WEBVTT - Standard Chartered CEO Bill Winters Talks Buyback, Stock Price Performances

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Standard Chartered shares higher in Hong Kong after the London

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<v Speaker 2>based bank said that it would ramp up its multi

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<v Speaker 2>billion dollar share buyback program, this as it reports a

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<v Speaker 2>beat on second quarter pre tax profits driven by its

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<v Speaker 2>wealth business. And I'm pleased to say that we're joined

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<v Speaker 2>now by the CEO of Standard Charted, Bill Winters.

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<v Speaker 1>Welcome back to the program, Veil.

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<v Speaker 2>Let's start with that buyback one point five billion dollars,

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<v Speaker 2>a plan to return at least five billion dollars to

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<v Speaker 2>investors by twenty twenty six. Is there a times you

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<v Speaker 2>could go beyond that target now that you've got results

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<v Speaker 2>like these. Yeah.

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<v Speaker 3>We set a three year target of an excess of

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<v Speaker 3>five billion. We've done two point seven billion in the

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<v Speaker 3>first first year so far. So yeah, if we continue

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<v Speaker 3>to perform well. What we've said to shareholders is we've

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<v Speaker 3>got a strategy. We're pursuing the strategy. It's working quite well.

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<v Speaker 3>Earnings are strong. We're managering capital very very directly and

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<v Speaker 3>I take quite active and that's allowed us to return

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<v Speaker 3>any surplus to shareholders.

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<v Speaker 1>And we said especially giving where our stock prices, which

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<v Speaker 1>is not as high as we think it should be.

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<v Speaker 1>We will buy.

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<v Speaker 3>Back as many shares as we can with surplus capital.

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<v Speaker 1>That's what we're doing.

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<v Speaker 3>If we keep on performing, of course, we can keep

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<v Speaker 3>on buying back shares.

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<v Speaker 1>Yeah.

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<v Speaker 2>I think earlier in the A you described the stock

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<v Speaker 2>price performances and I quote crap. So you're not still

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<v Speaker 2>not happy with it.

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<v Speaker 1>No, of course not.

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<v Speaker 3>It's less crap than it was, but it's you know,

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<v Speaker 3>we have a long way to go, and yeah, we

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<v Speaker 3>have to ask a question why it certainly isn't that

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<v Speaker 3>we're not performing well.

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<v Speaker 1>So the performances we can do better.

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<v Speaker 3>I will always recognize that we can do better, and

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<v Speaker 3>we are doing better. But yeah, I think we're operating

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<v Speaker 3>in a somewhat difficult environment and I think we need

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<v Speaker 3>to be clear about just how differentiated Center Chartered is.

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<v Speaker 3>And at the end of the day, we serve multinational

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<v Speaker 3>corporations on their cross border needs and we serve affluent individuals.

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<v Speaker 1>We do that extremely well.

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<v Speaker 3>We got a fully scaled and quite a substantial position

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<v Speaker 3>across Asian, Middle East and Africa, but also with more

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<v Speaker 3>national corporations coming out of the Americas and Europe.

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<v Speaker 1>That's what we do.

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<v Speaker 3>We're doing it well, it's generating good returns.

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<v Speaker 1>We keep on going.

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<v Speaker 2>So do you have potentially a new target figure for

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<v Speaker 2>the buyback target.

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<v Speaker 3>We haven't revised our We just set the five billion

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<v Speaker 3>target in February. I mean, we're not going to find

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<v Speaker 3>tune this thing every.

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<v Speaker 1>Three six months.

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<v Speaker 3>What we said was we'll do in excess of five billion,

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<v Speaker 3>and we're on track to achieve that. And as I said,

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<v Speaker 3>we'll keep on going if we can generate the strong performance.

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<v Speaker 2>Okay, I want to ask how your Fit for Growth

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<v Speaker 2>plans going. So this is your plan to cut costs

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<v Speaker 2>by one point five billion dollars over the next three years.

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<v Speaker 2>Are you seeing much wage inflation?

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<v Speaker 1>For example, we have.

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<v Speaker 3>We obviously had a big spike in wage inflation last year.

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<v Speaker 3>This year is much more subdued, and that obviously is

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<v Speaker 3>getting back down to normal. The fIF for Growth really

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<v Speaker 3>is a transformation program. So we've had cost cutting programs

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<v Speaker 3>pretty much my whole time as Center Charter, and we'll

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<v Speaker 3>continue to get more efficient. We're trying to do this

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<v Speaker 3>one a bit different though, which is actually quite a

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<v Speaker 3>bit differently, which is to look at every single one

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<v Speaker 3>of our processes and say, how do we simplify this.

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<v Speaker 3>How do we replace manual processes with digital processes, automation, simplification,

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<v Speaker 3>et cetera. How do we make it an easier place

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<v Speaker 3>to get things done for ourselves, for our colleagues, for clients.

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<v Speaker 1>That requires investments.

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<v Speaker 3>So in addition to saving one point five billion a year,

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<v Speaker 3>we said we're going to spend one point five billion upfront.

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<v Speaker 1>To achieve that everything is on track.

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<v Speaker 3>We've got over two hundred initiatives that we're pursuing.

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<v Speaker 1>Each one is quite small.

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<v Speaker 3>I mean, these aren't a big, big marquee projects, but

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<v Speaker 3>collectively it makes a big difference.

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<v Speaker 2>Okay, there's still into these pre tax profits arise driven

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<v Speaker 2>by your wealth business. Where are the biggest inflows geographically?

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<v Speaker 3>Biggest inflows for US are everything international, so what we

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<v Speaker 3>call international banking, a big chunk from mainland China, investing

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<v Speaker 3>in Hong Kong, investing in Singapore to a lesser extent,

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<v Speaker 3>and investing in Dubai. But that's happening global Indians, so

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<v Speaker 3>that the Indian wealthy population obviously growing very quickly. Again

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<v Speaker 3>across Dubai, Singapore, Hong Kong are three big wealth hubs

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<v Speaker 3>in addition to Jersey.

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<v Speaker 1>But also the rest of OSI in.

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<v Speaker 3>I mean, the wonderful thing about our footprint is that

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<v Speaker 3>there's a rising upper middle class. They're saving, in many

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<v Speaker 3>cases for the first time in their families histories, and

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<v Speaker 3>people who had some wealth before, of course are becoming

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<v Speaker 3>wealthier as these economies grow, and it just is playing

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<v Speaker 3>right into our strengths.

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<v Speaker 2>I do want to come back to the China outlook,

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<v Speaker 2>but on wealth, could you hire more wealth managers?

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<v Speaker 1>We are hiring more wealth managers.

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<v Speaker 3>We've had it about We've grown the number of wealth

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<v Speaker 3>managers by about nine percent nine ten percent per year

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<v Speaker 3>for the past three years, and we'll keep on going.

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<v Speaker 3>We're focusing on the full spectrum, from the ultra high

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<v Speaker 3>networth so private banking, through to our real sweet spot,

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<v Speaker 3>which is the mass affluent, so you know, people that

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<v Speaker 3>have material savings but aren't in the family office zone.

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<v Speaker 3>And we're very good at it helping lift those those

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<v Speaker 3>individuals or families out of the states that they've been

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<v Speaker 3>in which have been typically not accumulating savings into investing

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<v Speaker 3>substantial amounts.

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<v Speaker 2>And you've got a target of over eighty billion dollars

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<v Speaker 2>of net new money for twenty twenty four to twenty

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<v Speaker 2>twenty six. Are you confident now that you're going to

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<v Speaker 2>hit or beat that target.

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<v Speaker 1>We're very much on track.

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<v Speaker 3>So the guidance that we gave just just six months ago,

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<v Speaker 3>we've already surpassed that. In terms of the early stages.

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<v Speaker 3>It's been a good market. It's not been a perfect market,

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<v Speaker 3>and obviously we've had challenges in some of the equity

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<v Speaker 3>markets around the world, and so questions about how the

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<v Speaker 3>tech sector will perform.

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<v Speaker 1>Et cetera.

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<v Speaker 3>But against the backdrop of a market which is i'd

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<v Speaker 3>say neutral in terms of attractiveness, we're outperforming. So assuming

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<v Speaker 3>the market stays neutral, I think we'll do very very well.

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<v Speaker 3>If we have a very very difficult time in the market,

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<v Speaker 3>it gets tough for a short period of time. But

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<v Speaker 3>this is a long term story, and this you know,

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<v Speaker 3>we've been growing it at nine ten percent for ten years,

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<v Speaker 3>and we we cover that, and we'll cover that in our.

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<v Speaker 1>Earnings presentation in just a bit. That this is a

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<v Speaker 1>long term, secular growth story.

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<v Speaker 3>It'll be volable from quarter to quarter, maybe even from

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<v Speaker 3>year to year, but the trajectory is very clear and

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<v Speaker 3>we're perfectly positioned for it.

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<v Speaker 2>You mentioned China Hong Kong. I wonder whether you're still

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<v Speaker 2>staying on the sidelines when it comes to Hong Kong.

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<v Speaker 1>Mortgages, so.

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<v Speaker 3>Tooth stories about Hong Kong mortgages versus they're very safe.

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<v Speaker 3>We've got very low loan to value and aggregate, so

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<v Speaker 3>we've got zero concerns. Even with a somewhat soft residential

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<v Speaker 3>property market in Hong Kong, and it is a little

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<v Speaker 3>bit soft, we've got no concerns about losses. But the

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<v Speaker 3>market is extremely competitive and Hong Kong mortgages tend to

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<v Speaker 3>be the thing that soaks up surplus deposits, and there

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<v Speaker 3>is a surplus of deposits in Hong Kong right now,

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<v Speaker 3>so the margins are quite are actually unattractive in Hong Kong.

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<v Speaker 3>Our market chair has we've taken it down deliberately, but

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<v Speaker 3>we're not concerned about that because the franchise for our

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<v Speaker 3>customers in Hong Kong, it is still extremely strong and

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<v Speaker 3>we're able to service any customer that looks at mortgages

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<v Speaker 3>as part of a broader relationship. So we continue to

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<v Speaker 3>be active, just not as active as we have been

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<v Speaker 3>in the past.

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<v Speaker 2>Okay, we were talking about the stock price. What do

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<v Speaker 2>you think it's going to take for it to be

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<v Speaker 2>properly re rated by the market.

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<v Speaker 1>Well, that's a big question.

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<v Speaker 3>And the first story is for us is to keep

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<v Speaker 3>on performing. So this performance today we'll add to that momentum.

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<v Speaker 3>It's been if you can draw a line through the

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<v Speaker 3>interest rate.

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<v Speaker 1>Effect of the COVID period, it's been a.

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<v Speaker 3>Good study performance story for five years. But obviously we

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<v Speaker 3>have to demonstrate to the market that is sustainable in

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<v Speaker 3>this kind of a rate environment. Everyone expects rates to

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<v Speaker 3>come down probably starting in September. That will provide or

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<v Speaker 3>present some sort of an interest rate headwind, but we've

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<v Speaker 3>still guided to increasing that interest income because we can

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<v Speaker 3>think we can offset the rate effect with volume growth

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<v Speaker 3>and with mixshifts in our portfolio.

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<v Speaker 1>So I think, but we need to demonstrate that.

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<v Speaker 3>Second, I think that the world will need to recognize

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<v Speaker 3>that we're not a proxy for Chinese GDP. We are

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<v Speaker 3>a proxy for the degree to which China opens up

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<v Speaker 3>to some degree. We've got a super business in China.

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<v Speaker 3>We're helping connect China to the rest of Asia, to

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<v Speaker 3>the Middle East, Africa to the rest of the world,

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<v Speaker 3>and vice versa. Those trade links and investment links haven't

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<v Speaker 3>gone away. In fact, they're extremely robust. But the market

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<v Speaker 3>still sees China as an economic weak spot and is.

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<v Speaker 1>Concerned that that could spill over to our earnings.

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<v Speaker 3>Empirically, we're showing it doesn't, so I'm very hopeful as

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<v Speaker 3>we just stick to our knitting focus on those things

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<v Speaker 3>where we really make a difference, will perform, will generate

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<v Speaker 3>the results, share price will follow.

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<v Speaker 2>So you're not a proxy for China GDP. You're London listed,

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<v Speaker 2>but the business isn't predominantly about London. I do wonder

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<v Speaker 2>whether you expect a lift to the valuation because of

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<v Speaker 2>the boost from the lack of political uncertainty. Now, given

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<v Speaker 2>Labor's electual.

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<v Speaker 3>Win, well, it's certainly good to have a stable government

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<v Speaker 3>in the UK. I think they've, as the Chancellor has

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<v Speaker 3>made clear, they've were working through some challenges fiscal and otherwise.

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<v Speaker 3>But certainly all of the rhetoric to this point from

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<v Speaker 3>this Labor government has been very supportive of a stable

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<v Speaker 3>business environment. Which is not to say that that there's

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<v Speaker 3>going to be giveaways or handouts.

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<v Speaker 1>There won't be.

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<v Speaker 3>We don't expect that at all, but predictability in and

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<v Speaker 3>of itself is a good thing. The last government passed

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<v Speaker 3>through a competitiveness objective, a secondary objective for the regulators

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<v Speaker 3>to focus not just on financial stability but also on

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<v Speaker 3>creating a competitive financial sector.

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<v Speaker 1>These things are working through the system, and.

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<v Speaker 3>Me thankly it's a highly sophisticated regulatory environment here, stable politically,

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<v Speaker 3>that's a good environment for us to have a headquarters.

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<v Speaker 2>Okay, good, And just finally, Bill, you're in your tenth

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<v Speaker 2>year now as CEO. You talk about the long term.

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<v Speaker 2>You've said before you've got no plans of going anywhere,

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<v Speaker 2>and I wonder whether it's your intention to see through

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<v Speaker 2>this cost cutting and growth plan until at least their

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<v Speaker 2>completion in twenty twenty six.

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<v Speaker 1>Yeah, i'd like to. I'd like to, but you know,

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<v Speaker 1>you know how these things go. You live it from

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<v Speaker 1>day to day.

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<v Speaker 3>But certainly all the actions I'm taking today are with

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<v Speaker 3>a medium long term view. I've always tried to be

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<v Speaker 3>that way. And we've got a fantastic team as Santa Charter,

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<v Speaker 3>with a couple of new members and a couple of

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<v Speaker 3>people that have been with us for a long time.

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<v Speaker 3>So I'm quite sure that what we build in the

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<v Speaker 3>coming years we can continue for some time to come.

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<v Speaker 1>But yeah, my hope.

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<v Speaker 3>Objective is to see if we can deliver the strategy well.

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<v Speaker 2>I hope to be discussing your ownings with you for

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<v Speaker 2>many years to come. Bill into CEO Sander Charted. We

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<v Speaker 2>thank you for joining us