Reasons to be cheerful in the first flush, pre-tax profits doing very well.
Special dividend and maybe your speed. The buybacks.
But I just wonder what level of caution you have because I look at the net
interest income guidance, that's a 36 billion.
That's later than the fourth quarter on an annualized basis.
How cautious are you? Someone ISE.
Thank you for having me. It's good to be here.
And yes, I'm pleased with performance in 2022.
We delivered an increase in adjusted pre-tax profits of 17 percent, taking us
to 24 billion. We delivered a row to nine point nine
percent after significant items and the loss on sale of France.
Well, before that significant item, it was in eleven point six percent return
on tangible equity, which puts us in a good position to deliver the 12 percent
plus return on tangible equity in 2023. But minus if you just allow me a few
more comments. I'd also like to reflect on the change
that's taken place over the past three years.
If you go back three years ago, as you will know, we were very dependent on
profit generation coming from two principal markets Hong Kong and the UK
with a strong international banking franchise overlaying with transaction
bank and an international wholesale banking.
Well, I'm really pleased all three years later is a radical change in the profit
generation by geography. The Middle East alone last year
generated one point a billion of adjusted pre-tax profits.
Our troubled market in Europe three years ago produced an adjusted pre-tax
profit of two billion dollars. Our U.S.
business, again troubled three years ago, produced and adjusted pre-tax
profit of one billion. And even within Asia, we got good
diversification outside of Hong Kong and China.
We generated more than 4 billion dollars of adjusted pre-tax profit in 2022.
So that gives me a solid base of geographic profit generation supported
and overlaid with a strong international banking franchise and a market leading
transaction banking franchise. So that gives me confidence in our 2023
forecasts. Come to your points on net interest
margin guidance on an eye is 36 billion plus in excess
of 36 billion. We believe that we still have upside are
eye on an eye in 2022 was thirty two and a half billion.
We're guiding to in excess of 36 billion in twenty twenty three.
So good growth. There are some uncertainties on the
horizon, but we're still positive. We know where consensus is at the moment
and we think consensus is in a reasonable position.
So we're not looking to change guidance on an I or.
And I think we're pretty confident we have good prospects of delivering our
return next year. So, I mean, that's a fairly solid 13 and
a guidance, as you said, access of the 36.
If you're in the sweet spot for pay, you've told us a special dividend this
morning. What I want to get a sense is will all
the proceeds from the sale of Canada go to a buyback?
What does it take to assure the move to a buyback in May?
No. Well, listen, we first of all, have to
close that transaction and we're aiming to close up by the end of this year.
What we've signaled today is our first and priority use of some of those
buyback proceeds will be a 21 cent special dividend.
We think it's important to make that the first use thereafter.
As we close the transaction, we'll make a decision of how much additional
distribution we do via buyback and how much we're retain for internal use.
We're not making that determination at this point in time.
We'll make that determination on closure.
But I think I'd go beyond just the special dividend and the use of Canada
proceeds. What I think we've signaled change
results is good profit generation. A 50 percent payout ratio gives us good
returns to shareholders via dividends. It gives us also then the ability to use
the remaining 50 percent for growth and for buybacks.
And I think that's the difference today. A radical difference to three years ago
where we were over history between one could argue towards dividends.
We were sometimes in a payout ratio of 70, 80, 90 percent.
Where is it reasonable for the market? IBEX CEO Ralph Chalmers a few weeks ago,
he's paying ISE 5 billion. I was with Andy Halford a Standard
Chartered last week. He's paranoid about it.
He's got a whole set of other issues to deal with.
Not like you. What is reasonable in the scale of
buyback that the market can assume? No.
If and when you take it and present it later this year, we're not guiding at
the moment on the consumer buybacks. Will will deliver results on the quantum
of quantum buybacks later. Well, we have announced today is the
process for considering a buyback buyback.
We're accelerating from the second half of the year to be a process that
completes us or around Q1 results. So we're pulling that forward by Iran
about six months. I think that's an alum show, an
indication of our confidence in the proper generation capability of the
bank. When I look at the lines on on credit
losses in China, 600 million dollars, but you say the headwinds will subside
and use words like normalized. Is this peak credit losses in China?
No. When does that normalization arrive?
Can I push aside a complete implosion in China right off your radar?
Well, I think we're comfortable with where we struck the provisions on the
thirty first December and since the thirty first to December.
One could argue the environments in China generally for its economy,
commercial real estate has improved. We saw some of the policy announcements
that were made in early January. The supply side has benefited by the
provision of more liquidity by the Chinese banks and the Chinese
government. The relaxation of some of the regulatory
constraints that were on the sector, plus some of that extra liquidity has
been made available for the offshore debt as well.
And that's an important move that took place in early January.
And clearly we welcome. So the sentiment has improved in Q1 in
January relative to where we were in Q4. I think there's still a lot of work to
do on commercial real estate in China. Well, we're comfortable with our
provisions at the end of December.