WEBVTT - Standard Chartered Bank CFO Diego De Giorgi Talks Higher Returns

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

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<v Speaker 2>Now, Standard Chartered is set to return another one point

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<v Speaker 2>five billion dollars to shareholders this as the London based

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<v Speaker 2>lender reports fourth quarter earnings that beat estimates. Let's cross

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<v Speaker 2>over to London right now where Bloombos Ana Edwards is

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<v Speaker 2>standing by, ready to speak to the CFO.

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<v Speaker 3>Of that bank. Anna, Thanks very much, tom Y.

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<v Speaker 4>I'm really pleased to say I'm joined by Diego di Georgi,

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<v Speaker 4>who is the CFO of Standard Chartered and joins me

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<v Speaker 4>here on set in London. Diego, nice to have you

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<v Speaker 4>with us this Friday morning.

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<v Speaker 3>Thank you for coming in. So the numbers themselves coming

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<v Speaker 3>in better.

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<v Speaker 4>Than estimates, returning one and a half billion dollars to shareholders.

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<v Speaker 4>You've given some guidance this morning. I wonder whether the

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<v Speaker 4>guidance looks a bit conservative. That's one of the conclusions

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<v Speaker 4>coming out of one of the analysts this morning. How

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<v Speaker 4>do you how do you rationalize the guidance you're giving.

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<v Speaker 1>Well, look, we upgraded our guidance at Q three and

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<v Speaker 1>in the meantime we have delivered another strong repeat performance

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<v Speaker 1>by our engines of growth, financial markets, banking and in

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<v Speaker 1>particular our wealth management business, and it's really been consistent

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<v Speaker 1>delivery quarter after quarter, and that has allowed us to

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<v Speaker 1>reach eleven point seven percent return on tangible equity, which

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<v Speaker 1>is at one hundred and sixty business points increase on

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<v Speaker 1>last year. When you think of it, we're really delivering

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<v Speaker 1>top line growth fourteen percent, and we are marrying with

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<v Speaker 1>a returning capital to our shareholders. And we've announced, as

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<v Speaker 1>Tom just said, another one and a half a billion

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<v Speaker 1>dollar buy back, which, when you think about it, really

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<v Speaker 1>means that we are delivering what we have promised to

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<v Speaker 1>our shareholders, which is sustainably higher returns from our high

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<v Speaker 1>growth business in our high growth market.

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<v Speaker 4>Okay, and a lot of banks have had the experience

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<v Speaker 4>of being assisted in this activity by higher interest rates

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<v Speaker 4>and ness interest margin benefits from those higher interest rates.

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<v Speaker 3>What are you assuming for this.

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<v Speaker 4>Year and therefore, you know, could you be could your

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<v Speaker 4>numbers do better if rates are not cost as much

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<v Speaker 4>as maybe we were expecting recently.

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<v Speaker 1>So the environment might be a little bit more conducive

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<v Speaker 1>than we were expecting up until a few months ago.

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<v Speaker 1>But first of all, let's remember that in terms of

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<v Speaker 1>contribution to the top line, our net interestingcom contributes about

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<v Speaker 1>fifty percent, and our non net interesting income contributes about

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<v Speaker 1>another fifty percent. Non net interesting income has very strong

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<v Speaker 1>engines of growth, up twenty percent last year, as we

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<v Speaker 1>have just discussed. And in terms of net interest income,

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<v Speaker 1>we have been building up our heades the risking the

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<v Speaker 1>delivery of net interest income, and I think that positions

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<v Speaker 1>as well for this slightly more uncertain world.

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<v Speaker 4>Okay, so let's turn to the other paths of the

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<v Speaker 4>income stream and a wave nets interest margin in the

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<v Speaker 4>other areas. One of the areas want to ask you

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<v Speaker 4>about it is global markets and what you managed to

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<v Speaker 4>achieve them. The global markets business getting a boost from

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<v Speaker 4>some of the flacility in markets. It seems traders doing

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<v Speaker 4>well on that, and that's been a story across Wall Street,

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<v Speaker 4>across lots in the banking sector. The thing is, is

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<v Speaker 4>that sustainable in any way? Do you have any visibility

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<v Speaker 4>on whether that kind of performance is sustainable?

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<v Speaker 3>So I think it's sustainable for us.

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<v Speaker 1>And the reason is that our markets business, as we

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<v Speaker 1>often like to point out, is a peculiar type of

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<v Speaker 1>market business because we are a giant connector bank. Really

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<v Speaker 1>seventy five percent of what we do in markets is

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<v Speaker 1>helping our clients manage their exposures to foreign currency, interest

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<v Speaker 1>rates and other risks.

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<v Speaker 3>That is very.

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<v Speaker 1>Recurrent activity when volatility then spikes, so we add to

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<v Speaker 1>it performance in helping them take advantage of those market

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<v Speaker 1>these locations. But the delivery of our financial markets numbers

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<v Speaker 1>is highly de risked once again by this attractive, by

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<v Speaker 1>this attractive complexion of the business. And it's business that,

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<v Speaker 1>by the way, grows well. We pointed out at Q

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<v Speaker 1>three at our last set, at our last set of results,

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<v Speaker 1>that this part of the business grows at almost ten

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<v Speaker 1>percent perannum and it's been doing so for five years.

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<v Speaker 3>Yeah, okay, so.

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<v Speaker 4>You're confident in the sustainability of the performance there in

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<v Speaker 4>terms of the wealth management side of the business, managing

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<v Speaker 4>money for increasingly wealthy people. That's not a revenue stream

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<v Speaker 4>that you have. What do those conversations look like at

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<v Speaker 4>the moment? Are global investors are they talking about, well,

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<v Speaker 4>there's still no alternatives being invested in the United States

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<v Speaker 4>tech story or is it a much more global narrative?

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<v Speaker 3>How is it shifting?

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<v Speaker 1>So for us for standard charter, it's a very global

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<v Speaker 1>narrative in particular because of the nature of the wealth

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<v Speaker 1>management activities that we do. While we are present across

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<v Speaker 1>the continuum of wealth management all the way up to

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<v Speaker 1>the private bank, the core of what we do is

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<v Speaker 1>really with the affluent customers. These are customers that have

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<v Speaker 1>with US five hundred thousand dollars one million, two million dollars.

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<v Speaker 1>These people really save and invest with us. So that

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<v Speaker 1>kind of debate, although the type of products that they

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<v Speaker 1>use might be shifting over time, is really focused really

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<v Speaker 1>on the long term.

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<v Speaker 3>From that point of view.

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<v Speaker 1>Of course, we are assisted by the incredible secular trends

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<v Speaker 1>that we have in our markets.

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<v Speaker 3>Our markets are the.

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<v Speaker 1>Fastest growing ones in the world, and the places where

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<v Speaker 1>most of the weld two thirds of the wealth of

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<v Speaker 1>the middle class over the course of the next five

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<v Speaker 1>years is really going to be creating in Asia, Middle

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<v Speaker 1>East and Africa.

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<v Speaker 3>Yeah, and that's where the business is focused.

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<v Speaker 4>Let me ask you about the Shepherd's performance because bel

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<v Speaker 4>WinCE's the CEO, quite famously recently described a year or

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<v Speaker 4>so again, describe the performance of the shares as crap.

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<v Speaker 3>I wonder if you have a different word.

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<v Speaker 4>That you'd like to use now, because now the stock

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<v Speaker 4>is caught up with the rest of the.

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<v Speaker 3>European banking sector. So three words, more to do.

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<v Speaker 1>I think we've done well, I think, and by the way,

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<v Speaker 1>we don't manage to the stock res I mean we

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<v Speaker 1>manage the bank. We try to deliver sustainably higher returns.

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<v Speaker 1>We try to return excess capital after we have invested

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<v Speaker 1>heavily in our business so that we can deliver those

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<v Speaker 1>sustainably higher returns. But it's true that we've had a

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<v Speaker 1>good performance, but you know, we keep our eye on

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<v Speaker 1>the ball. We continue executing and we hope that the

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<v Speaker 1>market will continue to reward us. But there is more

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<v Speaker 1>to do, no doubt there.

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<v Speaker 4>Is most okay, we take that message in terms of

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<v Speaker 4>the way that you reward staff. We're sitting here in

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<v Speaker 4>the UK, diego and here in the UK you've got

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<v Speaker 4>more flexibility to pay stuff with bigger bonuses since in

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<v Speaker 4>recent regulatory changes. How important is that in the global

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<v Speaker 4>competition for banking talent?

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<v Speaker 1>Very much so, in the sense that it's truly a

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<v Speaker 1>global competition.

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<v Speaker 3>And look at a few things here.

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<v Speaker 1>We've always been a signed with the industry and we

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<v Speaker 1>intend to be aligned with the industry going forward. And

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<v Speaker 1>this shift towards more performance related pay I think is ideal.

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<v Speaker 1>It aligns the interests of our colleagues with the interests

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<v Speaker 1>of our shareholders, and it enables us to attract talented people,

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<v Speaker 1>which is what we need in order to serve our

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<v Speaker 1>clients in these uncertain and more fragmented times.

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<v Speaker 3>Yesertain, more fragmented.

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<v Speaker 4>And you've mentioned how some of that volacility helps on

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<v Speaker 4>the global markets business, for example, and there's a lot

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<v Speaker 4>of need to perhaps hold investors' hands through a lot

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<v Speaker 4>of this velocility. I wonder if that drives opportunity. Actually,

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<v Speaker 4>when you're managing money for wealthy global investors, if there's

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<v Speaker 4>a lot of velacility and a lot of uncertainty, does

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<v Speaker 4>that mean they require more or different things from you?

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<v Speaker 3>Very much so.

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<v Speaker 1>And by the way, allow me to take one step

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<v Speaker 1>back for a second. There is a lot of discussions

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<v Speaker 1>about theglobalization, lack of growth, et cetera. First of all,

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<v Speaker 1>the world is growing strongly and it will continue to

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<v Speaker 1>do so. Deglobalization is just globalization shifting towards new corridors.

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<v Speaker 3>And these new.

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<v Speaker 1>Corridors of growth that globalization is shifting towards are the

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<v Speaker 1>intra Asian Asia to the Middle East, Asian Middle East,

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<v Speaker 1>and Africa corridors the standard chart that really sits astride,

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<v Speaker 1>but there's.

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<v Speaker 4>Less over between those corridors. In a declobalized well.

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<v Speaker 1>There might be, but the diversification effect of all of

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<v Speaker 1>that will lead to a continued set of flows which

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<v Speaker 1>are going to be more fragmented. And that fragmentation, that

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<v Speaker 1>complexity of navigating this environment is what our clients look

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<v Speaker 1>to us for help.

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<v Speaker 3>Thank you so much for joining us. Very nice to

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<v Speaker 3>speak to you this morning.

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<v Speaker 4>Diego di Geogi at the CFO of Standard Charts