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Ladies and gentlemen, thank you for standing by, and welcome to the Standard Chartered update for the first quarter of 2019. Today's call is being hosted by Andy Halford, Group Chief Financial Officer. Once his opening remarks are finished, there will be an opportunity for questions and answers.At this point, I'd like to hand the call over to Andy to begin. Please go ahead.
Thank you very much, and good morning or good afternoon, depending on the time zone that you're in. Hopefully, you've had a brief chance to review our first quarter results statement already. So before we open the line to questions, I'll just add a bit of color to the key headlines, then share a sense of our expectations going forward.As you know, we set out in February a set of priorities and commitments for the next 3 years that will not only take us above the 10% return on tangible equity, but also create a truly differentiated bank for our customers and our shareholders. We have taken a number of positive steps towards that objective already. And although this set of results only covers 1 quarter, they show that we have made a good start. For example, shortly after the investor update, we were granted 1 of the 3 virtual banking licenses in the initial wave approved by the regulator in Hong Kong. We are very excited to be working with our partners on this initiative. HKT and its parent company, PCCW, are Hong Kong's leading telecom, media and digital solutions providers, and Ctrip is one of the world's most innovative online travel agencies. The strength that these strategic partners bring, combined with our own deep banking expertise in the market, means that we are in a strong position to redefine the digital banking experience for customers in Hong Kong. We will own the majority of the equity in this joint venture. And I mention it because it's a great example of how we are disrupting through digital and partnerships.And speaking of digital initiatives, we have rolled out our standalone digital bank model that we originated in the Côte d'Ivoire into further 4 markets: in Kenya, Ghana, Tanzania and Uganda.And then 3 weeks ago, we announced the end to various investigations into our legacy sanctions compliance and financial client controls. These matters have taken up considerable management time and effort, and resolving them removes a major area of uncertainty. These are 2 very different steps on the path of the course, but they are both important and will be hugely impactful in their own way.In terms of the 4 big markets we called out in February, where we see significant upside potential, although it's early days, 3 of them improved profitability year-on-year, and the 4th, Korea, we have returned capital to the group in the first quarter and thus further improved returns there.Finally, and not inconsequentially, another commitment we made in February given our strong capital position was to manage the E side of the RoTE equation more dynamically. With the material regulatory uncertainty result, we can now begin that process. Given the discounts to book value we currently trade at and coupled with our confidence in further improving profitability of the group, buying back our own shares is the natural best use of surplus capital currently to benefit all our shareholders. With this in mind, we have decided to spend $1 billion buying back our own shares, and we will start this process imminently and we intend to complete it before the end of this year.As we said in February, our intent is to operate within the refreshed 13%, 14% CET1 range, meaning we are prepared to return further capital that is not required in the business as and when appropriate. And this will continue to be subject to the execution of targeted capital actions, opportunities to invest in the business and of course, further regulatory approval.So turning to numbers. In terms of first quarter results themselves, our underlying profit before tax improved by 10% year-on-year or 12% at constant currency to $1.4 billion. This generated an annualized return on tangible equity of 9.6% compared to 8.6% for the same period a year ago. The 100 basis point uplift is certainly encouraging, but as you know, the first quarter's results do not include things like the U.K. Bank Levy that is charged at the end of the year.So looking at the numbers in a little bit more detail and starting with income. As we indicated at our full year results announcement, we benefited from unusually buoyant market conditions in the first couple of months of 2018, January in particular, and predominately in Wealth Management and Financial Markets. Partly as a result of that tough comparator that we called out, income in this first quarter was down 2% year-on-year.Foreign exchange translation also had a meaningful impact, and on a constant currency basis, it is worth highlighting that income was actually 2% higher and in March, income was higher than it was last year. So down 2% on a reported basis versus the strong comparator, but up 2% on a constant currency basis. And if you exclude the swing in DVA, then income was actually up 4%, with momentum in the business improving in the quarter. Although this is only 1 quarter and despite the outlook for the global economy remaining uncertain, it feels like sentiment in our markets is showing early signs of improvement.For these reasons, despite the slight contraction in this particular quarter, we're still confident that over the next 3 years, we can grow income at a compound annual growth rate of between 5% and 7% whilst keeping expenses growth below the rate of inflation. Over that period, we see that foreign exchange swings will likely even out. And given improving returns is the primary objective, then the reported income growth on its own in any given year is slightly less important than our ability to generate operating leverage via positive jaws. So if FX suppresses reported income this year, then it will also likely suppress expenses as it has in the first quarter, meaning there's an underlying operating profit level the FX will tend to cancel out.So moving to expenses, the other side of the jaws equation. I've already mentioned the beneficial impact FX has had on our reported number, but it is also worth bearing in mind that costs are often lowest for us in the first quarter of the year. Staff costs are usually higher in Q2 as the impact of pay rises flow through and there is the usual phasing of investment projects coming online as the year progresses.Then when thinking about the remainder of the year, we're well aware that to reach our minimum 10% return target by 2021, we need to generate a significant positive operating leverage over the period. And that absolutely remains our intent, including for 2019, whatever happens to FX in the meantime.I'll spend just a minute on credit quality, where, as you know, we have made considerable progress over the past few years. Credit impairment charges are often low in the first quarter as, this year, they were exceptionally low, less than half the same period last year, albeit benefiting significantly from operational release in Private Banking. This gives extra weight to my usual warning at this time of the year not to think of the Q1 outcome. As for the run rate for the remainder of the year, there is still a long way to go.Just a couple of observations on the balance sheet before I conclude with capital. Average interest-earning assets grew 5% driven by client loans and advances to customers, with growth from Financial Markets and Corporate Finance, in particular, and increases in trading book assets to support customer activity in Financial Markets. Average interest-bearing liabilities were also 5% higher, reflecting growth in customer accounts and repurchase agreements. And we continued to see some further migration from noninterest-bearing customer accounts into interest-bearing liabilities, but the net interest margin after adjusting for IFRS 16 remained stable.Risk-weighted assets were up $9.9 billion, 2/3 related to underlying asset growth, predominately in Financial Markets and Corporate Finance, and 1/3 related to seasonality in market-risk RWAs and impact of adopting IFRS 16.Finally, in terms of capital, our CET1 ratio was 13.9% at the end of the first quarter, down 30 basis points in the end of the year, but right at the top of the revised 13% to 14% range we gave in February. Incidentally, the 30 basis points includes the impact of the $186 million final charge as well as the foreseeable ordinary dividend, which is based on an interim dividend that, you may recall this year, will be $0.07 being 1/3 of the prior year full year dividend. Buying back $1 billion worth of shares, with all other things being equal, reduced the CET1 ratio by about 35 basis points, and the program will likely take several months to complete based on recent volumes.So to conclude. Before we open the lines for Q&A, our first quarter performance demonstrated that we are making tangible progress executing the strategic priorities laid out in February. While progress may not be linear, we remain very confident in our ability to deliver an RoTE of at least 10% by 2021.With that, I'll hand back to Callum and take your questions.
[Operator Instructions] Our first question today is from the line of Martin Leitgeb from Goldman Sachs.
Could I have 3 questions, please? And the first one is on the very strong revenue trend within Financial Markets. And I was just wondering if you could share a little bit of comment on what happened in the first quarter and to what extent this is a very strong quarter or this is essentially a result of something more fundamental and growing the restructuring of that unit, which I think historically has led to a comparatively weaker revenue trend compared to the rest of the group, but it seems to be that, that is one of the bright spots in today's results. The second question is with regards to the legal entity restructuring, which you announced back at the full year result. And I was just wondering if you could give us an update on where you are with regards to that legal entity restructuring in Hong Kong and at what point we could expect the revenue benefit from an optimized funding structure there to come through. And the final point is just on the earlier comment on the buyback, which you assume to complete by the end of the year, which seems a fairly long period of time at this stage. Could you just share with us what you're focused on in terms of where the buybacks can be executed, London Stock Exchange versus Hong Kong? And is that one of the considerations why it could take longer to complete?
Okay. Thanks, Martin. Thanks for those questions. So Financial Markets. I think there is certainly some element in here of our business progressively getting into a better tempo. There's been a lot of work that we have done over the last 2 or 3 years, as you know, of upgrading the team, updating our capabilities, moving more digital, focusing upon broadening the number of clients who we are offering products to. And so I think that just clearly had been one of the factors that has helped us here. Obviously, markets do move around from quarter to quarter, probably a little bit more buoyant in the Asia region than maybe elsewhere. Put the 2 together and we've had a good quarter. And it's nice, actually. See, we had a pretty good fourth quarter as well. So 2 good quarters there is good progress and has clearly helped the overall numbers.Second question, on legal entity restructuring. That continues. We made a number of changes in organizational structure that's impacted our business in Singapore. We have now changed internally some of the ownership relating to our Hong Kong business. And we hope, over the balance of this year, that we will have 2 or 3 maybe other changes that will occur. There are various approvals we need to get to do those. So I'd say that is on track. The benefit to that will accrue probably less this year, but then over the next couple of years, we'll start to see those benefits coming through in the income line as we reduce essentially some of our interest costs.In terms of the buyback, the time duration will depend very much on the volumes in the market. I think by the end of the year, I was not meaning precisely on the 31st of December, so it will depend a little bit on the volumes and what proportion daily volumes we can buy without obviously influencing the share price. And the exact terms of which markets we'll be buying back on will be published imminently.
Our next question today is from the line of Ronit Ghose from Citigroup.
I have a couple of questions, please. First of all, on the revenue side, 2 questions. Just following up on the previous question. Is there any element of your Markets business that you consider that you're over-earning in the first quarter? Kind of the total revenues are down year-on-year on a reported basis, but your rates and your FX revenues in some of the Markets line, as I was looking, are very good, Andy. So is this just, as you said, buoyancy in market, blah, blah, blah? Or is there anything here you want to call out, anything in the revenues at all? And the second revenue question is on Transaction Banking. And it looks like there's been a bit of a change in trend after many quarters of the Cash Management and Custody business doing better on revenues driven by margin expansion and volume growth. That's kind of gone sideways in Q1 on a linked-quarter basis, where straights had a very strong bounce-back compared to Q4. Is there any more color, I think, you can call out there? And my final question is on capital and RWAs. I hear what you say about the RWA growth Q-on-Q. Looking ahead, is there any further RWA optimization due to risk reduction that you've already done that's going to come through? Or should we maybe think you're modeling out arguably a growth in the future? Should we just look at balance sheet growth and loan growth because one of the success in the last few years has been quite a significant RWA optimization? Is that basically done now?
Right. I will try to answer your 4-part, 2-part question. So on revenue, the question -- the issue about over-earning, I guess, is quite an interesting one as to what over is opined against. As you know, the nature of that business does tend to be slightly lumpy in terms of volumes and in terms of sort of rates and a number of things, I think, well in the quarter and no doubt some of those may or may not recur in every forward quarter. But there's nothing particular that I'd call out there, albeit it was a noticeably good quarter for us, and on the average, we'll strive to do that, but there are no guarantees.Transaction Banking. Nothing sort of particular in there to call out. I think Trade was probably a little bit stronger than maybe we have seen over certainly the previous quarter. It was back at third quarter levels and not declining from third quarter levels, which is good. Cash Management was a little bit flatter in the period. But no, nothing that I'd particularly call out that was of concern in that space.And on the RWAs. I think the journey for most banks to optimize is a fairly never-ending journey. And there are always things that we will be looking at to optimize. As we said back in February, our belief is that through management off-balance sheets and assets, maybe 1 or 2 disposals, et cetera, we can keep the rate of RWA growth down below the rate of income growth over the next 3 years on the average, and that we will continue to be very focused upon. So the RWA growth, a good part which was actually asset growth, so the good growth in the first quarter, I think, is fine and there's nothing that's happened in the first quarter that would change my views on the medium-term outlook for RWAs.
Can I just circle back to Transaction Banking, please? So on the Cash Management, is there any change in trend on margin that you can see either in Q1 or you can see in the pipeline taking place? Is that margin expansion we've seen because of rising rates and also volume growth. You've been winning Custody mandates. Has there been a change in trend there?
If you go back a year, then there probably was a little bit more uplift in the margin coming through than we are seeing now. Margins are still holding up well, but sort of rates of improvement probably a little bit slower as you would expect. Volume and mandates, we're winning, still comes in at quite a steady run rate. So overall, I'd say there's nothing that I'd particularly call out there. First quarter last year, we were about $530 million on Cash Management income. We are now at 600 -- okay, the $600 million is similar to the fourth quarter, but generally, I think our business is still running well and there's nothing there that would concern me.
Okay. And just a final one on the revenues, the 5% to 7% CAGR is obviously a cumulative 3-year run rate. And this year, that's -- given the exchange rate, it's going to be pretty tough to get to the lower end of that, right, Andy? It's more like a 3% to 5%, if you have to put a number on a pretty lower end of that 3% to 5%.
Yes, let's just talk about that because, obviously, after a first quarter that's lower than -- the question you just raised is a very obvious one. So when we talked in February about the 5% to 7% range, that was a little on the average through that period of time. It was assuming that FX would sort of normalize over that period of time, and that sort of still remains our view. And I think on that basis, are you looking at this on a sort of normalized FX basis, we would still try to get into that 5% to 7% range. Obviously, it will be the lower end of that range likely given the first quarter. But still, our ambition is to try to get as close to the rates we can this year and then over the 3-year period to be within that range.
And our next question today is from the line of Chris Manners from Barclays.
Yes, so just a couple of questions, if I may. The first one was -- yes, another one just on the sort of revenue trajectory. I suppose to hit concerns just at the top line for the rest of the year, you need to give out 6% revenue growth in the back end of the sort of last 9-month period. And I take your point that adjusting for FX, adjusting for DVA, you're running at about a 4% revenue growth rate at the moment. Given -- yes, we're not likely to have any more rate hikes for the rest of the year, do you think that, that sort of 6% revenue growth rate is achievable? And just, I suppose following up from Ronit's question there, the second question was just a follow-up from that revenue growth as well. Given the cost control has been so strong and the sort of buyback that you're doing, are you trying to run a sort of maybe smaller bank here? Because I guess having less investment spend and so forth is actually going to maybe stymie your revenue growth prospect looking into next year. Or do you actually -- do you feel that that's okay?
Yes, Chris, it's interesting. If you look at the first quarter, and we can sort of ex out various factors in here, so I refer to the fact that the reported number is minus 2%. If you normalize for FX, we're plus 2%. If you ex out DVA, 4%. I could go on and say if you look at what happened in Wealth Management in the first quarter last year, it was probably roundabout $70 million more income in that period. Over the long term sort of average, that's another 2%. And actually, if I ex out enough of those, I've got the 6%, I've got to your number. Now I'm being a little bit selective in there because I'm picking a number of factors that also are headed just in one particular direction. But I think I'd go back to Ronit's sort of question earlier. Clearly, FX will play translation of it. At the end of the day, the most important thing for us is the end markets we're performing on a constant currency basis, and we need to look at it that way. FX translation will move around over periods of time. But that is like that we must be, I think, more sort of guided by what we're doing, actually underlying other businesses. As I say, after a first quarter when you have to ex out a few numbers to get to the averages, we will do what we can do to try to get into the 5% to 7% range in the quarter this year. Obviously, current trends have suggested we'll be lower into that rather than anywhere else, but that remains the case, that over a 3-year period, we'd still absolutely be aiming to be in the 5% to 7% range on the average.Second question, are we aiming to run a smaller bank? Well, we're probably the first smaller bank to have a 5% to 7% top line growth for 3 consecutive years, so I would argue that we are not trying to run a smaller bank, we are trying to thoughtfully grow the bank, while at the same time, we are trying to get more returns back to shareholders so that we can improve the return on capital we employ. And as we said in February, 13% to 14% as a range of capital we feel entirely comfortable with. It's a range we feel comfortable operating within rather than above as was previously the case, and I think the evidence that you're seeing today, that we're prepared to now do things. So 13.9%, the $1 billion will cost us about 35 basis points. In reality, that will take place over a number of months, although we will essentially book it, if you like, in the second quarter. And needless to say, we would not have got the buyback happening unless our regulators were happy with it and we are not going to be cutting back on investment at all in order to continue to grow the business and develop it as we want to do for the future.
Can I just follow up on that buyback point? Because I think it's an -- obviously, it's very material. Because -- and it says pro forma is taking you down to 13.55, and if you're to do another $1 billion, spend another 35 basis points to take yourself down to 13.2. Is that something that yourselves and the Board will be comfortable with?
Well, I think maybe there's a missing ingredient there that we might have actually been trading for a period longer and generating, so more underlying capital in the intervening period. So yes, from the Board's point of view, being in the 13% to 14% range is absolutely where we want to be. The evidence of this $1 billion is that we can return the $1 billion and comfortably be in that range. As we generate future capital going forward, the Board will no doubt look at this from time to time and we'll decide what is the appropriate thing to do at the various points in time in the future.
Our next question today is from the line of Manus Costello from Autonomous.
Yes, just following up on the question from Chris, really. Can I check if there's any update on the fed with Permata? And if you were to sell Permata, I reckon perhaps you could comment on whether this is right. It's about a 30 to 40 basis point uptick in your core Tier 1 ratio. So first question, is this assay a correct estimate? And secondly, if you do generate that incremental capital in the second half of this year, would you be committed to returning that back to shareholders to bring yourself back to the midpoint of your range?
Yes, thanks, Manus. So end of last year, obviously, we communicated that we were putting the investment, in part, in the noncore category. It is a business, that I think most of you know, where we have quite a high number of risk-weighted assets on our own balance sheet because of the structure and responsibilities that go with that investment. If we were not to be an owner of the business at a point in time, it does actually disproportionately release risk-weighted assets. If there are any developments in that regard at any future point in time, then we will update you. But as of now, there is nothing further to update. And then finally, to your question, hypothetically, if you come back to the 13% to 14% level, if we do anything that is likely one-off or continuing to be putting us above the range, then obviously that will be a point that would cause us to have a look at whether we are in the right place. If we're too high, then we can do the appropriate thing as we have demonstrated, that we are prepared to do today.
Okay. I think I follow that. On the -- just on the first bit, you're basically saying you don't want to answer whether it's a 30 to 40 basis point uplift.
It will be somewhere in that sort of, say, it could be a fraction higher than that, somewhere in that zone.
Our next question is from Fahed Kunwar from Redburn.
Just looking at costs and the loan losses, if I can get away from revenues for a second. If I look at both, and the questions are reasonably similar, if you look at cost, I know you said that 1Q is normally lower in investments we face. But if I look at the next 9 months of the year and look at the run rate you will have then for 2019, it looks like a kind of 10% pickup from the 1Q '19 run rate. So I appreciate costs are going to pick up and investment stays, but is that the kind of pickup we should expect, or is that kind of -- is that number -- is that 10% increase in kind of quarterly cost run rates a bit too high? And a similar question on the loan loss number as well. If you look at -- if you ex out the right-back that you had, you're still tracking, I think, for about $500 million total loan loss in other impairments and total impairments. And since it's going to be $1 billion as well, so I mean, is there something in the loan loss number that you're seeing that suggests that it would be higher? Or is that kind of -- is the $500 million-odd number for this year realistic? I appreciate how hard it is to forecast loan losses going forward. And I just wanted to, on capital, just understand, just to be clear on one thing. So the risk-weighted density was pretty much flat, so along with these are assets. I think you've said in this call, and obviously earlier as well in this strategy, that you expect, I think, keeping with the answer, we should still model that risk-weighted density of, I think it was, 37% in the call in this quarter, should carry on tracking down even after the Permata sale.
Okay. So the costs, loan losses and capital intensity. So on the costs, first quarter, I think, has been good. Controls that we have increasingly had in place, I think, working. We are managing to invest in the business and keep control of the costs. As I said in my script a short while ago, there will naturally be a couple of things that will put the cost slightly higher as is usual in the back or end of the year. One is salary increases, as they come through, are perfectly normal. And secondly, that the progress on spending on new investment areas does tend to build a slight momentum over the course of the year. So you can normalize the 2.4 for the quarter, 9.6. I think that would take you to a lower number than it's likely to be in the outcome. Our intent is still, I think if you look at this on a constant FX basis, that we would see costs for the full year being slightly below the rate of inflation, but nothing happened in the first quarter that makes me veer away from that. And indeed, we will absolutely keep the pressure on investing because we see a number of areas there which will enhance our future by so doing. And loan losses are always a little bit difficult to draw linear extrapolations from in the first quarter. We've called out the fact that even by our standards, the first quarter was incredibly low and in part, that was because of a reversal of a previous provision of about $48 million. So as I know you picked up in your question, one sort of needs to reverse that out, that even so, one gets to quite low numbers. I think the first quarter historically tends to be a little bit lower, so I would again not take the adjusted number and just multiply it by 4. We will do obviously what we can to make sure that, that cost is well controlled at the balance of the year. The lead indicators are still stable to marginally positive, which is good. And you will take your own view as to what you put in your models, which also links me to your third question about what you put in models for risk-weighted assets and the sort of capital intensity. As we've said, and I said just a while ago, our belief is, over the 3-year period, that we should, with a number of other actions as well collectively, be able to keep the rate of the other risk-weighted grades below that of the income growth, and that remains our view.
Our next question is from the line of Tom Rayner from Numis.
I think you've done the RWAs and revenue to death a little bit already. Just on the costs. I mean, I know it's only a quarter. Can you give us any sort of color on what's been going on within that cost number maybe on reg costs, accrual headcount, any phasing of investments, so by just giving us a little better feel for what was driving that sort of better Q1 number?
Yes. The reg costs are slightly better first quarter-on-first quarter, and that's very consistent with what was said previously. We saw our results getting to a peak of that about sort of first, second quarter last year, so it's nice to see, eventually, those starting to come down a little bit. Headcount today is slightly lower than where it was at this time last year, albeit there's a bit of a mix change in directly employed and contract workers. A lot of focus on our shared service sensors and locations of where our people are and all the work being done looking at interim processes, particularly from the eye of customers, to see what we can do in terms of improving the experience customers have, taking out wrinkles and hopefully, not only improving customer satisfaction, but also taking some costs out there. So as ever with costs, there's a constancy of new ideas, new things we're looking at. And at the heart of it is the intent to continue to make sure that we can invest, that we've got enough money to continue to invest in digitizing, in moving the business forward so that things like the Hong Kong joint venture we can do and we've got the appropriate investment funds to be able to do that without disturbing the flow of our P&L in the process.
Okay. And just, I mean, just can we, just one on the RWA. Obviously, it was quite a big annualized growth in Q1, and you've explained the drivers quite well around the accounting change and the sort of market risk. But just in fact, to Fahed's point, I mean, the credit-risk RWAs do seem to be tracking loans quite closely, and I think that's something that we're hoping over the medium term that we're going to see a divergence, in that your optimization will drive a slower pace of RWA growth versus the loan book, which is obviously important for your revenue numbers. So is there anything that you can add that haven't said already that -- on that issue?
The only thing I can add is that what we said in February that we believe will be the case, on the average, over a 3-year period, remains our view. It's only 8 weeks since we did that update. And not all of the things that will give us some upside benefit there have come through in the first 8 weeks, but that doesn't deter us from our belief that, actually, that growth should be more moderated than the underlying income growth.
Our next question is from Robert Sage from Macquarie.
And most of my questions have been answered, but I do have a couple, actually. First of all, I see that you're sort of talking about the sentiment improving a little bit within your markets. And in terms of interpreting this, should we be thinking in terms of Wealth Management, Financial Markets, Corporate Finance, in terms of whether sort of the primary sort of uplift might come from that? And also, explicitly, I see no reference here to Retail Banking loans. And I was just wondering what they've done in the quarter, whether there was any upward movement or not. The second question I'd have is that you made reference in your introductory remarks to Korea, saying that you'd made some capital returns to the group level. And I was just wondering whether you could comment whether this is actually a small amount in the materiality of it and whether there's much more to come.
Yes, Robert, so sentiment. It's very difficult to sort of capture across a number of markets just sort of where people's minds are at. I think, over a lot of last year, people were particularly looking at the sort of U.S.-China issues with a degree of sort of where is all this sort of heading. I think we sensed a little bit more moderation of people feeling that there will be some sort of resolution there and that life will continue thereafter. So it's more just, at the edges, a little bit of improving. I wouldn't -- it was a comment made sort of more generally rather than specific to individual product areas. Wealth Management clearly has been doing well in the first quarter, albeit, said earlier, the comparison a year ago, was difficult. But just generally, I think a sense that things are sort of settling down and people are sort of getting on with their lives and our businesses feeling that, that is not too bad a place to be. Retail Banking, the P&L side of it, the headline number was down year-on-year. However, the whole of that was explained by Wealth Management, and if you sort of ex out the Wealth Management side of it. The rest of the Retail business was performing very much in line with what we expected in line with the previous year. And bear in mind that the loans tend to be mainly local currency in Retail, that we are, we're sort of seeing balance sheet fairly similar to last year, sort of plus or minus 1%. So not a lot of change in that space, but a good line book lends to numbers of customers sort of doing well, and overall, credit quality also is still high.
And so you'd have the comps on Korea as well?
Korea. Sorry, Korea. Yes. Yes, so if you look at local filing, it's in the earlier part of the year. And these are the public record, we didn't make a big thing of it. There has been a sort of restack of the capital in country, and that has released $0.5 billion back to us as a group. Obviously, that's been done with full local approvals, et cetera. And the business is very focused upon continuing to generate a profitability, such that we can, over time, get further capital returns back from our investments in that market.
Our next question is from Jenny Cook from Exane.
Firstly, on the Hong Kong digital banking license, I wanted to get a feel for where we are on the cost trajectory of this program. Will the investment going into this be captured within your current cost outlook? I suppose on that, will you be fully consolidating this venture given your majority stake? Secondly, just coming back to RWAs, and sorry to kind of come back to this given the number of questions you've had on it so far, but they did come in quite a bit higher than the market was expecting in Q1. And importantly, ex IFRS 16 and market seasonality, the underlying seems to consume 30 bps of capital in Q1. If I look at consensus, I've got 2% RWA growth in 2019, including IFRS 16, which then puts your full year number below the Q1 RWA apron. I'm just wondering if you see that as realistic that the full year will end below Q1, particularly if the market will get enough tough books this year.
Yes, Jenny, so Hong Kong digital, we are incurring costs, and as we've been building the platform over the last few weeks and months, we have been incurring those costs and those are incorporated within our reported numbers and within our thinking going forwards. And yes, we will consolidate that because we're the major shareholder in the business when it is fully up and running. RWA seems to be the topic of the day. I can only reiterate that there are elements within the first quarter that are unique to accounting standards. There are elements that are unique to market risk that impacted sort of end of last year, early start of this year. And what is left in the credit space is actually, I think, sort of encouraging, being in line with the fact that we have got asset growth in balance sheet, which I'd say was a good thing. And we remain to repeat of the view that over a period of time, we should be able to manage the RWA growth below the rate of income growth, and that remains our view.
Your next question is from James Invine from Societe Generale.
I was just wondering if you could tell us if there's been any deliberate cost flex this quarter, just kind of offsetting the fact that the revenue is running below your target. And then I guess linked to that, if you could just talk about the jaws, give us a bit of divisional color on the jaws just because you've got some quite different income performances between the different business units.
Well, deliberate cost flex after being deliberate cost action, yes. As flex implying something that's transient, no. We have been consistently working on the cost base with the primary objective of taking out inefficient costs and freeing up enough space to be able to invest in the business as we move forwards. And that remains our view and remains the objective. I won't go into jaws by product or by whatever, but there is nothing particular in the cost, in the first quarter, that I would call out and as I said earlier, to begin the 5% to 7% range on income and below inflation on costs does imply the cross piece that we will see jaws opening up progressively over the 3-year period.
Fine. Okay. But I mean, is it -- I mean, I know you didn't want to give too much color, but I mean, is it fair to say that Retail Banking's got negative jaws still?
Retail Banking, I think, was fairly similar to last year. I mean, each of the business areas has got its own thing that it's working upon all over the cost side of it. No part of the business is immune from that. Wealth Management and the product set within Retail has got different cost components to it. And if we can get good growth at Wealth Management products, even if the cost is higher or vice versa, we will do that. We will do whatever is best for the bottom line for the business, and it's something that moves over time. Wealth Management income being lower than it was a year ago, cost base Wealth Management slightly more thick, those 2 things have an impact in this, but I wouldn't say there's anything particular that I would draw out on the cost front.
[Operator Instructions] We've just had another question. It's from the line of Gurpreet Sahi, Goldman Sachs.
Can I ask whether the buyback would be done for the Hong Kong a listing side or only for the London business?
Yes, we will issue more details either during the course of today or tomorrow, I can't remember which of the 2, which will give you more details on which markets and how we're going about this. But overall, we're pressing on with this ASAP, and depending upon market volumes, we will work our way through the $1 billion over the next 5 or 6 months or thereabouts.
There are no further questions. I'll now hand back to Andy for closing remarks.
Good. Thank you, and thank you all for your questions. I think this quarter has actually been quite an important quarter. Getting the long-standing legacy conduct issues out of the way is a big step forward. Starting to return the capital, something we have not done for a long time, is another big step forward. Momentum in the business, as I think you can see, is continuing the investments in things like the virtual bank license in Hong Kong, evidencing that we are prepared to do things differently going forward and are firmly positioning ourselves for a more digital world. Involving more partners, I think, is a good start for the year. And we will update you in another 3 months on the first half. Thank you all very much.
Thank you. That does conclude the conference for today. Thank you all for participating, and you may now disconnect.