Ladies and gentlemen, thank you for standing by, Welcome to the Standard Chartered update for the third quarter of 2019. Today's call is being hosted by Andy Halford, Group Chief Financial Officer. Once his opening remarks are finished, there will be an opportunity for questions and answers. At this point, I'd like to hand the call over to Andy. Please go ahead.
Thank you. Good morning or good afternoon, depending upon your time zone. As usual on these calls, before the lines open for questions, I will add a bit of color to the key headlines and summarize our expectations for the remainder of the year. I said when we delivered our first half results at the beginning of August, that we were making encouraging progress on our refreshed strategic and financial priorities, and I'm pleased to say that that certainly remained the case in the third quarter. I'll begin by summarizing our resilient performance against the framework that we laid out in February, starting with principal strategic priorities. Firstly, we said that we would invest to accelerate growth in both our differentiated network and affluent client businesses, and income in both respects has grown year to date.
By 7% on the network side, as our corporate and institutional clients turn to us to help them navigate the shifting sands of international trade, and by 5% with our affluent personal clients, which is not bad, given client sentiment in many markets remains subdued currently given the volatile macro environment. We recently won Triple A's coveted Rising Star Award in the ultra-high net worth private banking category, which shows that the hard work being put in by the team is being recognized by both clients and peers. Secondly, we set out to optimize the performance in four large and strategically important markets, and all four of those markets have generated a profit year to date, and in aggregate, their profitability for the nine months has improved compared with the nine months last year, by 16%.
Thirdly, we committed to streamline our operations to enhance client satisfaction and drive profitability, and we continued to make progress reshaping our legal entity structure to allow more efficient use of capital and liquidity. Our Taiwan and Korea subsidiaries have now been moved underneath the Hong Kong entity to sit alongside China, which completes our Greater China and North Asia hub. We've already started to realize tangible financial benefits from this, with funding from Hong Kong to our China and Korea subsidiaries replacing more expensive externally sourced lines that they've been using previously. From a more obvious P&L perspective, all of the productivity measures that we called out at the half year are going in the right direction, driving positive jaws in the period. For example, our underlying cost-income ratio improved over four percentage points in the third quarter to 63%, the best we've achieved for quite some time.
We also said that we'll embrace digitization and partnerships to reinforce competitive advantage and profitably disrupt in the markets in which we operate. We continue to work with our partners and the regulator in Hong Kong to develop our virtual bank proposition there. We're also pursuing digital retail banking initiatives with partners in both Taiwan and Korea, and are keen to see how the government's longer term plans develop in Singapore. Finally on this topic, we are now live with our homegrown digital bank in eight markets in Africa and hope to launch in Nigeria before the end of the year. A couple of stats on that. Firstly, around 80% of new current and saving account openings in those markets are coming via the new digital mobile channel.
Secondly, we've added around 100,000 new customers across those eight markets in less than a year, which given how long it's taken us to build a retail customer base of around 1 million in the region using traditional methods over multiple years, that's an extremely encouraging response. Last but certainly not least, since our last results, we have been following through on our commitment to do everything in our power to make the world cleaner and our communities more sustainable. We were a founding signatory of the Principles for Responsible Banking, a set of commitments designed to support the banking industry's contribution to achieving the UN's Sustainable Development Goals and the Paris Agreement.
Having launched a heavily oversubscribed sustainable bond focused on emerging markets in June, we recently followed up by issuing a sustainable deposit product for both corporate and individual clients in Singapore, the first of its type in Asia. The funds we raise from both will be used to help finance sustainable activities in developing markets across our footprint in Asia, Africa, and the Middle East. Turning now to our performance against the financial framework that we laid out to help you gauge progress towards our objective of delivering a return on tangible equity above 10%. I'll start with income, which in the third quarter in constant currency terms is up 8%, just above the top end of the medium-term range we reiterated in February.
From a segment perspective, client segment perspective, Corporate and Institutional Banking had another very strong quarter, with Financial Markets in particular making the most of the current volatile market conditions. All four client segments grew, with Private Banking continuing to impress both from a productivity and a net new money perspective. Similarly, from a geographic perspective, income grew in all four regions, with ASEAN and South Asia being the biggest contributor. An encouraging performance. Indeed, it's the highest third quarter income print since 2015. Do bear in mind that income is usually seasonally slightly lower for us in the fourth quarter. On costs, we generated another period of significantly positive jaws by keeping costs basically flat year-on-year. You should note, however, that costs can move around a bit on a quarterly basis based on the timing of new investments.
I said in August that you should expect costs to be slightly higher in the second half than they were in the first half, and that remains our guidance, which given costs are broadly flat quarter on quarter, means that costs in the fourth quarter, excluding the UK bank levy, will be slightly higher in the third quarter, primarily due to the phasing of the investment spend. Turning now to credit impairment, which increased year-on-year, but remains at a cyclically low level on a year-to-date basis, and asset quality overall has remained fairly stable. You may recall in the third quarter last year that we had a net release of $35 million in the stage 1 and 2 category. The $89 million swing to this year's $54 million charge probably makes the actual position look worse than it is.
The stage 3 impairment element was also up, but in relation to a few names with no particular pattern in terms of location or sector. Obviously, we are highly vigilant in this area because impairment has been running at historically very low levels throughout, and macro uncertainty remains high. You may ask me for a full year forecast. As usual, I'll decline, other than to remind you that credit impairment is usually highest in the fourth quarter. Finally, capital, where we are managing our strong resources carefully and proactively. We committed in February to return to shareholders surplus capital that we don't reinvest. As evidence of that, we recently finished buying back shares worth $1 billion, reducing the share count by 3.5% over the four-month period.
We will continue to evaluate future capital return opportunities whilst considering the earnings outlook, group and local regulatory capital requirements, and opportunities to invest to grow the business. Speaking of investing to grow the business, risk-weighted assets are up 2% compared with a year ago, and slightly down compared with the previous quarter. This is well below the rate of income growth over that same 12-month period as a consequence of our increased focus on returns generally and RWAs specifically. In terms of the development of risk-weighted assets over time, you should bear in mind that there are two broad trends to consider. Firstly, the intra-year or seasonal trend, where they tend to increase at the start, particularly in the first quarter, as corporate and institutional clients reengage following the year end.
The various optimization initiatives we are pursuing then take more of a hold as the year goes on, which is what we are seeing again this year. Secondly, the multi-year trend, where as you know, we've guided to RWAs growing out to 2021 on a net basis, i.e., after organic and inorganic optimization initiatives below the rate of both asset and income growth. Bringing it together then, our primary performance measure return on tangible equity increased just over 1.5% year-on-year to 8.9%. As always though, the risk of repeating myself, please do bear in mind the seasonality of our results with income usually lower and expenses and credit impairment usually higher in the fourth quarter. Plus, we'll also have the UK bank levy of just over $300 million. As you know, we're targeting return on tangible equity of 10% in 2021.
Our positive progress in the third quarter and year to date is encouraging in this regard. As I mentioned earlier, the external environment has become more challenging than we anticipated as the year has gone on. The expectation now is that interest rates will continue to fall. The extent to which that impacts our top line, both mechanically and through changing client behaviors remains to be seen and will depend on how much they fall and for how long. The global economy is still slightly slowing, but at a slower pace than previously expected. The significance of the underlying for us is that what growth there is continues to be generated disproportionately by markets in our footprint, and we are ideally placed to help our clients to take advantage of that.
Meanwhile, discussions between the U.S. and China on trade continue, but in fits and starts, and with several significant issues on both sides that will be difficult to resolve. Finally, a word on Hong Kong, which as you know, is our largest market. We are monitoring our portfolios in sectors such as retail, most directly impacted by the protests very carefully, but see no material new areas of stress at the moment. In terms of asset quality, we saw a slight uptick in early alerts in the third quarter, but a reduction in stage 3 loans. We expect the economic environment to slow, and whilst the cost of liquidity has increased slightly, we've not seen any material change to our balance sheet position.
Our third quarter performance was reasonably robust, with income growing 2% year-on-year or 3% if you exclude from last year's results the income from our non-core ship leasing business that we have since taken below the line. While the full year impact in Hong Kong is not likely to be material, and it has a long history of resilience generally, it is unrealistic to think there will be no financial impact on the economy, and therefore our business there into 2020, and we are watching the situation carefully. To conclude, before we open the lines to Q&A, firstly, our performance since we presented our investor update in February shows that we're making tangible progress on our strategic, operational, and financial commitments. Operating momentum is clearly present and the things that are in our control are going well and pretty much as we guided.
secondly, while incremental challenges and increased risks to revenue have arisen since the start of the year, we have various self-help levers to deploy in pursuit of our double-digit return on tangible equity. We're determined to build a sustainable and differentiated business driven by our people and our purpose, and will not take shortcuts to get there. With that, I'll hand back to Steve and take your questions.
Thank you very much. If you'd like to ask a question over the phone today, please press star then one on your telephone keypad and wait for your name to be announced. You can cancel the request by pressing the hash key. Once again, star then one if you'd like to ask a question over the phone today. The first question today comes from the line of Martin Leitgeb from Goldman Sachs. Please go ahead.
Martin, we can't hear you. I think Martin Leitgeb's on the line, Bill, if you could put that question through.
I will. I'll just open up his line. Just a moment.
Can you hear me? </edited_transcript
We can now.
Okay. Perfect.
Thank you.
Hello. Good morning. It's Martin here from Goldman. Just two questions, please. The first one, congratulations to the strong revenue print. I'm just trying to square up the guidance here in terms of strong performance in terms of revenues this quarter, but not only this quarter, also the first half of the year and the slightly more cautious tone in terms of outlook. I was just wondering, looking at your prior guidance of a revenue growth of 5%-7%, looking at prior comments on the benefits arising from legal entity restructuring and the better use of excess deposits within the group, how shall we think of revenue progression from here? Is it fair to assume this will be potentially towards the lower end of the prior range of 5%-7%, just given rates and global growth?
Do you still see scope for this to be somewhere in the middle of that range? Connected to that, I was just wondering how the various risk items in Asia, whether that's Hong Kong, whether that's trade, impacts international banks such as Standard Chartered. Do you see any benefit from this arising from potentially less competition from local players and the beneficial impact on margin, or is the situation just difficult for everyone? The second question, just briefly on capital. You mentioned in the release a net increase in requirement of around 20 basis points, and I was just wondering whether that impacts to any degree your 13%-14% range. I think previously language was that you expect to be well within that range, and I was just wondering whether that's still the case or whether there's a little bit of upward pressure there. Thank you.
Okay. Thanks, Martin. I'm not sure whether that was three or two questions, but I'll have a go at answering it anyway. On income. What are the stats there? We've got on constant currency basis an 8% print 3Q on 3Q. We are year to date, 5%. I think for the current year, we will realistically be in the range, albeit at the lower end of the range, but nonetheless, there or thereabout. I think if we'd been sitting here back in February when interest rate expectations were on the up, I would probably have been a little bit more optimistic about being sort of in the higher part of that range, whereas now with interest rate expectations now being on the down, I think that obviously would put us into a slightly lower place in that range.
Albeit, having said that, the 5%-7% is a multi-year number, and just as interest rate expectations have changed in the last six or seven months, it doesn't mean to say that they can't change again in the next six or seven or whatever it is. I think that we need to be careful not to be too precise about all of that. The 5%-7% still remains what we are gunning for. Legal entity restructuring will be helpful. It will be progressive, and I think as I have said before, that should provide some offset against what would otherwise be downward pressures on NIM because of interest rates.
hopefully we can attain, as has been the case in this quarter, a reasonably stable NIM. In terms of local competitors and risk, we're going to have to see how this plays out, because obviously this is quite evolutionary, and interest rate changes that kind doesn't happen overnight. I think generally I'd say that the sort of U.S., China situation for us actually has got a number of sort of positives that sit there in the sense that we are much more involved in the Asia connected chain than we are the Northern Asia to U.S. Certainly the flows there have continued. Our business in China is doing well. It's very focused, obviously, on the cross border activity, of which there is a lot that is still going on. I wouldn't call out any particular change on that front.
your final question on the 20 basis points. No, that doesn't have any impact at all on our 13% to 14%. We've set 13% to 14%, giving ourselves a little bit of slack there. that does not impact that target range at all.
Perfect. Thank you very much.
Thank you very much. The next question today comes from the line of Chris Manners from Barclays. Please go ahead.
Good morning, Andy. Chris Manners here.
Hi, Chris.
Hi. Yeah. A couple of questions, if I may. First one was just on Greater China, North Asia and Hong Kong, basically in terms of the revenue growth. Looked like a good year-over-year and quarter-over-quarter revenue print. I guess quarter-over-quarter you've had a day count benefit. Can you just help us think through a little bit on the net interest income drivers that you've got there in terms of where we might have on volume growth? I guess asset yields might come down a little bit because of HIBOR, how the deposit competition is, and help us think through that a little bit. The second question was just on your RoTE objective.
Again, sorry, I don't know if this might be getting too subtle, but it did seem to say in your release that your RoTE objective is 10%, whereas previously I think you were saying greater than 10%. Is that one nuance too many or is 10% what we're looking for now? Thanks.
Okay, Chris. Let's just take those in order. The Northern Asia performance, which is clearly impacted significantly by Hong Kong being a very big part of that business, I think has had a reasonable both third quarter and year to date, particularly in the context of what has been going on in Hong Kong. We've actually got the region, we've got sort of 2% third quarter income increase. It's actually 3% if you X out the ship leasing and normalize it. That is sort of pretty much the mirror of what we have got for the GCNA region overall with the highest growth being in China and the lower growth being in Taiwan. Margins, again, Hong Kong actually been very stable.
Even though earlier in the year there was some degree of volatility in HIBOR, actually in the third quarter itself HIBOR and prime rate, savings rate, et cetera, were all actually pretty stable. We've actually seen the NIMs in Hong Kong and the region stay reasonably flat and therefore the growth being slightly more driven by volume. Hong Kong balance sheet, if you go back to this time last year, we're higher now on client lending and we are higher on client accounts. Slightly more of that growth in the first nine months, slightly more moderated last three months, which is not surprising. I think against that backdrop it's a reasonable performance. The question of how much has the unrest impacted us? I guess possibly the growth might have been a bit higher if that had not been the case.
Nonetheless, it has certainly not been a calamity. We've got the business growing both top line and bottom line quite nicely. On your second question, I think you are being very subtle and precise. Generally our view is that to get to over 10%, we have to go through 10 as a number. If we do get to 10, you can rest assured we are not going to stop on that day and not seek to get any higher than it. We will make a note to make sure we get our words precise going forward.
Got you. Sorry, could I just follow up on the Hong Kong net interest income then? Because when I look at HIBOR, it's down about 30 bps versus the average of what you'd had in Q3. I thought that would actually give quite a bit of pressure on the asset yield. Maybe you could make a little bit of a forward-looking comment on where those Hong Kong margins might go, whether you can take anything out of your deposit cost or any mix shift that might actually help that hold up. That was, I guess, where I was getting at.
Yeah, I think outwardly people look at the sort of movement over time in HIBOR and sort of wonder why the NIM in our business sort of doesn't move around more. I think if you actually look at the relative size of our asset book liability book, you take out the mortgage book and the interrelationship with the prime rate and the caps that come in there. Actually, you see a pretty good normalization that tends to occur. If you go back many quarters with quite a bit of volatility in HIBOR and actually see the NIM in our Hong Kong business has remained pretty constant through that period. We do manage it carefully. We have in the past cut back a bit on the mortgage lending because we just didn't like the sort of margins that were in there.
We've done a little bit more of that recently. Overall it's something that because of the balance of the book and because of the interactivity with other rates and caps It actually doesn't produce the volatility that is implicit in your question.
Okay. No, that makes sense. Thanks, Andy.
Thank you very much. The next question today comes from the line of Manus Costello from Autonomous. Please go ahead.
Morning, all. A couple from me actually. Just to follow up on Chris's questions on NII. I noticed that your deposits were down quarter-over-quarter with CIB pricing away some of its deposit base. I wondered if you wanted to give us a bit more color on that and if that is something that will support the NIM in future, and if so, why you haven't done it in the past. I also just wanted to reaffirm, Andy, were you saying that you are happy to stick to 2020 constant currency five to seven% revenue growth as well as 2019 given the outlook? Thank you.
Yeah. Okay. Thanks, Manus. We are very focused in the CIB business on margins and returns. We are much more focused I think over time on the return on RWAs and taking out the RWAs that are lower. We will absolutely be hunting on the deposit side to see where we can improve the overall mix of the deposits. I think what you can see in these numbers is the combined impact of that, particularly in the CIB business, has been a very strong print on the top line, albeit FM has been a major contributor to that. The NIMs overall for the group have stayed pretty constant with where they were last year. Again, there are many factors going into that customer account as part of it. What we're doing with legal restructuring is part of that.
I think as you look forward, I would say that we probably would expect a reasonably stable NIM, and I think we would expect that the volume growth that we have clearly been seeing now over several quarters, we would hope that we would continue to see that. I think it is testimony to what's been going on as a business. I think there is a more natural momentum, and I think that applies both to the big corporates and also in the commercial bank, which although it didn't print quite such a big top-line growth, it was certainly no slouch in the period at all with an 8% increase. That I think is how I'd see the overall NIM sort of balance sheet interrelationship.
The 5-7, because we gave that out as a sort of multi-year guide, our sense was it was a sort of through the cycle currency sort of type number and therefore implicitly more sort of constant the reported currency. On the average over the period of time, our hope would be that we can be in that 5%-7% range on a constant currency basis. I think with the strong print in the third quarter that that should certainly be the case and certainly it's probably too strong, but should have a reasonable chance of being the case for the current year. As I say, to the extent that we can drive that on the average over that three-year period, and that is what we are very focused on trying to do.
does that mean you think you can hit it next year despite interest rate headwinds or
I'm saying on the average over the three-year period that we will absolutely be setting our stall out to be within that range. It may bobble about from time to time, but that is what we're trying to do on the average over that period.
Got it. Thank you.
Thank you very much. The next question today comes from the line of Anil Agarwal from Morgan Stanley. Please go ahead.
Hi, Andy. Good morning. Two or three questions. The first one following on from Manus' question on deposits. Second question is on LCR. LCR is still well above 100 at 133, where it's come down from 154 at the end of last year. Is there a number below which you would not want to go? Because I'm assuming it'll be well above 100, which will be your bottom line. The third question is on margins. On a QOQ basis, margins came down by about six basis points despite stable Hong Kong. Is there any one-off in margins there? Thanks.
Yeah. The deposit side has moved around a little bit. We've got more time deposits in Europe, but other than that, there's nothing I'd particularly call out on the deposits. The LCR at sort of 130, 140% is comfortably ahead of what we absolutely need to have from a regulatory point of view. Something sort of in that corridor thereabout is something we're happy to live with. The margin coming down this quarter compared to the immediate preceding quarter, I don't know if you recall, but we said in the preceding period that actually we had got some of the accounting was essentially sitting in the non-interest income area, and actually you needed to look at the two together to actually get the full story.
I would slightly look through the last quarter and actually say that what we've got this quarter and the quarters around it is actually more typical.
Sure. Thanks.
Thank you very much. The next question today comes from the line of Jennifer Cook from Exane. Please go ahead.
Thank you. Morning. I've got one question on leverage, please. Your U.K. leverage ratio came in at 5.1% in Q3, which continues the downward trend that we've seen so far this year. I'm not calling out the absolute level of the ratio, as I appreciate that you're still operating at a significant buffer to your minimum requirements. The scale of the relative move in a pretty short period of time, so down 70 basis points in 12 months, seems quite large for a leverage ratio. I was wondering if you could talk through the drivers behind this move, as there does seem to be quite a bit of growth in the repo book, and your U.K. leverage exposure is up 10% so far this year.
If you do continue to chase volume growth, and we continue to see this pace of erosion, just how low would you be prepared to take the leverage ratio, particularly in light to Q4 and the U.K. spot leverage ratio as a starting point for the U.K. stress test? Thank you.
Yeah. Repos certainly are a part of the leverage story. Do recall, leverage is sort of not a primary constraint for us in running this business. That does not mean to say we're going to run it to whatever level, but it is not the primary constraint in running this business. decisions on repos, decisions are based upon returns that we can get, and if we're comfortable with those and those are going to be additive to the overall economics of the business, we will do that. As I say, we're not running up against sort of hard boundaries on the leverage side, and therefore we can judge this on economics rather than purely on leverage ratios.
Okay. Is there a level at which you would kind of pause on the growth, or are you happy for that to continue falling at this kind of pace? </edited_transcript
No. I'm not saying that we would let it fall at this kind of pace, but I'm just saying that it's something which we don't have a stated target specifically on. We'll judge it more on the economics, and it is not the critical sort of governing feature for our balance sheet.
Okay. Thank you.
Thank you very much. The next question today comes from the line of Fahed Kunwar from Redburn. Please go ahead.
Hi. Morning, Andy. Thanks for taking the questions. Just a couple. The first one is, you mentioned the early warnings alerts in Hong Kong. Obviously, they're up 10% Q on Q. Could you just give a bit of color as to where you are seeing that? Was that entirely in Hong Kong? Was it anywhere else across the regions? Also, could we get an update on the Permata stake sale as well? Obviously, there's been a few rumors in the press over the last few weeks. Just where you are in that process, and whether you think it's going to happen over the next couple of quarters, or it could be a longer process than that. Thank you.
Yeah. Early alerts, let me address the sort of group level and then the Hong Kong level. Actually, it's not a particularly dissimilar story. We've got slightly higher early alerts at the end of the third quarter than we had at the end of the second quarter, group wide. That is also mirrored in Hong Kong. The group, the stage 3s are actually flat period on period. In Hong Kong, actually, the stage 3s are slightly down. For the group, it's sort of microcosmic movements. There's nothing particular that one would call out. In some senses, slightly higher early alerts, not a total surprise if you think about what's sort of going on in the world around us. Hong Kong, as I say, early alerts a little bit higher.
Again, what you would expect given the economic environment there, albeit the stage 3 is down. The accounts that we sort of focus upon, which are the non-payers, the stage 3s, stage 2s, et cetera, overall the quality of those in the Hong Kong book is good. We have got a high proportion of our business there, which is in mortgages, and that has got extremely good loans values, et cetera. I'd say it's sort of something we're obviously keeping a close eye on. We're not seeing big movements at this point in time. Although when you see sort of the hotel occupancy rates and things like that being clearly quite a notch down on where they've been before, it is something that we need to keep close to. In the big corporates book, things behaving well. We'll keep an eye on the sort of smaller corporates.
The mortgage book, good as I say, and keep an eye on the unsecured portfolio there as well. That's the broad shape of it. Nothing hugely to call out, but obviously something that we do need to monitor very closely and are doing that. Permata, obviously being a listed business, there is sort of a limit to what we can say. We said it a while ago, it was non-core. There's been a lot of press speculation that maybe there is more activity than that. I won't comment specifically on that. I'll just make the observation, one, that it clearly does tie up a fair amount of risk-weighted assets for the group. secondly, as and when there is any different news, then you will be the first to hear about it.
Thank you very much. Cheers.
Thank you very much. The next question today comes from the line of Tom Rayner from Numis. Please go ahead.
Thank you. Good morning, Andy.
Good morning.
Just on the equity tier 1 ratio, obviously our WAs came in a bit lower, and earnings are obviously clearly better than consensus today. We might have expected a slightly stronger equity tier 1 ratio. Now I understand there's an FX issue. I also understand that there's an issue around the accrual for the foreseeable dividend. I just wonder if you could explain those two drivers in a bit more detail for us, please.
Yeah. Good question. First observation, at 13.5, it rounded to 13.5 by a sliver, and it was actually quite close to being 13.6, so just the simple math of it actually has slightly tipped it to the wrong side of that line. Secondly, there's a bit of FX, but the foreseeable dividend is the other one. Essentially at the half year, we've accrued for the actual dividend, a third of the full year dividend, and therefore in the second half there's a sort of catch up to get that true up to the full year dividend, which actually we may look at for next year to see whether that's the best way to do that. That's just why there is slightly more drag from foreseeable dividend in the third quarter than there was in the first two
Going forward, the policy might change to sort of smooth the accrual more across the years. Do I understand that correctly?
Yeah. We're certainly going to have a look at it. We need to agree with regulators, et cetera, but we're certainly going to have a look at it. I'd prefer it to be more aligned with the profit generation than the fact that we do a sort of one-third, two-thirds dividend. As I say, it's something we're looking at. We'll need to get the regulators on board with.
Okay. There's no other impact? There's no other third item beyond the effects-
No
and for-
No.
No. Okay.
No, nothing else. Yeah.
Thank you. Cheers.
Thank you very much. The next question today comes from the line of Robin Down from HSBC. Please go ahead.
Good morning. Yeah, my question really relates to some of the earlier questions from Manus and Jennifer, really. I'm looking at page eight, its balance sheet. We've got this massive growth within other assets and other liabilities that's taking place. I'm old enough to remember Peter Sands when he was CFO, standing up saying Standard Chartered should move away from wholesale banking towards retail banking. It kind of feels like we're moving more and more back towards the balance sheet being more of a trading book than anything else. I just wonder whether Q3 is a bit of an aberration, whether you expect the size of the other assets and other liabilities to shrink back down again in Q4. Is there any sort of limits on how far you're going to push the trading book size?
Well two or three things. One, unfortunately, I haven't got the longer background history that you have got to recall the conversation with Peter, so I'm a little unsighted on that. Secondly, I would not regard our balance sheet as largely being a trading book. It has got an element that is traded, but it is not a huge element. It is more governed by economics and returns that we can make and what we need from a regulatory point of view to be holding centrally or with central banks.
thirdly, I suppose just to one aspect of your question, I'd probably look back thematically over the last four or five years and actually say what we've sort of done is use the steady predictability of the retail bank over the three or four-year period to actually, with Simon Cooper and the team, to sort of build back the quality of the corporate bank. therefore, now that we are seeing the corporate CIB business to a reasonable extent actually now, the commercial business sort of hitting a stride, that I think we have now got much more balance in the group overall between corporate and retail, and that we have gone through a period of the rebuild of the one funded by the other. I would not regard it as sort of being a trading balance sheet.
We, like most banks, have got to hold a fair amount in central high quality liquid assets for regulatory purposes. there's nothing else that I would particularly call out or be concerned by in the mix on the balance sheet.
if I look at the liabilities, we've got the deposits reduction coming through that you've referenced earlier. going the other way, you've added GBP 34 billion of other liabilities in the quarter. It's grown 15% in the quarter alone.
Yeah. It will move around quarter by quarter. As I say, it's nothing that's a particular concern for us.
Okay. Thank you.
Thank you very much. The next question today comes from line of Ed Firth from KBW. Please go ahead.
Yeah. Good morning, everybody. Could I just ask you back again, I guess, on revenue. I was just looking at growth expectations for Asia. At the start of this year, Hong Kong growth expectations were for about 2.5%. I think Singapore was about the same. We're now running at somewhere around 50 basis points. That's like a 2% loss of economic growth for two of your biggest markets. Yet your revenue is still 8% growth. I guess my question is, when you look at what you were thinking when you set the plan relative to what's being delivered now, were you actually in your mind thinking you were going to deliver 14 or 15% revenue growth and actually you've come in at eight? Which you had like a nice big buffer.
Have you found that certain core parts of the business have disappointed you've been able to make that up elsewhere? Could you give us some sort of a flavor of what that makeup is and how that's changed? Because it seems difficult to believe that you'd have seen that sort of slowdown in expectations for economic growth and it to have had no impact on your business at all.
Yeah. Good question, Ed. Sadly, we weren't sitting with a 14%-15% growth expectation at any time. That would have been nice-
Yeah. Sure
that wasn't actually where our plan was. No, what I'd say is this. You are absolutely right that where Hong Kong growth is now, and to a lesser extent but still to some extent, where Singaporean growth is weaker, particularly Hong Kong, than where we would have envisaged it if you go back nine months or so. That is clearly the case. I think what is good in these numbers is that actually, and remember we're operating in 60 markets around the world, that what we have seen is compensating improvements elsewhere, and particularly the ASEAN region has had a very strong three months and third quarter. we have actually seen good growth in Singapore, we've seen good growth in India, et cetera. therefore, to a reasonable extent, those not because they're directly associated, there is a degree of association but it's small.
Those have actually been performing really well. The sort of portfolio effect of, okay, fortunately, those have been performing well. The Hong Kong one's probably been a bit more depressed than it might otherwise have been. In Singapore, it's sort of interesting because actually the economy there growing, as you say, more slowly than we would otherwise envisage, but actually our business grew not far off double digit. I think I'd sort of look at this maybe from a different angle and say the focus we've had upon network activity and make sure that the cross-border, which is where we create the greatest value, is really still firing very strongly, have actually been a very strong counter to the areas that have been a little bit weaker. Hence you come to the seven, eight% print that we've got.
Okay. as we sort of roll out over the next two couple of years, is that the source of your sort of very lightweight warning over the 10%? Just the question of whether that mix change is sustainable. Is that where your uncertainty comes from?
I think what is the fair way to look at this is that most of the things that we do control are actually performing really well. The push on net worth, push on affluent, the costs, et cetera, obviously those are going as well as we would have hoped for. What is outside of our control, and you will understand this, interest rates in particular for any bank are clearly quite consequential, is outside of our control. The fact that we are now eight, nine months on from February, that the world outside at the moment is definitely looking more gloomy on interest rates.
We're just saying, "Hmm, if we had had the macro backdrop that we had in February still continuing now with the business momentum we've got, we would be thinking this is a really good place to be." We are going to have to work a bit harder given that some of the macro is tougher, to make this happen. Doesn't mean to say we're not going to achieve it just says we're going to have to work harder to make it happen. Some of the geopolitical, Hong Kong, and the U.S., China situation. We've still got another 22 months or whatever it is between now and the end of the 2021 period. Who knows just how those will evolve, how quickly they may settle or not, as may be the case.
We're just sort of saying, "Look, we will do our best to get there." There are factors outside that are on average, make it a little bit more difficult now than was the case before. That doesn't change our intent. It doesn't change the focus we've got. We're not going to do stupid things in the near term just to make it happen and then rue the day later on. We're just putting down a mark, which I think most banks have done anyway, just to say the world outside is a little bit tougher than it was when we sat down earlier in the year.
Perfect. Thanks so much.
Thank you very much. The next question today comes from the line of Guy Stebbings from Exane. Please go ahead.
Morning, Andy. Thank you for taking the question. I just wanted to come back to Pillar 2A, if I can. Apologies if I've missed it, can I check what the precise gross move was rather than net of the countercyclical? I presume it's around 30 basis points on a CET1 basis or 50 basis points on a total capital basis. Just wanted to check. I appreciate you can't be too specific in terms of exactly what's driving that and what the sort of regulatory allowances are, but are you able to give any color? That'd be very helpful. Then just finally on the Pillar 2A, I note your earlier comments that it can be absorbed in the current CET1 on target given the flexibility you have there.
From an MREL purposes perspective, should we think about that as adding 50 basis points to total Pillar 2A, so around 1% of RWAs for USD two and a half billion of extra issuance, or is this already within your thinking when you thought about MREL issuance requirements? Thanks.
Yeah. Okay. The net number is roughly 27, I think, of Pillar 2A, less six of countercyclical offset or something like that. I think you can work that out from some of our other disclosures. I'll go straight to it for you. You are right, it is a difficult one for us to talk to because we are not allowed to talk to it. There is nothing in there that I would particularly call out. It's just slight changing in shape of the book in some areas. It's not something that I would be troubled by. As you have reiterated, and as I said earlier, it does not impact the 13%-14% guidance range.
MREL, we had taken a view over a period of time that there would be some humps and bumps in the road, and we are generally actually in very good shape, already on the MREL front, and it does not change our otherwise plans for MREL and MREL issuance.
Okay, perfect. Thanks.
Thank you very much. There are no further questions on the line today. Please continue.
Good. Okay. Well, thank you for your questions. Just before we call off, just one mention that we are doing an update on the Africa Middle East franchise, which Sunil Kaushal, the CEO for that region, will be doing 27th of November. You are welcome to join that and hopefully that will shine a light upon another fascinating part of our business. With that, I think we'll call it and thank you for your time.
Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect.