Standard Chartered Regulatory News (STAN)

Standard Chartered PLC - Performance highlights

Commenting on these results, Bill Winters, Group Chief Executive, said:

"While 2015 performance was poor, the actions we took on capital throughout last year and in particular in December have positioned us strongly for the current macro environment. We have a balance sheet that is resilient and we are in the right markets. We have identified our risk issues, and we are dealing with them assertively. We are making good progress on executing our strategy, creating a bank that will generate improved financial performance over time following from our improved cost efficiency, tightened risk controls, and focus on our many core advantages."

Financial performance summary

· Underlying profit before tax of $0.8 billion, down 84 per cent, reflecting challenging market conditions and strategic management actions

· Underlying operating income of $15.4 billion, down 15 per cent:

o One-quarter of the decline resulted from lower exchange rates against the US dollar

o One-quarter resulted from business exits, disposals, and de-risking

o One-quarter related to lower commodity prices and mark-to-market valuations

o One-quarter related to lower levels of business activity

· Underlying operating costs, excluding the bank levy and regulatory costs, of $9.0 billion, down 7 per cent

· Underlying loan impairment of $4.0 billion, up 87 per cent:

o Around 40 per cent related to a number of exposures beyond our tightened risk tolerance

o The balance was mainly driven by falling commodity prices and deterioration in financial markets in India

· Reported loss before tax of $1.5 billion after taking:

o Restructuring charges of $1.8 billion, within the $3 billion indicated in November 2015, covering redundancy costs, impairments and a goodwill write down

o A broadly capital neutral credit and funding valuation adjustment of $863 million in the fourth quarter

o A positive own credit adjustment of $495 million

o A gain on sale of businesses in the period of $218 million

o Goodwill impairment of $362 million related to Taiwan

· Normalised basic earnings per share of (6.6) cents (2014: 138.9 cents)

· Normalised return on ordinary shareholders' equity of (0.4) per cent (2014: 7.8 per cent)

· The Board confirms its earlier decision not to declare a final dividend for 2015

The Group is strongly capitalised with a highly liquid balance sheet

· Strong Common Equity Tier 1 (CET1) ratio of 12.6 per cent

· Expect the CET1 ratio to be toward the top end of the 12-13% target range as we release around $20 billion risk-weighted assets (RWA) through the eventual liquidation of exposures beyond our tightened risk tolerance

· Well positioned for the introduction of the minimum requirement for own funds and eligible liabilities (MREL) at approximately 24 per cent

· Liquidity coverage ratio and net stable funding ratio both above 100 per cent

· Liquid asset ratio of 30.9 per cent (2014: 32.2 per cent)

· Advances to deposits ratio of 72.8 per cent (2014: 69.7 per cent)

· Disciplined balance sheet management:

o Customer loans and advances down 9 per cent to $261.4 billion;

o RWAs down 11 per cent to $302.9 billion and;

o Customer deposits down 13 per cent to $359.1 billion as we focused on high-quality liabilities

Comprehensive programme of management actions

· We are making good progress on executing our strategy

· Hired a new Chief Risk Officer and new Head of Corporate and Institutional Banking

· Delivered annualised cost efficiencies of $0.6 billion, including $0.2 billion from business exits

· We have commenced our programme to deliver future cost efficiencies of $2.3 billion over the next 3 years

· Early progress in restructuring more than $100 billion RWAs, including actively managing the liquidation portfolio which represents 3 per cent of the Group's loans and advances to customers

· Commenced implementation of our multi-year investment programme

Unless another currency is specified, the word 'dollar' or symbol '$' in this document means US dollar and the word 'cent' or symbol 'c' means one-hundredth of one US dollar.

Within this document, the Hong Kong Special Administrative Region of the People's Republic of China is referred to as 'Hong Kong'; The Republic of Korea is referred to as Korea or South Korea; Greater China includes Hong Kong, Taiwan, China and Macau; North East (NE) Asia includes Korea, Japan and Mongolia; Middle East, North Africa and Pakistan (MENAP) includes United Arab Emirates (UAE), Bahrain, Qatar, Lebanon, Jordan, Saudi Arabia, Egypt, Oman, Iraq and Pakistan; South Asia includes India, Bangladesh, Nepal and Sri Lanka; and ASEAN includes Singapore, Malaysia, Indonesia, Brunei, Cambodia, Laos, Philippines, Thailand, Vietnam, Myanmar and Australia

Standard Chartered PLC - Chairman's statement

2015 was a challenging year. While our 2015 financial results were poor, they are set against a backdrop of continuing geo-political and economic headwinds and volatility across many of our markets as well as the effects of deliberate management actions. Our share price performance has also been disappointing, underperforming the wider equity market, which has seen broad declines driven largely by the same macroeconomic concerns.

2015 was also, in many ways, a watershed where we embarked on a clear path under a refreshed Management Team, led by Bill Winters. Our strategy, announced in November 2015, prioritises returns and the allocation of capital and investment to areas in which we have a long-term competitive advantage. We will fund much of this investment through efficiencies found elsewhere. My clear and singular focus, which is shared by the Board and the Management Team, is to deliver these comprehensive actions, which we believe will restore the Group's performance.

The Board is confident in the Group's compelling opportunities and that Bill Winters and the Management Team have the necessary focus to weather the current headwinds, and reposition the business for the future. Our markets remain attractive through the medium and long term, our franchise is hard to replicate and we remain well positioned to support wealth creation in Asia, Africa and the Middle East. We are not looking for a short-term fix, but building methodically on the foundations of a strong balance sheet, growing markets, and a vibrant and ethical organisational culture. A lot of actions have been started in a short time, which Bill will cover in his review of the year. However, we are under no illusions that a lot more needs to be done.

With the support of shareholders, the Group now has a capital ratio in our targeted range. From this strong foundation, the Management Team has taken significant action to reduce costs, and plans to deliver $2.3 billion more savings by the end of 2018. These cost savings are creating capacity for investments to enhance our conduct and compliance systems and processes, and to provide a better experience for our clients. The strategy to reposition the Group is also underway, including action to liquidate assets beyond our tightened risk tolerance while growing businesses that the Board believes offer a compelling opportunity for sustainable long-term performance. We are actively investing to build greater depth in our Retail presence in focus cities, growing the contribution to the Group from Private Banking and Wealth Management as well as from Africa, and remaining at the forefront of the internationalisation of the renminbi.

Board changes

As part of the multi-year Board refresh that started in 2011 - aimed at streamlining the Board while ensuring an optimum mix of tenure, experience, diversity and geographic knowledge - we have announced a number of further changes to our Board. With these changes, the size of the Board has now been reduced to 14 members, as we set out in February 2015. Ruth Markland and Paul Skinner, two of our longest-standing independent non-executive directors, stepped down from the Board on 31 December 2015. Dr Lars Thunell, independent non-executive director and Chair of our Board Risk Committee, has also decided to step down from the Board. As announced in January of this year, Lars will be replaced as the Chair of the Risk Committee by David Conner, who joined the Board as an independent non-executive director on 1 January 2016. On behalf of the Board, I would like to thank Ruth, Paul and Lars for their significant contributions to the Group, and to welcome David to the Board.

Additionally, after 26 years in the bank, Mike Rees has taken the decision to retire from the Group and will step down from the Board and his role as the Deputy Group Chief Executive effective 30 April 2016. Mike has made a major contribution to Standard Chartered over the years, and more recently provided valuable support to the Board and the Management Team in shaping and executing our strategy.

These changes, together with the arrival in April last year of Gay Huey Evans and Jasmine Whitbread, mean that the Board will consist of the Chairman, two executive directors, Bill Winters and Andy Halford, and 11 non-executive directors.

Finally, as I indicated at the start of 2015, it remains my intention to step down from the Board during the course of 2016. Naguib Kheraj, the Group's Senior Independent Director, is leading the search for the next Chairman. Until a successor is appointed, I will focus on supporting the strategic transformation that we have set in motion, and on ensuring that the challenges in the markets do not deter us from making the right decisions for the long-term value of the franchise. The Board and I will provide all possible support to Bill and the Management Team as they continue to execute the strategy.

Dividend

In light of recent performance and the newly announced strategic actions, including the £3.3 billion rights issue completed at the end of last year, the Board confirms its previously announced decision that no final dividend will be paid for the financial year ending 31 December 2015. The total dividend for 2015 will be 13.7 cents per share as declared with the half-year results and paid to shareholders on 19 October 2015, and as adjusted for the rights issue.

The Board recognises the importance of dividends to shareholders, and believes in balancing returns with investment in the franchise to support future growth, while preserving strong capital ratios. The size of any future ordinary dividends will be a function of future earnings and our capital position relative to regulatory and market expectations. Subject to these factors, the Board intends to declare a dividend on Ordinary Shares in respect of the 2016 financial year.

People and pay

For several consecutive years, reflecting recent poor financial performance, the Group has reduced the amounts paid out in incentives to staff. At the end of 2015, a large portion of the Group's senior management left the bank as part of our restructuring. The successful execution of our strategy over the coming years will rely on the dedication and commitment of the remaining staff, who are highly sought after by our competition. It is therefore important that we pay competitively, while maintaining the discipline of only rewarding good performance and good behaviours. The Group's remuneration decisions have been made in light of these factors. Accordingly, the annual incentive payments for 2015 are down by 22 per cent year-on-year, with no payments to the executive directors for 2015. Since 2011, annual incentives have fallen by 41 per cent.

The successful execution of our strategy will allow us to improve shareholder returns significantly from a strengthened capital base. To help drive this outcome, the Group has introduced a new long-term incentive plan for our senior management staff, including the Management Team. We believe it is right that our most senior staff are not rewarded for the performance in 2015, but clearly incentivised to execute our strategy and to create real, sustained shareholder value. The value of the plan will only pay out if the Group has made substantial progress towards our returns and other strategic objectives by 2018. We believe that this will link closely the remuneration of the Group's senior management to the value generated for shareholders. Specific proposals in relation to executive directors will be presented to shareholders for their approval at the Annual General Meeting on 4 May.

Summary

There remains a broad range of macroeconomic uncertainties and challenges in the global economy, including the rebalancing of China's economy, the impact of lower commodity prices, and ongoing geo-political tensions. While we cannot control many of these developments, you should expect us to continue to reduce our sensitivity to adverse trends, while we support our clients and invest in improving the Group's systems, staff resources and processes, in part so that we can be a leading force in the fight against financial crime.

It is in uncertain times such as these that, through generations, the Group has set itself apart by managing for the long term and not being unduly distracted by near-term cycles. In this uncertain environment it is all the more important that we execute on the strategy. We have a clear path to follow, an experienced, high-quality Management Team and Here for good, our brand promise, firmly embedded in our culture. The Board is determined that the Group continues to adapt to the changing external environment and to realise fully the opportunities that are present in and between our markets.

Finally, I would like to thank our clients and shareholders for their continued support and also our staff for their tremendous effort and dedication to Standard Chartered through a challenging period.

Sir John Peace

Chairman

23 February 2016

Standard Chartered PLC - Summary of results

For the year ended 31 December 2015

Standard Chartered PLC - Group Chief Executive's review

I admired Standard Chartered from the outside for years. I recognised a bank with a differentiated franchise in some of the world's most exciting markets; a bank with outstanding client relationships and bankers who preserve and promote those relationships; a bank with a comprehensive set of products which are directly relevant to the clients it serves. Having now spent almost nine months at the helm, I am delighted to share my view that my perceptions from the outside are fully correct.

It is clear that we have real challenges to fully realise our potential - challenges we created for ourselves and those produced by a difficult external environment. Our Management Team and I have undertaken the root-and-branch review that I promised when I first joined, and sought to address every issue we have identified. With the launch of our strategy in November 2015, I am committed to demonstrating real discipline in execution and, starting from now, will update on our progress at each set of results.

The economic and geo-political backdrop for the Group clearly deteriorated over 2015 and has not improved into 2016. Chinese equity markets have been increasingly volatile, impacting sentiment around the world, and commodity markets have plumbed new lows. This combination of headwinds has had an impact on our performance, in particular in the second half of last year.

However, the weakness in our performance in 2015 is also partly the result of deliberate management actions. We have accelerated the necessary repositioning of our main businesses, tightened risk tolerances, reduced and liquidated risk concentrations, and restructured our organisation, including a significant reduction in staff numbers. The immediate impact of these actions has been reduced income following business disposals and asset reductions, upfront costs to gain future efficiencies and higher levels of impairment. These actions impacted our profits in 2015, but they were essential to secure the foundations and to reposition us for stronger returns and achieve our ambition of at least 8 per cent ROE by 2018 and 10 per cent by 2020.

The challenging external environment is not an excuse for our performance. We are not unwitting victims. Rather, the external challenges increase our urgent need to take all necessary steps to address the structural and operational issues we have identified as critical to improving returns. During 2015, we stepped up our cost reduction targets, built more capital, reduced risk exposures ahead of many of our competitors, and maintained an acute focus on returns. In this environment, these are the essential priorities that will ensure we stay fit and able to take advantage of attractive opportunities as they become available, and when other banks may be less able to react.

Our strategy, announced in November 2015, will address our performance issues and reposition our business on a strengthened platform. We have made good progress in a number of areas, though there is much work still to do during 2016 and beyond. The strategy's three core priorities are to secure our foundations, get lean and focused and invest and innovate in our franchise.

By executing our aggressive transformation programme, we will position the Group for much improved profitability and create the capacity to continue to invest in our key areas of strength. We are investing into areas such as the role we play in the ongoing opening of China, our differentiated presence in Africa, and our strong position serving the rising affluent populations in our markets.

Securing the foundations

During 2015, and in particular since November 2015, we have built a stronger and more diverse balance sheet. We have organised the Group to be more efficient, assigning clearer accountability for results. Our strong balance sheet and clearer structure will underpin our ability to achieve our goals, in particular at a time when the external conditions are challenging.

· In July 2015, we reorganised the Group around a new and simpler organisation structure, stripping out duplication and inefficiency and shifting greater accountability for performance to business and regional managers. While this simplification substantially reduces our cost base, the primary benefit is our ability to clarify accountability and improve decision-making speed and quality

· The Management Team was completed with the hiring of Mark Smith as the new Group Chief Risk Officer in January 2016, and Simon Cooper who joins to Head our Corporate and Institutional Banking business in April 2016. Both Mark and Simon have significant global experience and deep knowledge of our businesses

· With strong shareholder support of our rights issue, we strengthened our financial position, delivering a Common Equity Tier 1 (CET1) capital ratio of 12.6 per cent, temporarily suppressed by our restructuring initiatives, a liquid asset ratio of 30.9 per cent and a leverage ratio of 5.5 per cent

· We outlined a tightened risk tolerance covering every area of the Group, including operational risk, conduct risk, market risk and credit risk. As a result we identified a portfolio of around $20 billion of risk-weighted assets (RWAs) that includes a small number of exposures that have, over recent years, made the Group more sensitive to idiosyncratic risks. These positions are being assertively managed out. With exposures that are more diverse and less concentrated, the remaining portfolio should be less sensitive to adverse economic and credit cycles

· We have made progress on identifying and optimising $50 billion of low-returning relationship RWAs in Corporate and Institutional Banking and Commercial Banking. Early indications suggest that a significant proportion of these relationships can be retained at materially improved returns. We are aiming to complete this exercise within the next 18-24 months

· Finally, we highlighted two markets for specific focus. One is Indonesia where we will continue to explore the best way to achieve a single, properly scaled entity, via the merger of our two entities or through selling one or the other. The second is Korea, where we launched a Special Retirement Plan covering over 1,000 staff exits with annualised savings of over $100 million per annum. We have also started to reshape our branch network through our new association with Shinsegae. Our returns in Korea remain challenging but we are determined to reduce our losses there and return the business to profitability.

Collectively, our restructuring actions have cost $1.8 billion so far. We remain confident in the original estimated cost for our planned restructuring of around $3 billion.

There is clearly more work to do to restructure these portfolios and to demonstrate the financial benefit, but we are making good progress and believe these actions will deliver sustainable improvements in returns over time.

Getting lean and focused

In addition to the immediate actions on the Group's foundations, we have also made significant progress in reducing costs and improving efficiency. Our early efforts have resulted in Group operating costs, excluding the UK bank levy and regulatory costs, reducing by 7 per cent year-on-year. As part of our ongoing cost management, we also launched a Group-wide redundancy exercise as part of the planned restructuring, which was largely completed at the end of the year.

We have identified opportunities for future savings, launched our key investment initiatives and accelerated the transformation of each of our client segments. We have aligned key support functions closely with business managers, giving the members of our Management Team the ability to manage their businesses from end to end - improving efficiency and accountability. In 2015, we announced a new organisation structure, including reducing the current eight geographic regions to four and aligning key products with their most appropriate client segment. We also made several client transfers, notably combining Local Corporate Clients with our Commercial Clients. Each of these changes will only be reflected in our disclosures from the 2016 financial year. However, a restatement of prior periods will be provided early in 2016.

Building returns in Corporate and Institutional Banking

The returns we are currently earning from Corporate and Institutional Banking are well below the 10 per cent minimum threshold we have set for each of our businesses. Returns have been impacted by loan impairments, income pressures and high expenses as a proportion of income. We are acting on concrete plans to address each component of the profitability challenge.

Our core Corporate and Institutional Banking business is profitable and will grow in a less severe external environment. Our Corporate and Institutional Banking clients value our services, a fact reinforced by early progress in our RWA optimisation exercise to either reduce RWAs or manage up the returns on a portfolio of approximately $40 billion RWAs. We have differentiated offerings in products that deliver good returns and in markets that will resume strong growth once through the current period of economic consolidation. We win a good proportion of regional cash management and financing mandates across our markets. We are leading the expansion of renminbi services across the world. And we have deep local-currency financial markets knowledge and capabilities.

We have been repositioning our balance sheet so that the underlying strengths of our business become our areas of focus, reducing the distraction of volatile and adverse impairments. Our management and staff are well aware of the required changes and are operating at full speed to reposition our business and improve our returns.

Overhauling Commercial Banking

Our Commercial Banking business is very uneven across our markets with some presences more established than others. Overall performance has been poor with high loan impairments and weak income. To address a prior lack of focus on this client base, we created the Commercial client segment in 2014 with the larger corporate clients coming out of our Retail business and the smallest of our Corporate & Institutional Clients. At the end of 2015, we roughly doubled the size of the segment by adding Local Corporate Clients from Corporate and Institutional Banking. We have established Commercial Banking as a focused division of small and medium-sized corporate clients whose needs are substantially local but who can leverage the Group's strong cross-border capabilities. We are rebuilding a consistent coverage and risk management organisation model to deal with this client base.

We have put a management structure in place for Commercial Banking with experienced regional managers and we are substantially upgrading our credit risk approach. We exited the former small and medium-sized enterprise business in the UAE and will continue to reduce operational risk through the completion of our customer due diligence remediation programme. To improve returns, we will upgrade or exit almost $10 billion of low returning RWAs, close to one-quarter of this client base.

From these secure foundations, we are looking to build the Commercial Banking business of our future. We continue to build out our network proposition, partnering with our Corporate and Institutional Banking business to bank their buyers and suppliers. Finally, the Commercial Banking team, has a renewed focus on expanding the client base with almost 3,000 new customers added across the network in 2015.

Given our starting point, there is no quick solution to achieving sustainably better returns from this segment. However, with a consistent and client-focused approach, we will build a competitive business that leverages the best of Standard Chartered to serve this important client base in our markets.

Transforming Retail Banking

Our Retail Banking transformation is well under way and has continued to make good progress in 2015. We have taken upfront charges of some $400 million to reduce ongoing costs, notably in Korea, and are investing to build a much more robust, efficient and nimble systems infrastructure across the Group. In many of our markets, our brand resonates with the growing affluent and emerging affluent client segments and we will invest to reinforce that brand. This, combined with a plan to deepen our presence in core cities where there is a large and growing affluent client base, is powering the growth of Priority Clients. Excluding transfers of clients into Priority, this client sub-segment grew income by over 10 per cent year-on-year. Priority Clients contributed 35 per cent of Retail Clients income in 2015, up from 27 per cent in 2014.

Our Retail business in core cities, excluding China and Korea, already generates equity returns well in excess of 10 per cent. We aim to replicate this success across the rest of our focus cities via selective investment and disciplined optimisation of branches. Where we cannot see a route to improved returns in an acceptable timeframe, we will scale down or exit our presence in cities and markets.

As mentioned above, we have taken action to manage our expense base in Korea and focus on growth through operational improvements and our cooperation with Shinsegae. Nevertheless, we expect our Korean retail operation to be challenged for some time.

Over the course of 2016, we will implement the first stages of our infrastructure overhaul, driving improved efficiency and service quality. We will substantially improve our digital offerings both at the point of client interface as well as through our operational processes. Taken together, we are confident that delivery against these targets will drive returns and growth to strong levels over the next three years.

Investing in Private Banking and Wealth Management

We have an outstanding distribution platform for wealth products delivered through our Retail and Private Banking segments. We will substantially increase our investment in both the Wealth platform and the Private Banking coverage channels in addition to the Retail investments mentioned above. Our primary focus in Wealth Management is to upgrade our infrastructure to improve our digital offering and service quality. We will seek to grow our assets under management sourced through our Private Bank by increasing the number of relationship managers, increasing the number of clients sourced through our corporate relationships and upgrading appropriate Retail Clients.

We have real competitive advantages in these business areas. Our strong Wealth Management platform, local presence, strong brand and advice capabilities position us very well versus local and global competition. The underlying demographic trends make this a particularly natural place for investment.

Our 2015 performance was severely impacted by a concentrated credit loss of $94 million in the first half. We have reviewed, and will continue to strengthen, our credit process to avoid a repeat. Our revised business model will focus less on concentrated lending and more on the distribution of Wealth Management products and advice. As such, we began our investment process in 2015, announcing the addition of a new head of the Private Banking and Wealth Management business, recruiting relationship managers and beginning our technology investment programme.

Establishing best-in-class control and conduct capabilities

Our commitment to improve our conduct and controls is factored into every strategic and operational decision we make. We are on the front line in the fight against financial crime and take this responsibility most seriously. We have invested significant amounts in people and into our underlying conduct and compliance infrastructure with a total cost in 2015 of over $1 billion, up 40 per cent year-on-year. We continue to cooperate fully with the US authorities and the Financial Conduct Authority in their ongoing investigations. As we stated in November 2015, we remain unable to determine when these investigations will conclude or the size of any potential fines that might result. We will provide further updates in due course.

Summary and outlook

We have a good and valuable franchise, core financial strength, outstanding client relationships, and the right team of people. We have made substantial strides in securing the Group's foundations, we continue to take action to get leaner and more focused, and we are creating capacity to invest.

Given current market conditions and the early stage of implementation of our strategy, we expect the financial performance of the Group to remain subdued during 2016. We will continue to take the necessary and sometimes painful actions to reposition the Group for returns and disciplined growth. We will increase the value of our franchise through the relentless focus on execution that we set out alongside our strategy announced in November 2015. We will continue to balance support for strong, high-returning clients with discipline on our tightened risk tolerances. We will continue to take out substantial costs and invest much of these savings into the future of the Group. We will also retain a strong balance sheet which both protects us from economic volatility and positions us for future opportunity when conditions allow.

Finally, I would like to thank our clients, all the staff at Standard Chartered and you, our shareholders, for your support. The past year has been tough for everyone in the Group and for all of us as shareholders. We are the custodians of a fabulous franchise and, through continued hard work and clear decisions, we intend to achieve our ambition of delivering at least 8 per cent ROE by 2018 and 10 per cent by 2020.

Bill Winters

Group Chief Executive

23 February 2016

Standard Chartered PLC - Group Chief Financial Officer's review

2015 was a year of considerable challenges and changes. We have reorganised the Group, announced our strategy and completed a £3.3 billion rights issue. The substantial statutory loss for the year and poor underlying financial performance is a reflection of adverse external market conditions as well as the financial impact of planned management actions. Many of these actions have had an upfront negative impact on earnings, but they are the right steps to secure a sustained improvement in future earnings.

The key external headwinds included a decline in commodity prices, muted trade volumes, volatility in equity markets, and ongoing emerging market currency weakness against the US dollar. Though we have little control over external events, we are actively repositioning the Group to increase resilience and reduce correlation to these factors. We are further strengthening and diversifying our balance sheet, tightening risk tolerances, reducing areas of cost, and focusing on businesses where we can build stronger returns.

As part of repositioning the Group, we identified a portfolio of businesses and assets comprising approximately one-third of Group risk-weighted assets (RWAs) that needed to be restructured, including approximately $20 billion relating to exposures beyond our tightened risk tolerance. We expected to incur charges in respect of this restructuring from potential losses on liquidation of non-strategic businesses and assets, redundancy costs and goodwill write-downs totalling approximately $3 billion by the end of 2016. We have taken decisive action in a number of these areas, resulting in a restructuring charge of $1.8 billion in the fourth quarter of 2015. This represents a significant upfront portion of the charges announced in November 2015. We remain confident in the original estimated cost for our planned restructuring of around $3 billion. The main components of the charge taken in 2015 are:

· Nearly $700 million of redundancy costs, including a Special Retirement Programme in Korea of over $400 million

· Just under $1 billion in additional loan impairment relating to the planned liquidation of the $20 billion RWA portfolio. We have active plans to liquidate these assets and have downgraded and further impaired this book (with underlying loan impairment on this portfolio of $1.6 billion in the year). We expect the Common Equity Tier 1 (CET1) ratio to benefit as RWAs are released as these exposures are liquidated

· $126 million goodwill impairment relating to our operations in Thailand

Additionally, the Group's methodology for estimating the accounting credit and funding valuation adjustment was revised as the majority of our derivatives now have relevant market proxies. This methodology change resulted in a $863 million charge in the final quarter of 2015. While we cannot estimate the future volatility of this change, the Group has established a hedging desk to manage the credit valuation adjustment risk. This charge is broadly neutral on regulatory capital given the increase in the prudential valuation adjustment to $1.1 billion as at 30 September 2015. Further details are provided in note 1.

The performance commentary that follows is based on profit before tax on an underlying basis and will exclude restructuring charges, the impact of the credit and funding valuation adjustment methodology change, goodwill impairment, own credit adjustment and gains on disposals of businesses, unless otherwise stated. 

Group income fell 15 per cent, or by $2.8 billion, year-on-year to $15.4 billion. A significant proportion of the decline was attributable to external factors alongside the decisive and strategic actions taken to reduce risk and improve returns in the medium term. Income in the fourth quarter of 2015 was down 11 per cent on the previous quarter and down 27 per cent on the final quarter of 2014 as some of the external trends deteriorated throughout the year.

The full-year income decline has been driven by the following factors:

· Foreign exchange impact of around $700 million as a result of emerging market currency weakness against the dollar

· Around $400 million related to businesses that we have either sold or exited. In 2014 we sold our Retail business in Germany, our Retail securities business in Taiwan and exited our small and medium-sized enterprise business in the UAE. In 2015 we exited our institutional cash equities business and sold our consumer finance businesses in Korea, Hong Kong and China

· Negative mark-to-market valuations increased by around $300 million year-on-year on a portfolio of legacy stick positions. The remaining portfolio is now marked to a fair value of below $350 million. This portfolio has been materially reduced over the past two years and the potential for these assets to impact future performance is significantly reduced

· Around $300 million related to market driven falls in underlying commodity linked income. Our deliberate de-risking actions accounted for an additional commodity income decline of $100 million

· During the year we reduced our overall exposure to commodities by 28 per cent, with the portfolio now less than $40 billion, or 8 per cent of total Corporate & Institutional and Commercial exposures. The active risk reduction of this portfolio is largely completed and, on the assumption that commodity prices remain at around current levels, we would not expect this portfolio to reduce materially from here. We will, however continue to assertively manage within this portfolio to ensure we have good diversity, lower volatility and more security

· Around $200 million related to lower credit cards and personal loan income in Retail Banking, largely from active de-risking of our portfolios, in addition to the sale and exit of consumer finance businesses

· Finally, there was an impact from lower levels of client activity and there was almost certainly some loss of momentum as we implemented the new organisation structure and reduced headcount. The process for the senior staff levels is now largely complete with the majority of future headcount reductions likely to be achieved through natural attrition

Group operating expenses were closely managed during the year. Within Group expenses of $10.5 billion there was a significant increase in regulatory spend, up 40 per cent year-on-year to $1,006 million, including a 22 per cent increase in the second half of the year. Additionally the UK bank levy increased 20 per cent year-on-year to $440 million. Excluding regulatory spend and the levy, operating expenses fell 7 per cent year-on-year.

We achieved more than $600 million of cost efficiencies in 2015, including the benefits of businesses disposed or exited in the year of around $200 million. We are commencing our programme to deliver a further $2.3 billion over the next three years. We have reduced staff numbers by over 6,800 people during 2015. Through taking these tough decisions on costs, we are creating capacity to invest in repositioning our Retail and Private Banking businesses, in our Africa franchise, in our RMB services, and in enhancing controls.

Loan impairment, excluding charges of $968 million taken in the fourth quarter of 2015 as we progressed the liquidation of the $20 billion portfolio, increased by $1,867 million to $4,008 million. Loan impairment for the year, excluding all charges from the $20 billion liquidation portfolio was $2,381 million representing 87 basis points of loss on loans and advances to customers.

As a result of the above, underlying operating profit before tax of $834 million was down 84 per cent.

Significant steps have been taken to strengthen the capital position, including optimising RWAs and completing the two for seven rights issue in December 2015. In preparation for liquidating a portfolio of assets beyond our tightened risk tolerance, we downgraded a small number of exposures to Non-Performing. The CET1 ratio of 12.6 per cent includes the RWA impact of these downgrades as well as the associated provisions booked as part of the restructuring charge. It is our expectation that the CET1 ratio will benefit from the RWAs released as we liquidate this portfolio.

Our actions in 2015 and those planned for 2016, have impacted near term performance, however they are critical steps to deliver significantly improved and more sustainable returns to shareholders in the long term. We are repositioning the business, and building a more resilient foundation which is more able to absorb future regulatory requirements, weather periods of market uncertainty and take advantage of selective growth opportunities when they arise.

Corporate & Institutional Clients income was down 17 per cent year-on-year or $1.7 billion. Of the decline in income:

· Around $450 million related to foreign exchange translation given emerging market currency weakness against the US dollar. On a constant currency basis income was down 13 per cent

· Around $400 million related to active de-risking of commodity linked accounts and smaller trade values as a result of lower commodity prices

· A further $450 million related to challenging financial market conditions, particularly given volatility in the second half of the year, and by mark-to-market valuations on a small number of Capital Markets loan positions originated prior to 2013

· The remainder was the result of deliberate RWA management actions to improve returns, de-risking elsewhere, and a slowdown in underlying business activity, particularly given challenging market conditions in the second half

Income from Commercial Clients of $826 million was down 30 per cent, or 27 per cent on a constant currency basis. Income was impacted by planned client exits in 2015, subdued corporate activity driven by continued RMB volatility and a slowdown in China, impacting Financial Markets income in particular.

Income from Private Banking Clients of $557 million was down 9 per cent. Excluding business exits income was down slightly, with weaker demand for Wealth Management products, mainly in Hong Kong and Singapore in the second half of the year.

Income from Retail Clients of $5.4 billion was down 11 per cent. Excluding business and portfolio exits, de-risking, and foreign currency translation, income was broadly flat. Income growth in Wealth Management and across Priority Clients was offset by planned de-risking of the unsecured portfolio and margin compression across a number of markets.

· Transaction Banking income fell 12 per cent with Trade income down 19 per cent and Cash Management and Custody income down 4 per cent. Lower income was driven by weak global demand for trade, declining commodity prices and abundant liquidity in our key markets, placing increased pressure on margins. Foreign exchange had a particular impact on Transaction Banking with income down 8 per cent on a constant currency basis

· Financial Markets income was down 19 per cent impacted by further negative mark-to-market revaluations on Capital Markets loan positions. Excluding these revaluations, Financial Markets income was down 11 per cent driven by reductions in Commodity and Foreign Exchange Options income. This was partially offset by income growth in Rates, up 6 per cent, and Cash Foreign Exchange, up 2 per cent

· Corporate Finance income fell 14 per cent due to challenging market environment in the footprint, higher competition due to excess liquidity and focus on selective asset origination. This resulted in pricing pressures and lower origination levels in our financing businesses

· Lending and Portfolio Management income was down 18 per cent driven by a decline in lending balances resulting from return optimisation activities coupled with lower margins

· Wealth Management income rose 2 per cent year-on-year. Strong growth in the first half was largely offset by slower momentum in the second half due to client exits in Private Banking as we managed the segment within tighter risk tolerances, more volatile equity markets and the RMB devaluation

· Retail Products income declined 15 per cent due to adverse foreign currency translation, planned de-risking in unsecured products, and margin compression

· Asset and Liability Management decreased by 35 per cent due to lower accruals income partially offset by an increase in gains from liquidation of available-for-sale holdings

· Principal Finance income declined 78 per cent primarily impacted by weak equity markets leading to higher fair value losses in investments and lower realised gains on exits.

Other operating expenses, excluding the UK bank levy, regulatory and restructuring costs, fell 7 per cent to $9,032 million, driven by a 7 per cent reduction in staff costs year-on-year as we have reduced headcount. We delivered in excess of our planned $600 million cost efficiencies in 2015 and are commencing our programme to deliver $2.3 billion more over the next three years.

Overall, Group costs were down 2 per cent. The significant reduction in operating expenses was partially offset by increases in regulatory costs and the UK bank levy. Regulatory costs were up 40 per cent to over $1 billion in 2015 as we continued to invest in our control and compliance capabilities. The UK bank levy was $440 million, up 20 per cent. The rate of the levy will fall gradually from 0.21 per cent of eligible liabilities to 0.1 per cent by 2021. At that point the levy will also change from being charged on the Group's global balance sheet to just the UK balance sheet.

Excluding $968 million of loan impairment incurred as a restructuring charge in preparation to exit exposures in the liquidation portfolio, the Group's underlying loan impairment of $4,008 million was up 87 per cent year-on-year and is made up of:

· $1,627 million loan impairment incurred on assets in the liquidation portfolio

· $2,381 million loan impairment from ongoing businesses

Within this, Retail Client loan impairment fell 28 per cent to $677 million, representing 70 basis points of loss, as a result of deliberate de-risking actions taken, notably in Korea, Thailand and Malaysia, and the disposal of our Consumer Finance businesses.

Corporate & Institutional Clients and Commercial Clients loan impairment, increased significantly to $3.2 billion. We have reviewed the portfolio extensively through 2015 and have increased provisioning, largely to reflect lower commodity prices as well as further deterioration in India.

Other impairment of $311 million was down 23 per cent year-on-year and related to impairments in the period against aircraft and strategic investments.

Group risk metrics (inclusive of the liquidation portfolio and restructuring charges)

The above table reflects the significant actions taken since the announcement of our strategy to strengthen the balance sheet and reduce concentrations:

· Gross non-performing loans (NPLs) increased from $7.5 billion at the end of 2014 to $9.5 billion as at 30 September 2015 and have further increased on an underlying basis to $9.8 billion as at 31 December 2015. As part of the creation of the liquidation portfolio a further $3.0 billion was downgraded from credit grade 12 (CG12) to NPLs pending disposal of these exposures giving total NPLs as at 31 December 2015 of $12.8 billion. The aggregate NPLs and CG12 balances increased from $13.1 billion to $14.1 billion over the course of the year

· The changes in both the CG12 accounts and NPLs were mainly due to downgrading an interconnected group of exposures within the liquidation portfolio from CG12 to NPLs. Impairment against this group of exposures has been included in the restructuring charges based on the assessment of likely recoverable amounts

· We are making progress towards resolving the liquidation portfolio. However, as we execute on the liquidations we may require further impairments in 2016

· The cover ratio on our ongoing Corporate & Institutional Clients and Commercial Clients businesses has increased to 59 per cent, or to 70 per cent after including collateral

· Corporate & Institutional Clients NPL inflows from ongoing businesses slowed in the fourth quarter of 2015 when compared with the previous two quarters with the vast majority of new NPL inflows coming from accounts that have been on early alert for more than 12 months. While encouraging, a single quarter does not make for trend

· Total exposure to the Group's top 20 corporate clients as a proportion of Tier 1 Capital has reduced from 83 per cent to 61 per cent as we manage down concentrated exposures

Further detail on restructuring charge taken in the year

The total restructuring charge taken in the year of $1,845 million is made up of the following amounts, split by segment:

We remain confident in the original estimated cost for our planned restructuring of around $3 billion.

Further detail on the liquidation portfolio

To assist the analysis of both the liquidation portfolio and the rest of the Group's portfolio, the following table splits key disclosures across the balance sheet and profit and loss account.

In 2015 we have actively managed the balance sheet to increase the capital ratio, to retain high-quality deposits, price away low-quality deposits, and optimise RWAs for better returns. As a result, the balance sheet is more diverse, more efficient and provides a stronger platform to support the execution on the strategy.

Customer loans and advances were down 9 per cent as we focused on disciplined balance sheet management and more selective asset origination. Customer deposits were down 13 per cent as we concentrated on lower cost sources of funding, running down less attractive liabilities and investing in businesses, such as Cash Management and Custody that generate valuable liquidity. Currency depreciation against the US dollar impacted the balance sheet in the period. Excluding the impact of foreign exchange, customer loans and advances were down 6 per cent and customer deposits down 11 per cent.

Overall, the Group is highly liquid with an advances to deposits ratio of 72.8 per cent and has a Net Stable Funding Ratio and Liquidity Coverage Ratio above 100 per cent.

RWAs were down 11 per cent or $38.7 billion to $302.9 billion. We achieved this reduction through:

· Net positive underlying credit migration from ongoing business of $8.9 billion including gross negative credit migration of $15.3 billion offset by $24.2 billion increased provisioning and mark-to-market valuations

· Net negative credit migration of $3.6 billion relating to the liquidation portfolio since 3 November

· $9.6 billion from asset reductions

· RWA efficiencies of $17.3 billion including a $4 billion reduction in Financial Markets, $5 billion in loan sales, exiting $4 billion low-returning client relationships, and $4 billion through active management of unutilised limits, collateral and other system improvements

· $2.7 billion from the combined benefit of Principal Finance exits and the disposal of our Consumer Finance businesses

· $8.8 billion reduction from foreign exchange offset by $4.9 billion other movements

The Group has a strong CET1 ratio of 12.6 per cent after restructuring, or 13.2 per cent before restructuring actions.

During the course of 2015, ongoing business activities generated around 80 basis points of CET1 uplift, largely through a reduction in assets. The uplift from the rights issue added around a further 170 basis points. The immediate impact of the restructuring actions then reduced the CET1 ratio by around 60 basis points split between restructuring costs and downgrading assets in the liquidation portfolio. The CET1 ratio is expected to benefit from the RWA released as these exposures are liquidated.

Overall, the balance sheet remains highly liquid, well-capitalised and increasingly diverse as we liquidate exposures that are beyond our tightened risk tolerance, particularly large single-name exposures.

Summary and outlook

The weak momentum in the business reflects continued challenging market conditions combined with the immediate impact of the actions we have taken to strengthen the position of the Group. As we look forward, stresses remain apparent in our markets, and therefore we will continue to actively manage our portfolios. We have increased our capital base and are taking fundamental actions to reposition the Group for improved returns. The external headwinds are not improving. However, the strategy we are following is right for the Group. In these challenging conditions it is all the more important that we continue to execute with conviction and discipline.

2016 will be a year of accelerated execution. We will intensify our focus on balance sheet optimisation, on cost efficiency, and on investing to enhance controls and drive stronger returns in the future.

Andy Halford

Group Chief Financial Officer

23 February 2016

Standard Chartered PLC

Consolidated income statement

For the year ended 31 December 2015

Standard Chartered PLC

Consolidated balance sheet

As at 31 December 2015

Standard Chartered PLC

Consolidated statement of changes in equity

For the year ended 31 December 2015

Standard Chartered PLC

Consolidated cash flow statement

For the year ended 31 December 2015

The basis of preparation and summary of significant accounting policies applicable to these consolidated financial statements can be found in Note 1 in the Annual Report and Accounts 2015.

Impact of revision of credit valuation adjustment and funding valuation adjustment methodology

The Group enhanced its methodology for estimating the credit valuation adjustment (CVA) for derivatives as at 31 December 2015. Previously, the CVA calculation was based on an expected counterparty loss calculation using historical default probabilities, whereas the enhanced methodology uses market-implied default probabilities. In addition, the funding valuation adjustment (FVA) was also enhanced moving from bank internal funding rates to market-based rates. The net effect of the changes in estimate reduced net trading income by $863 million. It is impracticable to estimate the effect of the changes in fair value estimates on future periods.

Credit valuation adjustments

The Group makes a credit valuation adjustment (CVA) against the fair value of derivative products. CVA is an adjustment to the fair value of the transactions to reflect the possibility that our counterparties may default and we may not receive the full market value of the outstanding transactions. It represents an estimate of the adjustment a market participant would include when deriving a purchase price to acquire our exposures. CVA is calculated for each subsidiary, and within each entity for each counterparty to which the entity has exposure and takes account of any collateral we may hold. The Group calculates the CVA by applying the probability of default (PD) on the potential estimated future positive exposure of the counterparty using market-implied PD. Where market-implied data is not readily available, we use market based proxies to estimate the PD. The methodologies do not, in general, account for 'wrong-way risk'. Wrong-way risk arises when the underlying value of the derivative prior to any CVA is positively correlated to the probability of default by the counterparty. The Group continues to include 'wrong-way risk' in its Prudential Valuation Adjustments. The CVA calculation was previously based on an expected counterparty loss calculation using historical default probabilities. As at 31 December 2015, the calculation was revised to use market-implied PD. The change in estimate reduced net trading income by $712 million.

Funding valuation adjustment

The Group makes a funding valuation adjustment (FVA) against derivative products. FVA reflects an estimate of the adjustment to its fair value that a market participant would make to incorporate funding costs that could arise in relation to the exposure. FVA is calculated by determining the net expected exposure at a counterparty level and then applying a funding rate to those exposures that reflect the market cost of funding. The FVA for collateralised derivatives is based on discounting the expected future cash flows at the relevant overnight indexed swap (OIS) rate after taking into consideration the terms of the underlying collateral agreement with the counterparty. The FVA for uncollateralised (including partially collateralised) derivatives incorporates the estimated present value of the market funding cost or benefit associated with funding these transactions. The FVA calculation was previously based on the Group's internal funding rates. As at 31 December 2015, the calculation was revised to use market based rates. The change in estimate reduced net trading income by $151 million.

2. Segmental Information

1. Includes $495 million benefit relating to own credit adjustment, $863 million charge relating to a change in the methodology for estimating credit and funding valuation adjustments (Corporate & Institutional) and net gains on businesses sold/held for sale of $218 million (Retail $219 million gain and Commercial $1 million loss)

2. Includes $695 million charge relating to restructuring actions (Corporate & Institutional $231 million, Commercial $56 million, Private Bank $8 million and Retail $400 million)

3. Relates to $440 million for UK bank levy

4. Includes $968 million charge relating to restructuring actions in Corporate & Institutional

5. Relates to $488 million goodwill impairment charge in Taiwan ($362 million) and restructuring actions in Thailand ($126 million)

6. Includes $56 million charge relating to restructuring actions (Corporate & Institutional $13 million, Commercial $20 million, Retail $23 million)

7. Includes $885 million capital expenditure relating to operating lease assets2. Segmental Information continued

Performance by Client Segments continued