STANCHART(SCBFY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 12% increase in income and a 41% rise in profit before tax for Q3 2024, leading to an upgrade in income growth guidance towards 10% for the year [2][33] - Operating income reached $4.9 billion, with net interest income (NII) at$2.6 billion, up 9%, and non-net interest income increasing by 15% [5][6] - Return on Tangible Equity (RoTE) improved to 10.8%, up 4 percentage points year-on-year [6] Business Line Data and Key Metrics Changes - Wealth Solutions achieved a record quarter with income up 32%, driven by a 40% increase in investment products and a 16% rise in bancassurance income [9][20] - Global Markets income grew by 16%, while Global Banking saw a 7% increase [16][18] - Wealth and Retail Banking income rose by 11% to $2 billion, with significant inflows of affluent net new money totaling$10 billion in Q3 [20] Market Data and Key Metrics Changes - Underlying customer deposits increased by $3 billion, primarily from affluent clients in Wealth and Retail Banking [13] - The company noted a slight decline in total underlying customer loans and advances due to disciplined mortgage origination in Wealth and Retail Banking [12] Company Strategy and Development Direction - The company is doubling its investment in wealth management, targeting a 50$5 billion to at least 8 billion over the next three years [3][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating complexities in the market, particularly in China, where ongoing investment opportunities are anticipated [92][96] - The outlook for NII growth in 2025 is more challenging due to various factors, including interest rate dynamics and the impact of reshaping activities in mass retail [8][64] Other Important Information - The company is undergoing a three-year "Fit for Growth" program, expecting to achieve significant cost savings starting in 2025 [10] - Credit impairment trends remain positive, with a net release in Corporate and Institutional Banking (CIB) [10][11] Q&A Session Summary Question: Income growth expectations for 2025 - Management indicated that income growth in 2025 is expected to be slightly below the medium-term range of 5% to 7%, with consensus around 3% being a possibility [35][41] Question: Impact of mass retail business restructuring - The restructuring is expected to be financially dilutive in the short term, but management believes it will lead to higher returns in the long run [44][46] Question: Wealth management seasonality and capital return targets - Seasonality is expected in Q4, but management remains optimistic about the wealth management business due to strong activity levels [67][71] - The increased capital return target of at least 8 billion does not include hidden costs related to the restructuring [69][73] Question: Retail restructuring and RM hiring - The $1.5 billion investment is primarily in current expenses aimed at generating revenue, with a small portion potentially capitalized [84][87] - Relationship managers are expected to become profitable within 18 to 24 months after hiring [85][86]