Earnings Call: Q4 2011

Feb 29, 2012

Good morning, London. Good afternoon to those of you in Hong Kong and in Mumbai. I am delighted to report that 2011 was our ninth consecutive year of record income and profits. This performance once again shows that we are in the right markets, with the right strategy, and have the right leadership in place to deliver consistent value for our shareholders. Standard Chartered has continued to perform strongly with an 11% increase in profits. Despite our rights issue in 2010, we have delivered a return on equity of over 12% and we enter 2012 in great shape, poised for further growth with strong momentum in both of our businesses. In a moment, Richard will walk you through today's results in more detail, and then Peter will talk about where we see opportunities to grow the business in the next few years. First, there are a number of things I would like to highlight. As a board, we continue to keep shareholder interests top of mind when determining our strategy. In the last few years, we have grown our income, profits, and earnings per share, while simultaneously increasing our capital reserves and total dividends. Despite turbulence in the global markets and the increased cost of regulation, we have continued to generate considerable value for our shareholders year-on-year. This year, we are again increasing the total amount of dividend paid to shareholders. The board is recommending a final dividend of $0.5125 per share, bringing the total annual dividend to $0.76 per share, which is up 10%. I am quite sure that there will be some of you at least here today who will be interested in our approach to remuneration. Put simply, our approach to remuneration has not changed. We continue to reward our people for sustained high performance, and we do not reward failure or short-term risk-taking. Despite considerable growth in profits, the bonus pool has been kept flat, and the amount we are paying out in bonuses is less than we are paying out to our shareholders by way of a dividend. Let me also comment on the contribution we have made more broadly to society and the communities we serve. In the five years since 2006, we have increased our total lending by more than 90%, with mortgage lending up 40% and SME lending up 70%. We now employ nearly 87,000 people. It is worth noting that in achieving this, we have not taken a penny in direct government support anywhere in the group. In summary, 2011 was another year of strong performance for Standard Chartered, and the board remains confident for the year ahead. Despite continued global uncertainty and despite the ever-changing regulatory environment, the bank is in great shape and we have again demonstrated the continued success of our strategy, our diverse footprint, our unique culture and values, and most especially, the quality of our people. Let me now ask Richard to take you through the numbers. Richard. Thank you, John. Good morning, London, and good afternoon to Hong Kong and Mumbai. What I will be presenting to you today is another very good set of results, and we have delivered this despite the challenges in the external operating environment. As you listen to this presentation, there are a number of recurring themes. Firstly, continued top-line growth and good momentum in both businesses. Secondly, the diversity of our performance, be it by geography, by product, or client segment, giving the group real resilience. Thirdly, our conservative operating model, demonstrated by our capital, liquidity, and funding strength, allowing us to remain open for business through our customers and our clients. Let me draw out several key highlights. This is the ninth consecutive year of record income and profit, with income over $17.6 billion and profit of almost $6.8 billion. We have delivered double-digit income growth up 10%, including double-digit growth in consumer banking income and in wholesale banking client income. Expenses are also up 10%, despite the impact of the U.K. bank levy and a materially higher take-up on the early retirement program, or ERP, in Korea than we had expected. Our strong cost control has allowed us to continue to invest in both businesses. We delivered neutral cost income jaws for 2011 on a reported basis. Excluding the impact of the U.K. bank levy, jaws were 2% positive, and excluding the ERP as well, jaws were 4% positive. Double-digit growth in both pre and post-impairment profit, up 10% and 11% respectively. Our balance sheet is in excellent shape, with an advances-to-deposits ratio of 76.4% and a liquid assets ratio of 27.5%. Continued capital strength with Core Tier 1 at 11.8% and total capital at 17.6%. This is an excellent all-round performance, demonstrating the resilience of our business model and strategy. Over the past nine years, income has grown at a compound annual growth rate of 16% and profit at 21%. Our balance sheet strength and the consistency of our performance have been recognized by the rating agencies. We are the only major international bank to have been upgraded by all three rating agencies since the start of the financial crisis, and most recently by Standard & Poor's in December 2011. When considering the 2011 performance, there are a number of areas where the final outcome is different from guidance given at the time of the pre-close in December. Firstly, we had a very strong December, with wholesale banking performing particularly well and across all businesses, despite difficult market conditions, thereby enabling the Group to deliver double-digit income growth. Secondly, the take-up of the ERP in Korea was far stronger than we had expected. We had signaled the likely cost to be some mid to high tens of millions of dollars, whereas the final cost was $206 million, primarily in consumer banking, some $150 million higher than we had expected. As well as being a non-recurring item, it is anticipated that this will deliver ongoing savings of some $95 million per annum, and therefore a $300 million positive delta to expenses in 2012. Thirdly, the U.K. bank levy has settled at $165 million versus the $185 million guided. Fourthly, the loan impairment for the year is up 3%, as opposed to our expectation of being below the level seen in 2010, and I'll go into this in more detail later. The effective tax rate was lower at 27.2%, reflecting both changes in profit mix and increased utilization of foreign tax credits relating to branch profits. Looking at the final performance for 2011. Income has grown 10% year-on-year. Net interest income is up 20%, reflecting continued growth in customer loans and customer deposits, up 9% and 11% respectively, and also an increase in our liability margins. Non-interest income is down 1%. Within this, consumer banking non-interest income was up 8%, driven by strong performances in wealth management and SME. Wholesale banking non-interest income was down 5%, with the increase in transaction banking insufficient to offset a decline in corporate finance and financial markets. We have maintained a firm grip on expenses, up 10%, while continuing to invest in both businesses to build the income engines of tomorrow. Loan impairment was up 3%, reflecting our diversified portfolio, the economic performance of the markets we serve, our disciplined approach to risk management, and in consumer banking, the benefit attaching to the sale of a number of loan portfolios. Other impairment is higher at $111 million compared to $76 million, predominantly due to higher charges against Indian exposures taken in the first half. Operating profit of $6.775 billion is up 11%. Underpinning this strong performance is the diversity of our business. Next slide. The diversity of the Group, whether by geography or by product, is something we have consciously built out over the past decade or so. This diversity gives us real resilience and underpins the Group's ability to continue to grow even when some geographies have a difficult year. Our largest market, Hong Kong, contributed just 17% of the Group's income in 2011, even after an exceptionally strong performance. A number of geographies delivered a strong performance in 2011, particularly markets where we prioritized investment in 2010 with Hong Kong, Singapore, China, Malaysia, and Indonesia, prime examples. This has allowed the Group to deliver record levels of income in a year when one of our largest geographies, India, saw income fall by 11%. You can see on this slide a number of product areas and capabilities that we have invested in over recent years, such as corporate finance, commodities, and within transaction banking and foreign exchange, the renminbi capabilities that have added diversity to the product mix. Looking at performance metrics. This slide shows the key performance metrics, both on a reported basis, which includes the U.K. bank levy and also excluding the levy. Excluding the impact of the levy, profit was up 13%. Normalized EPS was up 4% to 205 cents, in part reflecting the full dilutive impact of the rights issue completed in November 2010. The current level of return on equity is impacted by the levels of capital the Group is now carrying to meet the emerging regulatory requirements and the continuing drag of a low interest rate environment on a deposit-rich bank. Return on equity was 12.2% on a reported basis and 12.6%, excluding the impact of the levy. Turning to the balance sheet. The balance sheet remains conservative, well-diversified, highly liquid, and strongly capitalized, a source of real competitive advantage. We remain open for business and in growth mode. The Group remains primarily deposit funded, with total deposits up 12% year-on-year and 31% over the last two years, despite increasing levels of competition for liquidity across a number of our markets. Our advances to deposits ratio and liquid asset ratio both remain strong. Our AD ratio was 76.4%, and our liquid asset ratio increased to 27.5%. We continue to be a significant net lender to the interbank market, and we have some $165 billion of liquid assets. We also have minimal refinancing requirements over the next few years, only some $4 billion through to the end of 2013, and both our wholesale banking and consumer banking businesses are self-funded. In terms of Basel III, we already meet the minimum requirement of 100% for both the net stable funding ratio and the liquidity coverage ratio well ahead of the required implementation date. Turning to assets. Our customer loans and advances, which grew 9% in 2011, continue to be well diversified by geography and by sector. Hong Kong remains our largest geography. However, this represents only 19% of customer loans and advances. We have a continuing bias to secured lending in consumer banking, with 83% of the book being either fully or partially secured. We have low loan-to-value ratios on our mortgage book with an average of 49%. We have a short maturity profile on our wholesale banking loan book, with 64% of the book under one year in tenor reflecting the trade bias of our business. We have no direct sovereign exposure to Greece, Ireland, Italy, Portugal, or Spain. Our total direct exposure to entities domiciled in these countries remains low at around 0.5% of total assets. We have been actively managing our European exposures for the last two years. Moving on to capital. The group continues to maintain a very strong capital position with a Core Tier 1 ratio of 11.8%. We have generated $4.7 billion of profit attributable to ordinary shareholders. We continue to grow risk-weighted assets in both businesses, with wholesale banking up 12% and consumer banking up 7%. The majority of growth in risk-weighted assets has been driven by credit risk. In addition, market risk risk-weighted assets was up 35%, or some $6 billion, reflecting in the main the introduction of Basel 2.5. Tier 1 is at 13.7%, and total capital is at 17.6%. We remain extremely well capitalized and are generating good levels of organic equity. Throughout 2011, we have had good support from capital markets, raising almost $5 billion of lower Tier 2 and senior funding. This support has continued into 2012, evidenced in January by two successful transactions in the senior unsecured and lower Tier 2 capital space. Both were heavily oversubscribed, reflecting the strong demand in the market for our name. Looking now at performance by business and consumer banking. The consumer banking business had a strong year in 2011, with record income up 12% to almost $6.8 billion. The business has benefited from selective growth in unsecured assets, improving deposit margins, and the impact of the investments made in 2010. Asset margins in the second half were up on the first half by a couple of basis points, generating positive momentum into 2012. Within this performance, we have seen good double-digit income growth across all of our high-value segments with private banking up 21%, SME up 14%, and priority banking up 10%. Expenses increased 10%, resulting in positive jaws, which were around 1% as we maintain tight control on business as usual costs. We have continued to standardize processes and improve cost efficiency to increase our investment capacity. In 2011, we have continued to invest in our consumer banking franchise with headcount up by over 1,200 staff focused on China, Singapore, Hong Kong, and Africa. Within this total, frontline headcount was up nearly 1,000. We added 35 new branches in 2011, including 19 in China. In addition, we have refreshed or replaced more than 400 ATMs. We have enhanced our mobile and internet banking capabilities and increased marketing spend year-on-year by some tens of millions of dollars. You can see from the slide that expenses in the second half increased 18%, or $387 million, over the first half, reflecting firstly, the non-recurrence of recoveries made against structured note provisions in the first half of $86 million. Secondly, a charge of $189 million relating to the consumer banking share of the ERP charge in Korea. Thirdly, increased investment spend in the second half by some tens of millions of dollars. The consumer banking loan impairment charge has decreased by 9% to $524 million, but increased in the second half of the year, and I will go into this in more detail later. As a result, consumer banking profit is up an excellent 26% to $1.65 billion. Turning to products. Mortgage income was down 2%, with margin compression of some 30 basis points and a 2% fall in balances, primarily in Korea. Margins in our key markets were impacted by competition, regulation, and the increased cost of liquidity. Market shares remain strong in our key mortgage geographies, albeit we have given up some share as we have priced the book up across a number of markets, including Hong Kong, Korea, China, and India. We've seen good growth in deposits despite increased competition for liabilities across some of our key markets, such as Hong Kong, Singapore, India, and Taiwan. Deposit income is up 17% year-on-year, benefiting from a 6% increase in balances and an improvement in margins of some seven basis points. Wealth management delivered double-digit income growth year-on-year, with income up 12%. In the second half, wealth management income has shown good resilience but was down 6% on the first half, impacted by weaker investor sentiment given the slowing global economy and market volatility. The outlook for wealth management remains very much influenced by any resolution to the European debt crisis. Moving to the next slide. Income in credit cards and personal loans, or CCPL, shows excellent momentum, up 18% year-on-year. Balances increased 17% over 2010, driven by selective asset growth in markets such as Hong Kong, Singapore, Malaysia, and Korea. We continue to gain market share. SME income is up 14% year-on-year, driven mainly by cash management and foreign exchange. We have delivered 30% higher income per customer managed by a relationship manager across our top eight markets. The SME book remains deposit-led, is predominantly secured, and we continue to maintain a strong vigilance on the credit quality of our loan book, and we focus on building multi-product relationships. Moving to impairment. Loan impairment is down, both in terms of dollars and basis points of loss. Overall, consumer banking loan impairment was $524 million, 9% down on 2010. Loan impairment increased by some $102 million, half-on-half, reflecting four factors: The underlying growth of our book, mix change, a small portfolio impairment charge in the second half as opposed to a release in the first half, and a lower level of sales of written-down portfolios in the second half. Looking by product, you will see that loan loss rates are down across all product categories. Included within other loans are CCPL balances of $19.1 billion, up 17% or $2.8 billion year-on-year. The improvement in loss rates resulted mainly from improved portfolio performance in India and in the U.A.E., continued investment in collections infrastructure, and the benefit from sales of written-down portfolios. We remain comfortable with our overall exposures and continue proactively to manage our book. However, in 2012, we expect loan impairment to increase, reflecting the size and the mix of the loan book, as well as some lower levels of sales of written-down portfolios. To summarize for consumer banking overall, this is a strong set of results with good double-digit income growth. We have maintained a tight grip on expenses but have continued to invest in order to underpin future income momentum. Wholesale banking. Wholesale banking has delivered another strong performance in 2011, with income up 9% and client income up 10%, the ninth consecutive year of double-digit client income growth. Own account income was up 2% on 2010 levels. We continue to focus on deepening client relationships, with client income contributing 82% of total wholesale banking income. In 2011, 48% of wholesale banking client income was generated offshore, up from 41% in 2010, and demonstrating the importance of the network and the increasing interconnectivity of our markets. Total wholesale banking income in the second half was broadly flat on the first half, reflecting the resilience of the business model, even in a challenging period. We have seen a number of repricing opportunities across our footprint in 2011, partially reflecting our dollar liquidity strength, but also some withdrawal of European competitors. For example, we have repriced corporate loans in Hong Kong, and there is evidence of repricing in debt capital markets across our core footprint. Cash margins have improved year-on-year, and trade margins, although down on 2010, increased marginally in the second half of the year. Expenses rose 6% in 2011, but were broadly flat half and half. We've maintained a tight control on costs, despite an acceleration of investment spend in the second half of the year. Investment in 2011 was mainly focused on technology and infrastructure, such as continued investment in our transaction banking platforms. Wholesale banking headcount increased by some 600 staff during the year, with new investment headcount mainly in operations to support volume growth. Loan impairment in 2011 was up 26% and other impairment was up 55%, and I'll go into more detail on this later. Profit before tax increased 9% to reach a record $5.2 billion. This strong performance was delivered despite a challenging market environment, with high levels of uncertainty and volatility, driven principally by the Eurozone crisis. Looking at income in more detail. Income remains well diversified, with double-digit growth in the three largest businesses, transaction banking, financial markets, and corporate finance. Commercial banking, by which I mean trade, cash management, lending, and the associated foreign exchange, remains core to our clients' day-to-day business needs and is at the heart of our wholesale banking business, contributing 55% of client income. Lending income fell 3% to $841 million, with margin compression more than offsetting an increase in average balances of 15%. In trade, income was up 9%, driven by 25% growth in average assets and contingents, as we continue to take market share. Trade margins fell 14 basis points year-on-year, but showed a slight increase in the second half, benefiting from repricing across a number of our markets. Cash management income saw excellent growth of 27% over 2010, underpinned both by strong growth in average balances, up 25%, and an improvement in cash margins of 11 basis points. Global markets income increased 7%, with financial markets the largest component, contributing 55% of total global markets income. I will go into more detail on financial markets on the next slide. ALM income of $921 million was up 1% with income in the second half up 14% on the first half, driven in particular by good income in China and in Korea. Corporate finance income was up 10% after a very strong finish to 2011. The 2011 corporate finance story is one of diversity and sustainability of income. We closed 15% more transactions with a greater number of small to mid-size deals across multiple geographies, and over 50% of income is net interest income. Principal finance income was down 34% with the business impacted by difficult market conditions, which limited exit opportunities and put pressure on valuations. We continue to invest in this business, which has a good pipeline and strong returns. Financial markets. Our financial markets business benefited from good volume growth as a result of its strong link to our transaction banking product set, giving it resilience despite difficult market conditions. Foreign exchange income was up 20%, driven by a 14% increase in flow foreign exchange volumes and strong growth in our options business. Foreign exchange income has benefited from good growth in our transaction banking business and also from the internationalization of the renminbi. The rates business was up 7%, impacted by the benign interest rate environment and margin pressure from local bank competition. Commodities and equities grew strongly, with income up 47%. Commodities performed particularly well, reflecting increased product capability, as well as our ability to assist our clients in managing volatility in commodity prices. Commodity volumes continue to grow strongly. Capital markets income increased 1%. The business continues to win strategic transactions and ranks highly in the league tables. Credit income was down 33%, with transaction volumes impacted by difficult market conditions. Moving to loan impairment. Wholesale banking loan impairment was $384 million, up 26% on 2010, with the vast majority of this loan impairment charge relating to increased provisioning on previously impaired accounts. Other impairment has increased from $64 million to $99 million, predominantly because of higher charges against Indian exposures taken in the first half of the year. Early alerts have increased, mainly due to accounts affected by ongoing investigations in India. We continue to monitor the situation, but do not expect to see material impairment resulting from these early alert accounts. Gross non-performing loans in wholesale banking have decreased 11% since December 2010, mainly in the MESA region. Credit quality across the wholesale banking book remains strong. We remain watchful, but are not currently seeing any signs of stress. We continue to be disciplined and proactive in our approach to risk management. Our wholesale banking loan book is conservative, diverse, and predominantly short-dated. To summarize, wholesale banking has delivered another good set of results with record levels of client income. There is currently good underlying business momentum building off the back of a strong close to 2011. Turning to geographic performance. Peter will talk to you in more detail about Greater China, India, Singapore, and Korea. However, let me highlight some of the other geographies. Within other APR, which grew income 12%, China, Indonesia, and Malaysia all delivered double-digit growth. MESA income increased 2%, in part impacted by the geopolitical events within the region. Within this, the UAE, which represents over 50% of MESA income, grew by 4%, and both Pakistan and Bangladesh grew income at a double-digit rate. Africa's income growth of 8% was driven mainly by wholesale banking, which contributes over two-thirds of total income. Wholesale banking client income grew 10%, with both transaction banking and financial markets performing very well in 2011, offsetting a decline in corporate finance. Consumer banking income grew 11% with good growth in credit cards and personal loans, as well as wealth management. The Americas, U.K., and Europe region continues to originate and support our clients' cross-border business within our footprint of Asia, Africa, and the Middle East. In 2011, income increased 16% and profit by 58%, with strong performances in cash management, ALM, and commodities. Turning then to outlook. We have started 2012 strongly, off the back of a very strong finish to 2011. Looking at January and our momentum into February, consumer banking has had a good start with income ahead of the comparable period last year. Wholesale banking has had a strong start with income well ahead. Expenses are under tight control across the bank and credit quality remains good. We continue to take a conservative approach to managing the balance sheet, maintaining a strong liquidity position, and keeping a watchful eye on asset quality, given the uncertainties in the external environment. We will maintain a tight grip on expenses whilst continuing to invest in growth. As you have come to expect, we will manage cost growth in line with income growth, so neutral jaws. However, when thinking about our performance in 2012, it is important to bear in mind a number of factors. First of all, the material and increasing drag on both income and costs from an ever more complex set of regulatory requirements. Secondly, the continued strength of the U.S. dollar against Asian currencies. Thirdly, we are not immune to potential turbulence in the global economy, whether arising from the Eurozone or elsewhere. We have started the year with very good momentum, an exceptionally strong balance sheet, and a full transaction pipeline. We remain focused on the fundamentals of our business and on the disciplined execution of our strategy. We are well-positioned in some of the most exciting growth markets in the world, and we are well-placed to make the most of the opportunities they present. Thank you, and now I will hand over to Peter. Thank you, Richard. Good morning to all of you, and good afternoon to those of you in Hong Kong and India. As John and Richard have said, these results represent our ninth consecutive year of record income and profits. We are superbly placed in some of the world's fastest-growing markets. We have the right strategy, a distinctive culture and values, a strong brand. We are focused on delivering for our shareholders, supporting our clients and customers, and making a positive impact on the communities in which we live and work. You shouldn't let the consistency of our performance mask the underlying achievement. Every year brings new challenges, and 2011 was no exception. Two of our largest markets saw sharp falls in profits. Some of our business streams, particularly in wholesale banking, faced very difficult conditions. The increasing burden of regulation and the U.K. bank levy created significant headwinds. Yet our 2011 performance demonstrates once again the power of our strategy and the resilience of our business model. The crisis that began in 2007 and brought markets to a halt in the autumn of 2008 continues to unfold. The roots of the crisis are now laid bare. Too much debt, too little growth, an erosion of competitiveness, and massive macro imbalances. Restoring the vitality of the world's most developed economies is an enormous endeavor with profound social and economic consequences. Working through these problems will be painful and will take time. Governments are struggling to control borrowing without undermining growth and employment. Regulators are wrestling with how to make the banking system safer without triggering too much deleveraging. Central bankers are pumping money in, but in doing so, risk laying the seeds for the next crisis. Ugly tones of protectionism and populism are being heard everywhere. Amidst all this, two facts are clear. One is that we are witnessing a profound shift in economic power and dynamism from the developed world to the emerging giants of the developing world. The second is that banks need to get out of the box of being part of the problem and get into the mode of being part of the solution. The crisis has undoubtedly accelerated the fundamental shifts in the world economy. Whilst not immune to the problems of the West, countries like China, India, Brazil, and Indonesia continue to grow at pace, building industries and infrastructure, turning hundreds of millions of people into consumers. The clouds over the West should not obscure the sheer scale of wealth creation and social progress in the developing world. Of course, such growth brings challenges: inflation, friction over resources, social inequality, environmental degradation. Moreover, the lack of consumption growth in the West undermines the export-driven model that has powered most Asian economies. But whilst we shouldn't underestimate such challenges, neither should we underestimate Asian countries' ability to respond. Intra-regional trade and investment is growing extremely rapidly. Domestic consumption is growing fast. Policy makers in Asia, and particularly in China, have much more monetary, regulatory, and fiscal flexibility than their counterparts in the West. Taken as a whole, emerging Asia should continue to grow at mid to high single-digit rates, slower than before the crisis, but still much faster than the West. This sharp polarization in economic performance and prospects is one reason different banks are in such different positions. Some banks have little choice but to deleverage, downsize, return, and retreat. Others, like us, have the liquidity, capital, and business model to turn the turbulence to our advantage. All of us face the challenge of the ongoing avalanche of regulation. None of us can be complacent about the continuing fragility of the system. We are supportive of Basel III, yet we worry about the increasing profusion of national or regional variations. This is creating incredible complexity, huge costs, and a multitude of unintended consequences, not least the fragmentation of the global financial system and the emergence of new forms of financial protectionism. We also worry about the extent to which the regulatory agenda is driven through the rear view mirror. All the attention has been on avoiding another Lehman's or RBS. Very little of the Basel III agenda is relevant to the Eurozone crisis. Even less has been done that might protect us from the longer-term consequences of QE, the LTRO, the extraordinary expansion of the role of central banks. At Standard Chartered, our approach to all of this is straightforward. Stand above the fray. Stick to our strategy and proven business model. Focus on our clients and customers. Keep a tight grip on the basic disciplines of good banking. It is easier to say than it is to execute. Whilst we are rarely the specific target of regulatory changes, they do affect us. They do erode our economics. Regulatory drag was a headwind in 2011 and will be again in 2012. Yet for all the negatives, regulatory drag, slowing growth in Asia, the risk of political and economic stress in the Eurozone, the Middle East, or elsewhere, we remain confident about our ability to grow and perform. Even as economic growth in our market slows to more sustainable levels, we can win more market share. Our capital and funding strength allows us to be open for business while others are pulling down the shutters. We are taking share in core products like trade finance with volume growth of 25%. We see huge opportunities in our core markets of Asia, Africa, and the Middle East, both within the individual markets and in facilitating the explosive growth of trade and investment flows within the emerging world. We also see huge opportunities in being the bridge for trade and investment between Europe and the Americas, and Asia, Africa, and the Middle East. Whether it is helping Unilever or Diageo make the most of the opportunities in Asia, or Tata invest in Jaguar Land Rover in the U.K., or Volkswagen, Tesco, Caterpillar issue RMB bonds. It is by doing exactly this kind of thing, lending to clients, facilitating their trade, helping them manage FX and commodity price risk, identifying and supporting new partnerships and investments, helping them to access capital markets, that we are fulfilling our social purpose. Helping drive economic growth, helping create jobs. At Standard Chartered, we have never lost sight of the role we play, of the impact we can have on the broader economy. In the five years since 2006, we have increased our lending by 91%, from large multinationals to SMEs, from credit cards to mortgages. Our profits have increased by 113% in the same period. Despite all that is changing around us, don't expect big changes in strategy. We still want to be the world's best international bank, leading the way in Asia, Africa, and the Middle East. We build deep, longstanding relationships with our clients and customers. We are focused on organic growth, investing at pace in both our businesses. We are obsessed with the basics of banking, being strongly capitalized and highly liquid, managing risk proactively, keeping tight control of costs, staying well diversified. Underpinning our strategy is a distinctive culture and set of values. Standard Chartered is here for good. Here for good in the sense of commitment and permanence. Here for good in the sense of always seeking to do the right thing. But whilst the fundamentals of our strategy won't change, we will be constantly anticipating and adapting to the opportunities and challenges we see. Regulatory change will force us to do some things differently and will change the economics of some of our businesses. Our mindset is as much about how we turn such changes to our advantage as it is about mitigating the impact. So far, I've talked big picture stuff, the macro environment, regulation, our strategy. Now I want to change gear and talk about some specific markets. Rather than start with the success stories, let me start with some of the places in which we faced challenges. Korea. As you know, we've not been satisfied with our performance in Korea. The cost-income ratio has been too high and the return on capital too low. The core issue was labor productivity. We couldn't reward strong performance nor deal with poor performance. Pay was driven more by seniority than merit. Sustained efforts to get the union to agree to a more flexible approach had failed, so in 2011, we took a more direct approach. This sparked a strike, which lasted 10 weeks and then collapsed. We stayed open throughout the strike, testament to the professionalism and commitment to our customers of many of our staff. While it had some impact on income momentum of the order of $50 million, overall income remained resilient, and customer deposits grew during 2011. In December, we launched an early retirement program. This had a big impact on Korea's profits in 2011, but it was undoubtedly the right thing to do. This program will deliver annualized savings of $95 million, and coupled with the enhancement of performance management, will enable a big shift in the culture, making Korea much more like the rest of the bank. To further underscore our commitment to Korea, in January, we rebranded the bank, dropping the SC First Bank name that harked back to the acquisition of Korea First Bank and replacing it with Standard Chartered. Korea is now a seamless part of Standard Chartered as a whole. There's still lots to do before we really have Korea performing the way we want, given the scale of the opportunities in the market, but we have taken significant steps in the right direction. We've just begun the new lunar year. It's the year of the black dragon, auspicious for change and prosperity. So with a more productive platform, a business with momentum, and a dragon in our favor, we enter 2012 with confidence. India was the second of our big markets to see a decline in profits in 2011. However, unlike in Korea, this followed a spectacular year. As you will recall, in 2010, India was our most profitable market. That 2011 proved challenging didn't surprise us at all. To tackle inflation, the Reserve Bank of India hiked interest rates 13 times in two years. This had a predictable impact on economic growth, down from 8.5% in 2010 to 7% in 2011, and on business confidence. In addition, a combination of protracted political and corporate governance issues further sapped business confidence, resulting in many investment projects being delayed or canceled. Whilst this correction was very real, and the slowdown in regulatory reforms and vital infrastructure projects will have lasting consequences, we remain confident about the longer-term growth prospects of India. The underlying drivers of growth, urbanization, demographics, better education, and an extraordinarily dynamic and entrepreneurial business culture remain robust. Indeed, there are already some signs that the climate is changing. Clear signals of an end to the rate cycle, some steps on critical reforms, progress on transparency issues. Moreover, looking only at the onshore income understates the strength of our India franchise. Whilst onshore wholesale banking income fell by 14%, income from Indian clients elsewhere in the network more than doubled, largely offsetting this decline as we leverage our network to support our Indian clients' international objectives. Our enthusiasm for India as a market remains undiminished. We continue to invest at pace in people, products, technology, and branches. We remain convinced that India will become one of the world's largest economies and is one of our biggest growth opportunities. These two markets had a tough 2011, but I'm confident both will resume their growth path in 2012. The fact that we could be hit by declines in profits in two of our biggest markets, but still deliver double-digit growth in profits and income, demonstrates, once again, the resilience of our model, the advantages of having multiple and diverse engines of growth. Whilst India and Korea faltered, other markets surged. For example, Greater China. Taken together, Hong Kong, Taiwan, and mainland China delivered income of $4.4 billion and profits of $2.1 billion, up 18% and 46% respectively. Greater China thus represents 25% of the group's total income and 31% of total profits. Hong Kong had an outstanding year, with income up 22% to over $3 billion and profits up 41% to over $1.5 billion, a record for any of our markets. In Taiwan, profits were up 44% to $342 million, helped in part by recoveries on structured notes. In mainland China, income increased by 17% to $825 million, while profits doubled to over $220 million. We're still making losses in consumer banking in mainland China, around $100 million in 2011, as we continue to invest in building the franchise. We opened another 19 branches and sub-branches in 2011, taking our total network to 81 across 21 cities. In wholesale banking, profits hit $278 million. Yet even this number massively understates the development of our China client franchise, since income from Chinese clients booked elsewhere in our network grew at over three times the pace of onshore client income. Our business in Greater China is increasingly focused as much on the flows between these markets as on the opportunities within them. As China's international financial center, Hong Kong is central to the internationalization of the renminbi. We have played a leading role in the explosive growth of offshore renminbi from the beginning. We conducted the first offshore trade settlement transaction in July 2009. We led the development of the dim sum bond market and priced and launched 56 such bond issues last year. Greater China isn't the only region in which we have seen strong performance in 2011. Across the ASEAN countries of Southeast Asia, we delivered income of $4.2 billion and profits of $1.9 billion, up 21% and 32% respectively. Singapore was the star performer, with income up 26% and profits up 40%. Singapore is now the third of our markets to have delivered more than a billion dollars of profit, following Hong Kong, which hit the mark for the first time in 2007, and India, which did so in 2009. In Singapore, we are reaping the benefits of sustained investment for growth, primarily organic, but complemented by select capability acquisitions. This is a market in which we have more than doubled income and profit since 2007. As you may have seen, we have today announced that we will subsidiarize our consumer and SME banking activities in Singapore. Our wholesale banking and private banking businesses in Singapore will remain within the branch. This decision reflects both our success and the growing scale and significance of the bank's consumer banking business in Singapore. We have, of course, taken this decision in consultation with the Monetary Authority of Singapore, and it is in line with their thinking. Subsidiarization of our consumer and SME businesses will have minimal impact on the group's capital or liquidity ratios and little or no impact on the vast majority of our customers. We see considerable opportunities for further growth in Singapore. In the consumer and SME segments, there are opportunities to continue to make market share gains, which we believe will be facilitated by moving to a locally incorporated structure. In private banking, we continue to capitalize on Singapore's strength as an international asset management and private banking center. In wholesale banking, we see significant opportunities stemming from Singapore's role as a hub for trade, for investment, for commodities. Elsewhere in ASEAN, our businesses have performed strongly. Thailand grew income by 16% and profits by 18%. Malaysia grew income by 11% and profits by 18%. Indonesia, including both Permata and our branch, grew income by 24% and profits by 44%. As in Greater China, we are leveraging our network strength to exploit the rapid growth of trade and investment between the countries of ASEAN and with the rest of the world. ASEAN has been somewhat overshadowed by Greater China. Yet with over 600 million people, aggregate GDP of $2.2 trillion, growing at 5.3% per year, it represents one of the most exciting parts of the world economy. The themes illustrated by Greater China and ASEAN, multiple engines of growth, opportunities in markets and between them, are not just true of Asia, but hold true across our franchise. Our Africa business continues to grow well, with income up 8% or 13% on a constant currency basis. Our Middle East franchise has proved resilient despite all the political turmoil in the region, with income up 2%. In our biggest market in the region, the UAE, we are seeing a return of confidence despite the debt overhang, with hotel bookings, airport arrivals, container traffic, all up strongly. Meanwhile, in Pakistan, income was up 13%, and in Bangladesh, 16%. In the West, i.e., Europe and the Americas, income was up 16% and profits by 58%. With Western banks in some disarray, with Western companies reaching out to the emerging world for growth, and with Asian companies investing in the West to acquire technology and brands, we are taking advantage of the opportunities to be a bridge between East and West. To give you a sense of our diversity, we now have 24 markets contributing over $100 million of income, up from 23 in 2010, and 19 in 2007. Delivering record income and profits in any year is always a good result. To do this every year for nine years, through a period of crisis and exceptional volatility, is testament to the dedication, discipline, and professionalism of the people of Standard Chartered. On behalf of the board, I would like to take this opportunity to thank them once again for their hard work in making this happen. We'd also like to take this opportunity to thank you, our investors, for your continued support, not least in giving us the capital required to absorb new regulation and sustain our growth. Our balance sheet strength remains a powerful source of competitive advantage. Amidst all this turmoil, we remain committed to our performance aspirations. Over the medium term and through the cycle, we expect to deliver double-digit income growth, double-digit EPS growth, cost growth in line with income, and mid-teens ROE. in 2011, we delivered on double-digit income growth and flat jaws, but it fell short on EPS and ROE as a result of the dilutive impact of the rights issue in late 2010. Looking at 2012, we have had a very good start, which puts us on track to deliver double-digit income, double-digit EPS, and flat jaws. It is very early days, and you don't need reminding that there are very considerable risks and uncertainties in the world economy, for example, in the Eurozone or the Middle East. ROE will likely still be somewhat under our aspiration, partly as a result of ongoing regulatory drag and the lag before this gets fully reflected in margins, and partly because of the impact of a low interest rate environment on a deposit-rich institution. Our markets are robust and resilient. We have the right strategy, and we're sticking to it. We have a powerful brand, a distinctive culture, and some fantastic people. Our client and customer franchise is stronger than it has ever been. 2012 will undoubtedly bring new and unexpected challenges. The global recovery is fragile. There are many risks and uncertainties. We expect volatility and turbulence. Yet, we enter the year in great shape. We're confident but not complacent, excited about the opportunities in our markets, but alert to the risks. Investing for growth, but keeping tight control on costs. Our businesses have good growth momentum and have begun the year well. We know what you expect from us. We know what we have to deliver. Thank you. John, Richard, and I will now take questions here in London. Jaspal, Ben, and Julian will take questions in Hong Kong, and Mike, Sunil, and Anurag will take questions in Mumbai. Thank you. Well done. Right. If you could just remember the usual protocol here, raise your hands if you want to ask a question. Wait for a mic to be brought to you, and if you could say your name and the institution you represent, that would be great. If we could start here on the left. Can we bring a mic here, and then we'll go over to the right. Morning. It's Ian Gordon from Investec. If I could have three, please. Firstly, on Hong Kong, I guess this was a standout performance as far as I could see, especially given the headwinds you flagged, the lower own account income, the asset spread pressures in consumer. I note the differentiation with your larger peer, the fact that you delivered double-digit loan growth in both businesses, even continuing in the second half, notwithstanding your limited appetite for mortgages. So I wonder if you could just provide a little bit of color about how that differentiation has been achieved and how sustainable it is. Secondly, wealth management. I thought the H2 performance was quite resilient given wider market issues. So within your outlook statements guidance, you talk about the consumer bank being ahead year-on-year. Can you comment on the wealth management contribution within that? In a similar vein, the third question, corporate finance was presumably a major contributor towards your strong Q4 finish in wholesale banking. Again, can you talk about the pipeline in that product line and how significant a contributor that was in terms of your very strong year-on-year improvement in wholesale banking in January and February? Thanks. Well, if I start by giving you a high-level response, then you can add some color, Richard. Yeah. You are right. The Hong Kong performance was extremely broad-based across both businesses, across multiple customer segments, and product lines. The one thing, though, I would highlight about it is that China made actually a significant contribution to Hong Kong's performance. A significant proportion of the offshore revenue of Chinese clients was Chinese clients doing things in Hong Kong, as you would expect, given Hong Kong's role as China's international financial center. On wealth management, yes, it had a resilient performance in the second half, and as you might imagine, the more buoyant mood of the markets is good for wealth management as we enter 2012. On corporate finance, you have taken a correct inference in that corporate finance income in the third quarter was slowed by the difficult conditions in the markets. It was quite difficult to get transactions complete. But in Q4, and particularly through into December, there was actually quite a lot of activity, and we have entered the year with a very, very good pipeline. Richard, do you want to add anything? If I take this in reverse and build that. To reinforce that, the transaction pipeline at the end of the year, in spite of a very good December, remained robust. That is evident from the fact that the first 2 months of the year have also been very good. The December performance for wholesale was, however, broader than corporate finance. We also saw very strong, continued performance across the transaction banking businesses. We also had a couple of realizations out of the principal finance business, which we had anticipated, but we are pleased to see arrive. Overall Q4 income, I think, in the wholesale bank, was up 9% on the third quarter, and 14% up on the previous fourth quarter. Our outlook, clearly, we are well ahead of the comparable first 2 months of the year, looking at our January, February picture for wholesale. On wealth management, I think I said in my script that we have a 12% income growth in wealth management. It is actually 6% down in the second half, so it did show some slowness, unsurprising given the volatility and pressures, particularly in equity markets. Wealth management is just under 20% of the consumer banking income. We have seen it pick up, so it is currently running in the first 2 months of the year at a better rate than it was in Q4. Again, probably of no surprise, there has been a slightly, I will call it, easier equity market or sense of confidence, and that is feeding through. So we have seen a pickup. On Hong Kong, just to add to Peter's point, when you look at the Hong Kong performance, frankly, it is a very strong performance all around. The rates of growth we are seeing, if I take wholesale, we are seeing 33% growth in cash management income, 23% growth in trade for financial markets. It was up 24% within that. Corporate finance actually doubled. So we had a very good corporate finance performance in Hong Kong. We have seen very good finish at the end of the year. We are still seeing second half momentum in loan growth in Hong Kong of about 7%, second half on first half. So if you annualize that, you get a sense for the underlying beat. So it is broad, it is diversified, and it has been a very good performance. Should we go here, and then Michael, I will come to you next, yeah. Yes, also really quick questions. First one- Sorry, can you give your name and institute? Sorry, Chris Wheeler from Mediobanca. Apologies. First of all, on Korea, obviously, the take up, the 207 versus the 50, was quite surprising, I guess. Can you just talk about what that means in terms of numbers of people? Yeah. And perhaps also talk about, does that mean those people are now gone, or do you now have to replace a number of those people, or how you are dealing with that? And perhaps around that whole subject, what your thoughts are on what the impact might be on revenue, or is it your view that having lost some revenues during the strike, we can look at it that any revenue attrition has already effectively been taken, if you want, in 2011? That is the first question. Second one, just on India, a very difficult question. Obviously, we have seen it up, which slowed in the second half. I wonder where you think we should be looking for the rest of the year. I think at your look down at Singapore, we talked about the elections next year as being an important factor, but the Uttar Pradesh elections this year may give you some indication where confidence may return. Just a little bit more thought there. Then finally, on the subsidiarization, is this all about you demonstrating to the Singaporean authorities that you are going to safeguard their consumer customers from any other problems around the group? Or is it something else that we might think about in terms of your relationship with Singapore? Thank you. Well, let me take the last one first. I would not get too excited about this. I think it is relatively straightforward what we are doing. It will take a bit of time to implement, because it is a very large business. And it has, as I said, minimal impact on the group. It is in line with the direction of thinking the MAS has about the domestic banking sector. But we also see it as advantageous in enabling us to be regarded more as a local institution for the purpose of SME and retail banking. On Korea, it is 848 or 850- 848 848- 13% people took up the early retirement program, and they have now left the bank. The amount of those jobs that will be replaced is very, very small indeed. So you can effectively assume that to all intents and purposes, that is a reduction from the bank and won't have any material revenue impact and will have a very significant cost impact. As we've said, it works out as about $95 million a year. The $50 million we mentioned in terms of lost momentum was more because the pace of taking on new business during the period of strike was slow. As you can imagine, we were running the network with a slimmed-down staff. It will take a bit of time to build back that momentum. But it was, as you say, it exceeded our expectations. We were delighted, frankly, with the result, because it's making really quite a significant step change in the cost base and productivity of Korea. But I would also say, we've still got lots to do to really get to where we want to get to in terms of Korea's performance. One other aspect of Korea's performance, which I didn't mention, but it's worth touching on, is that we're still seeing double-digit growth in the income from Korean clients elsewhere in the network. So we're continuing to get good traction working with the chaebol, the major Korean companies elsewhere. On India- 2012 prospects. 2012 prospects. We use the language of cautious optimism, which is a wonderfully hackneyed phrase, but comes in useful sometimes. I think the first quarter is going to continue to be somewhat slow. Until you have the U.P. elections, I think we'll still be in a bit of a sort of political hiatus. But, I have an increasing sense of optimism about getting through. Clearly, we're getting through the interest rate cycle. I think we are seeing more traction on some of the political and governance issues. I think that will be positive for the momentum of our business. We're certainly not anticipating the business going backwards in 2012. We are anticipating it going forwards, growing, and it's just a question of how much it grows. Did you want to add anything? I have nothing to add. Michael. The man with the beard. Yeah. Thank you. It is Michael Helsby from Merrill Lynch. I have got three questions as well. Firstly, on costs, clearly very strong performance to keep your underlying jaws at 4%. You have highlighted a $300 million cost swing in Korea from day one. I was just wondering, taking that into account and the very strong start you have had on income, should we be thinking about positive jaws again for 2012, or should we think that you would reinvest that $300 million in the rest of the franchise? That is number one. Question two is on Singapore. Clearly, an outsized performance there. I think the big driver was you kept costs flat in wholesale on the back of very strong revenues. You referenced big efficiency savings. I am very aware that you had spent a hell of a lot in 2010. Are there more efficiency savings to draw out in Singapore, or is it back to the flat jaws type outlook? Then just finally, a bit of a bigger picture question. I am fascinated by your comments about being a bridge to maybe the West in terms of driving revenues. I have always seen you more as a sort of local-to-local and intra-Asia, Africa, Middle East type franchise. How much of your revenues are coming from that sort of wider Western footprint, and what are you doing to invest in that and really help drive that share of business going forward? Okay. You are right to highlight the $300 million delta in cost relating to Korea, which is just the non-repetition of the $200 million for the ERP and the $95 million savings from the ERP. In terms of the impact on the group's jaws outlook, I think we would continue to say at this stage, we are very early in the year, that you should expect from us flat jaws. But the balance between whether we deliver as we did, actually an underlying picture, which is positive jaws, versus investment, will depend very much on how we see the world economy and the environments in our markets unfold. I do not know if you want to pick up on the Singapore? Yeah, on the Singapore cost, I think it was a very good performance. Some efficiencies, and it was particularly also the delta between 2010 and 2011 in rate of investment. We also actually saw some ability to provide costs out to other parts of the areas for resources located in Singapore, so a buildup of teams. So SCCG, Strategic Client Coverage Group, more sort of attribution of their costs into deals done outside Singapore. Going forward this year, I would anticipate a much closer relationship again between costs and income actually. On your question about Europe and the Americas and the role we play as a bridge. Richard Holmes here is the CEO for Europe, and so he would be very pleased to hear you ask this question because I think he, like his counterpart in America, thinks that their contribution to what we do probably does not get enough attention, and I think it is right. Europe and the Americas generates $1.8 billion of income. You should assume that the lion's share of that is actually what we are talking about. It is about doing things for big Western companies, typically, in our network, or it is about doing things for big Asian companies who want to do stuff in the West. And we have benefited from both phases of the crisis. In the earlier phase of the crisis, we won a lot of market share from particularly North American clients who were somewhat disenchanted with some of the banks they had been working with. In this more recent phase of the crisis, the opportunity is more in Europe. And you have got to remember that China's largest trading partners in the world remain Europe first and the U.S. second. What are we doing to exploit this opportunity? A whole range of different things. But I would highlight two countries where we have deliberately put extra focus. One is Germany, where we have very selectively, and not getting carried away, but we are selectively increasing our resource commitment to Germany as Europe's biggest trading partner with Asia, and we do see an opportunity to do more with German clients. The other one, and where we've been investing to grow, is Brazil, given the very rapid growth and particularly commodity-driven flows between Brazil and Asia. I'd reinforce the point that we stick very tightly to our strategy. We do not end up doing domestic business anywhere in the Americas or Europe. We are very much focused on this role of being a bridge. More questions. Should we go just beyond you, given that the mic is just there? I can't actually see who it is. I'm not tall enough. Thanks. Oh, hi. It's Rohit Chandrarajan at Barcap. Three seems to be the order of the day, so if I could have the same, please. Firstly, just on volumes, the U.S. dollar loan volumes look to be half, at flat half on half. A quick calculation, constant currency is perhaps up 5% with most geographies pretty much in line with the momentum seen in the first half of the year. The only exception looking to be Korea, where there seems to be about a 5% outflow in the mortgage book. Good. First question, wondering if you could comment on that at all. Sure. Secondly, just in terms of revenue outlook for 2012, two of your biggest geographies, Hong Kong and Singapore, you highlight a forecast, a marked slowdown in economic growth. Just wondering about the impact there on revenue performance for those two geographies. Then finally, just on the regulatory headwinds that you have outlined, just wondered if you could quantify your expected impact on income and costs. Thanks. Do you want to take the first one? Yeah. Actually, you have done the analysis for me, actually. So if you take the half two and half one loan growth, it looks flat. It is actually running at 5% up on a constant currency basis. Within that, the four main markets that are impacted are Singapore, 16% drag, Korea, 7% drag, Africa as a whole, 6%, and Singapore 4%. But the net for the group is a constant currency beat of 5% underlying loan growth. On Korea, again, it is a 5% fall in assets. You are quite right. Against what a headline looks like, 12% fall, which hence the 7%. If you exclude Korea, then the underlying beat in loans is about six and a quarter, 6.3%. So if you annualize that, you are getting the type of underlying loan growth, dollar growth that we are seeing. The non-dollar, interestingly, partly goes to your Hong Kong point, which people probably pick up. Just the underlying loan growth we have in Hong Kong in the second half is 7%, which is headline 7% constant currency. On your point about outlook in Hong Kong and Singapore, you are right that the expectations for economic growth in both markets is somewhat slower. We are not going to be totally immune to that. However, there are opportunities in both markets to win market share. We have had a good start in both markets. Whilst I am not at all complacent, the first couple of months in both Singapore and Hong Kong are good, and we have very broad-based momentum in both places. Yes. In terms of the regulatory headwinds, this is a difficult one because the regulations keep changing. The maths of it keep getting more complicated. The things that might be worth highlighting, I think, would be, and it is very difficult to put a number to them. Of course, the liquidity rules are coming ever more in place, and that has a degree of income drag as we have more and more liquidity buffers. We will have a little bit more impact on the UK bank levy because of the rate, as it was announced, I think, in November, being increased, but it is irritating, but not huge, the increment. The more complicated thing to get a handle on is when you look at the blizzard of all the other stuff around PALAC, resolution and recovery, and all that sort of stuff, there is potentially quite significant costs being built up in those, but there is still a lot of uncertainty as to how it is all going to get implemented. I do not know anyone. If we try to simplify it, I think we would say you can see well north of $500 million of cost annually from U.K. super-equivalence, excluding the impact of PALAC, were that ever to apply to Standard Chartered. Yeah. That's not an incremental '12 on '11, but that's, crudely speaking, you can easily see the cost of being in the U.K. as being of that sort of order of magnitude. I'm tempted to say roughly where I am and then come forward because it's just easier in terms of moving. That's Tom, isn't it? Yes, thanks very much. It's Tom Rayner from Exane BNP Paribas. I just wanted to stay on the issue, partly the regulatory drag. Because I think it's fairly clear where you see your P&L going, your revenue trends, and everything. But clearly the returns at the moment are depressed, and I would suggest maybe the biggest item is the surplus capital that you appear to be carrying, and the RWA growth, I think, was 10% last year. I'm just trying to get a sense of how important is this repricing story. It sounds as if you're going to try and reprice to improve the margins to some extent, but you can't be sure the regulatory issues go away or that the low interest rate environment goes away. I'm trying to get an understanding of how you think you will move from the current levels of return towards your desired mid-teens over the next, say, 2 years or 3 years. Yeah, and actually, on reflection, I'd probably make it three things that drive the delta between where we are and where we would like to be. The two I mentioned were, when does the full cost of regulation get reflected through in the pricing to customers? And the second one being the cyclical one about a low interest rate environment and its impact on a deposit-rich institution. The third one, which I didn't mention, is actually this year, in 2011, the balance of non-interest income versus interest income skewed away from non-interest income. And clearly non-interest income is very advantageous when you're thinking in terms of ROE. And that's probably, of the three, the one that is most in our control. Because while we can certainly do some repricing, and we have been doing some repricing, to some extent it's a market phenomenon. I think realistically, it will take some time for market participants to adjust to the realities of the new regulatory frameworks. It's not just the cost of capital that's holding incremental capital that's relatively easy to do the maths on. I think where it will take a bit more time is for people to really factor in the cost of the new liquidity regulations and what they mean for longer tenor assets. In terms of the interest rate cycle, well, Gerard, our Chief Economist, is in the front, and he will probably have a better answer than me. We are not counting on that in terms of dollars moving terribly fast. I think we will see local currency interest rates moving more rapidly than dollars, and that will have some benefit, but we would get much more benefit when dollars begin to move. It's easy to see what has to happen to get us to our mid-teens. It's quite difficult to predict exactly when that happens because not all, in fact, most of the variables are not entirely under our control. Just on RWA growth, I think last time you indicated 13%-14% per annum was a reasonable expectation. Yeah, I still think we will be looking at double digit, we are at 12%, 13%. The 13%-14% RWA growth is the maths we do when we say what returns can we generate at a particular rate of growth. So you can grow at 13%-14% risk-weighted asset growth, produce really at the low end of mid-teens, so 14% return. You can do that at capital levels, Core Tier 1 capital levels in the high tens. We are clearly standing at least 100 basis points ahead of that at the moment. So that's where that comes from. But I think it would be right to think of low double-digit risk-weighted asset growth going forward. Can I be cheeky, just because I've got the mic, just one last supplementary. Everyone's had three, so I can have two. The wholesale bank, the performance clearly has been good, but it's, I think, 70% of the profits. Excuse me. Excuse me. 70% of group profits, and I think on my quick and dirty maths, it's still making a better return than your consumer bank. I just wonder if we look forward, what you think the more normal sort of mix of ROE between those two divisions might be. We don't believe there is a sort of perfect, it would be great if the world was 50/50, because we don't think it works like that. As long as we are growing and creating shareholder value through both our businesses. I think it's also important to emphasize how much we run Standard Chartered as one bank. So we're very deliberately thinking about the shape of the balance sheet and the way one business helps another. Not just on the balance sheet, it's about customer referrals, it's about products, sharing of infrastructure, and so on. The other point I would make about consumer bank is it is deliberately, as a matter of strategy and execution, bearing two very significant costs in its P&L in 2011. One is obviously Korea, where we wanted to take a big hit on the ERP to improve productivity. The other that's a very significant drag on consumer banking, but we have no doubt is the right thing to be doing, is that we are losing about $100 million in mainland China from continuing to invest in rapid expansion. I think if you actually look at the returns of some of our mature businesses, but still growing businesses in consumer banking such as Hong Kong or Singapore, these are very attractive businesses. But you've got to get to a reasonable scale. Thank you very much. Can we come forward then to whichever reaches first a cluster of people. I am conscious it's 11:00, which I think we were originally scheduled. We're happy to run for another 10 minutes if people are. But if they have to ask three questions, could they ask three questions quite succinctly? I'll ask two. Chintan, do you want to That's an improvement. Two. If I think about your margins running into 2012, you're highlighting asset margin improvements. Against that, you have a liability margin. Sorry, I said it the opposite way. Yeah. Asset margin compression and Yeah liability margin improvement. If I think about 2012, you have a monetary policy loosening. That should be a headwind. How should I think about those moving parts running into 2012? If you could elaborate by geographies as well. Second, on China, your larger U.K. peer has indicated aspirations to grow inorganically there. Would you have similar aspirations? Well, this is a new strategy, which is ask only two questions, but make the first one of them incredibly broad. I mean, The overall group answer on margins, you have heard me say it a number of times before, is I think you should expect an outlook that is broadly stable from a group perspective. With lots of moving parts, I think. With lots of moving parts. If you looked at what happened in 2011, you got a 30 basis point compression on mortgages. You got over 100 basis points compression on credit cards. However, personal loans were getting better margins by some 29 basis points. Liability margins, both sides, both consumer bank and wholesale, were moving up, so 72 to 79 basis points for the consumer banks, so 10% up. The wholesale bank was 79 to 90 basis points in terms of overall cash management margins. So again, very good picture. Trade, I indicated in my script, I think, that whilst it was compressed down by 13 basis points or so, 13, 14 basis points, it was actually stable in the second half and the first half bounced slightly up, which gives you a clue, I think, for next year. I think the overall dynamic within the business, whether it is by geography or different product sets moving, will in the end turn out, as I say, at a broadly stable outturn. So I would be plotting that. Secondly, I think given time, if you want to go to particular geographies, Chintan will do that with pleasure. On China, you should expect us to continue to invest and grow our business. Frankly, it is going to be mainly organic investment, not least for the fact that the regulations as they stand at the moment do not actually allow you to acquire. But we will continue to invest. We have very big ambitions for China. Do you want to- Manas, yeah. Thanks. It is Manas Costello from Autonomous. I will have two succinct questions, please. Could you give us a bit of color on the pickup in other consumer impairment in the second half and how we should think about that going into 2012 as that loan book seasons? Secondly, you talked about the wholesale bank under one year lending being 64%. That has actually come down a bit since the half year and the full year. Are you taking share of some longer tenor business, and is this something we should expect to continue in wholesale? I think you can take both. That is fine. Yeah. Thank you very much. On the consumer impairment, absolutely. You saw 17% Please be succinct. It's the- All right. Yeah shift in under one year maturity WB loans. We were seeing- On the diversification slide, you saw some of the capabilities we are building out. I think that of itself would lend itself to a slight shift year on year, in the medium term, so in the 1-5 year tenor bucket. Step back, 64% are under one year, predominantly under 6 months as trade. I have got some appetite yet for that 64% to edge down year on year. I do not know what it would have been 4 years ago or 5 years ago. I cannot remember what the proportion was. I would guess still it was in the 60s at that point, so it is edging down. It is not fundamentally going to change. Robert. Robert Lauren, Nomura. I have just got one, if that is all right. I promise to keep it succinct. I was just asked, going back to the headwinds issue, or, sorry, the operating leverage jaws issue that you highlighted. Going into this year, you have had, I think, something like about a $200 million headwinds. You have made flat jaws. It looks like you are going to have at least a $200 million tailwind this time going into 2012. On the revenue side, you have highlighted how the non-interest income has been weaker. I guess I am looking for what is going to get tougher this year for you to only have flat jaws. So where are you going to be seeing negative leverage this time around? Are you just giving yourself a lower hurdle to jump through in 2012? You should take that, Peter. If I might add to that, India and Korea look like they are going to be tailwinds rather than headwinds, too. Let me start. India and Korea, we do expect them to resume growth in 2012. I cannot argue with your maths. Do not underestimate the flow-through drag of things like the LCR coming in as a negative on income, and do not underestimate the cumulative impact of a profusion of things relating to all sorts of different aspects of regulation on costs. A disconcertingly large portion of our forward-looking investment budget is doing things which are basically to meet various new regulatory demands of one sort or another. There will be costs associated with things like the subsidiarization, just the task of subsidiarizing Singapore. We are deliberately taking a fairly conservative stance. We started the year well. We are pacing investment very carefully. We think there is considerable uncertainty in the world, although our markets are clearly in better shape than most other parts of the world. I do not know whether you wanted to. If I could. I think that, just on the three items alone that Peter talked about, you could expect higher liquidity costs in year 2012 over 2011 from the liquid asset buffer, eligible assets definitions to drag us by over $100 million incrementally. You would have about a $20 million-$30 million estimated cost of the subsidiarization program in Singapore, and the levy would be a round number increase of, say, $40 million. The actual move up in the rates charged by the chancellor is already a 13% year-on-year delta before the balance sheet growth. You get to those, and you start to see some of the other. They are some of the more visible ones. I am conscious that we have overrun, so maybe we can make the next question the last question. There was somebody who has been quite patient over here. I cannot see who it is. Thanks very much. It is Jason Napier from Deutsche. Two, I promise, quick ones. In the third quarter, it is my recollection that you mentioned FICC revenues were up 18% sequentially, and now fourth quarter revenues are up 9% in total in WB sequentially. I just wonder whether there is some seasonality or mix difference in either the second or the third quarters that are not obvious at first blush. The second one was just on tax rate, given the foreign branch exemption you have taken, deferred tax changes, and the like. What are you thinking budget-wise for 2012 on tax? Can I apologize and duck the first? I really can't, top of my head, think of a particularly dynamic in Q2, Q3 FICC revenues that informs me for your Q4, so I apologize on that. On tax, I think, we would estimate 27%-28%, probably towards 27%, but 27%-28% would be a good rate at this stage to put into models. Clearly, it's highly dependent on profit mix. Thank you. Thank you very much. I'm sorry we've overrun a little bit. John, I'm conscious that none of the questions came your way. Did you have any? I'm very grateful for that. Final piece? Thank you very much for that. I am going to be very brief. What are the messages that we want to deliver today to shareholders? Standard Chartered should be viewed by shareholders as a growth story, and this is the ninth consecutive year of record profits, record growth. I think it is just another chapter in that story. Clearly, we are very pleased with the results today. It is a very broadly based, diverse performance, both in consumer bank and wholesale bank, and many of our markets have performed very well. The important message is, well, thank you very much for what you achieved last year, but shareholders want us to not get complacent, but certainly have confidence in the future. We have talked about the start we have made to the year. There is good momentum in the business. Peter, again, in the Q&A, alluded to some of the challenges that we face. Nonetheless, we have a strong management team. We have a clear strategy, almost a boring strategy, because it does not change very much. My goodness me, it is very effective. Those, I think, Peter, are the key messages I would deliver to shareholders. Just to say thank you to everybody for coming to today's presentation. Thanks, all. Thanks very much. Thank you.