Standard Chartered PLC

Okay, good morning everybody. Thanks for joining us.

I thought about wearing my Ironman outfit today. But I can wait till we reinstate the dividend.

That's an effort that we run in Hong Kong and Korea as you could probably know, maybe not that was your two Mega Pop Stars in Hong Kong and Korea and that had advert in the launch of this co-branded cart that we got with Marvel's that is part of our existing relationship and that is about 100,000 customers in this first very short period since launch. It's one little indication of some of the progress that we're making in terms of putting the bank out into a younger trusting brand that is really being received well by our clients in a few of those markets.

Thank you. To start off, good morning.

I'm going to say a few things upfront. Then I'm going to hand over to Andy who will go through the financials in some detail.

I'll come back at the end with quicker -- with some comments on the business with regions and broader thoughts. It's been an encouraging start to the year.

So we set out our strategy a year-and-a-half ago that had all these component pieces which you will see or offer from us and we've made a pretty much the progress that we would hope to make in each one of those categories and we can only say that we're very happy with the progress that we've made and with the way best been reflected in our first half results. So significant improvements in financial performance as we know but more important than just the financial, the business quality is getting better, the nature of our customer base, the nature of our asset books, the nature of our processes, the quality of our people both the ones who we brought in but also the ones that are in-house we feel like we've taken some really important steps to reposition the team for the future that we all feel.

We made good progress on our underlying crime franchise, the digital initiatives that we've been referring to repeatedly with the retail and wholesale, advent substantially in the first half of the year. We've invested in people and culture.

I'll talk a little bit about that when I come back later. The fight against financial crime likewise will coming on later but we've made ongoing good progress as recognized by amongst others the DFS and their public comments around the extension of our monetary et cetera.

And against this whole backdrop, we know that the external environment has been improving in many regards. Obviously the normalization of monetary policy in some markets early stages is a good thing.

The encouraging signs of economic growth and recovery in some markets is a good thing but there's also a lot of uncertainty and there is some videos in credit external challenges which I'll also comment in some detail so, overall happy with the progress that we've made. I'll hand over Andy now to go through some of the detail and I'll come back later and we'll have time for Q&A.

Thank you. Good, thank you privilege Bill and good morning everybody.

Let's just start as normal with the headline numbers and then I'll go into each of these in a little bit more detail. So total operating income for the half year at $7.2 billion that is up 6% year-on-year and up 3% on sequential quarters.

Expenses at $4.8 billion are normalizing at around run rate that we expect for the year. Loan impairment clearly significantly lower year-on-year 45% in the first quarter but significantly down year-on-year which I'll come on to in the bit and consequence of all that is a significant boost to the underlying profit before tax of $1.9 billion which is up 93%.

Now let's remember however that last year we did have the Principal Finance business stream in the core numbers whereas this year it's below the line in restructuring and we did have losses in the Principal Finances a year ago but if you normalize that, that is about 36% increase in underlying profit but nonetheless still up very significantly. And below the line I think recently for the team restructuring charges of $160 million or so a little bit that is, about half of it is Principal Finance losses the other half some adjustments to liquidation portfolio.

That brings the total cumulative restructuring charges to $2.9 billion and that plays against the indication at around $3 billion that we gave late in 2015 so, very much frankly as we expect to see. Profit before tax just reported $1.8 billion up and CET1 ratio 13.8%, that is 70 basis points up on a year ago.

It is 20 basis points up on the end of 2016. And the underlying ROE encouragingly now starts with the number five.

Now it is of course a period when we did not have the bank levy charges in so if you sort of normalize that I guess it's more a 4% with prior period but nonetheless an encouraging pickup on the previous year. And on the dividend as you've seen we have given that a lot of thought.

The conclusion was that on profit side clearly great progress and good traction there. On the capital side, a number of things still happening in the rectory side particularly Basel III for today IFRS 9 et cetera that may make some progress that the latter will do or may do in the latter half of the year and when we got all facts together then the Board will recast the dividend and refinance some of it and at the end of the year with all the facts.

So if we take then the quarterly facing of the key lines there, on the top left you can see the income which bit-by-bit has been launching and clearly the first quarter of this year we had quite a high ALM performance which was as high in the second quarter equally in the second quarter we had a good result in the FX base trade cash and on corporate finance a net-net we came out just slightly ahead of where we were at the end of the first quarter. The operating expenses a little bit higher in fourth quarter and last year partly due to the phasing of investment spend which is now more evenly spread throughout the year.

So, the run rate we've now got I think is a more predictable one. And loan impairment which I'll come on to a little bit later but you can see there is after the $200 million first quarter and slightly high numbers which we had said we thought would be higher and still at $400 million is somewhere below, significantly below where we’re at this time last year again coming to that one in a minute.

And then the underlying profit before tax, so fourth quarter last year has the 400 of the bank levy charge in it which is why that's the worst quarter and first quarter, second quarter this year, the primary difference there is slightly higher than impairment charge in second quarter as you can see from the chart on the left but nonetheless clearly underlying profit now operating at a much higher level than it was there a while ago. So on to income, just think of one or two lines here, operating income this has got the three consecutive half years so 6.8, 7, 7.2 on half yearly basis and that is up 6% which we say first half last year and compare it with first half of this year.

Now if one were to take out the negative income from Principal Finance in the prior period then the underlying increase first half is more like 4% albeit actually there were small amount of FX headwinds and also the small amount of reduction across the business which we sold off that's going to in the opposite direction, so somewhat in that 4% to 6% range. This is where we've been tracking and within the number for the half year we got about $80 million of benefit from interest rate increases primarily U.S.

and that is very consistent with the $300 million to $400 million range that we had indicated while ago, so 50 basis points. So obviously that was the full year number and that was including all currencies, whereas the prime impact from the U.S.

dollar, so $80 million also increase is from the interest rates. Chart on the bottom left then gives the breakdown of that overall 6% increase by fund group and you can see that Corporate & Institutional banking up 2%, now majority of that is the Principal Finance accounting, retail banking up 3% if you actually take out the businesses that were divested through the retail market so that's in the year actually the rest of the underlying 7%, so good performance on the retail front.

Commercial banking flat to slightly down but this will come onto a minute, the significant improvement there is on the profitability, very smooth improvement. And Private Banking although down 7% there was a matured benefit in the prior period, if we didn't have that then the private banking numbers were up about 3% on the period, so spreading across the client groups.

On the right hand side, then got this by geographic region, as you can see the Greater China, North Asia was very, very strong in the period and pretty much all markets within that region. So Hong Kong our biggest single market up 8% and Korea very encouragingly up 15%.

So really good progress over last six years in Korea and also to the profit coming up quite nicely in the Korea business, it remains well. And the other markets were sort of flattish a little bit of FX effectiveness; say for instance ultimately down 2% constant currency is actually flat and actually on consecutive half years after Middle East was up by 1%.

So overall that is the profile strong performance particularly in the Greater China, North Asia region. Now efficiency and cost sort of slightly I guess a lumpy story here, if you compare the first half this year with first half last year, we are up 5%, if you compare it with the second half last year, we are down 6%.

So semantically within that in the green at the top is regulatory costs which is up a little bit over the full one-year period, and the operating expenses in the middle are slightly down, and then people cost fractionally up at partly comp related bonus and also partly inflation. Overall, I think that's the run rate we have had in the first half which would be, if you sort of prelaunch it up to full year pretty similar to last year's overall expense cost break is where we would expect to be and that will be pretty consistent with the ambition target make sure 2018 expenses are lower than 2015 expenses.

Chart on the bottom left I think you've seen before November 15 that we will get $2.9 billion of gross cost positions out of business, so we are sort of halfway through roughly $0.7 billion in the 2017 year on that. And put in other way, we are about three quarters of the way through $2.9 billion as we speak.

So that is very much tracking as we expect it to be. Now changing gear on to loan impairments.

This is the chart that shows sequential half years of loan impairments and no great surprise where we are at now is basically from where we have been previously, so thinking of the $2.4 billion level and now down to $600 million also for the first half. I would say improvements across the board really commercial banks has done well certainly a lot of experience in commercial bank market improved year and a bit ago which is good but most of the segment actually I think now benefiting from the price control that we put in place a while ago.

And on the bottom here, you can see the dark blue we put the non-performing loans in the ongoing book, light blue is non-performing liquidation portfolio, and then the green on top is the Category 12, so they are the ones that are performing sort of certain of the four and you can see again we have moved from begin around the $14 billon level in the previous periods to be at the $11 billion level at the moment. So I think it trends in the right direction and then one of the favorite questions of the day is going to be so where is loan impairment charge going to be over the balance of the year and we have a three-year forecast on it.

And I don't know, I mean $400 million is good to have that for the second quarter. I look at $11 billion albeit with a fair amount of provision against that there is some of that that yet can come back and may need some provisioning.

So maybe we'll be running a little bit higher than the $400 million for the balance of the year but at least we’re talking numbers in that sort of range rather than in the higher range that we had a while ago. So let's look then at profit by client segments.

The top chart here, the main chart has got the make-up of the profit for the first half of $1.9 billion and underneath we've got the movements year-on-year. So a significant positive coming from treasury and ALM activities, government institutional banking then another $600 million that has ticked up from the prior year by that $400 million primarily because of the non-recurrence in Principal Finance loss, retail banking $0.5 billion, good performance there up about $70 million year-on-year and commercial banking that is a good positive numbers from previously negative numbers and again I think it's good to see the early signs which Bill will pick up of the progress we are making.

Private banking minus one we are still in the phase where we're investing in relationship managers and in better systems, so that is keeping the profitability down a little bit as we basically regroup and build that future, business for the future. So take the same chart then and do this instead by geographic region, this time the Central number is not such a significant part of it and that you can see here broadly about half the profit is coming from the Greater China region and half the profit is coming from the rest of the world and I think generally pretty good increases across all the markets there as you can see with the numbers at the bottom.

So earning has pretty held across the board but I think a pretty balance that whole improvement in profitability. Now margins is an area of some focus, so the top left chart here we've got the NIMs for the three half years, so we were 1.58% of last year, got that 1.48% and it has been good to see, actually got picked up slightly get to 1.55%, so that's where we were year ago a little bit higher.

And secondly down on the left hand side is the bottom in the light blue, we have got the loans & advances to customers which has after being slightly low at the end of last June you'll recall it picked up at the end of the first quarter will be sort of pretty much in the first quarter level through the back half of the year and that is a similar pattern actually on the liability side where customers hold in the dark blue had picked up in the first quarter running roughly the same sort of level albeit actually compares much upon the mix or the quality which will come onto also profit as we move forward. Now importantly to one of the things that there were mentions which I'll mention again, we focus upon to the quality of the business which we do think that's actually is improving bit-by-bit.

So, top right chat here has got the loan book split between the very good Credit grade one to five and the medium honestly 6 to 11. And you can see the growth we have had in the loan book has been very much in the former category, so, about $10 billion extra in the one to five camp whereas actually in the 6 to 11 company just stayed flat period-on-period.

So, that has been significant focus over the course of the half year. Now what's also underneath all of this in the bottom right chart I think is pretty important, we have seen good volume performance across most of the products.

The only one that down on the volume side is time deposit that is an entirely conscious decision it is just a less cost effective way of funding for us so that insignificant stand but the rest we have seen good progress on the volume front. However on the margin front it is the story of two half, asset margins I think like many banks still slightly under pressure so, hence slightly downward but liability margin upwards and when you put all of that together we have seen the overall NIM move back to the level of the year ago.

So, and final slide for me on the financials, before I hand back to Bill. So capital front as I said earlier 13.6% a year ago to 13.8% at the end of June, major movement there I guess is profit after tax, but the rest of it is relatively small movements, but nonetheless progress over that period.

And then down at the bottom we've got the risk-weighted assets which moved up slightly during the period 269 up to 274, and now clearly held by the three quarter position may still change that over a period of time, we'll see where that all plays out. And finally, just that the IFRS 9 not in a day a issue but we will provide an update on that later on in the year.

So I think that's probably it's on key numbers. I'll now hand back to Bill.

Great. Thanks Andy.

Before I go to the pages on the slide I wanted to reflect on a couple of overarching things that's -- that I just appropriate this point to reflect on it as we get to this part of our transition. You know our story a couple of years ago actually July of -- November of 2015 we set up -- we set out a strategy number of the steps that we were taking were I'll call it mechanical they were focusing on the capital risk quality, focusing on organization changes in organizational alignment, risk control, and repositioning the bank for growth and there's a heavy element of cleanup in that as we know.

We've largely completed that I'll never say that we're done with the cleanup as any said we've still got a relatively elevated level of NTLs and we know that things will be bumpy in that regard but nevertheless we feel like we're -- we've gotten through that initial reposition phase in reasonably good shape. The second part of this transition is what we really focus on over the course of the end of last year, the early part of this year and probably breakdown into two categories that but overarchingly is the need to reposition the mindset in cultures of this bank for one that is more aligned with the underlying growth that we know that the markets present us the potential to extract.

And not lose track of the fundamental relation that we've done over the past couple of years. The cultural change that we're trying to drive through is need to take a number of forms and first and foremost it's a shift from inward focus that I think is at the absolutely standard for companies that are going through big transitions to not with focus.

If you only see this from the perspective of a shareholder it's hard to understand what a big difference that is if you're looking at it from the perspective of a client and we talk to hundreds and hundreds of clients specifically about the bank's culture what they value the bank what they find frustrating about the bank. They noticed a decided shift from an outward focused proactive bank to a inward focused worry about my organization, worry about my job, worry about my expenses, worry about whether my client is a valuable client for the bank.

We're now moving back out again and we're seeing those results. On the retail side, in core income growth and C&IB and commercial side with new to bank clients with improving profitability on those underlying clients very, very early stage.

That our culture change is fundamental to what we're focused on right now and that we will not attract that. Keep that in mind as we go through the divisions by business review.

The second sort of overarching comment is trying to answer the question, how do we drive income growth in the back that's we've had some growth. We're encouraged by the progress that we've made but when we analyze the past couple of years and certainly the past six months, there are a few things that standout.

The few possible explanations for why we're not growing as quickly as we'd all like. But surprisingly falling short of any kind of expectations but you would all like to see more and many of you can comment on that.

Now the first is the fact that as Andy mentioned that the quality of our business has approved the overall riskiness the portfolio has improved, the nature of our client interaction has improved and that has a consequent impact on income. It also impacts loan impairments which we've also seen improve dramatically and should expect to see improve through the cycle.

Questions about what the steady state cost of risk is in this bank that we will see and we will continue to communicate what we see as the underlying trends, but we think that we're on a fundamentally different trajectory than we have been on over the past several years because of the actions that we've taken it does have an impact on income in the short-term. Secondary are these internal mindset issues that I referred to, there's no doubt that the inward focused cultural maladaptation of the bank has had an impact on income and debt we are addressing very decidedly and keep see very clear signs of change so, we're encouraged about how the actions we're taking will transmit through to income growth in the future.

Turning to external environment we know that there have been challenges. We've got a steady recovery in a number of our markets which of course is very encouraging.

We benefited from that to some degree, the flip side is we still have ongoing uncertainty in some of our markets and that’s contributed in some ways to suppressed income growth relative to our potential. So how do we weight those three things in terms of explaining, how we go from where we are to the income growth that we know we need in order to get to our aspirational cost of capital plus sort of return.

It's a judgment call but it's certainly all three that are contributing to that. But on all three external environment is something we just adapt to but our internal mindset culture and the -- the focus on the quality of our book are things that are in our control and I think we're doing the right thing.

So just if you take it very quickly to the businesses because I know you're more interested in questions C&IB business encouraging steady recovery. Keep in mind that the C&IB team came together later than other parts of the bank so, key parts of our financial markets team have only come in, in the earlier part of this year, both on the top level but also the second level down.

That team is largely in place at this point. We have a few more key hires that are starting in the later part of this year but probably the team is in place and they're beginning to make the changes that will drive what has been a relative underperformance in the financial markets.

So the personal changes don't just with our just limited financial markets we've got some of the same and in the coverage area, the team is coming together well under Simon's leadership, working well, and we're very encouraged about the progress we can make from here and the business model shifts in particular on the velocity of our balance sheet, the re-assumption of control of risk into the front line rather than relying on the second line to be the risk protectors. Those underlying thread of strategic change are well underway.

Retail banking the team has been in place longer but we also executed a pretty substantial shift of the authority for the running of that business day-to-day from the central organization typically based in Singapore to our regional and local operations. That's had a very profound effect in terms of both the decisions that we've taken but also the way that business operates.

We can see when we get into the regional discussions, some of the substantial investments we've been making in markets like Singapore and India. Very local strategies that are intended to recapture market share that we've lost over the past several years in each of those markets, combined with a ongoing central thrust around end-to-end digitization and some really best-in-class products that we're rolling out.

So whether those products are like the alliance that you saw with Disney and Marvel or our Asian miles Alliance or the Alliance that we've got with Shinsegae a largest retailer in Korea these are making a big difference and they're fundamentally local. These are on the ground initiatives that are being taken that were just a little bit harder to do when decisions went up to Singapore and then back out again.

Commercial Banking super turnaround and you've heard me say in this room that it was just too early to call whether we could really extract a value from this business that we believe is fundamentally there. The team has demonstrated a few things one is they can recontrol the risk and they've clearly done that.

Second is that we can attract new clients under this platform who are attracted to the things that are special about Standard Chartered which is our ability to offer cross border services and the ability to interact with their -- with our Corporate & Investment banking clients as part of the supplier distribution chain. Early stage in the recovery, still not at the level of profitability that we aspire, but it's great to see all three regions generating profit and generating some underlying growth in terms of new clients coming into the back to offset the substantial value clients that we exited through derisking or defaults.

Private Banking, as Andy said, it's a work-in-progress that the bulk of our new RM hires that came in at the very end of last year, early part of this year. Where they hit the ground, they hit the ground running, we’re seeing some encouraging signs of net new money coming in, we are largely through the derisking, so we’ve had a little bit of tail effect in terms of income growth as a result of claims that we’ve exited, that's a continuous process but we think that on balance we shift now to productive deployment of the new resources and less of the derisking related exits that we’ve had over the past couple of years.

Andy commented on the DC&A results it’s really outstanding that each one of these countries we wouldn't have Taiwan and Japan on here but it is similar story in terms of steady improvement particularly callout Korea obviously back to the adverse in the beginning, the results are really on the ground, local adaptations both on the cost side where we’ve taken deliberate actions as you know as well as on the income side, if we get real income growth on the back of a much smaller and more focused brand presence. Hong Kong we will continue to invest in that core franchise, it really is an extremely strong position both absolutely and relatively and we think that we have much more that we can do there even in a market that while it's grown quite strongly in the first part of this year, we know is a very developed economy but nevertheless we think that there are great gains we continue to make there.

China is all about focus and the team has executed very, very well to get that improvement in profitability. Each one of these countries is now profitability big change from two years ago.

Singapore had a decrease in profit largely on the back of a very isolated loan impairments and which also flow through on that C&IB side but we're also investing quite heavily in Singapore. We've lost market share in Singapore and in India for much of the past decade and we're making very deliberate investments with new product launches, that's really above our strategy.

We've got a product launch is targeted at the over 55 which is better of course natural client base, they call it the Silver offering at the conference of that so rebranded it my way but it's a highly impactful offering and we've got great client take-up in the early days but also targeting through these alliances with Marvel and things like that which we will roll out across our markets are targeting a younger audience. Online digital rollouts and adaptations in Singapore and in India are phenomenal.

So we’re getting -- we’re doing at the old fashion way, so good for us direct selling but also through digital channels which are really getting traction at this stage we get the investment expense coming through, the income we’re confident that will come through later. Africa is always a story of many, many different markets of course we've been impacted by both currency and by the interest rate capital imposed in Kenya.

The flip side is that Nigeria has managed to begin what will probably be a long process of recovery and we’ve been able to maintain our profitability in that market throughout that period. So we continue to be encouraged by both our presence in Africa, where we are now the only true international bank that is operating through most in Sub-Sahara Africa and the opportunity we have their quality of our franchise.

UAE has stabilized, the market that was fit both from a macro economic perspective that's also result of our very substantial derisking of our commercial client base, client base couple of years ago, we think that both our own presence in the country as well as the underlying economy has stabilized and is beginning to show some really good signs of growth. We've not seen that yet in terms of our business around Qatar or the business in the region resulting from the disputes with Qatar but of course we watch it very closely and while we're overall hopeful that there is a constructive resolution to that comfort, it doesn't appear to be available.

Europe and the Americas a lot of the focus has been on getting these next 90 clients, so these multinational clients who we believe should be able to really benefit from the services of Standard Chartered Bank, FM and transaction banking and our structured finance capabilities and we’re making really good progress in terms of getting those clients onboard. The income obviously comes a bit in the beginning but the more as you build those relationships out over time but it’s clear to us that we have an offering that is differentiated and relevant after the client base and we think we will continue to see some good growth across Europe and the Americas on the back of that and ongoing expense and capital disciplines.

Continue to invest selectively with the investments we split between our core strategic areas which we've been talking about continuously just give a few examples out here as well as ongoing investments in our risk compliance and then ongoing upgrading of obsolete system suite. The investments of course are only funded to our efficiency initiatives which as Andy said will also be ongoing.

So there is a very deeply embedded mindset at this point which is to get to invest if you find the savings first. By the same thing, we know we can do much long in that regard.

The financial crime is perennial but we feel we've made tremendous progress. We commented at the full year results the extension of the DPA but also the encouraging words that we got from the DFS around the progress that we're making as they made their statement publicly this incentive note where we get -- we've been rewarded, awarded each of the last three years a recognition by Simson that Standard Chartered Bank has materially contributed to one of their major financial crime resolutions don't know how many banks exactly get these letters but it's not a lot and we're in great company and its recognized by law enforcement directed to us all the time that we're doing great work.

We're doing great work with other banks on the sharing of information that is allowing us to come up with a fundamentally different approach to identifying illicit payment patterns using of course the entirely legal and agreed by law enforcement authorities that using those data patterns across banks to make a real difference in terms of the quality of things that we can get to law enforcement. So in summary, we began the year with a strong balance sheet and real questions about whether we could drive our income and earnings forward.

Over the first half of this year, we feel we've done that we know that we've got substantial capacity to go further, the investments that we're making are getting traction and paying off, we see that in the select areas that we've identified today, there's much more that we can do with some of those investments are early stage. Now we do think that we refocus the bank on leveraging our core advantages being our international network and the unique nature of that network and the quality of our brand in local markets, the nature of our positioning as actually leading edge digital bank recognized in continuously by our customers and also by the rewards that we get across our markets as a leading online digital mobile bank and continuing to focus and be as nimble as we should be able to be as a bank it's smaller than some of our big global competitors.

The global economic recovery is moving forward, we're obviously encouraged by that I made my comments about the sort of outlook, this really against that backdrop that we took the decision that we took on our dividend which is we've always said we want to see that our earnings are fundamentally sustainable and while these signs are encouraging, we're still at a relatively early stage of our recovery. Second is the certainty around our capital position, the big uncertainty that we face as we sit here today is around regulation, the Basel III, Basel IV as Andy mentioned.

It would be nice, if the regulators would close that process out, it's been too long as a fact of matter and we think it’s appropriate for us to factor in as much information as we can about our own sustainable earnings profile and the capital position in order to make the best decision we can on the dividend which as Andy said we will consider again at year-end. So we have the foundations in place growth, we've got the team in place; we're making the investments that will allow that growth to take off and then begin to drive.

We think we've demonstrated the progress that we've made in the first half of the year and very happy now to take your questions.

Thank you. Andrew Coombs from Citi.

Three questions expected. First one is on loan growth very strong results in the past quarter.

We do somewhat in second quarter is only FX translation issues there or is it underlying you can draw out on that trend. And second one turns back to quality, if you look at your past you've been impaired loans in C&I quite substantially $1.6 billion, $2.8 billion, you don't want to board the deterioration too large in cases in India and some regional trends perhaps if you could elaborate on what's driving that and some of the NPLs broadly.

And then the final question just on capital and dividend that means $509 million that you’re lifting capital in the full-year, I just want to check is that ordinary dividend, is there AT1 preference included there as well and I guess more broadly your thoughts on IFRS 9, Basel IV given that you flag that as a key point in the dividend?

I will let Andy take the second question, I will just comment on the first one. We don't have the objective to grow our balance sheet or to grow our loan, so we have the objective to increase the both cost of capital returning client relationships that we’ve got and clearly there is part of the cleanup process that we’ve gone through, we’ve been very deliberate in terms of either upgrading client relationships which in some cases involve increased lending exposures, in many cases involve lower the amount of credit exposure and increasing the non-financing income.

One of the points under the C&IB side that I didn't comment on specifically was the decided shift which is now going on for a couple of years from financing income to non-financing income that's exactly that’s we would hope for it to be. If that is coming along with growing loan portfolio that, that's hitting our profitable targets super and we’re keep on doing that.

But at the end of the day, the EVA mindset is beginning to permit the organization and insurance generates a value of over cost of capital we just declined to [indiscernible] my short answer and you had turnaround for asset quality and dividend comment.

Yes, I mean the asset quality overall I think is very, very similar to where we have it at the end of last year and is probably better than where it was this time last year. There are small data points which I should say is a little bit pressure here, a bit less pressure somewhere else to the one you referred to a little bit more upside.

Understand the earlier that we're actually monitor, those are actually on a improving frame relative to where we were previously. So, I think overall we sort of say the asset quality, is sort of there or thereabouts of where we were before, a little bit up, a little bit down but nothing sort of sitting in there to be worried about.

Sorry the third part of your question was what on the adjustments to the capital.

Exactly, [indiscernible] dividend and the cash capital.

Yes, so in the capital work for regulatory purposes, we have got the AT1 and the tight dividends and in the absence of an actual dividend there is an PR rate one puts in a proxy for dividend and that's not to disclose now but it sort of a how to keep a flow of the numbers there so it is a combination of those three factors that are sitting in that one number collectively.

What I guess [indiscernible] you talked about [indiscernible] and didn't give that. Should annual impacts much smaller than what one would initially expect, when you talk about regulatory constraints Basel IV [indiscernible] you're seeking clarity on IFRS 9 at this stage?

Yes. I think that is probably right I mean there's been a lot of work done on the modeling which is not yet complete on IFRS 9 but we've sort an emerging sense of where that's going to be.

I think the Basel III/IV states it's just altogether more difficult and I think most banks are in the same camps, but it's just unclear quite how it's going to end up. And at this point in time when the decision to seek the resumption of the dividend our sense is that the more information we have, to be confident in that decision to better and that if you believe some of the rhetoric may get resolved in the coming months, may be going but maybe it will do and I think if we have that and by the way IFRS 9 in that period will also become clearer then I think we have a clear of which to make the decision.

Yes, good morning, Martin Leitgeb from Goldman Sachs. Could I just follow-up on the dividend first.

And I think more broadly, I think some expectation have been done over the course of the capital of the profit progresses 1H 2107 regard might be time of the potential redemption of dividend is more than a context and then more talking then, obviously the larger big operation. I was wondering to comment this anything has a changed over the last quarter in terms of your redemption in terms of [indiscernible] potential headwinds asset quality outlook or this is purely essentially may be more process driven waiting for this [indiscernible] waiting for I think through the clarity outlined which has changed which made a little bit more course may be expectations and [indiscernible] a bit further.

Then more technically I think historically when I look at dividend provisioning with Standard Chartered you followed if I’m not mistaken one-third, two-third rule is the similar thing we could assume has happened for 1H 2017 in terms of the capital provisions for dividend. And thirdly, I think as part of the explanation you’ve mentioned that and is wondering is that essentially a smaller part of your concern compared to the regulatory issues and then just a follow-up briefly on the loan growth comment.

Following your competitive results earlier in the week there was some expectations of equally Standard Chartered having strong loan growth in the second quarter and coming back to the earlier point on the very strong loan growth in the first quarter was there anything very lumpy in there which has been repaid over the second quarter which overshadows a little bit the underlying loan growth you have seen some of the business retail is anything you can call out, what the underlying growth figures there was? Thank you.

No change in outlook as we've gone through the first half of the year we're encouraged by the progress that we've made so no change that we could call out there but we're going to decide when dividend and then decide how much and how so, that's to your one-third, two-third question. This we passed the stress test last year, we continue to improve our capital position and continue to improve our riskiness the -- the stress scenario that came out earlier in the year of course we haven't seen the results of that but the -- it's different and but it is relatively minor ways so that doesn't appear to be a binding constraint on our capital position as we sit here today.

And Andy will comment I think is in well on loan growth. As I said to the earlier question what we're really focused on is generating profitability and not soaking up excess capital with subpar loans.

Yes. Wasn't quite clear one-third, two-third question?

Yes, we have had a one-third two-third approach but just because we have zero doesn't need to say to, zero is zero at the end of year. We will review at the end of the year, just to be clear.

And on the loan growth think it also particular, I mean there was a little bit of corporate finance lending at the end of the first quarter which can come off shortly afterwards so, you get a pulling around a little bit but I wouldn't say those anything particular there. We had a bit of a pickup the back end of the first quarter we sort of maintain that build movement in the second quarter.

I just turn the mike back.

Hi good morning it's James Invine from Société Générale. I just wanted a couple of things together which is that you haven’t had a dividend when some people were expecting it.

The loan growth has come in pretty weak from the quarter and so can use consume -- sort of confirm that you are fully open for business and you feel you have the capital to right whatever business walks in the door. And then second on the regulatory uncertainty can you help us think about the uncertainty can you sort of range or how confident are you of your internal estimates of IFRS 9.

So do you think, IFRS 9 impact to within say 10 basis points and then on the stress test I mean, I know you don't know the results yet but you crunch all the numbers so presumably you must have a pretty good idea of what your number is going to be. Thanks.

Fully operating to business, that the right kind of business. There's no question about that in the organization.

And I think we done that it was right that in terms of the ongoing either restoration of some lost market share or maintain market share in key area so, I don't think there's any question there. [Indiscernible] regulatory point beyond what was already said.

And on the IFRS 9.

IFRS 9 I mean we have put in the numbers through models at the movement. We're getting in shape for those numbers but we're not the point where we've gotten definitively.

I think probably the Q3 results which should be able to put numbers to it. Obviously there is the second order issue which is about whether a transitional arrangement will be permitted, if that's based in over five years technically [ph] hits now a bit.

But I don't see the markets consensus on what likely impact across the banks is generally is too far off the market specifically at this point in time, I simply thought [indiscernible] a basis points may be but it's transitional then divide that by five or whatever the number is.

Mike down to the other side, there is any question.

Hey, thank you it's John Rayner from Exane. And two questions please and Bill I like to start on your return target and obviously it's very tempting and a lot of us do is sort of take your cost guidance have a view of where you're going to normalize impairments and then try and back out revenue and see just how challenging hitting that revenue target might be I'm just wondering from some of your comments you made at the beginning about the quality of business improving.

I mean should we be thinking now that the sort of sustainable normalized impairment rate that you're thinking of when setting these targets is somewhat lower than maybe the historic average if we go back and look say for the crisis so, maybe the revenue challenge is not quite as big as it may appear using sort of 40, 50, 60 basis points whatever you like that's my first question. My second was just a follow-up on the revenue growth itself.

So the -- we'll have two former on views on impairment it was clear we're not going to hit the return target for that some substantial income growth that’s we can’t manage impairment low enough for a sustained period of time or manage the expenses as aggressively as we have or we’ll continue to and hit the targets that we’ve got, so we’ve got to get some income but that’s not hard thing for us to understand. When we look at the what we’re delivering against the franchise we got right now and the franchise that we know that we can attract from new clients that we’ve not focused on historically or we focused on for some of the wrong business, business that we don’t think is valuable, so we can do perspectively.

We see the sources of income growth, those are the things that we’re investing in, those are the early signs of progress as our team is settling in and we continue to think that those -- the income growth that's required to get our improved returns is perfectly possible. We’re not short of capital, we’re not short of fund and we’re definitely not short of franchise, we’re missing some key investment areas before addressing and had been addressing through pretty substantial spend and substantial increase in investment spend over the past couple of years, we expect to maintain for the foreseeable future and that's intended to position us to figure exactly that income growth that quite correctly you're all questioning.

All we can do is to give you the readout on areas, where we think we’re making progress and tell you how we feel about it like I feel that something we can do. The second question is on sources of revenue growth.

Yes I mean I’m still looking on Slide 12 when the bottom lightly sort of flat up some key areas trade, corporate finance, mortgage et cetera. I'm just trying to get a sense of in some of these really important areas both Standard Chartered where you think you are versus the market in terms of market share?

What do you think the sort of market growth might be actually in some of those areas and how long is it going to take you to sort of catch-up back to at least financial market share or maybe even go further and start sort of increased asset sort of some real world examples really define things to gather some of this.

I don’t think we lost any share on the wholesale side as a practical matter I think in trade, cash and capital market structure finance, corporate finance. I think we’ve broadly maintained our share.

There is a question whether we I would like to be adverse and selective along the way. Some of the more valuable share and hold in with some of the less value share, it’s harder to tell because customers not typically tell you that they did the more interesting trade with your competitors but there may be a little bit of evidence of that but as a refocus on our underlying client franchise and as we continually upgraded the quality of the people that we’ve got, I mean both people who are already here as well as obviously the time is coming in, we think we can address those relatively small gaps on the wholesale side.

What we need to do is relatively wholesale shift of our income mix away from the relatively risky financing income to much more capital accretive and earnings accretive non-financing income, that’s what we’re doing. So we’ve done for the past couple of years and then while that doesn’t necessarily drive top-line growth it certainly drives improvements in ROE.

On the retail side, we clearly lost share in many of our markets, thankfully not the markets that are the most profitable for us or say Hong Kong and at many of the smaller South Asian or African markets where we generate good profitability and we held on to our share for the most part in those markets. But one would argue that given the relative advantages that we got holding onto share is not a very good place to be, we should be growing our share in those markets, that’s a lot of the focus from here.

We've lost potential share in many of the Asian markets, in India and in parts of the Middle East. And we have lost share as a result of lack of focus and under investments.

Some of these markets, we’ve exited. So we sold our retail business in Philippines, we’re in the process of selling our retail business in Thailand and some we are doubling down our investments, I called India and Singapore in particular but Malaysia, Vietnam are also markets that we’re investing in and as well as ongoing investments in each of our markets in Africa.

Those investments we’re confident would generate returns. We’re certainly improving the quality of those business and we also know that the local competition is extraordinary and that's we didn’t lose our market share to international competitors.

We lost our market shares to local competitors and they’re still there and for the most part they’re relatively strong but we have a differentiated outlook in key areas in particular around African clients. We tend to congregate in the core commercial hubs, where our brand also resonates well and in those areas we are investing in focused strategy in the areas where we’re having and this investment is a practical matter in the areas where we don’t have an advantage.

We probably did a little bit too much of that in the past couple of years because we allowed an element of our personnel client segment to be behave faster than we would like. So we’re refocusing on making sure that we got a broad offering but with the real value coming from those priority clients.

That's going to generate growth for us.

Any other questions why don’t you take the question [indiscernible] okay you can share the mike.

It’s David Lock from Deutsche Bank. Just two things, first one is on dividends and really it’s about how you’re approaching your policy towards capital management at the end of the year because you’ve talked a lot about growth potential, you’ve talked lot about momentum going back to franchise, the potential to improve the revenue line, sure the temptation must be really to deploy the capital to improve the business and actually not really look for dividends in the near term until that is resolved, always the dividend radius symbolic focus for you and the board in terms of that path to normalization for Standard Chartered, and I have a second one on regulation.

I’ll give the quick answer on dividend, Andy will comment as well, it’s not symbolic our shareholders to varying degree but shareholders like the dividend, I think they like to see moving that discipline on ourselves as well and we fully try that. So when it’s right for us to pay dividend we very much follow to doing that and we will continue to invest in our business as well.

I think we can absolutely do the various kind of dividend payment we’re at much high level of capital now we were in one or two years ago, it does deeper to constraints on the outside but just bit more clarity and then level to position it and started again.

I guess just following onto that the regulatory question which is when we get back to you in November presentation you talked about the RE dilution from regulation being 2% and the RE going from 10 to 8, just wondered if you get that views change any is that dilutive effect on the RE still very much 2% or if that is all Basel IV just any additional color you can give on that?

Unfortunately there is no color as opposed once Basel III is clear then your question is more evenly answered, I mean just very difficult to know this stage.

There are few things in that 2% bucket as well that wasn't just regulatory, looking all other buckets.

Could perhaps any color on what was other elements were?

We just have to leave that to your imagination.

Hi it's Claire Kane from Credit Suisse. I have got a question on cost piece and then a broader one on income, firstly on the cost you said staff cost were up 10% year-on-year and clearly from here on we’ve got kind of flat target.

So could you help us to understand how much of the other cost are available to be offset against the standard inflation which expecting staff cost and perhaps what the Standard run rate from here should be I guess well below 10%?

Well we’re doing a lot of the investment spend is focused upon how we improved system and process, so that build upon we can improve this headcount side of the business. We have done a fair amount of transparent activity from certain to other parts of the world which obviously has the cost differential in it in part.

The lower going on, on property cost which is next biggest cost immediately after quite closely correlated with it in terms of a number of locations, size of locations, working utilization across businesses like that also just bear in mind a year ago the profitability was very low variable cost was very low and with the profitability this year probably going fair enough that is bit more in excess of that. So cost increase but I think for a good reason, so I think when you put those together there will be a slight sort of mix change over a period of time.

We were sort of mid just about mid-9.5, 9.6 on cost last year and what we’re really doing is trying to keep sort of in that sort of territory, for example this year, so that we really can’t stop to level the income as it picks off and say that's very good one.

Thank you. And then on the income points I guess you said it great as fast as you would like EBITDA record certainly some of our aspirational target and I guess the -- my takeaway is from your comments that actually the macros improved a little bit you’re quite happy with how you repositioned the business competitive local banks that are making it harder for you to regain share that you would like and I guess what is -- is there a chance for sitting here each time and that revenue number still hasn’t come through and at what point would you be confident enough in the revenue outlook to reintroduce an ROE target.

I think anyone we could see in the annual report now is kind of 5% hurdle rate 2019 for alternative plan.

Yes, that’s the questions from the target that’s the minimum range of one of the three key metrics for the LTIFs for Andy and myself that’s not a target at all. But we said repeatedly our 8% to 10% target that we have expressed our confidence that we can hit that target and you'll ask me when we're going to hit that and we will say we're going to get there quickly as we possibly can.

So, that’s -- back to your it's possible that we're here in a year and things haven't worked out here obviously that we're taking all the steps that we that we can take right now to position and have for the past year-and-a-half to position the bank for steady growth. And we think that we're investing in things where we have a real edge.

We are getting share in some key markets and as Andy pointed out in most of the key areas that we're tracking our volume figures are encouraging and in many cases offset by margin compression so, we think we regain at an early stage in some key products, in some key markets, some of our regional share, I don't think we lost a lot of our share in the first place significantly better margins on the liability side of our balance sheet in part because of the U.S. dollar rate rises obviously but also because of are we focusing on higher quality of liabilities.

Hence the decrease in time deposits the increase in costs for example, these are early stage trends that we're -- that we've established that we think we have much further to go but we have certainly the income line has been impacted by the offsetting compression in asset margins reflection of the surplus liquidity and strong local competition. Our objective obviously is to position our business in the areas where we have real edge where we can grow faster than market.

Market is still growing at a pretty healthy clip in most of our regions and we're getting back to market type growth and then obviously in our selected areas we wanted to start to take real share back beyond that and I think we're making all the investments that we need to get that.

Thank you. It's Manus Costello from Autonomous.

I had a couple of questions please. Firstly, on the revenue headwind can you explain to us what's going on in the rates in FX franchise that’s a pretty big piece of the revenue headwind that we're seeing and it does appear that you're losing share versus the market that so give us some color around beyond just difficult markets what's going on there please.

And secondly just going back to this point around returns in growth and dividends et cetera. The RWA is already growing FX in the first half.

You're getting to a capital position now where you are north of your target range and if you do well in the stress test which you seem to imply your target range probably should come down as well, is it possible that you've just got too much capital but not enough growth and that actually the answer to improving the returns the shrinking the capital base with the stop trading at below tangible book, if we are sitting here with a lower RWA outlook be tempted to buy back shares next year.

Yes, some of the rates in FX business say that in terms of the longer-term trends that business has been under invested in for some time. That was in one way, one form rather a leader for a few years.

The good thing about that the encouraging times out of our recent FX business are the client receptivity so are regularly recognized now as a top 5 or top 10 global FX bank with very good electronic trading applications and good client franchise. Slightly overweight corporate clients, slightly underweight financial institutions which we're addressing directly but in terms of franchise potential and positioning we're in good shape.

And the team has not translated that to bottom-line results. In what by all accounts has been a bumpy quarter, some banks did reasonably well some banks did quite a bit worse than we did so.

When we look at the banks that operating within -- operate within emerging markets footprint other types of some are still reporting, I think we will find it was slightly heavier than the more G10 oriented banks we're in both segments. And so, I don't see anything that particularly concerning about our second quarter results beyond that the general negative trend that we've had for a couple of years which we're addressing through an almost entirely.

And new team is leveraging their existing franchise instead of capabilities that we've got. It's an area of substantial investment for us.

We're very determined to turn that around so, no excuses or other explanations for what happened we just, we have not performed up for our potential. We're encouraged about how we can take that forward.

And this should be below the run rate?

We should be able to get some real growth there that’s particularly on the FX side. The rates in the credit business, we've not been as strong as historically and we're very focused on rejuvenate each of those franchises.

On the credit side it's very consistent with that the broader trust around across the C&IB business in the bank to increase the velocity of our balance sheet to have a much more active presence in both loans and security trading markets and with higher rate to accomplish that, so credit has not been a big contributor to our bottom line, we hope to have a steady contributor over time and rates has been a much smaller business power FX business, we think there is a natural advantage as we have in FX in particular in local markets. Our transferables into the rate side as well, so we see opportunities there.

It’s mainly is relatively small business for us in financial markets but we also see some opportunities there. So it’s a rebuild out from pretty good set of foundations in currency.

Your second question was --

Speaking of buyback shares you’re trading at any bigger discounts this morning?

Yes the first thing is first, obviously we have to get to the point where we’re comfortable returning capital to shareholders and we will talk about that, buyback dividend that is a decision that we take when we get there.

It’s Rohith Chandra-Rajan from Barclays. Sorry for coming back to the dividend again.

But maybe if I could ask if possibility sustains at current levels mostly impacts bank levy, personalized incomes in line with your expectations and five year transition of Basel IV hasn’t we haven’t moved forward on Basel IV by the end of the year. Would that in itself prohibit the presumption?

We would take the dividend decision in the round and there is lots of things we’re looking at, we’ll always talk to that earnings stability and foreseeability and we talked about range of things that can impact our capital position, Basel IV is one important one but we’re going to make that decision based on the information we have in the round [indiscernible].

Okay. Thank you and I had another quick one, at the year-end you showed the $50 billion of low returning out of device each highlighted at north of 22 it will take, I'm just wondering if there is an update on that and to what degree that is impacting the revenue line?

We're just inclined to go back to that particular portfolio of $50 billion because quite a bit of time has passed. We have continued to make good progress on all of our low returning claims.

So the original $50 billion that we have identified as well as others that fallen into the category as a result of downgrade or failure to keep up the pace of business with those clients and we've had clients that have sort of naturally lifted out of that anymore that will as we get the improvement credit quality that we've seen. But we have a -- we will have a dedicated session for investors on our C&IB business in the second half of the year prior to the year results and part of it we will talk about is the metrics that we’re using now to really help understand the progress that we’re making on the secular improvements and the returns of that business.

We've had a very useful focus on a subset of that portfolio on day one but there has been so many ins and outs in that portfolio, that's not the best measure to look at perspectively but we will come up with some replacement things that we’re prepared to discuss openly and share those with you over the course of the fall.

So in thinking about that profitability now more on a product line basis than a client basis?

Yes we're doing exactly what we did before but we’re looking at the entirety of our client population. So we’re looking at the client mix and as we add new clients who are coming out of the year for example the next 90 in the European and American markets have much less capital intensive typically higher credit quality and much more focus on our transaction banking and FM capabilities, so we’re getting much higher reference on this assets on equity from those clients than we have from the average of the rest.

So how do we get the returns up in C&IB we will just continue to work very hard on improving the profitability of clients that are below our cost of capital target and keep bringing more clients that are naturally above and we’re doing both.

[Indiscernible] from RBC. I think of Q1 results sorry you were looking for the full year to flat interest margin overall, do you stand by that sort of expectation and what’s your experience on deposit is in Singapore and Hong Kong specifically?

Yes, I mean I think we will be fairly flat over the course of the year obviously this could grow little bit higher than we were at the back end of last year generally as said we have gained a bit on marginal liability side, we have lost bit on the asset side, I don’t see that changing to huge amount but a profile for the balance of the year, there is a little bit market by market to the group as a whole within a zone I think for the balance of this year.

Good morning, it's Chris Manners from Morgan Stanley. Just a few questions if I may.

First one was just on the past year of non-impaired loans, I guess entails with flat about $10 billion on half, non-impaired has gone from $5 billion to $6.6 billion on Page 53 just maybe you could describe a little color there interested to hear your thoughts. And second point was on associated income, it looks like about 6% to PBT and the half is coming from associate income in China in special items with $122 million just maybe little color on that maybe what that was.

And also just to be curious Hong Kong and the revenue performance, as I look half on half is about 4.5% growth rate, if we look at some of the other Hong Kong banks they are approaching double-digit revenue growth your volume really get 8% on the loans just trying to work out is there margin slippage there as to actually financial market revenues and it’s been a bit soft just maybe color there would be really helpful. Thank you.

Let me just pick up the first two. There are one or two accounts and these some funds just on payment profile just have slipped over a period and so there is nothing particularly significant all concerning in the past due not impaired.

And the associate increase is the investment little high in China which I think is the one you’re referring to. The growth rate to Hong Kong was sort of 8% up on the full-year basis stronger on wealth management and retail a little bit weaker in the commercial state of that period but about 8% was the half year and half year increase on Hong Kong.

There has been a fair amount of competition for assets in Hong Kong in particular. We broadly held our share but we’re not going for the -- we’ll not compromise returns.

And when you say, I was just looking at the first half this year versus second half last year Hong Kong would you think it will be best to look at seasonality on year-on-year maybe and so $123 million is that sustainable associate income or been growing or should have stayed just wondering how to model it?

It has been reasonably predictable and it has been slightly growing. And it's in China but only to that.

I’ve got question from [indiscernible] in Hong Kong is the current inability to find this business in the volume perspective that generates return on capital acceptable to you [indiscernible] management especially given what you’re saying in capital and talent, does that not suggest the major returns in the industry in many business lines below your cost of capital as you’re already increasingly facing tight competition from local competitors.

Okay. The short answer is we made progress on each of the areas where we thought to make progress and we’re perfectly encouraged by that.

So this idea is somehow we’re throwing the talent having doubled our profitability would be obviously incorrect. The -- there are clearly parts of this business that have structural challenges, the C&IB business or the equivalent to different firms were very, very, very, very few exceptions is not covering the source of capital right now and we can’t understand why, it’s been a sluggish economic environment over the past period of time and an enormous regulatory burden that has been ecommerce business that we’re all stood by it, do we believe that we can position that business to generate a cost of capital return over time, yes we do and those are exactly the steps that we’re taking to accomplish that and we’re making good progress in that regard.

But the idea that we can’t find interesting business to do hence the lower returns over the first part of the question is not accurate, we’re very comfortable that is good business to be done and we’re increasingly positioning ourselves to be able to do it.

Hi guys, it's Michael Helsby from Bank of America Merrill Lynch. I just want to pick upon on the revenue outlook Bill because clearly as you said it’s K and you do speak very encouraged by the things that you’ve been putting in place and actually when I look at Slide 29 which gives the quarter on quarter movement is striking that the annuity businesses, transaction banking, corporate finance, wealth management and retail are all and it’s the flow business is down.

So I guess I appreciate there is a lot of uncertainty in the longer-term but in the near term i.e. it’s the second half.

So think you can sustain of course the momentum in the annuity business along.

Those are the things that we’re investing in and the items that you mentioned which we’ve been calling out throughout the course of the morning, are the data returning businesses that much more importantly play to our strengths, those are our core strengths. It’s not to say that we don’t have some core strengths in some of deferred businesses because we have advantages there but it’s necessarily more volatile and the ability to differentiate will require sustainable continued focus but that mean we will have steady progression through the rest of time, no I’m sure there will be bumps in everything we do but we are positioning ourselves to accept change and steadily because those higher returning businesses and must repeat the progress that we’re making is encouraging so far.