For the twelve months ended 31 December 2016
London, 24 February 2017 Standard Chartered PLC (the Group) today releases its results for the year ended 31 December 2016. All figures are presented on an underlying basis with a full reconciliation between statutory and underlying presented on page 10.
“We made good progress in 2016, cleaning up our balance sheet and fortifying our capital position. We are attacking our cost base, reinvesting significantly to strengthen our competitive advantages and continuing to enhance our financial crime controls. Our financial returns are not yet where they need to be and do not reflect the Group’s earnings potential. Having worked hard to secure our foundations we are now focused on realising that potential.”
Bill Winters, Group Chief Executive
Financial performance summary:
- Operating income of $13.8bn down 11 per cent but stable through each quarter of 2016
- Profit before tax of $1.1bn up from $0.8bn in 2015
- Operating expenses of $10.0bn down 5 per cent and lower for the second year running
- Gross cost efficiencies of over $1.2bn created capacity to increase investment in the second half
- Loan impairment in the ongoing business of $2.4bn was flat like-for-like but remains elevated
- Restructuring charges of $855m related primarily to the liquidation portfolio and redundancy costs
- Statutory profit before tax of $409m compared to a loss of $1.5bn in 2015
- Underlying basic earnings per share of 3.4 cents (2015: negative 6.6 cents)
- Underlying return on Ordinary shareholders’ equity of 0.3 per cent (2015: negative 0.4 per cent)
Strengthened capital and improved liquidity position:
- Common Equity Tier 1 ratio of 13.6 per cent up 100bps mainly due to reduced risk-weighted assets
- $2bn Additional Tier 1 capital issued in August 2016 and a further $1bn in January 2017
- Advances to deposits ratio of 67.6 per cent reflects a high level of funding from customer deposits
- No Ordinary Share dividend declared for 2016
Strategic progress:
- Quarterly income stable through the year
- Gross cost efficiencies of $1.2bn delivered; targeting further efficiencies in 2017 and 2018
- Cash investment increased by 50 per cent year-on-year, particularly in the second half
- Overall credit quality has improved in 2016 although stresses remain in some sectors
- Risk-weighted assets in the liquidation portfolio reduced by over 80 per cent
- Total gross non-performing loans 24 per cent lower year-on-year, with cover ratio up from 53 to 67 per cent
- The Group’s balance sheet is now more diverse and its capital and liquidity position is strong
Summary and outlook:
- Encouraging early progress against the strategy
- Ended the year with income stability, lower costs and a more liquid, higher quality balance sheet
- Becoming more efficient, enabling further investment
- Operating conditions expected to remain challenging in 2017 although some headwinds are easing
- The eventual outcome of regulatory reforms to finalise banks’ capital requirements remains unclear
- Significant further improvement in financial performance is required
Africa & Middle East Performance:
- The Bank’s conscious decision to invest through the cycle in sub-Saharan Africa, while continuing to consolidate and build on its differentiated position in the Middle East has made an important contribution to the Bank’s overall performance. Despite good growth in Africa impacted by foreign exchange fluctuations, Standard Chartered’s Africa and Middle East business recorded underlying profit before taxation of $431 million in 2016 compared to $188 million in 2015 due to lower impairments and reduced expenses.
“Our results demonstrate the progress made in the execution of our strategy. We will continue to make investments through the cycle in controls, people and infrastructure to grow safely and capture the medium-term opportunity within the AME region. The environment remains challenging but we are getting on with our plan to improve our performance by putting our clients’ needs back at the heart of everything we do
Sunil Kaushal, Regional CEO, Africa & Middle East