Standard Chartered PLC

John Wilfred Peace - Chairman Andrew Nigel Halford - Group Finance Director & Group Executive Director Peter Alexander Sands - Group Chief Executive Officer & Executive Director Alun Michael Guest Rees - Deputy Group Chief Executive

Rohith Chandra-Rajan - Barclays Capital Securities Ltd. Tom A.

Rayner - Exane Ltd. Arturo de Frías - Santander Investment Bolsa Sociedad de Valores SA Chintan Joshi - Nomura International Plc Manus J.

Costello - Autonomous Research LLP Martin Leitgeb - Goldman Sachs International Ian D. Gordon - Investec Bank Plc (Broker) Jason C.

Napier - Deutsche Bank AG (Broker UK) Fahed Kunwar - Redburn (Europe) Ltd. Leigh Goodwin - RBC Europe Ltd.

(Broker) Chris R. Manners - Morgan Stanley & Co.

International Plc

Good morning, London. Good afternoon, Hong Kong.

2014 was a challenging year and our performance was disappointing. But it was also a year when we took decisive action to refocus our strategy and to reposition the group for the future.

As a board, we continue to believe that there are significant opportunities for the group in the medium to long term across our footprint, and that is why we've been careful not to take any knee-jerk reactions which may damage the long-term prospects of the business. However, at the same time, we need to be mindful that there are significant practice impacting our current performance which cannot be ignored; the imperative to build capital across the industry, the need for ongoing investment in enhancing our systems and processes associated with conduct and compliance, and the need to change the shape of our business to fit the demands of the current economic and regulatory landscape.

As a consequence of this, the board has recently endorsed a number of priority areas. The first of these, we embarked on last week, by providing clarity on our governance, our leadership and succession plans.

And today, we are going further by highlighting a number of other priorities. These are different steps to build on our capital levels, enhancing our return on equity, and continuing to improve our conduct and compliance capabilities.

Andy and Peter will go into some detail on each of these priorities shortly. But let me again stress the board's determination to reshape the business to restore the group's performance and to fully realize the opportunities in our markets.

At the same time, we are determined to continue to raise the bar on conduct and compliance to ensure that the Here for good, our brand promise, is firmly embedded in the DNA of the bank worldwide. And whilst we're comfortable with our current capital position, the board does want to improve our capital trajectory going forward.

And so today, you'll hear a lot about the actions we're taking around risk weighted assets, reducing costs and business disposals, all of which are aimed at strengthening both our Common Equity Tier 1 levels and our trajectory going forward. We believe we've identified strong levers to manage capital accretion over time and, therefore, the board is recommending a final dividend for 2014 of $0.572, resulting in a total annual dividend of $0.86, which is the same level of dividend per share as last year.

Let me now comment on how we remunerate our people, most of whom are not located here in the UK. As this chart shows, for several years we have significantly increased the amount paid out to shareholders by way of dividend, whilst at the same time consecutively reducing the amount paid out in bonuses despite increasing staff numbers over this period.

And in 2014, we are again proposing to pay out more to our shareholders by way of dividends than we pay out in bonuses. This disciplined approach to managing variable compensation has created significant competitive pressures in some of our key markets.

We are, of course, mindful of the external sentiment in some markets on bankers' pay and conscious of our disappointing performance in 2014, but it is essential that we remain able to pay competitively in the markets we operate in and where wage inflation on average is around 5%. Our people are much sought after by our competition, and we are acutely conscious of the importance of retaining and attracting the best talent as we look to execute on our strategy.

It also goes without saying that consistent with past practice, we will only reward our people for good performance as well as for their good behaviors. Now taking all these factors into account and reflecting our performance in 2014, the bonus pool is down – down on last year by 9% and is 27% lower than in 2011.

In light of the disappointing performance of the group, those executive directors on the PLC board throughout the year came to the conclusion that they should show leadership by not taking a bonus for 2014. So to conclude, a brief comment on last week's announcement detailing our comprehensive package of board and leadership changes.

I'd like to take this opportunity to thank Peter on behalf of the board for the immense contribution he has made to the success of the group over the past 13 years, both as Group Chief Executive and as Group Finance Director. Since becoming Group Chief Executive in 2006, the group has more than doubled in size and has been consistently profitable.

His leadership and insight over a period of huge change and challenge for the entire industry ensures that he leaves the group well placed to achieve its full potential as one of the world's leading financial institution. I would also like to thank Jaspal for his very considerable contributions to the business over the past 16 years, and to thank other long-serving board members who are stepping down this year and who have done so much to help position this great bank for the future.

A very big thank you to each and every one of you. Now, we're extremely fortunate to have Bill Winters, one of the most accomplished and respected bankers in the world today, taking over as Chief Executive from Peter in June to drive the bank's next chapter of growth.

Bill brings substantial financial experience from leading a very successful global business and has an exceptional understanding of the global regulatory and conduct environment. He's also a proven leader with a strong track record in nurturing and developing talent.

I'm personally thrilled that Bill is joining our bank at this strategically important time, and I'm sure we all wish him well in his new role. On that note, let me hand over to Andy, who will tell you more about the 2014 results and share with you some of his own observations and thoughts on group performance since he joined Standard Chartered just last year.

Thank you, John, and good morning or afternoon to everybody. And before going through the detailed numbers for 2014, I want to share with you a few perspectives nine months after joining the bank back in the summer of last year.

One thing, it has certainly not been, in line with Peter's original promise, has been dull. During that time, I've travelled extensively to some of our biggest markets, Hong Kong, Singapore, Korea and India, some of our smaller markets, Kenya and Tanzania, as well as our major network hubs in New York and London.

I have met with several hundred of our senior people as well as addressing town hall meetings in multiple locations. The universal takeaways have been that our people are immensely proud of working for the bank.

But depending in part on geography, they are feeling bruised by both the recent trading performance and the external commentary. They are determined to learn from the past year, but then put it behind them and move forward.

In many senses, arriving in the summer of last year, it was excellent timing, coinciding as it did with the newly-established Client and Product Groups commencing their individual strategies, which was subsequently articulated at our Investor Meeting in Hong Kong in November. Pulling together a 300-slide presentation on the bank's strategy had not been something on my original first 100-day checklist.

Since then, I have been heavily involved with Peter, Mike, and the executive team in turning those plans into clear operational and financial targets for each part of the business for the next three years, all of which culminated in the roll out of group-wide scorecards by the third week in January, something that Peter will refer to later. During that time, I also met with many of you and, clearly, very clearly, heard your concerns about business momentum, quality of the credit book, costs, U.S.

regulation and capital adequacy, as well as requests for a more realistic tone in our external market communications. To the latter point, we have, I believe, made the quality of information in our IMS much more insightful, terminated the somewhat ambiguous Pre-close Statements, and at the November Investor Meeting provided clear insights into our business especially relating to returns and the quality of the loan book.

In today's press release, we have refreshed many of the disclosures, which hopefully make the risk section in particular more informative. Unsurprisingly, I have spent a considerable amount of time over the last few months with Richard Goulding and the team in Risk, really getting to understand exactly how our overall operational risk processes work, how proactive we are in dealing with cyclical or sectoral changes, and how we go about provisioning.

What has been very clear to me is that our loan portfolio is extremely diverse and quite difficult to meaningfully draw conclusions from based upon high-level external assumptions. In the vast majority of instances, our exposures are to a client, not to a specific product.

And hence, the assessments on recoverability is much more about the robustness of that client's business model to a downturn, not to depressed prices per se. This involves a detailed upfront assessment by our teams on a client-by-client basis; not something easily capable of extrapolation from external data.

As well as individual assessments, the group also undertakes extreme stress testing exercises to scan for vulnerabilities. Many of the areas currently experiencing heightened stress levels were flagged as concerns several years ago and have been actively managed since.

This clearly doesn't mean we will avoid impairment. And indeed, this year, the year-end review has resulted in a number of provisions being taken particularly in the commodities sector to ensure that as best we can see based upon currently available information, we are appropriately provisioned.

I've also gone through these extensively with the new head of our group special asset management team, as well as our external auditors, KPMG. The majority of the issues relate to advances made several years ago, and very few relate to recent credit positions.

We've also taken a number of assertive actions around other impairment for the year. We have written off the remaining Korea goodwill that topped up a number of commodity exposure impairments, have written down a number of strategic and associate investments, as well as booking a goodwill charge on the exit of the institutional cash equities business.

One of the things that has given me comfort, as I have looked through the loan book, is the group's observed recovery rates, which are very supportive of the net exposures of the provisioning and of the collateral. I was also of the view very early on that we could do more on costs.

And, hence, we pre-announced the $400 million top dollar target for 2015, which is now well on track with, in Retail alone, around 2,000 jobs have been cut or announced and completed in the last three months of 2014 and a further 2,000 expected during 2015. We are now turning our attention to identifying cost opportunities for 2016 and beyond and have, as you all have seen, announced a three-year target to take $1.8 billion of cost out of the business, comprising underlying savings of between $400 million and $500 million per annum and the impact of any divestments.

Before I turn to the slides themselves, one final comment. It was clear to me that our financial framework was no longer suitable for the phase we are in.

In particular, the continuing regulatory imperative for the sector overall, ourselves included, of building more capital headroom, and the need to upgrade the robustness of our conduct in financial crime capabilities. We have, therefore, decided to target two overarching objectives going forward.

Firstly, to get our CET1 ratio between 11% and 12% in 2015 and thereafter and, secondly, to get our return on equity above 10% in the medium term. Unfortunately, several of the actions that solved for the former put more stress on the latter, and vice versa, hence, why we have sequenced the priorities in this way.

Indeed a simple way for showing underlying return on equity of the group would be to separate out the parts that are clearly dragging the overall performance. Korea and the bank levy alone would take our return on equity nearly into double digits.

However, life is clearly not that simple and Peter will discuss in more detail the two primary actions regarding RWA and cost that we will focus on to deliver on these priorities in a moment. So, on to the slides.

The numbers, as you know, are disappointing, with a 2% reduction in income and a 30% reduction in statutory profit before tax, in part driven by higher impairment charges. I will go through several of the numbers on this slide separately.

So, let me just comment on one or two of the items that are more lumpy in nature and less reflective of the underlying performance of the franchise. We have incurred restructuring cost of $181 million in the year, approximately a quarter relates to redundancy programs in Korea, with the balance reflecting the realignment of the client segments and product groups under the new organization structure, including a number of business exits.

Our bank levy has risen a significant 56% to $366 million. In August, as you know, we reached a settlement with the U.S.

authorities of $300 million. And more recently, we carried out a detailed review of the outlook for our Korean business.

Whilst we are encouraged by the recent PDRS trends, and hence the opportunity to improve upon the business' recent disappointing financial performance, it is nonetheless currently loss-making. And hence, we are writing off the remaining goodwill of $726 million on top of the $1 billion write-down last year.

This write-off has no cash effect to the group nor does it affect the capital ratios as goodwill is already fully deducted for prudential purposes. The main normalizing items are therefore the Korean impairment, U.S.

settlement and own credit adjustment. On this basis, adjusted profit before tax for the year was $5.2 billion, down 25%.

So, moving on to the next slide. Normalized earnings per share were, as a consequence, down by 28% to $1.46 and the normalized return on equity was 7.8%.

The balance sheet remains in good shape. Our Basel III transitional CET1 ratio of 10.5% is flat in the second half, despite absorbing 30 basis points of headwinds including model changes and the further foreseeable dividend, as well as having taken greater provisions on commodities exposure, as I referred to.

As I mentioned earlier, 2014 returns are clearly not what we aspire to, and key to those will be improving in executing on the client segment strategies. Peter is going to update you on these in a moment.

But before that, let's look at our performance in a little bit more detail starting with income by segment. As you can see from this slide, notwithstanding decisions to derisk our portfolio in areas such as Retail unsecured, and commodity financing, we restricted the reduction in the top line to 2%.

The biggest reduction in our year-on-year income performance was in the Commercial Clients segment, where income fell by $322 million (sic) [$329] (17:23). This was driven by current year Private Equity valuation reductions relative to realized gains in the previous year, weaker demand for renminbi products in financial markets, as well as exiting a significant number of relationships whose risk and return equation no longer met our requirements.

Income from Corporate & Institutional Clients was down 2% or $225 million. Continued weakness in Financial Markets and management actions taken to optimize returns on the balance sheet, offset gains on the exit of a number of Private Equity investments.

The business has shown early progress on the metrics we set out in November last year, with an improvement in the multi-market ratio from 2.6 to 2.8 and the multi-product ratio increasing from 5.9 to 6.3. Risk weighted assets increased by 10%, primarily due to the impact of Basel III and policy methodology and model changes.

Excluding this impact, risk weighted assets were flat. Income from Private Banking Clients was up 4%, driven by strong performance in Greater China.

It is worth noting that we have exited a number of subscale businesses in the period, and excluding the impact of these discontinued operations, income from Private Banking Clients was up 6%, driven by net new money inflows of $6 billion. The business has also increased the number of relationship managers during the year and added 1,300 new clients including early successes from the internal client referral program.

Retail Clients income of just over $6 billion was up 2% on the year. Strong growth in income from the Priority segment, up 16%, offset a decline in the Personal segment, which was down 5%.

This is consistent with our strategy to focus on more affluent segments and derisk our unsecured portfolios, particularly in Korea. We continue to reshape our business in Korea and during the year have exited 60 branches and almost 300 staff.

Excluding Korea, Retail Client income was up 4%. So, turning now and looking at income by product.

Transaction Banking income of $3.8 billion was down 3% year-on-year. Trade Finance, which accounts for just over half of this income, was down 5%.

Margins have remained broadly stable though average assets were down 4% in the second half, reflecting a slower trade environment and continued assertive management of low returning risk weighted assets. Cash Management and Custody, which accounts for the remaining part of the income, was flat year-on-year.

Margins were driven lower by the significant liquidity that persists across our key markets. But this was offset by good growth in average balances and record clearing levels as we continue to win multi-country transaction banking mandates.

Income from Financial Markets was down $456 million year-on-year. In Foreign Exchange, strong volume growth in cash FX, up 47%, and FX Options, up 89% has been offset by ongoing spread compression.

In Rates, low volatility and low interest rate continue to impact both volumes and spreads. Corporate Finance income was down 1% year-on-year as high levels of liquidity resulted in slightly increased repayment levels.

Wealth management income was up 17% and is benefiting, in particular, from the Prudential bancassurance partnership as well as an accelerating shift towards servicing high net worth individuals in the Retail clients segment, as I mentioned earlier. Income from Retail Products was down 4% or $206 million year-on-year, impacted predominantly by our continued derisking of the unsecured portfolio.

Within this, income from Cards, Personal Loans and unsecured lending was down 8% or $212 million year-on-year, following a 14% reduction in balances to $20.5 billion. Income from mortgages was down $59 million or 6% as property market cooling measures muted volume growth in a number of markets.

The other category on the slide includes income from Asset and Liability Management, Lending and Portfolio Management and Principal Finance. Asset and Liability Management income was up 19% to $653 million and benefited from the more efficient deployment of surplus renminbi customer deposits, the majority of which was recorded in the first half.

Second half income of $233 million is more reflective of the underlying performance. Lending and Portfolio Management income fell 4%, reflecting lower balances as we exited some lower-returning relationships.

And finally, Principal Finance income was up 17% year-on-year. The gains on the exit of a number of Private Equity investments at positive multiples more than offset lower revaluations.

So, moving to expenses. As you can see from this slide, underlying costs of $10.2 billion increased by less than 3%.

During the year, we have faced further regulatory cost increases of $237 million, which without which our overall underlying costs would have been flat. To offset these increases as well as inflation of nearly $400 million, the group has delivered cost efficiencies in 2014 of some $200 million, of which we are now doubling to over $400 million as our target for 2015.

We are now working, as I said earlier, on a pipeline of further sustainable productivity improvements for 2016 and 2017. Taken as a whole, these represent a significant program of initiatives that will deliver sustainable cost savings of some $1.8 billion in total over the next three years.

Peter will pick this up later. Turning to impairment.

Loan impairment is up $524 million or 32% to $2.1 billion for the full year. Approximately 40% of this arises in the Retail Clients segment, which is 3% lower than the previous year, benefiting primarily from improved PDRS in Korea.

The remaining $1.2 billion loan impairment arises in the Corporate & Institutional and Commercial Clients segments, where, since we spoke to you last, further weakness in commodity markets has impacted a small number of exposures that we have been closely monitoring for some time. Other impairment, excluding goodwill, was $403 million.

The main increase in the year included the impairment on the China warehouse fraud mentioned in our half year results and impairment of certain strategic and associate investments. Given the further deterioration in commodity markets this year, I want to cover our commodity portfolio in a little more detail.

Our total commodity exposure is now $55 billion or 10% of the group's overall total net exposure. The vast majority of our commodities exposures is trade-related, evidenced by the short tenor of the book, with 74% being less than one year.

This allows us to act quickly to changes in the external environment. In fact, our commodities exposure is down $6 billion in the second half of the year alone, as we actively managed the portfolio.

When thinking about vulnerability to a sustained bear market, there are some important factors to consider. 60% of our exposure is the global majors, large state-owned enterprises or are investment grade, which we expect to prove highly resilient even through a sustained downturn.

A further 32% is short-term or Trade Finance related and less than one year in tenor – again, highly resilient. 4% is to fund structured project or Corporate Finance with very high levels of collateral.

This leaves just 4% of the portfolio potentially more vulnerable to prolonged weakness in commodity prices. So, what actions have we taken to manage the risks here?

We have conducted an in-depth review of our Traders portfolio and, as a result, we have exited 150 relationships since early 2013, have reduced exposures since the half year by $2 billion or 6%, and have focused upon commodity traders with sound internal risk management capabilities and good access to other liquidity sources. Two years ago, we identified which clients in our Producers portfolio might be potentially vulnerable to a sharp correction in commodity prices.

We have actively managed those names since, reducing exposure, taking additional collateral, and exiting relationships were necessary. Whilst we have seen non-performing loan formation reflecting the extremely low level of some commodity prices, refreshed stress tests have identified no new names to add to this list.

Turning to oil specifically, which represents around half of our commodity exposure. 98% of our oil producer exposure is either to state-owned enterprises or to low cost of extraction companies who have a breakeven price below the current market price.

The real situation may be somewhat better than this, in fact, as we have conservatively allowed no slowdown in these companies' capital expenditure, no refinancing, no depletion of cash balances for a period of one year. We simply do not have exposures to high cost of extraction parts of the industry.

The final point of context for our portfolio is that many of our markets actively benefit from lower commodity prices. Even oil-producing markets like Ghana are net importers of oil and markets like India are receiving a real boost from lower prices.

In conclusion, we have conducted a very thorough review of our commodities exposure and the main areas of potential vulnerability lie in a very small proportion of our portfolio, which we have been very actively managing. So, what about the overall credit quality of the book?

As I have looked across the group over the past nine months, there are a number of observations that I want to make and share with you that give me comfort in the credit quality overall. Firstly, the book is becoming increasingly diverse.

No single industry now accounts for more than 16% of Corporate loans and advances and our top 20 exposures have reduced as a proportion of our CET1. The book remains predominantly short-dated, with nearly two-thirds of Corporate & Institutional and Commercial Clients exposure being less than one year.

We are holding increased levels of collateral, up 4%, with high levels of collateralization for longer term and non-investment grade loans. Over 40% of the corporate portfolio is investment grade and this mix is increasing.

While Early Alerts are not always the most accurate predictor of subsequent impairment, it is nonetheless encouraging that recent Early Alert trends have been stable. Delinquency rates in our retail book have started to improve, following continued derisking of the unsecured book and an improved PDRS trend in Korea.

CG accounts are stable compared to the half year. In fact, they're down compared to the half year.

And whilst non-performing loans are up slightly, 4% in the first half, the increase does relate to a number of accounts we have been actively managing for some time. And finally, market risk is predominantly client-driven and remains very low in absolute terms.

So in summary, the current elevated level of loan impairment reflects increases arising from India and China, as well as our commodity exposures in these and some other markets, including Indonesia and Africa. We flagged these areas of risk early and have been proactively managing them for some time.

So, change the topic, move on to the balance sheet. The balance sheet is in good shape, very diversified, well structured, and highly liquid, with deposits up $29 billion or 6% in the second half alone.

We already more than meet the minimum Basel III requirements for both the Net Stable Funding Ratio and the Liquidity Coverage Ratio. Loans and advances to customers are down $16 billion or 5% in the second half, driven by continued derisking of the retail unsecured portfolio; reducing exposure to the energy, mining and quarrying sectors; more assertive management of low returning relationships; high levels of liquidity resulting in early repayments; and currency translation.

Actually, on a constant currency basis, loans and advances to customers are flat year-on-year. As a result, our advances-to-deposit ratio is now below 70% and our liquid asset ratio is 32.2%.

In summary, we finished the year with our balance sheet in good shape. Turning to capital.

Our transitional CET1 ratio of 10.5% is flat in the second half. This is after absorbing a combined 30 basis point deduction for model methodology and policy changes, the foreseeable dividend and the settlement with the UK with U.S.

authorities as well as the impact of the increased UK bank levy. This is a clear demonstration of the group's strong underlying equity generation of some 50 basis points in the year, above our historic trend of 30 basis points.

Furthermore, our end point CET1 ratio of 10.7% is 200 basis points above our known minimum requirement, with capacity, therefore, to absorb future add-ons such as the countercyclical buffer as it is phased in. Furthermore, we have maintained a strong level of Total Loss Absorbing Capacity, or TLAC, above 20%, and our leverage ratio at 4.5% is significantly ahead of our 2019 requirement.

We currently plan to issue AT1 capital this year as we look to manage total capital efficiently and build our AT1 levels over time to the amount permitted by applicable regulations. Clearly, we are in an environment where we need to manage capital requirements dynamically over time, balancing it with delivering returns to shareholders.

So, where are our priorities going forward? Simply put, our financial priorities are to accrete capital to a CET1 ratio between 11% and 12% in 2015 and thereafter and to deliver return on equity of over 10% in the medium term.

These priorities replace the flexed financial framework set out in November 2013. The regulatory environment continues to evolve, typically requiring the industry to hold increasing levels of capital.

Against this backdrop, the group will prioritize actions that organically enhance the CET1 ratio whilst acknowledging there will be an impact on the return on equity. Based on our current best view of the regulatory outlook, we are very confident in our ability to reach a CET1 capital ratio of between 11% to 12% in 2015 and thereafter.

Building the group's return on equity to an attractive level, sustainably above the cost of equity is key to delivering long-term value to shareholders and remains our focus. So to summarize, the board took action to clarify leadership and succession last week.

And today, we are setting out the actions around our commitments on capital, returns and also around conduct and compliance. 2015 will be about accelerating management action and executing the plans we set out in November for the four client segments.

We are prioritizing organic capital accretion. And through a series of planned asset disposals and business exits as well as continued management of low-returning relationships, we expect to release $25 billion to $30 billion in RWA over the next two years.

To protect returns, we are targeting $1.8 billion of sustainable cost savings over the next three years, and we continue to raise the bar on conduct and compliance. We have a number of material initiatives underway, which Peter will go through in more detail.

Combined, these represent a significant program of initiatives that will create a platform (34:49) from which we can build the returns to an attractive level. Peter will talk you through each of these board commitments in a little bit more detail now.

So to close, whilst 2014 was a very difficult year, the staff around the bank and the management are absolutely determined to restore the group's performance levels. Thank you and I'll now hand back to Peter.

Thank you, Andy, and good morning to those of you in London and good afternoon to those in Hong Kong. Andy has covered our 2014 numbers and I'm not going to repeat what he said.

It was a tough year. Our performance was disappointing, and we are acutely aware of the impact of this for you, our shareholders.

We faced a perfect storm; a 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. As a result, we saw intense pressure on margins and volumes, a significant uptick in impairment, and a sharp increase in regulatory-related costs.

And of course, it wasn't all about external factors. Some of the decisions we took in the past look less good now than they did at the time.

Korea, for example, which in 2014 made a loss-before-tax of $145 million. Not everything we did was as well executed as it should have been.

For example, the upgrade of our transaction surveillance systems back in 2007, shortcomings here ultimately resulted in the civil penalty of $300 million we paid last August. We've taken a range of actions in response to the way our world has changed; some tactical, some more fundamental.

I know some of you think we should have acted faster or more dramatically. Perhaps that's right.

Perhaps we haven't explained properly what we've done. The fact is that in 2014, we did more to change the way the bank is run than in any year since when I first arrived.

We've overhauled the strategy, making it sharper and more focused. We've reconfigured the organization to get better alignment behind our strategic priorities.

We've attacked the cost base. We've redeployed capital.

We've disposed of or are in the process of disposing 15 underperforming and non-strategic businesses. We've derisked portfolios and segments such as unsecured or correspondent banking.

We've stepped up the pace of our program to raise the bar on conduct. And while some of these changes actually made 2014 performance worse since we sacrificed income or increased investment, I'm confident that the way we're reshaping the bank will get us back to a trajectory of profitable, sustainable growth, delivering returns above our cost of capital and, thus, driving the share price.

I should make clear that we are not counting on the world to do us favors. So while do expect a gradual return to a more normal interest rate environment, and this year we've already seen more volatility in currency markets, we're not counting on headwinds turning to tailwinds to boost our performance.

We are focused on the levers that we control, the things that we can do, to improve returns, increase productivity and return to growth. Our performance priorities are clear.

First, we must dispel concerns about capital, hence the clear target of an 11% to 12% CET1 ratio in 2015 and thereafter. Second, we must improve returns, hence we are setting a target ROE of over 10% in the medium term so that we are sustainably delivering above our cost of capital.

This will take a bit of time to achieve, not least because, as Andy said, the actions we're taking to strengthen the CET1 ratio make this more difficult. So, what do we have to do to make this happen?

I'll answer that by addressing the obvious big areas of shareholder concern – capital, costs, credit quality and income growth – expanding a bit on what we've done already and, more importantly, telling you what we are doing now. I'll also talk about conduct since this, too, is vitally important to the future success of the bank.

As I do this, I want to make clear that each element fits into an overall agenda of action and that all of these initiatives are already captured in the scorecards of the individual Clients and Product Groups' functions and geographies across the bank. On capital, we start from a strong position.

In terms of our CET1 ratio, at 10.7% on an end-state basis, we have a 200-basis-point buffer relative to known regulatory requirements. We weathered the Bank of England's stress tests comfortably.

We're strongly placed from a leverage and TLAC perspective. However, we understand market concerns about forward trajectory given the uncertainties about how regulatory requirements will evolve.

Although it is impossible to be definitive, a combination of RWA inflation and escalating expectations do point to a continuing upward drift in regulatory requirements. That's why we put such a focus on capital accretion, so that we can absorb regulatory changes and fund growth whilst also improving the ratio.

We accreted some 50 basis points in 2014; 20 basis points in the first half, 30 basis points in the second half. To achieve this, we cut some $9 billion of low-returning RWA, largely from Corporate & Institutional Clients, and saved another $2 billion from disposals.

We now plan to pull these levers even harder. Over the next two years, we plan to cut a further $25 billion to $30 billion of RWA from low-returning client relationships and underperforming businesses.

We are making good progress on this already. And by taking these actions, we are confident that we can achieve our target CET1 ratio of 11% to 12% in 2015 and thereafter.

Costs. In 2014, we kept a tight grip on costs.

Whilst headline expenses went up 5%, over half of this increase was due to the UK bank levy and restructuring costs attached to the very cost actions we are taking. Underlying expenses went up less than 3%, driven largely by increased spend on regulatory and conduct priorities.

In November, we announced a $400 million target for cost savings in 2015. We are more than on track to achieve this target.

And this $400 million number relates to our underlying business, i.e., it excludes cost saved from business exits and disposals. Combined with the impact of such actions, we're on track for cost savings to headline costs exceeding $600 million in 2015.

The progress we've made in attacking the cost base underpins our confidence in achieving $1.8 billion in cost savings over the period 2015 to 2017. Where will the rest of the savings come from?

Some will derive from the full year impact of actions we've already taken. For example, the decision to exit equities, which will give us $100 million savings in 2016.

Some will be the result of further peripheral business exits or withdrawals that we are currently pursuing. But most of the future savings will be from achieving sustainable efficiency improvement in our big markets and in our core business activities.

We're stepping up the pace of digitization, automating and reengineering key processes, standardizing technology platforms. For example, the only way we'll get the retail cost-to-income ratio down to our target of 55% is through accelerated digitization of products, of channels, of internal processes.

And the only way we can manage the ever-increasing complexity of regulation efficiently is through technology. So, we're not achieving cost savings by cutting back on investment; we're actually increasing investment in technology in order to achieve sustainable improvements in productivity.

Asset quality. Andy has already spoken in some detail about asset quality.

I just want to offer a more top-down perspective on where I think we are at. First, it should be no surprise that impairment increased in 2014.

GDP growth in key markets has been slower, commodity prices fell sharply, and we face some specific challenges in particular markets, for example, PDRS in Korea, fraud in China. Of course, we could have fared better.

With hindsight there were clients and situations we should have avoided, but we were never going to be entirely immune to the shift in the credit environment. Second, the actions we have taken to derisk are having impact in India, in China, in our commodities book, in our unsecured portfolio in Retail.

Whilst there are still many uncertainties in our markets, I'm very comfortable with our provisioning and with the shape and quality of the book. In Retail, whilst impairment remains at an elevated level, the indicators suggest some improvement, most notably in Korea.

Looking at the early data for this year, PDRS filings are now less than half what they were six months ago. In Corporate & Institutional and Commercial, the signals are more mixed.

But most of what we are dealing with now and provisioning for are accounts that have been troubling for some time. The inflow of new problem accounts into Early Alerts, CG12 or NPLs has slowed.

Whilst it would certainly be premature and tempting fate to call the peak, and there are areas we're monitoring and managing closely, we do not see signs of further deterioration. So, what about income?

How much have we sacrificed to achieve our objectives in capital, cost and risk? Where is the growth going to come from?

It is absolutely the case that we have deliberately given up income. The annualized income impact of exits and disposals from 2014 and planned for 2015 is some $450 million, although the 2015 impact depends on the timing of certain transactions.

We will strip this out of our reporting of underlying performance for 2015. On top of this, derisking and RWA savings in 2014 and the $25 billion to $30 billion of incremental RWA savings we planned to 2015-2016 will create a further drag on income, offset by our ability to redeploy into more attractively returning assets.

So, the actions we're taking have had and will have a muting impact on income momentum, particularly in 2015. So, where will the growth come from?

The best way to answer this is to look at the individual Clients segment and talk about the underlying drivers of income and returns and about what we're trying to achieve, building on what we said in November. Let me start with Retail Clients.

Here, the priority has been to get the cost down, shift the focus to more affluent clients and accelerate digitization, as well as to derisk from a conduct and credit perspective. It's all about getting the platform in more robust shape to support sustainable growth.

Retail Clients income was up 2% year-on-year but up 5% half-on-half, driven by Wealth Management and the shift towards more affluent priority and business clients. These will continue to be the key driver of income growth.

Indeed, we aim to increase the percentage of income from priority and business clients to 43% in 2015 from 38% last year. Private Banking.

Income growth in Private Banking was 4% headline, 6% excluding disposals. We see Private Banking as a steady and sustainable source of growth, although at this stage it's obviously very small in the overall scheme of the bank.

In 2015, we're looking at on-boarding some 2,000 new clients and to achieve double-digit AUM growth. Commercial Clients.

This is also relatively small right now but represents another huge opportunity. After a year of restructuring and remediation, with income down 22%, our priority for 2015 is to get back to a growth trajectory, strengthening the front line, leveraging the network, growing the client base.

We're aiming to on-board around 3,000 new-to-bank clients in 2015. Given that the Corporate & Institutional segment represents about 60% of the group's income, this is the crux of the issue.

Income fell 2% in 2014, impacted by a combination of derisking and RWA actions as well as pressure on margins and the impact of low commodity prices and low volatility. This overall picture disguises some areas of strong growth.

For example, Institutional investors, the institutional investors sub-segment, saw 18% income growth at attractive returns in 2014. And this is a big opportunity.

In Corporates, right now it's all about improving return rather than income growth per se, and achieving this is all about leveraging the network and deepening relationships to drive non-funded income, hence our focus on the multi-market and multi-product ratios that Andy talked about. In 2015, we're looking to take the multi-product ratio from 2014 figure of 6.3 to over 6.5 and the multi-market ratio from 2014 number of 2.8 to over 3.

We're also focused on non-financing income, targeting to increase the current proportion from 41% to more than 43%. These metrics are the key to driving good income growth; growth that lifts our return on risk weighted assets in this segment.

Step back from the segments and look at our markets and the scale of the income opportunity is evident. Despite all the turbulence and shifts in sentiment, the underlying drivers of economic growth – demographics, urbanization, investments in infrastructure – remain immensely strong.

Demand for financial services is rising rapidly. Our challenge is to capture these opportunities in a disciplined, return-focused way to drive shareholder value.

Before I close, I want to talk briefly about our conduct agenda since this is right at the top of the management agenda. We have launched a comprehensive program called Raising the Bar on Conduct, which encompasses every aspect of conduct, touches every person in the bank.

We recognize that we can't claim to be here for good unless we make every effort to ensure that good conduct informs every interaction and is embedded in every decision we make – from strategy, client on-boarding, product design, to remuneration. Amongst the more critical elements of this program, I would highlight the Financial Crime Risk Mitigation Programme, which encompasses over 50 separate projects and initiatives to remediate and reinforce our controls and capabilities in this vital arena.

This is a massive multi-year investment program. Playing a stronger role in the fight against financial crime is a strategic imperative for Standard Chartered.

To complement stronger controls, we're also derisking our client portfolios. For example, we have exited a significant number of correspondent banking relationships, mainly in Latin America and Central Europe.

We have also exited around 70,000 SME relationships over the last 18 months. And we're putting strict limits on the types of new client we're prepared to take on in certain geographies and sectors.

To reinforce our governance to these efforts, we've established a board-level Financial Crime Risk Committee, with a combination of experienced NEDs, non-executive directors, and expert advisors. The actions we've taken and are taking on capital, costs, risks and conduct are all part of a package.

We are reshaping the bank to respond to the way our world has changed. We're reshaping the bank to ensure we can fulfill our aspiration to bank, the people and companies, driving trade, investment and the creation of wealth across Asia, Africa and the Middle East.

And we're reshaping the bank to get back to sustainable profitable growth, delivering returns above our cost of capital. This will be the last occasion on which I present a set of results to you, and it's obviously one of the more challenging sets of numbers I have had to explain.

In my 13 years at the bank, I have seen lots of ups and downs. Standard Chartered today is very different from the bank I first joined as Finance Director in 2002.

That year, we made about $1 billion in profits. And in 2006, when I became CEO, we made about $3 billion.

Since then, of course, we've navigated the global financial crisis, roughly doubled in size and confronted all sorts of new challenges. The world of banking has changed far more dramatically than most people realize and, in my view, it's only part way through a fundamental transformation.

I will leave Standard Chartered proud of what we have achieved and confident about what the future holds for this extraordinary institution. In Bill Winters, I have a successor just right for the task.

I'm delighted to be passing the baton on to a bank of such caliber, to a leader of such strength. Bill will inherit a bank with a superb client franchise, a unique network and an exceptionally strong balance sheet.

Perhaps even more importantly, he will inherit a fantastic team of people; professional, collaborative, truly believing, truly committed to being Here for good. I'd like to end by saying my final thank you to our clients, my final thank you to our shareholders, and my final thank you to all the people of Standard Chartered.

This last couple of years has been pretty tough, but we have demonstrated resilience and an ability to adapt and reinvent. I know that Standard Chartered will, once again, show the world what a great bank this is.

Thank you. John, Andy, Mike and I will now take questions in London; Jaspal, Ben, May and Julian (55:07) will take your questions in Hong Kong.

Thank you very much.

Well done, Peter. Well done.

It's the usual procedure. If you can – if I'll point you out, and then we'll wait for the mic.

And then, if you can say your name and your institution. So, why don't we start on the right-hand side of the front.

Thank you. Good morning.

It's Rohith Chandra-Rajan from Barclays. Thanks very much for the new targets.

I guess, the two areas I'd like to focus on are RWAs and costs, which seem to be the key, really, to your 10% ROE target, and similar questions actually on both. So, the risk weighted asset reduction of $25 billion to $30 billion, could you just clarify whether that's a matter of gross number, so really how we should think about the evolution of the balance sheet, sort of it's about 8% of risk weighted assets?

And related to that, how much is from disposals? So, RWAs net or gross and how much of that is from disposals?

And your second question?

Second question was on costs. So the underlying cost reductions, so ex disposals, $400 million to $500 million a year, is a little bit above where inflation was in 2014.

You also had regulatory costs on top of that. So, just wondering whether you're guiding to something like flat costs over the next few years or whether there's some underlying cost inflation or reduction.

(56:38) RWA. Well, we can do them in reverse order.

On the costs one, as you say, we do face inflation. So, we've got $1.8 billion over three years.

On the other hand, inflation, particularly salary inflation, runs at about 5%. And to keep the math simple, we have a cost base of roughly $10 billion, so it's quite easy to do the mathematics there.

The two other factors you have to think about are the future trajectory of regulatory costs, which is difficult to predict (57:11) precisely. They've clearly risen very sharply over the last couple of years.

And then, the pace of income growth, which in and of itself also can have a natural impact on costs. So, that's the way you can think about the dynamics of the $1.8 billion and how it translates into the cost trajectory for the group as a whole.

Do you want to pick on the point on RWA?

Yeah. On the RWA, it's taking gross kind of the cost out (57:40).

So, it is looking at where we are getting lower returns coming through. And it is also primarily on an organic basis, running the business and its operation, it will be the delivery of it.

Clearly, as we run the business, we will be looking at opportunities to further grow our business, but this is specifically taking out areas where the returns are just not where we need them to be.

Okay. So, we go to John-Paul (58:06), and then we can slip back.

We'll come over to this side in a minute.

Thank you, Peter. So, John-Paul Crutchley from UBS.

I'm just sort of wondering if we can step back actually (58:16) just trying to reflect on the sort of shape, of where we think Standard Chartered is once you've gone through this sort of rebasing, reorganization in terms around capital and cost. Because if (58:25) 10% return on equity bank, given where the dividend currently is, that looks like you're going to be paying out roughly half of that earnings, at least in the short term, by way of distribution.

So, I mean, should we really thinking about this as being a lower growth fundamentally, a more (58:44) mature bank in the markets you're operating in? Maybe a question for the Chairman, so why was the dividend not given greater scrutiny, perhaps, in terms rebasing to actually facilitate greater growth longer term?

(58:56) attention around returns, the dividend and capital generation to fund the growth, but you've got quite a degree of sort of a sort of straitjacket around you.

Should I start then, John, and then if you want to...

Yes, of course, yeah.

...add your comments. Look, we're making it very clear that our focus right now is on the capital position and on returns.

And in 2015, the priority is capital. However, we are a bank which is positioned in some of the most attractive growth markets in the world and the economics of the bank are better when it is growing.

So, I do not see in medium term a tension between growth and returns. I actually think they are mutually reinforcing.

But we need to make sure that that growth is delivering the right returns. And hence, the focus on RWA deployment, and making sure that low-returning RWA, we sort of get it out of the system.

In terms of dividends, we're very, very conscious of the importance of dividends to our shareholders. And we are very conscious of the decisions we make about that in the context of our capital accretion objectives.

John, did you want to...

Well, I would just echo what Peter said. The board is really focused on capital.

You can see that from the presentation today. And clearly, shareholder, shareholder value and dividends is something that we, clearly, on a regular basis, talk about with a great deal of importance.

But I think today, 2015, the board is comfortable that we have adequate levels of capital. We've talked today about trajectory.

That's very important so that we can accrete capital going forward. But we're soon going to have a new Chief Executive.

And I think, clearly, what Bill will do, will continue to focus on capital, on issues surrounding dividend and so on. But I think at this stage today, the board is very confident that we can achieve between 11% and 12%.

And that's why both Peter and Andy, in their presentations, really focused on that as a key priority.

Tom – should we go on this side? We'll take a few on this side then.

Yes, sir. Thank you very much.

Tom Rayner from Exane. I wanted to ask a question, Peter, to give you one last chance to get my name right.

So, you've done it.

I know.

Thank you.

I know. I did well, didn't I?

Can I just firstly ask on the new 11% to 12% capital target range? I mean, it does look realistic.

I would suggest maybe towards the top end of the range once you put a sort of normal sort of management buffer on top of all the likely minimum requirements. But that target, I'm assuming, and this is really the first question, will take account of any future RWA inflation that might come around as a result of various proposals that are out there?

So, you'll still be targeting 11% to 12% irregardless of what the RWA base is. And then, I have a second question on the revenue side, please.

I think the short answer to that is, within reason, yes. But we know what we know sort of thing.

But, yeah, we are planning to get to that ratio, absorbing the things that we know are coming down the pike in terms of changes, although the magnitude of some of those is quite difficult – or the timing of them is quite difficult to know. Is that reasonable?

Yeah, I think so. I mean, we start with a sort of 200 basis point headroom.

We know there are things coming down, as Peter says, quantifying some of them is a bit tricky. But our view is 11% to 12%, net of those, that is where we should be.

Perfect. Thank you.

And then just back to the $25 billion to $30 billion RWA. Now I know this might not be a net reduction, but the thought that a lot of it would be to be consistent with the capital.

So my question is really why, when trying to calculate a revenue impact, would I not just take the revenue to risk weighted asset ratio, call it, 5% and apply it to that number and come up with $1.5 billion to $2 billion per annum, why would that not be (01:03:27)?

Well, because we're not stupid.

Funny comment there. (01:03:34)

I mean, I'm sorry to answer it like that, but we did say we were going to take the low returning RWA, right? So it is not going to be the average.

And also that we are going to be redeploying some of it. So I mean you should anticipate pretty muted RWA growth.

But it will be a combination of growth at attractive returns and us being very aggressive on pruning the RWA that is currently deployed, that is generating substantially below the average income per RWA.

Half the average?

Substantially below the income on RW – and actually, our experience has been thus far, it is quite difficult to predict because actually when you go into these situations, in individual client relationships, sometimes what you do is you actually exit the relationship and the RWA falls out. Sometimes what you do is you end up with a repositioned relationship generating substantially more return on the same.

And that's actually been – we've been surprised on the upside on that.

You should also assume in the future I'll not remember your name again after that question.

I've got a whole new chief executive to (01:04:58)

You're confused. I think you should just – why don't you just hand the mic next (01:05:03).

Thanks.

Thank you. It's Arturo de Frías from Santander.

Two questions also on revenue impacts and capital ratios. Similar to what Tom asked but with a slightly different angle.

On the revenue side, you say that the $450 million revenue impact has been calculated taking into account measures already taken and measures to be taken in 2015. So my question would be, are those most of the total measures that you need to take, i.e., if I ask in a different way, out of the $25 billion to $30 billion RWA reduction, how much of that should happen in 2015 and, hence, how much of the revenue reduction can be compared with the $25 billion to $30 billion, i.e., when you finish cutting your $30 billion RWAs, the total revenue impact is going to be $450 million or is going to be more than that?

What's your second question?

The second question is on capital ratios. I just would like you to help me understand why you think 11% to 12% is enough, because we have heard in the last few days that every other UK bank is targeting 12%, if not, 13%, and that trend is also expanding to Continental Europe.

I mean, we are seeing simpler or at least less diversified, less global retail operations targeting also 12% fully-loaded core. I mean, you're clearly a more global bank, you're clearly present in more volatile markets, why you think 11% to 12% is enough and not 12% to 13%?

Thank you.

Okay. I'll give a high-level response to both and then Andy can work out whether I got it right or not.

On the income, the first point is a clarification one. The $450 million refers specifically to income related to exits or disposals that we will in the future exclude from underlying numbers because they will be in the category of discontinued businesses.

However, the income impact of things like derisking or RWA is on top of that. So the $450 million is just very specifically, is things like our Hong Kong consumer finance business, the equities business, the UAE SLE (01:07:30) business that we separately identified.

So there will be an income impact from RWA stuff as well, but by its nature, it is not so easy to split out in quite the same precise manner. On the 11% to 12%, none of us know quite where capital ratios are going to end up, sort of five years, 10 years from now.

But what we do know is that our known minimum requirements at the moment are 200 basis points lower than our capital ratio. We also know that the trend is for that 8.7% to drift upwards, we want to ensure that we maintain a substantial and sensible buffer above that number as it drifts upwards.

And we think that 11% to 12% represents a sensible place for us to be. If that turns out some years down the road that it needs to be a different one, then presumably, it won't be me, but other people will make a different decision.

But this is an attainable target and maintains a buffer relative to known requirements that is, to my knowledge, stronger than any other UK bank has. Was that all right?

Yeah. I think that says (01:08:57) pretty good, actually.

Yeah. I mean, I would look at – we got this year – sorry – got 2014 year, we've got $450 million of income, which broadly won't be there in 2015 because we have disposal businesses or we are in the process of it.

And as on the same slide, there's the $300 million drag last year in the income from the work we did on risk weighted asset reductions. There will be some more of that this year, which, clearly, will have an impact upon income.

I think just on the sort of 11% to 12%, bear in mind that things like the G-SIFI sort of requirement do vary between banks. And we are at the lower end of that and is probably one of the more stable ones in there.

So, purely looking at this in absolutes, there's a debate about whether it should be absolutes or whether it should be relative headroom. And also, I think there's a piece about being realistic about where we are now.

If we get to the stage where we're having a nice discussion about popping out above 12%, that's fantastic. But for now, we're below 11%.

We need to get above 11%. And that's where we're going to focus.

Right, sorry. I wasn't paying attention.

Let's go over here to the right. Haven't drunk enough coffee this morning.

Hi. Chintan Joshi from Nomura.

Can I kind of carry on on the the RWA topic. It seems to me, you know – firstly, kudos that you seem to have presented a plan that's at least halfway through when new management would take this.

So, you're kind of giving it in a reasonable shape onwards. But why not more RWA reduction?

You're thinking about taking 16% of the cost base out. Even if I do some of the math, it feels like you will need quite a substantial revenue improvement to get to about – to your 10% or more ROE target.

It seems like it's a little light on RWA reduction, especially, when we are talking about regulatory requirements going upwards in the future. So that's the first question.

Second is on cost savings, I was quite – I mean, I've always regarded Standard Chartered as tech savvy, so when in your cost saving description you said more digitization, kind of a bit surprising for me, I would have thought Standard Chartered would already be quite on top of digitization at least. And I think on Retail side, feels more like it's a scale problem rather than a technology problem, so if you could elaborate on that.

And one very quick one, on Trade Finance – or rather Transaction Banking, perhaps for Andy, if you take a mark-to-market of the kind of commodity price moves, should India Trade Finance book be down automatically just on the back of collateral values going down? Thank you.

Okay. Why don't we have fun with this one?

We've got three different questions. Maybe I'll start on the technology one.

Perhaps you could talk, Mike, a bit about the practicalities of RWA reduction and why one has to take quite a balanced approach to that, and you can have the fun with the Trade Finance one. On the technology, well, I'm delighted that you think we're quite advanced on technology and frankly, that is the case.

If you look at the percentage of processes or transactions that are done on a straight through basis, and degree of standardization of platforms globally, I think we benchmark very favorably against any bank in the world. However, what we would say is that banks are probably less digitized than many other industries, partly because of the complications of regulations and jurisdictional issues, and that there is a massive opportunity for banks to become even more digital.

In fact when you think about it, what a bank is, none of what we do as bankers is inherently physical. So, we shouldn't really have all this paper and all this kind of stuff.

We should be able to digitize the whole thing. Now, we are not there yet.

But if you really, really want to make banks substantially more productive, which, I think they will have to become given the scale of the regulatory costs and capital requirements, then the only answer is through intense use of technology in absolutely everything that we do. So, we think we are in a good place relative to peers, but we think that there is a hell of a lot more to go for.

Mike, if you want to talk about the RWA issues.

Yeah. I mean, the RWA, this is not a new thing.

We've been at this now for a number of years. So, last year, we got RWA efficiencies around $9 billion – I can't actually remember the figure from year before, but this has been a multi-year – so, you've got to look at it in terms of a multi-year program.

And what we're doing is turning the pressure up on that program. And as Peter said earlier, the challenge here is that you want to get the balance between, if you're in a relationship, the first thing you want to do is to see if you could squeeze out to get the multi-product – multi-market ratio up because that gives you the kicker on return.

So, it's not as blunt as saying, we're not only seeing it matures, (01:14:02) then you're out. Because that misses the opportunity.

If you're in a relationship, the first thing you need to try to do is get the return up to get the RWA optimization. That requires a really detailed focused intensive process.

And the pinch point for that doesn't naturally come up every year. So where you tend to be losing return is on the bilaterals, on the standby facilities on those types of transactions, which may be one year, two years to three years.

So, the point of real leverage with the relationship is when the maturity comes up on that standby facility. So, both – the timing and the tenor of the maturity of it, which gives you a leverage, but also the intensity of focus, because what you really want to do is to get the return up and not exit the client.

You want more RWA efficiency rather than actually getting the RWA back. Because if you get the RWA back, you then got to find another client too (01:15:00) to invest in – at the return and you start again.

It's always better to start with a client you're already banking where you've got some sort of depth to (01:15:06) relationship and longevity. So, there's no easy silver bullet to this.

It's about a very intensive process, getting the timing right, and this is something we've been at for two years to three years. And what we're doing is turning the intensity up to say, when you got returns down at 1% return on risk weighted assets, that's – as you get up, going up, and dealing with the higher returns, then it gets more of a nuanced conversation.

And I think the thing that's different for us perhaps than some other institutions, some other institutions had a whole chunk of RWA in securities portfolios or particular things, and they could just foreclose those down and lock them up (01:15:51). What we're talking about is client-by-client optimization of the deployment of capital into those relationships.

Did you want to pick up on the Trade point?

Yeah. I mean, I think if I get your question correctly, I suppose there are two observations, one is that in the Trade Finance space in the commodities area at the moment, if you take something like oil, if we were financing a barrel, it was $100 price ticket previously, it's now half that.

And we're having to either run it twice the rate to make the same money or run it half the rate to get – well, same rate to get half the money. So, there is a volume sort of element to that which is more tricky.

Your point about collateralization with it. I think the positive there is that we are on relatively short tenor.

So, most of this is turning over pretty fast. We're very alert to the pricing albeit and hence, as things rotate often, new things come on, we will take a new view as to the collateral level that we need.

So I think overall, they sort of sells (01:16:47) broadly.

And it's fair to say that there's negative volume pressure just because of the (01:16:52)

Absolutely. I mean in trade...

Is it really material. (01:16:54)

Right. I mean in trade, the margins have held up, the volumes have been low.

Thank you.

Okay. Should we go into the middle of that – well, (01:17:03) I can't actually see people very clearly.

Thanks very much. it's Manus Costello from Autonomous.

Andy, you spent a while in your presentation talking about the difficulty in assessing coverage ratios from the outside, which I fully understand. But if I look at the wholesale banking coverage ratio over the last several years, it's dropped very dramatically from kind of the 80%s down to just 46% this year.

And if I look at it relative to international peers, it looks pretty low as well, a lot of those are north of 100% – or even north of 100%. So my question would be why has your assumption on recoveries during that period improved so much, and why do you think your assumptions on recovery and wholesale are so much better than your global peers?

I mean, first of all, direct comparisons with others are always tricky. The mix and the type of transactions they are doing, the mix and type of transaction that we are doing and the nature of the other party and so on clearly do vary.

Secondly, the level of collateral that we require may or may not be the same as that which others require. My main comfort on this is that evidentially, if you look at what recovery rate we do get on our problem loans.

It equates very, very closely to the value we have got on our books net of provision and collateral. And that is a Forced Sale Value of collateral as well it's not just a sort of gross theoretical number.

And so I think for me, that is fact based, it's specific to our business. It is evidential and it's not sort of trying to do comparisons with others where we're sort of second guessing what their own position should be.

What about the comparison with yourself historically, I mean, why has that come down historically? Why was 80% appropriate several years ago and now 46% is?

Did it use to be as high as that?

I don't remember that.

Can we take that offline because I don't think it was.

I don't think it was negative. (01:18:57) We need to look at that.

But we can come back to that.

(01:19:00)

Should we go – stay on this side. Why don't you just pass the mic in front – to the side, yeah.

Front and then to the side. Okay.

Okay. Sorry for that.

Good morning. Martin Leitgeb from Goldman.

Just three questions, please. The first one on the RWA reduction.

Is there any particular geographic focus to that or is that motto seen (01:19:20) very broadly in terms of your footprint? The second question is with regards to prudential valuation adjustment in capital going forward.

And I think you have guided historically that you might see headwinds there. Could you help us size what the potential impact here might be over the next one year or two years?

And last question, maybe a bit technical on footnote 12 to the financial statements, other assets. I think you haven't disclosed the fair value of other assets as of the end of 2014.

I was just wondering if you could give us an indication if this position is relatively close, or if there is quite a valuation gap there. Thank you.

I think we'll just keep this (01:20:05) first one.

Very simple. There's no particular geographic focus, but there is a sector focus.

And that comes from the leverage of the returns. So, we know, for example, bank trade has very little leverage.

Bank trade doesn't cover its return on risk weighted assets and cost of equity, and it's very difficult to get cross-sell into foreign exchange in cash management. Relative to corporate trade, where you can go do corporate trade, you get FX and you get cash.

So, you can get the leverage. So, there's more about where the opportunity to get the leverage is.

And I think it's more sector-based than probably geographical-based.

On the PVA point, there are loads of different actual and potential changes in regulatory treatment that affect capital. And I don't want us to get too boxed into, it's x basis points, because we could fill the rest of the Q&A session dealing with that.

The point is we know that. We know that's coming.

And what we're telling you is that we're going to get to 11% to 12% and we're going to do it this year. On the last point.

To your last point, we have endeavored to actually make the press release a little bit more concise than last time, which has actually reduced from about 150 pages to 100 pages, so there's a little less detail in there.

You failed, actually. The target was 100 – oh, it is 100 pages.

Overnight it's gone down from 101 pages to 100 pages.

I knew where the question was coming from. The good news is that when ARA is published, you will be able to find out the answer to your question.

Should we take one more over this side. Ian.

Hi. It's Ian Gordon from Investec.

I was just slightly surprised that your liability growth was as strong as it was in the second half, led by time deposits. And if I read it correctly, led by the Americas and to a lesser extent, Europe.

Could you just explain the thinking behind that and perhaps just wrap it into the comment on your interest rate sensitivities to a rising interest rate environment if and when we get there?

Well, shall I take the second part of that first, and then, Mike, you might want to talk about the dynamic driving deposit growth and particularly in the Americas. We are sensitive to interest rates as an institution.

Rising interest rates is a good thing for Standard Chartered. Steeper yield curves are a good thing for Standard Chartered.

It is impossible to be precise on the impact of them because you have to play out a scenario, a particular shape of the curve and particular interest rate scenarios across different currencies. We have talked about in the past of shifts in interest rate being things that could drive our numbers by several hundred million dollars.

It is not a small driver of income for the bank, and it's been one of the things that has depressed returns, particularly impacting the economics of the Cash Management business and also Retail deposits. Did you want to comment on the growth in deposits?

I mean, one of the truths of banking is it's always good to be liquid and more and more liquid because it gives you optionality. So deposit rating strategies with clients is a long-term thing which you don't pull the levers – you don't turn on and off.

So just because assets are muted and the return you get is muted, you don't stop the long-term haul of raising currency from Retail, Cash Management deposits from Corporates. That's a long term gain.

As you go into that, Corporates, why do people actually put deposits with you, they don't leave it in currency and overnight savings, they don't want to go into fixed and everything else, so you do get a change in the mix as you continue to go down that. So our deposit rating strategy is a long-term strategy, and irrespective the asset side, we will continue on that because it is the right thing to do for sustainable growth of the bank.

In particular, U.S., there's been a particular growth in deposits in the U.S. and that's a strange phenomenon which is as we've rationalized our correspondent banking business, and Andy talked about number of relationships, many people are doing as well.

So what's happening is we're getting more business from fewer relationships. So that's particularly coming through the Cash Management related to correspondent banking.

Okay. More questions, why don't we come over here please.

(01:24:31) Oh sorry, is it someone in front and then we'll come further back. If we can keep it quite succinct, we'll try and keep our answers quite succinct because I'm conscious of time.

Okay. Thank you.

It's Jason from Deutsche Bank. Two questions.

First of all, on the cost of achieving the headline cost savings. Can you give us any guidance as to expectations around restructuring over the three years?

We obviously know this year, I guess in greater details, assumptions as to what the capital drag from restructuring charges might be? And then secondly, just around the RWA release and efficiency program.

From some of the numbers that you gave in the November slide deck, it appears that some of the higher return product groups, if not relationships, are not delivering sort of what they're supposed to do, Principal Finance, Corporate Finance is supposed to be where you get in with the CEO office and generate the much higher returns, I guess that was my understanding of the group. And so I guess, I'm trying to get a sense, given the cost inflation that the firm faces, the lack of income is a problem.

And so, I wonder how you get to $25 billion as the lower bound, why the number isn't bigger, for example, such that you can aim for a higher ROE? That's a tricky one.

But I guess, the bottom line here is if you really did have a blank piece of paper, would the new strategy not be more aggressive, more fundamentally different from where you are today?

Do you want to pick up on the...

I was going to say – first one, the answer is no. The second one, listen, we've got $180 million of restructuring costs in 2014.

We are working on the program so we're going to get to the $1.8 billion. We do not have the details of exactly what the one-off costs are in order to get there.

I mean, on the second one, I guess my point would be what we are trying to do, clearly, is to triangulate a capital return, increased return on equity, and the funding of dividends. And it is a triangulation of those, it's not just the whole focus upon one, we are trying to sell for all three.

And ultimately, you've got to look at it at the level of individual client relationships. And so you can't solve just the Principal Finance aspect of the client relationship or the Corporate Finance aspect of it.

And so the key – and this is why it does take a bit of time, it is client by client, looking at the overarching relationship. Sorry, should we go on to – behind you.

Hi. It's Fahed Kunwar speaking from Redburn.

My first question's on revenues. It's helpful guidance on the revenue hit going forward.

On your ongoing business, it seems like a lot of your peers, including yourself, are pouring into the same kind of mass affluent kind of less risky business. So the margins that have come down in 2014 again, do they keep on coming down considering the liquidity into those businesses?

The next part of the question, I guess is, jaws has always been quite an important determinant for yourselves. When we think about – well, you haven't really mentioned it in the slide pack.

So you have your ongoing business and the group business I guess, are you still looking at kind of flat to positive jaws going forward or have you kind of stopped looking at it through that way? The question then on credit quality as well.

On your kind of performing loans, your Grade 12 category, the corporate institutional clients have gone to kind of $1.5 billion to $4.5 billion. Is that part of the review that you did on the commodity exposure that you're talking about as a one-off thing, or is there something ongoing underlying there?

And the last bit is a clarification point, how is the E calculated on your ROE? Thanks.

I don't think we do anything particularly on ROE. It's a normalized ROE and it's in the press release.

You can derive it from the notes. On the more affluent point, look, the economics of Retail Banking are very clear that you make a disproportionate return on the more affluent customers relative to mass market customers.

And that's not unique to us, that's something that I see across all retail banks. If you can pull the lever, relatively small shifts in the proportion of your income you get from what we call priority customers, can actually make a very material difference to your income.

And we are making good progress on that. The income in prioritized grew well and it is driven a lot by non balance sheet items, particularly Wealth Management products and bancassurance.

And you will see from the numbers at our bancassurance and Wealth Management income grew quite significantly. Do you want to pick up on the other questions?

Yeah.

Jaws (01:29:20)

I mean, the jaws one, we could have a long debate about. What we decided is to go for hard numbers.

And we can target in the business hard numbers and we can get programs together and deliver on hard numbers. And that's what we're going to do.

And $1.8 billion over a three-year period is going to be $400 million or $500 million a year. As you saw on the chart here in 2014, that was a $200 million number.

So, actually, stepping up to $400 million, $500 million a year is going to be a big step up. We're on track to do that in this year.

And we will get there, but I prefer hard numbers. The other one just on CG12s and non-performing, I mean, I suppose, if I sort of step back, the – I suppose, two observations.

One is that the non-performing loans compared at the first half are up slightly, about $300 million. But the CG12s, the worst category of performing, is actually $900 million lower than it was at the half year.

And I think, therefore, one sort of needs to take both of those into account. And when one looks at the overall position, it's why we're sort of saying we're sort of okay where we're at, but I do think that the two together are probably the answer.

I'm conscious of timing, I don't want to keep you for longer than they, a lot of people (01:30:30) there are a lot of questions still in the room. So we will go for another 10 minutes or so if that's okay with people.

I'll take another question from this side. Duncan (01:30:39) and just whoever's nearest you.

Sorry.

Thank you. (01:30:45) from Bernstein.

Two quick questions. Peter, when you put up that slide in terms of profit growth from when you became CEO till here, one of the markets, which helped you get there was India.

We don't get too many questions out there, that's an economy in recovery. Can you give us a little brief about your franchise there?

Is there fundamental things that are broken there and not being able to recover income? And the second thing was in Principal Finance.

Again, Andy to your risk diagnosis, so how much capital is tied up in the business? What does the business actually represent (01:31:18)?

I saw that you had some gains in Q4. So how should we think about the business going forward?

So combination of the two of you can tackle the Principal Finance. On India, good question, India was a powerful driver of profit growth for us in earlier years in my tenure.

And then, at the time, actually where India went through a difficult couple of years, it was a difficult couple of years for us too and our profits in India fell quite sharply. I think we are now in a – like India, we are – India itself we are in a process of transition, where there are some very encouraging signs.

We have a government that is much more dynamic in terms of reform. We have a central bank governor who is, as recent media events suggests, is very actively managing the monetary situation within the economy.

We see all those as very, very positive signs. However, there is quite a sort of overhang of the paralysis that affected India over the last couple of years.

So, we see that this as a sort of transitional phase for both the economy and for our business in India. However, over the medium term, we remain extremely positive.

We have a very, very strong franchise there. There's nothing sort of broken about it at all.

It's a very strong client franchise. And we are very positive over the medium term over India's prospects.

On the Principal Finance one, it goes back to the previous question as well. On Principal Finance, the economics to that business are attractive on a stand-alone basis.

But what you don't see, which is the previous question, is the leverage it gives us with the clients. So, that's not in Principal Finance.

That comes out in terms of Cash Management, FX. And the leverage we get is very significant.

But that's in the broad relationship and comes back to Peter's point. So, assets at work at the moment (01:33:27) are about $2.3 billion in Principal Finance, and the leverage that gives us with our clients on a client basis is very significant and very significantly higher than the product – the economics of the product, which, in and of itself, are already attractive.

The other thing is you'll notice our Principal Finance assets are down year-on-year because that gives us another opportunity in terms of repackaging that. And Peter talked earlier about the importance of the growth of our institutional investor segment.

So, we give an opportunity there for good assets, which we can create. So, the leverage it gives us is more than just standing alone, looking at the individual product economics.

Okay. This side, should we take a – got a mic?

Where is the mic? Oh, sorry, you've got it.

Why don't we take this one and then we'll come over to this side.

Hi. Thank you, Peter.

It's...

Can I limit people to one question a person because – as a discipline?

I'll keep it to one question. Don't worry.

We can limit it by giving one answer, right. Yes, that's a good idea.

Did you have a methodological change in the way you calculate NPLs in Africa? Because if I look at the, say, for the first half of 2014, they're now on page 51, $471 million of gross NPLs, and in your last report for the half year, they were $966 million, and there hasn't been a big change in the loan balance.

So, I was just wondering if there was a methodology change or something came out of NPLs that was significant, because it is a big – it's about $495 (01:34:55) million delta...

Yeah. They've been put on a financial basis.

We can explain that to you afterwards, but are now on an equipment basis.

The actual aggregate NPL hasn't changed, we just moved it. Okay.

Yeah. Hi.

Thanks. This is Leigh Goodwin from Royal Bank of Canada.

I was going to ask about AT1s in your statement but as I can only ask one question, I would be interested to know whether you're going to quantify that for us (01:35:19)

That's a very sly way of putting it, isn't it?

Actually my question was more...

What is your question?

My question is on dividends. And I wasn't quite sure what you're saying your strategy on dividends is.

It feels like it's sort of – the $0.86 is something you're either putting there as a holding pattern until you've had a – the new chief executive has a look at it, or you're actually saying we're going to grow into that and from there, be aggressive (01:35:43). I wonder whether you could just clarify what the new dividend strategy is if there is a new one.

Well, I think the thing we would say is we are acutely conscious of the importance of dividends to our shareholders, the important role in plays in the value our shareholders get from investing in Standard Chartered. And we are also managing our capital ratios very assertively and we have set out a very clear target.

Doing stuff with the dividend is not the first port of call because of the importance of it to our shareholders, and we are using the levers that we can control to get to where we want to get to on the capital ratio. I don't know if you wanted to add (01:36:26).

I think It's very important, that's why, again, today, we're talking about trajectory on our capital, on our Common Equity Tier 1 capital, and we're confident of getting between 11% and 12%. And so, as Peter said, we have then levers we can pull and the board can choose which priorities and which levers to pull at any time.

Okay. Chris?

Good afternoon, everyone. It's Chris Manners from Morgan Stanley.

One question it is then. So, I was looking at your ROE target of just over 10% in the medium term.

And I remember at the half year results you did explain there was actually really good revenue growth opportunities. I think you put up a slide from McKinsey showing maybe 10% compound annual growth rate in banking revenue pools in the markets that you're in over the next sort of five years or so.

If you only do 10% ROE, presumably, you can only grow – see now 10% only grow all the way by (01:37:22) 10%, and then basically manage to grow revenues in line with the revenue pool if you pay out zero, or how do you make a payout (01:37:33)...

We're not saying we're limiting ourselves to a 10% ROE. But given the – your math is fine, but given that we are below a 10% ROE, to set a number that is significantly higher would seem not sensible at this point.

Our first priority is to get ourselves to a 10% ROE. And then, we'll worry about the pace of growth and stuff thereafter.

Stanley. (01:38:00)

Thanks.

And then, if we could make this the last question, I think, because otherwise, I think we really will overrun. Yes?

Right. Okay.

The last question (01:38:13)

(01:38:14) it's got to be a good question.

Yeah. You have $10 billion in costs, two-thirds of that in staffing.

I was wondering if you could cut it, no pun intended, along staffing lines between the sort of country-based people and sort of business based versus back office. And where I'm getting at is that kind of – look at you guys as long as you've been sitting there, and it's always struck me that sort of a lot of the problems seem to come from the country side versus the sort of business side of Standard Chartered.

So if you do focus a lot of the head count reductions and cost reductions on the country-based management structure, might there be an upside in terms of lower regulatory changes as well?

The reality if we run a matrix and we have some businesses that globally are more efficient than others and we have some geographies that to any given business are more or less efficient than others. So there is a both a geographic and a business line dimension to the efficiency equation.

So for example, our Korea business in Retail is not nearly as efficient as we would like. We've been taking assertive action on that.

The number of branches is down by something like 60 or so. And we've been reducing the head count.

But also, if I look at Retail globally, we think it has a cost/income ratio that is just simply too high. And that's on a global basis.

So we are looking at efficiency. And frankly to deliver the $1.8 billion, we have to do this.

We are looking at it both ways. So it's not a question of saying we're going to take a country perspective or a business perspective, we're going to say, look at every perspective.

And the other thing we're doing is we are looking very hard at the processes which cut across different client segments and parts of the bank and saying, let's try and standardize and optimize, those as far as possible. So, we minimize having different processes that's doing roughly the same thing or duplication around the institution.

So, this is...

That's more of my point.

The stuff to go for and, as I said earlier, the trick to doing all of this is technology. It's very difficult to – there are some opportunities where you can actually stop doing something.

But most of the time, the opportunity is to do it in a way that is much more efficient. And if you can take people out of the equation, that's the most powerful way of making it more efficient.

I think we have run out of time. I don't know, John, whether you wanted to make any closing comments.

Very briefly. Standard Chartered is a very good bank.

It's going through a transition. It's going through change.

And I hope what we've been able to do today is give you the confidence that we really have been listening to our shareholders. We really are taking action to refresh the strategy and get the bank in very good shape for the future.

And although 2014 was disappointing, we still think the future and the emerging markets, some very exciting markets in the world offer great opportunities for the bank. Thank you all for coming today.

Thank you very much.