Q2 2025 Standard Chartered PLC Earnings Call
Good morning and good afternoon, everyone, and Welcome to our 2025 interim results. Call, I'm joined here in London by Diego and as usual, we'll run through the presentation before taking your questions.
We've delivered a strong set of results in the second quarter of 2025. Despite the uncertainties in the period, our performance has demonstrated how much our clients value our services and our truly distinctive network.
Q2 income was up. 15% year-on-year, excluding notable items, driven by double-digit growth across global banking, Global markets, and wealth Solutions, and with record net, new money in our fellow, buisness this income growth, which generated a significant Improvement in rote is Testament to our ability to deliver exceptional services in support of our clients needs.
William Winters: With our strong capital position, we are announcing a further share buyback of $1.3 billion, which will start imminently. This takes our total distribution since full-year 2022 results to $6.5 billion, towards our target of at least $8 billion between 2024 and 2026. Diego De Giorgi will now take you through the performance in detail, and I will then come back to talk about how we are continuing to support clients and how we are creating opportunities across our business segments, after which Diego De Giorgi and I will take your questions. Diego De Giorgi, over to you.
And it is clear that our strategy is working.
Million dollars towards our Target of, at least 8 billion dollars between 2024 and 2026.
Diego will now take you through the performance and details, and I will then come back to talk about how we're continuing to support clients and how we're creating opportunities across our business segments.
After which, Diego and I will take your questions. So, Diego, over to you.
Diego De Giorgi: Thank you, Bill. Good morning and good afternoon, everyone. In my remarks today, I will be comparing the second quarter year-on-year on an underlying basis and speaking to constant currency unless otherwise stated. The group delivered an operating income of $5.5 billion, which was up 14%, or 15% excluding notable items. This reflects strong underlying performance of our businesses in CIB and WRB, further supported by the gain associated with the sold transaction in the quarter. Operating expenses were up 3%, and credit impairment was subdued again at $117 million, mainly due to net recoveries in CIB. As a result of the strong top line and lower impairment, profit before tax for the quarter was $2.4 billion, up 34%, with a return on tangible equity of 19.7%. Let's turn to each component in detail. On a quarter-on-quarter basis, NII was down 4%. While U.S.
Thank you Bill, good morning and good afternoon everyone. In my remarks today, I will be comparing the second quarter year on year on an underlying basis. And speaking to constant currency unless otherwise stated the group delivered, the operating income of 5.5 billion dollars, which was up 14% or 15%, excluding notable items.
This reflects strong underlying performance of our businesses in CIB and WB further supported by the gain associated with the sold transaction in the quarter.
Operating expenses were up 3% and credit impairment was subdued again at 117 million, mainly due to net. Recoveries in CIB.
as a result of the strong talk line and lower impairments profit before tax, for the quarter was 2.4 billion dollars up, 34%, with the return on tangible Equity of 19.7%,
Diego De Giorgi: dollar rates were stable in the quarter, there was a sharp drop in highbore as well as lower rates in Singapore and India. Given the pace and magnitude of moves in some of those rates, our ability to pass through to customers was somewhat limited. This margin pressure was partly offset by volume growth, where we saw a 2% increase in average interest earning assets. We have increased our structural hedge to $75 billion as at the end of the quarter, hitting our full-year target six months early. We will continue to increase the hedges in the second half, though at a reduced pace. You will see on page 28 that our currency-weighted average interest rate outlook for 2025 is now 110 basis points lower than 2024 and down 28 basis points since we last reported.
Now, let's turn to each component in detail. On a quarter on quarter basis, knee was down 4%.
While US dollar rates were stable in the quarter. There was a sharp drop in higher as well as lower rates in Singapore and India, given the pace and magnitude of moves in some of those rates, our ability to pass through to customers was somewhat Limited.
This margin pressure was partly offset by volume growth, where we saw a 2% increase in average interest-earning assets.
We have increased our structural hedge to $75 billion as of the end of the quarter, hitting our full-year target six months early. We will continue to increase the hedges in the second half, though at a reducing phase.
You will see on page 28 as our...
created average interest rate out.
Diego De Giorgi: Note that our outlook is based on forward rates, which imply a recovery in highbore later this year. As a result, we now expect our 2025 NII to be down by a low single-digit percentage year-on-year. Non-NII has continued its momentum in the second quarter, with 31% growth year-on-year, driven by the impressive performance in Global Markets and Wealth Solutions. Excluding the sold gain and notable items, non-NII was still up strongly at 22%. We previously guided that we expect total income in 2025 to be below the 5% to 7% CAGR we are targeting between 2023 and 2026. Given the strong performance year to date, we are upgrading our 2025 income growth guidance to be around the bottom of the 5% to 7% range at constant currency, excluding notable items. I will talk to the specific product drivers in the segment commentary shortly.
is now 110 basis points, lower than 2024 and down 28 basis points since we last reported
Note that our outlook is based on forward rates, which imply a recovery in hybrid later this year.
As a result. We now expect our 2025 knee to be down by a low single digit percentage year on year.
Non-Nye has continued its momentum in the second quarter with 31% growth year on year, driven by the impressive performance in global markets and Well Solutions.
Excluding the solved gain and notable items non knee was still up strongly at 22%.
We previously guided that we expect total income in 2025 to be.
Below the 527% kager, we are targeting between 2023 and 2026.
Given the strong performance here today, we are upgrading our 2025 income growth guidance to be around the bottom of the 5% to 7% range at constant currency, excluding notable items.
Diego De Giorgi: Now, turning to expenses, Q2 operating expenses were up 3% year-on-year, largely driven by business growth initiatives, partly offset by efficiency saves and PIT4Growth. The PIT4Growth program continues to progress well, and we have achieved $500 million of run-rate savings from actions in progress. This is in line with our plan, and we are pleased with how we continue to simplify, standardize, and digitize the bank. With regards to the cost to achieve or CPA, we noted in the recent past that it is hard to predict the phasing of spending as we are disciplined in our approach to execution. As a result, we are revising the phasing of the 2025 CTA to be between 35% to 45% versus previous guidance of around 50%. To be clear, we will spend the remainder of the CTA in 2026 with no spillover into 2027.
I will talk to the specific product drivers in the segment. Commentary shortly now turns to expenses.
Q2 operating expenses were up, 3% year on year, largely driven by business growth initiatives. Partly, offset by efficiency saves and fit for growth.
The fit for growth program continues to progress well and we have achieved 500 million dollars of run rate savings from actions in progress. This is in line with our plan and we are pleased with how we continue to simplify standardize and digitize the bank.
With regards to the cost to achieve or CTA, we noted in the recent past that it is hard to predict to the phasing of spending as we are disciplined in our approach to execution.
As a result, we are revising. The phasing of the 2025 CTA to be between 35 to 45% versus previous guidance of around 50%.
Diego De Giorgi: We remain confident that 2026 total expenses will be below $12.3 billion on a constant currency basis. We note that current FX forward rates would add around $100 million to the 2026 target. Credit impairment for the quarter was $117 million, significantly lower quarter-on-quarter. Our loan loss rate of 12 basis points in Q2 benefited from net recoveries in CIB, which we do not expect to continue to repeat consistently. We are therefore maintaining our guidance for the loan loss rates to normalize towards the historical through the cycle 30 to 35 basis points. WRB impairment came down in the quarter to $153 million as a result of reduced exposure in our unsecured portfolio in line with our plan, as well as a one-off recovery from the sale of non-performing loans in Korea.
To be clear, we will spend the remainder of the CTA in 2026 with no spill over into 2027.
We remain confident that 2026 total expenses will be below. 12.3 billion on a constant currency basis.
We note that current FX forward rates would add around $100 million to the 2026 party.
Credit impairment for the quarter was $117 million, significantly lower quarter on quarter. Our loan loss rate of 12 basis points in Q2 benefited from net recoveries in CIB, which we do not expect to.
We are therefore maintaining our guidance for the loan loss rates to normalize towards the historical through the cycle. 30 to 35 basis points.
Diego De Giorgi: Our overall credit portfolio remained resilient, and we are not seeing any new significant sign of stress emerging across the group. Underlying loans and advances to customers were up slightly quarter-on-quarter, and we continue to expect low single-digit percentage growth in underlying customer loans and advances for the year. Underlying customer deposits were up 4%, or $19 billion in the quarter. We attracted good net new money from affluent clients, whilst the growth in CIB was mainly from Transaction Services CAGR. Turning now to capital. Risk-weighted assets were up $6 billion in the quarter, with over half coming from FX impact. We saw $1.7 billion from asset growth and mix, and the $1.6 billion increase from asset quality was mainly due to a sovereign downgrade. These were partly offset by a $1 billion reduction in market risk RWA, as well as CIB optimization activities.
To 153 million as a result of reduced exposure in our unsecured portfolio, in line with our plan, as well as a 1-off recovery from the sale of non-performing loans.
In Korea.
Our overall credit portfolio remained resilient, and we are not seeing any new significant signs of stress emerging across the globe.
Under the line, loans and advances to customers were up slightly quarter on quarter, and we continue to expect low single-digit percentage growth in underlying customer loans and advances for the year.
And the underlying customer deposits were up 4%, or $19 billion, in the quarter.
we attracted good net new money from a few and clients whilst the growth in CIB was mainly from transaction Services casa
turning now, to Capitol,
Risk assets were up $6 billion in the quarter, with over half coming from effects impacts. We saw $1.7 billion from asset growth and mix, and the $1.6 billion increase from asset quality was mainly due to a sovereign downgrade.
Diego De Giorgi: We continue to guide to low single-digit percentage growth in RWA. We would highlight that our Basel 3.1 day one impact is expected to be close to neutral, and we do not expect the output floor to be a binding constraint. We delivered robust capital generation with our CET1 ratio of 14.3%, up 50 bps quarter-on-quarter. As William Winters said, we are announcing a new $1.3 billion share buyback to commence imminently. This will take our performance CET1 ratio to 13.8%. At $6.5 billion in distributions since our full-year 2023 result, we are well on track to achieve our guidance to exceed $8 billion of capital returns from 2024 to 2026. Our TNAB per share of $16.80 was up 16% year-on-year. Our earnings per share for the first half was up 41% year-on-year.
These were partly offset by a $1 billion reduction in market risk RWA, as well as CIB optimization activities.
We continue to guide to low single digit percentage growth in rwa. We would highlight that our Basel 3.1 day 1 impact is expected to be close to neutral. And we do not expect the output floor to be a binding constraint.
We deliver robust capital generation with our CET1 ratio of 14.3%.
50 basis points, quarter on quarter. As Bill said, we are announcing a new 1.3 billion share by back to commence imminently. This will take our performance C1 ratio to 13.8%
At 6.5 billion dollars in distributions. Since our full year 2023 results we are well on track to achieve our guidance to exceed 8 billion dollars of capital returns from 2024 to 2026
Diego De Giorgi: Both of these metrics demonstrate that our strong profit accretion is augmented by the reduction in our share count, which was down 9% year-on-year. Now, let's take a look at our business segments. CIB income for the quarter was $3.3 billion, up 9%. This was driven by exceptional performance in Global Markets, where income was up 47%. We saw increased demand for our services in our Asia footprint markets. Flow income was up 22% on the back of higher rates and FX income, and episodic income was driven by market-making activities from elevated volatility. While it is still early in the quarter, client flow momentum has continued from Q2. Global Banking income was up 12%, driven by an increase in corporate lending and higher origination volumes year-on-year.
Our earnings per share of $16.80 was up 16% year on year. Our earnings per share for the first half was up 41% year on year.
Both of these metrics. Demonstrated, our strong profit accretion is augmented by the reduction in our share count, which was done 9% year on year.
Now, let's take a look at our business segments.
CB income for the quarter was 3.3 billion dollars up 9%. This was driven by exceptional performance, in global markets, where income was up. 47%.
We saw increased demand for our services in our Asia footprint markets. Flow income was up 22% on the back of higher rates and affects income. And episodic income was driven by market making activities from elevated volatility.
While it is still early in the quarter, client flow momentum has continued from Q2.
Diego De Giorgi: Transaction Services income was down 8% year-on-year, driven by lower income in our payments and liquidity product line due to margin compression from lower interest rates. In Wealth and Retail Banking, Q2 income was up 4% to $2.1 billion, with another excellent quarter in Wealth Solutions, where income was up 20%. The growth in Wealth Solutions was broad-based across geographies and products. Investment product income was up 22%, with particularly good growth in structured products, thanks to our product innovation and open architecture approach. We also continue to see good momentum in bank assurance, with income up 14%. Our key performance indicators in affluent have continued their upward trajectory as we delivered a record net new money of $16 billion in Q2. This was skewed toward deposits as clients await investment opportunities.
Global banking income was up. 12% driven by an increase in Corporate Landing and higher origination volumes here on year.
Transaction. Services income was down 8% year on year, driven by lower income in our payments. And liquidity, product line due to margin compression from lower interest rates.
In Western retail banking. Q2 income was up 4% to 2.1, billion dollars with another excellent quarter in well Solutions, where income was up. 20%.
The growth in W Solutions was broad-based across geographies and products.
Investment products income was up 22%, with particularly good growth in Structured Products, thanks to our product innovation and open architecture approach. We also continue to see good momentum in Bank Assurance, with income up 14%.
Diego De Giorgi: We onboarded 64,000 new-to-bank affluent clients in the quarter, bringing the total clients onboarded to 135,000 year to date. We have also appeared over 150,000 clients across the continuum, resulting in a larger pool of affluent clients driving wealth activities. Lastly, within our venture segment, our income from mocks and trusts was up 48%, and they are showing strong operating leverage with expenses down 3% in Q2. This income growth was driven by product innovation and volume growth, with mocks and trusts growing their deposits by over 30% and 40% respectively. Our SC Ventures portfolio recorded a gain of $238 million from the sold India transaction. Following this transaction, SC Ventures will retain a non-controlling ownership interest in the acquiring end. We have provided more detail in the appendices on the accounting approach for our venture segment.
Our key performance indicators in Affluent have continued their upward trajectory as we deliver a record net new money of $16 billion in Q2. This was skewed toward deposits as clients await investment opportunities.
We onboarded 64,000 new to bank affluent clients in the quarter, bringing the total clients on board as to 135,000 year to date. We have also appeared over 150,000 clients across the Continuum resulting, in a larger pool of affluent, clients riding wealth activities.
Lastly, within our Venture segment our income from ox and Trust was up 48%.
And they are showing strong operating leverage with expenses down, 3% in Q2.
This income growth was driven by product innovation and volume growth, with Mocks and Thrust growing their deposits by over 30% and 40% respectively.
In the transaction.
following this transaction as he Ventures will retain a non-controlling ownership interest, in the acquiring entity,
Diego De Giorgi: To conclude, we are maintaining our income guidance of 5% to 7% CAGR in 2023 to 2026 at constant currency, excluding the impact of deposit insurance, and we continue to track towards the upper end of this range. Based on the strong performance year to date, we are upgrading our income growth guidance in 2025 to be around the bottom of the 5% to 7% range at constant currency, excluding notable items. Within this, NII is expected to be down by a low single-digit percentage year-on-year. The rest of our guidance remains unchanged. With that, I will hand back to William Winters. Thank you.
We have provided more detail in the appendices on the accounting approach for our Venture sector. So to conclude we are maintaining our income guidance of 5 to 7% cover in 2023 to 2026 at constant currency.
Excluding the impact of Deposit Insurance, we continue to track towards the upper end of this range.
Based on the strong performance here, today we are upgrading our income growth guidance for 2025 to be around the bottom of the 5% to 7% range at constant currency, excluding notable items.
Within this year, it is expected to be down by a low single-digit percentage year on year.
The rest of our guidance remains unchanged with that. I will hand back to Bill. Thank you.
William Winters: Thank you, Diego De Giorgi. At Q1, we told you that our network business, which represents around 60% of our CIB income, is highly diversified, resilient, and agile. While, of course, we monitor geopolitical developments, we remain focused on delivering our cross-border strategy in support of our clients' needs. Network income in the first half was up 4% year-on-year, or up 9%, excluding the impact of rates, which is in line with the longer-term trend we showed you at our recent CIB investor seminar. I would remind you that our network income is well diversified as we facilitate the flow of goods and services for our clients with income across Transaction Services, Global Markets, and Global Banking. With continuing shifts in supply chains, we saw a 17% increase in intra-Asian corridor income.
Thank you, Diego.
Now a a q1 we told you that our Network business which represents around 60% of our C income is highly Diversified resilient and agile.
Well, of course, we monitor geopolitical developments. We remain focused on delivering our cross-border strategy in support of our clients' needs.
Network income in the first half was up. 4%, year-on-year, or up 9%. Excluding the impact of rates.
Which is in line with the longer-term trend. We showed you at our recent CIB investor seminar
and I would remind you that our Network income is well Diversified as we facilitate the flow of goods and services for our clients, with income across transaction Services, Global markets, and global banking.
William Winters: This was driven by increased FX and commodity trading, as well as financing solution activities for our corporate clients. I want to provide a few examples of how we're helping our clients navigate the current environment. Among our corporate clients, we've seen increased demand for a range of services. For example, we back a Chinese electronics firm as their sole partner in India, and we recently helped them expand to set up a production facility in Vietnam, displacing an existing competitor relationship. At the same time, we're seeing more FX hedging from this client. Clients value our expertise and speed of execution, especially at times of increased volatility. Another recent example of where we help multinational corporate clients is the support we've given to a major U.S. technology company in hedging their FX risk, resulting in Asian FX volumes more than doubling for this client.
With continuing shifts, in Supply chains, we saw a 17% increase in intra-asian Corridor income.
This was driven by increased FX and commodity trading, as well as financing solution activities for our corporate clients.
I want to provide a few examples of how we're helping our clients navigate the current environment.
Among our corporate clients, we've seen increased demand for a range of services. For example,
We are back with a Chinese electronics firm as their sole partner in India, and we recently helped them expand to set up a production facility. In Vietnam, we are just placing an existing competitive relationship.
And at the same time, we're seeing more FX hedging from this client.
Clients value, our expertise and speed of execution, especially at times of increased volatility.
William Winters: We're also seeing progress across our financial institution client base, which you know is a key area of focus for us. We've won a number of mandates as our clients continue to diversify their relationships. We recently won an exclusive sub-custodian bank mandate from a major Chinese bank across eight markets, spanning Asia and Africa, and additional markets are expected to be implemented at a later stage. In Global Banking, origination volumes in the first half grew 30% year-on-year. The pipeline remains strong, and the business is in good shape. Though we remain watchful of the macro outlook, a lower interest rate environment could increase the demand for origination in the future. Our wealth and affluent engine has continued its strong momentum.
Another recent example of where we help multinational corporate clients is a support. We've given to a major US technology company in hedging, their FX risks resulting in azen, FX volumes more than doubling for this client.
We're also seeing progress across our financial institution client base, which you know, is a key area of focus for us.
We've won a number of mandates with our clients to continue diversifying their relationships. We recently secured an exclusive sub-custodian bank mandate from a major Chinese bank across eight markets in Asia and Africa, with additional markets expected to be implemented at a later stage.
In global banking, origination volumes in the first half grew 30% year-on-year.
The pipeline remains strong, and the business is in good shape.
Though we remain watchful of the macro outlook, a lower interest rate environment could increase the demand for origination in the future.
William Winters: Our franchise now ranks as the number three affluent wealth manager in Asia, and our affluent AUM has demonstrated impressive growth over the long term, with an 11% CAGR since 2016 and an AUM of $420 billion at the end of the first half of 2025. Our Wealth Solutions income grew strongly across asset classes, particularly in capital markets, driven in part by our success in structured products. Our product innovation and advisory capabilities, coupled with our open architecture platform, put us in a great position to capture market opportunities and cater to changing client preferences. Moreover, our success in generating strong net new money throughout the first half represents a very solid start against our ambition to deliver $200 billion of net new money from 2025 to 2029. Next, I want to take a moment to talk to you about our digital asset strategy.
Our wealth and excellent engine have continued. It's strong momentum.
Our franchise now ranks as the number 3 excellent wealth manager in Asia, and our impressive AUM has demonstrated strong growth over the long term, with an 11% CAGR since 2016 and AUM of $420 billion at the end of the first half of 2025. Our Wealth Solutions income grew strongly across asset classes, particularly in capital markets, driven in part by our success in Structured Products.
Our product innovation and advisory capabilities, coupled with our open architecture platform, put us in a great position to capture market opportunities and cater to changing client preferences.
Moreover, our success in generating strong net new money throughout the first half represents a very solid start against our ambition to deliver $200 billion of net new money from 2025 to 2029.
William Winters: We act as a conduit between clients and financial markets across all of the services we offer. Our clients increasingly expect digital asset solutions, and as such, we expect digital assets to be an important part of the future of financial services. We are at the forefront of innovation in the institutional adoption of digital assets, and we are well placed to offer services through our regulated platforms. In embracing this adoption, we are creating both services for clients and future revenue opportunities for the bank. We are acting as a bridge from traditional finance to digital assets for our clients. For example, we are seeing interest in the use of stablecoins by logistics operators to provide real-time payments for their customers and suppliers. This year, we supported China AMC in launching the first tokenized retail fund in Asia, providing asset servicing to both digital and real-world assets.
Next, I want to take a moment to talk to you about our digital asset strategy. We act as a conduit between clients and financial markets across all of the services we offer.
Our clients increasingly expect digital asset solutions. As such, we expect digital assets to be an important part of the future of financial services.
Worth of Forefront of innovation in the institutional adoption of digital assets and we are well placed to offer services through our regulated platforms.
In embracing this adoption, we're creating both services for clients and future revenue opportunities for the bank.
We are acting as a bridge from traditional Finance to digital assets for our clients.
For example, reversing interest in the use of stable coins by Logistics operators to provide real-time payments for their customers and suppliers.
And this year, we supported China AMC in launching the first tokenized retail fund in Asia.
William Winters: Importantly, we welcome the fact that regulators in our markets are taking a leading role in building digital asset infrastructure, and we are excited to be playing our part in this journey. A key example is a joint venture we recently announced with Animoca Brands and Hong Kong Telecom to apply for a license to issue a Hong Kong dollar-backed stablecoin. Once executed, this will make us the only Hong Kong notice-showing bank, which is also an issuer of the stablecoin. We are also creating future revenue opportunities. We are currently the only GSIP that is offering trading in deliverable spot Bitcoin and Ether, a service we launched just this month. We have also been granted a license in Luxembourg to offer digital asset custody services to EU clients. Our venture's portfolio further enhances and complements our digital asset offering.
Importantly, we welcome the fact that regulators in our markets are taking a leading role in building digital asset infrastructure. And we're excited to be playing our part in this journey.
A key example is a joint venture. We recently announced with animoka Brands and Hong Kong, Telecom to apply for a license to issue. A Hong Kong dollar back. Stable coin,
Once executed, this will make us the only Hong Kong non-issuing bank which is also an issuer of other stablecoins.
We're also creating future revenue opportunities. We're currently the only G that is offering trading in deliverable spot Bitcoin and Ether, a service we launched just this month.
We've also been granted a license in Luxembourg to offer digital asset custody services to EU clients.
William Winters: Zodiac Custody is now operating in eight markets across Asia, Europe, and the Middle East and has grown its assets under custody 10 times in the last 18 months. Zodiac Markets recently announced its Series A fundraising, with Circle investing in the company. Zodiac Markets' notional trading volume has almost tripled year-on-year, and based on our estimation, it has been responsible for over 20% of net minting of Circle's USDC stablecoin over the last 18 months. Turning to sustainable finance, our income for the first half was up 5% year-on-year, and we are very well on the way to achieve our target of at least $1 billion by 2025. We have seen broad-based growth across our products, and with $136 billion mobilized since the beginning of 2021, we are making good progress towards our commitment to mobilize $300 billion in sustainable finance by 2030.
Our Ventures portfolio further enhances and complements our digital asset offering.
Zodiac custody is now operating in 8 months, Asia Europe, and the Middle East and has grown its assets under custody 10 times in the last 18 months.
Zodiac markets, recently announced its series, a fundraising the circle investing in the company.
Sodium markets, notional, trading volume has almost tripled year on year and based on our estimation, it has been responsible for over 20% of net. Minting of circles usdc stablecoin over the last 18 months.
Turning to sustainable finance, our income for the first half was up 5% year on year, and we are very well on our way to achieve our target of at least $1 billion by 2025.
William Winters: Highlights in the first half of the year include our first-ever social bonds of 1 billion euros, the announcement of the first Indonesia Just Energy Transition Partnership solar project, and the closing of a landmark 2.5 billion pound carbon capture and storage transaction in the U.K. We are committed to our sustainable finance agenda, and we will be staying the course. To conclude, we have delivered a strong set of results in the first half of the year, and we are upgrading our full-year 2025 income growth guidance to be at the bottom of the 5% to 7% range. We are announcing a new share buyback of $1.3 billion today and are well on track to achieve our distribution target.
We've seen broad-based growth across our products, and with $136 billion mobilized since the beginning of 2021, we're making good progress towards our commitment to mobilize $100 billion in sustainable finance by 2030.
Highlights in the first half of the year include our first-ever social bond of €1 billion, the announcement of the first Indonesia Just Energy Transition partnership solar project, and the closing of a landmark £2.5 billion carbon capture and storage transaction in the UK.
We're committed to our sustainable finance agenda, and we will be staying the course.
So to conclude, we have delivered a strong set of results in the first half of the year, and we're upgrading our full-year 2025 income growth guidance to be at the bottom of the 5% to 7% range.
William Winters: We set ourselves clear and ambitious transformation goals that will continue to structurally improve our profitability and help us to deliver our strategy at a greater pace and scale, and I am encouraged by the progress we are making. We know that our clients truly value our service and our distinctive network, and the performance in this period of uncertainty really does demonstrate the important roles Standard Chartered plays for our customers. With that, I will hand over to the operator, and Diego De Giorgi and I can take your questions. Thank you.
We're announcing a new share buyback of 1.3 billion dollars today and are well on track to achieve our distribution targets.
We set ourselves clear and ambitious transformation goals that will continue to structurally improve our profitability and help us to deliver our strategy at a greater pace and scale. I'm encouraged by the progress we're making.
We know that our clients truly value our service and our distinctive network, and the performance during this period of uncertainty really demonstrates the important role the Gender Charter plays for our customers.
Operator: Thank you. Dear participants, as a quick reminder, if you wish to ask a question over the phone, please press star one, one on your telephone keypad. Alternatively, you can submit your questions via the webcast. We are going to take our first question, and it comes from the line of Aman Rakkar from Barclays. Your line is open. Please ask your question.
So with that, I'll hand over to the operator and Diego and I can take your questions. Thank you.
Thank you. Dear participants, as a quick reminder: If you wish to ask a question over the phone, please press *11 on your telephone keypad. Alternatively, you can submit your questions via the webcast.
And I will going to take our first question.
Aman Rakkar: Good morning, Bill. Good morning, Diego De Giorgi. I will ask around net interest income, please. Two-part question, if I may. Could you just lift the lid a little bit on the highbore assumption that is embedded in your guide? You talked about a kind of recovery in H2. If you could kind of help us there, that would be great. I was interested in the deposit performance in the quarter. It was really strong in WRB. Deposits were up 4% Q1Q. I am interested just around the sustainability of that deposit momentum, and it does not sound like that is kind of translating into your firm NII, a firm NII outlook. Are you expecting that to convert into AUM or something along those lines? The second question I had was just around your revenue guidance as well.
And it comes to the line of Amun Ra from Bless. Your line is open; please ask your question.
Good morning Bill. Good morning, Diego. Um, yes I will ask uh,
Around interesting companies. Um,
To part question. If I may
Um, I could you just lift the lid a little bit on the higher assumption that's embedded in your your guide. You talked about a kind of
Recovery in H2. Um, so if you could kind of help us there, that'd be great. Um,
and I was interested in the deposit performance in the quarter as a really strong in
WRB deposits at 4% Q on Q. Um,
Interested just around the sustainability of that. Um, deposit momentum.
And it doesn't sound like that's kind of translating into your firmer, nii, you know, a firm knee Outlook. So are you expecting that to convert into a more or something along those lines? Um,
Aman Rakkar: Just at face value, the revenue guide probably implies a kind of low single-digit revenue build into 2026 year-on-year. Obviously, that is just taking your guidance at face value. There are a number of moving parts there, but I guess markets are going to be strong this year. I am not sure what episodic revenues are going to be like next year. How do you think about the jaws? You are obviously committed to positive jaws next year, but if revenue comes in weaker, if it comes in flat, can you talk to the cost levers that you have at your disposal to ensure that you do positive jaws? Could we expect a kind of absolute reduction in costs, for example? Thank you so much.
The second question I had was just around your your Revenue guidance as well. So just at face value. The the revenue guide probably implies a kind of low single digit.
Revenue build into 2026 year on year.
Um,
Obviously, that's just taking your guidance at face value. The number of moving parts there, but I guess.
You know, the market is going to be strong this year. I'm not sure what episodic revenues are going to be like next year. So
How do you think about the Jaws? You're obviously committed to positive Jewels next year, but if Revenue comes in,
Week after it comes in flat.
Can you talk to the the cost levers that you have at your disposal to ensure that you do positive? Jaws can we expect to kind of absolute reduction in costs?
William Winters: Let me start off. First of all, thanks for the questions, and good morning, good afternoon, everybody, and thanks for taking some time with us on such a busy day. I will go straight to Diego De Giorgi on the NII questions, but maybe just broadly on guidance and income. Income growth has been strong. The momentum has carried through into July, so we are encouraged that this environment plays well to our strengths. The underlying trends supporting our business are very strong, and I think our execution against that underlying market strength has been good. Overall, we feel the momentum is good. What will the external environment throw at us in the second half of the year? We do not know.
For example, thank you so much.
Well, let me start off. I'm on, first of all, thanks for the questions and good morning. Good afternoon, everybody and thanks for, for, uh, taking some time with us on such a busy day. Uh,
William Winters: I think we, as always, have tried to be somewhat prudent in terms of guidance, but I can assure you that as we sit here today, the underlying drivers of our income, which are a strategic transformation over years, combined with a really attractive external environment at the moment, which looks like it is set to continue for some time as uncertainty shifts into a different zone rather than goes away, all feels pretty good. Of course, we have reiterated our overall expense cap guidance, and that is exactly where we expect to be. There is no real change on cost guidance independent of the external environment. Diego De Giorgi, you will have thoughts on the NII question, and no doubt the revenue and cost as well.
I'll go straight to Diego on the knee questions, but let me just broadly on on guidance. Uh, and and income income growth has been strong. Uh, the momentum has carried through into, uh, into July. Uh, so we're encouraged that this environment plays well to our strengths. Uh, the underlying Trends supporting our business are very strong. Uh, and I think our execution against that underlying Market strength has been good. So overall, we feel the momentum is good now. What what will the external environment throw at us in the second half of the year? We don't know. And, uh, so I think we, as always, we, we tried to be, uh, some prudent in terms of guidance, but I, I can assure you that the, the as we sit here today, the, uh, the, the underlying drivers of our income, which are, you know, a strategic transformation over over years. Combined with a really attractive external environment at the moment, which looks like it's set to continue for some time as uncertainty, uh, I'll say shifts into a different Zone rather than than than goes away. I'll feels all feels pretty good. Uh, and of course we, we've
Reiterated our overall expense cap guidance and that's, you know, exactly where we where we expect to be so uh, no real change on on cost guidance. Uh,
Diego De Giorgi: Absolutely. I will help Aman Rakkar lift the lid. Let us lift the lid. One month, HIBOR has moved by about 200 bps between Q1 and Q2. It averaged just short of four in the first quarter, just short of two in the second. If you look at the, as always, we make no predictions about where interest rates go. We use the forward. If you look at the forward, they are very steep, and they imply that we are going to be 100 bps higher than today for both first one month and three month HIBOR between now and the end of the year. That is what we are basing our comments on. What I think is particularly important is that even if HIBOR stays at the current levels, we are completely confident in our current guidance for net interest income.
Diego De Giorgi: Our net interest income guidance holds comfortably even if HIBOR does not change, and everything tells us that HIBOR will change. You will have seen a six, I think, six intervention by DHKMA overnight, smaller than the previous five. The aggregate balance is being reduced substantially, and we all know that once the aggregate balance declines a little bit more from today, a few tens of billions more from today, from what it is today, a convexity effect gets into operation, and any change in HIBOR rates then gets magnified and gets accelerated. We are in a good place from that point of view, and we will see where that goes. We are also confident in our outlook for 2026. I do not think we should see anything negative in how we think about 2026.
Independent of the, of the external environment. But but Diego, you'll have thoughts on the knee question and no doubt the revenue and cost as well. Absolutely, I'll help Amin lift the lid. Uh, so let's let's lift the lid. Um 1 month, High bar um has moved by about 200 basis points between quarter 1 and quarter 2 is averaged just short of 4 in the first quarter, just short of 2 in uh the um, in the second. Now, if you look at the as always, we make no predictions about where interest rates, go we use the forward. If you look at the forward, they're very Steep and they imply that we're going to be 100 bits higher than today. Uh for both first 1 month and 3 month high, or between now and the end of the year. That's what we are basing. Our comments on. Now, what I think is particularly important is that even if hyber States, at the current levels, we are completely confident in our current guidance for net interest income. So,
Our net interest income guidance holds comfortably even if hyber does not change and everything tells us that hyber will change, you will have seen a 6 6. I think 6060 interval by the hkma overnight smaller than the previous 5. The aggregate balance is being reduced substantially. And we all know that once the aggregate balance declines a little bit more from today, a few tens of billions more from today.
Diego De Giorgi: If there is one thing I would point you to, I would point you to page 28 and our currency-weighted forward curve again. You can see the 2026 one, and if you look at the heavy headwinds that we are suffering in 2025, you see that in 2026, the situation ameliorates substantially. Do not read anything particularly negative. We are confident. We love our business model, and we will continue executing at pace.
From what it is today, um, and a convexity effect to get into into operation and any change in hybrid REITs, then gets magnified and gets accelerated. So, we are in a good place from that point of view. Uh, and, uh, we'll see. We'll see where that goes. Um, we are, um, uh, we are also confident in our, in our outlook for 2026. I don't think you should see anything negative in how we think about 2026. If there is 1 thing, I would point you to is, I would would point you to page 28, and our currency weighted forward curves. Again, you can see the 2026 1. And if you look at the, uh, heavy headwinds, that we are suffering in 2025, you see that in 2026, the situation, ameliorates substantially. So don't read anything in particularly negative. We are confident we love our business model and we will continue executing that space.
William Winters: Is there just around the deposit performance in the quarter then in W?
Diego De Giorgi: Oh, I'm sorry. I skipped that. Deposit performance in the quarter, particularly strong. A couple of things that work there, and by the way, one of the things, particularly the growth of CASA in Hong Kong that led to a little bit of softness in the net interest income line, it has been particularly good. It has been particularly good among other reasons because we have been truly acting as a haven for our Wealth Management customers in terms of putting money with us in what was a very, very uncertain environment. We take it as a very positive factor. It is not always that uncertain times lead to a growth in deposits, and therefore, that is positive. How sustainable it is at these levels, at this type of rate of growth, we can have a debate.
Next, is there a to to just around the deposit performance in the course of then in W? Okay, so sorry I I I, I, I skipped that. Um, so the positive performance in the quarter, particularly strong, a couple of things that work there. And by the way, 1 of the 1 of the things that particularly the growth of Kaza in Hong Kong uh that led to a little bit of softness in the net interest income, um, line. Um, it's been, it's been particularly good. It's been particularly good among other reasons, uh, because we have been
Diego De Giorgi: I think that your comment, if I remember well what you said, that it is actually probably more of a first step towards this being invested in assets under management and becoming part of our Wealth Solutions is exactly the way to think about it. We attracted more deposits than normal because our clients were putting money, but not putting money yet at work fully, and they will put money at work as the more extreme outcomes do not take place and as uncertainty continues to dissipate. Thank you, Aman Rakkar.
William Winters: Thank you.
Ed more deposits than normal because people because our our clients were uh putting money but not putting money yet at work fully and they will put money at work as the more extreme outcomes. Don't uh take place and as uncertainty continues to dissipate
Diego De Giorgi: Next question, operator.
Thank you, man. Thank you.
Operator: Yes, of course. Now we're going to take our next question, and it comes to the line of Andrew Coombs from Citi. Your line is open. Please ask your question.
Next question, operator yes, of course. Now we're going to take our next question.
Aman Rakkar: Morning. Perhaps I can follow up on the last question first and then ask a fresh one. If we look at the Wealth Solutions business and the net new money flow, there is a disproportionate amount in deposits. I think 12.5 of the 15.5 billion this quarter. I know previously your thought process was actually you would see more people shifting to wealth products as rates come down. You are not obviously seeing that at the moment. So, when do you think you might start seeing that shift toward more of a fee income stream and away from the NII reliance that you currently have on those affluent clients given the deposit balances? The second question, just on the episodic revenues in the markets business.
And it comes to learn of Andrew Crumps from City. Your line is open; please ask your question.
Uh, morning per second. I can follow up on the last question first, and, and then ask a fresh 1. So if we look at the world Solutions business and the net new money flow, um, there's a disproportionate amount in the deposit. So I think 12 and a half and the 15er, I know previously, you thought your thought process was actually due to more people shifting to wealth products, uh, as rent come down, you're not obviously doing that at the moment. So, when do you think you might start seeing that shift? Uh, towards more of a fee, income stream, and what, in a way from the knee, Reliance that you currently have on those aberrant clients, uh, given the deposit balances.
Aman Rakkar: I know we always have this debate around what is episodic versus what is flow. You have clearly been a beneficiary of the higher volatility. You are running around 400 million of episodic revenues per quarter now, which has doubled the historic run rate. How sustainable do you think that is, I guess?
William Winters: Great, Andrew. Thanks for both questions. Diego De Giorgi addressed a lot of questions. Let me add just a little bit of color on that as well. When we have a surge of new clients and new money, we obviously have an initial inflow into deposits. We are absolutely seeing our clients, as they age, migrating from deposits into Wealth Solutions. I think this is a case where our position as an open architecture provider of super high-quality managed product is definitely accruing benefits to us. Obviously, we see that coming through in our Wealth Solutions line as well. There is nothing about the recent surge in deposits that, to us, is anything other than a positive. These are clients that are signing up with Standard Chartered PLC.
Um, and then the second question is just on the episodic revenues in the markets business. I know we always have this debate around what type is solak versus what's flow. You've clearly been a beneficiary of the higher volatility. You're running around $400 million of episodic revenues per quarter now, which is double the historic run rate. Um, how sustainable do you think that is, I guess?
William Winters: They are putting money into the account with a full expectation, ours and theirs, that they will deploy that into a range of products over time. We see this as an unambiguous positive without really any reservations at all. On the episodic versus flow question, of course, you are right. We have had an extremely uncertain time with a lot of market volatility, although interestingly within a relatively narrow range, right? Nevertheless, extraordinary volatility and a lot of uncertainty in the minds of our clients. They have turned to us in increasing proportions to execute their risk management transactions with Standard Chartered PLC.
Great Andrew, thanks for both questions. I'll digress to 1 question. Let me add just a little bit of color on that as well. Uh, so we have a, when we have a surge of of of new clients and new money, we obviously have an initial inflow into deposits. We are absolutely seeing our, our call, our clients, as they age, migrating from from deposits into wealth Solutions. I think this, this is a case where our position as as an open architecture provider of of super high quality. Uh managed products is definitely a growing benefits to us and obviously we see that coming through in our in our world Solutions line, as well. So there's nothing about the, the, uh, the recent surge in deposits that to us is anything other than a positive. These are clients that are signing up with the center Charter. They're putting money into the account, with the full application, ours and theirs, that they will deploy that into a range of products over time. So, uh, we see this as an ambiguous positive, uh, Without Really any reservations at all, uh, on the episodic versus versus flow question.
Of course, you're right. We've had an extremely uncertain time with a lot of market volatility, although interestingly, within a relatively narrow range, right? Uh, and
William Winters: I think it reflects the set of capabilities that we have built over a period of time and the fact that we have been adding significant numbers of new clients, in particular in the West, who are themselves very focused on how their own supply chains and manufacturing bases and distribution channels are changing, hence turning to us. Is it sustainable? I mean, you will have to tell me how long the politically induced volatility that we have seen over the past year or so is likely to persist. It feels like it is here to stay, although the nature of that volatility is changing all the time. We are also pretty clearly going through different types of paradigm shifts in the way that globalization plays itself out. I know we love to say that globalization is dying.
Nevertheless extraordinary volatility, and a lot of uncertainty in the minds of our clients, uh, they have turned to us in increasing, uh, proportions to execute the risk management transactions with Senator Charter. I think it reflects the the set of capabilities that we built over a period of time. Uh and the fact that we've been adding significant numbers of new clients in particular in the west uh who are themselves very focused on how their own Supply chains and Manufacturing bases and distribution channels are changing and turning to us. So is it sustainable? Well,
I mean, you'll have to tell me how long the politically induced volatility that we've seen over the past...
William Winters: We do not say it, but people say that globalization is dying or going backwards. We couldn't feel more strongly that the opposite is the case. Globalization is very much alive and well. It is just taking a very, very different complexion. That shift is a long-term shift, and that long-term shift will have our clients increasingly diversifying their supply chains, their manufacturing chains, their distribution chains from currencies with which they are familiar to, in many cases, markets and currencies with which they are less familiar. They happen to be our home markets. We have typically a higher market share in the destination markets for new investment than we have at the outset. This is very good for our FM business. It is very good for our financing business. It is very good for our global banking business. Hence, the very strong result independent of the day-to-day market volatility.
Year, or so, is likely to persist? Feels like it's here to stay. Although the nature of that volatility is changing all the time. Uh, we're also pretty clearly going through, uh, different types of Paradigm shifts. Uh, and the way, the globalization plays itself out and I, I know, we, we love to say that globalization, is that we don't say it, but people say that globalization is a dying. You're going backwards. We couldn't feel more strongly that the opposite is the case. Globalization is very much alive and well, it's just taking a very, very different complexion that shift, is a long-term shift and that long-term shift will have our clients, increasingly diversifying, their supply chains and Manufacturing chains that their distribution chains, uh, from currencies with which they're familiar.
William Winters: Is it sustainable at this pace? We will see. Is there a good, strong underlying level of support for ongoing growth? Yes.
Diego De Giorgi: will add just one very quick thing on the Wealth Solutions, net new money part of the question on the deposits. We have attracted something like 135,000 new-to-bank clients during the first half. William Winters has given you the strategic view. I will give you just the immediate tactical answer to your question. You said uncertainty versus interest rate. This quarter, uncertainty definitely was trumping interest rates in terms of our client mindshare. That is not the long-term history of this business, undoubtedly.
2 in many cases markets and currencies with which they're less familiar. Uh, they happen to be our home markets. Uh so we have a typically, a higher market share in the destination markets for new investment. Then we have, uh, at the outset, this is very good for our FM business. It's very good for our financing business. It's very good for our global banking business. Hence, the very strong result independent of the, the day-to-day Market volatility. So, is it sustainable at this pace? I, we'll see. Uh, is there a good strong underlying level of support for ongoing growth? Yes.
The first half bill is giving you the strategic view. I'll give you just the immediate tactical answer to your question. You said, uh, uncertainty versus interest rate. This quarter, uncertainty definitely was trumping interest rates.
William Winters: Good. Let's take the next question, please.
In terms of our client mind share, that is not the long-term history of this business, and that,
Operator: Thank you. Now we will proceed with the next question, and it comes from the line of Perlie Mong from Bank of America. Your line is open. Please ask your question.
Good. The second question, please.
Thank you.
Aman Rakkar: Hello. Thank you for taking my question. A couple. I guess the first one is continuing on the wealth part. On wealth margins, I do not know how much you talk about this, but wealth AUM is up in the quarter, but investment products income is not up very much, and it looks to be down a little on a constant currency basis. I think previously you talked about some money moving from custody assets into wealth AUM, and you would expect some of the margin to maybe come through later on. Is that still the expectation? I guess last quarter, the volatility was high and lots of market activities going on. When do you expect the shift from maybe more defensive products into more sort of higher margin products to come through? That is number one.
Now, proceed with the next question, and it comes from the line of Pearl. Monk from Bank of America. Your line is open; please ask your question.
Aman Rakkar: The number two question is on stablecoins and digital assets that you have talked about. This is quite a new topic for all of us. You have talked about your joint venture with Animoca and another Chinese telecom company. The stablecoin licensing appears to be a little bit later than expected now in 2026. I think maybe market expectations may be end of this year, and it looks like Hong Kong dollar and U.S. dollar is more likely to go ahead first versus CNH. What is your expectation, and how big do you think the opportunity is, and what will be the most impactful for you in terms of benefits, and what would you like to see in the REC framework? Or is it too early to comment?
Hello. Thank you for taking my question, a couple. I guess. What? First 1 is, um, uh, continue on the wealth part. Um, so on wealth margins, I don't know how close how much you talk about this, but, um, wealth AUM is coping with water. But an investment products income is not up very much. And looks to be down a little on a constant currency basis. Um, so I, I think, previously, you talked about, you know, some money moving from the custody assets into welfare, um, and you would expect some of the margin to to maybe come through later on. Um, is that still the expectation and I guess last quarter, the volatility was high and lots of Market activities going on. So um, when do you expect to shift to from maybe more defensive products into into more sort of higher margin products to to come through? So that's number 1. And I guess the number 2 question is on stable coins and is your assets that you've talked about. Um so this is quite a new topic.
For, for all of us. Um, so you've talked about your, uh, your um, joint venture with animoka and, um,
William Winters: Perfect. Thanks for the questions. I think Diego De Giorgi and I are going to ping-pong on the wealth management question, so it is his turn. I will leave that to him. Just talk a little bit about stablecoins, maybe broaden it out at the outset to talk about digital assets and DLT technology as a mechanism of exchange and as a mechanism of settlement in financial markets, both for payments and for the settlement of securities and other things. The bet that we made that started six, seven years ago was that eventually there would be a substantial increase in the nature of digital payments and digital settlement on blockchains. The initial manifestation of that was in cryptocurrencies. There has been tremendous growth, obviously, in the cryptocurrency world, largely around Bitcoin and Ether, but also around other coins. We early on invested in that technology.
And, uh, another Chinese telecom company. Um, so the stablecoin licensing appears to be a little bit later than expected now in 2026. I think maybe market expectations, maybe end of this year. And it looks like the Hong Kong dollar and US dollar are more likely to go ahead first versus um, CNH. Um, what's your expectation? And how big do you think the opportunity is? And what will be the most impactful for you in terms of um, benefits? And what would you like to see in the regulatory framework? Or is it too early to comment?
Okay. Perfect thanks. Thanks for the questions. I think Diego and I are going to ping pong on, on the wealth management question. So it's his turn. Uh, so I'll leave, I'll leave that to him. Uh, just talk a little bit about civil coins but maybe broaden it out, uh, at the outset to talk about digital assets and, and, and DLT technology, uh, as a as a mechanism of exchange and as a mechanism of settlement uh in financial markets, both for payments. And and for uh and for the settlement of Securities and other things, like the bet that we made it started, you know, 6, 7 years ago uh was that eventually uh there'd be a substantial increase in the nature of
William Winters: We set up a couple of ventures, Zodiac Markets, Zodiac Custody, which is an exchange marketplace and an institutional-grade custodian, which gave us the opportunity to develop this technology at the leading edge of any institutional provider of these products. These are very well-established ventures doing very well, generating significant interest from institutional customers. As we think about how this blockchain and digital settlement morphs from the cryptocurrency world, which is the bulk of the activity today, into the traditional finance world, we continue to believe, in fact, we believe more strongly than we ever have, that this is an inexorable direction of travel. That both presents an opportunity, a set of opportunities for us, also presents some risk.
Of digital payments, uh, and digital settlement on blockchains. And the the initial manifestation of that was in cryptocurrencies uh the subsequent manifestation and and there's been tremendous growth, obviously in the cryptocurrency world largely around Bitcoin ether. But but also uh around other coins. So we early on invested in that technology. Uh, we set up a couple of Ventures, Zodiac Zodiac custody where, which is an exchange Marketplace and and, and an Institutional grade custodian which gave us the opportunity to develop this technology, uh, at the the Leading Edge of any institutional provider of these products. These are very well established Ventures doing very well uh generating significant interest from institutional customers. Uh, and as we think about how the this blockchain and and digital settlement morphs from the the cryptocurrency world, which is the bulk of the activity today, into the traditional Finance world, we continue to believe. In fact, we believe more strongly than we ever have that. This is an
William Winters: We are ready for a set of payment systems, whether they are domestic or cross-border, that are using stablecoins or tokenized deposits or central bank digital currencies or anything else in digital form. We are ready to provide those services to our clients. In fact, we are providing those services to our clients today, albeit in relatively small scale, both compared to our traditional payments and settlement business, but also relative to the cryptocurrency world today. It is going to happen. We are going to be at the cutting edge of that. We are going to take significant market share by virtue of being at the cutting edge, and we are going to defend the market share that we have got, and we are going to retain our clients.
Extra direction of travel. Uh, so that both presents an opportunity or a set of opportunities for us. Also, presents some risks. Uh, so we are ready for the, for a set of payment systems, whether they're domestic or cross border, uh, that are using stable coins, or tokenized deposits, or Central Bank, digital currencies, or anything else in digital form, we are ready to provide those services to our clients. In fact, we'll provide those services to our clients today. Albeit in relatively small scale both compared to our traditional
William Winters: Our clients are going to come to us because they know when they go to Standard Chartered PLC, they can access any market, any product, any service, any payment mechanism, any settlement mechanism through our portals, whether those portals are technical portals or our relationship managers. That is our game. The reason that we set out the detail in the deck that you are referring to and some of the, obviously, the more public pilots that we have got going in Hong Kong and elsewhere is that we wanted you to understand the range of activities that we are investing in today, not because they are generating huge profits today, although arguably they are generating significant value, but rather because we want to make it clear just how well positioned we are for the future of finance. That is our job. Thankfully, our clients see that.
Payments and settlement business, but also relative to the cryptocurrency world today. But you know what, it's going to happen. Uh, we're going to be at The Cutting Edge of that. Uh, we're going to take significant market, share by virtue of being at The Cutting Edge. Uh, and we're going to defend the the market share that we've got. And we're going to retain our clients and our clients are going to come to us. Because they know when they go to Standard Chartered, they can access any Market, any product, any service, any payment mechanism, any settlement mechanism?
The more public Pilots that we've got going in Hong Kong and elsewhere. So we wanted you to understand, uh, what the the range of activities that we're investing in today, not because they're generating huge profits today.
William Winters: Our clients invest heavily with us to understand how they should be adapting and adopting, and regulators are dealing with us directly. I think we have significant influence over the regulatory agenda. Of course, we never get a chance to dictate terms, but we are able to inform, educate, and explore together as we do in Hong Kong. I must say we are extremely happy with that level of engagement. That would be a little bit longer.
Although arguably they're generating significant value. Uh, but rather because we want to make it clear just how well positioned we are for the future of finance that that that's our job. Thankfully, our clients see that. So our clients invest heavily with us to understand how they should be adapting and adopting and uh and and Regulators are dealing with us directly. I think we have, you know, significant influence over the regulatory agenda. Of course, we never get a chance to dictate terms.
Aman Rakkar: To when that might become something tangible in the P&L?
But we are able to, to inform educate, and explore together as we do in Hong Kong. And I must say, we're extremely happy with that level of Engagement. Uh, so that that a little bit longer to when that might
William Winters: Yeah, Tuesday. I cannot be more precise than that. There is defense and there is offense. The defense is, are we going to find ourselves waking up one day and find that some fintech or some very large payment platform or some other bank has taken a big chunk of share from us in our cash management business or in our Financial Markets Products business? No, we are not going to find that. I guarantee you we are not going to find that because we will be there at the same time. The offense is, can we execute our current business much cheaper, safer than we can today? So, generating a higher return on tangible equity, that is going to take some time to play out, but is going to play out.
P&L, yeah, Tuesday. But I can't get, I can't be more precise than that.
There's defense and there's offense. So, the defense is...
uh,
are we going to find ourselves waking up 1 day and find that that some fintech uh or some, you know, very large payment platform or some other bank has taken a big chunk of share from us in our cash management business or in our, our financial markets business. No, we're not going to find that. Uh, I guarantee you, we're not going to find that because we'll be there at the same time. Uh, the offense is, uh, can we execute our current business, much cheaper safer than we can today. So generating a higher return on tangible equity,
William Winters: Can we take market share from people who were pooh-poohing digital assets as recently as last Tuesday, who suddenly are becoming very positive and talking a lot about it, but arguably do not know what they are talking about? Yeah, we are going to take market share from those people, and I am going to enjoy it at the time, wherever I happen to be.
Diego De Giorgi: Wealth management?
That's going to take some time to play out, but is going to play out. Uh, can we take market share from from people who were poo, pooing digital assets, as recently as last Tuesday? Who, you know, suddenly they're becoming very positive and talking a lot about it, but arguably don't know what they're talking about. Uh, yeah, we're going to take market share from those people and I'm going to enjoy it at the time wherever I happen to be.
William Winters: Over to you, Diego.
Diego De Giorgi: Wealth management, wealth management, much more prosaic and less exciting than the future of digital assets. Wealth management margins, yes, you are right, slightly depressed this quarter, but we have very, very clearly flagged it in the previous one because we had, you will remember, a conversion from a number of clients from assets under custody to assets under management, and it was a very meaningful amount in the tens of billions of dollars. The ripple effect of the reduction in the return on assets caused by the fact that those amounts of money take some time to be put to work through the system will continue for a little bit.
West management.
Diego De Giorgi: I also have to say we try to refrain from guiding too much and spending too much time on things like this type of margin on a quarterly basis because you have to imagine there are things like client flows, market moves, composition of mix, and the bane of all simple comparisons, forex effects. In all of this, it is a little bit difficult to be that precise, but it will continue to improve because that is the direction of travel. On the shift in products, which was the second part of your question, definitely they were defensive during this quarter, particularly in April, as you can imagine. We have seen the beginning of that shift.
Over to you, Diego wealth management, wealth management much, more prosaic and less exciting than the future of digital assets, wealth management, margins. Yes, you're right. Um, it's like the price that this quarter, but we had very, very clearly flagged. It in the previous 1 because we had, you will remember a conversion from a number of clients from assets under custody to assets under management. And it was a very meaningful amount in the tens of billions of dollars, so that the ripple effect of the reduction in the return on assets. Uh, caused by the fact that those amounts of money, takes some time to be put to work through the system, um, will continue for a little bit. I also have to say, we try to refrain from Guiding too much and spending too much time on things like the M. This type of margin on a quarterly basis because you have to imagine, there are things like client flows, Market, moves, uh, composition of mix. Um, and the bane of all simple comparisons, Forex effects.
So in in, in all of this, it's a little bit difficult to be that precise.
Diego De Giorgi: It will undoubtedly continue because that kind of an amount of inflow, which I remind you is a record inflow of net new money in one of the most difficult quarters in recent memory, will definitely turn itself into higher Wealth Solution sales going forward.
William Winters: Great. Next question, please.
Um, but it will continue to improve because that is the direction of travel on the shift in products, which was the second part of your question. Uh, definitely. They were defensive during this quarter. Particularly in April, as you can imagine we've seen uh, we've seen at the beginning of the shift, it will undoubtedly continue because that kind of of an amount of inflow which I remind you is a record, inflow of net new money in 1 of the most difficult quarters in recent memory. Um, will definitely turn itself into higher well, solution sales going forward.
Operator: Thank you. Dear participant, as a reminder, if you wish to ask a question over the webcast, please use the Q&A box available on the webcast link at any time. Now we will proceed with the next question on the phone. The question comes to the line of Joseph Dickerson from Jefferies. Your line is open. Please ask your question.
Great next question, please.
Thank you.
Dear participants. As a reminder, if you wish to ask a question over the webcast, please use the Q&A Box available on the webcast Link at any time.
And now, I will proceed with the next question on the phone.
Aman Rakkar: Hi. Thank you for taking my question. I guess on the SC Ventures, you are clearly starting to monetize out of that business, and given the stake that you will retain in the new entity, you know you are going to get something like, I don't know, $24 million of pre-tax ongoing from that. Do you see monetization out of SC Ventures as a tailwind now on a quarter-by-quarter basis, or is this something that is more of a one-off? I guess on the capital distribution, you have guided to exceed $8 billion. I am sure you will tell me that the key emphasis is on exceed, but you have done $6.5 billion of distribution since 2023. I guess, is there any reason why you are being ultra-conservative on that front, or is it just emphasis on exceed many things?
And uh, the question comes to land of Joseph Dickerson from Jeffrey, your line is open. Please ask your question.
Hi, thank you for taking my question. Um, I guess on the um, SC Ventures, you're clearly starting to monetize, um, out of that business and uh, given the uh, stake that you'll retain. Um and um,
William Winters: Yeah, emphasis on exceed. Diego will say that in a much more elaborate way. The SC Ventures, we have been doing this for a little over five years, right? We said at the outset that we would be investing in a number of things where we thought we had a competitive advantage in terms of the investment. In some cases, those were minority investments in fintechs, where our competitive advantage came from the fact that we were using those fintechs for some product or service. I must say that that investment portfolio has worked out quite well. We feel we are a very advantaged investor in those very particular cases.
The new entity, you know, you're going to get something like, I don't know, 24 million, a pre-tax ongoing, uh, from that. I mean, do you see, um, monetization out of SC Ventures as a as a Tailwind? Now on a, you know, quarter by quarter basis or is this uh, something that's more of a 1-off. Um, and then I guess on the capital, uh distribution, um, you've got to exceed 8 billion. I'm sure you'll tell me that the key emphasis is on exceed, but you've done 6 and a half billion of distribution since n23. I guess what, you know, is there any reason why why you're being ultra-conservative on that front? Or is it just emphasis on exceed many things?
William Winters: In terms of the ventures that we built, starting with our two digital banks, Mocks and Trust, but also including Solve, which obviously we have now merged into JumboTail, the Zodiac Markets and Zodiac Custody, which are the digital asset ventures that we set up, and many others that we have created. Those are the most notable, both in terms of visibility, but also invested capital. We said from the beginning that we would invest in things where we had an advantage and where we could imagine there would be a strong strategic connection to our business. In some cases, the digital banks, that strong connection is very clear. We see those digital banks as pretty core to our strategy.
We've been doing this for uh, for a little over 5 years, right? And uh, we said at the outset that that we would uh be investing in a number of things uh that we where we thought we had a competitive advantage in terms of the investment. Now, in some cases, those were minority investments in, in fintechs, uh, where our competitive Advantage came from. The fact that we were, we were using those Syntax for some product or service. And I must say that that Investment Portfolio has worked out quite well. We feel, we're, very advantaged investor in in those very particular cases. Uh, but in terms of the ventures that we built, uh, starting with, with our 2, digital Banks mocks and Trust. Uh, and but but also, including solve, which, which, obviously we, we've now merged into jumbo tail. Uh, uh, the, the Zodiac markets and zodiac custody, which is the digital asset Ventures that we set up and you know many others that we've created those are those are the the the most notable but both in terms of of that visibility but also invested Capital uh
William Winters: Obviously, it will be up to us to figure out how to exploit the maximum value from those digital banks, but they are at the heart of what we do as a bank. Zodiac Markets and Zodiac Custody, the digital asset ventures, seemed like they could be strategic at the outset, but we were not 100% sure. We did not totally understand how digital assets would develop and whether what we were building were going to be perfect for the future world. As it turns out, they are highly relevant. We see those as absolutely strategic. We would have to have a change of strategy or view to monetize those investments in a material way. We have raised capital from third-party investors in each of those cases, and we will continue to. That is both the function of bringing in partners that can help contribute to those businesses.
We said from the beginning that we would invest in things where we had an advantage and where we could imagine, there would be a strong strategic connection to our business. In some cases, the digital banks that strong connection is very clear. Uh, so we see those digital Banks is, is pretty core to our strategy. Now obviously, it'll be up to us, to figure out how to exploit the, the maximum value from those digital Banks. But but they are at the heart of of what we do. As a bank uh, zodiac markets and zodiac custody. So the, so the digital asset Ventures, uh, seemed like they could be strategic about set, but we weren't 100% sure. We didn't totally understand how digital assets would develop and whether what we were building, we're going to be perfect.
For the future world as it turns out, they're highly relevant, right? So we see those as as absolutely strategic. Uh,
William Winters: In the most recent funding round for Zodiac Markets, for example, Circle joined our register. As you have heard us say, we are the third largest minter and burner of USDC through Zodiac Markets. There is a strategic collaboration there. It makes sense for them to be on the share register of that particular entity. But it is also helping us to defray some of the investment that we would make in some of these ventures as they fully scale up. You can definitely expect to see some of that, but those are strategic ventures for us. Other things might have been strategic. It might have been a really strong basis for us to penetrate the micro-SME market in India, but it turned out to be not as strategic for our business, but very strategic for somebody else's business.
We have to have a, a change of of of strategy review to monetize those investments. In a material way, we have raised capital from third-party investors in each of those cases, and we'll continue to. Now, that's that's both the function of bringing in partners that can help contribute to those businesses, uh, in the most recent funding round for Zodiacs. For example, Circle joined our register as the you've heard us say, we're the third largest Minter and burner of usdc through Zodiacs. Uh, so yeah, there's a strategic collaboration there. It makes sense for them to be on the, on the share register of that particular entity. Uh, but it's also helping us to to defray some of the investment that we would make in in some of these Ventures as they fully scale up, so you can definitely expect to see some of that. But those are strategic Ventures for us.
William Winters: We merged that off into JumboTail, which will be a leading contender to be the leading e-commerce platform in India, and we are very happy to own a minority stake in that venture. But the strategic value is really in somebody else rather than us. Is there a pipeline of those types of venture investments where we could see ourselves passing those off into the market over time? Yes, there is. There is also a pipeline of investments that we have made in minority investments that we could also monetize over time. It is not a quarter-to-quarter occurrence, and we are definitely not saying $238 million per quarter for the rest of time or even per year. But we do have a building, I will call it a building track record, of creating valuable entities that will either produce good profits for us or will create good monetization opportunities.
Other things might have been strategic solved. It might have been a really strong basis for us to penetrate the the micro SME Market in India, but it turned out to be not as strategic for our business, but very strategic for somebody else's business. So we merge that off into jumbo tail.
Which will be a leading Contender to be the leading e-commerce platform in India. And we're very happy to own a minority stake in that Venture. But the Strategic value is really in somebody else rather than us. So, is there, is there a pipeline of those types of, of venture investors, uh, Investments, uh, where we could see ourselves passing those off into the market over time? Yeah, there is, uh, there's also a pipeline of
William Winters: You should expect to see both of those, and you should expect to see both of those growing over time.
Diego De Giorgi: On that one, I would only add one thing, Joe, that obviously when you think about, as William Winters says, we have pipelines of these. When they realize is uncertain, but it is part of our guidance. Our overall package of guidance includes obviously this kind of event. I was planning to leave the question on capital distribution to the word exceed, but now that William Winters has put me on the spot, I will say two other quick things. One, look, we are highly capital generative. We are very happy about that. There is some seasonality in it, among other things. More importantly, the second thing is our capital hierarchy is very clear. We invest to grow our business first and foremost so that we deliver sustainably higher returns to our shareholders. That is the first part of our capital hierarchy.
Of Investments uh that we've made and minority investors that we could also monetize over time. It's not a quarter to quarter occurrence uh and we're definitely not saying you know 238 million per quarter for for the rest of time uh or even per year but we do have a a, a good a building. I'll call it a building track record of creating valuable the entities that will either produce good profits for us or we'll create good, monetization opportunities and you should expect to see, uh, both of those. And you should expect to see both of those growing over time.
Diego De Giorgi: We have strong engines of earning generation, and that allows us to balance that very well with the distributions, and that is what we will try to continue to achieve, an emphasis on exceed indeed. Thank you, Joe. Operator.
So on on that 1, I would only add 1 thing. Joe. That obviously, when you think about as bill says we have a we have pipelines of these um, when they realize is uncertain, but it is part of our guidance, our overall package of guidance includes, obviously this kind of events I was planning to leave the the question on Capital distributions to the world exceed but now that V has put me on this spot. I said to other 2 other quick things, 1 look, we are highly Capital generative. We are very happy about that, that there is some seasonality in it among other things. Um, and more importantly, the second thing is our Capital hierarchy is very clear. We invest to grow our business first and foremost, so that we deliver sustainably higher returns to our shareholders. That is the first part of our Capital hierarchy. Now we have strong engines of um earning generation and that allows us to balance that very well with the distributions. And that's what we will try to continue to achieve an emphasis on exceeds.
William Winters: Thank you, guys. You are welcome.
Thank you, Joe.
Operator: Thank you. Now we are going to the next question. The question comes to the line of Amit Goel from MedioBanker. Your line is open. Please ask your question.
Operator. Thank you guys.
Thank you. Now, we're going to our next question.
Aman Rakkar: Hi. Thank you, guys.
William Winters: have two on costs. The first is one related. Basically, I am just trying to understand why you are slowing the Fit for Growth program in terms of the projects mobilization into 2026, and then likewise, having the cost savings coming a little bit later, especially when we are seeing an FX headwind as well, impacting reported costs. Secondly, I guess because the overall cost guide is unchanged, I am just curious in terms of the costs outside of the program. Are you seeing basically lower inflation or is there less hiring? I am just curious what is driving the other costs then. Thank you.
And the question comes from line of Amit from Medio. Banker Yolen is open; please ask your question.
Um, why are you, um, kind of slowing the, um, the Fit for Growth, um, program in terms of, um, the kind of project mobilization into 2026? And then, uh, you know, likewise having the cost savings coming a little bit later?
Um, you know, so especially when we're seeing an fx headwind as well, impacting kind of reported costs.
Diego De Giorgi: Let me just take a first half of this. I will hand to Diego De Giorgi. He has obviously been very involved from the beginning with this program. Fit for Growth is fundamentally a transformation program. It is not a cost-cutting program. If we transform the bank, if we make it a simpler place to operate, if we automate our processes, digitize everything that we do, we will save money. What we said at the outset is we will save $1.5 billion through that program, and we are going to make $1.5 billion of investments to achieve that. A critical component of keeping to our 12.3, now a constant currency, $12.4 billion expense cap. The way that we execute the program is around how do we maximize the transformation value of the program, not how do we hit the quarter-by-quarter expense numbers in terms of phasing and timing.
Um, and then secondly, um then I guess because the overall cost guide is is unchanged. So I'm just curious in terms of the, the costs outside of the program. Um, are you seeing basically lower inflation or or is it, um, you know, is there less hiring or just just curious what um, what's driving the I guess the the other costs then thank you.
But let me just take a, a first, a first half of this and I'll hand to Diego is the obviously been very involved uh from the beginning with this program. Uh Federal growth is fundamentally a transformation program. Uh, it's not a cost cutting program. Uh, if we transform the bank, if we make it a simpler place to operate, if we automate our processes digitize, everything that we do, we will save money. And what we said at the outset is, we'll say, 1 and a half billion dollars through that program. And we're going to make 1 and a half billion dollars of Investments to achieve that a critical component of keeping to our 12.3. Now the constant currency 12.4 billion dollar expense cap uh the way that we actually
Diego De Giorgi: We are very clear that overall this program is working and will work. We will generate the transformation. We are seeing very good early signs of the ability to invest in a prudent way to generate these kinds of savings down the road. As important as that is making it easier for our colleagues to do business, making it easier for our customers to do business with us, reducing error rates, improving quality of delivery, reducing risk overall. That is the package. We are going to manage that program by program, undertaking by undertaking as we go through. If things are on track, but the phasing of actual financial expenses, money spent and money recovered, we always said would vary from quarter to quarter or period to period. That continues to be the case. We just call that out because we know that everybody is tracking the specific financial numbers.
Diego De Giorgi: I will turn to Diego De Giorgi to get some color on that. I just want to make it really clear that this is a program about transformation, and the transformation is very much on track.
I think it's the program is around. How do we maximize the transformation value of the program? Not how do we get the quarter by quarter expense numbers in terms of phasing and timing? So we're very clear that overall this program is working and will work. Uh, we will generate the transformation. We're seeing very good early signs of of the ability to invest in a prudent way to generate these kinds of of, of savings down the road. But, but you know, as important is that is making it easier for our colleagues to do business, making it easier for our customers to do business with us, reducing error, rates, improving quality of, of, of delivery reducing risk overall, right? That? That's the package. And we're going to manage that uh program by program sort of undertaking by undertaking as we go through the things, we're on track. Uh but the phasing of actual Financial expenses, you know, money, spent and money recovered. It we always said, would vary from border to quarter or or period to period, that continues to be the case. Uh, and and and we just call that out because we know that everybody's is tracking this specific Financial numbers, but, uh, I'll turn to the
Operator: I think you have said almost everything that needs to be said in the sense that we've been saying, and we've been particularly reiterating in the last few months that we are spending to truly transform the bank. There is lots of wood to chop to transform the bank, and there is work involved. As a consequence, we need to be strategic in how we spend that money. It is a lot of money that we are spending, and we want it to achieve the right result. Therefore, given that we are very comfortable because we have always had a very high degree of cost control, and we continue to deliver good numbers in terms of costs. You mentioned the effect headwind.
To get some color on that. I just wanted to make it really clear that this is a program about transformation and the transformation is very much on track.
I think you have you have said almost everything that there needs to be said in the sense that we've been saying, and we've been particularly reiterating in, in the last few months that we are spending to totally transform the bank. And there's lots of wood to chop it to transform the bank and and there's work involved. Um and there's a consequence, we need to be strategic in how we spend that money. It's a lot of money that we are spending and
Operator: If you strip that out, and if you strip the reclassification of the deposit insurance reclassification that we put in place in Q4, our growth of cost this quarter is 2%. We clearly have costs under control. We will continue. We are completely committed to our cost cap, but we will spend the Fit for Growth money wisely so that we achieve exactly the transformational result that Bill has highlighted.
Diego De Giorgi: Let's just make one other kind of obvious observation. We're making more money than the market thought we would, and we intend to pay our people for that, at least a little bit. So that is contributing to expense numbers along the way, and I'm sure you would both understand and appreciate that.
We want it to achieve the right result and therefore we are given that we are very comfortable because we have always had a very uh, High degree of cost control and we continue to be to deliver good numbers in terms of costs. You mentioned the attack headwinds, if you strip that out. And if you strip the reclassification of the deposit uh insurance reclassification that we put in place on in the fourth quarter uh our growth of cost, this quarter is 2%, so we clearly we clearly have cost under control. We will continue, we are completely committed to our cost cap. But we will spend, um, the fit for growth money wisely so that we achieve exactly the transformation. A result that bill has highlighted
Operator: Thank you, Aman Rakkar.
William Winters: Thank you.
That's just, let's just make 1 other kind of obvious observation. We're making more money than, uh, than the market thought we would. And we intend to pay our people for that, uh, at least a little bit. Uh, so that that is contributing to expense numbers, along the way. And I'm sure you would both understand and appreciate that.
Operator: Thank you.
Aman Rakkar: Thank you. Now we are going to take our next question. Just give us a moment. The question comes to Liane of Rob Noble from Deutsche Bank. Liane, is open. Please ask your question.
Thank you, Amy. Thank you.
Now, we're going to take our next question. Just give us a moment.
Rob Noble: Morning. Thanks for taking my questions. Just on highball again, is there not a massive opportunity to arbitrage the highball U.S. dollar liable gap with the Treasury book? Is that something you actually profit from? Or if not, what prevents it? Just to follow up on what you said, Diego De Giorgi, you are comfortable with the guidance even if highball stays at current level. I presume there is no incremental impact. It could push you from, say, down 1% to down 3% within your low single-digit guide. On Hong Kong commercial real estate, is there any increase? What are you seeing here? Is there any increasing risk in the book stage three loss experience pricing or any comments you have there? Thanks.
And the question comes from Robert Noble from Deutsche Bank. Your line is open. Please ask your question.
Morning. Uh thanks for taking my questions um just on a high War again. Um is there not a massive opportunity to Arbitrage? The the highball US dollar liable Gap with the treasury book? Is that something you actually profit from? Or if not what prevents it. Um, and just to follow up on what you said, Diego is, you're comfortable with the guidance. Even if hibble stays a current level, I presume, there's not no incremental impact it, it could push you from say down 1% to down, 3%, within your low single digit guide.
Diego De Giorgi: I mean, as with any financial market phenomenon, if there was a really easy arb, there would be no gap. So, of course, we're positioning around this as we can, servicing customers as well. But it's not the easiest arbitrage to execute. Diego, why don't you take the questions?
Um, and then just on Hong Kong, uh, commercial real estate. Is there any increase? What are you seeing here? Is there any increasing risk in the book, stage 3 loss, experience pricing or any comments? You have their
Operator: I did. One of the arbitrages is difficult to execute because of the stiffness of the curve in highball. The proof of the fact that arbitrage is difficult to execute is the fact that the arbitrage is not closing that quickly. That also contributes to the fact that demand for credit remains relatively low in Hong Kong and a number of other things. Fundamentally, that is what is driving the fact that the arbitrage stays open. I would also add one thing that I am sure my Treasurer, Dan, would be particularly keen for me to remind you. We do not exactly play arbitrage in Treasury. We manage the complexities of the firm. That is on the arbitrage on the highball side. I would reiterate, yes, you asked me a question that is almost impossible to answer unless I veer off from what we always tell you.
I mean, as with any Financial Market phenomenon, if if there was a really easy ARP, but there would be no, no Gap. So, yeah, of course, we're we're, we're positioning around this as we can, uh, servicing customers as well. But it's, it's, it's not the easiest Arbitrage to execute but Diego. Why why don't you why don't you take the questions? Well, I did. Um 1 of the the Arbitrage is difficult to execute that because of the stiffness of the curve in hyper, okay? Uh, and the proof of the fact that that that Arbitrage is difficult to execute, if the fact that the Arbitrage is not closing their quickly, um, and that is also to that also contributes to the fact that demand for credit remains relatively low in Hong Kong and a number of other things. But fundamentally that is what is driving the fact that the Arbiter stays open, I would also add 1 thing that I am sure my Treasurer done would be particularly Keen for me to remind you. We don't exactly play Arbitrage as in in treasury. Um, we manage the complexity of the firm. Um, so that that, that on the Arbitrage, on the higher,
Operator: We tell you that we think about forwards. If I think about forwards, yes, I am comfortable that our guidance takes into account what the forwards incorporate. If the forwards are wrong and are wrong by a wide margin, we will have to come back to you. That is the right way, I think, of thinking about it. On Hong Kong commercial real estate, no particular development. I would stress again, it is a $2 billion portfolio, less than 50 bps of our overall group exposures. It is 96% performing, 80% plus secured, with less than 50% loan to value. We assess that loan to value on a recurring basis to make sure that it is up to date. Our exposure in Hong Kong commercial real estate is truly different from other players.
Side. I and I and I would rate it. Yes, you asked me. You asked me a question that is almost impossible to answer unless I Veer off from what we always tell you, we tell you that we think about forward. If I think about forwards, yes, I am comfortable that our guidance takes into account, what the forwards incorporate. If the forwards are wrong and the wrong by a wide margin, we will have to come back to you. Uh, but that is that is the right way I think of thinking about it.
Oh no, Hong Kong uh, commercial real estate. No, no, no particular development. I would press again, it is a $2 billion.
Operator: We are exposed to the very large developers and to the developers that are part of the Hongs, that are our clients around the world in Indonesia, in Asia, in India, in the U.S., and in Europe. As a consequence, benefit from that kind of support and from that kind of stability. That is what makes our exposure to commercial real estate different in Hong Kong. Thank you.
Diego De Giorgi: Thank you.
Portfolio less than 50 bips of our overall group. Exposures it's 96% performing 80% plus secured with less than 50% loan to value. And we assess that loan to value, uh, on a recurring basis to make sure that it is up to date. Um, our exposure, in Hong Kong commercial. Real estate is truly different. Uh, from other players, we are exposed to the very large developers, and to the developers that are part of the haungs that are our clients around the world in Indonesia, and in India, in the US and in Europe. And as a consequence benefit from that kind of support and from that kind of stability, and that's what makes our exposure to commercial real estate different.
You know.
Rob Noble: Operator.
Aman Rakkar: Thank you so much. Now we are going to take our next question. It comes to Alastair Warr of Nick Lloyd from Morgan Stanley. Alastair Warr is open. Please ask your question.
Thank you, thank you, no problem.
Operator.
Thank you so much.
Rob Noble: Thank you very much. Congratulations on the results. Three questions from me. The first is just a technical question. Your stage two loans seem to have gone up about 10% in the quarter, about 9%, I think. I just wonder if you could comment on what has driven that. Secondly, just on capital and dividend. Dividend increase, obviously, quite substantial year on year. Share price has gone up a long way. I just wonder if you could give us what your latest thoughts are in terms of mix between share buyback and dividend as a way of returning capital. Finally, can I just ask William Winters to elaborate on the comments you made about efficiencies of the digital banks? Is that scaling up? Is that actually bringing costs down in absolute terms? Where are we in sort of cost-income ratio terms in mocks and trust at the moment?
Now we're going to take our next question, and it comes from line of Nick Lord from Morgan Stanley. Your line is open; please ask a question.
Thank you very much. Uh, congratulations on the results. Uh, 3 questions for me. But first is just uh technical question. Your stage 2, uh loans seem to have gone up about 10% in the quarter about 9%. I think I just wonder if you could comment on on what has driven that
Uh, secondly, just on Capitol and dividend. I mean, dividend increase obviously quite substantial year on year. Uh, share price has gone up a long way. I just wonder if you could give us, uh, what your latest thoughts are in terms of mix between share buyback and and dividends as a way of returning capital.
Diego De Giorgi: I will take the digital bank question first. I can offer some observations on your first two questions. We are seeing steady growth in customer numbers and income in the digital banks. That comes from customer numbers lead to income growth. We are also adding products and services on top of the core deposit payment, credit card, and personal lending products that happen there. We have an interestingly growing wealth platform. It is more of the automated and entirely digital variety. It is quite complementary to what we offer from Standard Chartered PLC in Hong Kong and Singapore. Each of these incremental trends is improving the cost-income ratio and improving the long-term expected financial performance for those digital banks. We have optionality as well to expand those digital banks into other markets.
Um, and then finally, can I just, uh, ask you, Bill, to elaborate on the comments you made about the efficiencies of the digital banks? Um, is that scaling up? Is that actually bringing costs down in absolute terms? And where are we in sort of cost-to-income ratio terms in Mocks and Trust at the moment?
So maybe I'll, I'll, I'll take the digital Bank question first, so that I can offer some observations on your first 2 questions. Uh, obviously, we're seeing, uh, steady growth in, in customer numbers and income in the digital Banks. But that comes from that comes from customer numbers lead to income growth. But we're also adding products and services on top of the, the, the core deposit payments. Uh, you know, credit card and personal lending products that have been there. We've got an interestingly growing wealth platform, obviously. It's it's it's more of the automated entirely digital variety. Uh, so quite complimentary to what we offer from Standard Charter Bank, in Hong Kong and Singapore. Uh, but each of these, these incremental Trends, uh, is obviously improving the cost income ratio and uh, and improving the long-term expected financial performance for those digital Banks. Uh,
Diego De Giorgi: While we have no plans at the moment to use those particular baskets of technology in different markets, we can all look to the increasing interconnectedness between Hong Kong and China. We can live with some hope that we will be able to increasingly offer the services of Mox to mainland-based clients. Mainland-based clients today can open an account at Mox, but they have to do it in Hong Kong. Is that going to evolve over time? I do not know. That kind of optionality, together with the underlying growth in the business, makes us very optimistic about the future of those banks. On the Stage 2 loans, it is largely around reclassification of some sovereigns. Diego De Giorgi will comment on that. On the capital and dividend, the interim dividend is somewhat mechanical. It is, in fact, mechanical based on the full-year dividend last year.
Of course, we got optionality as well to expand those digital Banks into other markets. And while we have no plans, uh, at the moment to use those that, that those particular baskets of technology in different markets. Uh, we can all look to the the, the the increasing interconnectedness between Hong Kong and China. And when we can live with some hope, uh, that we'll be able to increase the services of mocks to Mainland based clients. Now, Mainland based clients today can open an account at mocks but they have to do it in Hong Kong. Uh, is that going to evolve over time? Don't know. Uh, but that kind of optionality together with the underlying growth in the business, makes it very optimistic about the about the future of those Banks.
Diego De Giorgi: We will be looking very determinedly at whether we should be shifting in any way our buyback versus dividend mix as we get to the year-end decision. In the meantime, of course, we have announced a $1.3 billion share buyback. It takes our CET1 ratio performer to 13.8%, which is within our range, still at the cautious end of the spectrum. I think that is appropriate given the environment in which we operate.
Go comment on that and and the the capital and dividend obviously that this is the interim dividend is is so on mechanical. It is in fact mechanical based on on the the full year dividend last year, uh so we'll be looking, you know, very uh, very determinedly at at whether we should be shifting in any way, our our, our buyback versus dividend mix as we get to the the year, end decisions, but in the meantime, of course, we've announced to 1.3 billion dollar share buyback.
Diego De Giorgi: We are absolutely committed to returning surplus capital to shareholders. As Diego De Giorgi said, first and foremost, we need to make sure that our business is maintaining its pace of investment, which we have been able to do at a relatively stable level for the past several years as we move increasingly from the foundation-level type investments into core banking systems and things of that nature, into more discretionary investments. We are still in the heavy lifting phase in some of those programs, but much closer to the end than the beginning, which means that we will be able to be investing increasingly in things that will generate revenue in our business rather than shoring up our foundations. How that affects the capital return mix will be determined pretty thoughtfully over the rest of this year.
It takes our C1 ratio performant to 13.8%, uh, which is within our range, still at the cautious, end of the spectrum. But I think that's that's appropriate given the environment in which we operate. Uh, but we are absolutely committed to returning Surplus Capital to shareholders and as Diego said, first and foremost, we need to make sure that our business is, is maintaining its pace of investment, which we've been able to do at a, at a relatively stable level for the past several years. Uh, as we move, uh, increasingly from the from the foundation level type investments into, you know, core banking systems, and things of that nature into more discretionary Investments. Uh, we're still on in the, in the, the, the heavy lifting phase and some of those programs but much closer to the end than the beginning. Uh, which means that that, that we'll be able to be investing increasingly in things that will generate Revenue in our business uh rather than than touring up our our foundations but
How that affects the the capital return?
Mix.
Diego De Giorgi: Of course, as the share prices increase, it does change the equation on the margin. Diego De Giorgi?
Operator: Just one quick comment on the Stage 2. As Bill said, sovereigns in Africa primarily. A couple of considerations there, just need to be on the same page. Bear in mind that, first of all, these things move relatively fast. Second, they happen because compared to origination, we believe that there has been some change in the credit risk profile, which happens, for example, obviously, with things like a sovereign downgrade. When it happens, that doesn't mean that this will lead to this being put either into early alerts or into credit grade 12. So it can say perfectly, you can have things in Stage 2 that are perfectly investment grade and with a very, very low probability of default. So those are the dynamics behind it.
Operator: I would say in general, by the way, that although we've had a couple of sovereign downgrades around the world, the environment with a weak dollar, lower interest rates remains actually pretty positive from that point of view for many of the countries in our footprint. Therefore, I would be quietly optimistic going forward. Thank you, Nick. Operator.
Would be determining, you know, pretty pretty thoughtfully over the rest of this year. And of course, as share prices increase, uh it does change the equation on the margin Diego. Just 1 quick, comment on the stage 2. Uh, as Bill said, sovereigns, uh, in Africa primarily, um, a couple of considerations there, just, uh, doncic to be on the same page bear in mind. First of all, these things move relatively fast, second, they happen because compared to origination, we believe that there has been some change in the credit risk profile, which happens, for example, obviously with things like a sovereign downgrade. Um, when it happens, that doesn't mean that this will lead to this being put either into early alerts or into credit grade 12, so it can stay perfectly. Uh, you can have things in stage 2 that are perfectly investment grade and with a very, very low probability of default. So it's just uh, um, uh, it's, it's that that is, that is, those are the Dynamics, um, behind it. Um, and I would say,
In general, by the way, that although we've had a couple of, uh, of sovereign downgrades, uh, around the world. The environment with a weak dollar, lower interest rates remains actually pretty positive from that point of view, for many, of the countries in our footprint. Uh, and therefore I would be uh, quietly optimistic going forward.
Aman Rakkar: Thank you. Now we are going to take our next question. It comes to Alastair Warr from KBW. Alastair, please ask your question.
Thank you, Nick.
Operator.
Operator: Good morning, everybody. Thanks for taking my questions. I just had two. One is a slightly boring numbers question. Can I just try and square your revenue guidance? There is a lot of notable items. I think broadly speaking, first half is up 12%. I think I am right that you said momentum has continued into Q3. Yet your guidance for the year is still bottom end of 5% to 7%, which would suggest that revenue in the second half, you are somehow expecting it to slow to sort of flat, I think. Am I missing something there? Could you just help us a little bit about why the bottom end of 5% to 7% and why not something a little bit more optimistic than that? That is the first question. The second question is just really about capital allocation again.
Thank you. Now, we're going to take our next question and it comes to line of at first from KBW. Your line is open. Please, ask your question.
And good morning everybody. Um, thanks for taking my questions. Um, yeah, I just had 2 1, a slightly boring uh, uh, numbers question. But, um, can I just try and square your Revenue guidance? Because, um, there's a lot of notable items, but I think, broadly speaking, first half is up, 12%.
And and I think I'm right that you said momentum has continued into into Q3.
Operator: I think when you had a big strategy day a couple of years ago, one of the frustrations you expressed was that your share price meant that investing capital organically was very tough because the comparative of a share buyback was obviously very attractive when you were trading on 50p in the pound. You are obviously not trading like that anymore. Your returns, your organic returns are sort of mid to high double digits, certainly in the second quarter. I just wonder, how is that playing out in your thinking about how you allocate capital? Are you now looking more to put it to work in the region? If so, where would you be expecting to see perhaps more growth, but potentially in the past, you would have been putting that capital back into cash return? Thanks very much.
And yet, your guidance for the year is still at the bottom end of 5% to 7%, which would suggest that revenue in the second half, you're somehow expecting it to slow to sort of flat. I think, um, am I missing something there? Or could you just help us a little bit about why the bottom end of 5% to 7% and why not something a little bit more optimistic than that? Um, that's the first question. And then the second question is just really about capital allocation again. Um,
I think when we you had a big strategy there a couple of years ago and 1 of the frustrations you expressed was well, yeah, was was that your share price meant that investing Capital organically was very tough because the the the comparative of a share buyback was obviously very attractive when you were trading on, you know, 50 p in the pound. Um, you obviously not trading like that anymore and your returns, your organic returns are sort of mid to high double digits. Certainly in the second quarter. So I just wonder how does that is? Is does that how
Diego De Giorgi: Thanks for the questions, Ed. I am going to leave the first question to Diego De Giorgi on revenue guidance. On the capital allocation, as I recall what we said a couple of years ago, we really kind of broke things into three buckets. One was inorganic investments externally, which were quite difficult. There were some things that were for sale at that time that we participated in auctions, but we did not win. We did not win because we were very disciplined about things that might have been attractive in a number of regards, but financially were unattractive relative to the alternative use of capital. Then we looked at purely organic investments, some of which were in the core businesses, WRB, CIB. Some were productivity-driven investments, so improving our operations. Some were investments in things like ventures for new businesses.
Kept playing out and you're thinking about how you allocate Capital. Are you now, looking more to put it to work, um, in the region. And, and if so where, where would you be expecting to see, perhaps more growth, but potentially, in the past, you, you, you, you would have been, you would have been putting that Capital back into cash return. Thanks very much.
Participant about, uh, things that might have been attractive in in a number of regards, but financially were unattractive, relative to the alternative UC capital.
Diego De Giorgi: There, obviously, you are investing at book value kind of by definition. We found those investments to be very attractive. Hence, we were continuing to increase our overall level of investment into our business. That has carried on to this day. Then third, obviously, was returning capital to shareholders, which has the obvious attraction when you are trading at a discount. I mean, book value is book value. I was just saying a discount to what we think is the appropriate value for a company. I know that there are companies that buy back a lot of shares who are trading at a multiple of book value. I think that reflects some level of optimism about their business rather than some sort of mechanical capital allocation.
Diego De Giorgi: Clearly, at a stock price that is trading at or a bit above book, the attractiveness of buybacks relative to other investments is lower, all else equal. I would say we are quite optimistic about the underlying growth story in our bank. We are very happy to continue to invest in that growth story in whatever the most effective way to invest is. As Diego De Giorgi has said a couple of times, first and foremost, that is going to be investing in our core operation. Obviously, investing in our own stock is another way to play the fundamental optimism and growth story that we see. Do we have additional degrees of freedom to pay a premium for something externally? Yes, we do. We will be super, super disciplined in terms of anything that we did externally. It has got to be both strategic and financially accretive relative to alternatives.
Uh, then we looked at at at purely organic Investments, some of, which were in in the core businesses, uh, some were productivity driven Investments, so improving our operations, and and some were Investments and things. Like, Ventures for, for new businesses there, obviously, you know, you're investing it at at Book, value, kind of by definition. And we found those Investments to be very attractive. Hence, we were continuing to increase our overall level of investment into our business. And that is, that is carried on to this day. And, uh, and then third obviously was, uh, was returning Capital to shareholders, which has the the obvious attraction. When you're trading at a, at a discount, I, I mean Book value is booked out. I was just say a discount to what we think is the appropriate value for a company. I note that there are companies that buy back a lot of shares who are trading at a, at a multiple of Book value. And, uh, so I think that reflects, you know, some level of optimism about their business rather than some, sort of mechanical Capital allocation, uh, but, but clearly at a, at a at a stock price, it's trading at or
Or a bit of a book uh, the the the the attractiveness of BuyBacks relative to other Investments is lower all while SQL. Uh, but I would say we're quite optimistic about the, the underlying growth story in our bank and we're very happy to continue to invest in that growth story in whatever the most effective way to invest is and this has had a couple of times first and foremost that's going to be investing in our core operations.
Diego De Giorgi: If we find those things, we will come to you and explain why we think this is a good thing to do with our money, with your money. If we do not find them, we do not find them because we have got plenty to do organically. Diego De Giorgi?
Operator: Definitely nothing to add on that one. On revenue guidance, I understand your math. I think we give you all of the pieces that you need in order to arrive to a conclusion in the sense that we tell you that NII is clearly experiencing some pressure. Remember to include the effect of the deposit insurance reclassification always. Importantly, the comps are tougher in the second part of the year. It is because we performed very well last year in Q3 and in Q4. So you need to factor that in. I think you hit the nail on the head when you say, no, there is not anything that we are inherently negative about our business. The start of the quarter has been good across our different businesses. If there is a touch of conservatism, I will take it on myself to be unabashedly slightly conservative at times.
Uh, but obviously, investing in our own stock is, is another way to, to play the fundamental optimism and growth story that we see. Uh, do we have additional degrees of freedom to to uh, to pay a premium for something externally? Yeah, we do, uh, but we will be super, super disciplined. Uh, in terms of anything that we did externally it's got to be both strategic and financially accretive relative to Alternatives. Uh, if we find those things, we'll come to you and explain why we think this is a good thing to do with our money, uh, with your money. Uh, if we don't find them, we don't find them because we've got plenty to do, organically Diego.
Operator: Thank you, Ed.
Diego De Giorgi: Thanks very much.
Nothing. Definitely nothing to add on that. 1 on Revenue, guys and I understand your math. Um, I I think we give you all of the pieces that you need in order to arrive to a conclusion. Uh, in the sense that we tell you, that knee is, uh, is clearly, uh, experiencing, some pressure. Um, remember to include the effect of the deposit insurance with classification, always importantly, the comps are tougher in the second part of the year and, uh, and it's because we perform very well last year in Q3 and in Q4. So you need the, you need to factor that in. I think you, uh, you hit the nail on the head. When you say no, there isn't anything that we are inherently negative about about our business. The start of the quarter has been good across our different businesses. And if there is a touch of conservatism, I'll take it on myself, to be unabashedly slightly conservative at times.
Operator: Thank you. One more question?
Thank you. Thanks very much. Thank you.
Aman Rakkar: Yes, of course. Now we are going to take our final question for today. It comes to Kunpeng Ma from China Securities. Kunpeng, please ask your question.
1 more question.
Uh yes, of course. Now we're going to take our final question for today.
Rob Noble: Oh, thank you. Morning, Bill. Morning, Diego De Giorgi. Just one quick follow-up on the stablecoin. William Winters said the stablecoin business will eventually increase royalty in the long run. Everybody said the stablecoin will greatly reduce the customer cost of the banking business. Who will pay for the increase of banks' royalty in the long run? Maybe I guess from the scale of clients or efficiency or something indirectly. I do not know. William Winters, could you please give us some quick color on the effect of the stablecoin business on the profitability mechanism of your banking business? Thank you.
And it comes to line of kenma from China. Security San is open, please ask your question.
Diego De Giorgi: Thanks for the question, Kunpeng Ma. I am going to broaden out the question from stablecoins to digital means of settlement. There is an interesting tussle going on between the idea of stablecoins or the idea of tokenized bank deposits or the idea of central bank digital currencies, or maybe something else that has not been invented yet, but that will be a more appropriate medium of exchange for settlement. Where is the money going to come from for us? It will come from a few places. This is the bet that we will make. One is we will be more relevant to our customers because we have got a lead in this space. We are going to pick up market share. It is that straightforward.
Oh, thank you morning, Bill morning, Diego, just 1, quick follow up on the stable coin uh bills that just the stable coin business will eventually increase Roi in the long run, you know, but you but you know, everybody said, you know, the stable coin will greatly reduce the customer cost of of the banking business. So so, um, who will pay the increase, who, who will pay for the increase of banks, Roti in the, in the long run? Maybe I, I I I guess from scale of clients or efficiency or some something in that indirect indirectly, I don't know. So, so we could, could you, please give us some quick color on the on the effect of the stable coin business and you know, on the profitability mechanism of your banking business. Thank you.
Well, thanks for the question, conveying? And uh, I I I'm going to broaden out the question from several coins to to, to, to digital means and settlements, because obviously there's very interesting tussle going on, uh, between the idea of stable coins or the idea of tokenized Bank deposits for the idea of Central Bank, digital currencies, or maybe something else that that hasn't been invented yet. But but there will be, there will be a more appropriate medium of exchange for for settlement.
Diego De Giorgi: Second is that everything that we do will be done more cheaply because these instruments, whether it is AML and financial crime compliance or sanctions adherence, et cetera, are going to be easier and cheaper to do if we are settling on blockchains. You are absolutely right that the price will come down or the cost to end users will come down. That has been the case. I have been in banking for 40 years, and for a little more, actually. For 40 years, every year, we have dealt with that kind of question. Our margins are coming down, or at least our income from a particular product is coming down. Somehow, over those 40 years, there has been a really good compound growth in profits in banking. The reason is the costs have come down faster and volumes have gone up faster than income has come down.
Uh, is is going to be easier and cheaper to do. Uh, if we're settling on on blockchains
Diego De Giorgi: Obviously, not in every single year, but I will make the bet that this is one of those paradigm shifts where volumes will soar because the cost of execution is lower and because the risk is lower. Our job is to be like what happens in the market is going to happen, whether Standard Chartered PLC likes it or not. Our job is to be ready for it before it happens, rather than responding after it happens.
Diego De Giorgi: As we sit here today, I could not be happier with the positioning of our bank in all the things that matter to us, whether it is what our affluent customers want in terms of products and services and technology, whether it is what our corporate clients want in terms of facilitating their diversifying investments, their diversifying supply and distribution chains through us, whether it is what our financial institutions want in terms of the way that they are custodizing assets, managing their interest rate and currency exposures. We are absolutely there at the cutting edge of what our clients want today. Digital assets is one of those areas. That means more people open up relationships with us. More people use us as their primary transacting bank.
Uh, you're absolutely right that the uh, the price will come down or the cost to end, users will come down. Uh, that's been the case and I've been in banking for 40 years and and for yeah a little more actually. Uh, and for 40 years every year. Uh, we've had we dealt with that kind of question. Oh yeah, our margins are coming down or at least our in our income. From a particular product is coming down somehow over those 40 years. There's been a really good compound growth in profits, in in banking. And the reason is it costs to come down faster and volumes have gone up faster than, uh, than than income has come down. Obviously not in every single year. But I will make the bet that this is 1 of those Paradigm shifts where volumes will soar. Because the cost of execution is lower and because the risk is lower, uh, our job is to be like what happens in the market is going to happen whether Senator Charter likes it or not, our job is to be ready for it before it happens, rather than responding after it happens.
And as we sit here today, I just could not be happier with the positioning of our bank, in all the things that matter to us, whether it's what our affluent customers want. Uh, in terms of products, and services and Technology, whether it's what our corporate clients want, in terms of facilitating their diversifying Investments, their diversifying Supply, and, and distribution chains.
Diego De Giorgi: More people use us to access the markets and the products and the services that they want to access outside. We are completely agnostic to what they use on the other side of our portal, as long as it is best execution for them. We have and we will find ways to make money at every turn along the way and have happy customers that are smiling all the way to the bank. So with that, unless Kunpeng Ma, you want to follow up, I would say thank you very much to everyone for, as always, for putting some really thoughtful questions onto the table and for showing this interest in us and helping us get our story out. I wish you all a very happy rest of summer.
Through us whether it's what our financial institutions want in terms of the way that they're customizing assets managing their interest rate and currency exposures. I mean we are absolutely there uh at The Cutting Edge of what our clients want today. Digital assets is 1 of those areas. That means more people open up relationships with us. More people use us as their primary transacting Bank. More people use us to access the markets and the products and the services that they want to access outside. We're completely agnostic to what they use on the other side of our portal. As long as it's best execution for them and we have and will find ways to make money at every turn along the way and have happy customers that are smiling all the way to the bank,
So for that, uh, I I left companion. You want to follow up, I say uh, thank you very much to everyone for for, as always for putting some really thoughtful questions onto the table and uh for showing this interest in us and helping us get our story out and that wish you all a very happy rest of the summer.
Thank you.