Standard Chartered PLC STAN
Q4 2012 Earnings Call Transcript
Transcript Call Date 03/05/2013

Sir John Peace - Chairman: Good morning London. Good afternoon to those of you in Hong Kong and in Mumbai. I'm pleased to report that 2012 was our 10th consecutive year of income and profit growth.

Throughout a turbulent decade for the world economy and for banking, we’ve continued to deliver consistent value for our shareholders. Standard Chartered remains a growth story with a modest increase in profits in 2012 and a normalized return on equity of 12.8%.

Clearly, the settlements reach with a DFS and other U.S. authorities had an impact on our profits. But despite this, we are increasing the total amount of dividend paid to shareholders. The Board is recommending a final dividend of $0.5677 per share.

This brings the total annual dividend $0.84 per share, which is up 10.5%, in line with our long track record of performance. We are entering the New Year with strong momentum in both of our businesses.

Now in a moment, Richard will take you through our results in more detail and Peter will talk about our strategy and opportunities we see for growth, but first, there are a few things I'd like to highlight.

Over the last decade, Standard Chartered has delivered consistently not just for shareholders, but for the communities in which we operate. We have tripled the number of people we employ to over 89,000. We have paid an excess of $11 billion in corporate tax. We have increased our lending to clients and customers around five-fold to $289 billion.

Importantly, we have achieved this by sticking to our strategy, focusing on the basics of good banking in markets we know well with clients and customers with whom we have deep and, in many cases, long relationships.

As 2012 showed, there is still work to be done to rebuild public trust in banks. There will therefore be some interest today I am sure in how we reward our management and staff. We’ve not changed our approach. We continue to remunerate our people, not just for what they achieved, but how they demonstrate our values rewarding long-term performance not failure.

Reflecting the Group’s overall performance in 2012 and the impact of the U.S. settlements, our bonus pool is down by some 7%. Once again, the amount paid in bonuses is less than the amount paid to our shareholders by way of a dividend; it’s less than the corporate taxation and well under half of the retained earnings.

We know that we will be held to our brand promise here for good, and we continue to work hard to embed this commitment in everything we do taking a long-term view of our obligations to shareholders, to clients and customers and the communities in which we operate.

2012, in summary, was another good year of performance, thanks to a consistent strategy, a stable management team, supportive clients and customers and shareholders, and above all, our great people. The Board remains confident for the year ahead.

Let me now ask Richard to walk you through the numbers in more detail. Richard?

Richard Meddings - Group Finance Director: Thank you, John. Good morning London and good afternoon Hong Kong and Mumbai. What I will be presenting to you today is another strong set of results, where we have delivered our 10th consecutive year of income and profit growth before and after the settlement costs with the U.S. authorities.

Our underlying performance has been driven by good levels of client and customer activity, leading to double-digit income growth in markets such as Hong Kong, China, Africa, Indonesia, Malaysia, the Americas, U.K. and Europe region, as well as in a number of our smaller, fast-growing markets.

The business closed 2012 strongly, in particular, with Wholesale Banking where December was the third highest client income month ever with key contributions from Trade and Corporate Finance. Our footprint markets continue to grow at superior rates to those of the West and the GDP outlook for many of our markets is improving as we enter 2013.

Business momentum has continued into this year with a strong January across the Group. There are three broad themes in my presentation today. Firstly, continued income growth from a diverse business. Secondly, strong cost and risk control and an emphasis on allocating scarce resources to higher returning businesses. Finally, a continued focus on the basics of banking, maintaining our liquidity, funding and capital strength.

Let me draw out several key highlights. We've delivered a strong underlying performance against our four key financial objectives, as group income increased 8% in the year, or at a double-digit rate on a constant currency basis.

Normalized earnings per share increased 14% year-on-year. Cost/income jaws were negative 2% in 2012. However, excluding the normalization items, group jaws are strongly positive at 5%, and normalized return on equity improved 60 basis points to 12.8%, in line with our objective of increasing returns to our mid-teens target.

Our balance sheet is in excellent shape. We are highly liquid, diversified, and we enjoy continued capital strength with Core Tier 1 at 11.7%.

Let me take you through the numbers in a little more detail. As guided, income has grown 8% on a reported basis, or 10% on a constant currency basis, with the Indian rupee alone accounting for over half of this headwind.

Net interest income is up 8%, reflecting continued growth in customer loans and customer deposits, and broadly stable net interest margins. Noninterest income also grew 8%, which included a one-off gain on a property sale in Korea, and also income from a liability management exercise.

We maintained a firm grip on expenses, up 10%, absorbing the impact of the $667 million settlement of the U.S. authorities, a legacy commercial legal provision of some $90 million, as previously guided, and the U.K. bank levy, which increased from $165 million in 2011 to $174 million in 2012. Excluding these items and other one-offs in 2011, costs grew just 2%.

Through active management of our cost base, we’ve created room for investment in both businesses. We have grown Group headcount by around 2,200 staff. We’ve stepped up investment in systems and continue to expand our distribution network and reach.

Loan impairment is up 34%, representing 43 basis points of Group customer loans and advances, with the Consumer Banking charge increasing in line with expectations, and we have seen some localized signs of pressure. In Wholesale Banking, loan impairment remains a function of a small number of provisions arising from idiosyncratic rather than broader macro concerns.

Other impairments increased $83 million to $194 million on valuation provisions made against a small number of Principal Finance investments and the impairment of strategic investments in associates during the period.

The U.K. bank levy came in at $174 million, some $25 million lower than forecast on improved counterparty netting across geographies.

Turning to performance metrics. Earnings in the period have been normalized for several items, with the largest being the settlement with the U.S. authorities. Additionally, income of $90 million from the repurchase of subordinated liabilities and a $70 million charge relating to the impairment of associates have been normalized.

Normalized EPS, therefore, grew 14% to $2.252, with a normalized return on equity of 12.8%, up 60 basis points from the prior year, representing good and steady progress towards the mid-teens objective.

Next slide; the 2012 performance clearly demonstrates the resilience and diversity of our franchise. When some of our businesses grow at a slower rate, other engines accelerated to compensate. Offsetting slower income growth in Singapore and MESA, 25 countries grew income at double-digit rates, and both China and Wholesale Banking in Africa reached the $1 billion income threshold. And looking through the product lens, there were also multiple growth engines with Trade, Corporate Finance, deposits and credit cards and personal loans all growing income at double-digit rates.

Moving to the next slide; a strong balance sheet is a competitive advantage, and our strategy has yielded a highly diverse balance sheet with no material geographic or industry concentrations. Our mantra of fund before we lend has resulted in strong liquidity positions at both the group and in each of our markets.

We also seek to make optimal use of our capital resources. We have sought to allocate capital better. For example, through rigor in tail management and also through relationship up-tiering exercises, as well as by prioritizing investments and in allocating RWA capacity with an ever stronger focus on returns.

Turning to the balance sheet in more detail; total deposits are up by $36 billion, or 9%, on 2011 and are at record levels after strong growth in the second half. Our advances to deposits ratio is 74.1% and our liquid asset ratio is 30.4%, with almost, therefore, a third of Group assets in cash or near cash.

We remain a customer deposit funded bank and have seen good double-digit customer deposit growth in the Americas, U.K. and Europe region, in Singapore and in Hong Kong. We already more than meet the minimum Basel III requirements for both the net stable funding ratio and the liquidity coverage ratio.

Applying the liquidity requirements announced by the Financial Stability Board in January, we estimate that our LCR would be significantly in excess of 100%. If the U.K. authorities were to converge on the Basel III liquidity regime, significant trapped liquidity could be released and injected back into the real economy supporting much needed economic growth.

Turning to assets; we continue to see good levels of customer activity with loans and advances to customers up 6%, driven primarily by growth of balances in Trade and in Corporate Finance and in Mortgages in the second half of the year.

In terms of asset profile, we have a continuing bias to secured lending and Consumer Banking with 82% of the book being either fully or partially secured, and therefore, only 18% is unsecured.

In Mortgages, we have an average loan to value ratio of 48% and we have a short maturity profile on our Wholesale Banking loan book with 62% under one year in tenor, reflecting the trade bias of our business.

In summary, we finished the year with our balance sheet in robust shape.

Moving to capital; throughout 2012 we enjoyed strong support from capital markets raising $3.25 billion of Tier 2 capital. In January 2013, we also issued a total of $2.75 billion of Tier 2 subordinated debt including $750 million with a 30-year tenor in response to strong reverse enquiries and good appetite for our name.

The Group continues to maintain an excellent capital position. The Group’s Core Tier 1 ratio is 11.7%. This is just ahead of the half year 2012 position even after deducting the cost of the settlement with the U.S. authorities.

Tier 1 capital stands at 13.4% and total capital is 17.4%. Including the Tier 2 issuances in January of this year, total capital now stands at 18.4%, a very strong level.

Group risk-weighted assets grew 12% or $31 billion to $302 billion with Wholesale Banking growing at 11% and Consumer Banking at 12%.

In summary, the business generated approaching $5 billion of post-tax profits, sufficient to maintain the dividend growth, underpin 2012 capital ratios, and generate sufficient organic equity to support the 12% risk-weighted asset growth.

We still expect the fully phased Basel III impact on Core Tier 1 to be around 100 basis points. The main component of this movement is CVA, where we would hope for some change in the regulatory calculations to a more coherent basis.

There is increasing debate about risk-weighted assets. Whist the industry could clearly do more to standardize some definitions, many of the differences arise from regulatory adjustments. These appear to be increasing and wholly separate from the requirements of Basel III.

In 2012, $7.3 billion or 23% of the Group’s risk-weighted asset growth was due to regulators imposing model changes. A major component of this growth was a change by the FSA and the loss given default levels applied to unsecured sovereign exposures.

Looking now at performance by business, and firstly, Consumer Banking. Consumer Banking income of $7.2 billion is up 6% or 8% on a constant currency basis. While Hong Kong and Singapore have consolidated their gains in 2011, growing income at 6% and 5%, respectively, emerging market such as Africa, China and Indonesia have grown at double-digit rates, increasing the diversity of income sources.

Expenses have been tightly managed up 3%, resulting in positive headline jaws of 3%. However, as you may remember in 2011 Consumer Banking benefited from the recoveries made against structured note provisions of $96 million and also incurred a charge of $189 million relating to the early retirement program in Korea.

Net of these one-offs, Consumer Banking expenses are up 5% and broadly in line with income growth. The control of cost has created investment capacity, which was deployed in an increase in headcount, increased marketing spend, continued investment in the Breeze mobile platform now in seven markets and in adding 69 branches, including 27 in Africa and 19 in China.

Finally, the Consumer Banking loan impairment charge increased 33% and I will address this in more detail in a later slide. As a result, Consumer Banking profit is up 8% to $1.78 billion. However, on an underlying basis operating profit is down 1%.

Turning to products. Mortgage income was down 6% with margin compression of some 12 basis points primarily in Hong Kong, Korea, Malaysia and Singapore. Mortgage income across our markets was impacted by a mixture of regulatory measures designed to core underlying markets.

In the second half, we have seen improved momentum with income growth of 12%. Deposit income is up 11% year-on-year benefiting from an improvement in margins of some 6 basis points and an 11% increase in balances.

While Wealth Management income is flat year-on-year, a strong double-digit growth in insurance and fixed income products helped offset the drop in more volatile equity linked products. Income in credit cards and personal loans show strong momentum, up 12% year-on-year with double-digit income growth in Hong Kong, Malaysia, Singapore, UAE and Korea.

Balances increased 17% over 2011, more than offsetting margin compression of some 12 basis points. We have enjoyed steady market share gains in both credit cards and personal loans.

Thinking about segments, SME income is up 5% year-on-year and Private Banking income grew 12%, having added approximately 4,000 new client accounts and over $6 billion of new client AUM.

Moving to impairment; loan impairment is up 33% to $697 million. The increase reflects portfolio growth, gradual mix change and some seasoning. Additionally, there are some areas of localized pressure such as in Korea, where we have seen an increase in filings under the Personal Debt Rehabilitation Scheme, or PDRS, and we expect this trend to continue if not actually accelerate in 2013.

Loan loss rates and forward-looking indicators have increased slightly in unsecured products. While in mortgages they remain at very low levels. In 2012, loan impairment benefited by some ($80 million) from sales of previously written down portfolios in line with 2011. We anticipate some debt sales in 2013 will be not at the same levels as in 2012.

To summarize for Consumer Banking overall, the business delivered a resilient performance maintaining a tight grip on expenses and has created capacity to invest to underpin future income.

Furthermore, Consumer Banking has started 2013 strongly benefiting in particular from continuing Wealth Management momentum..

Turning to Wholesale Banking. The Wholesale Banking business has delivered a strong performance in 2012, with income up 9% and client income, which represents 81% of total Wholesale Banking income up 8%.

This year represents the 10th consecutive year of income growth. Our client focus strategy resulted in income growth across all client segments with double-digit growth in local corporates, in commodity traders and in financial institutions. The local corporate segment now represents nearly a third of client income.

Additionally, as we told you last year, we've increased our focus on the next 600 clients growing income here 12% to reach almost $2.5 billion.

Over 50% of Wholesale Banking client income was generated outside of the home country of our clients showing the importance of our international network and you can see this in particular in the excellent growth in the Americas, U.K. and Europe region.

Expenses rose 17% year-on-year on a headline basis excluding the settlements for the U.S. authorities and a legacy commercial legal provision expenses were up only 2% year-on-year. On a half-on-half basis, expenses fell 3% given reduced variable compensation.

Tight business as usual cost control means that we will continue to be able to invest in a number of infrastructure platforms in trade, in cash management and in foreign exchange. Loan impairment in 2012 was up 36% representing 34 basis points of Wholesale Banking customer loans and advances. Other impairment was up 21%. I'll go into this in more detail later.

Profit before tax decreased 2% to $5.1 billion, although excluding the settlements for the U.S. authorities profit rose 11%, so an excellent underlying performance.

Looking at income in more detail; income remains well diversified with double-digit growth in Transaction Banking and in Corporate Finance more than offsetting a flat performance in Financial Markets. Trade income saw excellent growth of 22% year-on-year to almost $2 billion, driven by 10% growth in average assets and contingents and a net interest margin increase of 12 basis points.

In the second half, high levels of liquidity in markets such as Hong Kong, China and Singapore have caused net interest margins (overall) to full 12 basis points offsetting balance growth of 4%.

Cash management income was up 5% over 2011, with a 9% growth in average balances. We saw cash margins tighten by 8 basis points in the second half on account of excess liquidity in many of our markets.

Global Markets income increased 7% with Financial Markets contributing 51% and I’ll go into more detail on Financial Markets on the next slide.

ALM income of $849 million was down 8% with income in the second half down 27% given the costs of meeting the regulatory liquid asset buffer requirements.

Corporate Finance delivered strong income growth of 19% year-on-year from 18% more transactions. Over 60% of Corporate Finance income is now annuity income.

Principal Finance delivered income of $483 million, up 75% year-on-year and we also made $1.2 billion of new investments in the period.

Financial Markets, our Financial Markets business delivered a broadly flat performance against a backdrop of regulatory tightening low volatility and market volumes. Income in the second half was lower, given seasonality and some further tightening of spreads. We continue to be client-focused and build our flow business with client income contributing over 0.75 of Financial Markets income.

Foreign exchange income was down 11% year-on-year with a decline in flow and options business, primarily on account of tightening spreads. However, the rates business was up 8%. Overall, our capital markets business grew by 8% in 2012 and within this the debt capital markets business delivered excellent growth at 46%, offsetting a weaker performance in syndications down 7%. Finally credit delivered income up 44% underpinned by our strong and improved credit rating and therefore, increased client flows.

Moving to loan impairment. Wholesale Banking loan impairment was $524 million, at 34 basis points of loan and advances to customers. The majority of the 36% increase related to provisions made on a very small number of exposures in India and the UAE. We are seeing no stresses across our portfolio. Other impairment increased by 21% to $121 million predominately due to valuation impairment taken on a small number of Principal Finance investments.

Gross nonperforming loans in Wholesale Banking are $4.3 billion, this is before provisioning and collateral. Two-thirds of these nonperforming loans, relate to a small number of exposures in the MESA and India regions and we are very comfortable that this is not indicative of any wider risk issue looking at the Wholesale Banking book.

Credit quality, across the Wholesale Banking book remains good. We remain watchful but we are not currently seeing any new areas of stress. Looking at the overall risk profile of the Wholesale Banking book, it continues to be well diversified by geography. 62% of the book is less than 12 months in turn reflecting the continued trade bias of the portfolio. We have no directs of an exposure to Greece, Ireland, Italy, Portugal or Spain.

The Commercial Real Estate book of $11.6 billion has an average loan-to-value of 41% and the business continues to distribute assets. Primary distribution increased by 35% year-on-year on good levels of appetite and secondary distribution remains strong at similar levels to 2011. So to summarize, Wholesale Banking has delivered another very good set of results driven by the diversity of the business and a disciplined execution of its strategy.

The business has also had a strong start in 2013, particularly in client income which has performed well and is ahead of the same period last year. Own account income, however, is down reflecting lower ALM income. The current pipeline and performance in Corporate Finance and also in debt capital markets remains very strong. The growth in client income is underpinned by strong underlying transaction volumes and market share gains will be at margins remain under some pressure arising from the strong liquidity conditions evident in many of our markets.

Turning to geographic performance, Peter will talk to you in more detail about key markets in Greater China, ASEAN and India, so let me highlight the key features for some other geographies, Korea. At the headline level, Korea shows income growth of 8% and profit growth of around 200%. The headline numbers, however, are flattered by one-off items in both 2011 and 2012. In 2012 income benefited from $74 million from a property sales, while expenses in 2011 included $206 million of early retirement plan costs.

Excluding these items, income in Korea benefiting from some private equity gains is up 3% and costs reflecting headcount efficiencies reduced by 4%, resulting in an underlying operating profit growth of 16%.

In Consumer Banking, underlying income is broadly flat with good growth in credit cards and personal learns offsetting a double-digit decline in mortgages.

Consumer Banking loan impairment increased 34% due to industry-wide increases in PDRS filings as mentioned earlier. Wholesale Banking in Korea remains subdued; however, income arising from Korean clients in the network continues to increase at a double-digit rate.

The outlook for Korea is likely to remain challenged with profits further reducing in 2013 from the underlying 2012 levels.

Africa; Africa's broad-based income is up 15%, or 20% on a constant currency basis with double-digit growth in 10 markets, including Kenya up 34%, South Africa up 28%, Ghana up 20%, Zambia up 19%, Uganda up 16%, and Nigeria up 13%.

Both of the businesses grew at double-digit rates with eight markets contributing over $100 million in income, including three generating over $200 million.

Wholesale Banking income grew 15% and is well-diversified across products, client groups and countries. The Consumer Banking business remains an unsecured SME and deposit led business with a particularly strong performance in deposits in the year.

Finally, the Americas, U.K. and Europe; the region delivered an excellent performance with income up 30% to $2.3 billion. Excluding income of $90 million arising from the debt buyback, income grew 24%. The region is now one of the largest contributors to Group Wholesale Banking income as increasingly the business acts as a bridge for clients to and from Asia, Africa and the Middle East.

Wholesale Banking represents around 90% of the region's income with especially strong performances in Transaction Banking, in Corporate Finance and in Financial Markets, all drove income at double-digit rates.

Transaction Banking grew 16% to $726 million as we supported global supply chains and provided U.S. dollar and euro clearing facilities to clients around our network. We've continued to invest across the region, adding relationship managers, especially in Europe and we recently made an acquisition in Turkey.

Turning then to outlook; looking at January and our momentum through February, the Group has started well. Consumer Banking income is well ahead of the comparable period last year. Wholesale Banking continues to build on very good levels of client activity and very strong volumes seen across our markets. But margins are under pressure, at least in the near-term reflecting high levels of liquidity.

We continue to have a firm grip on the leaves of risk, cost and investment, and we remain open for business increasing the financing support to our clients and customers. We continue to take a conservative approach to managing the balance sheet, maintaining a strong liquidity position and keeping a watchful eye on asset quality given the uncertainties have remained in the external environment.

We remain focused on consistent delivery against the framework of our four financial objectives, double-digit income growth, neutral jaws, double-digit growth in earnings per share and mid-teens return on equity in the medium-term.

So we have started the year with very good momentum and an exceptionally strong balance sheet. We are well-positioned in some of the most dynamic growth markets in the world and we are well-placed to make the most of the opportunities they present. We continue to take market share, we continue to grow and we remain both confident and also committed to consistent financial delivery.

Thank you, and I’ll now hand over to Peter.

Peter Sands - Group Chief Executive: Thank you, Richard. Good morning and good afternoon to those of you in Hong Kong and India. In many ways, 2012 was a milestone for the Bank, our 10th year of unbroken growth in income profits and dividends, the 10th year since we created Wholesale Banking under Mike Rees, the 10th year since we launched our values and, as it happens, it's 10 years since Richard and I joined the Bank.

The Bank has changed enormously over the last decade. It's easy to underestimate how much since it's happened, primarily through continuous rapid evolution through organic growth rather than through big steps like major acquisitions.

Over the last decade, the Group’s income has grown by CAGR of 15% and pre-tax profits of 18%. We had good example of the magic of compounding, grow this kind of pace for 10 years and you end up in a very different place than you started off.

Take Nigeria; in 2003, our business in Nigeria produced $21 million of income. This year it produced $258 million, a 12-fold increase.

In Mainland China, we produced $44 million of income in 2003. We had 14 branches and 409 staff.

In 2012, we generated $1 billion in Mainland China, plus over $700 million in network income. We now have over 8,500 staff and 100 branches across 25 cities. Or Indonesia, income there grew almost seven times, from $119 million to $813 million, but it's not just a story, of small growth markets getting bigger.

In 2003 Hong Kong generated 29% of the Banks' income, a shade under $1.4 billion, but while Hong Kong's income has now more than doubled to $3.3 billion, it now accounts for just 18% of the Banks' income that's creating not just the pace of our growth, but also its diversity.

As John has mentioned over the last 10 years the Bank has paid around $12 billion in dividends and around $11 billion in tax and increased lending to customers and clients by nearly 400%.

Our history shapes the way we think about the future. A primary emphasis on organic growth in big markets as well as small, investing with a long-term perspective building diverse income streams.

Of course, it gets harder to deliver the same rates of growth as we get bigger and it doesn't come smoothly. Every year brings new challenges. 2012 was no exception. Most obvious was the resolution of the issues around our past compliance with U.S. sanctions. The US$667 million settlement dented our profit growth. It also damaged our reputation. We further suffered significant headwinds from a multitude of regulatory changes, most notably the income drag from the liquid asset buffer and the increase in the U.K. bank levy.

The macroeconomic environment, which for us is normally a tailwind given the markets where we are in, also proved quite challenging in 2012. Economic growth slowed in most of our markets reflecting the global slowdown, local currencies fell against the dollar.

Some of our individual markets were particularly challenged. India was a good example. GDP growth slowed sharply from an average of 7.9% over the previous five years to 5.2%. The rupee fell 15% year-on-year. Business momentum plummeted as political deadlock and governance scandals rocked confidence.

As a result, our India business slowed, with income falling 12%, while we also saw some step up in impairments, so profits fell 16%. Yet, network income grew over 30% as we do more and more in support of India's leading companies as they invest and grow overseas. So our overall income from our Indian franchise was more resilient falling only 4%.

Moreover, the mood in India has changed noticeably since last summer. The economic reform agenda looks back on track and business and investor activity has undoubtedly picked up. We have a great business in India, Which I'm confident will be a huge part of our future growth story.

Given the headwinds we faced in 2012, it's no surprise that both income and profit growth for the Bank as a whole was somewhat slower. But we showed once again that we can be very disciplined in costs, without compromising investment and the underlying momentum of the Bank's businesses remain robust.

So, how are we looking at the world (now)? There is no doubt that sentiments has improved. Maybe this is because the tail risk events of Eurozone collapse so of the U.S. falling off of fiscal cliff now look more remote. Maybe it's because as someone at (indiscernible) put it where we are fed-up, we are being fed-up.

But there is undoubtedly more momentum in markets and more confidence in businesses. This has to be a good thing, but we shouldn't get carried away. The underlying problems of the Eurozone haven't gone away. The U.S. fiscal cliff has been moved, not scaled. Unemployment levels, particularly for the young remains shockingly high in many parts of the world.

The unconventional monetary policies of Central Banks have taken us into uncharted territory. The risks of inflation and currency volatility should not be underestimated.

Our markets in Asia, Africa and the Middle East are not immune, slower growth or shocks in the West will undoubtedly affect them. But there continues to be a clear gap between the growth in our markets and growth in the West.

GDP growth in the U.S. is forecast at 2.3% for 2013 with the euro area at around 0.2%, contrast this with China at 8.3%, Nigeria 6.6%, Indonesia 6.5%, even India, for all its challenges, will grow at multiples of the West.

The underlying drivers of growth in the emerging world, industrialization, urbanization demographics remain extraordinarily powerful. We’ve seen strong growth in intraregional trade and investment across our markets. For example, from 2000 until 2011, Africa's trade with India increased by a CAGR of 25%, while China-MENA trade, Middle East North Africa trade, rose from a value of $18 billion to over $240 billion in the same period.

We're seeing the emergence of vast numbers of middle-class consumers and the scale is staggering. 28% of the world's middle-class lived in Asia in 2009. By 2030, it will be 66%. The rapid internationalization of the renminbi is a symbol of the shift in global economic power. In 2012, we estimate 12.6% of China's trade was settled in renminbi, up from 5.1% in 2010. Our recently launched Renminbi Globalization Index, which measures the size of this market across four core asset classes, shows a more than seven-fold increase over the same period.

As we look at the world, many of the biggest challenges and arguably our biggest risks arise from the world of regulation and politics. There is a (huge amount) happening, touching every aspect of how we run the bank and how our economics work. We are supportive of many of the changes. Establishing workable approaches to resolving failed banks is a very good idea. We strongly support statutory bail-in and the recent recalibration of Basel's liquidity rule strikes a much better balance.

Yet there are many crucial areas where unilateral action is undermining international coordination or where politics has overtaken prudential objectives. One example is derivatives, where the sheer complexity of competing and overlapping proposals makes unintended consequences and inevitability. The debate about RWA models is also very confused. We fully accept the challenges to the credibility of RWA models but abandoning them in favor of standardized is no solution, neither is adding lots of ad hoc flows and buffers.

At our Annual Meeting of the Bank’s top leadership in January, we took stock of our strategy and debated our priorities for 2013. We have refreshed our statement of strategic intent, sharpening the language and shifting the emphasis in a number of ways. But the essentials of our strategy remain the same. We want to lead the way in Asia, Africa, and the Middle East. We want to be here for good.

As every year, the context and challenges differ. So our immediate priorities must shift as well. We set seven. First, we must continue to build stronger relationships with our clients and customers. Deep long-term client relationships have always been the foundation of our business. Now that every bank claims to be relationship driven, we just have to be that much better, more relevant, more committed, more responsive.

Second, we must prove to a skeptical world that we really are here for good. This is all about doing the right thing and being there for the long term. It's about recognizing that we have an important role to play in the economy and broader society. We must step up our efforts to innovate and digitize. While we have made enormous progress in automating processes and offering online and mobile access to our services, I believe we are only at the early stages of using technology to transform the business of banking. I want to make sure we make this happen rather than have it happened to us.

Intensify collaboration across the network; for Standard Chartered, the network is key to our competitiveness. We are not a dominant local bank. We don't dominate specific product segment. We're differentiated by our ability to facilitate cross-border Trade and Investment, and that is as much about the way we work as about our physical network.

Get fitter and more flexible; we need to be ever more efficient, smarter in deploying cash resources more adaptable and agile.

Accelerate the next generation of leaders; taking a long-term perspective means building a strong succession pipeline of diverse leaders. This is something I personally -- I'm very focused on,

Finally, deliver superior financial performance. This is both an outcome and a non-negotiable pre-requisite. By focusing on the fundamentals, sticking to our strategy, funding before lending, keeping a tight grip on risks and costs, we can continue to deliver a distinctive combination of growth and returns for you, our investors.

Let me say a bit more about three of these priorities, I have touched on. Proving we are here for good is all about values and culture. Lots of people are now talking about the culture of banks, but we have been investing time and energy in reinforcing our culture for a long time. We see our culture as a key source of competitive differentiation. We see culture as a key risk management tool.

We introduced our values a decade ago, embedding them in our performance management system, so the people got rewarded not just for they achieved but for how they achieved it. We've been using ethical dilemma case studies to train staff in Wholesale Banking for five years with championed employee volunteering since 2006, enabling every member of staff to devote three days to a course they are (passionate) about.

We continue to have huge impact through Seeing is Believing, our initiative to fights avoidable blindness. Since we started in 2003, Seeing is Believing has raised some $57 million and reached over 31 million people. There is no single tool to reinforce culture, no magic recipe and no organization of nearly 90,000 people can ensure that everyone does everything perfectly all the time, but I'm absolutely convinced that we need to keep working at reinforcing this aspect of Standard Chartered, because it's one of the things that makes us standout.

That's why we created the Board, Brand and Values Committee in 2010. That's why we launched here for good. Well, we must stay true to our values and culture, we must also keep innovating to offer our clients and customers, new and better solutions, to cut costs and to reinforce risk management in an inherently digital industry, failing to embrace technology-driven innovation would be suicidal.

We’ve been investing to increase automation of back-end systems to drive down transaction costs and to improve service quality and resilience. As a result, our operations cost income ratio has consistently declined, while stock productivity has risen. We’re also investing in underlying data management systems and analytical capabilities. This is critical for seamless management of client relationships across multiple geographies and it's also vital for risk management. We are accelerating innovation to make the Bank more accessible and easier to use through social media, online and mobile. We continue to rollout new Breeze apps, and now have over a million downloads since Breeze was launched.

We've come a long way in Internet Banking. 10 years ago frankly, we would have been thrilled to have been described as a laggard. In November last year we won Global Finance's, World's Best Retail Internet Bank and that was for the second year running.

In Wholesale Banking, we are investing in our global platforms to enhance product capability and seamless delivery. Project unity and cash management to harmonize our underlying infrastructure and enhance functionality, project (Storm) and Custody to streamline cash and FC processing and enabled better cut-off times, project (Rezo) in FX and ALM to enable us to straight-through process payments 24/7 across 43 markets, reducing risks and reducing cost per trade by around 10%. Across the Bank, we are investing harder and faster in technology than ever before.

Both culture and technology are crucial tools in intensifying collaboration across the network. From our earliest years in the 19th century, we were focused on international trade. We opened in India, in China in 1858, in Hong Kong and Singapore a year later. Our long history in our markets has real resonance with our clients and cannot be replicated by new entrants.

Today, we are one of the top two Trade Finance banks in the world. Trade represents around 16% of Wholesale Banking income, but when you include products and services linked to Trade, it drives over half.

Most big international banks operate on a hub and spoke model or as a collection of local (baronies). By contrast, we're a true network, with no dominant geography and a culture of cross-border collaboration. But we could be even more seamless in serving our clients' cross-border needs, even more effective in optimizing deployment of our local currency and dollar balance sheet. This requires refining performance metrics, streamlining information and process flows and above all, what I've called pathological collaboration, an infectious spirit of cooperation and coordination.

We also need to be always listening to our clients, understanding where they want to trade and invest. What products and services they need from us? It's with this logic that we continue to expand our network. In 2011, we opened our rep office in Mongolia. In November 2012, we completed the acquisition of Credit Agricole's business in Turkey, upgrading our rep office into a subsidiary. Last month, I visited Yangon to open our back office in Myanmar, returning to a country we first opened up in 1862.

Also in February, we signed an agreement to form a joint venture bank with ENSA, one of Angola's largest insurance companies. By upgrading our presence in this way, we will be one of the first international banks to have an onshore presence in sub-Saharan Africa's third largest economy. In all these places, we're serving the needs of our existing clients. In all these places we're taking a long-term perspective, investing now with a 10-year plus horizon.

With our return to Myanmar, we're now the only international bank present in all 10 ASEAN nations. Over the last five years our income in ASEAN has grown by CAGR of 14%. In 2012 income growth in ASEAN slowed to just over 7%. Singapore, our largest market, grew by only 1%, but we saw a good growth in Indonesia, up 13%, Malaysia up 18%, Thailand 13%, the Philippines 11%, Vietnam up 27% and it's important but Singapore's performance in context. Singapore income grew 26% in 2011 by CAGR 20% over the last five years.

We're taking advantage of domestic growth within ASEAN, as the region's 600 million people become increasingly prosperous. We're taking advantage of intraregional trade and investment as ASEAN's economies become increasingly integrated. At $4.5 billion ASEAN now represents just under 24% of the Bank's total income.

We are also benefiting from the economic convergence of Greater China. In 2012, Hong Kong, Taiwan and mainland China delivered income of $4.9 billion, up 11% faster than the 9% CAGR of the last five years. Greater China now represents just over a quarter of the Bank's total income. We will keep investing in China where income grew by 21%. With our network of across 25 cities, we are one of very few international banks that reach huge inland cities like Chongqing, Chengdu and Xi'an. With growth inland now faster than growth in the coastal regions, we are well placed to benefit from the changing shape of China's economy.

In China we are executing a very focused strategy. In Consumer Banking, we are concentrating on the high value segments and on SMEs in particular. In Wholesale Banking, we are focused on rapidly growing midmarket companies. We also support multinationals investing in China, such as Shell and Tesco and we're helping China's leading companies as they expand overseas.

In fact in addition to what we do onshore, China is now our largest generator of network income, up 25% year-on-year to over $700 million. Hong Kong is the largest recipient, as we increasingly run our Hong Kong and China businesses as one. Income in Hong Kong grew by 10%, with WB income from renminbi denominated business up 30%, mainly in FX and trade, whilst renminbi deposits in the Consumer Bank grew by 70%.

Taiwan had a more challenging year, given regulatory constraints on consumer lending, and the year-on-year distortions from one-off gains in 2011. Yet, in Wholesale Banking we're now making real progress in leveraging the links with China, particularly in Transaction Banking.

Greater China is a key engine of growth for Standard Chartered. With a significant presence, long history and deep relationships across all three markets, we're extraordinarily well placed to benefit from the region’s continued growth and convergence.

2012 was undoubtedly a challenging year and 2013 will no doubt bring new challenges. But the story of the last decade is a story of resilience, of growth, of consistent delivery. Since 2002 Standard Chartered has been transformed. I would like to thank you for the support you've given us throughout this journey, and I'd also like to thank the staff of Standard Chartered for their hard work, professionalism and commitment.

Looking forward, I think the next 10 years should be equally exciting. We are in the right markets. We have a clear strategy. We are investing in our businesses.

There is no doubt that our markets will continue to change dramatically as they grow and get richer. There is no doubt that technology will change the way banks work and compete and there is no doubt the regulation will force further change in business models. We are not at all complacent. Yet by sticking to our strategy, by staying true to our culture, and by being innovative and adaptive, I am confident that we can continue to be successful.

We remain committed to our financial aspirations; double-digit income and EPS growth, costs growing in line with income and mid-teens ROE over the medium term. We are committed to being here for good, for our clients and customers, for the communities in which we live and work. We are as obsessed with the basics of banking, how we manage risk, costs and control as we ever were.

We start 2013 in great shape. Our businesses have very good momentum. As Richard outlined earlier, the Consumer Bank is well ahead of the same period last year whilst Wholesale Banking client income is also performing well.

Our balance sheet has never been stronger. We are superbly placed to seize the opportunities. We have the strength to weather the storms.

Thank you. John, Richard and I will now take questions here in London. Jaspal, Ben, and Julian will take questions in Hong Kong and Sunil, and Anurag and Vivek will take questions in Mumbai.

Sir John Peace - Chairman: (Indiscernible) if you could indicate if you want to ask a question, raise your hand, wait for a mic and then if you get one, say who you are. Why don't we come straight to here, Michael?

Transcript Call Date 03/05/2013

Michael Helsby - Bank of America Merrill Lynch: It's Michael Helsby from Merrill Lynch. Two related questions actually. Richard, you pulled out a couple of times the drag from the liquidity balances and I think you inferred if we moved to more relaxed Basel versus the U.K. standards, that would be beneficial. I was wondering if you could perhaps quantify that in ROE terms. Secondly, as I say, linked to that, you made some headway in normalized ROE in 2012. I think that was because you had the underlying jaws of 5%, but clearly, you're talking about still flat jaws going forward. I was wondering, given the revenue or the margin pressure that you drew out as well, whether there is a tactical opportunity. So, just give us a bit of operating leverage to make bit of a step change on a very, very short-term basis. I think the franchise, as you've shown, has been here for well over 100 years, they will be here for another 100 years, but whether this is just an opportunity short-term to boost the ROE by just having some operating leverage?

Richard Meddings - Group Finance Director: Just on the liquidity drag, I won't give it you in ROE terms. I'll let you to do that and you could work the – I think the estimate we would give, and there are lots of different assumptions you can make, and the main assumption is to what extent do you free-up surplus and then invest it in commercial yielding assets as opposed to free-up levels of surplus liquidity you simply carry in low yield assets required by regulation in an eligible liquidity instruments definition. So what we will say is that the income drag currently from the regulatory liquidity is around $300 million would be our assumption. Again, I would just repeat the comment that actually – the FSA is committed actually to convert with Basel III. We would be pleased to see that happen sooner rather than later. We are substantially ahead today of the 100% LCR requirements, not needed, not acquired until 2019. So it will be quite helpful to see that incremental and liquidity surface come out. We had this discussion, Michael, you and I on jaws. I think that for eight or nine years now, we have run this financial framework, which is neutral jaws, and I think we state -- we absolutely stated that. Our ability to hit it depends upon how do we see income unfurling or unrolling on us in the year. Our confidence is we can open the investment gates to invest more, but actually we want to get both returns and growth, and I think just that consistency of investing year-in, year-out and building out the physical, which now presumes that a mobile business gathering infrastructure Standard Chartered Group in the growth markets of the world, I think, just boosts the machine that's located in its right franchises. So I don’t think I would through the year back-off the intention to invested pace. Now, I’m more concerned actually given the amount of investment opportunity and the investment demand we have from colleagues around the businesses and the geographies, to have some sort of constraining factual, my constraint actually is the level of income growth. So we have this jaws concept rather than the cost/income ratio that I think stood us in really very good stead over the last decade actually. Anything you want to add to that, Richard.

Peter Sands - Group Chief Executive: No, the only point I would add is, actually you know from the way we've done it in the past is that we managed it very dynamically. We're pacing the investments and releasing investment as we see of both the opportunities, but also our performance unfolds through the year. Just to build on Richard's comments about liquidity, I mean, we are carrying surplus liquid assets at the moment, and so we would prefer to be – we still want to be rock solid in terms of the bank's balance sheet, but at the moment we are probably carrying somewhat more than we would want. That doesn't mean you would get a $300 million type uptick, because that's the envelope of the liquidity cost, but you will get some relief on that. More questions, why don't we just go behind.

Manus Costello - Autonomous Research: It's Manus Costello from Autonomous. Just to follow on cost, a lot of the benefit from jaws came in the Americas, U.K., Europe region, little understood region that you report. I wonder how much of that was due to any kind of expense cram down in the second half of the year as you were trying to offset the impact of the fines, and whether or not we should expect a more normalized level of jaws in that division going forward?

Richard Meddings - Group Finance Director: There was no cram down particularly into a particular region. We, obviously, as we dealt with the U.S. authority, clearly had (mind) to the fact there were going to be incremental cost, but that said, we actually accelerated investment in the second half over the first half in the businesses. So we still stayed, we stayed invested. I think it's simply a feature of the businesses that we are running, so actually we gave a slight flavor to it. But the two main market – the two main business units, sorry, in Wholesale Banking which is 90% of the income are Transaction Banking, and that generated about $726 million, up 16%, and Financial Markets was very strong, was also up 16%, and that's about $650 million, and then Corporate Finance was up almost 60% of income on transaction – just on very good transaction execution, and that's just under $400 million. The nature of those businesses, I think, gave us real leverage through the cost base. The other aspect I think when you look at second half, simply going to be particularly as it's a wholesale predominant business. If you look at Wholesale's cost, and particularly the adjustment to variable comp from the rates we were accruing at in the first half to the year end amounts we paid, you saw an adjustment to the variable comp, which would have impacted a geographic area which is more weighted to wholesale than being broadly spread across Consumer, but there was no cram down aimed at a particular region.

Chris Manners - Morgan Stanley: Chris Manners from Morgan Stanley here. I had a question for you on the revenue trajectory. Trade Finance seem to be improving very strongly, plus 22% year-on-year. So I'd ask you to elaborate on the momentum there, just in volume and margins terms and how that's being affected by competition. And then, on the FX side, 20% half on half, down 11% year-on-year. I mean, should that have a chance to spring back against the currency volatility we've been seeing so far this year?

Richard Meddings - Group Finance Director: So FX, well, the answer to FX is quite simply, if you look at the start of the year, FX has started much better. I mean, I think it does go to volatility and client appetite, the volumes are up, and we haven't seen anything like the same spread compression. In FX in 2012 we saw something like a 17% spread compression across the FX businesses for a variety of reasons in 2012. With regard to Trade Finance, the underlying volumes that we're seeing are really very, very good today and they remain. So, the underlying activity levels are strong. We are seeing in that business, and in cash actually, we are seeing a continuation of the pressure we saw building, I think, in the last couple of months of 2012. So the current margins that we are seeing, given the liquidity, are lower than the end rate or the year-end rate in 2012. So I think the picture there is a balanced picture. We've got some margin compression softening, not completely countering, but softening just the sheer strength of the underlying Trade Finance activities we see.

Peter Sands - Group Chief Executive: If I can add one sort of general comment on margins. We spend a lot of time, both internally and in our discussions with you, looking at the margins of different products and in different markets and so on. The thing that has always struck me is that the Group margin remains remarkably constant…

Richard Meddings - Group Finance Director: Broadly stable.

Peter Sands - Group Chief Executive: It has been 2.3% for the last four years. It was 2.5% for the period before that, and then interest rates immediately after the crises plummeted and as a liability loan bank, that cost us margin. But actually there is a huge amount of movement, but the Group's margins stays pretty well broadly stable. The thing that will really drive a change in Group margin will be the broader interest rate environment, because we would benefit from a rising interest rate.

Chris Manners - Morgan Stanley: (Indiscernible).

Sir John Peace - Chairman: You've got to admit those slides were pretty cool. Just how extensive now the network is and how strategically that’s a differentiator for us compared to many of our competitors.

Richard Meddings - Group Finance Director: Eventually, let's go right about, Michael – Paul, sorry.

Tom Rayner - Exane BNP Paribas: So it's Tom Rayner, Exane BNP Paribas. Could I just ask a question on the table on Page 31 of the release. I'm just trying to understand a little bit better the past due but not individually impaired, because the figure for the Wholesale Bank, you did mention to it, Richard, in your commentary, but I think from the half year, it's up $4 billion or maybe a bit more than that. And reading the text on that page, it sounds as if quite a lot of those loans were renegotiated or sort of restructured sort of after the balance sheet date. I'm just trying to get a sense, does that mean that those loans will now drop into the sort of restructured loan bucket that you show on Page 35. So in Wholesale Bank it's, I think, running at about $1.8 billion.

Richard Meddings - Group Finance Director: Yes.

Tom Rayner - Exane BNP Paribas: Then what happens when they are in there? I mean, they get reviewed quarterly, what should we be thinking about the trends? I'm just trying to understand the whole issue a bit better.

Richard Meddings - Group Finance Director: So there are lots of different reasons why the facilities of the customers get reshaped. Changing circumstances, the customer may want a different set of facilities. There are two elements I think to the table, where I think if I draw your – I'm sure (people can see) where the deltas, I think, are worth commenting on. One is, I think in the up to 30 days past due in that Wholesale column where you can see $1.6 billion up from $600 million, and on the left hand side above you can see in the bottom paragraph, the explanation for that is pretty broadly drawn. These are loans past due less than 30 days and if you can see where they arise, they are mainly in Hong Kong and the UAE. Actually with regard to these, 75% or so of these have either been repaid, predominantly they have been repaid or actually renegotiated. So at the end of January, this number was down by about $1.2 billion. If you go to the 60 days, this is a very small number of exposures, where throughout October we were in discussions with the clients, and it's dominated by a couple of exposures around a different facility pattern. They went into – they went past due with our agreement essentially in December – November, December with a very small – to very small degree. Those conversations continued and have now been renegotiated and settled. So as at the end of January, as it says in – on the top of that page on the right, these transactions were regularized. In other words, made good, renegotiated. Renegotiated so that the cash flows when discounted at the original rate show no impairment whatsoever, and nor do we expect these exposures to impair. Before I come to your – I’ll just point to that Page 35. I think if you look at the flow – the inflows to GSAM, (IR), the trouble exposures area, they have been very low in January and February. If you then reflect on what I have just explained about the 30 days and the 60s and 90 days, actually today these amounts will be around the same level, if not slightly below what you saw at the end of 2011. How are they treated? Once they are essentially renegotiated, they move to the renegotiated disclosure. You’ll see them in that second line at the bottom of the footnote on Page 35. They remain in that for six months. As long as they perform for six months, they then fall out and go back up into loans and advances is the treatment. But fundamentally, the $3 billion has been predominantly renegotiated and has disappeared by the end of January from this disclosure, as has most of the $1.6 billion.

Tom Rayner - Exane BNP Paribas: There is no sort of trend? I mean, these were very much ….

Richard Meddings - Group Finance Director: No, there were – a phrase I used earlier, I would call them idiosyncratic in terms of the $3 billion is dominated by a couple of exposures, where we're simply in discussions with the client about reshaping the facilities.

Richard Meddings - Group Finance Director: Why don't we stay right near the back there?

Unidentified Analyst: (Indiscernible) from Citigroup. I had three questions on Korea on Slide 25, and there's lot of areas doing very well, but this is one of more changed regions, shall we say. So three questions, now the first one is on the impact of the Personal Debt Rehabilitation Scheme. If we look at NPLs in the Korea Consumer Bank, they are up quite a bit half-and-half, 36%. So just wondering how much you think that's already played out and how much further it is to go there? Secondly, with regard to loans outstanding in Korea, they've – they are one of very few regions that's down year-on-year, $38 billion to $36 billion, partly due to regulatory restriction that you referenced, but also I’m sure due to some active management, so keen for you your thoughts on – whether you think that’s further shrinkage to come in 2013? Finally, just a bigger picture question on Korea, I guess, it's an area which you mentioned in your speech that profits will decline in 2013 versus 2012. It doesn't necessary seem to fit with the medium term target of a mid-teens return outlook. So just interested – is it compatible and what do you think is the long-term solution for Korea?

Richard Meddings - Group Finance Director: Why don't I take the general question first, and then if you can pick up on PDRS and the mortgages. The Korean banking environment is a tough environment, and Korean banks have generally been reporting pretty tough results and we absolutely want to get better returns out of that business, both in terms of cost productivity and capital productivity, but there isn't a silver bullet for doing that. We made some good progress with the ERP that we did last year in terms of improving cost productivity and productivity per head in both businesses has increased by double-digits this year. But we're still not where we want to be and we're not going to get there terribly fast, because there are some real headwinds and PDRS is a good example of headwind. One of the more positive things is actually the growth in network income, which continues to grow at a double-digit rate and where we can see continued prospects for sustained growth. Of course, that isn't actually in Korea, but it's in the numbers of the rest of the network, but it is part of what Korea contributes to us as a business. We remain very committed to our business in Korea. We want to get better performance out of it, but we also see the benefits of having one of the Asia's largest economies, and where some of Asia's most successful companies are trading all around our footprint. Do you want to pick up on PDRS and mortgages?

Richard Meddings - Group Finance Director: Yes, on the mortgage point, first on your question about loans outstanding. Remember that the government introduced a new requirement for the banking system to hold 30% of their mortgage books essentially in fixed rate mortgages. I would think our team of credit did a really good job and formed partnership with the Korean Housing Finance Corporation, essentially to source for that – to source fixed rate mortgages, which we then on-sold into KHFC, and that program actually went faster than we thought in terms our origination capabilities. So actually we've originated $4.9 billion, which is pretty much the cap that we want in fixed rate mortgages by the end of the year, but of course they are then on-sold off our balance sheet and on to KHFC, so that's the reason for the shape of the loans. The PDRS again is a government initiative and it's a government initiative where they bring consumers who are under pressure (through a quarter super fives) process, where there is a mandatory impairment write-down of between 30% and 40%. The programs tend to be a five-year tenure, five-year duration, where the customer agrees essentially with the court, a basis of payments for all of that outgoings and on the basis they stay with that, then actually they step out free without having been declared bankrupt or anything like that. So, as people file for PDRS banks automatically under Government Sponsored Schemes will provide between 30% and 40% depending upon the particular profile. We are seeing a rise in those. The industry is seeing a rise in those. It shouldn’t be a surprise given the economy, but also actually given the new government and there was a new government coming in, which is (singling) much more direction in this way, I'm much more consumer friendly, I'm looking to promote economic democratization. So we are seeing high filing under PDRS. We expect that continue to hold it. In context I think that we’ll probably see Korea, about $220 million. We'll probably see some low tens of millions of dollars of increase coming from PDRS would be our expectation over the level we've seen in 2012 is worth highlighting because the delta is significant on the Korean number.

Unidentified Analyst: (Indiscernible) I asked this question earlier and you said why (don't you) ask questions. So it's about China and it's just the – bears I would say it would point out shadow banking risk about -- what happens if there is a policy that pull back in housing and things like that and I think – I figured just be good opportunity for you to sort of (indiscernible) case for China and why you’re…?

Peter Sands - Group Chief Executive: There was a thing about China is that it's such a large economy and there are so many different things going on at once, it is at almost any statement you make about it, it's true somewhere. There are big problems in shadow banking, there are bits of it that are overheated. But fundamentally, I think the economy will continue to grow strongly. The shape of it is changing. So as I mentioned in my remarks, what you're seeing is faster growth in the inland cities than you are on the coast and you are seeing very rapid growth in services and the private sector companies are growing extremely rapidly. The economy is still dominated by the data and enterprises and one of the biggest questions is going to be what is going to be the policies stance towards the dominance of the economy by data and enterprises and getting that right is going to be one of the key determinants, I think, of sort of long-term success of China's economy. But fundamentally we are positive about China. We are continuing to invest there at pace in both businesses. As you can tell from the remarks, it’s having a big impact not just in China, but elsewhere around our network. But it isn’t going to be smooth and the one thing they didn't write about some of the bare arguments is that there are going to be bumps along the way and so we are very thoughtful about not being caught on the wrong side of the bumps that we anticipate.

Unidentified Analyst: On Trade, can I just follow-up. What proportion of your Trade Finance Renminbi settled and how much kind of cleared new opportunities versus cannibalization exists within that space?

Richard Meddings - Group Finance Director: I don’t know the proportion. I think probably – let me give you my Renminbi broadly, the Renminbi revenues. We generated around $600 million of Renminbi revenues of which a two-thirds came essentially in the FM businesses and one-third came in the Transaction Banking businesses.

Sir John Peace - Chairman: And lot of the FM…

Richard Meddings - Group Finance Director: Lot of the FM (is) from the Trade. So if that helps to some extent, not answering your questions and – I hope that does. We've seen a 14% growth in Renminbi deposits and over 50% growth in Renminbi assets in 2012 – 58% growth in Renminbi assets.

Unidentified Analyst: Secondly, I mean, we frequently take your views on regulations, what do you make of the FPC review, what do you think can come out of it?

Richard Meddings - Group Finance Director: Now they are not going to give you a two hour answer to this, I promise you.

Sir John Peace - Chairman: You mean the FPC review of…?

Unidentified Analyst: Yes, what's coming up in March?

Sir John Peace - Chairman: I mean the honest answer is, we don't know. I'm afraid that's the answer. We are not experts on the U.K. banking system. We think so – I'm better off answering questions about China.

Unidentified Analyst: Finally, just a detail point, FX was a headwind last year, where are we now on the FX headwind, tailwind, for this year from the rates we can see so far?

Sir John Peace - Chairman: It was a 2% on revenue's headwind last year.

Richard Meddings - Group Finance Director: We are assuming a broadly stable – in our expectation, clearly it is early, but we assume broadly stable (indiscernible) neither very much help, but nor the same degree of negative.

Sir John Peace - Chairman: You wanted (another one) Michael. And then we'll come to Mike.

Michael Helsby - Bank of America Merrill Lynch: This is Michael Helsby again. I guess, the two things you've really emphasized, I think when I listened to your comments today, I think one of them was that the stabilization and I think turnaround in India, so I was wondering if you can give us some more color on what you are seeing there, because the revenue trends have been pretty soft onshore for quite a while. The other one is just a Consumer Bank, because again, that's been quite a slow moving beast and you really are emphasizing the well ahead. So I was just wondering if you could give us more color there. I noticed that second half revenue was up 5% on the first half. So I was wondering if it still be well ahead versus the second half. However, it's a year-on-year comment.

Peter Sands - Group Chief Executive: Well, I’ll start at a high level than you can actually go into detail. On India, very, very – I mean (crude word) putting is what we sort of called the bottom on India. We reckon the economy as a whole has gone through a sharp slowdown, but confidence in business momentum is picking up. That's translating through into the underlying momentum of our business. That doesn't mean we're saying that it's going to go (indiscernible) upwards, but we see a much more encouraging trend there. One of the critical thing, as I say, is the fact that the reform agenda, projects are getting approved. The big companies are investing back in India. A lot of them had put their efforts and concentration on elsewhere. Now you're seeing opening up of the FDI, you're seeing the new cabinet committee on the investments actually unblocking a lot of the projects that got stymied. So there was a real sense of change. I forgot what your other question was.

Richard Meddings - Group Finance Director: About CB.

Peter Sands - Group Chief Executive: CB has had a very nice start. Part of that is Wealth Management. There was a different mood in the market as we began 2013. You also saw the benefits of the step-up in Mortgage Finance in the second half and that flowed through. I don't know if you wanted to add anything on that.

Richard Meddings - Group Finance Director: No, I think that's it. I would say Wealth Management very good and mortgage is continuing momentum you saw in the second half starting (well) was a negative in the first part of 2012, actually has been a good positive in 2013. Compare with the $0.05 second half runway, you’ll have to define wealth for me, but we’ve had a very good start. The good start is actually configured against the first two months of last year.

Mike Trippitt - Numis: Mike Trippitt at Numis. Just following on actually from Tom Rayner’s question, the answer may be the same but just looking at the non-performers on Page 49, which moved up in Wholesale from sort of 3.1-ish to 4.3, bulk of that in Middle East and India, but the individual provision is sort of lagging there quite substantially. So, I just want what sort of words of comfort you can just give around the direction of travel on non-performance. Just in conjunction to that, the expected loss deductions in Core Tier 1 have gone up as well. So is there anything that you’re recognizing in the ELs that you can't recognize in the impairment provisions?

Richard Meddings - Group Finance Director: That could be a very long answer, the second one. I mean, if you look at our EL, it’s running at 3.5 times our level of underlying provisions even in the worst part of the triceps EL (Ms. Noma) expected as traveling at double our actual provisions. As was expected, is a regulatory calculation and is driven by a lot of underlying model assumptions. That’s not what we expect – we actually expect to see in our loan impairment. As you can think, expected losses met with the annual average through this cycle, my goodness, we’re going to have go some to get back to an average and we don’t see that (indiscernible). So the EL is full of adjustments and assumptions, which have nothing to do what we anticipate of book to – underwrite book so we just don't look on NPLs, if you go back two years, you'll find the wholesale bank NPL are moving in the region of $3 billion to $4 billion, yes they are $4.3 billion now. Second half of 2012 was at 6% on the first half outcome. It's moving in $3 billion to $4 billion. That's before provisions in collateral. Within those NPLs, over two thirds of them are in two regions and actually that's concentrated to relatively few accounts where we have extremely good line of sight and are very comfortable with the underlying provision that we're counting. When you look at the NPLs after collateral and after provisioning, they are 65% covered, 35% netted risk after that is well within the 49% historic recovery rate that Standard Chartered has achieved in this former loans recovered, so if that helps – and I don't feel there is any – there is sort of emerging stresses anywhere that's making you nervous at all.

Peter Simon - HSBC: (Peter Simon) from HSBC, I think last year, the focus was on unsecured lending in the Consumer Bank at the expenses of mortgage lending and I wondered looking back a year, how you sort of felt about that because there is $280 million of additional income on just the card book, but about $170 million of additional impairments. I wondered if you had your time again, would you still make that same decision. I sort of got the impression from some of the things you said that you seem to be talking more about secured lending in consumer now as based on unsecured.

Richard Meddings - Group Finance Director: We would make our decision again, I think the unsecured – the proportion of the LI that attaches to unsecured is $120 million of the credit cards and the personal loans out of $168 million of increase and when you look at the unsecured, it remains as you've heard, say 18% of the portfolio with 2010 I think it was 20% there is lots more of them to grow, but we are going to grow it cautiously and remember again that when you look at the unsecured book, what are the two sort of macro fact that you watch for, you watch for the economic fortunes of the economies that you serve. We see improving GDP and underlying economics across our markets, but more importantly you watch for unemployment. If you look at employment stats in our markets, they are take Hong Kong and Singapore they are 14, 15 year lows at the moment. So again, I think you have to look at the underlying context. Then how do we do it, 94% of the portfolio is in markets with positive credit bureaus, we have very good line of sight, where we offer unsecured without that credit bureau line of sight then we offer as you know we pay through payroll customers to payroll customers only and that UAE and across Africa and about 22% of the portfolio is actually offered to customers where we have that payroll. So as a category, I expect it to continue to drive through (high align) in 2013 as the book seasons and we’ve grown at 17% in 2012. So we’ll do that, but is it showing us any reason to back off getting more balanced business, no.

Peter Sands - Group Chief Executive: I think we log it out there are no more questions. Did you want to make any final remarks, John?

Sir John Peace - Chairman: Certainly Peter. Let me try and summarize the results that we’ve announced today. A strong set of results, set against a backdrop of uncertainty in marketplaces set against a settlement with various agencies in the United States. We have continued for the 10th consecutive year to grow our income and our profits and I’m delighted to say we’ve also shown today a significant increase in EPS and of course, more specially a dividend for our shareholders. We’ve tried in the presentation today to put across to you how important our culture is, our culture and values is an integral part of the way we do business. I think what Peter did in his presentation particularly, was to look forward over the next 10 years and to do that it look back over the past 10 years and over that time we’ve seen very significant growth at the business. We remain very optimistic and indeed excited about the next 10 years and indeed, we started this year very strongly. So on that note, thank you all for coming and thank you to our shareholders for your support. Thank you.