1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,080 --> 00:00:11,360 Speaker 2: How confident are you after these full year earnings that 3 00:00:11,400 --> 00:00:14,040 Speaker 2: actually are at a record that you can continue on 4 00:00:14,080 --> 00:00:16,759 Speaker 2: this trajectory given all of the challenging environment around you. 5 00:00:18,640 --> 00:00:20,400 Speaker 1: Well, I'm very pleased with the fact that we've been 6 00:00:20,400 --> 00:00:23,759 Speaker 1: able to report thirty billion of PBT, which is obviously 7 00:00:23,760 --> 00:00:27,120 Speaker 1: a record. But also I'm very pleased with the return 8 00:00:27,160 --> 00:00:29,280 Speaker 1: on tangible equity. We've been working hard for the past 9 00:00:29,320 --> 00:00:31,760 Speaker 1: four years to make sure we deliver mid teen's returns, 10 00:00:32,120 --> 00:00:34,960 Speaker 1: and we did that last year. You know, before material 11 00:00:35,000 --> 00:00:37,440 Speaker 1: notable items, we had a return on tangible equity of 12 00:00:37,479 --> 00:00:41,199 Speaker 1: fifteen point six percent. I'm also really pleased with the dividends. 13 00:00:41,240 --> 00:00:43,479 Speaker 1: We've been owned sixty one cents, which is the highest 14 00:00:43,479 --> 00:00:46,400 Speaker 1: dividend for the full year since two thousand and eight, 15 00:00:46,960 --> 00:00:50,000 Speaker 1: and we completed seven billion dollars a buyback, and we 16 00:00:50,040 --> 00:00:52,520 Speaker 1: announced another two billion dollar up to two billion dollar 17 00:00:52,560 --> 00:00:54,320 Speaker 1: buy back this year. So I'm really pleased with that 18 00:00:54,920 --> 00:00:58,360 Speaker 1: strong capital generation, and I believe with the cet one 19 00:00:58,440 --> 00:01:01,680 Speaker 1: ratio of fourteen point eight percent, we've got strong potential 20 00:01:01,800 --> 00:01:06,000 Speaker 1: future capital distribution as well. In the fourth quarter, we 21 00:01:06,040 --> 00:01:08,280 Speaker 1: did have some noise in the numbers. We had three 22 00:01:08,360 --> 00:01:12,160 Speaker 1: principle items that pulled down the profit. The first one 23 00:01:12,240 --> 00:01:15,919 Speaker 1: was we rebooked the loss on sale of our French 24 00:01:15,920 --> 00:01:19,480 Speaker 1: operation that we completed that transaction. It's neutral for the 25 00:01:19,560 --> 00:01:22,320 Speaker 1: year because we took a credit on that in Q 26 00:01:22,360 --> 00:01:24,960 Speaker 1: one and we've taken a charge in Q four, so 27 00:01:25,000 --> 00:01:27,679 Speaker 1: that nets each other out and neutral. There was an 28 00:01:27,720 --> 00:01:31,920 Speaker 1: adjustment for hyperinflation in Argentina driven by the devaluation that 29 00:01:31,959 --> 00:01:35,720 Speaker 1: took place. That's really a technical issue. And then the 30 00:01:35,800 --> 00:01:41,440 Speaker 1: third issue technical issue was Bocon. We have had had 31 00:01:41,440 --> 00:01:44,720 Speaker 1: an investment in Bocon for twenty years. Every quarter we 32 00:01:44,800 --> 00:01:47,920 Speaker 1: have to do a valuation in use test. We did 33 00:01:47,960 --> 00:01:51,240 Speaker 1: that again this quarter, updated the model and it compares 34 00:01:51,360 --> 00:01:55,080 Speaker 1: the value in use to the carrying value, and the 35 00:01:55,120 --> 00:01:57,680 Speaker 1: value in use dropped below and that would resulting in 36 00:01:57,720 --> 00:01:59,600 Speaker 1: a three billion charger. I just want to make clear 37 00:02:00,120 --> 00:02:04,160 Speaker 1: that has no impact on our capital position of any significance. 38 00:02:04,320 --> 00:02:08,400 Speaker 1: It does not prohibit distribution because it's non capital impactful. 39 00:02:08,760 --> 00:02:11,919 Speaker 1: It is a technical accounting issue. And I also want 40 00:02:11,960 --> 00:02:15,800 Speaker 1: to reiterate we have strong confidence in the China economy. 41 00:02:16,280 --> 00:02:20,080 Speaker 1: We believe there are huge opportunities ahead, and we believe 42 00:02:20,400 --> 00:02:23,360 Speaker 1: that our partnership with BOCOM has been a good partnership 43 00:02:23,360 --> 00:02:26,080 Speaker 1: for twenty years and that status has not changed. 44 00:02:27,160 --> 00:02:29,720 Speaker 2: No, given what you've just explained, are are there any 45 00:02:29,800 --> 00:02:32,959 Speaker 2: large asset sales ahead? Is there anything else that you're 46 00:02:32,960 --> 00:02:36,720 Speaker 2: thinking either that you need to sell off or actually 47 00:02:36,720 --> 00:02:39,880 Speaker 2: that there could be some kind of accounting concern. 48 00:02:41,520 --> 00:02:44,040 Speaker 1: Well, I think we've got the final lego of our 49 00:02:44,040 --> 00:02:47,600 Speaker 1: disposal of Canada to come at the end of Q one. 50 00:02:47,760 --> 00:02:51,280 Speaker 1: That will be a big sale completion. We're on track 51 00:02:51,320 --> 00:02:53,519 Speaker 1: for that at the end of Q one. That will 52 00:02:53,520 --> 00:02:57,680 Speaker 1: allow us to as we've already announced first use of proceeds, 53 00:02:57,720 --> 00:02:59,800 Speaker 1: we would like to use the first use of proceeds 54 00:02:59,840 --> 00:03:03,720 Speaker 1: as a special dividend of twenty one sense. We continue 55 00:03:03,760 --> 00:03:06,519 Speaker 1: to look at the portfolio to make sure the portfolio 56 00:03:08,040 --> 00:03:12,200 Speaker 1: is strategically correctly positioned and no businesses are underperforming. But 57 00:03:12,280 --> 00:03:15,560 Speaker 1: I think we've done the material transactions, but we will 58 00:03:15,600 --> 00:03:18,760 Speaker 1: continue to adapt and change if we feel as though 59 00:03:18,800 --> 00:03:22,200 Speaker 1: part of the portfolio is not strategic or is underperforming. 60 00:03:22,480 --> 00:03:25,400 Speaker 1: I also want to recap on Q four if you revert, 61 00:03:25,440 --> 00:03:30,079 Speaker 1: if you take the profit the underlying before material notables, 62 00:03:30,560 --> 00:03:33,079 Speaker 1: Q four reports would have been a seven point three 63 00:03:33,120 --> 00:03:37,560 Speaker 1: billion PBT, which is well up on the prior quarter 64 00:03:37,640 --> 00:03:38,640 Speaker 1: in twenty twenty two. 65 00:03:39,520 --> 00:03:42,360 Speaker 2: No, just going back to some of your potential significant sales, 66 00:03:42,600 --> 00:03:46,960 Speaker 2: are you also close to identifying any potential new Bolton acquisitions? 67 00:03:48,480 --> 00:03:50,640 Speaker 1: We keep looking at boltons and we've done quite a few. 68 00:03:50,720 --> 00:03:53,200 Speaker 1: I was really pleased that we were. We announced the 69 00:03:53,200 --> 00:03:57,480 Speaker 1: acquisition of Citybank's wealth business in China. That follows two 70 00:03:57,560 --> 00:04:02,040 Speaker 1: other investments we've put into China recently, taking our shareholding 71 00:04:02,120 --> 00:04:04,720 Speaker 1: in our insurance joint venture from fifty percent to one 72 00:04:04,760 --> 00:04:08,040 Speaker 1: hundred percent and the securities joint venture from fifty percent 73 00:04:08,040 --> 00:04:11,160 Speaker 1: to ninety percent. So you can see our confidence in 74 00:04:11,240 --> 00:04:13,960 Speaker 1: China is still strong and we're investing and we've done 75 00:04:13,960 --> 00:04:17,680 Speaker 1: three boltons there. We'll continue to look for boltons, particularly 76 00:04:17,720 --> 00:04:24,520 Speaker 1: in our wealth management business. We believe buying additional product capability, 77 00:04:24,680 --> 00:04:30,400 Speaker 1: specialism or distribution capability would be interesting, but we'll only 78 00:04:30,800 --> 00:04:33,080 Speaker 1: announce anything on that as and when we've got a 79 00:04:33,080 --> 00:04:34,919 Speaker 1: transaction to complete. 80 00:04:36,040 --> 00:04:38,400 Speaker 2: Have you identified anything at the moment and in which 81 00:04:38,440 --> 00:04:40,720 Speaker 2: part of the world. 82 00:04:40,240 --> 00:04:44,919 Speaker 1: We're always looking? The world is more around our wealth 83 00:04:44,960 --> 00:04:49,320 Speaker 1: business and we're trying to really build out our international 84 00:04:49,320 --> 00:04:53,000 Speaker 1: wealth and international retail banking proposition, and wherever we see 85 00:04:53,040 --> 00:04:56,400 Speaker 1: opportunity to enhance that and accelerate the organic growth plan, 86 00:04:56,760 --> 00:05:00,520 Speaker 1: we'll consider those boltons, but nothing in in the near 87 00:05:00,560 --> 00:05:01,680 Speaker 1: term pipeline. 88 00:05:01,240 --> 00:05:04,559 Speaker 2: At the moment, Are you still confident, Noll, that actually 89 00:05:04,640 --> 00:05:06,880 Speaker 2: the Chinese property market has bottomed out? 90 00:05:08,440 --> 00:05:11,159 Speaker 1: Yes, I am, Francine. I think when I signaled it 91 00:05:11,200 --> 00:05:13,920 Speaker 1: at Q three, I think I believe the market as 92 00:05:13,960 --> 00:05:17,880 Speaker 1: a whole has hit the bottom. I did say back then, 93 00:05:18,080 --> 00:05:21,120 Speaker 1: it still will take time for it to recover, and 94 00:05:21,200 --> 00:05:25,200 Speaker 1: I believe it will recover in a gradual and progressive basis, 95 00:05:25,320 --> 00:05:28,479 Speaker 1: not with one big bang stimulus package. But I have 96 00:05:28,600 --> 00:05:31,120 Speaker 1: been pleased to see some of the stimulus that has 97 00:05:31,160 --> 00:05:34,520 Speaker 1: gone into the Chinese economy in recent months, but that's 98 00:05:34,560 --> 00:05:38,760 Speaker 1: more around stimulating the demand side of the economy rather 99 00:05:38,839 --> 00:05:41,880 Speaker 1: than stimulating the supply side, and I think that's the 100 00:05:41,960 --> 00:05:44,039 Speaker 1: right thing to do, because then you'll get a more 101 00:05:44,120 --> 00:05:48,200 Speaker 1: enduring and sustainable recovery in the sector. It does mean 102 00:05:48,240 --> 00:05:50,240 Speaker 1: that there will still be some developers that are going 103 00:05:50,320 --> 00:05:52,800 Speaker 1: to work through their challenges, but I do believe the 104 00:05:52,839 --> 00:05:54,240 Speaker 1: bottom has been reached. 105 00:05:55,600 --> 00:05:58,480 Speaker 2: How concerned are you about recent developments in US commercial 106 00:05:58,640 --> 00:06:01,760 Speaker 2: real estate? Are you worried that spills over to the 107 00:06:01,839 --> 00:06:03,839 Speaker 2: UK and other markets and that will lead to write 108 00:06:03,880 --> 00:06:05,000 Speaker 2: downs and provisions. 109 00:06:06,200 --> 00:06:09,040 Speaker 1: No, I think we've taken a fairly cautious position, and 110 00:06:09,360 --> 00:06:11,200 Speaker 1: if you go back over the US two to three 111 00:06:11,200 --> 00:06:15,880 Speaker 1: to four years, we've been progressively de risking our portfolio, 112 00:06:16,000 --> 00:06:18,479 Speaker 1: particularly in commercial real estate in the US. I think 113 00:06:18,520 --> 00:06:22,719 Speaker 1: our book today in the US would probably be circa 114 00:06:22,839 --> 00:06:26,039 Speaker 1: fifty percent or less than the book we would have 115 00:06:26,080 --> 00:06:27,960 Speaker 1: had there four or five years ago. So I think 116 00:06:28,000 --> 00:06:31,479 Speaker 1: we're well positioned. We're watching it closely, and I think 117 00:06:31,520 --> 00:06:35,600 Speaker 1: we've done a similar portionary position in the UK commercial 118 00:06:35,600 --> 00:06:39,320 Speaker 1: real estate market. I think they it's really a function 119 00:06:39,400 --> 00:06:42,600 Speaker 1: of the post COVID world and the demand for commercial 120 00:06:42,640 --> 00:06:45,279 Speaker 1: real estate is a lot lower today than it would 121 00:06:45,279 --> 00:06:47,240 Speaker 1: have been four or five years ago. But I think 122 00:06:47,240 --> 00:06:48,480 Speaker 1: we're ahead of the curve on that. 123 00:06:51,040 --> 00:06:53,760 Speaker 2: Given you're giving back some two billion to shareholders, can 124 00:06:53,800 --> 00:06:57,440 Speaker 2: shareholders expect in the year about seven billion in terms 125 00:06:57,440 --> 00:06:59,400 Speaker 2: of what you're giving back to them? 126 00:07:00,400 --> 00:07:03,000 Speaker 1: I listen, I'm not giving a prediction on twenty twenty four, 127 00:07:03,040 --> 00:07:06,799 Speaker 1: but what I can confirm is we completed seven billion 128 00:07:06,839 --> 00:07:09,039 Speaker 1: a buy back in twenty twenty three. But I'm not 129 00:07:09,040 --> 00:07:11,680 Speaker 1: giving a prediction beyond what we've just announced, which is 130 00:07:12,240 --> 00:07:16,520 Speaker 1: up to a further two billion buy back with announced today. 131 00:07:16,880 --> 00:07:20,160 Speaker 1: But clearly we have strong capital generation capability, and I 132 00:07:20,240 --> 00:07:23,880 Speaker 1: just want to draw your attention to our confidence. Is 133 00:07:24,360 --> 00:07:28,040 Speaker 1: there in the reiteration of our twenty twenty four target 134 00:07:28,440 --> 00:07:32,240 Speaker 1: to deliver mid teen's returns. We've reiterated that target today. 135 00:07:33,080 --> 00:07:35,480 Speaker 1: That gives you a measure of confidence, and it will 136 00:07:35,480 --> 00:07:37,720 Speaker 1: give you a measurer of our ability to continue to 137 00:07:37,760 --> 00:07:40,360 Speaker 1: distribute to our shareholders. You know, if you look at 138 00:07:40,400 --> 00:07:43,480 Speaker 1: all of what we distributed on twenty twenty three, that's 139 00:07:43,520 --> 00:07:47,280 Speaker 1: around about nineteen billion dollars of capital return to our shareholders. 140 00:07:48,440 --> 00:07:52,480 Speaker 1: With respect to the year of twenty twenty three. What 141 00:07:52,520 --> 00:07:55,080 Speaker 1: you'll see is our set one ratio finished the year 142 00:07:55,080 --> 00:07:59,120 Speaker 1: of fourteen point eight percent. We'll do the buy back 143 00:07:59,160 --> 00:08:01,200 Speaker 1: in Q one take you down a bit. But then 144 00:08:01,240 --> 00:08:03,880 Speaker 1: we've got the completion of the sale of Canada, and 145 00:08:03,920 --> 00:08:06,280 Speaker 1: we said before that that is probably going to be 146 00:08:06,320 --> 00:08:09,800 Speaker 1: circle over one hundred basis points of creative to see 147 00:08:09,840 --> 00:08:11,440 Speaker 1: T one when that completes. 148 00:08:12,680 --> 00:08:15,200 Speaker 2: So no, what are you telling me that that actually 149 00:08:15,360 --> 00:08:17,960 Speaker 2: shareholders should maybe get a little bit less than they 150 00:08:17,960 --> 00:08:19,960 Speaker 2: did last year or still wait and see. 151 00:08:20,760 --> 00:08:22,640 Speaker 1: I'm not giving you any guidance on that fren scene, 152 00:08:22,680 --> 00:08:24,080 Speaker 1: but it was very good of you to try for 153 00:08:24,120 --> 00:08:24,840 Speaker 1: a second time. 154 00:08:26,840 --> 00:08:31,960 Speaker 2: Okay, I have to come back on right, Yeah, okay, 155 00:08:32,160 --> 00:08:32,440 Speaker 2: tell me. 156 00:08:34,640 --> 00:08:36,400 Speaker 1: I just want to listen. I wanted to just say 157 00:08:36,440 --> 00:08:40,120 Speaker 1: that we're very recognizant to the fact that interest rates 158 00:08:40,200 --> 00:08:42,320 Speaker 1: are starting to decline. We see that as a positive 159 00:08:42,559 --> 00:08:45,800 Speaker 1: by the way freancing, because that's inflation coming down, leading 160 00:08:45,800 --> 00:08:49,520 Speaker 1: to lower interest rates, leading to the potential for they 161 00:08:49,600 --> 00:08:52,880 Speaker 1: pick up in economic activity as the second half of 162 00:08:52,960 --> 00:08:57,600 Speaker 1: twenty twenty four comes into site and beyond, and I 163 00:08:57,600 --> 00:09:00,600 Speaker 1: think that is where we see opportunities for the revenue 164 00:09:00,600 --> 00:09:02,520 Speaker 1: growth beyond just interest income.