Third Quarter 2019 Results

Compared to the third quarter of 2018 statutory net interest income grew 8 per cent while the net interest margin was flat at 156 basis points.

·      Average interest-earning assets increased 8 per cent driven by higher loans and advances to customers and increased trading book assets to support client demand for emerging market bonds and reverse repurchase agreements. Gross yields increased 19 basis points compared to the average in the third quarter of 2018 and predominantly reflected the rises in global interest rates that occurred through last year

·      Average interest-bearing liabilities increased 11 per cent driven by growth in customer accounts and client demand for repurchase agreements. The rate paid on liabilities increased 18 basis points compared to the average in the third quarter of 2018 reflecting the same historical rises in interest rates

1  Variance is increase/(decrease)

2  Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $6,132 million at 30 September 2019, $2,704 million at 30 June 2019, $3,151 million at 31 December 2018 and $3,597 million at 30 September 2018

3  Change is the percentage points difference between two points rather than percentage change

Asset quality overall was broadly stable in the quarter with no new areas of stress identified. The Group remains vigilant considering continuing geopolitical uncertainty and performs regular reviews and stress tests of its portfolio to help identify then mitigate any risks that may arise.

Gross Stage 3 loans and advances to customers of $6.2 billion were flat compared to 30 June 2019. These credit-impaired loans represented 2.3 per cent of gross loans and advances, the same proportion as at 30 June 2019. They are 61 per cent covered before collateral and 82 per cent covered after collateral, an improvement of 1 percentage point for both measures compared to 30 June 2019.

Credit grade 12 balances grew 10 per cent since 30 June 2019 reflecting a combination of upgrades from Stage 3 and new inflows. Early alert accounts increased 10 per cent in the quarter due to a few material exposures but are lower year-on-year and on a year-to-date basis.

The proportion of investment grade corporate exposures has increased to 63 per cent due to growth in repurchase agreements. This is back to broadly the same levels as at 31 December 2018 following a drop as at 30 June 2019.

The Group's statutory performance is adjusted for profits or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing underlying performance period-by period. These adjustments are set out below.

Restructuring charges of $123 million primarily related to the run-down of the Group's Principal Finance exposures together with impairments related to the Group's discontinued ship leasing business. Other items of $10 million included profits from the Group's joint venture investment in Indonesia which is no longer considered core as well as provisions for regulatory matters.

1  Variance is increase/(decrease)

2  The Group now excludes $10,632 million held with central banks (30.06.19: $6,835 million, 31.12.18: $7,412 million, 30.09.18: $7,172 million) that has been confirmed as repayable at the point of stress

3  Change is percentage points difference between two points rather than percentage change

The Group's balance sheet remains strong, liquid and well diversified.

·      Loans and advances to customers increased 2 per cent since 30 June 2019 to $270 billion driven in particular by Financial Markets and Corporate Finance

·      Customer accounts of $388 billion reduced 3 per cent since 30 June 2019 with an increase in operating account balances within Cash Management balances offset by a run-off in Corporate Term Deposits. As a result, the Group's advances-to-deposits ratio rose to 65.6 per cent from 63.7 per cent in the prior quarter

·      Other assets and other liabilities since 30 June 2019 were 4 per cent and 15 per cent higher respectively. The growth in other assets was driven by increased trading book assets and reverse repurchase agreements partly offset by a reduction of cash balances at central banks. The growth in other liabilities reflects increased trading book liabilities and repurchase agreements

1 Variance is increase/(decrease)

Total risk-weighted assets (RWA) reduced $2 billion since 30 June 2019 to $269 billion.

·      Credit risk RWA reduced $1.8 billion, with asset growth offset by favourable foreign exchange movements and efficiency actions including model changes and the partial sale of the Group's Principal Finance portfolio

·      Market risk RWA reduced slightly, to $23 billion

·      Operational risk RWA are calculated annually so are unchanged

On a year-to-date constant currency basis total RWA increased at broadly the same rate as income growth. The execution of organic and inorganic RWA optimisation initiatives support the expectation that income growth will exceed RWA growth in the medium-term.

1 Variance is increase/(decrease)

2 Change is percentage points difference between two points rather than percentage change

The Group's common equity tier 1 (CET1) ratio of 13.5 per cent was up 6 basis points compared to 30 June 2019 due to profits generated in the quarter and lower RWA partly offset by adverse foreign exchange movements on reserves and an increase in the foreseeable dividend. The Group's formulaic approach to setting the ordinary dividend results in a higher foreseeable dividend in the second half of the year.

The Group repurchased 116,103,483 ordinary shares for an aggregate consideration of approximately $1 billion between 2 May 2019 and 25 September 2019 at a volume-weighted average price of 686.3p per ordinary share. The shares were subsequently cancelled, reducing the total issued share capital by 3.5 per cent.

The Group was advised during the period that its Pillar 2A requirement as reviewed regularly by the Prudential Regulation Authority has increased. After the period end, the Hong Kong Monetary Authority announced that the countercyclical buffer rate for Hong Kong would reduce from 2.5 to 2 per cent. The net effect of these changes (applied to the period-end balance sheet) is to increase the Group's CET1 requirement by 21 basis points to 10.2 per cent and its expected 2022 minimum requirement for own funds and eligible liabilities (MREL) including the combined buffer by 90 basis points to 26.6 per cent. The Group continues to operate above its minimum capital requirements and remains well positioned relative to expected MREL.

For further information, please contact:

Mark Stride, Head of Investor Relations    +44 (0) 20 7885 8596

Julie Gibson, Head of Media Relations      +44 (0) 20 7885 2434

1  Following a reorganisation of certain product teams within Financial Markets, $46 million of income that in 1H 2018 was reported within Credit and Capital Markets was transferred to Rates during 3Q 2018. Prior periods have not been restated

2  In Dec 2018 it was decided to discontinue the ship operating lease business; any future profits and losses will be reported as restructuring. Prior periods have not been restated

Basis of presentation

This interim management statement covers the results of Standard Chartered PLC together with its subsidiaries and equity accounted interest in associates and jointly controlled entities (the Group) for the three months ended 30 September 2019. The financial information on which this statement is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with Standard Chartered's significant accounting policies as described in the Annual Report 2018, except for IFRS 16 as described below.

The information in this announcement does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018, which contained an unqualified audit report under Section 495 of the Companies Act 2006 (which did not make any statements under Section 498 of the Companies Act 2006) have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

IFRS 16

IFRS 16 Leases became effective on 1 January 2019 and introduced a single lessee accounting model that requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

The impact on the Group of adopting IFRS 16 is primarily where the Group is a lessee in property lease contracts. The Group has elected to adopt the simplified approach of transition and has not restated comparative information. On 1 January 2019 the Group recognised a lease liability, being the remaining lease payments including extensions options where renewal is reasonably certain, discounted using the Group's incremental borrowing rate at the date of initial application in the economic environment of the lease. The corresponding right-of-use asset recognised is the amount of the lease liability adjusted by prepaid or accrued lease payments related to those leases. The balance sheet increase as a result of recognition of the lease liability and right-of-use asset as of 1 January 2019 was approximately $1.4 billion, with no adjustment to retained earnings. The asset is presented in 'Property, plant and equipment' and the liability is presented in 'Other liabilities'.

The Group uses a number of alternative performance measures in addition to underlying earnings including credit grade 12 and cover ratio in the discussion of its business performance and financial position. These are defined as follows:

Credit grade 12 accounts

These are customer accounts that while performing at present exhibit potential credit weaknesses and could become impaired in the future. There is however, currently, no expectation of specific loss of principal or interest, and therefore interest on credit grade 12 accounts is taken to income.

Cover ratio

The cover ratio under IFRS 9 represents the extent to which stage 3 loans are covered by stage 3 impairment allowances.

This information will be available on the Group's website at www.sc.com.