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

Annual Report 2015

A relentless focus on execution

Bill Winters Bill Winters
Bill Winters Group Chief Executive

Our strategy, announced in November 2015, will address our performance issues and reposition our business on a strengthened platform. We have made substantial strides in securing the Group’s foundations, we continue to take action to get leaner and more focused, and we are creating capacity to invest. In this environment, these are the essential priorities that will ensure we stay fit and able to take advantage of attractive opportunities as they become available, and when other banks may be less able to react.

Who we are

Who we are

We are a leading international banking group, with around 84,000 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. Our heritage and values are expressed in our brand promise, Here for good.
More than

150 years old

Working across

67 markets

With around

84000 employees

Our strategy

Our strategy

Our aspiration Our aspiration

To establish a strongly capitalised bank poised for growth in our dynamic and growing markets, with the goal to deliver returns by business of 10 per cent

Our objectives Our objectives

Secure the foundations

Strengthening our balance sheet and aligning our strategy to a tightened risk tolerance

Get lean and focused

Driving sustainable improvements in returns by restructuring our client businesses and assertively managing costs

Invest and innovate

Investing in our core strengths and taking advantage of opportunities in our markets

Our values Our values

Courageous:


We stand up for what we believe and do the right thing


Responsive:


We can be relied on to respond quickly and deliver lasting value


International:


We value others and actively collaborate


Creative:


We adapt and innovate to meet evolving needs


Trustworthy:


We act with integrity and earn the trust of others

Business model

We have a sustainable approach to our business, which is reflected in our brand promise, Here for good

Our business activity is supported by our brand promise, Here for good
  • Focusing on clients

    Developing long-term relationships with clients

  • Contributing to sustainable economic growth

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

  • Being a responsible company

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

  • Investing in communities

    Working with local communities to promote social and economic development

We add value for our clients by using our distinctive strengths

Our business activity is supported by our brand promise, Here for good
  • Strong brand

    A leading international banking group with a 150-year history in our markets, clear strategic objectives and a strong focus on client satisfaction

  • International network

    A proven track record in providing banking services across Asia, Africa, and the Middle East

  • Local connectivity

    Supporting clients at a regional level by drawing on deep local knowledge and collaborating through country franchises

  • Investment approach

    Investing in our business and its systems to improve our services and drive long-term value for our clients

  • Our people

    A diverse and inclusive workforce that is highly skilled and committed to the highest standards of conduct and integrity

Our business is structured to allow us to better serve our clients

Our business activity is supported by our brand promise, Here for good
  • Corporate and Institutional Banking

    Allowing companies and financial institutions to operate and trade globally by serving them across multiple markets

  • Commercial Banking

    Providing mid-sized companies with financial solutions and services that help them achieve their ambitions of international expansion and growth

  • Private Banking

    Supporting high net worth individuals with their banking needs across borders and offering access to global investment opportunities

  • Retail Banking

    Offering small businesses and affluent and emerging affluent individuals a full spectrum of banking support

We provide solutions that meet our clients' evolving needs

Our business activity is supported by our brand promise, Here for good
  • Retail Products

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

  • Wealth Management

    Investments, portfolio management, insurance and advice and planning services

  • Transaction Banking

    Cash management, payments and 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 markets

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

Our business activity is supported by our brand promise, Here for good
  • 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

Our business activity is supported by our brand promise, Here for good
  • Shareholders

    Aiming to deliver robust returns and long-term sustainable value for shareholders

  • Clients

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

  • Regulators, governments and industry bodies

    Supporting governing bodies in their drive for monetary and fiscal improvement

  • Communities

    Supporting growth and job creation, delivering financial innovation and having a low environmental impact

  • Employees

    Providing learning and development opportunities and forming a collegial, values-driven team

Our business activity is founded on a robust Risk Management Framework

  • We manage our risks to build a sustainable franchise, in the interests of all our stakeholders

  • We only take risk within our risk tolerances and risk appetite, and where consistent with our approved strategy

  • We manage our risk profile so as to maintain a low probability of an unexpected loss event that would materially undermine the confidence of our investors

  • We seek to anticipate material future risks, learn lessons from events that have produced adverse outcomes and ensure awareness of known risks

We execute our business to the highest standards of conduct

  • We uphold the Group’s brand promise, Here for good, and our Code of Conduct, through the way we conduct our business

  • Good conduct is the creation of an appropriate business strategy aligned to our stated risk tolerances and the execution of business in accordance with both

  • We are guided by both the letter and the spirit of laws and regulations

  • Our success in living up to the highest standards of conduct is measured by our ability to achieve fair outcomes for clients, investors, our reputation and the markets in which we operate

Our performance

Our performance

Group performance Group performance

Normalised return on equity1 (%)

(105%)

11.2

2013

7.8

2014

(0.4)

2015

Operating income2 ($million)

(15%)

18,671

2013

18,236

2014

15,439

2015

Profit before taxation ($million)

(136%)

6,064

2013

4,235

2014

(1,523)

2015

Total assets ($million)

(12%)

674,380

2013

725,914

2014

640,483

2015

Normalised earning per share1 (cents)

(105%)

194.23

2013

138.93

2014

(6.6)

2015

Dividend per share4 (cents)

(83%)

81.93

2013

81.93

2014

13.73

2015

Liquid asset ratio (%)

 

29.8

2013

32.2

2014

30.9

2015

Advances-to-deposits ratio (%)

 

75.7

2013

69.7

2014

72.8

2015

Capital ratio (%)

 

10.9

1.3

4.8

17.0

2013

10.5

0.9

5.3

16.7

2014

12.6

1.5

5.4

19.5

2015

1. Results on a normalised basis reflect the results of Standard Chartered PLC and its subsidiaries (the ‘Group’) excluding items presented in note 14 of the financial statements

2. Excludes own credit adjustment of $495 million (2014: $100 million), net gains on business disposals of $218 million (2014: $2 million loss) and $863 million valuation losses in respect of credit valuation and funding valuation adjustment

3. Prior years’ earnings per share amounts and interim and final dividend per share amounts declared and paid prior to the rights issue in November 2015 (including 2015 interim dividend per share) have been restated as explained in note 44 of the financial statements

4. Represents the total dividend per share for the respective years together with the interim dividend per share declared and paid in those years

Performance by segment,
product and region
Performance by segment,
product and region

Operating income by segment

($million)

15,439

Operating income by product

($million)

15,439

Operating income by region

($million)

15,439

Our performance

Key performance
indicators

1

Deliver sustainable
improvements in returns
over time

1

Deliver sustainable
improvements in returns
over time

Normalised earnings per share (cents)

188.5

2011

214.3

2012

194.2

2013

138.9

2014

(105%)

(6.6)

2015

Aim

To deliver earnings per share (EPS) growth.


Analysis

EPS declined sharply compared to 2014, reflecting a challenging market environment and actions taken to reposition the Group and drive sustainably better returns over time.

Normalised return on equity (%)

12.2

2011

12.8

2012

11.2

2013

7.8

2014

(105%)

(0.4)

2015

Aim

To deliver return on equity of over 10 per cent in the medium term.


Analysis

Returns declined sharply compared to 2014, reflecting a challenging market environment and actions taken to reposition the Group and drive sustainably better returns over time.

2

Build trusted relationships
with clients

2

Build trusted relationships
with clients

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


4.0

2014

4.0

2015

Aim

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


Analysis

We maintained our relative global NPS at four points above the market average.

Corporate & Institutional Clients' depth of client relationships

Average products per client

Average markets per client

6.3

2014

0%

6.3

2015

2.8

2014

7%

3.0

2015

Aim

To use our network and product capabilities to increase the number of markets and products per client


Analysis

The average number of products and average number of markets per client were stable.

3

Maintain a strong capital
position to support the
execution of our strategy

3

Maintain a strong capital
position to support the
execution of our strategy

Capital ratios (%)

11.8

1.9

3.9

17.6

2011

11.7

1.7

4.0

17.4

2012

10.9

1.3

4.8

17.0

2013

10.5

0.9

5.3

16.7

2014

12.6

1.5

5.4

19.5

2015

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. In November 2015, in recognition of the changing external environment, we increased this target range to between 12 and 13 per cent.


Analysis

Including shareholder support of our rights issue, we strengthened our financial position, increasing our CET1 ratio to 12.6 per cent.

4

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

4

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

Private Banking Clients

Total AUM ($billion)

Number of clients new to segment

60

2014

(2)%

57

2015

1,310

2014

(12)%

1,152

2015

Aim

To grow and deepen client relationships and add new clients.


Analysis

We added 1,152 new clients compared to 1,310 in 2014. Our assets under management (AUM) decreased by 2 per cent.

5

Protect the environment,
contributing to sustainable
economic and social development

5

Protect the environment,
contributing to sustainable
economic and social development

Total Scope 1, 2 and 3 Greenhouse Gas emissions/$million operating income

15.84

2013

14.79

2014

(1.4)%

14.59

2015

Aim

To reduce Greenhouse Gas emissions arising from our operations.


Analysis

We continued to reduce our Greenhouse Gas emissions relative to operating income. Starting in 2014, we include Scope 3 emissions arising from air travel in this measure.