance since the beginning of 2021, making good progress towards our $300 billion commitment by 2030.
Bill: We continue to advance our broader sustainability agenda as we embedded net zero across the organization and through the transaction lifecycle.
Bill: We recognize that achieving our net zero target by 2050 requires active collaboration and engagement with our clients. So I'm also pleased to have published our inaugural transition plan alongside our annual report today.
Bill: Looking ahead, we've made no changes to our 2025 and 2026 targets on a like for like basis, albeit the growth rates are now from a higher base in 2024 than previously expected.
Bill: We will continue to deliver strong income growth and with a positive start to 2025. We're currently tracking towards the upper end of our 5% to 7% CAGR target for 2023 to 2026.
Bill: We continue to expect to deliver positive jaws in every year.
Bill: We remain committed to distributing at least $8 billion to our shareholders through the dividend and share buybacks from 2024 to 26.
Bill: And we're continuing to target our LTE approaching 13% in 2026 and to progress thereafter to.
Bill: To conclude our strategic focus and execution has delivered a strong performance our cross border focus positions us well to benefit from new corridors of globalization across CIB NW RB.
Bill: We remain disciplined on costs and our fit for growth program is accelerating.
Bill: This all leads to improving returns and increase shareholder distributions.
Bill: This is our time.
Bill: With that I'll hand back to the operator, and Diego and I will be happy to take your questions.
Bill: Thank you.
To ask a question during the session you will need to press star one one on your telephone you will then hear in automated message advising Johann just raised please wait for your name to be announced to withdraw. Your question. Please press star one again, if you wish to ask a question via the webcast. Please use the Q&A box available and click submit.
Bill: We will now take our first question. Please.
Bill: Please standby.
Speaker Change: And the first question comes from the line of Joseph Dickerson from Jefferies. Please go ahead. Your line is now open.
Joseph Dickerson: Hi, good morning, Thanks for taking my questions and congrats on a very consistent delivery over the course of.
Joseph Dickerson: This year with the results I guess just on a couple of questions first on the.
Joseph Dickerson: Commentary around 2025 revenue being below the 5% to 7%.
Joseph Dickerson: CAGR I mean, I think we kind of expected that out of Q3, but it looks like.
Joseph Dickerson: But there has been a pretty significant step up quarter on quarter in terms of volume and mix effect in the NII.
Joseph Dickerson: Such that that is annualizing now at about $10 9 billion. So I guess, what's the pass through dynamic there that you seem to be calling out.
Joseph Dickerson: Because it seems too.
Joseph Dickerson: Also come.
Joseph Dickerson: Come up against positive commentary on the non II aspects for the start of the year.
Joseph Dickerson: And then the second question is just more high level.
Joseph Dickerson: Beyond 2026, do you think the bank is capable of delivering more in the mid teens type of.
Joseph Dickerson: Return above 13%.
Joseph Dickerson: As our fit for growth kicks in and we continue to leverage our wealth opportunities and the footprint. Many thanks.
Joe: Joe Thanks, very much for the questions.
Joe: Obviously, you are pointing out the strong momentum from Q4, which you've noted has carried through into 2025.
Joe: We're not changing our guidance we have indicated that we think that the the compound growth rate will be at the higher end of that 5% to 7% range, obviously, reflecting the strong in 'twenty four and a good start to 'twenty five.
Joe: But the.
Joe: Clearly, we're going to push for every bit of upside that we can we think the franchise is in really good shape. The environment is very supportive and.
Joe: And we will drive that very hard.
Joe: 2026, and beyond obviously, we guided to approaching 13% <unk> in 2026, and we're well on track to achieving that and we have further guided that we expect that to continue to progress. After 2026, So we're not updating our guidance.
Joe: And I can certainly tell you that 13% does not feel like any kind of an appropriate endpoint for us and that we think we can drive this substantially from there.
Joe: Sending out all sorts of things are the things, we can control in terms of our own execution and the.
Joe: Our progress, we're making we feel extremely good about.
Joe: The external environment will see its a long way off but.
Joe: Jacob.
Pick up on both questions also on fundamentally on the first question.
Joe: And I suspect that there is a few other people on the line that have similar lines of thought so let me let me help you.
Joe: Let me run you through how we think about so first of all and foremost I would say we start from a high note. We ended up with Q4 of 2024 really well.
Joe: And so the guidance that we've given at Q3 that we reiterate today, which I'll pause for a second on NII.
Joe: As you did in your question.
Joe: It's clearly asking from a higher point.
Joe: You referenced in your question that PPR and indeed that is an important element we had been very assertive in managing our PPR.
Joe: In our pass through rates in the fourth quarter for the first.
Joe: <unk> by the fed we see what we do but inherently in a lower rate environment, our ability to manage through as assertively as we had.
Speaker Change: Is that more of a lead.
Speaker Change: So that needs to be factory factored in the rate environment has not changed meaningfully from Q3, but we are.
Speaker Change: We have long expected than in our latest set of currency weighted forward curves you will see that we expect the currency impact for <unk>.
Speaker Change: 2025, or 76 basis points, but we clearly have the right head.
We also had the impact of the strategic actions that we're going to take during the course of the year.
Speaker Change: In terms of containing the shifts towards our wealth management for upland business.
Speaker Change: Clearly that we had indicated that lead to about $100 million of impact on NII.
Speaker Change: Or is that lost consideration, which doesn't really affect the numbers, but I think it's really important to bear in mind and it's something we're very proud of the way that our treasury team has continued to push in terms of the strengthening of our structural hedge you have our structural hedge now at 64 billion growing 475 next year.
Speaker Change: Zoe does not provide affiliate to NII at the current level of rates that clearly will stand us in good stead. If the rate cuts, we're going to are going to prove to be deeper than he is currently embedded in the forward curves. So.
Speaker Change: Any way to put it challenging to grow NII, but from a higher base and therefore implicitly the number that we are going to be targeting is a higher number than the number we were targeting.
Speaker Change: That's the way to think about it on an NII basis, but I would be remiss if I didn't mention that as you think about our entire rate of revenues never forget we are half NII have known NII, our non NII last year grew at 20%. We have had a strong start to the year.
Speaker Change: It's clear that we are we enter 2025 with a high degree of confidence.
Speaker Change: That's very helpful. Thank you Stuart.
Speaker Change: Thanks, Diego operator can we take next question. Please.
Speaker Change: Of course, we will now take our next question. Please.
Speaker Change: Please standby.
Speaker Change: The next question comes from Robin down from HSBC. Please go ahead. Your line is now open.
Robin: Good morning.
Speaker Change: Quick questions on NII, but I'm going to leave.
Speaker Change: For some of those around us to kind of explore deposit migration et cetera.
Speaker Change: Can I ask you to come in quicker questions one of them.
Speaker Change: You've made to 2025 I think CIP.
Speaker Change: In particular, Youre, calling out you've had a good start there.
Speaker Change: Markets and banking is up.
Speaker Change: Is that a comment that basically implies a year on year increase.
Speaker Change: Or is it just a good start.
Speaker Change: Absolute terms I appreciate it's on the 21st of February but.
Speaker Change: <unk> know what you mean by could stop.
Speaker Change: And then the second question, probably slightly if kind of a <unk> question, but the software write downs.
Speaker Change: You've taken.
Speaker Change: To get rid of of kind of dormant.
Products et cetera.
Speaker Change: I think last time, we spoke of the sulphide Roundtable I thought you were slightly up.
Speaker Change: Pablo So cta publicly the restructuring in effect going forward with them.
Speaker Change: A lot of duplication of systems.
Speaker Change: Is that now is that process now kind of bolt on and captured in this and the software write down or should we be expecting further software write downs as U.
Speaker Change: Going forwards.
Speaker Change: The reason I'm asking is.
Speaker Change: It's kind of you can you tell us and affect the Cta charge.
Speaker Change: You're highlighting is always in effect kind of cash charges at all affects the capital line or is that going to be some element of software write down within the kind of a one off.
Speaker Change: <unk>.
Speaker Change: What impact capital.
Speaker Change: If that makes sense.
Speaker Change: Good.
Very much for the questions Robin.
Speaker Change: 25 has started off well and.
Speaker Change: That's not just CIB CIB and well.
Speaker Change: Global banking has had a reasonable start as well so.
Speaker Change: The momentum that we felt at the end of last year of course, we think in Q4, which was quite strong as well.
Speaker Change: Continue to build and I think it's pretty clear.
Speaker Change: We've got uncertainty in markets.
Speaker Change: We've got a clients.
Speaker Change: File, which is increasingly sort of coming our way if I, if I could put it that way. So the issues that are of concern to our clients play directly to our strengths.
Speaker Change: And that momentum continues to build both on the on the on the CIB and on the W. RV side in particular.
Speaker Change: In global markets and well.
Speaker Change: So we don't need to see much more of that as you pointed out is ROMI or at least have.
Speaker Change: In two weeks into the quarter.
Speaker Change: <unk> you have some thoughts on that question and I'll, let you take the suffered question in its entirety.
That's 19 either.
Speaker Change: On the 20 to 25, all good I would say that the one wealth management in particular, you mentioned CIB in particular, but with management has also had a strong start let's not.
Speaker Change: Forget that we had in the early and relatively lumpy Chinese new year, and that's notwithstanding everything is going well and the business.
Speaker Change: Very well before and continues to do well afterwards, so all fine also on the wealth management side, let's let's talk software right answer in your question is really software, writing, but a little bit more let me let me take it in small steps first of all in terms of the software right answer the one that we had.
Speaker Change: We have flagged that was a matter of the <unk>.
Documentation of the decisions.
Speaker Change: Taken in the context of the software capitalization.
Speaker Change: One is done finished.
Speaker Change: By the way as you well know and as you referenced that you did have any impact to our capital and as a consequence. It has no impact on our ability to grow our business.
Speaker Change: Return capital to our shareholders. So that's part of that is taken account.
Speaker Change: <unk>.
Speaker Change: Then of course to achieve the four SSG is largely very largely a cash expense.
Speaker Change: So there.
Speaker Change: Another portion of the capitalization of issues with capitalization there it is.
Speaker Change: De Minimis thing.
Speaker Change: What is true in what we referred to in terms of the conversations that we have had following the Q3.
Speaker Change: Is that the.
Speaker Change: <unk>.
Speaker Change: You can expect on top of the 50% of the fit for growth one 5 billion.
Speaker Change: Cost to achieve that will come.
Speaker Change: And that will come in 2025, you cannot you can expect a little bit more.
Speaker Change: Few other things.
Speaker Change: One of which that are fundamentally to one that is.
Speaker Change: These deduplicate did it's more deduplication.
Speaker Change: Occupancy costs due to the fact that as we continue to move.
Speaker Change: Around our physical setup in terms of the massive data centers, we have some double occupancy costs.
Speaker Change: And we also had the we will have certainly something due to the market exits that we will be effecting, although obviously the timing for those.
Speaker Change: Is uncertain.
Speaker Change: The way the right way I think to think of it is think of something like $100 million to $100 million of the.
Speaker Change: Additional.
Of additional.
Speaker Change: Impact.
Speaker Change: Part from the 50% of your program. So it's largely fit for growth, but there is a little bit of a tail.
Speaker Change: All the rest.
Speaker Change: Definitely finished the software write downs that had to do with the documentation of the decisions on capital usage.
Speaker Change: Great. Thank you. Thank you.
Operator next question please.
Speaker Change: As a reminder, if you wish to ask a question via the webcast. Please use the webcast link anytime it takes effect.
Speaker Change: We will now go to our next question. Please standby.
Speaker Change: And the next question comes from Andrew Coombs from Citi. Please go ahead. Your line is now open.
Speaker Change: Okay.
Andrew Coombs: Good morning.
Andrew Coombs: I will take up the unchanged right around NII.
Andrew Coombs: And then one.
Andrew Coombs: Good question as well.
Andrew Coombs: Only NII just on slide five.
Andrew Coombs: Can you unpack that 153.
Andrew Coombs: Improvement in the mix, but you may not.
Andrew Coombs: That's obviously quite a bit higher than consensus was expecting and just trying to work out how much of that relates to that.
Andrew Coombs: <unk> stepped down in China.
Andrew Coombs: CIB deposits, that's probably not likely to continue.
Andrew Coombs: Okay.
That would be helpful.
Andrew Coombs: And then second annualized it's primarily in.
Andrew Coombs: In Euro and yen.
Andrew Coombs: So quite a big increase five one to five six which is a market.
Andrew Coombs: Mark is due to Hong Kong commercial real estate.
Andrew Coombs: There is obviously no charges today all about at what point would you potentially take provision okay. Thank you.
Thanks, Andrew.
Andrew Coombs: Turning to NII question over to Diego before doing that.
Andrew Coombs: The early alerts I think we've been pretty consistently cautious in terms of.
Speaker Change: Recognizing these these episodes of instabilities first in China and.
Speaker Change: More recently in Hong Kong and will continue to be cautious, but you see that our our provision level.
Speaker Change: Despite I would say equally cautious introduction of further overlays and Hong Kong relatively small.
Speaker Change: And our stage two in phase III is very very benign.
Speaker Change: There are there are flashpoints in Hong Kong, we know and we're all very focused on those but we think that the overall environment is one that feels relatively stable and we feel very comfortable with our positioning in fact very very comfortable with our positioning.
Speaker Change: I wouldn't read too much into the earlier the increase other than that it means that we're very very focused and do.
Speaker Change: So on the on the NII question.
Speaker Change: A couple of factors at work, but fundamentally the key factor is the shift in the.
Speaker Change: In the mix of assets from our treasury assets through our commercial assets. We had funded the trading book as you will have certainly seen that.
Speaker Change: We've done that because clients were looking for opportunities to.
Speaker Change: To capture volatility or other opportunities that were arising with anything what they think is the way the tubes by the way. The fact that we can lean into our businesses even our in particular, our market business is largely a recurrent business, but that has often like in this quarter the opportunity to benefit from.
Speaker Change: Is all of the key moments of increased volatility we have the ability to really do it in two ways, we can lean into it with risk weighted assets.
Speaker Change: But this but this quarter for example, we haven't.
Speaker Change: And we have been able to deploy.
Speaker Change: To deploy capital in other ways, while still.
Speaker Change: Facilitating our client activity that is the largest part of the team there is.
Speaker Change: Another element, which is which speaks to the nature of the quality of our funding, but we continue obviously to continue to improve that.
Speaker Change: And we're in particularly in particular, we have been reducing time deposits at corporate and deposits.
Speaker Change: And substitute them with cheaper ways of funding so that is at the heart of the.
Andy: Of that change that you have referenced Andy Thank you.
Speaker Change: Yeah.
Speaker Change: Next question. Thank you we will now go to our next question.
Speaker Change: And the next question comes from the line of Charlie Munger from Bank of America. Please go ahead. Your line is now open.
Charlie Munger: Thank you for taking my question just a couple.
Speaker Change: One of its restructuring.
Speaker Change: This year with looking at some somewhere like maybe 402 million of restructuring so fit for growth side. I think there is still maybe like a two to 300 million restructuring charge.
Speaker Change: I know it when you're operating in 60 markets and it's always just talked about is going to be a decline, but Tim I guess, if I look back the last seven eight years. It looks like that there is a sort of a run rate for <unk>.
Speaker Change: Lack of a better phrase of maybe somewhere between $2 million to $400 million.
Speaker Change: The right way of thinking about it and that's number one and number two is.
Speaker Change: Again, it's quite a suite Harry but Jim.
Speaker Change: About 300 million of notable items non interest income.
Speaker Change: To do with Ghana, and Egypt, So I guess, how do you think about what do you put in structuring and other and what do you need.
Speaker Change: I think top line because it obviously affects some of the growth rates at that time.
Speaker Change: We're looking at.
Speaker Change: No.
Speaker Change: Noting that your guidance isn't notable items, but obviously it is it is part of the numbers that we have to strip out an adjustment.
Speaker Change: Okay. Thanks, Charlie I will go straight to video on this.
Speaker Change: So on restructuring.
Speaker Change: I think that the answer is the same question is first of all.
Speaker Change: How do we think about a run rate of recession, we don't think about run rate of restructuring.
Speaker Change: And as a consequence.
Speaker Change: I don't think that we don't guide also to restructuring going forward, having said that within that the I just the in the previous response, Randy I did flag at some elements of restructuring that we know are going to come next year. The dual occupancy at the exit from markets that would be in the region of 100 to 200 million.
Speaker Change: So below the range that you had indicated that I don't know if it feels a bit high if you think about it that way.
Speaker Change: Thinking more in the range of all but what we are expecting for example for next year, but.
Speaker Change: As you yourself caution that it's difficult to think of a restructuring ahead of time and it's also difficult to think about what happens within the footprint.
And how we get that reflected in our numbers what I can tell you for sure are two things one we do things because orthos.
Speaker Change: Side, the where to put things.
Speaker Change: Whether they fall in our business in our treasury and our operations depending on their own they affect us at different places.
Speaker Change: The P&L more importantly, I think is that our guidance is all ex notables. So we try to make it as clear as possible what is the underlying data and what is not.
Speaker Change: And we always are very scrupulous to pull out royalty is notable.
Speaker Change: Whether it's in our favor or not in our favor so that we make sure to communicate what is the real strength of the business, which I continue to think it is very much so and while those numbers seem a relatively large when you look at them that way, we're talking about an almost $2 billion revenue line. So.
Speaker Change: They are they are meaningful.
Speaker Change: Relatively at the margin I would say.
Speaker Change: Just a little bit more color.
Speaker Change: Over the past eight years or so.
Had over 20 material dispositions of businesses.
Speaker Change: Partial or whole countries.
Speaker Change: The three that we announced last year in terms of retail exits.
Speaker Change: In sub Saharan Africa.
Speaker Change: And in other businesses as well and that's been a kind of a continuous evolution as the bank has transformed itself.
Speaker Change: We look today, we say we are much more focused.
Speaker Change: We're a.
Speaker Change: Thanks, it's probably much more towards core strengths.
Speaker Change: Evolution is ongoing and we will never stop looking at every line of business every client segment every market to ask ourselves. The question are we really differentiated in the space and if the answer is yes, then we're going to invest in it and if the answer is no then we're going to find a way to reposition that which in most cases will generate some kind of restructuring charge. So we definitely don't think of it.
Speaker Change: Is the run rates, but we do see the opportunity.
Speaker Change: Obligation to continuously restructure and.
Speaker Change: And I can't see when that will stop.
Okay.
Speaker Change: You probably take next question. Please thank you.
Speaker Change: I would now like to hand to minus Christy you for any questions on the webcast.
Speaker Change: Thank you I've got one question at the moment from guys.
Speaker Change: Exam Guy asks.
Speaker Change: Could you. Please help us think about the NII trajectory over this year.
Speaker Change: Entering 2025 at close to $11 billion run rate, but implying it will be lower so could you give us some color on the phasing during the year.
Other way to ask it what is your guidance for 2025 and I imply about the trajectory into 2026.
Speaker Change: Okay.
Speaker Change: So a guy.
Speaker Change: Very difficult to talk about quarters.
Speaker Change: And from this point of view, we are clearly in the hands of the volatility of rates.
Speaker Change: And so I would draw you back to thinking about what the.
Speaker Change: Rather than the past.
Speaker Change: Think about the objective and where we are going to go we're going to do everything we can to grow NII, but we have three forces that work against US one is mechanical which is the reclassification and it's easy and it's a neutral obviously to operating profit.
Speaker Change: It's one we have the people.
Speaker Change: The decrease in our ability to manage aggressively.
Speaker Change: Rates continue to decrease.
Speaker Change: And we have the strategic actions that we can quantify at about $100 million, how they take place during the course of the year, it's difficult to say from where we stand, but I think that if you think about where we're going and if you then look at our currency forward the rates and you think about how the <unk>.
Speaker Change: Headwind, then abates into 'twenty six.
Speaker Change: And you combine that with the strength of our non net interest income the engine. The engines of growth I think that gives you the confidence both for 25 and for 2006 going forward.
Speaker Change: Okay.
Speaker Change: Operator.
Speaker Change: Nine minutes.
Speaker Change: Right.
Speaker Change: Operator, Please next question.
Speaker Change: Thank you we will now go to our next question.
Speaker Change: And the next question comes from Ken Pang MA from China Securities. Please go ahead. Your line is now open.
Speaker Change: Hi, good morning.
Diego. Thank you for taking my question there is a component of Chinas purchased IP.
Two questions. The first is on CRE.
Speaker Change: Some update you CLS has been charged in Q4. So if we look forward because we know you are you still under pressure. So this question. Please.
Speaker Change: Let me just.
Speaker Change: Just assume that the majority of the Hong Kong CRE is in trouble or.
Speaker Change: But nothing else.
Speaker Change: That's helpful.
Speaker Change: It's not a big deal.
Speaker Change: Very small ups.
Speaker Change: Base, another story about how cost CRE trajectory going forward.
Speaker Change: Second lines about Africa.
Speaker Change:
Speaker Change: A lot from the Chinese companies.
Speaker Change: Targets beyond <unk>.
Speaker Change: This is ashwin.
Speaker Change: Snapshot.
Speaker Change: Having some headaches and some of the Asian African countries.
Speaker Change: But if we look forward.
Speaker Change: Your view Africa as a whole.
Speaker Change: <unk> potential to become another big Colorado business saw standard chartered going forward, yes.
I have just two questions. Thank you.
Speaker Change: Great. Thanks, and thanks for joining us it's great to have you here.
Speaker Change: So we.
Speaker Change: We talked a bit about Hong Kong theory, we can talk a little bit more is it a big deal. It's a big deal because it's a big market for us and we're very focused on it do we have a problem absolutely not.
Speaker Change: I would say we feel very good.
Speaker Change: About our portfolio positioning and about the prospects for the market but.
Speaker Change: As you said.
Speaker Change: There are some there are some problems there and we're going to watch it very carefully and we're working very constructively.
Speaker Change: In the market to make sure that we navigate this in the best possible way, but we think there.
Speaker Change: Perfectly adequately provided.
Speaker Change: And frankly, the issues very very very clearly.
Speaker Change: No doubt it will have some more color on that.
Speaker Change: Africa.
Speaker Change: You mentioned some headaches in Africa, I mean overall, our Africa business is Super strong has performed well.
Speaker Change: Pro forma consistently so we've had a period of of country restructurings or near restructurings.
Speaker Change: The piano for Us in Africa has been consistently good.
Speaker Change: Returns are accretive and in very differentiating in terms of the position that puts us in vis vis our multinational clients very much including our Chinese clients.
Speaker Change: So how do we manage to generate decent results in Africa. Despite the fact that Theres, just curious that rose and currency concerns in a number of countries. We do it by being the the differentiated provider in each of those markets so well.
Speaker Change: Well the windows of debt restructuring in a particular country.
Speaker Change: In Zambia, where the two that we've experienced in recent years.
Speaker Change: Of course, we take we took a loss at the time of that restructuring.
Speaker Change: Also tend to be the aggregator of deposits in that period.
Speaker Change: We tend to be.
Speaker Change: The ones, who can generate the highest net interest margin and we are definitely the go to source for.
Speaker Change: Whatever the appropriately creative solutions are to.
Speaker Change: To help local corporations and multinationals to manage their exposure to that country, whether that's done exposure or currency exposure.
Speaker Change: And we've consistently generated returns that were foreign excess of the cost of the debt restructurings.
Speaker Change: And that's because of the position that we occupy.
Speaker Change: <unk>.
Speaker Change: When I'm talking about differentiation.
Speaker Change: For U S or European or Chinese or Korean MNC, who.
Speaker Change: Who has an operation in Africa, and most large MNC is do they want to have a bank with global centers, who are operating underground operating locally who can help them navigate the challenges.
Are they inevitably come up.
Speaker Change: Can any developing economy.
Speaker Change: And more often than not the two center chartered because of our because of our presence.
Speaker Change: This puts us in a really good stead not just for those companies in Africa, but for the rest of their business. So I could regale, you with endless anecdotes of customers, where we initiated the relationship.
Speaker Change: Some market in sub Saharan Africa.
Speaker Change: Insinuated ourselves into the into the core banking group for that client was unable to bid through an RFP process or whatever on the cash management business in India or in the trade flows or FX panel in China, and only got there because of the introduction that we got in Africa in the first place. So it's a big differentiator.
Speaker Change: And its paying its own way plus.
Speaker Change: Then there is the whole notion of here for good which is we are we are a purpose driven company and we're able to play out our purpose and Africa two extraordinary effects.
Speaker Change: And that's really good for business.
Speaker Change: Jacob.
Speaker Change: I can just add one thing that maybe taking it in a slightly different direction.
Speaker Change: The the the slides that we have given you on our network business I think make a number of the points that are important they point to the diversification of our network. They point to the resilience of our network.
Speaker Change: What happens in any one specific country or corridor or sector or region.
Speaker Change: It also points to the fact that these new cardoso globalization that are being redefined the intra Asia, the Asia Middle East and importantly, the Asia Middle East to Africa.
Speaker Change: Important things in which very few people can provide our type of services. If you look at on the on.
Speaker Change: That graph and you'll see that every part of our network contributes to the success of our African business and vice versa.
Speaker Change: He is truly at the heart of the cross border corporate and investment banking get unique.
Speaker Change: <unk> set of capabilities that we offer to our clients.
Speaker Change: Thank you we will now go to our next question.
Speaker Change: Please standby.
Speaker Change: And the next question comes from the line of <unk> <unk> from Goldman Sachs. Please go ahead. Your line is now open.
Speaker Change: Thank you management for taking the question and congratulations on a good set of numbers can I have two quick ones. Please first is really on the supply chain shifts.
Speaker Change: They are happening, especially this year with some policy move from the U S. Our clients are adjusting to these tariff changes and how do we how does it play to our strengths of being a bank, which is as you say falling global standards.
Speaker Change: In Asia Africa, and Middle East.
Speaker Change: With respect to kind of advising their clients and then second quick one is on slide 39, I do see that the cost ratios in both of our key businesses have kind of moved up during Q2, we see it as sustainable from our discussions with clients or the treasuries and can we say that the cost ratio has kind of bottomed out.
Speaker Change: Third quarter of last year. Thank you.
Speaker Change: Great. Thanks.
Speaker Change: On the supply chain shifts of course, we're seeing an ongoing shift that began.
Speaker Change: Yeah.
Speaker Change: Realistically began back in the Obama days.
Because China was achieving the point of being something other than a low cost manufacturer.
Speaker Change: So we saw a significant significant migration of manufacturing into places like Vietnam, and Indonesia, Malaysia.
Speaker Change: In some cases.
Speaker Change: That accelerated obviously as a result of.
Speaker Change: The first round of trade tensions between the U S and China and then it accelerated further on the back of <unk>.
Speaker Change: Security concerns largely coming out of Covid.
Speaker Change: It's carried on through the through the Biden years and is now carrying out again. So this is not a new phenomenon.
Speaker Change: <unk> has been very substantial shift of elements of low cost.
Speaker Change: Manufacturing from China to other markets the markets that.
Speaker Change: And these are Chinese companies, who are moving and non Chinese companies, who are moving.
Speaker Change: Most of them are clients of standard chartered bank and most of the markets into which they are growing our core markets for center Charterbank.
Speaker Change: Which is another way of saying this has been a good thing for us. The fact that that the housing markets are benefiting from the shift of more recently, South Asian markets, including India had benefited from the shift in some episodic cases African and middle Eastern markets will also benefit. These are all core markets. So.
Speaker Change: So are you going to the shorthand and say.
Speaker Change: We have a higher market share outside of mainland China.
Speaker Change: Although we do inside mainland China. So those shifts are working very much in our favor question when a company moves, especially a Chinese company moves out of China into one of the neighboring countries.
That brings with it some need for local currency financing and currency risk management interest rate risk management those are our products. So.
Speaker Change: As we have this this gradual shift in supply chains motivated by by cost security or tariff levels and all three are contributing to that.
Speaker Change: It's been a helpful thing for US just to anticipate the conclusion.
Speaker Change: Therefore, the case that if we.
Speaker Change: Launch into a full scale global trade war that this is a good thing for us of course not.
Speaker Change: It would be bad for the global economy.
Speaker Change: Would be bad for the aggregate level of trades and it would almost certainly saiful cross border investments.
Speaker Change: Which is not good for anybody.
Speaker Change: The fact that it's not good for anybody gives me some confidence that it's not going to happen.
Speaker Change: But obviously, we're in a crazy world and crazy things that happen, but.
Speaker Change: We're certainly focused on helping our clients too.
Speaker Change: Accomplish that the financing and have their own supply chain shifts.
Our material and ongoing.
Speaker Change: We talked about this all the time, so Diego will have thoughts on that question.
Speaker Change: Pick up the cost question as well I'll take the I'll take the cost on the other one I think it's very clear these new cardoso globalization and a great opportunity for us in an extreme event hopefully, we'll never materialized because no one gains from cutting off their nose to spite their face.
Speaker Change: I think the way to think about <unk> is to think about the optimization of liabilities. We are all about optimizing our liability structure and we are all about funding our tests in the cheapest possible way that means we have three sources for doing that.
Speaker Change: In retail we have a retail of cancer, but in retail what is very good for US. It's also time deposits because 10 deposits on a way that very often is the way that wealth management clients come into the system. So really growing the two of them and do we see a real migration not particularly were not of interest.
Speaker Change: Right or there.
Speaker Change: There hasnt been enough of a break in clients' minds in terms of interest rate direction and level that makes us consider a substantial change in the change in the mix, but undoubtedly we want to continue to push all of our funding base as the internet retail within the CIB.
Speaker Change: Which is more volatile by the way as you have seen for example, with this quarter and where we are.
Speaker Change: <unk> had some outflows that have all been reversed in the in the first quarter.
Speaker Change: But clearly there is more volatility because the sums that very large multinational corporations and financial institutions can move around that can be substantially larger in.
Speaker Change: In CIB undoubtedly we want to emphasize that because corporate corporate term deposits are inexpensive source of funding for us. So we want to deemphasize it and our treasury once again works constantly to reduce debt the source of funding and the Gulf of awards.
Speaker Change: More efficient sources.
Speaker Change: Okay.
Speaker Change: Thank you we will now go to our next question.
Speaker Change: Please standby.
Speaker Change: And the next question comes from <unk> from Barclays. Please go ahead your on site.
Speaker Change: Good morning, Bill good morning JJ.
Speaker Change: Alright.
Speaker Change: Okay.
Speaker Change: A question.
Speaker Change: Sure.
Net interest income.
Speaker Change: Two quick questions on net interest income.
Speaker Change: Yes around.
Speaker Change: Youll pass throughs, so I guess you're talking about.
Speaker Change: Not being able to execute both series of excessively.
Speaker Change: Going forward as you did in Q4, so presumably lower pulse reason right now I just wanted to kind of confirm.
Speaker Change: And your kind of updated rate sensitivity disclosure.
Speaker Change: Roughly speaking.
Speaker Change: Any numbers on what Youre seeing and how that compares.
Speaker Change: I think directionally I get that it's less.
Speaker Change: The pulse rate that you're modeling and you're kind of going forward.
Speaker Change: Can you help us 30 number.
Speaker Change: Okay.
Speaker Change: And then the second question is around the <unk>.
Look for deposits.
Speaker Change: There's a lot of focus on lending.
Speaker Change: Okay.
Speaker Change: The outlook for that kind of.
<unk> continues to be below where you'd like it to be in the long term.
Speaker Change: Deposits are bigger.
Speaker Change: Your average interest earning assets anyway.
Speaker Change: I'm kind of interested in.
Speaker Change: What your take is on deposit formation in your markets because I look at places like Hong Kong. The money supply is growing very strongly despite subdued lending so.
Speaker Change: Yes.
Speaker Change: The reason I'm asking these questions maybe it's the third the third part of the question, but we are really struggling to make sense of your Nols.
Speaker Change: Kind of commentary for 25, it's kind of coming across the various questions being asked.
Speaker Change: The idea that you don't grow net interest income when you annualize it so strongly.
Speaker Change: We're actually not very rate sensitive anymore, you're executing post are you pretty well.
Speaker Change: You would expect some balance sheet momentum it just does not stack up at all.
Speaker Change: Probably the fourth or fifth Tom Youre paying all that kind of question, but if there's anything we are missing around please can you let us know thank you.
Speaker Change: Hello <unk>.
Speaker Change: Yes.
Speaker Change: Alright.
Speaker Change: From the top first of all in terms of the Pts.
Speaker Change: Sure.
Speaker Change: We give you we give you we've always given you ranges for both the CIB and <unk>.
Speaker Change: And through the cycle, if you wish to gas.
Speaker Change: The way to think about it is that in Q4, we definitely had <unk> on the CIB side that were above the range it and in <unk>, we were within that range.
Speaker Change: Somewhat towards the top end of that range, where do we go I think if we go back inside the range.
Speaker Change: And where do we go within that range.
Speaker Change: We will see where we end up we obviously work hard at optimizing and we work hard on our pricing.
Speaker Change: To the question of what do we use a tool in the models, we use more the mid to lower end of the ranges that we gave you. So that we can give you a sense of the birth of where we are and what do we use.
Speaker Change: Deposit first.
Speaker Change: Yes.
Speaker Change: <unk> for one second on one thing that you said almost ampersand, while you were asking about the possible because I think it's important you said demand low demand growth.
Speaker Change: Loans remained subdued it's already buzzer, but its better than slightly better than we had expected.
Speaker Change: We grew them in.
Speaker Change: In 2024 by 4%, it's pretty much in line with our guidance of low single digits, if anything it almost approaching the mid.
Speaker Change: Which is probably the place where we tend to think of the growth of credit demand in our footprint is that natural level. If you wish so through that.
Speaker Change: The demand for loans has not been spectacular, but it has not been bad and obviously, where we are particularly good at attracting deposits. It is by leveraging on our wealth management for affluent in the sense that we capture recapture inexpensive.
Speaker Change: Across our markets is obviously heavy in the markets, where we are present with a continuum of our business like Hong Kong and Singapore, but also in other markets and as I said time deposits for wealth management.
Speaker Change: Good.
Speaker Change: Good the installment that in that respect now I know that by saying that I.
Speaker Change: Have you heard of myself for the third the question because I can tell you that everything is going well that we have.
Speaker Change: Demand growth and at the same time.
Speaker Change: We are.
Speaker Change: Looking at.
Speaker Change: The way that the NII develops this year with caution.
Speaker Change: I would use the word we are conservative about optimistic it's difficult it's difficult to say something different then you'll have to forgive a CFO for us something a bit conservative.
Speaker Change: The reality is that we are doing well.
Bob.
Speaker Change: The level of uncertainty out there is higher than it was before.
Speaker Change: And we know that we can continue to perform on pass through rates in the way that we have and therefore from this higher level that we have established in 2024. So the ultimate result will be better than the results that we were forecasting in Q3, but we remain somewhat conservative.
Speaker Change: Thank you guys.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: We will now take our next question please standby.
Speaker Change: And the next question comes from Rub Nickels from Deutsche Bank. Please go ahead. Your line is now open.
Rub Nickels: Good morning, Thanks for taking my questions. It's another one on the software impairment charge can you give us an idea of what the useful life of software that you use within the models.
Rub Nickels: Is that something that you changed with the charge.
Rub Nickels: If you did should I not expect higher amortization.
Rub Nickels: And cost inflation from from this going forwards.
Rub Nickels: And then the other side of that.
Rub Nickels: You spend about $1 billion a year in software it's not.
Rub Nickels: The same level that we should expect to continue in capex from software.
Rub Nickels: Alright.
Thanks, Rob.
Rub Nickels: Jacob.
Rub Nickels: No change in the calibration of useful life.
Rub Nickels: As Dave mentioned earlier, we did change the way that we have documented and reviewed the documentation for the initial capitalization decisions that we made.
Rub Nickels: But that's when we've completed that review and our overall investment level is has been pretty steady for the past couple of years, we would expect it to grow very gently.
Rub Nickels: With <unk>.
Rub Nickels: Growth in earnings.
Rub Nickels: We continue to invest in everything that we feel that we need to invest and to achieve our plan and position us well for the future. Obviously, the surplus is going back to shareholders.
Rub Nickels: But no you Shouldnt expect.
Rub Nickels: Any material increase in the software that we're capitalizing but.
Speaker Change: Feel free to dig in on all of that just just one thing absolutely as Bill said no no difference.
Rub Nickels: Change.
Rub Nickels: Indeed in the useful life of us likely between five and 10 years.
Speaker Change: Anywhere between depending on depending on the particular piece of software and I do think though that you are going in the wrong direction in terms of thinking of the impact that it could have that you are thinking.
Rub Nickels: It could.
Rub Nickels: The increased cost if anything it will have a slightly flattering effect.
Rub Nickels: Because a few tens of millions of dollars of cost that we would have incurred were not going to incur so.
Rub Nickels: Youll see us light.
Rub Nickels: Slight improvement there that's the only thing that I would I would point to other than that all.
Bill: As Bill said.
Speaker Change: All else equal for it thank you.
Speaker Change: Of course, thank you Rob Thanks, Rob next question.
Speaker Change: We will now go to our next question. Please standby.
Speaker Change: And the next question comes from the line of Jeremy <unk> from CIBC. Please go ahead. Your line is now open.
Speaker Change: Thank you for taking up my question on <unk>, the first lines on the costs. So.
Speaker Change: I appreciate your commitment to cost discipline and the cost savings positive jaws in the double R&D transformation et cetera. So far another angle. The Asia market is optimistic and is also a highly competitive so what is the reasonable underlying cost growth for you to capture the opportunities without under.
Speaker Change: Investing it and is it possible that we may see the cost growth materially to pick up after the typical growth program and E. After 2026 and the second question is on the buybacks I know you've never wanted to guidance.
Speaker Change: As the $1 5 billion bond like a new run rate that we can refer to.
Speaker Change: Has the bulk of the Cta will happen in 2025, so is that a major concern when you do buybacks later this year. Thank you.
Speaker Change: Thanks, very much Jeremy for further questions of.
Speaker Change: Of course, you are right the Asian markets are very competitive.
Speaker Change: Investing substantially in particular in our wealth business, but also more generally in our in our CIB business.
Speaker Change: And we've been getting very good returns on those investments, we announced back in Q3 of $1 5 billion.
Speaker Change: Further step up in investment in our wealth business over the coming years and that's intended to obviously drive the income growth that we're talking about this is exactly to your point that to remain competitive and to continue to take the share that we have been taking that we intend to take.
Speaker Change: We're going to have to invest.
Speaker Change: But we've been fully factored that into the guidance that we've given.
Speaker Change: In every regard and as we pointed out we've been funding. We are funding we will continue to fund that.
Speaker Change: <unk> into our wealth business.
Speaker Change: By optimizing the rest of our business.
Speaker Change: Some of that of course is going to come through fit for growth and just being more efficient in everything that we do some of that is the repositioning of key parts of our of our mass market business across the network.
Speaker Change: But it's all it's all baked into our guidance and I'll, just I'll observe that in a very competitive market.
Speaker Change: We've been an employer of choice, we've been able to attract extraordinary talent.
Speaker Change: The market price for that talent and we'll continue to.
Speaker Change: I would say that the competitive environment. So far has been working to our favor and we feel like we're pretty well positioned for that going forward.
Speaker Change: Diego, you'll have some more thoughts on that and I'll, let you take the buyback point as well.
Speaker Change: On this one just one thing that you mentioned and Jeremy you mentioned post fit for growth et cetera, well ship for growth that is intended to exactly transform the way that we do things at the bank investments like the technology platform the process simplification the service delivery platform.
Speaker Change: These are all things that overtime are designed to give us a more efficient more competitive banks.
Speaker Change: And therefore, you should take heart from the fact that we are making these big investments.
Speaker Change: Because it will transform the way that costs will look in the future.
Speaker Change: On the buybacks.
Speaker Change: You should not take it as a new run rate, but definitely we've taken decisions every every time, we do it.
Speaker Change: I would say that what is important there is.
Speaker Change: In particular as you can.
Speaker Change: What you just said that we had flagged indeed that that 50% of the fit for growth cost to achieve that's happened this year.
Speaker Change: We do need that you do need to factor it into your thoughts in terms of capital returns, we do it in two hours.
Speaker Change: Our engine of profit growth are working well and that has enabled us to announce a one $5 billion share buyback, but we shouldn't extrapolate on that you should stay very focused on the fact that we are guiding to over 8 billion between 2426, and we do underline the word other it is our objective to go over.
Speaker Change: If we can.
Speaker Change: Thank you so much. Thank you Jeremy Thanks question he will.
Speaker Change: I'll now take our next question please standby.
Speaker Change: And the next question comes from Alastair Ryan from Autonomous Research. Please go ahead. Your line is now open.
Alastair Ryan: Good morning, Good morning, Diego I've, just got a follow up on the capital return if I may when you said over $8 billion.
Alastair Ryan: Consensus in the market already quite a long way ahead of that during the second half of last year.
Alastair Ryan: And if you just take pro forma 13, six upped your buyback, but capital generation you have been running at the higher end or above your range should be just on a 234 years you'd be thinking about you trying.
Alastair Ryan: Trying to manage the CET one towards the lower end of what you talked about is that comfort.
Alastair Ryan: Thanks for that.
Alastair Ryan: Or more hovering if you like.
Alastair Ryan: Great. Thanks for the question.
Alastair Ryan: Sure.
Alastair Ryan: We've had a we've had a good runs I think operationally, but also in terms of capital management.
Alastair Ryan: Pretty consistently demonstrated that we're prepared to go into that 13% to 14% range.
Alastair Ryan: Occasionally dropdown to the bottom end of the range, we've occasionally hovered closer to the top end of the range or at the top end of the range.
Alastair Ryan: And we will continue to take that approach as we reflect on the world right now, there's a little bit of uncertainty out there.
Alastair Ryan: And while things are going very well at the moment it doesn't feel like a bad time to be in the middle of our range as we started off this year rather than than down towards the bottom are we prepared to drop down to 13% in the right circumstances, absolutely. We've done in the past also during times, where there was some uncertainty and we'll do that in the future. If we think it's appropriate but we're going to take that decision day by day.
Alastair Ryan: One of the areas of uncertainty over the past several years is in Basel III, one we've always guided to what our best guess was we're guiding now to our best guess being that it's neutral, it's obviously been delayed by year.
Alastair Ryan: But.
Alastair Ryan: There are some ups and downs within the overall mix is I think there is for every bank, but we don't see that as being an impact because of the uncertainty that I'm talking about is much more the geopolitical uncertainty.
Alastair Ryan: And the fact that.
Alastair Ryan: None of those things that the credit cycle has gone away.
Alastair Ryan: And it still feels like we're in a relatively benign part of the credit cycle. So it is appropriate to be to be slightly cautious and thats, where we are but no reluctance to dropdown to the bottom end of the range, where we think thats what the circumstances right.
Alastair Ryan: Next question.
We will now take our last question.
Alastair Ryan: Standby.
Speaker Change: And the last question comes from Kian at the same from J P. Morgan. Please go ahead. Your line is now open.
Speaker Change: Hello can your line is now open please amit.
Amit: Yes. Thank you very much for taking my question.
Amit: I have a question on transaction services income and in particular, the payment and liquidity line.
Amit: Hasn't been growing I'm, just trying to understand.
Amit:
Amit: Normally I would expect this line to grow more or less with GDP may be even higher and we haven't seen any growth I'm, just trying to understand a little bit.
Amit: How we should think about.
Amit: The RASM in line going forward.
Amit: And secondly, I have a question regarding mix in trust clearly these are becoming more seasoned business, becoming profitable in 2006.
Amit: How should we think about the end game all of these two assets.
Amit: So let me just start with remarks and Trust me I'll pass over to you for more on that and then transaction services question.
Amit: Just I think you all know Matson trusts were de Novo banks with de Novo Tech stacks and a part of it was an experiment to see whether we could develop new technology.
Amit: And assembled.
Amit: Technology from partners and just something that was really differentiated.
Amit: Part of it was that we think that this is a super business model in two markets extremely well Hong Kong and Singapore.
Amit: And the experiment's been highly effective.
Amit: I mean, we're very very very happy with the technology that we developed ourselves and with partners and we're finding ways to port that technology into other parts of the bank and other markets. It's not just the technology. It's also the way of doing business everything from from what satisfies the customer.
Amit: Two ways, we can add incremental products and services we've got.
Amit: A growing suite of wealth management products for example in Egypt of Matson Trust at this point.
Amit: Which will help drive really good strong profitability growth.
Speaker Change: Every indicator is that as these banks reached maturity and you heard Diego say earlier over 1 million customers in Singapore and approaching that in Hong Kong.
Amit: This is very substantial market penetration with high high levels of customer satisfaction.
Amit: This will be very profitable banks with very low cost income ratios very low cost too to add clients and very low cost to serve.
Amit: That is clearly the model for for mass market banking going forward Interestingly also presents real opportunities for us to graduate those those same clients into the more affluent propositions that we offer whether those are in central Bank. We're building those into marks and trust.
Amit: States. These are strategic assets for us. We we think we can achieve material levels of profitability in each of those banks and.
Amit: Equally obviously, we're doing that with partners and financial partners and technology partners, So where those partnerships evolve over time, most likely will we choose to reposition those banks in some way vis vis center charterbank entirely possible, but our focus right now is on getting the most value from those banks as we can given the super momentum that we generated over there.
Amit: Early lives.
Speaker Change: <unk> over to you for both questions.
Speaker Change: So entre on transactional services are I think market are terrific businesses hadn't built that's great.
Speaker Change: To them.
Speaker Change: On the underwriting.
Speaker Change: So this is let's let's let's go from the top on transactions to visit for a second because it is composed of different parts you singled out payments and liquidity, but look this is a business that lives with fundamental right now with fundamental net interest income the headwinds right. So that that is where one starts but within it the dynamics are quite different in the sense that.
Speaker Change: In security services security services have done extremely well this year, it's up 12% for the year.
Speaker Change: Our line of business in which we continue to invest because we have a really differentiated proposition that we offer our clients our financial institutional clients around the world to access our network and it's a great opportunity for us to foster those relationships with financial institutions and drive other business with them.
Speaker Change: <unk>, which has also been somewhat challenged the index gains partially from the net interest.
Speaker Change: Net interest income headwinds because it is a business that obviously benefits from lower from lower rates, but also partially from the dynamic.
Speaker Change: <unk>.
Speaker Change: A lot of our clients have gone for hard currency financings, sorry for local currency financings that away from hard currency financings in some cases, particularly in some very large geographies and therefore that that type of swing has an impact on our business.
Speaker Change: But it's a good business and its phenomenal source of cross selling a lot of the advantages from the business you do see it in our financial markets business will spend more time on with all of you when we have our CIB.
Speaker Change: They may be one of the important part that we really want to touch upon.
Speaker Change: Typically the payments liquidity fundamentally to needs and interest rates game and indeed, the headwinds there and the margins really end up being the two hour healthy it's going to be a source of.
Speaker Change: There are opportunities there for improvement as the interest rate cycle changes.
Speaker Change: Yes.
Speaker Change: Great. So I think I think we've run through the questions that just leads me to say thank you very much for this time and attention on what I know, it's a busy busy Friday morning, great.
Speaker Change: Great questions as always and thanks for your ongoing support through your coverage have a great weekend.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Thank you guys.
Okay.
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