Ladies and gentlemen, thank you for standing by, and welcome to the Standard Chartered Update for the Q3 of 2019. Today's call is being hosted by Andy Halford, Group Chief Financial Officer. Once these 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 Pending 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 are making encouraging progress on our refreshed strategic and financial priorities, and I'm pleased to say that that certainly remains the case In the Q3, I'll begin by summarizing our resilient performance against the framework That we laid out in February, starting with principal strategic priorities. So firstly, we said that we would invest Accelerate growth in both our differentiated network and affluent client businesses And income in both respects has grown year to date, so by 7% on the network side as our corporate and institutional clients turn to us To help them navigate the shifting fans of international trade and by 5% with our affluent personal clients, which It's not bad given client sentiment in many markets remains subdued currently given the volatile macro environment. We recently won AAA's coveted Rising Star Award in the ultra high network 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 4 large and strategically important markets And all 4 of those markets generated a profit year state and in aggregate, their profitability for the 9 months Has improved compared with the 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. And from a more obvious P and 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 Proved over 4 percentage points in the Q3 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? And finally, on this topic, we are now live with our homegrown digital bank in 8 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.
And 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 around 1,000,000 in the region over using traditional methods, over multiple years, that's an extremely encouraging response. And 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 community is more sustainable. We were a founding signatory of the principles for responsible banking, A set of commitments designed to support the Manke industry's contribution to achieving UN's sustainable development goals and the Paris Climate Agreement. And 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 industrial clients in Singapore, the first of its type in Asia. The funds we raised 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 is delivering a return on tangible equity above 10%. I'll start with income, which in the Q3 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, Corporate and Institutional Banking had another very strong quarter with financial markets in particular making the most of the current volatile market conditions, But all 4 client segments grew with private banking continuing to impress both from a productivity and a net new money perspective. And similarly from a geographic perspective, income grew in all four regions with ASEAN and South Asia being the biggest contributor. So an encouraging performance, indeed it's the highest Q3 income print since 2015, but do bear in mind that income is usually Seasonally slightly lower for us in the Q4.
And 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 cost 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 the costs in the Q4 excluding the UK bank levy We'll be slightly higher in the Q3, 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 Q3 last year that we had a net release The $35,000,000 in the Stage 1 and 2 category.
So the $89,000,000 swing to this year's $54,000,000 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 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 and as usual, I'll decline other than to remind you that credit impairment is usually highest in the Q4. And finally, capital, where we are managing our strong resources carefully and proactively.
We committed in February to return to shareholders surplus capital We don't reinvest and as evidence of that we recently finished buying back shares worth $1,000,000,000 reducing the share count by 3.5% over the 4 month period. We will continue to evaluate future capital return Whilst considering the earnings outlook, group and local regulatory capital requirements and opportunities to invest to grow the business. And 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 2 broad trends to consider.
Firstly, the intra year We'll see some more trend where they tend to increase at the start particularly in the Q1 as corporate and institutional clients reengage following 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. And secondly, the multiyear trend, whereas you know, We've guided to RWA is 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.
So 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 repeating myself, please bear in mind The seasonality of our results with income usually lower and expenses and credit impairment usually higher in the 4th quarter Plus we'll also have the UK bank net pay of just over $300,000,000 As you know, we're targeting return on tangible 10% in 2021. Our positive progress in the Q3 year to date is encouraging in this regard. As I mentioned earlier, the extended 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 flying, but at a slower pace than previously expected. The significant silver lining 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.
And finally, 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 protest very carefully, Let's 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 Q3, 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. And our Q3 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. So while the full year impact in Hong Kong is not likely to 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. So to conclude, before we open the lines for Q and 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. And secondly, While incremental challenges and increased risk to revenue have risen 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 are determined to build a sustainable and differentiated business Driven by our people and our purpose and will not take shortcuts to get back. With that, I'll hand back to Steve and take your questions.
Thank you very much. The first question today comes from the line of Martin Litke from Goldman Sachs. Please go ahead.
Martin, we can't hear you. We have I think Martin Lickit is on the line, Steve, if you could put That question is through.
I will. I'll just open up the slide just a moment.
Can you hear me? We can now.
Perfect. It's Martin here from Goldman. Just two questions, please. And the first one, Congratulations to the strong revenue print. And 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.
And I was just wondering, looking at your prior guidance of a revenue growth of 5% to 7%, looking at Prior comments on the benefits arising from legal entity restructuring and 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% to 7% just given Rates and global growth or do you still see scope for this to be somewhere in the middle of that range? And Connected to that, I was just wondering how the various risk items in Asia, whether that's Hong Kong, whether that's trade, International banks such as standard charter, do you see any benefit from this arising from potentially less competition from local players and the beneficial Back to margin or is the situation just difficult for everyone? And the second question just briefly on capital. You mentioned in the release a net increase in of around 20 basis points.
And I was just wondering whether that impacts to any degree your 13% to 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 that the 3 or 2 questions, but I'll have a go at answering it anyway. So on income, So one of the stats there, we've got on constant currency basis, an 8% print 3Q on 3Q. We are year to date 5%.
So 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 thereabouts. I think if we've 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 Sections 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% to 7% is a multiyear number. And just as interest rate expectations have changed in the last 6 or 7 months, It doesn't mean to say that they can't change again in the next 6 to 7 or whatever it is. So I think that we need to be careful not to be Too precise about all of that, but the 5% to 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 That should provide some offset against what would otherwise be downward pressures on them because of interest rates. So, hopefully, we can attain as has been the case in this quarter, a reasonably stable NIM. In terms of local competitors and risk, I mean, we're going to have to see sort of how this plays out because obviously this is quite evolutionary Interest rate changes, that doesn't happen overnight.
I think generally, I'd say that the sort of U. S.-China situation For us actually, it has got the number of sort of positives that sit there in the sense that we are much more involved In the Asia sort of connected chain than we are the Northern Asia to U. S. And 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. So I wouldn't call out any particular change on that front. And then your final question on the 20 basis points, No, that doesn't have any impact at all on our 13% to 14%. We said 13% to 14% giving ourselves a little bit of slack there. So 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. Yes, so a couple of questions, if I may. The first one was Just on Greater China, North Asia and sort of Hong Kong basically in terms of the revenue growth. Looked like a good year on year and quarter on quarter revenue print. I guess quarter on 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 and how the deposit competition is and help us think through that a little bit. And then 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, your ROTE objective is 10%, whereas previously, I think you were saying greater than 10%. Is that one nuance too many or is sort of 10% what we're looking for now?
Thanks.
Okay, Chris. So let's just take those in order. So the Northern Asia performance, Which is clearly impacted significantly by Hong Kong being a very, very big part of that business. I think has had a reasonable both Q3 and year to date, particularly in the context of what has been going on in Hong Kong. So we've actually got for the region, we've got sort of 2% 3rd quarter income increase actually 3% if you exit out the ship leasing and normalize it.
And 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. So even though earlier in the year, there was Some degree of volatility in HIBOR actually in the Q3 itself. HIBOR and prime rate, tokens rate, etcetera, were all actually Pretty stable. So 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 1st 9 months, slightly more moderate last 3 months, which is not So I think against that backdrop, it's a reasonable performance. The question of how much is the unrest impacted us. I guess, Possibly, the growth might have been a bit higher if that had not been the case. But nonetheless, it has certainly not been a calamity, and we've got the business growing both top line and bottom line quite nicely.
On your second question, I think you are being very, very, very subtle and precise. And generally, our view is that to get to over 10%, we have to go through 10% As a number and 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 And we will make a note to make sure we get our words precise going forward.
Got you. So can 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. And I thought that would actually give quite a bit of pressure on the asset yield. So 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 That was, I guess, where I was getting
at. Yes. I mean,
I think outwardly people look at the 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 account 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. And if you go about many, 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. So we do manage it carefully.
And we have in the policy 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. So overall, it's not it's something that's 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. That makes sense. Thanks, Andy.
Thank you very much. The next question today comes from the line of Manus Costello from
A couple from me actually. Just to follow-up on Chris' questions on NII. On NII, I noticed that you were low your deposits were down quarter on quarter with CIB pricing away some of 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. And I also just wanted to reaffirm, Andy, were you saying that you are happy to stick to 2020 Constant currency 5% to 7% revenue growth as well as 2019 given the outlook? Thank you.
Yes. Okay. Thanks, Manus. So we are very, 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 The other areas are lower. We will absolutely be hunting on the deposit side to see where we can improve the overall mix Of the deposits and I think what you can see in these numbers is the combined impact of that particularly in the CIB business has been a very, very strong print.
On the top line will be FM has been a major contributor to that. The NIMs overall for the group have stayed pretty constant with where they were last Yes. And again, there are many factors going to that customer account as part of it. What we're doing in legal restructuring is part of that. So I think as you sort of look forward, I would say that we probably would expect a reasonably stable NIM.
And I think we would Back to the sort of 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 testament to what's been going on as business. Think there is a more natural momentum. And I think that implies both to the big corporates and also in the commercial bank, which although it's in print, quite such a big Top line growth, it was certainly no scratch in the period at all with an 8% increase. So that I think is sort of how I'd see the overall NIM sort of balance sheet, its relationship.
The 5 27 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 reported currency And on the average over the period of time, our hope would be that we can be in that 5% to 7% range on a constant currency basis. I think with the strong print in the Q3 that that should certainly be the case and that certainly is probably too strong, but should have a reasonable adjustment in the case for the current year. And as I say, to the extent that we can drive that on the average over that 3 year period, 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 3 year period that We will absolutely be setting our stores out to be within that range. It may fall 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. 2 or 3 questions. The first one Following on from Manus' question on deposits, is there any geographical bias to deposit reduction? 2nd point is second question is on LCR.
So LCR is still well above 100 at 133, but it's come down from 100 and At the end of last year. So is there a number below which you would not want to go, because I'm assuming it will be well above 100, which will be your bottom line? And the third question is on margins. On a Q o Q basis, margins came down by about 6 basis points despite stable Hong Kong. Is there any one off in margins there?
Thanks.
Yes. I mean, 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. So something sort of in that corridor or thereabouts is something we're happy to live with.
And the margin came down this quarter compared to immediate preceding period quarter. And I don't know if you recall, but we said in the preceding period That actually we had got some of the accounting sort of was essentially sitting in The non interest income area and actually you needed to look at the 2 together to actually get the full story. So 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.
I've got one question on leverage, please. Your UK 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 significant buffer your minimum requirements, but the scale of the relative move in a pretty short period of time, so down 70 bps in 12 months, seems quite large for our leverage ratio. I was wondering if you could talk through the drivers behind this move as it does seem to be quite a bit of growth in the repo book and your UK leverage exposure is up 10% so far this year. And 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 Q4 and the UK spot leverage ratio as a starting point for the UK stress test.
Thank you.
Yes. Repos certainly are a part of the leverage story. Do you 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. So decisions on repos, decisions are based upon returns that we can get.
And if we're comfortable with those, those are going to be additive to the overall economics of the business. So 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. But 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?
No, no, 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, good morning, Andy. Thanks for taking the questions. Just a couple. The first one is you mentioned the early warnings that are in Hong Kong, they're up plus they're up 10% Q on Q. Could you just give a bit of color Where you were seeing that?
Was that entirely in Hong Kong? Was it anywhere else across the region? And also, could we get an update on the Pramatta steak sale as well? There's 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.
Yes.
So early alerts, let me address this sort of group level and then the Hong Kong level actually Not a particularly dissimilar story. So we've got slightly higher early alerts The end of the Q3 than we had the end of the Q2 group wide and that is also mirrored in Hong Kong. So the group, the Stage 3s are actually flat period on period. And in Hong Kong, actually, Stage 3s are slightly down. So 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 earlier, that's 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, so it's 3, stage 2, etcetera. Overall, the quality of those in the Hong Kong book It's good. We have got a high proportion of our business there, which is in mortgages and that has got extremely good lines values, etcetera.
So 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 where they've been before, It is something that we need to keep close to. But 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.
So that's a broad shape there. Nothing huge to call out, but obviously something that we do need to monitor very closely and are doing that. Hamzah, obviously being a listed business, there is sort of a limit to what we can say. We said a while ago, it was non core. There's been a lot Correct speculation, but maybe there is more activity than that.
I wouldn'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. And secondly, as and when there is Any different news then you will be the first to hear of our set.
Thank you very much, Chris.
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. Just on the equity Tier 1 ratio, the RWAs came in a bit lower And earnings are obviously clearly better than consensus today. So 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.
But I just wonder if you could Explain those 2 drivers in a bit more detail for us, please.
Yes. So, good question. So first observation at 13.5, it rounded to 13.5 by a sliver and it was actually quite close to 13.6. So Just the simple math of it actually has slightly shifted to the wrong side of that line. Secondly, there's a bit of FX, The full table dividend is the other one.
So essentially, the half year, we've accrued the actual dividend the 3rd 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 best way to do that. But that's just why there is slightly more drag from foreseeable dividend in the Q3 than there was in the first two.
So going forward, we might the policy might change to sort of smooth the accrual more across the year. Do I understand that
Yes. We're certainly going to have a look at it. I mean, we need to be regulated, etcetera, but we're certainly going to have a look at it. I prefer it be more aligned with the profit generation and the fact that we do a sort of 1 third, 2 thirds dividend. But as I say, it's something we're looking at, we need to get the regulators on board with.
Okay. And there's no other impact, there's no other third item beyond FX and foreseeable? No.
No. Nothing else. Nothing else.
Thank you. Cheers.
Thank you very much. The next question today comes from the line of Rob Down from HSBC. Please go ahead.
Yes. My question really relates to some of the earlier questions from Manus and Jenny really. I'm looking at page 8 of
the balance
sheet. And we've got this massive growth within other assets and other liabilities that's taking place. And I really just I'm old enough to remember Peter Sands when he was CFO standing up saying standard chart should move away from Wholesale Banking towards retail banking, but 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. And I just wonder whether Q3 is a bit of an aberration, whether you expect the sort of The size of the other assets, model 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, 2 or 3 things. 1, 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.
And it is more governed by economics and reserves that we can make and what we need from regulatory point of view to be holding centrally With Central Banks. And thirdly, I suppose, just one aspect of your question, I'd probably look back thematically over The last 4 of my peers will actually say what we sort of done is use the steady predictability of the retail bank over the 3 or 4 year period. So actually with Simon Cooper and the team to sort of build back the quality of the corporate bank and there Now that we are seeing the corporate CIB business and to reason it's actually now the commercial business sort of getting a stride, but 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 Sort of the rebuild of the other of the one funded by the other. But I would not regard it as sort of being a trading balance sheet, we like most banks have got the whole fair amount sort of in central high quality liquid assets for regulatory purposes. But 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, I mean, we've got the deposits of reduction coming through that you've referenced earlier. But then going the other way, we've added kind of CHF 34,000,000,000 of Other liabilities in the quarter, it's grown 15% in the quarter alone.
Yes. I mean, 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 the line of Ed Firth from KBW. Please go ahead.
Yes, good morning, everybody. Could I just ask you back again, I guess, on revenue? I mean, I was just looking at growth expectations for Asia. And 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 it Somewhere around 50 bps. So that's like a 2% loss of economic growth for 2 of your biggest markets. And yet your revenue is still 8% growth. So I guess my question is, is when you look at what you were thinking when you set the plan relative to what's been delivered now, Were you actually in your mind thinking you're going to deliver like 14% or 15% revenue growth and actually you've come in at 8%, You had like a nice big buffer. Or 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 that to have had no impact on your business at all?
Yes. Good question, Ed. Sadly, we weren't sitting with a 14% to 15% growth expectation at any time. That would have been nice, but It's Steve, where I'll plan. Now 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 Singapore growth is weaker, particularly Hong Kong That where we would have envisaged it if you go back sort of 9 months or so.
That is clearly the case. I think what is good in these numbers is And remember, we're operating in 60 markets around the world. The more capacity is compensating improvements elsewhere. And particularly the ASEAN region has had a very strong 3 months and third quarter. And we have actually seen good growth in Singapore.
We've seen good growth in India, etcetera. And therefore, to a reasonable extent, those Not because they're directly associated. There is a degree of association, but it's small. And those have actually been performing really, really well. And the sort of portfolio effect of okay fortunately those have been performing well.
The Hong Kong ones are being a bit more depressed than it might otherwise have been. And in Singapore, it's interesting because actually the economy there growing as you say more slowly than we would otherwise envisage, but Our business grew not far off double digit. And so I think I'd sort of look at this So 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, very strongly, Have actually been a very strong counter to the areas that have been a little bit weaker and hence you come to the 7%, 8% print that we've got.
Okay. And as we sort of roll out over the next couple of years, I mean, is that the source of your sort of Very lightweight warning over the 10% that 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 All are actually performing really, really well. And the push on that was pushing affluent, the costs, etcetera. 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 For any bank, clearly quite consequential is outside of our control. And the fact that we are now 8, 9 months On from February, the world outside at the moment is definitely looking more gloomy on interest rates.
We're just saying, if we have had the macro backdrop that we had in February still continuing now With the business momentum we've got, we'll be thinking this is a really, 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. 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 and how quickly they may settle Or not, this may be the case. And we're just sort of saying, look, we will do our best to get there. There are factors outside On the average, makes 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 move the day later on, but we're just putting down the market, 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.
Good morning, Andy. Thank you for taking the question. I just wanted to come back to Good afternoon, Efgan. Apologies if I missed it, but can I check what the precise gross move was rather than net of the accounts cyclical? I presume it's around 30 basis points on a CET1 basis or 50 basis points on a total Capital basis, I just wanted to check.
And I appreciate you can't be too specific in terms of exactly what's driving that kind of what the sort of regulatory allowances are, but are you able to give any color? That would be Very helpful. And then just finally on the Pillar 2A, I know your earlier comments that it can be resolved in the current CET1 target given the flexibility you have there. But from an MREL purposes Should we think about that as adding 50 basis points to total Pillar 2A, so around 1% of RWAs, dollars 2,500,000,000 of extra issuance? Or Was this already within your thinking
when
you thought about MREL issuance requirements? Thanks.
Yes. Okay. So The net number is roughly 27, I think, to the 2A less 6 of It will offset or something like that. I think you can work that out and some of our other disclosures. So I'll go straight to it for you.
You are right. It is a difficult one for us 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 change in shape of the book in some areas. But it's Not something that I would be troubled by.
And as you have reiterated, as I said earlier, it does not impact the 13% to 14% guidance Range. MREL, we had taken a view over a period of time that there will be some huts and bumps in the road. And we are generally Actually, 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, Just one that mentioned that we are doing an update on the Africa Middle East franchise, Which Suril Karshal, the CEO for that region will be doing 27th November. And you are welcome to join that.
And hopefully, That will shine a light upon another fascinating part of our business. So 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.