Hsbc Holdings Plc · LSE:HSBA
Hsbc — H1 2016 Earnings Presentation
31 slides from Hsbc's earnings presentation, 2016
Slide 1: Value of the network
Value of the network Connecting customers to opportunities Reduce Group RWAs by c. $290bn and re-deploy towards 1 higher performing businesses; return GB&M to Group target profitability 2 Optimise global network 3 Rebuild NAFTA profitability 4 Set up UK Ring-Fenced Bank Realise $4.5-5.0bn cost savin
Slide 2: Our highlights
Our highlights 1st Half 2016 ‒ Reported PBT of $9.7bn down $3.9bn ‒ Adjusted PBT of $10.8bn down $1.8bn; a reasonable performance in the face of considerable uncertainty: 1H16 ‒ Revenue down $1.3bn or 4% versus a strong 1H15: Client-facing GB&M and BSM down Reported PBT (1H15: $13.6bn) Financial 7%
Slide 3: 1H16 Key metrics
1H16 Key metrics 2015 Full Year Key financial metrics 1H15 1H16 Return on average ordinary shareholders’ equity1 10.6% 7.4% Return on average tangible equity1 12.0% 9.3% Jaws (adjusted) - (0.5)% Dividends per ordinary share in respect of the period $0.20 $0.20 Earnings per share $0.48 $0.32 Common e
Slide 4: Financial overview
Financial overview Reconciliation of Reported to Adjusted PBT 2015 Full Year Discrete quarter Half year $m 2Q15 2Q16 vs. 2Q15 1H15 1H16 vs. 1H15 Reported profit before tax 6,569 3,608 (2,961) 13,628 9,714 (3,914) Includes Currency translation 142 - (142) 452 - (452) Significant items: Fair value gai
Slide 5: 2Q16 Profit before tax performance
2Q16 Profit before tax performance Reduced costs more than offset by a fall in revenue and increased LICs 2Q16 vs 2Q15 PBT analysis5, $m Adjusted PBT by global 2Q15 2Q16 vs. 2Q15 % business, $m RBWM 1,908 1,480 (428) (22)% CMB 2,140 2,052 (88) (4)% 2Q15 2Q16 vs. 2Q15 GB&M 2,434 2,118 (316) (13%) Gro
Slide 6: 2Q16 revenue performance
2Q16 revenue performance Lower revenue in 2Q16 versus a very strong performance in 2Q15 Revenue analysis6, $m 1Q14 2Q14 1Q15 2Q15 1Q16 2Q16 Lower Wealth Management revenue vs. 2Q15: Wealth Management Other ‒ A strong performance in 1H15, notably in Asia 5,476 5,428 5,774 Wealth 5,273 5,153 5,352 (28
Slide 7: 2Q16 Loan impairment charges
2Q16 Loan impairment charges Higher specific LICs vs. 2Q15; LICs broadly unchanged compared with 1Q16 LICs analysis5 by type $m 2Q15 1Q16 2Q16 vs. 2Q15 vs. 1Q16 2Q16 vs. 1Q16 by region Group (811) (1,209) (1,205) (394) 4 Adverse Favourable Brazil (226) (373) (414) (188) (41) Group excl. Brazil (585)
Slide 8: 1H16 operating expenses
1H16 operating expenses Continued progress with our cost base with a 4% decrease excluding Brazil Operating expenses trend6 Analysis (excluding bank levy and Brazil) UK bank levy7 (4)% Brazil operating expenses 0.2 15.6 0.4 (0.3) (0.9) 1H15: 2H15: 1H16: 1H16 vs. 15.0 $15.6bn $15.4bn $15.0bn 1H15: ex
Slide 9: Operating expenses
Operating expenses Improving efficiency and customer experience through process enhancements and use of digital platforms Selected achievements Automation of manual payments Accelerating client onboarding Increasing customer connectivity Volume manually processed Average calendar days to open a dome
Slide 10: 1H16 vs. 1H15 profit before tax performance
1H16 vs. 1H15 profit before tax performance Lower adjusted PBT from a fall in revenue and increased LICs; continued progress with our cost base 1H16 vs. 1H15 adjusted PBT analysis, $m Adjusted PBT by global 1H15 1H16 vs. 1H15 % business, $m RBWM 3,753 2,839 (914) (24)% CMB 4,371 4,128 (243) (6)% 1H1
Slide 11: Capital adequacy
Capital adequacy Strong capital base: common equity tier 1 ratio2 – 12.1% Regulatory capital and RWAs $bn 1H16 CET1 ratio movement % 12.8 31 Dec 31 Mar 30 Jun 2015 2016 2016 0.5 (0.4) 12.1 11.9 0.2 (0.1) Common equity tier 1 capital 130.9 132.9 130.7 Total regulatory capital on a transitional 189.8
Slide 12: Reduce RWAs by $290bn
Reduce RWAs by $290bn10 More than 60% of our target achieved Key movements in Group RWA ($bn) 1H16 achieved reduction Progress since Dec-14 Dec-15 1,103 Target (FX 1Q16 2Q16 Total rebased)10 FX (9) translation GB&M GB&M excl. 141 RWA 11 12 23 94 (48) excl. BSM BSM initiatives Book size 19 US CML US
Slide 13: Strategy Update
Strategy Update 13
Slide 14: Diversified universal banking model with unrivalled global presence
Diversified universal banking model with unrivalled global presence Distinctive advantages Benefits 1H 2015 1H 2016 ‒ Percent of client revenues linked ‒ Access to c.90% of global trade and to international clients12, % >45 >45 capital flows Unrivalled ‒ Banking operations in highest growth ‒ Transa
Slide 15: Progress on strategic actions to capture value from our international network
Progress on strategic actions to capture value from On track to meet 2017 target our international network Strategic actions Progress during 1H16 Targeted outcome by 2017 Status Actions to re-size and simplify ‒ $48bn further reduction in 1H16, notably in GB&M Reduce Group RWAs by c.$290bn ‒ ‒ CML
Slide 16: Aim to return capital to shareholders
Aim to return capital to shareholders Development of balance sheet and equity position Balance sheet items and share count indexed to 100 in 201018 ‒ Reduce low-return activities from legacy portfolios Reduce and low-return businesses low-return Equity Share count Loans and advances RWAs ‒ Continue
Slide 17: Conclusion
Conclusion Strong franchise in challenging operating environment Group financial targets Strength of franchise and universal banking model ‒ Continued to capture value from international network: ROE >10% ‒ Sustained growth in Commercial Banking underpinned by our international network and global pr
Slide 18: Appendix
Appendix 18
Slide 19: Appendix – Oil and gas, as of June 2016
Appendix – Oil and gas, as of June 2016 Oil and gas20, $bn ‒ Overall exposure of $31bn represents c. 2% of wholesale drawn risk exposures Overall drawn 7% higher than risk exposure $31bn Dec-15 ‒ Large integrated producers remain resilient ‒ 4% of the portfolio is CRR 7-8, the majority of which is i
Slide 20: Appendix – Metals and mining, as of June 2016
Appendix – Metals and mining, as of June 2016 Metals and mining20, $bn Overall drawn In line with ‒ $18bn represents c.1% of wholesale drawn risk exposure risk exposure $18bn Dec-15 ‒ Precious metals, copper, nickel and zinc prices rose in 1H16. Prices are generally forecast to continue improving. ‒
Slide 21: UK loans and advances to customers, as of June 2016
UK loans and advances to customers, as of June 2016 UK loans and advances to customers UK Personal of $127bn UK Mortgage lending ‒ Total UK lending of $285bn which Scotland Northern Ireland East Anglia represents c. 30% of Group exposure Greater London Credit cards 8% South East ‒ Wholesale: $158bn;
Slide 22: Mainland China exposure, as of June 2016
Mainland China exposure, as of June 2016 Mainland China drawn risk exposure21 Wholesale lending by type: Our top 5 exposures to banks ‒ Total China exposure of $143bn of which amounted to $22bn 55% is onshore CRRs 1-3 4-6 7-8 9+ Banks 22% NBFI Sovereigns 35 - - - $35bn 1% ‒ Wholesale: $135bn; Retail
Slide 23: Appendix – Balance sheet
Appendix – Balance sheet Loans and advances to customers, $bn (constant currency) Customer accounts, $bn (constant currency) 1,282.9 1,291.0 1,269.5 1,257.5 1,264.4 1,258.2 919.2 895.3 893.5 900.6 894.3 40.9 27.7 887.6 36.1 48.7 39.3 35.4 19.7 48.7 35.4 39.3 36.1 40.9 27.7 20.0 1,218.2 1,228.3 1,222
Slide 24: Currency translation and significant items
Appendix Currency translation and significant items $m 2Q15 2Q16 1H15 1H16 Currency translation 142 - 452 - Significant items: Revenue Gain on sale of several tranches of real estate secured accounts in the US 17 68 17 68 Gain on the partial sale of shareholding in Industrial Bank 1,009 - 1,372 - (A
Slide 25: Reported Consolidated Income statement
Appendix Reported Consolidated Income statement $m 2Q15 2Q16 1H15 1H16 Net interest income 8,170 7,847 16,444 15,760 Net fee income 4,041 3,389 7,725 6,586 Net trading income 1,990 2,488 4,573 5,324 Other income 2,850 770 4,201 1,800 Net operating income before loan impairment charges and other cred
Slide 26: Reported Consolidated Income statement by global business: 2Q16 vs 2Q15
Appendix Reported Consolidated Income statement by global business: 2Q16 vs 2Q15 $m RBWM CMB GB&M GPB Other Total22 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 Net operating income before loan impairment charges and other 6,531 5,957 3,748 3,886 5,019 4,447 564 486 2,856 1,370 17,051
Slide 27: Reported Consolidated Income statement by global business: 1H16 vs 1H15
Appendix Reported Consolidated Income statement by global business: 1H16 vs 1H15 $m RBWM CMB GB&M GPB Other Total22 1H15 1H16 1H15 1H16 1H15 1H16 1H15 1H16 1H15 1H16 1H15 1H16 Net operating income before loan impairment charges and other 12,442 11,117 7,534 7,509 10,261 8,913 1,177 973 4,687 4,028 3
Slide 28: Reported Consolidated Balance Sheet
Appendix Reported Consolidated Balance Sheet $m At 31 Dec 2015 At 31 Mar 2016 At 30 Jun 2016 Assets Cash and balances at central banks 98,934 126,265 128,272 Trading assets 224,837 268,941 280,295 Financial assets designated at fair value 23,852 23,957 23,901 Derivatives 288,476 342,681 369,942 Loan
Slide 29: Footnotes
Appendix Footnotes 1. On an annualised basis 2. Since 1 January 2015 the CRD IV transitional CET1 and end point CET1 capital ratios have been aligned for HSBC holdings plc 3. We plan to maintain a corporate presence in Brazil to serve our international clients 4. Refer to slide 24 for a complete lis
Slide 30: Important notice and forward-looking statements
Appendix Important notice and forward-looking statements Important notice The information set out in this presentation and subsequent discussion does not constitute a public offer for the purposes of any applicable law or an offer to sell or solicitation of any offer to purchase any securities or ot
Slide 31: Issued by HSBC Holdings plc Group Investor Relations
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ United Kingdom Cover image: Tsing Ma Bridge carries road and rail traffic to Hong Kong International Airport and accommodates large Telephone: 44 020 7991 5072 container ships. At HSBC, we help customers across the w