Thank you very much for joining us with Standard Chartered CFO Diego. Diego, you started as CFO in January 2024. The stock is up, I think, since you joined. I checked yesterday, 150% roughly. SX7P is up 110, so there's a track record here.
Not bad, huh?
Not bad, not bad.
A testament to the great guys of Standard Chartered. I agree.
Now the pressure's on, of course, to continue with that. Let's talk about the business because you guys have done extremely well. Maybe we go by business first, and go a little bit into the key drivers, and then we go a little bit into group and future as well as group P&L. In terms of business, if we maybe start with wealth, can you just explain to the audience the conversion, especially also what we see in Hong Kong of customers coming into retail and your acquisition of customers, deposits, conversion into wealth? In that context, what is a structural wealth growth and what is a market share gain? Just unpicking really all of these items that are driving a lot of your wealth revenues.
Absolutely. You say, Kian, that this is, Hong Kong, it's really a little bit of everywhere. In Hong Kong, it's particularly true because in Hong Kong we do operate a true universal bank model. As a consequence, the funnel of retail customers that we migrate up to affluent and then eventually to the private bank is particularly visible. That dynamic exists everywhere across our network where we operate our wealth management activities. The fundamental thing to remember about our wealth management is that it is propelled by incredible, incredible secular forces.
The growth of the middle class in Asia, the increasing sophistication of investors in those areas of the world, the fact that Hong Kong is the fastest growing by far wealth center in the world, and by the end of this decade, will be also the largest one by absolute size. By the way, the second fastest one and the third largest is Singapore, which is also one of our homes. All of these, the growth of global Chinese, the growth of global Indian, the fact that global Indians are active almost in a perfect overlap to our network and to our footprint from the East Coast of Africa up to the Middle East to India, down to Southeast Asia. All of these are very, very powerful secular forces.
It's clear that, more, cyclical trends at times do help us, but I think we have shown in recent quarters in particular that the resilience of our business model, our business model really works in more volatile and in less volatile times. In the second quarter, just after April the 2nd, we attracted $15 billion of net new money in wealth management, which was an absolute all-time record. It was mostly, and this will allow me then to go to your second part of the question or to the first part of the question, which was mostly skewed toward deposits. In this quarter, in the third quarter that we just reported on, we attracted $13 billion of net new money, which is a good number, but it was mostly skewed toward wealth solution products.
That gives you a sense of how these flows move over time. We attract a balanced level of deposits and wealth solutions, but when times are more uncertain, there is more weight towards the deposits. We like the deposits anyway. They are a good way for us to fund. They are definitely cheaper than for us to fund with time deposits from corporates. Over time, they have the beauty that they then become wealth solution products, and the Q2 to Q3 dynamic is a perfect example of that.
What helps us in this and makes this an even more resilient and more structural and more long-term trend is the fact that our clients, although we operate across the spectrum from mass retail all the way to the private bank in certain of our locations, the reality is that our laser focus is on affluent customers, $1 million-$10 million. They are lower cost to acquire. They are lower cost to serve. They are extremely loyal. They do not move when their relationship managers move in the way that the private banking clients move. They are very anchored to the bank by some anchor products like life insurance or mortgages. Then we build portfolios around with our managed investment portfolios. Overall, a very strong and very secular-based type of growth.
We've seen net new money flows, growing at 15% year to date. We've seen, your, wealth income growing 25%. Can you also talk a little bit about the structural elements versus more, if you're thinking you're gaining market share in this segment as well?
I think it's, it's undeniably the case because if you look at the growth of, of other wealth managers, it's not at our levels. I think we gain share in two different ways. We gain share from more global players by the fact that we are laser focused on what we do. And servicing affluent customers is not the same thing as servicing mass, and it's definitely not the same thing as servicing ultra. That is how it works. Where we really gain market share is from the local players. We gain even more market share from the local players when times are more discombobulated like they are right now.
Of the $15 billion of net new money in Q2, it's very obvious that there is a strong element of haven factor of people bringing money to Standard Chartered because in many cases, we are one of the few international banks in that country. In some cases, we might very well be the only one.
You have clearly, advisor, higher targets. Can you just update us where you are and as well on your net new money flow?
Totally. We guide for $200 billion of affluent net new money over the course of the next five years, which means roughly $10 billion per quarter. Pretty obvious that with $15 and $13 in the last two, we are doing very well. On the other hand, we are a few quarters into putting out these targets. We will have plenty of time to look at them. So far, so good, it's working nicely. We have also said that we are going to invest $1.5 billion in our wealth management activities, largely by refocusing out of more mass, or out of more mass business in our wealth and retail business. We're doing fine. 50% of that money is, as you say, Kian, aimed at hiring relationship managers. We say that we are gonna add about 50% to our number of relationship managers.
We are continuing to progress well. What I think is important to remember from that point of view is that when you think about the fact that we are saying that we are growing, as you said, we are growing our assets under management definitely more than 10% per annum. When you look at that, it's clear that we do need more relationship managers, of course, to service more customers. There is an element of productivity gain that is very, very important. We train them, we provide them with technology. Part of the $1.5 billion spend, 25% of it is in technology meant to empower the relationship managers. That is what propels this very important part of our story that is the wealth management business.
Shifting over to the cross-border income, your network bank, your network bank, and, it's not always easy for us to compare network banks. There's not a lot of data. Maybe you can explain a little bit your strengths in the network bank, the corridors where you see the most potential, where you're strong as well, and how you compete in, compared to some of your competitors. What's differentiating you from, some of the, larger competitors which are also in this, in this space?
Absolutely. Look, first of all, it's fierce competition, as you can imagine. We give you a sense of our network in our various publications. There is a beautiful, in my humble opinion, ribbon chart that shows the ins and outs flows in the various parts of our network. When you look at the chart, you realize immediately that our network is our strength. It is true that there are other network banks, but there is not another network bank that is present in all of the ASEAN countries, another network bank that has the kind of exposure we have to some of the fastest growing economies in Africa and some of the fastest commodities-led areas around our footprint.
It is the network, its agility, its diversity, its diversification effect that is very important, combined with the fact that we have very active cross-selling between our banking business and our markets business, which I am sure we will talk about at some stage. Our markets business is a giant risk management machine. When you marry that kind of network with a risk management machine that spans across all fixed income, currency, and commodities, including commodities, particularly at this time of high volatility, you see where our competitive advantages lie. In terms of corridors, since April the 2nd, the theory that in the world, that globalization is far from dead, it just flows in different ways. The fastest growing regions in Asia are proven by our network flows.
By far, the most powerful network, part of the network is the intra-Asia. Within intra-Asia, India to ASEAN, Middle East to ASEAN, and China down to ASEAN remained the most important one. When you look at the network, remember the network is very far from meaning trade. Trade is less than 5% of what we do. Network is all of the flows of capital, of FDI, of FCI, of trade, of goods, of services, of wealth across our piece. You really see that that is the power of it.
Your growth rate has been quite high, 9% CAGR in the cross-border income since 2019, adjusting for interest rates, which really have an impact. It seems like you're gaining market share if you compare that with your peers. Is there again some rationale that you can give us of what you're doing or where you are that relates to the outperformance?
We are steadfast. We are steadfast on our network, and we are steadfast in our presence on the network, even though our network is a living organism. Some parts of it are exited, some parts of it are entered over time. By focusing on the network and maximizing it, we are taking advantage of the fact that some people are somewhat retreating and retrenching toward other areas, and that the domestic banks find it very difficult to compete with us at a time of very high volatility of supply chains and exit markets. If you are a large corporation and all of a sudden you find that the particular location in which you were manufacturing in, let's say, in ASEAN doesn't work for your exit markets, it's very difficult to use a local bank to take, to affect the changes.
It's what you saw during Q3 when volatility abated a little bit. When our clients had again the conviction of putting in place strategic solutions, our banking business had its best quarter ever at almost $600 million.
As you mentioned, we should really put that in context also of the financial market business, where we saw quite strong growth again in the third quarter. Also, can you talk about the business mix? What are your strengths in that business and how you see that with the combination with a network bank in terms of captive business, but also in terms of multiplier effect from your relationships?
Spot on in linking the two. I mean, you link them in exactly the way that we think about it in managing them, which is our bank, our markets business is for 70% a big risk management machine. It is a risk management machine that we put at the service of corporates, of financial institutions, worldwide. Bear in mind when we talk about financial institutions, we are talking about the likes of us or the likes of you, JP Morgan. We also do a lot with the likes of our audience, i.e., with investors. We are fundamentally a bank to banks and broker dealers, to security services houses, to global custodians, giving them access to our regions in a way that for them is a lot more effective and a lot more cost efficient.
That's how we link our market business and the risk management part of our market business. That is about 70% of that particular activity. It grows very well. It grows at 10%. There is a page in our Q3 release that shows that over the course of the last almost six years, we've grown at 10% per annum in a very, very consistent way in what we call the flow business. Then we add on top of it what we call the episodic business, which is business that is related either to capital market activities or to flares of volatility, big events where larger trades happen. Because the other beautiful characteristic of the flow business is that it's programmatic, it's small, it's digital, it's low cost to execute.
The episodic can be different from that point of view, but obviously it's a nice addition to what we do. If you think about the long term, the flow business grows at 10% per annum consistently. The episodic business ebbs and flows on top of it. As our banking business will continue to grow, the episodic business will also continue to grow because part of it comes from the activities that lie in banking. That's how we integrate the two businesses.
If we put this all together, from a business perspective, you're doing very well. Clearly there's this overhanging risk and concern in the market on tariffs and the potential tariff impact on business activity. It doesn't feel like much to me, we haven't really seen much in the numbers so far. How do you think about business activity with that uncertainty that comes on top?
I would say, I promise you, I'm not joking. I would say that we have seen the results in the numbers. The numbers have been excellent. They've been excellent in Q2 and they've been excellent in Q3 after the announcement of tariffs for two different reasons. That is how I, how we think of it and how I think when we speak to our clients, where do we see the action? You have to remember, not imagine, that April the 2nd was a big shock to the system. As the shock to the system took place, the banking business activity was abated to a certain extent as people were trying to figure out what to do. The market business activity flared up immediately because volatility, volatility flared. That was the story of Q2.
As the situation has stabilized, the thing has reversed. Episodic activity has gone down. Flow has remained strong. In Q2, flow was not up 10%. It was up 12%. It has done particularly well. Banking had the best quarter ever because our clients restarted doing strategic projects. From that point of view, the thing that is really important to think about us and how we are very, very different from many of the other banks that we compete with is that we are very clear about what we do and what we do not do. We work in corporate and investment banking with the largest corporations on the face of the planet. Those corporations, when a shock happens, are quick to react. They have the wherewithal to do it. They have the capabilities, and they rely on someone like us to shift things around.
We deal a lot less, very little in actual facts with the small and medium enterprises of the world. If there is one thing that I always say at this kind of, in this kind of situation, it is that it's in the small and medium enterprises of the world that the risks lie in this very fragmented world. Because if you are a small and medium enterprise and your one supply chain gets cut, how are you gonna change it? How can you change it efficiently and quickly? If you are Apple and something changes, you'll move at the speed of light. We deal with the Apples of this world, not with the small and medium enterprises.
and putting that picture together in terms of ROTE, you are already reaching in 2025, you got it was the third quarter, your ROTE target for 2026, the original target of 13%. You're gonna give us an update with the full year results for 2026. I really do the projection, at least in our forecast, we already get towards 14% in 2027. what we are interested in, and you will have an update in May on your more medium term targets. Can you talk maybe about sustainability of ROTE? how can we get comfortable that these levels are sustainable?
In very many different ways. First of all, because we've now been producing it for quite some time and we've made it very clear that it's a staging post. All of the trends that we have discussed so far in this first 20 minutes of conversation are all very secular. I appreciate that you can say tariffs are not secular. They ain't going back into the bottle. The world will stay a more fragmented and more complicated world than it was before April the 2nd. The trends, the structural trends play to our strength. If you think about our, we are a very balanced bank from this point of view. I love the fact that I get a disproportionate number of questions. You and I joke about it every quarter about net interest income.
The reality is that net interest income for us is about 50% and non-interest revenues are about 50%. Net interest income, we have de-risked it very intensely with the building of our structural hedge. The sensitivity to rates that we report through the IRBB is down from $1.5 billion to $600 million in the course of a few years. From a certain point of view, you can expect it to continue to trend in that direction as we continue to hedge ourselves. On non-interest revenues, we have powerful engines of growth, the banking, the markets, and the wealth management where we started from engines of growth. These are important propelling forces that are gonna be helped at the margin by a number of other things that continue to spice it up.
At its heart, it's the delivery of less risky NII and powerfully growing non-interest revenues that is gonna propel our return on tangible equity, of which, as you can imagine, I'm not gonna give you a number now because we are gonna do it, we're gonna do it in February and then again in May in Hong Kong.
It feels so what we've seen so far in the different markets that you operate in and clearly with your strategy, which really, I think really in the first third quarter, you could see it's really all going in the right direction. It's just a continuation of that from what we, what you expect going forward.
Oh, it's, it's look, we are not about revolution. We are about evolution. The strategy has been in place for a long time. We know very well that resources are finite. We invest very heavily in our CIB CrossBorder and very heavily in our wealth management. We de-emphasize the rest and we fuel the machine. By the way, because we have strong, strong earnings of, earning generation engines. I think we manage our capital and our risk-weighted assets very dynamically. Capital velocity is a mantra at Standard Chartered that enables us to invest in increasing return on tangible equity and return capital to our shareholders.
Shifting gears a little bit and talking about some of the growth elements of the future, I would call them. One of them is clearly digital assets. I think Bill Winters really started talking about digital assets when we really, as analysts, were not really that focused on it very, very early on, probably the first CEO to talk about it. Digital money. You have this nice chart in your presentation. You basically have your fingers in everything and in the pie, you know, custody, crypto, but also digital money movement, tokenized deposits, tokenized assets, et cetera, et cetera. I can go on. Can you talk about your strategies there, how you position, how do you see that enhancing your franchise?
Bill has positioned us incredibly well. I mean, Bill is a visionary and Bill was particularly a visionary in this particular aspect. We started investing a long time ago. We are also blessed by the fact that the regions in which we operate want to be at the forefront of the digital asset revolution. Think about the Hong Kong Monetary Authority sponsoring the stablecoins. We are the only money printing bank in Hong Kong that is gonna have that, that work with them in a sandbox to work on that. We are working with the providers of Singapore dollar stablecoins. We are experimenting with tokenized deposits, with the likes of Ant. We are a little bit of everywhere by design because our view is that this is still a fast moving environment. What exact form will it take?
We do not know. It might very well be that it will bifurcate in ways that we can only imagine. It might be that stablecoins end up being fundamentally a retail product and tokenized deposits end up being, for example, an institutional product, something that your house believes in pretty strongly, right? Like, like us. The way that we really think about it, what we want to be is we want to be a portal at the center of what our clients do. We go where our clients want to go. That is what inspires us.
by being at the center of what they do, whichever way something will, whichever form something will take, if it's gonna be a tran, a payment, it's gonna be a SWIFT, it's gonna be a SWIFT type of coin, it's gonna be a tokenized deposit, it's gonna be a central bank deposit, central bank digital currency. We wanna sit at the center because we know that by sitting in the center of what our clients do, we will reduce the threat from non-bank actors, which is very important, and we will figure out ways of making money.
Another one of the potential growth segments, and interested in your view on the realization of that value, is clearly your Trust and Mox, which are your digital banking platforms in Hong Kong and Singapore, expected to be profitable in 2026 still.
Correct.
How do you think longer term monetizing these two assets?
First of all, I think that these are assets that as they reach maturity in terms of the number of customers, and we've been doing very well both in Hong Kong and particularly in Singapore, where our partner NTUC FairPrice, et cetera, has been a phenomenal customer acquisition and deposit acquisition approach. First of all, as they mature, as they reach maturity on number of customers, but we continue to add products and they become profitable in 2026. These are very high return on tangible equity businesses. We love having them. As the world will continue to develop, we use them to understand where our clientele is moving. Remember, these are in the two places in the world where we truly operate a universal bank approach. In Hong Kong, we are one of the three money printers.
In Singapore, we are the only so-called significantly rooted foreign bank. I.E. we have fundamentally the same rights as the three large Singaporean banks, and we compete head to head with them. We can follow the clientele. We can provide them with more services. We are adding more and more. We are adding wealth management in both places. Let me give you an example of how they are very, very different. In Hong Kong, our clientele skews younger, skews younger and skews more mass. As we think of wealth management, we think of wealth management for that type of clientele. In Singapore, on the other hand, Singapore is a culture where people like having multiple credit cards and like, like having multiple banking relationships. Trust has actually gained a lot of real affluent clients that are the natural clients of someone like Standard Chartered.
The wealth management offering there will skew more toward that type of product. It will be, if you wish, a little bit more sophisticated and a bit less transactional. The other one will be more sophisticated in the transactional sense. That allows us to continue to experiment. Frankly, we are not yet at the point where we know where the limit is, but we will know a little bit more in May and we will give an update on that one.
Okay. That's great. You have something to look forward to on Mox and Trust.
I know you can, I know you can't wait to Trust Hong Kong with us.
We'll wait till May. We'll hold off. If you look at some of the areas that have been challenging in the past, geographically, I'm thinking Korea, India, Indonesia, UAE, can you talk about the turnaround there, and how you see these businesses progressing or regions?
Sure. Let's start from the start. The fact that it's, it's, it's a bit surprise, it's a bit strange to me because it was before my time at Standard Chartered. The concept that the UAE was once a challenge place for us makes me laugh because right now it's our third largest wealth management hub. It's a place where we are investing a lot in wealth management. We have completely refocused our business all around wealth management. There are 10,000 billionaires, not billionaires, 10,000 billionaires would be too much, 10,000 millionaires that are gonna join Dubai as Dubai, as the Dubai population, the Emirates population continues to grow.
That is a, that is a, that is, and by the way, that is the blueprint, that is mutandis because they are not as, as large wealth centers, but it's exactly the blueprint that we are gonna, that we are gonna follow in the other places with some changes. Think Korea. Korea is definitely a difficult market from a retail point of view. We will continue to shift very heavily toward wealth management, which means we are upgrading, we will continue to reduce our footprint there. We continue to upgrade the quality of our footprint. We opened a great wealth management center in Gangnam, that is proving the fact that our proposition there with our signature funds and our open architecture is working really, really well in that market. It is a wealthy market.
I mean, the growth, the growth of wealth in the affluent segment of the population in Korea is in the very high single digits. No doubt it's going well there. In India, it's, India is another place where we will pivot towards wealth, and pivoting toward wealth in India. We now have three wealth centers in Mumbai and one in Chennai that are fundamentally solely aimed at the global Indian population. I've said before, we exist, our footprint seems tailor-made for serving that population. You think about those investments, that's the direction of travel in India. While our CIB business, of course, in India does extremely well because for a decade we have been the main provider of dollar financing to Indian corporations. We are the dollar clearer of Gift City. We are growing in Gift City, our activities, et cetera, et cetera.
That is where we are going in all of these geographies. It is de-emphasizing the mass, the single, the single product customer relationship. We sold a large portfolio. You will remember last year a large portfolio of personal loans in India. We have de-emphasized certain of our digital activities with mass customers and invest into wealth. That is the footprint. That is the blueprint. Dubai shows us that we know how to do it.
If we maybe switch from these potential turnaround slash growth opportunities to more the group P&L, and maybe start with NRI, and we're not gonna talk first quarter. You've given guidance for the first quarter, but more longer term trends, balance sheet mix, balance sheet growth, especially lending. What do we need to really see lending picking up both on the retail corporate side? In that context, clearly your structural hedge, how should we think about the dynamics, the challenges as well, more from a top-down perspective?
Sure. As it probably the, probably the best way to, that it works to break down NII is to think about its components. Let's think about, you mentioned one super important component, volumes. But let's start from a second, from rates. If we start from rates, our footprint has a lot of rates. Never read what happens to software in the U.S. and think that that's what's happening to Standard Chartered. That's a small component of what we do. In fact, that's why we publish our own index weighted by our level of activity by countries of how interest rates affect us. It's clear that two things are clear. One is that next year there is still some headwind coming our way and a little bit than we were expecting before.
It is also very clear that a large amount of the headwind has already taken place this year. From a rates point of view, there is nothing to be particularly afraid if you believe the forwards, which are the only thing we look at. We do not make, we are not JP Morgan. We do not make our own forecasts and predictions. We love taking the forwards and managing ourselves based on what the market expects. The second big influence on NII, of course, ought to be volumes. As you say, when are we gonna see volumes? The interesting thing is at the beginning of the plan, at the beginning of 2024, we said that we thought we were in a subdued period for volumes and that we would see volumes growing at low single digits.
This year to date, customer loans and advances have actually grown at 4%. Our risk-weighted assets on a constant currency basis have grown at 3%. It's going a little bit better than what we expected, but it's definitely below the natural rate of growth of our footprint, which is more in the 5% plus region. If you believe that there is an inverse correlation between rates and volumes, you gotta believe that next year it's gonna be a little bit better as rates continue to decline. Are we gonna go back to the average trend line? I doubt it because the decrease in interest rates is not particularly marked, at least right now we don't expect it, but volumes should come to help a little bit.
The third component of NII and one that I am very, very happy with the way we are handling it is the pass-through rates. On pass-through rates, we are currently operating at pass-through rates that are nicely in excess of the top end of what we normally operate in, in the corporate and investment bank. We are operating within normal framework in wealth and retail. Why is that? Two reasons. One, because we are disciplined, because we believe it is really important to manage pass-through rates well. The second, we are also helped by the environment, particularly post-April the 2nd, the entire world, it is running itself a little bit more liquid.
Certainly, corporations are running themselves as substantially more liquid, which means that there are a lot of dollars around, which means that we can be a little bit discriminant in what do we wanna pay up for and what we do not want to pay up for. Pass-through rates right now are doing very well. Do I believe that we can continue to keep them there? We will do our best from our point of view, but in lower interest rates, pass-through rates become more difficult to manage. Of that, there is simply no doubt. Fourth, very importantly, the mix. There are several parts where we push the mix very aggressively. First of all, in assets, we obviously want to have as much commercial assets and as little treasury assets as possible.
We move aggressively trying to provide credit to clients, but there is a limit to how much volumes they will want. On the liability side, we are very clear that one of our big pushes continues to be higher quality liabilities, which means wealth and retail over corporate and investment bank. Within wealth and retail, maximize as much as possible the CASA that we attract, bearing in mind that for someone like Standard Chartered, time deposits are not a bad word. Quite to the contrary, we like time deposits in wealth and retail because they are cheaper than in the corporate bank. By the way, because eventually they become wealth solution sales to our customers. We really like them. These are the four big influences.
There is a fifth little influence, but that's the tail rather than the dog, which is the fact that several of the initiatives that we are doing in the wealth and retail side in order to reduce single customer relationships and reduce credit card and personal loans come with a little loss of NII in the region of $100 million, which is not the end of the world. But it is a little bit of a headwind, which is good to take because it leads to higher return on tangible.
If you're shifting to cost, you have the Fit for Growth program, $1.5 billion, your run rate's around $600 million.
Bit more. Yep.
You indicated around 80% will be achieved next year. Let's say we'll double roughly, I assume $1.2 billion or so. At the same time, you know, we're seeing this growth in wealth, we're seeing activity levels picking up, especially on the fee side in Asia. How should we think about growth, cost going forward in terms of cost management, the programs that you have and going forward in terms of cost pressure versus further productivity gains that you can take?
You'll forgive me for this because you've heard it many times, but maybe some people in the audience haven't heard it. I always say that the diet of a CFO is a pretty varied diet. We eat, we are omnivores, but there are two things that I eat every day. One is costs and the other is balance sheet optimization. Costs, there is no doubt that they will remain an important focus. I think we have demonstrated that we are managing them pretty well, pretty assertively. You are very right. Growth is important and revenues are important. We always say that there are certain costs that are the cost of success and we need to feed the machine in order to achieve the results. Fit for Growth was ideated for that. It is a transformational program.
It's a program that has helped us reshape the way that the bank does many things. Also, it has helped to reshape the way that our people think about transformation. Our people are more cost attuned, are more transformation attuned today than they were two years ago. Having said that, Fit for Growth definitely finishes next year. There isn't Fit for Growth number two. Our cost to achieve finishes being spent next year. We are being careful in how we spend it. As you continue spending in a program, you realize that some of the things that you are spending, you need to stop spending and redeploy it somewhere else. You need to always make sure that you are spending for growth. Within that context, we will deliver what we have promised for 2025. We will get into 2026.
What you did not mention is that there is a portion of the, sorry, you actually did, that there is a portion of the benefits that actually accrue after 2026. I think that you will continue to see a very cost-conscious Standard Chartered going forward. We will tell you which form that will take once again in May.
Okay. I think with that, we open up for questions. There should be a microphone on the table. Do you have questions? I have a few more questions, but let's see.
The key and reserve.
Thank you. It's Gigi Sparling from JP Morgan. You've talked a lot with other bank management teams today about M&A, but we never seem to talk about it with Standard Chartered. Is that something that you are discussing, please, at a management level?
It not much, I would say, in the sense that M&A, you do M&A for various reasons, but fundamentally you do M&A because you need to create growth in one way or the other, of revenues, of synergies, of cost synergies, or whatever it is. We are blessed with a naturally growing footprint where we can grow very well organically, where our return on tangible equity is continuing to increase. When our shareholders, many of whom sit in the audience today, are happy to see us reinvest in our organic growth because we are doing it at increasing levels of return on tangible equity. The answer is not much. It is true that as time evolves, as we are at a high level of return on tangible equity, we generate a lot of earnings.
Would we be able to look at small bolt-ons or in fields or things that can help us accelerate the growth? Possibly, but it's far from that. It's very low on the level of management discussions inside Standard Chartered.
I mean, you generate about 200 basis points of capital when we do the calculation. How do you think about optimizing also from a capital return perspective? There is M&A, but there is also clear capital return. You are now at tangible book value. Does that change things about the mix between buybacks and dividends? How do you think about the hurdle rate, which is clearly getting higher?
I think that in, I cannot imagine a state of affairs at Standard Chartered today in three years, in six years, in which we are not gonna always have at the top of our capital allocation hierarchy investing in our own business. Because it's at, it's at increasing levels of return on tangible equity and they are increasingly attractive. That part is and will remain, I believe, the most important part of our capital allocation hierarchy. As you say, we generate plenty of capital. We intend to continue returning capital to our shareholders aside from the commitments we have made of over $8 billion in the 2024 to 2026 period. In May, once again, we will put out a capital allocation hierarchy. I think dividends and buybacks will continue to feature. Why? For a number of reasons.
Because although we are above tangible book value and we are far from happy about being only above tangible book value, buybacks, you do them for as long as you believe that your stock is undervalued. We think that we are still undervalued. It also has the beautiful side effect of increasing those lovely per share numbers of earning per share, TNAB per share, et cetera, which we know are important contributors to the happiness of our shareholders and to the health of our stock price. They will continue. It is true that the higher level of return on tangible equity and the recurrent nature of generation of earnings of our franchise make it so that over the course of the next few periods, we will have to think about what do we do from a dividend point of view.
It's entirely possible that we decide to increase the payout ratio from that point of view because we are in a position where we can do it, but it's a bit early to discuss that in more detail.
We very much agree with you. One times tangible 27 on our numbers versus 14% return. So still very cheap.
Thank you. Thank you. Can we restart this?
We take further questions. Yeah, this one.
Hi. Could I ask again on, on wealth? Given the wealth is a secure story, what could go wrong? Is it high competition from relationship managers, margin on product offering, or, or flows? If you could, elaborate on that. Thank you.
I struggle to believe on any of those. First of all, I'll tell you what can go wrong on wealth. We can have a nine-month markets recession with every asset class down 30%. That is not gonna be good for our wealth management business or any other wealth management business. On the more idiosyncratic points that you pointed out, we are gonna grow our relationship managers by 50% over five years. We are perfectly in line with the 10% that we need to grow for this year. It's a constant J curve because it takes them 12 to 18 months to come up to speed and be at their most productive. Relationship managers for affluent love to come to work for us because we are open architecture. We are an international bank. We are in the right places in the world.
There is no shortage of talent out there. Competition is undoubtedly carnivorous. We have added to assets under management, through our net new money, very, very consistently, and we've maintained good return on asset level of margins. I think, and the flows, the nature of the flows, we are very balanced. Last quarter, yes, it's true that international clients, what we like to call increasingly the globally minded affluent, are the most important part of our clientele, but they were 60% and 40% were domestic. Within the 60%, we have global Chinese, we have global Indians, we have expatriates, we have other internationally minded people that are moving to places like the Middle East, or inside India. We have a lot, we have a lot of different opportunities.
I struggle to think of any of the various very well diversified parts of wealth management as one that could weigh layers, but there is no doubt that an outside markets-based recession is not good.
Any further questions? Oh, we're actually out of time.
There you are. Yeah. I was looking at that.
Let's stop here. Yes. Otherwise I get in trouble. Thank you very much, Diego. It was very comprehensive. We look forward to May, and of course also the full year results with the guidance for 2026.
Will do. Thank you, everyone. Thank you.