Standard Chartered PLC

Good morning, everybody. Thanks for joining us bright and early.

You'll notice that in some of our key-ups for these sessions, we referred to childish names, whether it's toys or Marble Credit Card or things like that. It's because we're young at heart, and we thought you could use a bit of that first thing in the morning, at despite 160 years of history.

But that company [Toys], it's a great success, right? It's an SMB client of ours in Hong Kong.

They had their ups and downs as anybody getting into that kind of business does. We're stuck with them throughout; they're stuck with us throughout.

They're now a major exporter of toys around the world, including these cool little marble series, so if you're interested we can probably source you one. Now how we're starting the year.

We're pretty good. We're happy with the start of the year.

It's a solid start, strong financial performance as you see in improving steadily. We will talk a little bit our key growth agendas, which we think are firmly on track, doing more or less, what we would like it to and what we expected.

In particular, we'll focus on the progress we're making on the digital front. There clear evidence that the risk discipline that we introduced quite strongly three years ago is bearing fruit in much lower loan impairments, but also improving returns, and that will be a recurring theme that we come back through today and in the quarters to come.

Capital remains very strong, liquidity remains very strong. We think that this is appropriate, given the remaining uncertainties, both geopolitical and regulatory.

But we're certainly comfortable to get that backdrop, reinstating the interim dividend, that $0.06 per share. And as we've said it full-year, and we'll repeat now, we would hope and expect that that dividend would increase as our earning increase, and including, obviously, we hope and expect our earnings to continue to increase.

The return on equity is making steady progress towards our medium-term goal of over 8%. And as we look to the period to come, we will look to – continue to manage each of the lines contributing to equity, high income cost capital and loan impairments or other impairments.

All these things are supportive of the medium- to long-term trends that we set out, and we feel we very much on track. Good indicators of underlying success of thinking about the inputs, customer satisfaction surveys are indicating that we're steadily improving.

When we look at the fact that we got a top net promoter score in six of the eight major retail markets where we operate, and that's near – that's a top. That's not just the top four for our sub segment.

These are client saying to us that we have a fundamental differentiated value proposition, and we're delivering it increasingly well. Likewise, on the corporate side or towards the client work, third-party surveys, assessments of market share, all give us the strong sense that we're on the right track with clients.

We are driving a hard-driving performance culture. We're not fully there yet by any means, but we're taking very concrete steps in the early part of this year, we'll talk a bit later.

And then finally, the economic backdrop is supportive. And obviously, we're in a cyclical business, we're in a good part of the cycle right now.

And we feel that this is going to continue for some time, so we're investing into our growth markets with a high and great confidence that there’s a value in these markets and the growth will remain. Of course, there are uncertainties.

We're also prepared for that. So the strong capital position, the strong liquidity, prepare as well for the curveball that could come out as through time.

I will talk a little bit about that, in particular, the trade issues later. You seen this breakout at the full year, we thought it would – it's worth sticking with this format.

We've broadly break-in our business into three types of business; first, and this is now a little bit over half of the income of the bank, is these areas where we focused on extrapolating our key competitive advantages into real growth in our markets. This is the transaction banking business, the wealth management business, the mortgage and auto business, if you're lending, where we have a differentiated proposition vis-a-vis clients, either because of our brand, because of our existing position, because of the markets where we operate.

That part of our business is growing very nicely, 14% year-on-year, 8% half-on-half. These are areas that we're focused on.

We're generating the growth, of course, mathematically, it will continue to be a bigger part of our bank. That's what one would expect for the areas that are playing to our key competitive strength.

We're very happy with the progress. That second bucket, the middle bucket, which we called return optimization is that portion of the bank that we recognize back in 2015, we still recognize today, ease ongoing transformation.

And that's a legacy lending book in our corporate business. It's parts of the NASS market in our retail business.

This part of our business is being optimized. Part of optimization is sacrificing some income along the way in order to improve returns, and making some investments in order to be able to deliver product more efficiently.

So we managed to say about zero in terms of income growth, so 1% of year-on-year, 4% down, half-on-half, but we're improving the underlying returns, and of course, that's becoming the smaller portion of the bank, mathematically. And in fact, the final bucket and other the final quarter of our income roughly is seeing [indiscernible] market sensitive areas.

So Financial Markets and Treasury, in particular, where we had – where we know that the external environment is going to drive the quarter-to-quarter results. We intend to grow that line and grow that through the cycle, but expect to have some noise along the way.

And that's exactly what we've had, with 4% year-on-year decrease, on the back of the very strong Treasury results in the early part of last year. And the 23% half-on-half increase on the back of resume strength in Financial Markets on the road to recovery.

So backup to more normal level and that market sensitive area. We've included a measure risk adjusted income, which is just income-less total impairments, because we think we want to convey the sense that, yes, we are growing income, but we're going higher-quality income.

We're going income that has a lower expected loss. And over time, obviously, that measure of income, that's loan impairments, will give a truer picture of the quality of the income that we're generating.

Clearly, we are generating a strong growth rate, especially the 15% half-on-half, on a risk-adjusted basis is encouraging. All that leads to the return on equity of 6.7% in the first half of the year, and we'll drill into that 7.5% return on tangible equity, which is not the measure that we used most commonly, but obviously, it's one that we use for comparisons in many cases.

And we think this is strong indication that we're on the road to hitting our medium-term targets as we set out at the full-year. With that, I will hand over to Andy, and I'll come back at the end with some more [indiscernible] comments.

And then time for Q&A.

Thank you very much, Bill. So as usual, just pick up one or two of the key financial numbers, and then go to a little bit more detail.

So 7.6% topline, 2.4% underlying AP and 6.7% ROE. So just in terms of high level, 7.6% on topline is the 6% increase, first half on first half.

Operating cost, up 7%, 5% on the constant FX, some acceleration of investment spent very deliberately into the first half which we'll come back to. Big change, I guess, on the numbers really in the credit impairment line, so $8.3 billion charge for the half year evidentially lost for quite a long period of time.

And massively lower than where we were two or three years ago. Again, I'll talk about that in a minute.

But that has contributed to the 2.4 of underlying operating profit, which itself is a 23% increase, year-on-year. Restructuring of the [indiscernible], and is broadly, net neutral, and a statuary profit of 2.3%.

Below the line, dividend per share, 6%, as Bill has referred to, so the reinstatement of the interim. The CET1 at 14.2% strong, up 60 basis points in the 6-month period.

Return on equity, 6.7% on the pure return and equity measure. If you do it on a tangible equity basis, the equivalent number is 7.5%, basis days up about 1.5%, year-on-year.

So just a little bit more detail then on the income. A year ago $7.2 billion in the first half of this year, $7.6 billion about $400 million increase in income.

You can see in the green box on the left-hand side here, the things which are contributed to that. And on the right-hand side, things detracted from it.

So the biggest contributors have been Transaction Banking and Wealth Management, both of those up 15%, 16%, year-on-year. Particularly, within Transaction Banking, the Cash, so the Transaction Banking up about 25%, year-on-year.

And then other contributions from retail Financial Markets, et cetera. On the right-hand side, Treasury down a little bit that was primarily the non-recurrence of the big boost we got in January of the previous year.

Otherwise we've had it similar to prior year. In terms of second quarter, that was about 100 lower than in the first quarter of this year, primarily Wealth Management, variable in the first quarter, slightly less point, but at a more normalized level from the second quarter and a little bit Financial Markets.

But broadly speaking, those aside fairly at similar levels of activity. So two charts, one of them just doing the breakdown of the key numbers between the main Transaction and then following one on the major geographic regions.

So on here, I think actually very focused, particularly, on the topline here, the Corporate Institutional Banking business. So 7% income growth, but actually this percentage isn’t front here.

Profit growth [7% to 8%], so very significant improvement, particularly in Permata, et cetera, and now seeing the ROE prints at 6.9%, the highest that we've had in that business for quite some period of time. Retail bank, 13% ROE, on the right-hand side there, so by far the most high returning of our business is very consistent with the session that's depend on the team did.

But they invested very recently, but good growth there, 9% on topline and high ROE. Commercial Banking, 7% growth in topline went slightly back on the bottom line, primarily because a year-ago we had an exceptionally or exceptionally low as the commercial business, low loan impairment and that normalized more in the period.

And then private banking is still not the significant profit contributor, but at least seeing some topline growth there at 12%. So that’s sort of, broad composition of where we're at with the overall business about half the profit coming from Corporate and half coming from Consumer and the center.

So equivalent numbers this time done on the regional basis, so gross channel and North Asia, as we all know, about 40% of the group by way of income has had a very, very strong first half through the year across really all countries. And they region up 11% of income, Hong Kong, itself the biggest business up 11%, profits up 25%, and I think the highest operating profit we’ve had in Hong Kong in half year since 2013, so very strong there.

But also really across the phase, China, 24% increase in income, some of that FX related, but nonetheless, a very strong performance there. And Korea 6% in income and now actually regularly making a profit, which is really good after the challenges there a while ago.

So I think, really across the whole region, a good performance and across pretty much all clients segments as well. And I’d see on the 6% up, and we had very strong performance, particularly in Singapore.

So 15% up on income, 77% up on profit, but the whole of the region has performed nicely. African, Middle East, a little more lucid, Africa a, probably, a little bit more so than the Middle East, so fairly flat on profits, and then Europe and Americas continues to be the big half for the Corporate activity in the CIB business.

On the bottom left, we have got the cost for the first half. And you can see at $5.1 billion directions, we are up 7% – earlier, 2% that is FX.

So $5.1 billion is up on the first half last year, but it’s very similar to the second half of last year. Within that, very important to note, we have very deliberately accelerated some of the investment spend and therefore the expense that in the first half whereas normally, it would go into the second half.

And that will come onto that the next slide. That really being an endeavor to get some of the system upgraded more quickly.

So we can improve the client experience. So overall, we're saying we'd anticipate the second half expenses to be similar to the first half at bank, ex-bank levy and that’s assuming the FX rates, so the roughly lowers since at the moment.

So on the investments spend, the chart here on the left has got the first half investment spent for each of the last four years. And you can see, hopefully, very clearly, that we have been increasing that progressively throughout that period.

So two observations; one, it is very much increasing. The second, which I think is also very important is the top slice their strategic, as you can see is just on the half total spend in the past.

We have spent almost everything on regulatory and lessons, and have a very, very little spend on actually improving the fabric of the business. So a significant shift in terms of what we're doing to actually improve the physical infrastructure, [indiscernible] et cetera going forward.

Right hand side of the chart, gives one or two proof points as to what we are now seeing on particular customers are saying as a consequence of that. So the Retail Banking there, the number of digitally active clients has increased now to pretty much one in two, about transfers it was one and three, a while ago.

Commercial Bank, number times, so actually just going straight through as in structure electronic processing, 57%, that was 50%. And possibly, most significantly, Corporate Institutional Banking average times onboard the client, which used to be 40 days plus, now down to 8.

So really, really helping on the customer feedback on many fronts is really, really positive here. So very challenge continues to spend and on the sharing [indiscernible] accelerating some of that into the first half.

Now Credit impairment, so there's a good chart probably three years ago we busy still looking like that. $300 million of charge in the first half, which is roughly half where we were in the immediate two proceeding half years, and two reasons for that one, the gross provisioning is lower than we've had before.

And secondly, the level of recovery that we're actually getting is higher than we've had before. Now that can move around between periods, but nonetheless, roughly of that harving, so it's relates to low grades provisioning, and two-thirds relates to higher recoveries.

Although we're on at first you know that really hasn't influenced general shape of this at all. Importantly, some of the underlying metrics in the text on the right, so the ongoing Stage III, as a news for using non-performing loans and those have reduced half-on-half by 6%.

The early alerts, sort of ones where sort of watching more broad indicators, 21% and the cash return, which is the one below non-performing loans is 30% lower. So really significant improvement in the quarter 3 off the board and hence, why we're getting that through.

I know it would be one we're acquire going to end up to the full year on loan impairments is always very difficult one. I think I have consensus to about $1 billion.

I think to be mark, right that could we will see, so anyways good progress on the credit side of the business. Moving then onto balance sheet and margins.

So encouragingly, we saw net interest margin continuing to move ahead a little bit. So we've had quite a number of quarters where that's been the case.

1.59%, obviously, some of that benefiting from interest rate increases with, again, high margins or liability products, offsetting some reduction on the asset side. Net interest income has arisen over the first half by 10%, it's pretty much the whole of the increase in the income.

But that is, I think, the strong performance there. Bottom left, you can see the customer accounts, so the deposits from customers, et cetera, 412, 435, so up 6% since end of last year and the loans and balances, two customers, up about 4% since the end of last year as well, so just gently taking forwards on both fronts.

Quality book on the top right-hand side, so in the solid growth, the proportion of book that is investment grade, is just progressively rising so 54%, 57%, 61%. And the proportion of a total Tier 1 capital, that is right into our top 20 Corporate exposures, around the 50% level.

We are - for the bottom right. And we have got a good loan deposit ratio.

Let me show one or two stands there. The focus we've had on the operating accounts within the Corporate business, like I showed getting as many of those, which has been very key to 25% growth in the cash Transaction Banking income.

So that has notched up during the period. So as the liquidity been generated by the retail bank, also up quite nicely in the period.

Slight reduction capital in the retails side, slightly move to turn deposits in one or three markets, but not hugely, and despite that the overall NIM, as I said, is up by 4 basis points. CET1 and risk rated assets.

So CET1 is said up by 60 basis points to 14.2% that is primarily driven by profits that helps that helps to have more of those offset on dividends and then the RWAs being a small et cetera there. The RWA, it's in the bottom, is partly FX, but this helped one or two mobile changes, operational risks, which is formally on 3-year training bases.

But you put all of this together. And we're down at $272 billion on the RWAs, so relative to the increase in the legislations, more RWA efficiency, which something we’ve been very focused upon.

So in summary, paying a little all for medium-term guidance range on the topline, where we have been investing money. We are seeing the growth, which is very encouraging.

And hence why we have accelerated some of the spend. We continue to target, keeping the annual expense growth below the rate and inflation.

The credit book behaving well, is also another plus dividend being resumed and more competence. I think, as each quarter goes on, the 8%, and hopefully, more [indiscernible] achievable on the ROE.

With that, back to you Bill.

Thanks, Andy. Just a couple more comments for me.

Dig in a little bit on the ROE guidance we've given, and the programs that we're making. Some of the things that we're looking at to give us confidence that we will exceed our 8% target, so hit that 8% plus ROE target in the medium-term, and obviously, continue beyond them to cover cost of capital and generate some incremental value for our shareholders.

Just quickly running through the indicators that are encouraging for us. On the C&IB business, as Andy said, the network income as a percentage of the total has continued to increase, up to 67%.

Non-financing income, similar, but somewhat separate up to 52%. So clearly focusing on those value-added services for our clients, corporate clients, in this case, leveraging our core strengths.

On the retail side, with the ROE at 13%, the wealth and deposit income as a percentage of the total up to 60%. This is clearly the capital lite version of the retail business playing to our core strength with affluent customers.

As Andy mentioned, again, Digital Reactive clients up to 47% of our total, and we would expect that to continue to grow as we roll out the digital initiatives that we mentioned earlier. And then I'll spend just a moment on in a couple of minutes.

Commercial Banking, new to bank clients are growing helpfully. This is an area where we contracted substantially on the back of earlier credit losses.

As we're seeing new clients come in and who themselves are doing a higher and higher proportion of their business, and with us a non-financing income are a good a positive indicator. On the Private Banking side, we'll be watching ongoing net new money flows and AUM.

We've had a significant period of consolidation in that business, including an element of derisking. We're fully ready to start growing that business, and we are going the topline.

We should see that flowing-through in terms of net new money in AUM in the period that follow. Just a couple of comments on the digital side.

The objectives, I think, are relatively straight forward and familiar to you likewise the impact, being a combination of better customer service and lower cost for us, just a more efficient process. Worth calling out the degree to which we're balancing our investment portfolio between things that we're developing in-house and things that we're developing with partners.

We've had some great successes that manifest themselves in the early part of this year that are purely in-house. So our digital bank in Ivory Coast, Cote d'Ivoire which we will rollout across Africa over the next 18 months, through the Middle East and South Asia, is entirely developed in-house.

This is 100% Standard Chartered technology, so it's our mobile banking app, it's our core banking system, it's everything in between those. And it works.

It's highly effective, it's cost efficient and it's being extremely well received in the Ivory Coast. We don't have a retail business in the Ivory Coast, so this is it for Standard Chartered, it's a pure standalone digital bank.

When we roll out in other markets, Ghana, Nigeria, Kenya, et cetera, we do have a retail business. And this will be a digital offering side-by-side.

In India, we rolled out a real-time onboarding, so purely digital account suite, full-banking services, layering in the services over the course of this year. Everything that you can do in a branch other than money, you can do on your mobile phone.

Obviously, based in India of national identification system, they are hard number, which has been highly effective and very impactful in terms of generating new accounts for us in India. We expect that to accelerate.

Again, entirely Standard Chartered technology. The Robo advisor that we built in Singapore, which is award-winning in many regards, entirely developed by Standard Chartered.

Andy mentioned that the strata bank system that is our treasury portal for corporate clients developed by Standard Chartered years ago, updated new release in the early part of this year, super high impact with our corporate clients, and driving our leading market share with corporate clients and Transaction Banking and Financial Markets in our markets. Likewise, the EQ and NFI connect our online trading platforms that we've rolled out for our private bank clients, which we'll rollout across the world developed by Standard Chartered.

But it's all about Standard Chartered. We're mid-sized bank.

We can't do everything ourselves. We don't have the tech budget of the largest banks in the world.

We do have access to the best technology in the world through our FinTech partners. We've got 50 partners around the world, that number will grow as we continue to expand.

We become very good at managing these partnerships whether they are partnerships with giants like [indiscernible] over anybody that they might have worked with to build a remittance service between – as the pilot, obviously, between Hong Kong and Philippines. It's working highly effective, short-term, low cost, remittance platform to allow expatriate workers in Philippines and in Hong Kong to return to their money to their families or whatever in the Philippines.

Obviously, completely financial crime compliant et cetera, et cetera, which is a critical part of any remittance platform. So, on the – maybe the other end of the spectrums, Ripple, which is a company that we've partnered with several years now.

We have built a leading transporter payment system, that's actually functioning with Blockchain based payments, initially between Singapore and India, but similar to the – financial remittance platform. This is something that we've developed in partnership with the world leader, and in fact, our participation with them has helped make them a world leader.

So cash is developing a way for us to expand our physical footprint in Singapore into 400 retail and other consumer outlets to offset the fact that we're restricted and the number of branches that we can have or even the number of ATMs that we can have in Singapore and so on. So we're very happy working with partners, we're very happy working on our own.

The combination of these two things is positioning Standard Chartered as, A-leading digital bank in the world. And of course, our aspiration is to be leading digital bank with our customers.

This is all part of the much broader cultural agenda that we're driving very hard, listed on the left – bottom left here, the three value behaviors in Standard Chartered, uses an internal thing. This is – we use this internally and it’s on the back of our ID cards.

But importantly, it came from within the organization. We spent a couple of years now, refocusing our organization on what it means to have a strong performance culture?

What it means to recognize that we can be best-in-class, the things that we set out to achieve, not in everything. But things that we know we can do well.

So we never settle continuous improvement. We will leverage the capabilities of our bank across borders and across divisions, I'd better together.

And do the right thing, obviously, speaks to conduct, but it also speaks to the way that we engage with our clients and the way that we engage with our clients and the way that we engage with each other. These value behaviors are making a big difference in Standard Chartered.

It is part and parcel of a much broader program. But one that is transforming our culture into what we'll need to be to operate successfully in the digital economy in the fastest growing markets in the world in a disciplined way.

Talking a little bit about our foundations of risk, control and conduct, just mentioned that the focus on culture, drilling a bit on cyber, very, very focused on managing our financial prime risk. We've made good progress that's been recognize by regulators, prosecutors.

You will see that we did extend or the prosecutors extended our DPA until the end of this year, while they complete their investigation of the historical issues related to sanctions and other financial prime control through 2012. The good news is that they continue to recognize the progress Standard Chartered has made.

And we'll continue to work up in cooperatively within the – until they're finished with their investigation. But the encouraging signs along the way are the progress that we recognize, but also the progress that they recognized on our behalf.

Cyber is an issue that would become – it has become and it will continue to become increasingly important. We have a program to make sure that we stay either close any gaps that we identify or get to the best practice in the market, focused on protecting, enabling, engaging and responding.

This is something that you'll be asking about and something you should expect to hear from us about, because it's a big area of focus for us. We don't take this lightly in anyway.

It is taking an increasing proportion of our investment and operating budget. We think that our program is on track.

We recognize that there is more that we can do. I think, you'll probably hear that from everybody.

The macro environment in which we operating is broadly strong. The economic growth is good.

The slight tempering of growth in China is not particularly concerning to us. We think, it's – the natural consequence of the Chinese focus on cleaning up the Financial system and streamlining the way that finance has delivered in China.

Although, of course, it's something that we watch, and could watch, in particular, the extent to which trade fears or trade warfares, impact the pace of investment in or around China. No concerning funds of any materiality at this point, but clearly, people are watching carefully.

So when we talk about uncertainties in the future, the trade is an important consideration for us. We're not ringing any alarm bells at this point.

Otherwise the backdrop is probably supportive. Just call out on the upper right of this chart.

Our exposure to direct trade between China and United States, which obviously is at the epicenter of these concerns about trade wars. Now our trade income directly related to China-U.S.

trade as a portion of our total income is around 1%. If we look at the company's, countries, supply chains, who are in the Chinese supply chain that would be affected by a significant ratcheting up of terrorist or other trade restrictions.

You get to another 1% or 2%. So 2% to 3% in total.

Not material in the overall scheme of things, of course, that trade even with 25% terrorist isn't going to 0%, but it could be impacted on the margin. The bigger concern, of course, would be outright destructions in trade, so outright limitations on exports of particularly technology or imports of particularly good, which could have a more dramatic impact on supply chains.

It could reach further beyond China into the rest of South Asia. Other clients of ours that are dependent on Chinese intermediate manufacturing or ultimate exports.

There's no sign of that in the short-term, although we can't ignore the possibility that the trade work could escalate to the point where that could become a material impact. I think, the bigger impact would be on global GDP, because that would likely trigger a much broader range of hears.

The markets would be quite unhappy about that eventuality, and we could expect to see that reflected, which would then have second-order effects on things like our Wealth Management business. But as we're very focused on this trade question, I don't think we have any blinding insights, relative to what you might have.

But we do in our own business. And I think that borrowing a really exceptional escalation, we should be fine.

Just to sum it up quickly. We have had a solid start to the year.

We set out a plan three years ago. We're broadly on track.

We said that – we described the things we were going to focus on. We focus on those things, they are working.

The topline is growing, it's growing in the areas that we called out, growing consistently. Some of that is cyclical, across the Wealth Management is cyclical, we know that.

We've been in relatively benign market. But stripping out the cyclicality, that the structural improvement and the quality of our business and the quality of our growth is undeniable [Audio Dip].

We're going to retain a strong capital position, as Andy mentioned. It's the right thing to do as we came out the back end of our period of transition.

And as we look forward to a period, we're there are some potential bumps in the road. We always want to be sure that we can weather a storm relatively well.

And that will be the time when we can take advantage of most opportunities. The ROE migration is in line with our hopes and expectations.

Clients are increasingly recognizing the value of Standard Chartered, and we are driving a strong underlying culture at the bank, which we'll accrue benefits for years to come. So that, I will be joined by Andy appear.

We'll take any questions that you'd like to throw at us.

Good morning. It's Martin Leitgeb from Goldman Sachs.

Two questions please. And the first one is just to come back to your comments earlier on capital and then over to expand that to dividends.

I was wondering, if you could shed a bit of light on what kind of Core Tier 1 level we should think of Standard Chartered learning going forward. I think in the comments earlier, you characterized the current state as is appropriate given the number of risks out there.

So should we think about 14 as the kind of the threshold going forward? And the second question is just regards to dividend.

And obviously, looking at a significant increase in profitability, we're shown, how should we think about prospects for capital return going forward? When do you update or when do you think you can give us an update with regards to potential payout ratio or dividend policy from here?

Thank you.

Our public statements are in capital have been – that we would expect to operate in 12% to 13% range. We're, obviously, well above that at this point.

And we've reintroduced the dividend at the full year. And then obviously, reintroduced the interim dividend now.

And that's a clear indication that we think that we have an ability to resume that dividend through earnings currently, and then prospectively. We've also said that we expect to increase the dividend as our earnings increase.

As is much guidance that I think we're going to dividend specifically. As to capital, I think as the uncertainties that we faced recede and some have receded already.

We'll be able to provide some greater clarity, as to what we think the appropriate end state, as for capital, with the most obvious remaining uncertainty from a regulatory perspective is the national discussion that may or may not be applied to various areas of the Basel III framework that was rolled out last year. And then that could be a little while incoming before that's perfectly clear.

Of course, we still have the open investigations in the U.S, which we would hope and expect will close out at some point in our lifetime as well.

Maybe you got one.

Hi. Thanks for taking the question.

Just a couple of questions. The first one is on the revenue.

Just looking at the quarter-on-quarter progression, that kind of stripped out the obvious liquidity sensitive balances like deposits and cash measuring custody where things are quite good. I think on the whole q-o-q to revenues are down pretty much across-the-board.

I used to turn a square that would effect that loan growth, and it was decent. What caused those revenues to be weaken?

I guess, specifically, Wealth Management. Did you see effects of, kind of, Chinese deleveraging coming through the – on the retail side of things?

You talk about asset price competition. With that from local regional players or with that from western banks?

Thanks.

Well, if you strip out all the positives, and say ultimately what's left, will be quite negative. But I mean, across the fees, we had 130 reduction.

I think [indiscernible] or between the quarters. About 80 of that was Wealth Management, about 40 or so was in Financial Markets.

Wealth Management, I think, I had probably look at as being a particularly strong first quarter. The market is generally were very strong and where we're at in the second quarter was actually a good compared with many quarters prior to that.

So it was an opposite for the second quarters. It was a big problem.

And Financial Markets it moves around. We have some quarter bit stronger some less so.

So I wouldn't really read too much into the one quarter. We had balance sheet growth on the half years sort of 4% or thereabouts.

So I just think each quarter, we'll have slightly different dynamics. It is evidential slightly weaker.

I think, Wealth is the primary reason for that. But I think, it does a thing to [indiscernible] from the view of the full-year, it should be in the 5% to 7% range.

Thanks. And just the second question is on how to think about the jaws, obviously.

So year-on-year, 1H 2018 and 1H 2017, I think minus 1% jaws. But I look at consensus, they're expecting around 4% jaws, and we are expecting around 4% jaws.

Your income range is 5% to 7%. You're below cost inflation suggest a range.

And you're between 3% and 7%. Considering how much investment has been increasing, which I guess, is a positive thing, how should we think about our jaws going forward?

Thanks.

Well, I think to our simple math, we should be thinking about those improving over a period of time evidentially, a less inflation was a lot higher than we got in the mind, which hopefully willing to take there that part of topline inflation or below on the cost side, it should be starting to improve, which also prepared a time. Just to make one point and some comment we have spent a bit more in the first half in expenses and some of that is decided to moving some investments spend forward going with last year being the second half.

We tended to be a bit second half loaded on investment spend and actually questioning why that would be. We know these programs need to take place.

Why should there not be a more even distribution through the year. So that will take a little bit of cost that would've been in the second half of the year out.

But I think to your question the intent would certainly be both in the next two, three, four years. We do need to get the jaws moving in the positive direction.

Thank you.

Next question.

Good morning. [Indiscernible].

On impairments clearly very low in the first half of the year, lot of write-backs, very difficult to forecast, I'm sure. But CET12 is down, early indicators down, and you highlighted risk adjusted revenues for the first time, presumably you wouldn’t want to see that come down [indiscernible] highlighted it.

So does that gives a sign of conviction that these gross impairments shouldn’t be jumping up significantly from here albeit from other base?

I think the loan impairment line is one of the more unpredictable lines in the P&L because it can’t be lumpy, and we can't modify. There is an issue with the client that we didn’t know about.

So yes, it will be lumpy to think it will stay at those levels. I suspect we pretty much have everything aligning.

The recoveries are being really strong, unusually so, and the gross provisions have been low. As I said earlier, if we can break the billing barrier, that would be fantastic.

We were $2.5 billion two years previous to that. So it's genuine across a difficult one to forecast.

But it is certainly having purged itself evidentially.

I would just add. I know you’re looking for guidance on the next three large single end defaults, but more broadly, we've fundamentally changed our underwriting standards.

We've significantly upgraded the overall quality of the portfolio. So for a lot of the questions, Andy says it’s completely correct.

There's going to be lumpiness in that number. Through the cycle, expected credit loss, is substantially lower now than any time in the banks recent history by design.

And just note, that, that comes out of cost, now there's an income cost to that. But because of the way that we’re managing the portfolio and because of the lower returning assets that we're putting on the book.

But it's a – has an opposite effect on returns, which is we're doing higher quality, high returning business. This should smooth out our loan impairments over time.

So I know you're going in different direction, but couldn't resist the opportunity to give the editorial on the broader trend here.

Thank you. Just a quick one on capital and RWA movements and during the first half come down quite significantly, but some one-off things going there in terms of up risks, market related FX.

How should we think about going to the second half, excluding changes, which could have a negative impact? The underlying statutory should start to increase it?

Well, your formula induced on the FX movement, obviously, I think that the focus we have got and then have had for a period have had for a period of time of improving the productivity of the RWA is taking the lower returns out, it should be out directionally having a more efficient direction. The real issue I think given that we have a lot of liquidity is other opportunities to learn to more and if there are with the right resilience we would be very happy to go and grab them.

So I wouldn't be so focused upon guiding two of an RWA number as long as which is conducive to get in the ROE up, we'll be doing it.

It’s Robert Sage from Macquarie. I’ve got two questions please if I may.

First one is on the margin, which seems about 4 basis points. And I think, you said at the second quarter was up a couple of basis points for a handful of basis.

It’s seems sort of fairly progressive moved up, and I know that high bore's gone up. And you have had the U.S.

interest rate rising whenever. Is it the sort of a fairly, steadily billed in margin that we should look forward to, do you think?

And the second question was on the Associates line, which talks very smartly in the second quarter. And I know you've been talking about matters, sort of moving around.

And I was wondering whether that was the primary driver here, but I've also note that you're calling out China, it's probably saw a nice question. It's not Bo Hyde or sort of particularly doing that, and should we see for sort of the second quarter numbers being something that sort of provides a basis for sort of future extrapolation?

Okay, let’s take second one first. So the predominant increase in of the Associates is very high, if you look at the regionals, but you can see that without.

I would say the probably had a strong unusually good second quarter. So probably not quite extrapolate that going forward, but somewhere between the first and second quarters probably would be a proxy for that.

On the NIM, we have had a number of quarters now where we have seen the NIM nudge forward a little bit. And that is good because of the several years prior to that when we have seen the opposite happening.

And second quarter fairly similar, so not a huge amount of difference obviously we did have movements in a sort of high door and all the rates actually in the second quarter, which will have influence it a little it, but notwithstanding that very strong performance from Hong Kong. So I'd say if we can sort of flat a little bit that is clearly where we all focused.

But there are many moving parts that contribute to that, generally the same theme is before the – margin slightly improving, offsetting a little bit of weakness on some of the asset margins?

Hi, it’s David Lock from Deutsche. Just I got one which is on Slide 10, on your scale of investment pickup.

And obviously could we understand the rational behind the step up in systems enhancements and strategic spend. But the regulatory spend continues to be this slug of investment that is continuing step up.

I wonder if you could give any more color on when you expect that investment to slow down and mention a lot of that must be building systems to track things and taking out manual processes. But could you just give any color on where you expect that trend and if that mix, but swing that kind of the cash investments such we can become more strategic unless regulatory?

Well, the good news is that the first half here, we have been here and it has actually come down slightly. So we are on a slightly better track than previously.

We said in February that we close some quite big program deliverers at the back end of last year and therefore we will hopeful that we sort of at all rounds of the peak and that in the first half would suggest that's probably the case. I mean over four or five year period that would see a little bit of moderation in that but bearing in mind there is quite lot of compliance and of that all those businesses usual sort of tight cost in it and that clearly is going to be talk the fabric the business going forward.

It should decline a little bit but I wouldn't have a huge decline in that.

[Indiscernible]. Just one kind of a follow-up on your investment spend.

And just kind of the strategic spend. I was just wondering in the context of close competitor of yours recently announcing that they've invest up to for that two-thirds of your market cap and technology in growth initiative over the next few years to what extent could that can create our pressure on your investment spend?

I'm just going to kind of get some were about to investment spend could need to go to and to what extent that strategic investment spend is perhaps defensive driven? Thank you.

So it will maybe a little bit the point that I'm trying to make in the earlier comments the existence of the FinTech universe broadly defined effectively gives us an option of making investments to show up on Page 10 or investments that show up on OpEx, through partnerships of form or other and we done both to good affect. The things that we're investing in ourselves are things that we think are the mission critical, where we need to have our own capability or where we have some particularly differentiated position or structural advantage that means were better, investor in that particular area.

So when it comes to building digital banking applications for relatively underdeveloped or under penetrated emerging markets we think that’s the core strength of ours and we want to make sure that we have that capability ourselves. And that said, we’ve also launched lending to build a digital bank in Hong Kong, not an underdeveloped emerging market by any means.

And on the assumption that Hong Kong process led by the may ultimately congrats and are getting the license that we are applying for we would expect to use a healthy combination of our technology and third parties, with the bias to third parties. Why?

Because we think that is margins as developed as Hong Kong you go to make sure that you have at the best-in-class for each step of the value chain per customer, our job will be to pull that together into the offer. So that would be likely be a mix of things that show up on Page 10 our strategic investments and things that show up on OpEx, as a practical matter because where either partnership or acquiring a service under license from somebody else.

So I'm not sure if I'm getting straight your question but I think at the in aggregate, the investment spent that were making independent of the accounting when that happens show up on we will continue to grow. It will continue to go because we are investment markets with earnings are growing, with customer preferences that are changing and with opportunities that are great so we're not at all shy about continuing to step up our investment spent what will quite comforted by is that the investment that we've made over the past two years, which were substantial increase on previous years are paying off, they're paying off evidenced by the income growth that we're getting in the market share gains that were getting in our key focus areas.

Thanks. It’s Manus Costello from Autonomous.

I can ask by the Corporate Finance income line, which I find particular hard to forecast you called out some asset margin pressure there but you also put it in your slide on the optimize returns. So can you give us some idea of what we should be expecting the growth underlying in terms of the assets but also in terms of revenue margins coming under pressure there?

Corporate Finance does move around, it obviously depends upon a little bit of the timing of the closing of the deals, and what we have seen is I think year-to-date the volume of transactions we've done a slightly higher 5% or so something a year ago. But the margin per deal has been a little bit lower and on consequently we've seen slightly lower Corporate Finance income now in the previous half year.

The order book is strong and it remains at and above levels we've seen recently. So honestly it depends on conversion and it depends upon timing, but, overall the health of that business is good but it does move around a little bit between quarters.

Yes, you had a very strong second half last year. Do think that something that you can a cycle successfully or should we expect second half last year to be an aberration?

It's quite event driven. I mean it just depends on how much plan activity we have got and we did have a second half of last year with decline.

The family order book is looking good a moment should both while but we will have to see how much of that come through.

May be you could just kind Manus on the - why we put it in the optimization bucket. There's clearly two components of all the single to in Corporate NASS part is the money that you make in arranging a deal, fees on inviting various parties and any scheme were able to take in terms of our underwriting price versus where we distributed.

That's upfront, for the most part and it's in and of itself is capital like a part of the business, with that often comes and retain position, which in the past that way we reported Corporate Finance. The vast majority of the income has actually been NII on retain positions.

We shipped the big chunk of the lending book out of the Corporate Finance business line and into the lending business a year and half year-ago. So that’s addressed substantially but there's still meaningful component of the Corporate Finance business, which is NII, and which is specifically relating to those deals where we put an active role and structuring and distributing.

As we build up our distribution capabilities, which we are I think successfully, although we started from way behind, I think best-in-class certainly. We’ve cut up very quickly, much more actively securitizing, so it has undertaken several securitization transactions in the early part of this year to design to optimize the portfolio.

Some of those have Corporate Finance deal packages that we bumbled and sold to investors, which themselves are just getting up to speed with the kind of assets that a bank like Standard Chartered originate. So as we optimize the portfolio with much more active portfolio management, we should shift the balance increasingly from NII to fee income effectively or spreads on fibers itself and that business will graduate out of the optimization bucket into the high growth.

Because the underlying opportunities for Corporate Finance deal origination remain robust. Our pipeline is good, our market share is strong, our technical skills are good and differentiated relative to the other people in the market.

And it's not an area where we face anywhere near the same amount of local competition for the kinds of deals that we do because they are cross-border by their nature. So we are optimizing that this is a – it's actually a – it’s a good opportunity to make further optimization doesn't mean exit, optimization means reposition our business model and underlying portfolio, and we’re pretty advanced in that regard in Corporate Finance.

Hi. It’s Claire Kane from Credit Suisse.

Two questions please. The first on the treasury income.

That line has come back up to the H1 2017 run rate, and again, in Q3 last year you said $250 million was a more normal level. So if you just maybe explain what gains are in the Q2 number or is this the ongoing run rate for that line please?

And then my second question is on the DPA, given the investigation continuing, what you see is the range of outcomes or the conclusion of that, can you confirm that there's no balance sheet position for any financial penalty there? Thanks.

So unless they confirm on the former the Treasury area, I mean it doesn't move around, so we've got various component parts in there. The performance for the treasury markets business, we've got charged to be made to our business for the equity that is provided by the group as interest rates rise we increase in the charges there.

So that is slightly higher than what it was before. We offset gain slightly a little bit because we’ve retired some debt at the back end of the period.

So there's nothing particularly abnormal in that, but I'd say slightly higher interest rates in the charges into the businesses for the equity they are tying up, is the primary contributor.

And you’re reconfirming the DPA question or are you confirming something else?

I was comparing the back end of the question, which is the DPA

So no balance sheet provisions, could you give us a sense of the outcome you are expecting?

I wish we could.

Thanks.

Next question?

Good morning. It’s Chris Manners from Barclays.

Just two questions if I may. And the first was just maybe if you could give us a little bit of update on what's happening in India.

I see the revenue is down 14% year-on-year and assuming there might be some FX in there. But PBT is only $100 million in the first half, MMB used to do a $1 billion PBT and just maybe give an update?

And the second one was just to bring it back to capital and capital management, you are running 200 basis points above sort of 12% to 13% guidance range. And when we look at the dividend assuming you do – is it fair to assume one third, two third splits of the dividend like in all your PoC now.

Is that what you're trying to indicate? And if so, you'll probably end up with service capital, so we will be talking about buybacks to manage that or maybe just a bit more clarity on the thinking?

Thanks.

I’ll take the first part about India. You are right, and years gone by and the bank earned lot more money in India.

You skipped the period in between where we lost a butt load. They're not unrelated.

So what we're building in India is a really healthy business, we've invested heavily in automating the retail business and invested in building our shared backup where we had last share pretty steadily during those go-go days of the building of pretax. We allow the core business to deteriorate, and we've been investing to build that backup, but with technology and with feet on the street.

It is paying off in terms of share and we're beginning to get the traction, see the traction on retail income. Commercial Banking business remains strong.

The large corporate business has been pretty subdued on the back of the Indian bank rehabilitation process. We took our pain a couple of years ago in India and it’s time to say we don't take any more pain ever, but we are thoroughly cleaned up.

I would say in India, the Indian banking system is not, and that bankruptcy/liquidation process is underway. It has put a serious grist in the mill for large corporate activity in India, but our share is – good healthy business in increasing, we're comfortable that we're making steady progress.

We clearly have a long way to go with these current return numbers, relative to the capital we committed to that country, but we're really focused on that.

On the capital front, [indiscernible] questions on excess capital and it hasn’t always been the case in the past. As Bill said, I mean we are running a little bit higher.

We’ve got some Basel III things yet to becoming clear U.S. except for us.

So I think it’s probably better to be a little bit higher just at the moment. $0.06 interim dividend, we haven't formerly gone through it, is it one-third, is it two-third or whatever, at the end of year obviously we’ll have the more substantial discussion or what we should with the final dividend, but evidentially the move we can get by profit growth going up with a better got to be the dividend.

So are very, very well aware of this issue and its nice to have on the table.

Thanks.

Thank you. Jason Napier from UBS, the first one on the interest rate sensitivity slide, Slide number 27.

Just noted that there is a fairly modest fall in implied sensitivity and I just wondered whether you can talk specifically about the competitive dynamics in Hong Kong and at the extent to, which the lower and measured rates sensitivity is driven by competition as supposed to just the level of rates and how that’s performing? And then secondly, on the private bank obviously modestly loss making at he moment, what are sort of the art sticks that you're using other than sort of assets under management to tell whether on track because I know the revenue per customers nearly $70,000, the average AUM on the number you disclose is already $8 million.

So just wonder how much money should this thing make in the near-term was really a longer term strategic bid?

And so the interest rate sensitivity and the 330 revised to 300. This is not an exact science.

We happen to make a lot of assumptions about competitive pricing, about customer behavior et cetera. Our core in the numbers primary reason for the change is just that as the interest rates do get higher.

There is a slightly more previous position across with more choosy about where they're going to put the money and what sort of interest rates are expecting from it. And obviously, a reasonable portion of our book is in Hong Kong and we have seen in HIBOR rise through the period over first half of the year and therefore that is affected into those equations.

But we have done this quite across number of countries. And it is not just one sematic assumption.

So we have tried to take [indiscernible] market by market and to the consequence of that is it just a slightly lower number.

On the private bank, our intention is to build a healthy business from a period pretty significant retention. So we dropped an aggregate close to third of our client base as we went through a combination both of combines related reviews, but also looking those clients and the types of activity they wanted to engage with Standard Chattered.

We were a little bit of over concentrated with clients that were borrowing against single stocks typically stocks typically stocks that in our own company, where we were a banker to the company. And we're shifting that to obviously a completely compliant client base that is also focused on managing a portfolio of wealth, which could be provided by us.

We manufactured very little, basically we manifested deposits and the rest resource with the parties that their interest were referred to distributor with the world discrete investment product providers including obviously the potential on the insurance side, a little bit less relevant for Private Banking than for our broader wealth category. So we completed the transition at this point, I think we've got our client base that were by the comfortable with.

We’re demonstrating that clients wanted to participate in this platform. So we are adding clients.

We are generating some good topline growth. We saw the activity margin and capability, but again a different nature portfolio that has been the case in the past.

And we’re hovering around breakeven at this inflection point. We’re quite comfortable that as we drove this business that of course there is an element cyclicality as well, which is just a health warning that we have to note, but the structural we will building a business that should generate strong growth for the foreseeable future.

We relatively modest expense increases in a relatively capitalized version that should be accretive to the bank 's earnings and accretive to our ROE materially over time. And that's been getting to pay off now.

Thank you. Tom Rayner from Exane.

It was slight clear, [indiscernible] say anything about the U.S. settlement much and is it possible though you can give us any color on sort of what aspects of the program needs improving, which is kind of led to the BPA extension can you really think that the fact that the dividend has been resumed PRA are fairly reserved about the potential outcome or is it just again too much?

If we couldn’t comment on the PRA thinking on anything, we obviously feel comfortable that our banking is the same and the dividend that we would expect to increase is starting to increase. And on the DPA the only thing that I can say is that we've had a program that was set out with the regulators and prosecutors back in 2012 and 2014.

We made good progress. We think that we’re on track?

Is that call that each time I’ve set up here. It’s a long-term play and we will never be completely done.

There were always be more that we can do, but we feel that we have a very good understanding of where our gaps are and we got a very good program for closing those gaps absolutely encourage that the prosecutors when they expend the DPA make the observation that we made steady progress and they now made that observation the second time. Of course that's not normal.

We had the opportunity not to say that or to say worse, to say that things simply are up to stock, as much as we can say we're encouraged, it will close out eventually. We’re confident.

I wish I could call the timing or the particular implecations.

Okay, thank you. End of Q&A

Thanks.