STANCHART(US:SCBFY)2024-02-23 17:40Financial Data and Key Metrics Changes - The company achieved a return on tangible equity (RoTE) of 10.1% in 2023, marking the first time it surpassed the double-digit target since 2014 [27][18] - Total income increased by 13% year-on-year, with adjusted net interest income growing by 23% [27][24] - Operating profit before tax rose to $5.7 billion, up 27% from the previous year [27][28] Business Line Data and Key Metrics Changes - Financial Markets (FM) income was $5.1 billion, down 2%, but up 3% when adjusted for non-repeating gains from structured notes in 2022 [34][27] - Wealth Management income increased by 10% to $1.9 billion, with significant growth in treasury products and bancassurance [36][38] - The Corporate, Commercial, and Institutional Banking (CCIB) segment delivered an income return on risk-weighted assets of 7.8% [12][27] Market Data and Key Metrics Changes - Cross-border income reached nearly $7 billion, up 31%, with significant growth in the ASEAN and AME corridors [40][41] - The China franchise operating profit was under $100 million short of the target of $1.4 billion, reflecting challenges in the commercial real estate sector [14][27] - Customer deposits increased by $10 billion in the quarter, driven by successful deposit campaigns [49][27] Company Strategy and Development Direction - The company aims to target a RoTE of 12% by 2026, focusing on income growth, expense discipline, and capital management [18][55] - A new $1.5 billion "Fit for Growth" program is being launched to simplify and digitize operations, aiming for $1.5 billion in savings [66][70] - The strategy includes a commitment to return at least $5 billion to shareholders between 2024 and 2026 [70][68] Management's Comments on Operating Environment and Future Outlook - Management noted a strong start to 2024, particularly in wealth management and financial markets, supported by previous investments [11][29] - The company is well-positioned to capture growth opportunities in Asia, with GDP growth expected to be around 5% over the next three years [72][73] - The focus will be on enhancing operational leverage and maintaining cost discipline to achieve sustainable growth [70][68] Other Important Information - The company has returned $5.5 billion to shareholders since January 2022, exceeding its three-year distribution target in just two years [68][70] - Credit impairments were significantly lower, with a loan loss rate of 17 basis points, well below the expected range [44][27] - The company has reduced its exposure to China commercial real estate by around 40% since the end of 2021 [44][27] Q&A Session Summary Question: How much of the trajectory to the 12% return on tangible equity is idiosyncratic versus requiring improvement in the market backdrop? - Management indicated that the trajectory to 12% is largely structural, driven by income growth in wealth and financial markets, with some elements being market-sensitive [92][93] Question: Can you provide more detail on the Fit for Growth restructuring program? - The program aims to address structural inefficiencies and complexities within the business, focusing on technology evolution and operational effectiveness [104][106] Question: What are the constraints on the shareholder distribution target of greater than $5 billion? - Management acknowledged that while they aim to exceed the $5 billion target, they are also cautious about potential RWA inflation and credit impairments [97][99]