The bank’s wealth management income has increased 12% to ‘a record US$2.2 billion’ in 2021 year-on-year (YoY) driven by strong sales of funds, structured notes and wealth lending.
The UK bank reported ‘sustained growth in client numbers and double-digit growth in assets under management (AuM)’. Additionally, bancassurance income was up nine percent.
The figures translated to 15.1% of the total operating income following financial markets, retail products and transaction banking, which posted US$4.9 billion, US$3.4 billion and US$2.6 billion in income in 2021, respectively.
China business has grown significantly, almost doubling underlying operating profit
However, the wealth management segment was the only business delivering gains compared with 2020.
The income posted by financial markets represented a stable level compared with 2020 as the gains from credit markets and structured finance were offset by a 12% decline of macro trading income YoY.
In the meantime, income from retail products dropped six percent YoY as deposits income was down 41% to US$860m. Transaction banking income fell 8.7% YoY as trade gains were offset by a 22% fall of cash management.
At a group level, the total underlying operating income was stable at US$14.7 billion while the pre-tax underlying profit rose 55% to US$3.9 billion in 2021 YoY.
On the sustainable investment side, assets under management (AuM) rose 2.8x as at end of 2022 YoY, according to the bank which did not disclose the actual volume.
‘For 2022, we will replace this Aspiration with a more ambitious Sustainable Investing AUM Aspiration as part of our net zero Aspirations which will expand products covered to include exchange traded funds (ETFs), bonds, equities, structured products among others,’ stated the bank.
By region, Asia generated over two-thirds of the total pre-tax income, or US$3.1 billion, from 21 markets led by Hong Kong SAR and Singapore. The figure was up 11% YoY mainly due to lower credit impairment charges.
‘China business has grown significantly, almost doubling underlying operating profit, driven by wealth management, financial markets, trade and unsecured products,’ added the UK bank. ‘The income we have booked from clients based in China has grown nine percent and China remains the group’s largest network income originator.’
Liabilities
As of end of 2021, the bank led by CEO Bill Winters had the liabilities of debt securities in issue, namely structured notes issued by Standard Chartered, at US$5.6 billion held at fair value through profit or loss - 3.7% lower compared with a year ago.
Approximately 85.3% of the positions are classified as ‘level 2’ where independent market data is available through pricing vendors and broker sources and the remaining falls under ‘level 3’ where the valuations of these debt securities are implied using input parameters such as bond spreads and credit spreads when such liquid external prices are not available.
Specially discounted cashflows and internal pricing model were deployed as the valuation techniques used to measure the fair value of the level 3 positions at US$821m, which was more than fourfold compared with end of 2020.
With the former, credit spreads and interest rate curves comprised ‘significant unobservable inputs’ where their respective value range were 0.9%-2.2% and 0.9%-5.6%. The weighted average of the two inputs were 1% and 4.9%.
Meanwhile, the value range of equity correlation and equity-FX correlation were 8%-96% and 70% – 85%, respectively, based on the latter technique. Their respective weighted average was 70% and 33%.
Off-balance sheet, the estimated fair value of structured notes measured increased 9.8% to US$61.6 billion as at end of 2021 YoY. Approximately 57.7% of the amount came from ‘level 2’ and the remaining from ‘level 1’.
According to SRP data, the UK bank issued 112 capital-at-risk structured notes exclusively distributed by Standard Chartered Bank in Taiwan in 2021, which are linked to a total of 37 types of underlying assets featuring share baskets. Majority of them have a tenor of less than one year.
Issued by UBS (39), Credit Suisse (37) or Société Générale (36), the products were structured across snowball, callable, worst-of option, accrual, reverse convertible, lookback, range and uncapped call.
There were additionally 33 one-month flow notes issued by SC in Malaysia in 2021, comprising dual currency investments and equity-linked investments.
Click here to view Standard Charter’s 2021 annual report.