Earnings Call: Q4 2012

Mar 5, 2013

Good morning, London. Good afternoon to those of you in Hong Kong and in Mumbai. I am pleased to report that 2012 was our 10th consecutive year of income and profit growth. Throughout a turbulent decade for the world economy and for banking, we have continued to deliver consistent value for our shareholders. Standard Chartered remains a growth story, with a modest increase in profits in 2012 and a normalized return on equity of 12.8%. Clearly, the settlements reached with the DFS and other U.S. authorities had an impact on our profits. Despite this, we are increasing the total amount of dividend paid to shareholders. The board is recommending a final dividend of 56.77 cents per share. This brings the total annual dividend to 84 cents per share, which is up 10.5%, in line with our long track record of performance. We are entering the new year with strong momentum in both of our businesses. In a moment, Richard will take you through our results in more detail, and Peter will talk about our strategy and opportunities we see for growth. First, there are a few things I would like to highlight. Over the last decade, Standard Chartered has delivered consistently, not just for shareholders, but for the communities in which we operate. We have tripled the number of people we employ to over 89,000. We have paid in excess of $11 billion in corporate tax, and we have increased our lending to clients and customers around five-fold to $289 billion. Importantly, we have achieved this by sticking to our strategy, focusing on the basics of good banking in markets we know well, with clients and customers with whom we have deep, and in many cases, long relationships. As 2012 showed, there is still work to be done to rebuild public trust in banks. There will therefore be some interest today, I am sure, in how we reward our management and staff. We have not changed our approach. We continue to remunerate our people not just for what they achieve, but how they demonstrate our values, rewarding long-term performance, not failure. Reflecting the group's overall performance in 2012 and the impact of the U.S. settlements, our bonus pool is down by some 7%. Once again, the amount paid in bonuses is less than the amount paid to our shareholders by way of a dividend. It is less than the corporate taxation and well under half of the retained earnings. We know that we will be held to our brand promise, Here for Good, and we continue to work hard to embed this commitment in everything we do, taking a long-term view of our obligations to shareholders, to clients and customers, and the communities in which we operate. 2012, in summary, was another good year of performance, thanks to a consistent strategy, a stable management team, supportive clients and customers and shareholders, and above all, our great people. The board remains confident for the year ahead. Let me now ask Richard to walk you through the numbers in more detail. Richard. Thank you, John. Good morning, London, and good afternoon, Hong Kong and Mumbai. What I will be presenting to you today is another strong set of results where we have delivered our 10th consecutive year of income and profit growth before and after the settlement costs with the U.S. authorities. Our underlying performance has been driven by good levels of client and customer activity, leading to double-digit income growth in markets such as Hong Kong, China, Africa, Indonesia, Malaysia, the Americas, U.K. and Europe region, as well as in a number of our smaller, fast-growing markets. The business closed 2012 strongly, in particular in wholesale banking, where December was the third highest client income month ever, with key contributions from trade and corporate finance. Our footprint markets continue to grow at superior rates to those of the West, and the GDP outlook for many of our markets is improving as we enter 2013. Business momentum has continued into this year with a strong January across the group. There are three broad themes in my presentation today. Firstly, continued income growth from a diverse business. Secondly, strong cost and risk control, and an emphasis on allocating scarce resources to higher returning businesses. Finally, a continued focus on the basics of banking, maintaining our liquidity, funding, and capital strength. Let me draw out several key highlights. We have delivered a strong underlying performance against our four key financial objectives, as group income increased 8% in the year or at a double-digit rate on a constant currency basis. Normalized earnings per share increased 14% year on year. Cost income jaws were negative 2% in 2012. However, excluding the normalization items, group jaws are strongly positive at 5%. Normalized return on equity improved 60 basis points to 12.8%, in line with our objective of increasing returns to our mid-teens target. Our balance sheet is in excellent shape. We are highly liquid, diversified, and we enjoy continued capital strength with Core Tier 1 at 11.7%. Let me take you through the numbers in a little more detail. As guided, income has grown 8% on a reported basis or 10% on a constant currency basis, with the Indian rupee alone accounting for over half of this headwind. Net interest income is up 8%, reflecting continued growth in customer loans and customer deposits, and broadly stable net interest margins. Non-interest income also grew 8%, which included a one-off gain on a property sale in Korea, and also income from a liability management exercise. We maintained a firm grip on expenses, up 10%, absorbing the impact of the $667 million settlement with the U.S. authorities, a legacy commercial legal provision of some $90 million as previously guided, and the U.K. bank levy, which increased from $165 million in 2011 to $174 million in 2012. Excluding these items and other one-offs in 2011, costs grew just 2%. Through active management of our cost base, we have created room for investment in both businesses. We have grown group headcount by around 2,200 staff, we have stepped up investment in systems, and continue to expand our distribution network and reach. Loan impairment is up 34%, representing 43 basis points of group customer loans and advances, with the consumer banking charge increasing in line with expectations, and we have seen some localized signs of pressure. In wholesale banking, loan impairment remains a function of a small number of provisions arising from idiosyncratic rather than broader macro concerns. Other impairment increased $83 million to $194 million on valuation provisions made against a small number of principal finance investments, and the impairment of strategic investments in associates during the period. The U.K. bank levy came in at $174 million, some $25 million lower than forecast, on improved counterparty netting across geographies. Turning to performance metrics. Earnings in the period have been normalized for several items, with the largest being the settlement with the U.S. authorities. Additionally, income of $90 million from the repurchase of subordinated liabilities and a $70 million charge relating to the impairment of associates have been normalized. Normalized EPS therefore grew 14% to 225.2 cents, with a normalized return on equity of 12.8%, up 60 basis points from the prior year, representing good and steady progress towards the mid-teens objective. Next slide. The 2012 performance clearly demonstrates the resilience and diversity of our franchise. When some of our businesses grow at a slower rate, other engines accelerate to compensate. Offsetting slower income growth in Singapore and MESA, 25 countries grew income at double-digit rates, and both China and wholesale banking in Africa reached the $1 billion income threshold. Looking through a product lens, there are also multiple growth engines, with trade, corporate finance, deposits, and credit cards and personal loans all growing income at double-digit rates. Moving to the next slide. A strong balance sheet is a competitive advantage, and our strategy has yielded a highly diverse balance sheet with no material geographic or industry concentrations. Our mantra of fund before we lend has resulted in strong liquidity positions at both the group and in each of our markets. We also seek to make optimal use of our capital resources. We have sought to allocate capital better, for example, through rigor in tail management and also through relationship up-tiering exercises, as well as by prioritizing investment and in allocating RWA capacity with an ever-stronger focus on returns. Turning to the balance sheet in more detail. Total deposits are up by $36 billion, or 9% on 2011, and are at record levels after strong growth in the second half. Our advances to deposits ratio is 74.1%, and our liquid asset ratio is 30.4%, with almost therefore a third of group assets in cash or near cash. We remain a customer deposit-funded bank and have seen good double-digit customer deposit growth in the Americas, U.K., and Europe region, in Singapore, and in Hong Kong. We already more than meet the minimum Basel III requirements for both the net stable funding ratio and the liquidity coverage ratio. Applying the liquidity requirements announced by the Financial Stability Board in January, we estimate that our LCR will be significantly in excess of 100%. If the U.K. authorities were to converge on the Basel III liquidity regime, significant trapped liquidity could be released and injected back into the real economy, supporting much-needed economic growth. Turning to assets. We continue to see good levels of customer activity, with loans and advances to customers up 6%, driven primarily by growth of balances in trade and in corporate finance, and in mortgages in the second half of the year. In terms of asset profile, we have a continuing bias to secured lending in consumer banking, with 82% of the book being either fully or partially secured, and therefore, only 18% is unsecured. In mortgages, we have an average loan-to-value ratio of 48%, and we have a short maturity profile on our wholesale banking loan book, with 62% under one year in tenor, reflecting the trade bias of our business. In summary, we finished the year with our balance sheet in robust shape. Moving to capital. Throughout 2012, we enjoyed strong support from capital markets, raising $3.25 billion of Tier 2 capital. In January 2013, we also issued a total of $2.75 billion of Tier 2 subordinated debt, including $750 million with a 30-year tenor in response to strong reverse inquiries and good appetite for our name. The group continues to maintain an excellent capital position. The group's Core Tier 1 ratio is 11.7%. This is just ahead of the half-year 2012 position, even after deducting the cost of the settlement with the U.S. authorities. Tier 1 capital stands at 13.4%, and total capital is 17.4%. Including the Tier 2 issuances in January of this year, total capital now stands at 18.4%, a very strong level. Group risk-weighted assets grew 12%, or $31 billion, to $302 billion, with wholesale banking growing at 11% and consumer banking at 12%. In summary, the business generated approaching $5 billion of post-tax profits, sufficient to maintain the dividend growth, underpin 2012 capital ratios, and generate sufficient organic equity to support the 12% risk-weighted asset growth. We still expect the fully phased Basel III impact on Core Tier 1 to be around 100 basis points. The main component of this movement is CVA, where we would hope for some change in the regulatory calculations to a more coherent basis. There is increasing debate about risk-weighted assets. Whilst the industry could clearly do more to standardize some definitions, many of the differences arise from regulatory adjustments. These appear to be increasing and wholly separate from the requirements of Basel III. In 2012, $7.3 billion, or 23% of the group's risk-weighted asset growth, was due to regulators imposing model changes. A major component of this growth was a change by the FSA in the loss given default levels applied to unsecured sovereign exposures. Looking now at performance by business, and firstly, consumer banking. Consumer banking income of $7.2 billion is up 6%, or 8% on a constant currency basis. While Hong Kong and Singapore have consolidated their gains from 2011, growing income at 6% and 5% respectively, emerging markets such as Africa, China, and Indonesia have grown at double-digit rates, increasing the diversity of income sources. Expenses have been tightly managed, up 3%, resulting in positive headline jaws of 3%. However, as you may remember, in 2011, consumer banking benefited from the recoveries made against structured note provisions of $96 million, and also incurred a charge of $189 million relating to the early retirement program in Korea. Net of these one-offs, consumer banking expenses are up 5% and broadly in line with income growth. The control of costs has created investment capacity, which was deployed in an increase in head count, increased marketing spend, continued investment in the Breeze mobile platform, now in seven markets, and in adding 69 branches, including 27 in Africa and 19 in China. Finally, the consumer banking loan impairment charge increased 33%, and I will address this in more detail in a later slide. As a result, consumer banking profit is up 8% to $1.78 billion. However, on an underlying basis, operating profit is down 1%. Turning to products. Mortgage income was down 6%, with margin compression of some 12 basis points, primarily in Hong Kong, Korea, Malaysia, and Singapore. Mortgage income across our markets was impacted by a mixture of regulatory measures designed to cool underlying markets. In the second half, we have seen improved momentum with income growth of 12%. Deposit income is up 11% year-on-year, benefiting from an improvement in margins of some six basis points and an 11% increase in balances. While wealth management income is flat year-on-year, strong double-digit growth in insurance and fixed income products helped offset the drop in more volatile equity-linked products. Income in credit cards and personal loans shows strong momentum, up 12% year-on-year, with double-digit income growth in Hong Kong, Malaysia, Singapore, UAE, and Korea. Balances increased 17% over 2011, more than offsetting margin compression of some 12 basis points. We have enjoyed steady market share gains in both credit cards and personal loans. Thinking about segments, SME income is up 5% year-on-year, and private banking income grew 12%, having added approximately 4,000 new client accounts and over $6 billion of new client AUM. Moving to impairment. Loan impairment is up 33% to $697 million. The increase reflects portfolio growth, gradual mix change, and some seasoning. Additionally, there are some areas of localized pressure, such as in Korea, where we have seen an increase in filings under the Personal Debt Rehabilitation scheme, or PDRS, and we expect this trend to continue, if not actually accelerate, in 2013. Loan loss rates and forward-looking indicators have increased slightly in unsecured products, while in mortgages they remain at very low levels. In 2012, loan impairment benefited by some $80 million from sales of previously written-down portfolios, in line with 2011. We anticipate some debt sales in 2013, albeit not at the same levels as in 2012. To summarize for consumer banking overall, the business delivered a resilient performance, maintaining a tight grip on expenses, and has created capacity to invest to underpin future income. Furthermore, consumer banking has started 2013 strongly, benefiting in particular from continuing wealth management momentum. Turning to wholesale banking. The wholesale banking business has delivered a strong performance in 2012, with income up 9% and client income, which represents 81% of total wholesale banking income, up 8%. This year represents the tenth consecutive year of income growth. Our client-focused strategy resulted in income growth across all client segments, with double-digit growth in local corporates, in commodity traders, and in financial institutions. The local corporate segment now represents nearly a third of client income. Additionally, as we told you last year, we've increased our focus on the next 600 clients, growing income here 12% to reach almost $2.5 billion. Over 50% of wholesale banking client income was generated outside of the home country of our clients, showing the importance of our international network. You can see this in particular in the excellent growth in the Americas, U.K., and Europe region. Expenses rose 17% year-on-year on a headline basis. Excluding the settlements with the U.S. authorities and a legacy commercial legal provision, expenses were up only 2% year-on-year. On a half-on-half basis, expenses fell 3%, given reduced variable compensation. Tight business-as-usual cost control means that we have continued to be able to invest in a number of infrastructure platforms, in trade, in cash management, and in foreign exchange. Loan impairment in 2012 was up 36%, representing 34 basis points of wholesale banking customer loans and advances. Other impairment was up 21%. I will go into this in more detail later. Profit before tax decreased 2% to $5.1 billion, although excluding the settlements with the U.S. authorities, profit rose 11%, so an excellent underlying performance. Looking at income in more detail. Income remains well-diversified, with double-digit growth in transaction banking and in corporate finance, more than offsetting a flat performance in financial markets. Trade income saw excellent growth of 22% year-on-year to almost $2 billion, driven by 10% growth in average assets and contingents and a net interest margin increase of 12 basis points. In the second half, high levels of liquidity in markets such as Hong Kong, China, and Singapore have caused net interest margins overall to fall 12 basis points, offsetting balance growth of 4%. Cash management income was up 5% over 2011, with a 9% growth in average balances. We saw cash margins tighten by eight basis points in the second half on account of excess liquidity in many of our markets. Global markets income increased 7%, with financial markets contributing 51%, and I will go into more detail on financial markets on the next slide. ALM income of $849 million was down 8%, with income in the second half down 27%, given the costs of meeting the regulatory liquid asset buffer requirements. Corporate finance delivered strong income growth of 19% year-on-year from 18% more transactions. Over 60% of corporate finance income is now annuity income. Principal finance delivered income of $483 million, up 75% year-on-year, and we also made $1.2 billion of new investments in the period. Financial markets. Our financial markets business delivered a broadly flat performance against a backdrop of regulatory tightening, low volatility, and market volumes. Income in the second half was lower given seasonality and some further tightening of spreads. We continue to be client-focused and build our flow business with client income contributing over three-quarters of financial markets income. Foreign exchange income was down 11% year-on-year, with a decline in flow and options business, primarily on account of tightening spreads. However, the rates business was up 8%. Overall, our capital markets business grew by 8% in 2012, and within this, the debt capital markets business delivered excellent growth at 46%, offsetting a weaker performance in syndications, down 7%. Finally, credit delivered income up 44%, underpinned by our strong and improved credit rating, and therefore increased client flows. Moving to loan impairment. Wholesale banking loan impairment was $524 million at 34 basis points of loans and advances to customers. The majority of the 36% increase relates to provisions made on a very small number of exposures in India and the U.A.E. We are seeing no stresses across our portfolio. Other impairment increased by 21% to $121 million, predominantly due to valuation impairment taken on a small number of principal finance investments. Gross non-performing loans in wholesale banking are $4.3 billion. This is before provisioning and collateral. Two-thirds of these non-performing loans relate to a small number of exposures in the MESA and India regions, and we are very comfortable that this is not indicative of any wider risk issue. Looking at the wholesale banking book, credit quality across the wholesale banking book remains good. We remain watchful, but are not currently seeing any new areas of stress. Looking at the overall risk profile of the wholesale banking book, it continues to be well diversified by geography. 62% of the book is less than 12 months in tenor, reflecting the continued trade bias of the portfolio. We have no direct sovereign exposure to Greece, Ireland, Italy, Portugal or Spain. The commercial real estate book of $11.6 billion has an average loan to value of 41%, and the business continues to distribute assets. Primary distribution increased by 35% year-on-year on good levels of appetite, and secondary distribution remains strong at similar levels to 2011. To summarize, Wholesale Banking has delivered another very good set of results, driven by the diversity of the business and a disciplined execution of its strategy. The business has also had a strong start in 2013, particularly in client income, which has performed well and is ahead of the same period last year. Own account income, however, is down, reflecting lower ALM income. The current pipeline and performance in corporate finance and also in debt capital markets remains very strong. The growth in client income is underpinned by strong underlying transaction volumes and market share gains, albeit margins remain under some pressure arising from the strong liquidity conditions evident in many of our markets. Turning to geographic performance, Peter will talk to you in more detail about key markets in Greater China, ASEAN, and India. Let me highlight the key features for some other geographies. Korea. At the headline level, Korea shows income growth of 8% and profit growth of around 200%. The headline numbers, however, are flattered by one-off items in both 2011 and 2012. In 2012, income benefited from $74 million from a property sale, while expenses in 2011 included $206 million of early retirement plan costs. Excluding these items, income in Korea, benefiting from some private equity gains, is up 3% and costs, reflecting headcount efficiencies, reduced by 4%, resulting in an underlying operating profit growth of 16%. In consumer banking, underlying income is broadly flat, with good growth in credit cards and personal loans offsetting a double-digit decline in mortgages. Consumer banking loan impairment increased 34% due to industry-wide increases in PDRS filings, as mentioned earlier. Wholesale banking in Korea remains subdued. However, income arising from Korean clients in the network continues to increase at a double-digit rate. The outlook for Korea is likely to remain challenged, with profits further reducing in 2013 from the underlying 2012 levels. Africa. Africa's broad-based income is up 15%, or 20% on a constant currency basis, with double-digit growth in 10 markets, including Kenya up 34%, South Africa up 28%, Ghana up 20%, Zambia up 19%, Uganda up 16%, and Nigeria up 13%. Both of the businesses grew at double-digit rates, with eight markets contributing over $100 million in income, including three generating over $200 million. Wholesale Banking income grew 15% and is well diversified across products, client groups, and countries. The consumer banking business remains an unsecured SME and deposit-led business with a particularly strong performance in deposits in the year. Finally, the Americas, U.K., and Europe. The region delivered an excellent performance with income up 30% to $2.3 billion. Excluding income of $90 million arising from a debt buyback, income grew 24%. The region is now one of the largest contributors to Group Wholesale Banking income, as increasingly the business acts as a bridge for clients to and from Asia, Africa, and the Middle East. Wholesale Banking represents around 90% of the region's income, with especially strong performances in transaction banking, in corporate finance, and in financial markets, all growing income at double-digit rates. Transaction banking grew 16% to $726 million as we supported global supply chains and provided US dollar and euro clearing facilities to clients around our network. We have continued to invest across the region, adding relationship managers, especially in Europe, and we recently made an acquisition in Turkey. Turning to outlook. Looking at January and our momentum through February, the group has started well. Consumer banking income is well ahead of the comparable period last year. Wholesale Banking continues to build on very good levels of client activity and very strong volumes seen across our markets. But margins are under pressure, at least in the near term, reflecting high levels of liquidity. We continue to have a firm grip on the levers of risk, cost, and investment, and we remain open for business, increasing the financing support to our clients and customers. We continue to take a conservative approach to managing the balance sheet, maintaining a strong liquidity position, and keeping a watchful eye on asset quality, given the uncertainties that remain in the external environment. We remain focused on consistent delivery against the framework of our four financial objectives, double-digit income growth, neutral jaws, double-digit growth in earnings per share, and mid-teens return on equity in the medium term. We have started the year with very good momentum and an exceptionally strong balance sheet. We are well-positioned in some of the most dynamic growth markets in the world, and we are well-placed to make the most of the opportunities they present. We continue to take market share, we continue to grow, and we remain both confident and also committed to consistent financial delivery. Thank you. I will now hand over to Peter. Thank you, Richard. Good morning, and good afternoon to those of you in Hong Kong and India. In many ways, 2012 was a milestone for the bank, our 10th year of unbroken growth in income, profits, and dividends. The 10th year since we created Wholesale Banking under Mike Rees. The 10th year since we launched our values. As it happens, it is 10 years since Richard and I joined the bank. The bank has changed enormously over the last decade. It is easy to underestimate how much, since it has happened primarily through continuous rapid evolution, through organic growth, rather than through big steps like major acquisitions. Over the last decade, the Group's income has grown by a CAGR of 15% and pre-tax profits of 18%. We are a good example of the magic of compounding. Grow at this kind of pace for 10 years, and you end up in a very different place than you started off. Take Nigeria. In 2003, our business in Nigeria produced $21 million of income. This year, it produced $258 million, a twelvefold increase. In mainland China, we produced $44 million of income in 2003. We had 14 branches and 409 staff. In 2012, we generated $1 billion in mainland China, plus over $700 million in network income. We now have over 8,500 staff and 100 branches across 25 cities. Or Indonesia. Income there grew almost seven times from $119 million to $813 million. But it is not just a story of small growth markets getting bigger. In 2003, Hong Kong generated 29% of the bank's income, a shade under $1.4 billion. While Hong Kong's income has now more than doubled to $3.3 billion, it now accounts for just 18% of the bank's income. Illustrating not just the pace of our growth, but also its diversity. As John has mentioned, over the last 10 years, the bank has paid around $12 billion in dividends and around $11 billion in tax, and increased lending to customers and clients by nearly 400%. Our history shapes the way we think about the future. A primary emphasis on organic growth in big markets as well as small, investing with a long-term perspective, building diverse income streams. Of course, it gets harder to deliver the same rates of growth as we get bigger. It does not come smoothly. Every year brings new challenges. 2012 was no exception. Most obvious was the resolution of the issues around our past compliance with U.S. sanctions. The USD 667 million settlement dented our profit growth. It also damaged our reputation. We further suffered significant headwinds from a multitude of regulatory changes, most notably the income drag from the liquid asset buffer and the increase in the UK bank levy. The macroeconomic environment, which for us is normally a tailwind, given the markets we are in, also proved quite challenging in 2012. Economic growth slowed in most of our markets, reflecting the global slowdown. Local currencies fell against the dollar. Some of our individual markets were particularly challenged. India was a good example. GDP growth slowed sharply from an average of 7.9% over the previous five years to 5.2%. The rupee fell 15% year-on-year. Business momentum plummeted as political deadlock and governance scandals rocked confidence. As a result, our India business slowed, with income falling 12%, while we also saw some step-up in impairments. Profits fell 16%. Yet network income grew over 30% as we do more and more in support of India's leading companies as they invest and grow overseas. Our overall income from our Indian franchise was more resilient, falling only 4%. Moreover, the mood in India has changed noticeably since last summer. The economic reform agenda looks back on track, and business and investor activity has undoubtedly picked up. We have a great business in India, which I am confident will be a huge part of our future growth story. Given the headwinds we faced in 2012, it's no surprise that both income and profit growth for the bank as a whole were somewhat slower. But we showed once again that we can be very disciplined in costs without compromising investment, and the underlying momentum of the bank's businesses remain robust. How are we looking at the world now? There's no doubt that sentiment has improved. Maybe this is because the tail risk events of a Eurozone collapse or of the U.S. falling off a fiscal cliff now look more remote. Maybe it's because, as someone at Davos put it, we're all fed up with being fed up. But there is undoubtedly more momentum in markets and more confidence in businesses. This has to be a good thing, but we shouldn't get carried away. The underlying problems of the Eurozone haven't gone away. The U.S. fiscal cliff has been moved, not scaled. Unemployment levels, particularly for the young, remain shockingly high in many parts of the world. The unconventional monetary policies of central banks have taken us into uncharted territory. The risks of inflation and currency volatility should not be underestimated. Our markets in Asia, Africa, and the Middle East are not immune. Slower growth or shocks in the West will undoubtedly affect them. But there continues to be a clear gap between the growth in our markets and growth in the West. GDP growth in the U.S. is forecast at 2.3% for 2013, with the Euro area at around 0.2%. Contrast this with China at 8.3%, Nigeria 6.6%, Indonesia 6.5%. Even India, for all its challenges, will grow at multiples of the West. The underlying drivers of growth in the emerging world, industrialization, urbanization, demographics, remain extraordinarily powerful. We've seen strong growth in intra-regional trade and investment across our markets. For example, from 2000 until 2011, Africa's trade with India increased by a CAGR of 25%, while China-MENA trade, Middle East-North Africa trade, rose from a value of $18 billion to over $240 billion in the same period. We're seeing the emergence of vast numbers of middle-class consumers, and the scale is staggering. 28% of the world's middle class lived in Asia in 2009. By 2030, it will be 66%. The rapid internationalization of the renminbi is a symbol of the shift in global economic power. In 2012, we estimate 12.6% of China's trade was settled in renminbi, up from 5.1% in 2010. Our recently launched Renminbi Globalisation Index, which measures the size of this market across four core asset classes, shows a more than sevenfold increase over the same period. As we look at the world, many of the biggest challenges, and arguably our biggest risks, arise from the world of regulation and politics. There's a huge amount happening, touching every aspect of how we run the bank and how our economics work. We are supportive of many of the changes. Establishing workable approaches to resolving failed banks is a very good idea. We strongly support statutory bail-in, and the recent recalibration of Basel's liquidity rules strikes a much better balance. Yet there are many crucial areas where unilateral action is undermining international coordination or where politics has overtaken prudential objectives. One example is derivatives, where the sheer complexity of competing and overlapping proposals makes unintended consequences an inevitability. The debate about RWA models is also very confused. We fully accept the challenges to the credibility of RWA models, but abandoning them in favor of standardized is no solution. Neither is adding lots of ad hoc floors and buffers. At our annual meeting of the bank's top leadership in January, we took stock of our strategy and debated our priorities for 2013. We have refreshed our statement of strategic intent, sharpening the language and shifting the emphasis in a number of ways. But the essentials of our strategy remain the same. We want to lead the way in Asia, Africa, and the Middle East. We want to be Here for Good. Yet every year, the context and challenges differ, so our immediate priorities must shift as well. We set seven. First, we must continue to build stronger relationships with our clients and customers. Deep, long-term client relationships have always been the foundation of our business. But now that every bank claims to be relationship-driven, we just have to be that much better, more relevant, more committed, more responsive. Second, we must prove to a skeptical world that we really are Here for Good. This is all about doing the right thing and being there for the long term. It's about recognizing that we have an important role to play in the economy and broader society. We must step up our efforts to innovate and digitize. While we have made enormous progress in automating processes and offering online and mobile access to our services, I believe we're only at the early stages of using technology to transform the business of banking. I want to make sure we make this happen rather than have it happen to us. Intensify collaboration across the network. For Standard Chartered, the network is key to our competitiveness. We are not a dominant local bank. We don't dominate a specific product segment. We're differentiated by our ability to facilitate cross-border trade and investment, and that's as much about the way we work as about our physical network. Get fitter and more flexible. We need to be ever more efficient, smarter in deploying scarce resources, more adaptable and agile. Accelerate the next generation of leaders. Taking a long-term perspective means building a strong succession pipeline of diverse leaders. This is something I personally am very focused on. Finally, deliver superior financial performance. This is both an outcome and a non-negotiable prerequisite. By focusing on the fundamentals, sticking to our strategy, fund before we lend, keeping a tight grip on risks and costs, we can continue to deliver a distinctive combination of growth and returns for you, our investors. Let me say a bit more about three of these priorities I've just touched on. Proving we're Here for Good is all about values and culture. Lots of people are now talking about the culture of banks, but we've been investing time and energy in reinforcing our culture for a long time. We see our culture as a key source of competitive differentiation. We see culture as a key risk management tool. We introduced our values a decade ago, embedding them in our performance management system so that people got rewarded not just for what they achieved, but for how they achieved it. We've been using ethical dilemma case studies to train staff in wholesale banking for five years. We've championed employee volunteering since 2006, enabling every member of staff to devote three days to a cause they're passionate about. We continue to have huge impact through Seeing is Believing, our initiative to fight avoidable blindness. Since we started in 2003, Seeing is Believing has raised some $57 million and reached over 31 million people. There's no single tool to reinforce culture, no magic recipe, and no organization of nearly 90,000 people can ensure that everyone does everything perfectly all the time. I'm absolutely convinced that we need to keep working at reinforcing this aspect of Standard Chartered, because it's one of the things that makes us stand out. That's why we created the board Brand and Values Committee in 2010. That's why we launched Here for Good. While we must stay true to our values and culture, we must also keep innovating to offer our clients and customers new and better solutions, to cut costs, and to reinforce risk management. In an inherently digital industry, failing to embrace technology-driven innovation would be suicidal. We've been investing to increase automation of back end systems to drive down transaction costs and to improve service quality and resilience. As a result, our operations cost-income ratio has consistently declined while staff productivity has risen. We're also investing in underlying data management systems and analytical capabilities. This is critical for seamless management of client relationships across multiple geographies, and it's also vital for risk management. We're accelerating innovation to make the bank more accessible and easier to use through social media, online, and mobile. We continue to roll out new Breeze apps and now have over 1 million downloads since Breeze was launched. We've come a long way in internet banking. 10 years ago, frankly, we would have been thrilled to have been described as a laggard. In November last year, we won Global Finance's World Best Retail Internet Bank, and that was for the second year running. In wholesale banking, we're investing in our global platforms to enhance product capability and seamless delivery. Project Unity in cash management to harmonize our underlying infrastructure and enhance functionality. Project Storm in custody to streamline cash and FX processing and enable better cut-off times. Project Razor in FX and ALM to enable us to straight-through process payments 24/7 across 43 markets, reducing risks and reducing costs per trade by around 10%. Across the bank, we're investing harder and faster in technology than ever before. Both culture and technology are crucial tools in intensifying collaboration across the network. From our earliest years in the 19th century, we were focused on international trade. We opened in India and China in 1858, in Hong Kong and Singapore a year later. Our long history in our markets has real resonance with our clients and cannot be replicated by new entrants. Today, we're one of the top two trade finance banks in the world. Trade represents around 16% of wholesale banking income, but when you include products and services linked to trade, it drives over half. Most big international banks operate on a hub-and-spoke model or as a collection of local baronies. By contrast, we're a true network with no dominant geography and a culture of cross-border collaboration. We could be even more seamless in serving our clients' cross-border needs, even more effective in optimizing deployment of our local currency and dollar balance sheets. This requires refining performance metrics, streamlining information and process flows, and above all, what I've called pathological collaboration, an infectious spirit of cooperation and coordination. We also need to be always listening to our clients, understanding where they want to trade and invest, what products and services they need from us. It's with this logic that we continue to expand our network. In 2011, we opened our rep office in Mongolia. In November 2012, we completed the acquisition of Crédit Agricole's business in Turkey, upgrading our rep office into a subsidiary. Last month, I visited Yangon to open our rep office in Myanmar, returning to a country we first opened up in 1862. Also, in February, we signed an agreement to form a joint venture bank with ENSA, one of Angola's largest insurance companies. By upgrading our presence in this way, we'll be one of the first international banks to have an onshore presence in sub-Saharan Africa's third-largest economy. In all these places, we're serving the needs of our existing clients. In all these places, we're taking a long-term perspective, investing now with a 10-year plus horizon. With our return to Myanmar, we're now the only international bank present in all 10 ASEAN nations. Over the last five years, our income in ASEAN has grown by a CAGR of 14%. In 2012, income growth in ASEAN slowed to just over 7%. Singapore, our largest market, grew by only 1%, but we saw good growth in Indonesia, up 13%, Malaysia up 18%, Thailand 13%, the Philippines 11%, Vietnam up 27%. It's important to put Singapore's performance in context. Singapore income grew 26% in 2011 and by a CAGR of 20% over the last five years. We're taking advantage of domestic growth within ASEAN as the region's 600 million people become increasingly prosperous. We're taking advantage of interregional trade and investment as ASEAN's economies become increasingly integrated. At $4.5 billion, ASEAN now represents just under 24% of the bank's total income. We're also benefiting from the economic convergence of Greater China. In 2012, Hong Kong, Taiwan, and mainland China delivered income of $4.9 billion, up 11%, faster than the 9% CAGR of the last five years. Greater China now represents just over a quarter of the bank's total income. We will keep investing in China, where income grew by 21%. With our network across 25 cities, we are one of the very few international banks that reach huge inland cities like Chongqing, Chengdu, and Xi'an. With growth inland now faster than growth in the coastal regions, we are well-placed to benefit from the changing shape of China's economy. In China, we are executing a very focused strategy. In consumer banking, we're concentrating on the high-value segments and on SMEs in particular. In wholesale banking, we're focused on rapidly growing mid-market companies. We also support multinationals investing in China, such as Shell and Tesco, and we're helping China's leading companies as they expand overseas. In fact, in addition to what we do onshore, China is now our largest generator of network income, up 25% year-on-year to over $700 million. Hong Kong is the largest recipient, as we increasingly run our Hong Kong and China businesses as one. Income in Hong Kong grew by 10%, with WB income from renminbi-denominated business up 30%, mainly in FX and trade, whilst renminbi deposits in the consumer bank grew by 70%. Taiwan had a more challenging year, given regulatory constraints on consumer lending and the year-on-year distortions from one-off gains in 2011. Yet in wholesale banking, we are now making real progress in leveraging the links with China, particularly in transaction banking. Greater China is a key engine of growth for Standard Chartered. With a significant presence, long history, and deep relationships across all three markets, we are extraordinarily well-placed to benefit from the region's continued growth and convergence. 2012 was undoubtedly a challenging year, and 2013 will no doubt bring new challenges. The story of the last decade is a story of resilience, of growth, of consistent delivery. Since 2002, Standard Chartered has been transformed. I would like to thank you for the support you have given us throughout this journey, and I would also like to thank the staff of Standard Chartered for their hard work, professionalism, and commitment. Looking forward, I think the next 10 years should be equally exciting. We are in the right markets. We have a clear strategy. We are investing in our businesses. There is no doubt that our markets will continue to change dramatically as they grow and get richer. There is no doubt that technology will change the way banks work and compete, and there is no doubt that regulation will force further change in business models. We are not at all complacent. Yet by sticking to our strategy, by staying true to our culture, and by being innovative and adaptive, I am confident that we can continue to be successful. We remain committed to our financial aspirations, double-digit income and NPS growth, costs growing in line with income, a mid-teens ROE over the medium term. We are committed to being here for good, for our clients and customers, for the communities in which we live and work. We are as obsessed with the basics of banking, how we manage risk, costs, and control, as we ever were. We start 2013 in great shape. Our businesses have very good momentum. As Richard outlined earlier, the consumer bank is well ahead of the same period last year, whilst wholesale banking client income is also performing well. Our balance sheet has never been stronger. We are superbly placed to seize the opportunities. We have the strength to weather the storms. Thank you. John, Richard, and I will now take questions here in London. Jaspal, Ben, and Julian will take questions in Hong Kong. Sunil, Anurag, and Vivek will take questions in Mumbai. Right. If we could do what we normally do, which is if you could indicate if you want to ask a question, raise your hand, wait for a mic, and then if you get one, say who you are. Why don't we come straight to here to Mike. Michael. Thank you, sir. Michael Helsby from Merrill Lynch. Two related questions, actually. Richard, you pulled out a couple of times the drag from the liquidity balances. I think you inferred that if we moved to more relaxed Basel versus the U.K. standards, that would be beneficial. I was wondering if you could perhaps quantify that in ROE terms. Secondly, as I say, linked to that, you made some headway in normalized ROE in 2012. I think that was because you had the underlying jaws of 5%. Clearly, you are talking about still flat jaws going forward. I was wondering, given the revenue or the margin pressure that you drew out as well, whether there is a tactical opportunity to just give us a bit of operating leverage to make a bit of a step change on a very short-term basis. I think the franchise, as you have shown, has been here for well over 100 years. It will be here for another 100 years. But whether there is just an opportunity short term to boost the ROE by just having some operating leverage. Just on the liquidity drag, I will not give it to you in ROE terms. I will let you do that, and you can work the E. I think the estimate we would give, and there are lots of different assumptions you can make. The main assumption is to what extent do you free up surplus and then invest it in commercial-yielding assets, as opposed to free up levels of surplus liquidity you simply carry in low-yield assets required by regulation in an eligible liquidity instruments definition. So what we would say is that the income drag currently from the regulatory liquidity is around $300 million, would be our assumption. Again, I would just repeat the comment that actually the FSA is committed actually to converge with Basel III. We would be pleased to see that happen sooner rather than later. We are substantially ahead today of the 100% LCR requirement that is not needed, not required until 2019. So it would be quite helpful to see that incremental liquidity surplus come out. We have had this discussion, Michael, you and I, on jaws. I think that for eight or nine years now, we have run this financial framework, which is neutral jaws. I think we absolutely stay to that. Our ability to hit it depends upon how do we see income unfurling or unrolling on us in the year, our confidence as we then open the investment gates to invest more. But actually, we want to get both returns and growth. I think just that consistency of investing year in, year out, in building out the physical, which now includes internet and mobile, business-gathering infrastructure, Standard Chartered Group, in the growth markets of the world, I think just boosts the machine that is located in those right franchises. I do not think I would for a year back off the intention to invest at pace. I am more concerned actually, given the amount of investment opportunity and investment demand we have from colleagues around the businesses and the geographies, to have some sort of constraining factor on it. My constraint actually is the level of income growth. So we have this jaws concept rather than a cost-income ratio that I think has stood us in really very good stead over the last decade, actually. I do not know if you want to add to that at all. No, the only point I would add is, as you know from the way we have done it in the past, is that we manage this very dynamically. We are pacing the investment and releasing investment as we see both the opportunities, but also our performance unfold through the year. Just to build on Richard's comments about liquidity, we are carrying surplus liquid assets at the moment. So we would prefer to be, we still want to be rock solid in terms of the bank balance sheet, but at the moment, we are probably carrying somewhat more than we would want. That does not mean you would get a $300 million-type uptake, because that is the envelope of the liquidity cost, but you would get some relief on that. Okay. More questions. Why do not we just go behind? Thanks. It is Manus Costello from Autonomous. Just to follow on costs. A lot of the benefit from jaws came in the Americas, U.K., Europe region, the little understood region that you report. I wondered how much of that was due to any kind of expense cram down in the second half of the year as you were trying to offset the impact of the fines, and whether or not we should expect a more normalized level of jaws in that division going forwards. There was no cram down, particularly into a particular region. We obviously, as we dealt with the U.S. authorities, clearly had mind to the fact there were going to be incremental costs. But that said, we actually accelerated investment in the second half over the first half in the businesses. So we still stayed invested. I think it is simply a feature of the businesses that we are running. So actually, we gave a slight flavor to it. But the two main business units in wholesale banking, which is 90% of the income, are transaction banking. That generated, what, $726 million, up 16%. Financial markets was very strong for us, also up 16%, and that is about $650 million. Then corporate finance was up almost 60% in income just on very good transaction execution, and that is just under $400 million. The nature of those businesses, I think, gave us real leverage through the cost base. The other aspect, I think, when you look at the second half, is simply going to be, particularly as it is a wholesale predominant business. If you look at wholesale's cost and particularly the adjustment to variable comp from the rates we were accruing at in the first half to the year-end amounts we paid, you saw an adjustment to the variable comp, which would have impacted a geographic area which is more weighted to wholesale than being broadly spread across consumer and wholesale. There was no cram down aimed at a particular region. Okay. Why don't we just go in front? Yeah. We will move further back, too. I have seen you. Good morning, everyone. It is Chris Manners from Morgan Stanley here. I had a question for you on the revenue trajectory. Trade finance looked to be performing very strongly, +22% year-on-year. Just thought I would ask you to elaborate on momentum there, just in volume and margin terms, and how that is being affected by competition. On the FX side, slipped 20% half-on-half, down 11% year-on-year. Should that have a chance to spring back seeing as the currency volatility we have been seeing so far this year? Thanks. Well, great. Go on. FX, well, the answer to FX is quite simply, if we look at the start of the year, FX has started much better. I think it does go to volatility and client appetite, so volumes are up. We have not seen anything like the same spread compression in FX in 2012. We saw something like a 17% spread compression across the FX businesses for a variety of reasons in 2012. With regard to trade finance, the underlying volumes that we are seeing are really very, very good today. So the underlying activity levels are strong. We are seeing in that business, and in cash actually, we are seeing a continuation of the pressure we saw building, I think, in the last couple of months of 2012. So the current margins that we are seeing, given the liquidity, are lower than the year-end rate in 2012. I think the picture there is a balanced picture. We have got some margin compression softening, not completely countering, but softening just the sheer strength of the underlying trade finance activities we are seeing. If I can add one general comment on margins. We spend a lot of time, both internally and in our discussions with you, looking at the margins of different products and in different markets and so on. The thing that has always struck me is that the group margin remains remarkably constant. Broadly stable. Indeed, it has been 2.3% for the last four years. It was 2.5% for the period before that, then interest rates immediately after the crisis plummeted, as a liability long bank, that cost us margin. Actually, there is a huge amount of movement, but the group's margin stays pretty well broadly stable. The thing that will really drive a change in group margin will be the broader interest rate environment, because we would benefit from a rising interest rate environment. Yeah. I think, yes, you asked about competition. Yes. Clearly, I think we need to demonstrate on this fantastic little slideshow. You have got to admit, those slides are pretty cool. Just how extensive now the network is and how strategically that is a differentiator for us compared to many of our competitors. Right. Eventually, let us go right to the back. Michael? Thank you very much. Paul, sorry. That's all right, Bob. Sorry. It's Tom Rayner from Exane BNP Paribas. Could I just ask a question on the table on page 31 of the release? I'm just trying to understand a little bit better the past due, but not individually impaired, because the figure for the wholesale bank, you did mention it, Richard, in your commentary. Yeah. But I think from the half year, it's up $4 billion, or maybe a bit more than that. Reading the text on that page, it sounds as if quite a lot of those loans were renegotiated or restructured after the balance sheet date. I'm just trying to get a sense, does that mean that those loans will now drop into the restructured loan bucket that you show on page 35? In the wholesale bank, it's, I think, running at about $1.8 billion. Yes. Then what happens when they're in there? They get reviewed quarterly. What should we be thinking about the trends? I'm just trying to understand the whole issue a bit better. There are lots of different reasons why facilities with customers get reshaped, changing circumstances and so on. The customer may want a different set of facilities. There are two elements, I think, to the table where I think if I draw your I'm sure people can see where the deltas, I think, are worth commenting on. One is, I think, in the up to 30 days past due in that wholesale column, where you can see 1.6 billion up from 600 million. On the left-hand side above, you can see in the bottom paragraph, the explanation for that. It's pretty broadly drawn. These are loans past due less than 30 days. If you can see where they arise, they're mainly in Hong Kong and the U.A.E. Actually, with regard to these, 75% or so of these have either been repaid, predominantly they've been repaid or actually renegotiated. At the end of January, this number was down by about $1.2 billion. If you go to the 60 days, this is a very small number of exposures where from about October, we were in discussions with the clients, and it is dominated by a couple of exposures around a different facility pattern. They went past due with our agreement, essentially in November, December, to a very small degree. Those conversations continued and have now been renegotiated and settled. As at the end of January, as it says on the top of that page on the right, these transactions were regularized, in other words, made good, renegotiated. Renegotiated so that the cash flows, when discounted at the original rate, show no impairment whatsoever, nor do we expect these exposures to impair. Before I come to your point about page 35, I think if you look at the inflows to GSAM, the trouble exposures area, they have been very low in January and February. If you then reflect on what I have just explained about the 30 days and the 60s and 90 days, actually today, these amounts would be around the same level, if not slightly below what you saw at the end of 2011. How are they treated? Once they are essentially renegotiated, they move to the renegotiated disclosure. You will see them in that second line at the bottom of the footnote on page 35. They remain in there for six months. As long as they perform for six months, they then fall out and go back up into loans and advances is the treatment. But fundamentally, the $3 billion has been predominantly renegotiated and has disappeared by the end of January from this disclosure, as has most of the $1.6 billion. There is no sort of trend. These were very much- No. A phrase I used earlier, I would call them idiosyncratic in terms of the $3 billion is dominated by a couple of exposures, where we're simply in discussions with a client about reshaping the facilities. Thank you very much. Right. Why don't we stay right near the back there? Good morning. It's Andrew Coombs from Citigroup. I just had three questions on Korea on slide 25. I'm clear there's a lot of areas doing very well, but this is one of the more challenged regions, shall we say. So three questions there. The first one is on the impact of the Personal Debt Rehabilitation scheme. If we look at NPLs in the Korea consumer bank, they're up quite a bit, half and half, 36%. So just wondering how much you think that's already played out and how much further there is to go there. Secondly, with regards to loans outstanding in Korea, they're one of the very few regions that's down year-on-year, $38 billion to $36 billion, partly due to regulatory restrictions that you referenced, but also, I'm sure, due to some active management. So, keen for your thoughts on whether you think there's further shrinkage to come in 2013. Then finally, just a bigger picture question on Korea, I guess. It's an area which you mentioned in your speech that profits will decline in 2013 versus 2012. It doesn't necessarily seem to fit with the medium-term targets of a mid-teens return outlook. Just interested to think, is it compatible, and what do you think is the long-term solution for Korea? Why don't I take the general question first Yeah and then you can pick up on the PDRS and the mortgages. Look, the Korean banking environment is a tough environment, and Korean banks have generally been reporting pretty tough results. We absolutely want to get better returns out of that business, both in terms of cost productivity and capital productivity. But there isn't a silver bullet for doing that. We made some good progress with the ERP that we did last year in terms of improving cost productivity, and productivity per head in both businesses has increased by double digits this year. But we're still not where we want to be, and we're not going to get there terribly fast, because there are some real headwinds. PDRS is a good example of a headwind. One of the more positive things is actually the growth in network income, which continues to grow at a double-digit rate, and where we can see continued prospects for sustained growth. Of course, that isn't actually in Korea's numbers, it's in the numbers of the rest of the network, but it is part of what Korea contributes to us as a business. We remain very committed to our business in Korea. We want to get better performance out of it, but we also see the benefits of having one of Asia's largest economies and where some of Asia's most successful companies are trading all around our footprint. Do you want to pick up on PDRS and mortgages? Yes. On the mortgages point first on your question about loans outstanding. Remember that the government introduced a new requirement for the banking system to hold 30% of their mortgage books, essentially in fixed-rate mortgages. I think our team in Korea did a really good job and formed a partnership with the Korea Housing Finance Corporation, essentially to source fixed-rate mortgages, which we then onsold into KHFC. That program actually went faster than we thought in terms of our origination capabilities. So actually, we've originated $4.9 billion, which is pretty much the cap that we want in fixed-rate mortgages by the end of the year. But of course, they are then onsold off our balance sheet onto KHFC. So that's the reason for the shape in loans. The PDRS, again, is a government initiative. It's a government initiative where they bring consumers who are under pressure through a court-supervised process, where there's a mandatory impairment write-down of between 30% and 40%. The programs tend to be a five-year tenor, five-year duration, where the customer agrees, essentially with the court, a basis of payments for all of their outgoings. On the basis they stay with that, then actually they step out free without ever having been declared bankrupt or anything like that. So as people file for PDRS, banks automatically, under government-sponsored scheme, will provide between 30% and 40%, depending upon the particular profile. We're seeing a rise in those. The industry is seeing a rise in those. It shouldn't be a surprise given the economy, but also actually given the new government. There is a new government coming in, which is signaling much more direction in this way, much more consumer-friendly and looking to promote. There's a phrase, economic democratization. economic democratization. Economic democratization. We are seeing high filings under PDRS. We expect to continue. To hold it in context, I think that we will probably see Korea. What was Korea ROE? About $220 million. We will probably see some low tens of millions of dollars of increase coming from PDRS, would be our expectation, over the level we have seen in 2012. But it is worth highlighting because the delta is significant on the Korea number. Thank you. Sandy. Hi, it's Sandy Chen from Cenkos. Well, Peter, I asked this question earlier, and you said, "Fine, you ask the question." It's about China, and just the bears would say would point out shadow banking, risk meltdown, what happens if there's a policy like pullback in housing, things like that. I figured it'd just be a good opportunity for you to sort of restate the bull case for China and why you're, you know. The thing about China is it's such a large economy, and there's so many different things going on at once, is that almost any statement you make about it is true somewhere. There are big problems in shadow banking. There are bits of it that are overheated. But fundamentally, I think the economy will continue to grow strongly. The shape of it is changing. As I mentioned in my remarks, what you're seeing is faster growth in the inland cities than you are on the coast, and you are seeing very rapid growth in services. The private sector companies are growing extremely rapidly. The economy is still dominated by the state-owned enterprises. One of the biggest questions is going to be What is going to be the policy stance towards the dominance of the economy by state-owned enterprises? Getting that right is going to be one of the key determinants, I think, over the long-term success of China as an economy. But fundamentally, we are positive about China. We are continuing to invest there at pace in both businesses. As you can tell from the remarks, it's having a big impact, not just in China, but elsewhere around our network. But it isn't going to be smooth. The one thing that is right about some of the bear arguments is that there are going to be bumps along the way. We are very thoughtful about not being caught on the wrong side of the bumps that we anticipate. Okay. Yeah. Good morning. On trade, can I just follow up, what proportion of your trade finance is renminbi settled and how much clear new opportunities versus cannibalization exists within that space? I'm trying, in my head. I don't know the proportion. Let me give you my renminbi. Broadly, the renminbi revenues, we generated around $600 million of renminbi revenues, of which two-thirds came essentially in the FM businesses, and one-third came in the transaction banking businesses. A lot of the FM A lot of the FM is linked linked to the trade If that helps to some extent not answer your question, then I hope that does. We have seen a 14% growth in renminbi deposits and over 50% growth in renminbi assets in 2012, 58% growth in renminbi assets. Okay. Secondly, we frequently take your views on regulation. What do you make of the FPC review? What do you think can come out of it? They are not going to give you a two-hour answer to this, I promise you. You mean the FPC review of capital? Yes. What is coming up in March. The honest answer is we do not know. I am afraid that is the answer, and we are not experts on the U.K. banking system. I am better off answering questions about China. Finally, just a detail point. FX was a headwind last year. Where are we now on the FX headwind/tailwind for this year from the rates we can see so far? Yeah. It was a 2% on revenues headwind last year. We're assuming a broadly stable, in our expectation for the year. Clearly, it's early, but we're assuming broadly stable. I always feel neither very much help, nor the same degree of a negative. Thank you. You wanted another go, Michael. Then we'll come. Mike. Mike. Yeah. Thanks. It's Michael Helsby again. There's two things you've really emphasized, I think, when I've listened to your comments today. I think one of them was the stabilization, and I think, turnaround in India. I was wondering if you could give us some more color on what you're seeing there, because the revenue trends have been pretty soft onshore for quite a while. The other one is just the consumer bank. Again, that's been quite a slow-moving beast, and you really are emphasizing the well ahead. I was wondering if you could give us more color there. I noticed that second half revenue was up 5% on the first half. I was wondering if it'd still be well ahead versus the second half, or whether it's a year-on-year comment. Why don't I start at a high level, and then you can actually give the detail. Possibly. On India, the crude way of putting it is we've sort of called the bottom on India. We reckon the economy as a whole has gone through a sharp slowdown, but confidence and business momentum is picking up. That's translating through into the underlying momentum of our business. That doesn't mean we're saying that it's going to go vertiginously upwards, but we see a much more encouraging trend there. One of the critical things, as I say, is the fact that the reform agenda projects are getting approved. The big companies are investing back in India. A lot of them had put their efforts and concentration on elsewhere. Now you're seeing opening up of FDI, you're seeing the new cabinet committee on investments actually unblocking a lot of the projects that got stymied. So there is a real sense of change. I've forgotten what the other question was. About CB. Oh, yeah. CB has had a very nice start. Part of it's wealth management. There was a different mood in the markets as we began 2013. You also saw the benefits of the step-up in mortgage volumes in the second half. Absolutely. That flowed through. I do not know if you wanted to add anything on that or I- No, I think that is it. As I said, wealth management, very good, and mortgages continue momentum, as you saw in the second half, starting well. So what was a negative in the first part of 2012 actually has been a good positive in 2013. Compared with the 5% second half run rate, you will have to define well for me. But we have had a very good start. The good start is actually configured against the first two months of last year. Mike. Thanks very much. Mike Trippitt at Numis. Just following on, actually, from Tom Rayner's question, the answer may be the same, but just looking at the non-performers on page 49, which have moved up in wholesale from 3.1-ish to 4.3- Bulk of that in Middle East and India, but the impairment, the individual provision lagging that quite substantially. So I just wonder what sort of words of comfort you can just give around the direction of travel on non-performance. I think- Just in conjunction with that, the expected loss deductions in Q1 have gone up as well. Is there anything there that you're recognizing in the ELs that you can't recognize in the impairment provisions? That could be a very long answer, the second one. If you look at our EL, it's running at three and a half times our level of underlying provisions. Even in the worst part of the crisis, our EL, misnomer expected, was traveling at double our actual provisions. That's what's expected as a regulatory calculation and is driven by a lot of underlying model assumptions. That's not what we actually expect to see in our loan impairment. Actually, if you think expected loss is meant to be the annual average through the cycle, my goodness, we're going to have to go some to get to an average, and we don't see that at all. The EL is full of adjustments and assumptions which are nothing to do what we anticipate our underlying book to. Just look on NPLs. If you go back three years, you'll find that Wholesale Bank NPLs are moving in the region of $3 billion-$4 billion. Yes, they're at 4.3 now. Second half of 2012 was up 6% on the first half outcome. It's moving at $3 billion-$4 billion. That's before provisions in collateral. Within those NPLs, two-thirds of them, over two-thirds of them are in two regions. Actually, they're concentrated to relatively few accounts where we have extremely good line of sight and are very comfortable with the underlying provisions that we're carrying. When you look at the NPLs after collateral and after provisioning, they're 65% covered. 35% net at risk after that is well within the 49% historic recovery rate that Standard Chartered has achieved for non-performing loans recovered. So if that helps, I do not feel there is any, and there are no sort of emerging stresses anywhere that is making me nervous here at all. Yeah. Yeah, Peter. Peter Toeman from HSBC. I think, last year, the focus was on unsecured lending in the consumer bank at the expense of mortgage lending, and I wondered, looking back a year, how you felt about that, because there is $280 million of additional income on the card book, but about $170 million of additional impairment. So I wondered if you had your time again, would you still make that same decision? I have sort of got the impression from some of the things you said that you seem to be talking more about secured lending in consumer now as opposed to unsecured. We would make that decision again. I think the unsecured proportion of the LI that attaches to unsecured is $120 million to the credit cards and the personal loans out of $168 million of increase. And when you look at the unsecured, it remains, as you have heard us say, 18% of the portfolio. In 2010, I think it was 20%. There is lots more room to grow it, but we are going to grow it cautiously. Remember again, that when you look at the unsecured book, what are the two sort of macro factors you watch for? You watch for the economic fortunes of the economies that you serve. We see improving GDP and underlying economics across our markets, but more importantly, you watch for unemployment. And if you look at unemployment stats in our markets, they are, take Hong Kong and Singapore, they are at 14, 15-year lows at the moment. Again, I think you have to look at the underlying context. How do we do it? 94% of the portfolio is in markets with positive credit bureaus, who have very good line of sight, where we offer unsecured without that credit bureau line of sight. Then we offer, as you know, through payroll customers to payroll customers only, and that's UAE and across Africa, and about 22% of the portfolio is actually offered to customers where we have their payroll. As a category, I expect it to continue to drive through higher LI in 2013 as the book seasons, and we've grown at 17% in 2012, so it would do that. Is it showing us any reason to back off getting a more balanced business? No. I think we might be done if there are no more questions. Did you want to make any final remarks, Tom? Certainly, Peter. Let me try and summarize the results that we've announced today. A strong set of results, set against a backdrop of uncertainty in marketplaces, set against a settlement with various agencies in the U.S. We have continued for the tenth consecutive year to grow our income and our profits, and I'm delighted to say we've also shown today a significant increase in EPS and, of course, more especially, our dividend for our shareholders. We've tried in the presentation today to put across to you how important our culture is. Our culture and values is an integral part of the way we do business. I think what Peter did in his presentation, particularly, was to look forward. To look forward over the next 10 years. To do that, he looked back over the past 10 years, and over that time, we've seen very significant growth in the business. We remain very optimistic and indeed excited about the next 10 years. Indeed, we've started this year very strongly. On that note, thank you all for coming, and thank you to our shareholders for your support. Thank you