7th May 2008 11:50
Standard Chartered PLC07 May 2008 STANDARD CHARTERED PLC ANNUAL GENERAL MEETING 7 MAY 2008 The meeting will deal with the proposed Resolutions as outlined in the Notice ofAnnual General Meeting dated 27 March 2008 and will provide a summary of thebusiness and financial performance of the Group in 2007 and an interimmanagement statement. The following statements are excerpts from the speeches to be made toshareholders by Mervyn Davies, Chairman, and Peter Sands, Group Chief Executive,at the Annual General Meeting, being held today at 12.00 noon in London. Mervyn Davies, Chairman This is a special year for Standard Chartered as we celebrate 150 years of ourpresence in India and China. Therefore, I am particularly delighted to see twoformer chairmen and so many former executive and non-executive directors in thisroom today. I have been on the Board of the Bank since 1997 and it is my second year aschairman of the Board. I am privileged to be here today to share with you ourBank's progress in 2007. It's only been a year since we last met and what a year it has been. Since August, the industry has had one of its most difficult periods in history:huge credit losses, major banks being recapitalised. No securities firm,investment company, insurance company or bank - ourselves included - has beenunscathed. As the banking industry reflects on the current crisis, there are many lessonsto be learnt: firstly, it is a cyclical industry; secondly, liquidity is key -just as important, if not more so, as credit evaluation; thirdly, mispricing forrisk can have fatal consequences; fourth, compensation arrangements need to becarefully controlled - if not controlled, compensation can negatively affectbehaviour and risk management; and, finally, we are part of a global industry,where good and bad news, capital and, indeed, people cross borders at lightningspeed. Who would have thought that a global credit crunch, which originated from thesub-prime mortgage crisis in the US, could spread so quickly and lead to thecollapse of a bank in the UK? We will continue to see volatility in these markets. I do not believe the crisisis over. But it's important to reflect on what else is going on in the world. Weare seeing a fundamental shift in buying and even eating habits. Recent headlines are stark: • Countries, including India, Vietnam and Egypt, are rushingto restrict exports in scarce food commodities and many Asian economies that hadlargely become self-sufficient in food have recently started to import largeamounts of staple foods; • Biofuels are having an increasingly negative impact onfood supplies; • Grain and other food and commodity prices have soared as aresult; • And there is concern as food prices increase, we may seemore social unrest. • Water scarcity is an evolving concern for the developingworld. • Speculators are being encouraged into commodities by thecredit crunch; • And finally, there is an increasing global demand forcommodities. The demand for commodities is clearly evident in the infrastructure boom in theMiddle East and Asia, and in China and India in particular. That in turn isleading many countries to look at environmental issues and that is somethingwhich we as a Bank are very focused on. The key challenge for the world now is how we manage increasingly scarceresources. You also have to look at the other drivers of change. There are fundamentalshifts in economic power from developed to developing economies and fromcommodity consumers to commodity producers. Technology is undoubtedly accelerating this shift. Youthful populations indeveloping countries and ageing populations in developed countries arecontributing as well. The former are producing, while the latter are consuming. But the basic message is that globalisation will change everything and thechange is happening significantly faster than we have ever seen before. On the whole, Asia looks like it is the big winner from all these changes. Theregion, despite all the challenges, has become a huge production platform forthe goods and services the rest of the world wants. Whilst the focus in the West is on the credit crunch, it is inflation that isworrying many of our markets. Many countries are tightening policy and we shouldnot be surprised if there is slower growth, albeit still greater than in theWest. In 2020, China will be the second largest economy and India the sixth largest.Combined with Brazil and Russia, these four BRIC countries will dominate ourthinking. Meanwhile, economies in Africa, the Middle East and Latin America arebenefitting from soaring commodity and petroleum prices driven by the risingAsian demand for imported energy and other raw materials. So, given this background, what does this all mean for Standard Chartered? It is clear that: we are well positioned for growth in our markets; we shouldinvest in those growth markets; it is also clear that our prudent approach torisk management has paid off. However we will not be complacent and remain as highly disciplined and asvigilant as we have ever been. Summary So, I can assure you, as chairman of the Company, that Standard Chartered istoday: a well-capitalised bank; a highly liquid bank; and a profitable bank. Our key strength is our people - they're simply wonderful! We employ staff ofmost nationalities and religions. I want to take this opportunity to thank themon behalf of the Board for their contribution to the Bank's success. We are a special company not only because of the diversity of our revenues andproducts but also because of the diversity of our people. Even though we areheadquartered in London and regulated by the FSA, we are very much aninternational bank. Overall, we are well placed in a world of turmoil. Governance Now, a few words on governance and the Board. We have, in my view, a very strong and dynamic team. In August last year, wewelcomed John Peace to the Board as deputy chairman and senior independentdirector and Sunil Bharti Mittal as an independent non-executive director. AndGareth Bullock joined the Board as group executive director. In September, Kai Nargolwala stepped down from the Board after eight years. Onbehalf of the Board let me take this opportunity to thank Kai for hissignificant contribution to the group's success. We are also very grateful to Sir CK Chow, who will retire from the Board thisyear after 10 years of dedicated service as a non-executive director. I wouldlike to thank him for the considerable time and effort he has given to the Bank.And it is great to know that he is staying on as chairman of our Hong Kongsubsidiary. After almost ten years as Standard Chartered's head of consumer banking, MikeDeNoma has decided to pursue other adventures in his life. He has been a highlyvalued member of the Board for the past eight years during which time the Bankhas grown significantly. Mike has done an exceptional job. He has been apleasure to work with both during my time as chairman and previously as CEO. Wewish him every success in the future. I am very pleased that we have found an outstanding successor in Steve Bertaminiwho will join us from G.E. very soon. He will also be joining the Board on 1June as group executive director. Steve brings a wealth of experience andstrategic insight into the markets in Asia, and will be a great addition to thePLC board. In closing, I would like to say that Standard Chartered today is extraordinarilywell positioned to seize the new realities thanks to 150 years of bankinghistory in our markets, our growing geographical spread and scale and thebreadth of our products and capabilities developed in recent years. Thank you, our shareholders, for your support. Peter Sands, Group Chief Executive Performance Highlights 2007 was my first full year as Chief Executive of Standard Chartered. Given thescale of the storms sweeping through financial markets, I am delighted with whatwe achieved. As you are all aware, the Bank delivered another year of recordincome and profits, showing the results of our investment programme over thelast few years in our key growth markets of Asia, Africa and the Middle East. • Profit before taxes rose 27 per cent to $4.04 billion • Income increased 28 per cent to $11.07 billion • Normalised earnings per share climbed 16 per cent to 197.6 cents The Board is recommending an annual dividend of 79.35 cents per share, a nearly12 per cent increase from the year before. Standard Chartered shareholders' returns continued to outperform those of our UKpeer group. We haven't done this by squeezing the business. We invested in bothour businesses at record levels. We stepped up the pace of organic growth. Andwe continued to make acquisitions. We have not been unscathed by the financial crisis. But our disciplined approachto running the Bank, focusing on our strategic priorities, has stood us in goodstead. Firm Foundations Our performance in 2007 was underpinned by firm foundations in the way we manageour liquidity, capital, risk profile and costs. We have no direct sub-primeexposure and very limited indirect exposure to U.S. sub-prime assets. Our firm foundations will prove critical to our continued success and we remainwatchful for any trouble ahead. I can assure you that as a Bank that's grown upin emerging markets over 150 years, we've plenty of experience in dealing withsuch volatility. Emerging Opportunities Alongside these challenges, new opportunities are emerging. We're hiring excellent talent from our competitors, who are attracted by ourstrength, values, brand and growth potential. We're seeing a flight to quality,with a good inflow of deposits. And we're seeing opportunities to deepen ourrelationships with our customers. Back in 2003 we said we wanted to be the world's best international bank,leading the way in Asia, Africa and the Middle East. That is still ouraspiration and we are making good progress on that journey. Hong Kong Consumer Banking Let me talk a bit about how we accelerated organic growth in 2007, starting withour biggest business, Consumer Banking in Hong Kong, which delivered a 22 percent rise in profits on the back of a 17 per cent increase in income. This isthe first time in six years that this business achieved double-digit incomegrowth. In fact, Hong Kong, where our Board met last month, made more profit in 2007than the entire Group did in 2001. Profits rose 34 per cent to just under $1.2billion, surpassing $1 billion for the first time. India Wholesale Banking The individual business that contributed the biggest increase in profits wasWholesale Banking in India, where profits were up 91 per cent on the back of an82 per cent increase in income. Now Wholesale Banking's largest business, this is a superb franchise. Ourhistory in India dates back to 1858. Last month I was in Kolkata to celebratethe 150th anniversary of the opening of our first branch in the city. At theceremony we got a chance to meet four generations of customers and staff. All across India, we're investing in front-line staff, in new products and ininfrastructure, seizing the opportunities emerging from India's rapid economicgrowth and the dynamism of its corporate sector. Overall, including Consumer Banking, India broke through $1 billion in incomefor the first time in 2007 and generated more profits in 2007 than in 2006 and2005 put together! China And it's not just in our biggest businesses and markets that we've seenaccelerated growth. We're also seeing the benefits from investments we made tobuild new engines of growth. For instance, in China where, as in India, we arecelebrating our 150th anniversary this year, we are investing heavily and seeingvery rapid growth in income. In 2007, both income and profits rose more than 70per cent. Private Bank Another new engine of organic growth is The Standard Chartered Private Bank.Launched just a year ago, The Private Bank is making excellent progress. We are already seeing our unique combination of local heritage and internationalcapability, our ability to offer a broad range of international wealth products,and our distinctive brand, are proving enormously appealing to our customers. Delivering on acquisitions Delivering on our major acquisitions - Korea, Pakistan and Taiwan - will remaina top priority for 2008. I'm confident that they will be major drivers ofearnings growth in the coming years. In the second half of 2007 we announced five capability-driven acquisitions,including American Express Bank. Completed in February this year, theacquisition has turbo-charged the growth of our private banking business andsignificantly reinforced our transaction and financial institutions business.In February we also completed the acquisition of Yeahreum, a mutual savings bankin Korea. The logic behind all these capability-driven acquisitions is to extend anddeepen our product range and expertise, enabling us to serve our clients moreeffectively across a broader range of needs. They add fuel to our organicgrowth. Building the brand Another key determinant of shareholder value is our brand. We want to build ourbrand at the pace we are growing the business. I'm delighted that our progress has been recognised. A recent survey ofinternational brands by Millward Brown found that the Standard Chartered brandwas one of the top 10 rising brands in the world, with its value growing over 70per cent. It was ranked sixth in the UK. Sustainable business Yet another way in which we distinguish ourselves is through our commitment tothe broader communities in which we live and work in. Our approach towardsfostering a sustainable business and making a difference to the world we operatein differentiates us from our peers and delivers value to our shareholders. I hope you will take some time to read about our initiatives in these areas inour Annual Sustainability Review, a summary of which also appears in our annualreport. The Sustainability Review was published on line this year as part of ourefforts to cut down paper consumption and help improve the environment. We havealso published our annual report in an easy-to-read format on the web for thefirst time. Trading update The Group has had a very good start to the year. Despite the turmoil infinancial markets, rising inflation and increasing economic uncertainty, tradingconditions in the Group's main operating markets have held up well in the firstquarter. We continue to have good momentum in both businesses across multiplegeographies. Consumer Banking has achieved double digit growth in income, across a broadspread of products and geographies, despite some pressure on liability incomegiven the interest rate environment. We have continued our programme ofinvestments focused on expanding distribution and new products. Asset qualityremains good, but with continued challenges in Pakistan and Thailand. Wholesale Banking has had a particularly strong start to the year, driven byaccelerated growth in client income across a broad set of geographies, productgroups and client segments. Asset quality in the corporate loan book has shownno material deterioration, although we remain extremely vigilant given theexternal environment. In our Asset Backed Securitisation (ABS) portfolio acombination of impairment and widening credit spreads has resulted in a chargeto profits of $97 million and an additional charge to the available-for-salereserve of $156 million in the first quarter of 2008. The Group remains well capitalised and, despite the turbulence in financialmarkets, has enjoyed consistent access to debt capital markets. Since thebeginning of the year we have issued approximately $4 billion of senior andsubordinated debt to support our continued growth. The Group also has a strong liquidity position. We continue to take a highlyproactive approach to managing our capital, liquidity and risk profile in thisuncertain and volatile environment. On 29 February we completed the acquisition of American Express Bank and we havemade a good start on the integration process. On 7 March we announced thedisposal of our asset management business in India for net proceeds ofapproximately $130 million. We expect to complete this transaction in the firsthalf of 2008. Overall, we have made a very good start to the year and continue to have goodmomentum although there remain considerable volatility in financial markets andmany potential challenges in the external environment. Nonetheless, StandardChartered is in the right markets, is in great shape and has a clear and provenstrategy. We look forward to providing a further performance update next monthin our pre-close statement on 26 June. Thank you for your support. - END - For further information please contact: Arijit De, Head of Media Relations +44 (0) 20 7885 7163 Stephen Atkinson, Head of Investor Relations +44 (0)20 7885 7245 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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