Cost of capital
Today the division’s return on equity has doubled to 14 per cent. We are focused on just 6,300 customers of high credit quality, with the dual benefit of reducing capital consumed and the risk of credit losses.
Return on risk weighted assets is now more than double that of 2016 at 1.59 per cent. Our product mix is more balanced, with revenue generated evenly across lending, transaction banking and markets. Importantly, the returns on lending is at or above the cost of capital.
Our international network has reduced capital and expenses significantly and we have invested in global technology platforms over the past seven years, significantly simplifying the tech stack.
The business today is very different and is well positioned to maintain strong returns. This was achieved by consistently sticking to the core elements of our strategy.
We have concentrated our efforts on high-quality customers who value our services and network and we’ve developed long term and deep relationships with these customers.
We focus on priority sectors with the highest return and growth prospects, namely financial institutions, technology, resources, energy and infrastructure, food, beverage and agriculture and sustainability. And our geographic network, particularly our access to Asian markets, gives us a unique competitive advantage.
We had to make our international network fit-for-purpose and improved its performance. We revised and determined a capital allocation and return expectations for each country.
Next, we simplified our technology and introduced integrated systems across our global network. This has improved customer experience and has allowed us to embed automation and provide clean data for more effective insights.
The importance of the investment in new technology cannot be overstated. Over the past seven years we spent $1.2 billion on this technology in Institutional. We simplified the network and created single platforms that are integrated globally.