Okay. Thank you very much, everybody, for attending this session at the Morgan Stanley European Financials Conference. Very honored to be joined by Diego Di Giorgio, the CFO of Standard Chartered. Thank you very much for coming along today. My name is Nick Lord, and I'm the head of Southeast Asian Research at Morgan Stanley, but I'm also the Hong Kong Bank's analyst. We are going to start off with a polling question just to get a sense of what people think on Standard Chartered. If you could press your buttons. The polling question is, what is preventing a further upward re-rating of Standard Chartered stock price? Is it, one, the share price already reflects returns given its risk profile? Two, lower rates could impact top-line growth? Three, wealth targets are too aggressive? Four, concerns over longer-term ability to manage cost-income ratio?
I'll just give you a second to poll that.
I would like to think of it as what could prevent. Hopefully not.
Hopefully not, yeah. Okay, interest rates. That is very similar to the answer we got for another bank yesterday. That is the first one. Cost-income ratio, second. Wealth targets people seem happy with. People do not seem to think there is an issue with the share price, which is encouraging.
Good start.
Yeah. Okay, let me—we're going to run through some Q&A for about 20-25 minutes, and then we'll open up to the audience. I want to start off, and I want to talk a little bit about revenue and top-line growth, because I think that's sort of what people are focused on nowadays. Maybe we'll just address the first question in that poll.
The interest income outlook.
Which is an interest income outlook. What, in your mind, are the key blocks that are sort of underpinning that outlook, especially given the rate volatility we've had in the last few months?
That is definitely one of them. Let's start, first of all, from what is our outlook. We continue to think that the outlook is what we discussed at our full-year results. We continue to think that from the higher base that we made in Q4 of 2024, it will be challenging to grow net interest income this year. The reality is that the main, vastly the main reason for that is that we have been managing very, very well our pass rates. As rates continue to decline, that is unlikely to continue at exactly the same, at exactly the same levels. We think that that will take place during the rest of the year. Q1 has been good from this point of view still. We continue to manage assertively, but with rates declining, that is unlikely to be able to continue. That is the broad picture.
If you break it down a little bit more, let's start from the starting point. The starting point is higher because Q4 we did better than what people expected, helped, of course, by higher for longer, but really helped by past rate management a little bit across the entire footprint. That has continued during the course of Q1. There is no doubt that in Hong Kong and in other places across the footprint, as rates continue to decline, the ability to pass through at the same elevated levels will be reduced. Rate volatility, you mentioned it, Nick, it's truly rate volatility. I mean, look at what happened in the last couple of weeks in terms of the seesaw in movement. That, by the way, has all sorts of other impacts on other parts of the business, but we can leave that for later.
The other impact that it's important that our investors take into account is that as we continue the shift towards wealth management for affluent within our Wealth and Retail division, there are some net interest income headwinds that will come out of it as we exit certain portfolios, as we exit certain client relationships. We have indicated that that is going to be in the region of about $100 million for 2025. Last but not least, our structural hedge, $64 billion at the end of the year, growing to $75 billion during the course of 2025 is what we are targeting. That is not a flip to our net interest income in the sense that the hedges of some U.K. banks, for example, are. It's really a hedge and a protection.
The way that we look at it and the reason why we are happy to continue building the hedge, even at a slight cost, as we continue to build it, as we continue to build it in 2024, and we are going to continue in 2025, is that we think it produces net interest income that is of a higher quality, fundamentally. We are reducing the volatility of net interest income. We have reduced our exposure to rates in terms of the IRBB, which, for imperfect that it is, is still the one measure that one can look at by almost two-thirds. At this point, our exposure to dollar rates in particular is really limited. I mean, we're talking about less than $100 million for a parallel shift of the curve by 100 basis points.
Bringing it all back to one, higher starting point in Q4, assertive management of PTRs that continued during Q1, but it will be unlikely to be able to be kept at these levels. Therefore, we continue to believe it is challenging to grow NII this year.
Okay, perfect. You mentioned in there you spoke a little bit about affluent and how you're shifting into the wealth business. We've seen, obviously, equity markets under a lot of pressure, especially US equity markets. I guess we've also seen volatility, which typically people want more advice in that environment. How are you seeing wealth sort of progress at the moment? If you think about some of the trends in the market, what are you doing to sort of offset some of the impacts on your business from those trends?
Yeah. What we are seeing during the course of this quarter is very much a continuation of what we have seen in Q4. Wealth management continues to do well, pushed by both, as you just mentioned, some, let's call them cyclical temporary effect, but obviously by a very powerful wave of secular effects, which are fundamentally the growth of the middle class in Asia and the Middle East and Africa. It is the fact that we are an open architecture provider. It is the fact that we are very focused on a continuum of wealth with a laser focus on the affluent part of that continuum, but with the ability to continue to graduate clients into the cohorts of the affluent and from affluent graduating them up to the Private Bank. Those are very strong secular forces that continue to operate.
In the near term, clearly, some of the volatility and some of the upside, particularly in equity markets in the region, have been helpful. I would point out that, as we have said many times before, we are a less exposed wealth manager to the movements of the market for a number of reasons. First of all, we are very diversified in terms of our offer, all the way from fixed income to treasury products to structured notes of all types. That is embedded. That has resulted in a growth of the wealth management franchise that when you look at it over a really long period of time, I mean, you go way before COVID, and with the exception of the blip of the exact peak of the COVID phenomenon, has really been an almost 10%, 9% CAGR over that period.
It's an area in which the investments we have made further de-risk the delivery of the results because we've invested very heavily in things like bancassurance, obviously with Prudential Wealth Management Services, including increasingly the use of model portfolios and model funds that we deploy to our client base that further de-risk us from that point of view. That means that our return on assets has really been stable at 1.4% there or thereabout. Now, it might actually blip down a little bit in the near term because we have had a number of conversions of mandates from a handful of clients in Q4 that was really, really meaningful that you have seen, but it will then trend back up there. Yes, definitely a good time out there in the market for wealth management.
In particular, remember another thing, the stability of our wealth management has to do with the fact that although we have a Private Bank and it's an important part of our offering, the focus is really on wealth management for affluent. When you hear clients of Private Banks saying that they are investing less or they are deleveraging, they are reducing their exposure to the market or to certain markets, that doesn't really happen to affluents, okay? Affluents save and invest with us for retirement. They are anchored around one or two or three products: a mortgage, life insurance, a large-time deposit, and then we complement that with wealth solutions. It is less prone to the vagaries of the market.
Yeah. Just in terms of, I guess, the higher end of that wealth continuum, I mean, what are you seeing at the moment in terms of competition for RMs? And if we think about the life of an RM, where are you at the moment in terms of that hiring cycle, productive cycle?
In terms of competition, the competition is always fierce for RMs. There is, again, a very big difference between competing for RMs and the effect of, especially when you lose on the competition and someone leaves the platform, there's a big difference between the Private Bank and the affluent continuum. When you think about the Private Bbank, the relationship manager, I'm going to exaggerate for effect, owns the client. In the affluent space, the RM doesn't own the client. The RM looks after the client. The RM is the steward of the client, and it's a very large base of clients that they serve.
Even though competition is high and we continue to attract our fair share, helped in some cases, particularly toward the top end by some exits from the markets that we serve in that area, we continue to be able to add in line with our ambition that you will remember is an ambition to grow our relationship managers at about 10% per annum for the next five years as part of our $1.5 billion renewed effort of investments in wealth management for affluents. The average relationship manager takes about a year and a half to be truly productive. When you ask us where we are, I can't draw. I love whiteboards, but I can't draw on this one. It is really a series of J curves, right? I mean, it is every cohort that comes in that has a new J curve.
As the ones that we have hired a year or two ago get to peak profitability, the new ones are getting in and they are getting trained. Don't forget also that with relationship managers for affluent, we have a great ability to hire people, but also to train people from the inside. I mean, we hire people fundamentally from university, and we put them through classes and courses, including some that we have designed together within SEAD. That is also a very distinctive capability. I mean, you don't necessarily just depend on the job market out there in order to continue to fuel your growth, but you can be more the master of your destiny.
Okay. Brilliant. Perfect. If we want to move on to the wholesale banking side, I guess we've seen a lot of market volatility, which I assume benefits trading businesses. I just wonder, I mean, you tend to be more of a market business in that space rather than an ECM or an ECM type business. What are you seeing there? Are you seeing sort of strong performance come through from that volatility?
Yeah. Volatility undoubtedly helps the market business, and the market business has had a very strong start to the year, as we have indicated. Volatility, though, comes in different types, right? Volatility of policy is not necessarily something that is particularly good even for a market business. While the market business has continued to do well, I think it's perceivable in the last few weeks that people are starting to ask themselves what's going on more broadly in the world. They might be moving a little bit more toward the sidelines. Still, you're right, the flows in markets are good. The reality is that the flows in banking are good too in the sense that the pipeline has been doing well and Q1 has continued to develop well.
It's really difficult to figure out what's going to happen in the future, more with the banking business, as you said rightly, Nick, than with the market business, because in banking, what we are seeing is we are witnessing all sorts in all directions and in all of our corridors, all sorts of tactical and strategical steps by clients. What do I mean with that? A little bit of prepositioning, a little bit of bringing ahead of certain investments in order to put yourself ahead of some potential rumored tariff movements, but also some strategic decisions of increasing or decreasing the exposure to certain areas in order to increase the security of your supply chain and of your production footprint is all stuff that we are seeing. That means that in the short term, it's good.
Okay. Thank you very much, everybody, for attending this session at the Morgan Stanley European Financials Conference. Very honored to be joined by Diego Di Giorgio, the CFO of Standard Chartered. Thank you very much for coming along today. My name is Nick Lord, and I'm the head of Southeast Asian Research at Morgan Stanley, but I'm also the Hong Kong Bank's analyst. We are going to start off with a polling question just to get a sense of what people think on Standard Chartered. If you could press your buttons. The polling question is, what is preventing a further upward re-rating of Standard Chartered stock price? Is it, one, the share price already reflects returns given its risk profile? Two, lower rates could impact top-line growth? Three, wealth targets are too aggressive? Four, concerns over longer-term ability to manage cost-income ratio?
I'll just give you a second to poll that.
I would like to think of it as what could prevent. Hopefully not.
Hopefully not, yeah. Okay, interest rates. That is very similar to the answer we got for another bank yesterday. That is the first one. Cost-income ratio, second. Wealth targets people seem happy with. People do not seem to think there is an issue with the share price, which is encouraging.
Good start.
Yeah. Okay, let me—we're going to run through some Q&A for about 20-25 minutes, and then we'll open up to the audience. I want to start off, and I want to talk a little bit about revenue and top-line growth, because I think that's sort of what people are focused on nowadays. Maybe we'll just address the first question in that poll.
The interest income outlook.
Which is an interest income outlook. What, in your mind, are the key blocks that are sort of underpinning that outlook, especially given the rate volatility we've had in the last few months?
That is definitely one of them. Let's start, first of all, from what is our outlook. We continue to think that the outlook is what we discussed at our full-year results. We continue to think that from the higher base that we made in Q4 of 2024, it will be challenging to grow net interest income this year. The reality is that the main, vastly the main reason for that is that we have been managing very, very well our pass rates. As rates continue to decline, that is unlikely to continue at exactly the same, at exactly the same levels. We think that that will take place during the rest of the year. Q1 has been good from this point of view still. We continue to manage assertively, but with rates declining, that is unlikely to be able to continue. That is the broad picture.
If you break it down a little bit more, let's start from the starting point. The starting point is higher because Q4 we did better than what people expected, helped, of course, by higher for longer, but really helped by past rate management a little bit across the entire footprint. That has continued during the course of Q1. There is no doubt that in Hong Kong and in other places across the footprint, as rates continue to decline, the ability to pass through at the same elevated levels will be reduced. Rate volatility, you mentioned it, Nick, it's truly rate volatility. I mean, look at what happened in the last couple of weeks in terms of the seesaw in movement. That, by the way, has all sorts of other impacts on other parts of the business, but we can leave that for later.
The other impact that it's important that our investors take into account is that as we continue the shift towards wealth management for affluent within our Wealth and Retail division, there are some net interest income headwinds that will come out of it as we exit certain portfolios, as we exit certain client relationships. We have indicated that that is going to be in the region of about $100 million for 2025. Last but not least, our structural hedge, $64 billion at the end of the year, growing to $75 billion during the course of 2025 is what we are targeting. That is not a flip to our net interest income in the sense that the hedges of some U.K. banks, for example, are. It's really a hedge and a protection.
The way that we look at it and the reason why we are happy to continue building the hedge, even at a slight cost, as we continue to build it, as we continue to build it in 2024, and we are going to continue in 2025, is that we think it produces net interest income that is of a higher quality, fundamentally. We are reducing the volatility of net interest income. We have reduced our exposure to rates in terms of the IRBB, which, for imperfect that it is, is still the one measure that one can look at by almost two-thirds. At this point, our exposure to dollar rates in particular is really limited. I mean, we're talking about less than $100 million for a parallel shift of the curve by 100 basis points.
Bringing it all back to one, higher starting point in Q4, assertive management of PTRs that continued during Q1, but it will be unlikely to be able to be kept at these levels. Therefore, we continue to believe it is challenging to grow NII this year.
Okay, perfect. You mentioned in there you spoke a little bit about affluent and how you're shifting into the wealth business. We've seen, obviously, equity markets under a lot of pressure, especially US equity markets. I guess we've also seen volatility, which typically people want more advice in that environment. How are you seeing wealth sort of progress at the moment? If you think about some of the trends in the market, what are you doing to sort of offset some of the impacts on your business from those trends?
Yeah. What we are seeing during the course of this quarter is very much a continuation of what we have seen in Q4. Wealth management continues to do well, pushed by both, as you just mentioned, some, let's call them cyclical temporary effect, but obviously by a very powerful wave of secular effects, which are fundamentally the growth of the middle class in Asia and the Middle East and Africa. It is the fact that we are an open architecture provider. It is the fact that we are very focused on a continuum of wealth with a laser focus on the affluent part of that continuum, but with the ability to continue to graduate clients into the cohorts of the affluent and from affluent graduating them up to the Private Bank. Those are very strong secular forces that continue to operate.
In the near term, clearly, some of the volatility and some of the upside, particularly in equity markets in the region, have been helpful. I would point out that, as we have said many times before, we are a less exposed wealth manager to the movements of the market for a number of reasons. First of all, we are very diversified in terms of our offer, all the way from fixed income to treasury products to structured notes of all types. That is embedded. That has resulted in a growth of the wealth management franchise that when you look at it over a really long period of time, I mean, you go way before COVID, and with the exception of the blip of the exact peak of the COVID phenomenon, has really been an almost 10%, 9% CAGR over that period.
It's an area in which the investments we have made further de-risk the delivery of the results because we've invested very heavily in things like bancassurance, obviously with Prudential Wealth Management Services, including increasingly the use of model portfolios and model funds that we deploy to our client base that further de-risk us from that point of view. That means that our return on assets has really been stable at 1.4% there or thereabout. Now, it might actually blip down a little bit in the near term because we have had a number of conversions of mandates from a handful of clients in Q4 that was really, really meaningful that you have seen, but it will then trend back up there. Yes, definitely a good time out there in the market for wealth management.
In particular, remember another thing, the stability of our wealth management has to do with the fact that although we have a Private Bank and it's an important part of our offering, the focus is really on wealth management for affluent. When you hear clients of private banks saying that they are investing less or they are deleveraging, they are reducing their exposure to the market or to certain markets, that doesn't really happen to affluents, okay? Affluents save and invest with us for retirement. They are anchored around one or two or three products: a mortgage, life insurance, a large-time deposit, and then we complement that with wealth solutions. It is less prone to the vagaries of the market.
Yeah. Just in terms of, I guess, the higher end of that wealth continuum, I mean, what are you seeing at the moment in terms of competition for RMs? And if we think about the life of an RM, where are you at the moment in terms of that hiring cycle, productive cycle?
In terms of competition, the competition is always fierce for RMs. There is, again, a very big difference between competing for RMs and the effect of, especially when you lose on the competition and someone leaves the platform, there's a big difference between the private bank and the affluent continuum. When you think about the private bank, the relationship manager, I'm going to exaggerate for effect, owns the client. In the affluent space, the RM doesn't own the client. The RM looks after the client. The RM is the steward of the client, and it's a very large base of clients that they serve.
Even though competition is high and we continue to attract our fair share, helped in some cases, particularly toward the top end by some exits from the markets that we serve in that area, we continue to be able to add in line with our ambition that you will remember is an ambition to grow our relationship managers at about 10% per annum for the next five years as part of our $1.5 billion renewed effort of investments in wealth management for affluents. The average relationship manager takes about a year and a half to be truly productive. When you ask us where we are, I can't draw. I love whiteboards, but I can't draw on this one. It is really a series of J curves, right? I mean, it is every cohort that comes in that has a new J curve.
As the ones that we have hired a year or two ago get to peak profitability, the new ones are getting in and they are getting trained. Don't forget also that with relationship managers for affluent, we have a great ability to hire people, but also to train people from the inside. I mean, we hire people fundamentally from university, and we put them through classes and courses, including some that we have designed together within SEAD. That is also a very distinctive capability. I mean, you don't necessarily just depend on the job market out there in order to continue to fuel your growth, but you can be more the master of your destiny.
Okay. Brilliant. Perfect. If we want to move on to the wholesale banking side, I guess we've seen a lot of market volatility, which I assume benefits trading businesses. I just wonder, I mean, you tend to be more of a market business in that space rather than an ECM or an ECM type business. What are you seeing there? Are you seeing sort of strong performance come through from that volatility?
Yeah. Volatility undoubtedly helps the market business, and the market business has had a very strong start to the year, as we have indicated. Volatility, though, comes in different types, right? Volatility of policy is not necessarily something that is particularly good even for a market business. While the market business has continued to do well, I think it's perceivable in the last few weeks that people are starting to ask themselves what's going on more broadly in the world. They might be moving a little bit more toward the sidelines. Still, you're right, the flows in markets are good. The reality is that the flows in banking are good too in the sense that the pipeline has been doing well and Q1 has continued to develop well.
It's really difficult to figure out what's going to happen in the future, more with the banking business, as you said rightly, Nick, than with the market business, because in banking, what we are seeing is we are witnessing all sorts in all directions and in all of our corridors, all sorts of tactical and strategical steps by clients. What do I mean with that? A little bit of prepositioning, a little bit of bringing ahead of certain investments in order to put yourself ahead of some potential rumored tariff movements, but also some strategic decisions of increasing or decreasing the exposure to certain areas in order to increase the security of your supply chain and of your production footprint is all stuff that we are seeing. That means that in the short term, it's good.
In the long term, will people continue to pull the trigger if they can't figure out from week to week what's going to happen remains undoubtedly a question. What comes to our help here hugely, of course, is again, our network effect, right? It's the fact that we are very diversified across so many different corridors that so few are of real meaningful size in a single country-to-country exposure. Only seven of our corridors are larger than $100 million in a network business that is $7.3 billion last year. That diversification and that resilience clearly comes to our help. It also means that within a scenario that remains somewhat discombobulated, there are always some pockets, some areas, some regions, some countries that are thriving, that are the beneficiaries of the disgrace that might have befallen other countries in this fast-moving geopolitical environment.
It is really that diversification, the trading of tens and tens of different currency pairs every day, the volumes that we put through our transaction banking that clearly comes to our help. Remember also that markets are for us really a hedging machine. It is the monetization of the flows that we have with corporates, with financial institutions, with banks and broker-dealers, and also, of course, with investors like many of you in the audience, but a lot of it is really recurrent.
Going back to that point, and you've obviously produced a very interesting slide in your results pack, lots of blue and green lines moving all over the place.
We're very proud of our report chart.
It does look very nice.
Manus, David, myself, all of the team.
Ultimately, a lot of trade is driven by the US as an end market. When you're talking to your clients across these different markets and across these different trade corridors, what are they talking about in terms of how they may react if that just becomes a less attractive market for them over time?
A couple of considerations about the U.S. Undoubtedly, the locomotive of the world and clearly remaining so. Asia is booming. The flows intra-Asia and the flows between Asia and the other and the rest of the world, including the ones that we captured that we have shown on that famous slide, are very, very powerful. It's clear that there are horrible scenarios potentially out there, right? I mean, a real trade war, if people have not read their books and they haven't figured out what happened in 1930 with everyone beggaring their neighbor, yeah, there are terrible scenarios out there. One hopes that people have read and people don't want to cut off their noses to spite their faces.
If you eliminate the tail event of a 1930s type of economy developing in the world, the importance of the U.S. is high, but the fact that we are exposed to the intra-Asian corridors, the ASEAN corridors that grow in double digits, the Middle East corridors that grow at almost 20% is what gives us a lot of hope for being able to serve our clients and benefit from the products that we offer them in what is becoming fundamentally a more fragmented world. It is not that globalization is dead. It moves by very different corridors, and those corridors are not as smooth as they used to be.
Okay. Perfect. Sticking on to CIB, I mean, obviously something that Standard Chartered has done for a very long time is the originate-to-distribute model. It seems that a lot of other banks are now beginning to talk about that, especially in the Asia region. I mean, not just sort of international banks, but some of the local and regional banks are talking about the same model. I just wonder if you could talk about a couple of things. First of all, are you seeing a pickup in competition there? What is the environment like? Secondly, who are you? Who are the buyers of a distributed product? What are the trends you see in terms of demand for that product going forward?
Absolutely. Originate-to-distribute is super important to us. It is one of the many things that allow us to say that we are going to grow our revenues toward the top end of our 5%-7% CAGR for 2024-2026, while indicating that we do not need to grow the balance sheet in the same way. We are happy to grow the balance sheet for the right product at the right return on risk-weighted assets. We do not need necessarily to do it, and we have proven it in spades, I think, in 2024 with our numbers. In originate-to-distribute, we also benefit from the fact that we have been doing it for a long time, and I will come in a second to what product that means, but the demand is growing exponentially.
It's growing exponentially because we've always had demand from financial institutions, of the bank broker-dealers, and of the investor type like you for a long time. Entire new complexes are growing, and they are giant complexes. The alternative asset managers, the growth of the large credit complexes, the insurance companies with which these credit complexes very often come together with, and the growth of large and aggressive and increasingly diversified pension funds all play to our strength. By the way, it's one of the reasons why we continue to indicate that we want to continue to grow the percentage of financial institutions in our CIB business. Among other reasons, it's to capture these kinds of opportunities. Why do these clients like doing originate-to-distribute with us? Because we have a product that is a phenomenally useful product for these constituencies.
We have loans that are in G3 currencies, but investment grade, largely 80% investment grade, and obviously traded at a spread to what you would originate in the US or in Europe. It is true that there might be, and there is, a burgeoning demand for it because even though these are never going to be 20% of the portfolio of these investors, you do not need them to be 20% of the portfolio of these investors for the demand to be gigantic and continuing to grow for years.
Our competitive edge to the last part of your question, Nick, our competitive edge in this is very powerful because while we might compete with other global banks, very few global banks have the kind of footprint that we have and can originate in all of the places where we can originate. When we compete against the local or the regional banks that you mentioned are making more noises about developing originate-to-distribute, we have at least three very large advantages. One, we are a huge dollar clearer, and that makes it a very complementary offering to what we offer our investors in terms of originate-to-distribute. We can do very large size, and we can do it across different markets, across different product classes. We can do it by ourselves from our balance sheet. We can take some of it on our balance sheet while we distribute another portion.
Very often, we do it in partnership. Look at the partnership that we have struck up with Apollo to do infrastructure financing. The third, and often, I think, somewhat overlooked characteristic that we have that is really powerful in many of our markets, certainly in India, certainly when it comes to renminbi products, certainly in the 10 countries of ASEAN in which we are present, is our ability to exist in both the onshore and the offshore market.
That means that wherever and whenever there is an arbitrage between local rates and international rates, whenever there is movement in foreign currencies, whenever there is an opportunity that our investors want to exploit in either physical form, real delivery, or derivative form, like we've done a lot in Q4, and you've seen the growth of our market balance sheet without a growth of risk-weighted assets, we are in a class of our own very often. Dollar clearing, size, and onshore-offshore are very powerful drivers of our competitive edge.
Okay. That's interesting. If we could talk a little bit about ventures. I think your target is less than $200 million in cumulative losses in 2025, 2026, most of that, I think, in 2025. Can you talk about how that's going to happen? I mean, is this all uplift from Mox and Trust? Is it gains from the other sort of venture portfolio businesses? If it's the former, so Trust and Mox, what's going to drive that sort of big uplift in profitability?
It's a combination of the two. It's a combination of the two because Mox and Trust are obviously very important, and they are going to become profitable in 2026. Clearly, Mox and Trust are sizable businesses. I mean, very sizable businesses. I mean, Trust in Singapore has surpassed the 1 million customers. Mox continues to grow strongly. They are places in which we can continue, quarter after quarter, to add more functionality, more product to what we offer to our clients. Perfect case in point, Mox, where after an unsatisfactory start of our lending processes, we've tweaked the algorithms, we've changed the constituencies that we go after, and we have restarted the lending machine towards the end of last year. Mox and Trust are clearly important, and they are sizable businesses, so they will contribute importantly.
What's happening on the venture side is that after a little bit of a fintech ice age for a few years, the thaw is well underway, and raising more capital is becoming possible, and also exiting some of these or diluting ourselves in some of these investments is becoming more possible. You will see more realizations that, by the way, because these businesses are now adolescents as opposed to toddlers, those realizations will then go to fuel whatever investments we have without the necessity for us to put more money into it, which is why we are very excited about the fact that after a relatively long period of investment, these businesses are coming onto their own, and they are going to contribute more and more.
Okay. Great. Maybe now if we could talk about costs. You've obviously, I mean, Fit for Growth appears to be progressing well. I mean, when you've gone through the implementation of this program, and I guess this year is the big year for implementation, what have been the unexpected challenges that you've faced?
Probably two. The nature of this is a real transformation project, right? I mean, it's $1.5 billion of spend to achieve $1.5 billion of efficiencies. One of the objectives that is difficult to achieve, hence one of the challenges, has been the fact that it's easy to revert to tactical solutions. When you tell people, "Okay, I want you to invest this," the temptation at times is to say, "Okay, I'll fix this little problem that I've had for a long time." The answer is, "Yeah, but no. That is not a Fit for Growth project. We have a very large budget for technology. We'll spend from the budget for technology for that one." That's a tactical solution. It's not a strategic solution.
Driving toward a strategic solution is challenging at times because strategic solutions obviously require more thought, more transversal work between different divisions and different functions, require more advanced technological solutions, etc. The second, to an extent, is spending the money. It's a lot of money to spend, and keeping pace with the spending of the money is important, but it's also important that money is well spent. As a consequence, as we look at it, we are always informed by our objective of achieving the efficiencies that we are going to achieve by spending the money. We never forget that we have an overarching thing, which is our commitment to our $12.3 billion cost cap that we took instead of a cost-income ratio to the question that had 27% of the respondents.
Cost-income ratio is an easier way of looking at this thing because for as long as your revenues grow well, which our revenues grow well because we are in fast-growing markets, you can be a little bit more profligate with costs. We put on more discipline to us. One of the lessons with Fit for Growth is that sometimes if you want to spend well, spend strategically, and spend intelligently, you might well want to phase your spending a little bit carefully rather than rush for the doors and open the purse strings, spoken like a true CFO.
Okay. What's next? I mean, when we get to the end of 2026 and we've delivered the cost target, is there more to go? I guess in particular, I'm thinking about what you can do on AI. I mean, we've had, again, from a region, if I take two banks, DBS has spoken about getting rid of a large number of its contingent staff. I think it's about 10% of its workforce. CIMB is talking about a 10% PPOP uplift from AI. What do you think you can achieve from AI?
I will refrain from putting a number on it for now, mostly because I think that 2025 is an important pivot point from inspiration to perspiration when it comes to AI, also for a lot of other things. I like using the perspiration concept in the management of the bank. In AI, it's going to be particularly visible. Why? Because like a lot of others, we started with 200-cent boxes. Let's try this in very many different ways. Let's spend very little money, but in very many different places and get to the right use cases, etc. We just had a big management team meeting in Hong Kong last week, literally.
We are clearly now moving into identifying what are the 5, 7, 10 important areas in which we are now going to concentrate investment, but also concentrate the scarce resources that one has that understand well AI, understand well the business, and even scarcer resources that straddle these two worlds, what one would call business translators, people who can actually look at a business problem, know what are the capabilities of AI, and think of a solution that actually works and is also cost-effective. That is where I think we are going to be moving. We already use it in very many different ways, Copilot, a large language model that we are training both with broad data and now increasingly with internal data.
Imagine the excitement from the point of view of finance, if nothing else, which is one of the areas in which we are very active in the deployment of artificial intelligence, of the idea of being able to ask questions and obtain results that are number-based, but also obtain narratives that tie a lot of different numbers together, which is one of the important roles that we do for the bank as a whole. Yes, excited, but focusing on investments, lots of perspiration this year. I think during the course of the year, we will get to a better vision of what this can really mean and whether Sam Altman at OpenAI is right in saying that if you're not getting 20% efficiencies, you have not started to use AI well.
Okay. Okay. Credit, I do not think that is something that is high up people's concerns at the moment, which is good news. I guess if you could talk about, I mean, at the moment, it feels like we are in one of those places where, with the exception maybe of Hong Kong CRE, there is not a huge amount that is actually on the radar. We have got a changing global dynamic. Where are you sort of looking at the moment and thinking, "Are the lights beginning to flash? What should I be focused on?
You're right that it's not something that is high on people's minds. I still sleep badly at night thinking through this because especially when you don't know exactly where it's going to come from, you'd sleep doubly badly. Right now, it's one of those cases, right? Do we think that we are going to go back to a more normalized credit environment? It has to be the case. It can't be that we continue to produce net releases in CIB for a lifelong period of time, right? I mean, credit cycles exist. Something will come out. Where will it come out is not so evident because the places of the past are either in the rearview mirror, China commercial real estate, or they are really not particularly looking particularly challenging, sovereign credit across emerging markets.
Even the places where there is some flashing, Hong Kong commercial real estate, are very limited. I mean, our exposure to Hong Kong commercial real estate is de minimis. It's $2.6 billion, less than 50 basis points of our overall exposures. It's 80% secured, less than 40% loan-to-value. It's almost all with the large Hongs and the large developers that we have been doing business with for 175 years. They are unlikely to take the keys of a building and give it to you when you're doing trade financing in Malaysia, you are doing jet fuel for the airline, and you're doing shipping all over the world. It remains a good environment.
What I think the reason why we are cautious and we sleep badly, but we are optimistic about our credit profile going forward is because we have really changed the nature of the bank over the years. If you look over 10 years, the percentage of our balance sheet that is investment-grade has gone from 40% 10 years ago to 75% today. The degree of concentration in our top 20 clients is at a minimal level in the grand scheme of things. We have really de-risked while still producing strong returns and good growth. We have really de-risked our balance sheet. Our wealth and retail business, although obviously in a higher rate environment, it has continued to show what I would consider relatively normal levels of impairment. Even that business, we are shifting increasingly toward wealth management for affluent.
Revenues from affluent represent 70% of our revenues in WRB, and they continue to increase. Over time, that business too is becoming a business of a different type of credit quality. Within all of it, the increased focus on financial institutions goes again in the same direction. Among the various many good qualities of financial institutions, lower risk-weighted asset absorption, higher cross-sell and velocity, the other nice characteristic is lower impairment. I think it is really the complexion of the bank that has changed that allows us to look at this optimistically.
Okay. Thank you. I'm going to stop there and ask if there's any questions from the audience. Is there anybody who has anything they'd like to ask? No? Maybe I'll go on with another one. You're approaching, well, you're making good progress towards your target of approaching 13% ROT guidance. We're in a very different position now in terms of perceptions of a bank from where we were even two or three years ago. Do you think you've earned the right to make bolt-on acquisitions at this stage? What are the areas where you're missing? Where would you look?
It is good that we are in a different place. It also means that life going forward is increasingly difficult because the speed at which one can improve and also the linearity at which one can improve changes. Our ambition is big. I mean, 13%, we are very clear that towards 13% in 2026 is just a staging post. We know that these franchises can produce better and better results if we continue to stick to our knitting, if we continue to stick to our areas of strength, and we double down in our investments in them. 13% will be a step in a direction. As we do that, if we look at our valuation, we still think we are deeply undervalued. We are.
We think that there is so much more to come that as we think about deploying capital, we make it very, very clear that the first and foremost thing that we do is we deploy capital towards achieving sustainably higher returns. Once we have done that, because we have strong engines of profitability, we can deploy capital towards returning capital to our shareholders in buybacks or dividends. We have done well. We are at $4.9 billion returns since the beginning of 2024. We have a target of over, underline the word over two or three times, as we always do, over $8 billion during the 2024-2026 period. That is how we think about it. Within all of that, will there be a time when acquisitions will have a role to play? Yeah, we believe strongly that they will.
It's just that the time is not yet now, but there will be a time. When that time comes, where will we go? We will go to the areas we will double down on areas of strength, fundamentally. We will double down on those areas in our wealth management, whether it is capabilities from a product point of view or from a geographical point of view that complement our wealth management push, particularly the part towards affluent. In the CIB, it might be a similar thing. Across our footprint, there are many assets that are relatively non-core for very large global institutions that instead fit very, very well with us and fit very, very well with what we are to our large corporate and financial institution customers.
We are the ones who do things in the regions where we are strong, in places where they do not want to have to deploy their own capital to do it. We are very happy to deploy our capital and offer those capabilities. That is probably where we would go searching for it. It is a bit early still.
Okay. That's pretty clear. If we just talk about Hong Kong, which I guess is your biggest market, and it's been a market that's been challenged for some time. What is your outlook there? I mean, are you seeing green shoots come through? How long does it take for loan growth really to pick up in Hong Kong? What is the view on what we're seeing there?
Yeah. As I mentioned briefly before, we were in Hong Kong for all of last week doing management meeting, but also meeting with tons of clients. We also had a very interesting meeting with all of our key partners and suppliers from all around the world that flew to Hong Kong to spend time with us and develop further partnerships and ways to accelerate our growth. It was a very interesting week. Within that, we spent a lot of time with local clients and with our people. What is very clear is that Hong Kong has been through a relatively difficult time, but it benefits from both the decisive actions of the monetary authority and of the executive in trying to stimulate the economy.
It also gets the reflected effect, the halo effect of what's happening on the other side of the border, where particularly this week, you have seen a pretty decisive now, the measure in and by themselves, all of those 30 measures that were announced on, what was it, February 16th, to foster consumer demand in China, each one of those is relatively inconsequential by itself. When you put them all together, they have a cumulative effect, and also they have a very important signaling effect that the desire of the leadership in China is to extend the help that was being offered to real estate, to the real estate industry, and to the manufacturing industry and the export sector, and extend it also towards consumers.
Hong Kong benefits from that because Hong Kong is an important trade union between China and the world, is the financial center through which China accesses the world very largely, and the local economy then benefits from the reflection of this. Where are the areas where this is particularly slow in taking effect? Things like offices. Office demand remains subdued, although the governor of the HKMA was pointing out that the trend in terms of attracting more multinational corporations and international firms to Hong Kong has swung to the positive during the course of last year, and that ought to help the market over time. That is a little bit how do we look at Hong Kong. Within that, by the way, in residential, if anything, we have restarted writing mortgages towards the end of last year.
It's more of a trickle as opposed to a flood, but we're back to a market share of origination that is more in line with what I consider a normal market share of origination, low double digits, 10% for us in mortgages in Hong Kong. We like it because we like those products for many different reasons, including the nice effect that it has on our net interest income and reducing its volatility.
Okay. Definitely. We've got a couple more minutes left, so just going to check if there's any last questions from the audience. No?
We're going to have a long afternoon of one-on-ones, so I'm sure there will be plenty of questions.
I'm sure you're going to have lots of questions to come through. Diego, thank you very much.
Thank you very much.
Thank you, Pritha.
Thank you for having us here. We love working with you on this.
You're welcome. Thank you very much.