Standard Chartered Annual Report 2014

Driving investment, trade and the
creation of wealth across Asia, Africa
and the Middle East

Taking action to deliver sustainable, profitable growth

2014 was a tough year and our performance was disappointing. We faced a perfect storm: negative sentiment towards emerging markets, a sharp drop in commodity prices, persistent low interest rates and surplus liquidity, low volatility, and a welter of regulatory challenges. We have taken a range of actions in response to the way our world has changed. I am confident that the way we are reshaping the Group will get us back to a trajectory of sustainable, profitable growth.

Peter Sands,
Group Chief Executive

Who we are

We are a leading international banking group, with more than 90,000 employees and a 150-year history in some of the world’s most dynamic markets. We bank the people and companies driving investment, trade and the creation of wealth across Asia, Africa and the Middle East, where we earn around 90 per cent of our income and profits. Our heritage and values are expressed in our brand promise, Here for good.

  • More than

    150

    years old

  • Working across

    71

    markets

  • With more than

    90,000

    employees

Our strategy

The world’s best
international bank

Here for good

Relationships

Build trusted relationships with the people, companies and institutions shaping our markets' future

Investment

Play a leading role in facilitating investment and deepening financial markets

Trade

Become the undisputed leader in commercial payments and financing for and in Asia, Africa and the Middle East

Wealth

Be recognised as a leader in growing and protecting our clients' wealth

Relevant scale

Establish sufficient scale and balance sheet and franchise strength to be relevant and influential in our key markets

Courageous

We take measured risks and stand up for what is right

Responsive

We deliver relevant, timely solutions for clients and customers

International

We value diversity and collaborate across the network

Creative

We innovate and adapt, continuously improving the way we work

Trustworthy

We are reliable, open and honest

Colleagues

A great place to work, enabling individuals to grow and teams to win

Society

A force for good, promoting sustainable economic and social development

Investors

A distinctive investment, delivering consistently superior performance via disciplined growth

Regulators

A responsible partner with exemplary governance and ethics

Our business model

We build deep relationships
with our clients

Retail Clients

Individuals and small businesses

Private Banking Clients

High net worth individuals

Commercial Clients

Mid-sized companies

Corporate & Institutional Clients

Large companies and financial institutions

We provide solutions that meet their evolving needs

Retail Products

Deposits, savings, mortgages, credit cards and personal loans, and other retail banking products

Wealth Management

Investment, portfolio management, and advice and planning services

Transaction Banking

Cash management, transactions, securities holdings and trade finance products

Corporate Finance

Financing, strategic advice, mergers and acquisitions, and equity and principal financing

Financial Markets

Investment, risk management and debt capital services

Through our activities, we generate income, profits and return on equity

Income

Net interest income, fee income and trading income

Profits

Income gained from providing our products and services minus expenses, impairment and taxes

Return on equity

Profit generated relative to the equity invested

We create long-term value for a broad range of stakeholders

Clients

Enabling individuals to grow and protect their wealth, and helping businesses to invest, trade and expand

Shareholders

Delivering long-term sustainable value for investors

Employees

Providing a great place to work

Society

Supporting growth and job creation, delivering financial innovation and helping to address the most pressing challenges facing the communities in which we work

We add value for our clients by using our distinctive strengths

Brand

We have a 150-year history in some of the world’s most dynamic markets and our Here for good brand promise captures what we stand for

Capital

We are strongly capitalised and highly liquid, allowing us to support our clients for the long term

Local depth

We draw upon deep local knowledge and experience in the markets in which we operate

Network

We collaborate to support clients across our client segments, product groups and geographies

People

Our diverse and inclusive workforce is committed to the highest standards of conduct and integrity

We ensure that the value we create is sustainable by focusing on three key priorities

Being a responsible company

Managing our operations to deliver long-term value for our stakeholders

Contributing to sustainable economic growth

Ensuring that our core business of banking supports sustainable growth and job creation

Investing in communities

Working with local communities to promote social and economic development

Our performance

Normalised return on equity1
%

Operating income2
$million

Profit before taxation2
$million

Total assets
$billion

Normalised earnings per share1
Cents

Dividend per share3
Cents

  1. Standard Chartered uses non-generally accepted accounting principles (GAAP) measures, where these are not defined under International Financial Reporting Standards (IFRS) or they have been adjusted
  2. Operating income includes own credit adjustment (OCA) benefit of $106 million and $100 million for 2013 and 2014 respectively. Profit before taxation for 2013 and 2014 include OCA and goodwill impairment. 2014 also includes $300 million in respect of the civil monetary penalty. 2012 included $667 million due in respect of settlements with the US authorities
  3. Represents the recommended final dividend per share for the respective years together with the interim dividend per share declared and paid in those years

Operating income by client segment
$million

Operating income by product group
$million

Operating income by region
$million

  1. Others include Lending and Portfolio Management ($1,026 million), Asset and Liability Management ($653 million) and Principal Finance ($325 million)

Key performance indicators

  • Normalised earnings per share
    Cents

    Aim

    To deliver earnings per share (EPS) growth.

    Analysis

    EPS declined 28 per cent compared to 2013, reflecting a challenging market environment and significant restructuring actions.

    Normalised return on equity
    %

    Aim

    To deliver return on equity of over 10 per cent in the medium term while balancing the long-term objective of having strong yet efficient levels of capital.

    Analysis

    Returns declined 30 per cent compared to 2013, reflecting a challenging market environment and significant restructuring actions.

  • Retail Clients
    Net Promoter Score (NPS)1 relative to market average

    Aim

    To increase customer satisfaction with our products and services and to become the bank that clients recommend.

    Analysis

    Our relative global NPS in 2014 was four points above the market average.

    Corporate & Institutional Clients
    Depth of client relationships

    Aim

    To leverage our network and product capabilities to increase the average number of markets and products per client.

    Analysis

    We continued to drive deeper and broader client use of our products and markets.

    1. ‘Net Promoter Score’ and ‘NPS’ are trademarks of Satmetrix Systems Inc., Bain & Company, and Fred Reichheld. Standard Chartered uses Bain methodology recalibrated for financial services to calculate NPS
  • Capital ratios
    %

    Aim

    To maintain a strong capital base and accrete capital to a Common Equity Tier 1 (CET1) ratio of between 11 and 12 per cent in 2015 and thereafter.

    Analysis

    The Group remains strongly capitalised, with a transitional CET1 ratio of 10.5 per cent, or 10.7 per cent on an end-point basis. The Group has continued to manage its balance sheet proactively and with discipline, focusing on deployment of risk-weighted assets.

  • Private Banking Clients

    Aim

    To grow and deepen client relationships and add new clients.

    Analysis

    We added 1,310 new clients compared to 1,658 in 2013 and increased assets under management (AUM) by 3 per cent.

  • Total Scope 1, 2 and 3 Greenhouse Gas emissions/$million operating income
    Tonnes CO2 equivalent/$million operating income

    Aim

    To reduce Greenhouse Gas emissions arising from our operations.

    Analysis

    We reduced Greenhouse Gas emissions relative to operating income for the past three years. Starting in 2014, we have included Scope 3 emissions arising from air travel in the KPI. Air travel emissions data is collected from 41 countries and based on seating class and distance flown.

  • My Voice employee survey gap score

    Aim

    To continually align the aspirations of our people with those of the Group, encouraging a performance-oriented culture and a place where people love to work.

    Analysis

    Using a new employee survey, My Voice, we are gaining an understanding of our core strengths and opportunities to improve, including a new gap score. In 2014, our overall My Voice gap score was 0.36. Areas that need attention include collaboration and clarity around growth opportunities and career paths. Strong scores were registered for the Group’s brand, strategy and culture, with particularly positive results on individual commitment, conduct and job engagement.