Hsbc Holdings Plc · LSE:HSBA
Hsbc — Investor Day (June 2017)
61 slides from Hsbc's investor day presentation, Jun 15, 2017
Slide 1: Global Banking and Markets Investor Update 2017
15 June 2017 Global Banking and Markets Investor Update 2017
Slide 2: Important notice and forward-looking statements
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 other finan
Slide 3: Agenda for the day
GB&M Investor Update Agenda for the day Presenters Introduction 9:35AM – 9:40AM Samir Assaf and Gerard Mattia 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM Business Heads: GB&M clients and businesses 10:00AM – 10:20AM Robin Phillips, Matthew Westerman 2 Break 10:20AM – 10:40AM Di
Slide 4: Progress since June 2015 Investor Update
GB&M Investor Update Progress since June 2015 Investor Update Major Strategic Outcome by 2017 Progress so far actions Actions to return to Group target profitability GB&M1 - gross reduction US$100bn2 GB&M - US$99bn gross reduction and net Reduce RWAs and net reduction US$64bn US$56bn as of 1Q17
Slide 5: Distinctive business model
GB&M Investor Update Distinctive business model Distinctive GB&M business model Re-affirming investor commitments Revenue Mid single digit growth Client-base with equal mix of Greater revenue corporates and financial predictability given Operating institutions Positive adjusted Jaws relatively low
Slide 6: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 7: Presenters
Presenters Samir Assaf Gerard Mattia Chief Executive Officer Chief Finance Officer Global Banking & Markets Global Banking & Markets
Slide 8: Banking industry wholesale revenues forecast to grow with improving returns
Industry Banking industry wholesale revenues forecast to grow with improving returns Banking Industry wholesale Revenue1 Banking Industry wholesale RoE2 2014-20F, US$bn 2014-16, % +3% CAGR 11% 740 755 10% 10% 730 2014 2015 2016 2020F 2014 2015 2016 Source: Oliver Wyman analysis 1. Revenue pools incl
Slide 9: Regulatory changes – post-crisis policies near finalisation
Industry Regulatory changes – post-crisis policies near finalisation Regulatory change outlook Net Stable Funding Ratio (NSFR) Fundamental Review of the Trading Book (FRTB) Capital and Standardised Approach to Counterparty Credit Risk (SACCR) liquidity IFRS 9 UK ring-fencing - 2019 Brexi
Slide 10: GB&M represents circa one third of HSBC Group
GB&M – Part of HSBC Group GB&M represents circa one third of HSBC Group Revenue1 Operating Costs1 LICs1 2016 – US$ 2016 – US$ 2016 – US$ 30% 29% 17% GB&M GB&M GB&M 14.9bn 8.9bn 0.5bn Profit Before Tax1 RWAs External Assets2 2016 – US$ 2016 – US$ 2016 – US$ 29% 35% 31% GB&M GB&M GB&M 5.6bn 300bn 663b
Slide 11: GB&M is focused where it has sustainable competitive advantages
Industry/GB&M GB&M is focused where it has sustainable competitive advantages HSBC GB&M focus areas Global Markets1 Global Liquidity & Cash Management2 2016 – US$ 2016 – US$ c.90% c.90% Industry Industry Revenue Revenue Pool Pool c.130bn c.228bn3 c.10% c.10% Financing & Advisory4 Securities Services
Slide 12: Sustainable competitive advantages generating historically stable and recurring revenues
GB&M - Competitive advantages Sustainable competitive advantages generating historically stable and recurring revenues Group Advantages GB&M Advantages GB&M revenue, 2014–16 average Balance Sheet 1 Clients1 c.50% c.25% Banks & Insurers Strength Asset Managers Client-base with equal Strong capital He
Slide 13: Client-base with equal mix of corporates and financial institutions
1 Clients Client-base with equal mix of corporates and financial institutions GB&M client distribution by revenue 2016 Top 8 Corporate Segments2 % of Corporate revenue Consumer & Retail Infrastructure Corporates Capital Goods & Automotives Power & Utilities Telecoms, Media & Technology Other sectors
Slide 14: Distinctive universal model and international network creates revenue synergies
1 Clients Distinctive universal model and international network creates revenue synergies Total revenue synergies by Global Business GB&M enabled revenue synergies Revenue1 2016, US$bn US$bn Definition Global Liquidity and Cash 10.5 GB&M clients Management 3 2.7 with GLCM and GTRF Global Trade a
Slide 15: Broad wholesale product suite helps enable deep client relationships
2 Products Broad wholesale product suite helps enable deep client relationships Product building blocks Client revenue multiplier by number of products2 2016, # of products >10x Financing & Advisory1 (ex. Lending) Rates & Securities Equities Lending c.4x Credit Services 1x Trade & Foreign Liquidity
Slide 16: Diversified product offering distinct from our peers
2 Products Diversified product offering distinct from our peers Revenue split by Products against peers 2016 3% Transaction Transaction Banking Banking Global Liquidity & Cash Management 22% Financing & Advisory 28% Securities Services 29% Foreign Exchange4 Global Trade & Receivables Finance F
Slide 17: Focused strategy has resulted in top market positions driving c.70% of revenue
2 Products Focused strategy has resulted in a top 5 market positions driving c.70% of revenue GB&M: revenue1 by product by market rank % c.70% of adjusted revenue Example Top 3 and Top 5 positions #1 GTRF Globally 100% c.50% #2 Foreign Exchange Top 3 #3 GLCM Asia ex #1 DCM, GLCM, GTRF & Japan Securi
Slide 18: Distinctive network enables us to serve the largest global clients
3 Geographies Distinctive network enables us to serve the largest global clients GB&M client revenue by number of countries/regions 2016, % c.50% c.25% c.15% c.10% 3 or fewer countries 4 or more countries 3 regions 4 or more in 1 Region in 1 region or booking in 2 regions Accessible to local banks A
Slide 19: More than half of GB&M revenue is cross-border
3 Geographies More than half of GB&M revenue is cross-border Cross-border client revenue along major corridors % of Global GB&M cross-border revenue, 2016 Outbound total = 100% Inbound total = 100% Cross- border c.30% c.35% c.35% c.10% c.40% North America c.25% Europe Asia c.5% c.10% In-country MENA
Slide 20: Geographic footprint geared towards faster growing markets
3 Geographies Geographic footprint geared towards faster growing markets % CAGR % Global GDP1 Global trade2 GB&M Revenue3 US$tn US$tn US$bn 70 160 29 69 15 Europe 26% 22% 5% 6% 38% 35% 37% 23% 5% North America 29% 5% 12% 15% 15% 7% 6% 6% 6% 3% 5% 7% 8% 8% Latin America 7% 8% 7% MENA 4% 6% 8% 7% 41%
Slide 21: Historically stable and recurring revenue with low volatility
REVENUE STABILITY Historically stable and recurring revenue with low volatility Quarterly GB&M Revenue1 Event driven & cyclical, including Credit and Funding Valuation adjustments Stable & recurring Total Revenue excluding Credit and Funding Valuation adjustments c.30% Revenue Total GB&M revenue qua
Slide 22: Historically predictable revenue driven by relatively low volatility
REVENUE STABILITY Historically predictable revenue driven by relatively low volatility 1Q14 – 1Q17 Quarterly volatility peer comparison1,2 % US Universal Banks3 GB&M Peer revenue equivalent quarterly volatility (1Q14-1Q17) US Investment Banks3 17 EU Investment Banks3 Average EU Universal Banks3 16 H
Slide 23: Significantly outperforming our peer group historical growth
REVENUE GROWTH Significantly outperforming our peer group historical growth Peer Revenue Growth Comparison1 HSBC Market Share Growth CAGR 2014-16, % Corporate & Investment Banking4, % 4.8% +120bps 7.5 7.1 1.3% 6.3 0.6% Peer average: -0.8% -3.3% 2014 2015 2016 -7.8% EU US US EU HSBC Main drivers of g
Slide 24: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 25: Presenters
Presenters Robin Phillips Matthew Westerman Co-Head of Co-Head of Global Banking Global Banking Diane Reyes Thibaut De Roux Cian Burke Global Head of Global Global Head of Global Head of Liquidity & Cash Management Markets HSBC Securities Services
Slide 26: Client centric coverage model serving clients with more products in more countries
Client coverage GB&M has a client centric coverage model allowing us to serve our clients with more products in more countries Global Relationship Bankers are the focal point of client relationships – delivering all of HSBC’s products Single point of delivery for all Group products Client revenue mu
Slide 27: GB&M clients are large multinational corporates and institutions
Client coverage GB&M clients are large multinational corporates and institutions Customer Client profile threshold1 # of clients2 US$ Financial All Financial c.2k Institutions Institutions Global Banking & Markets Multinational >US$5bn c.2k Corporates turnover1 Large Corporates, < US$5bn Mid-Market
Slide 28: GB&M has a disciplined approach to capital allocation
Client coverage GB&M has a disciplined approach to capital allocation Capital allocation approach Track record Revenue1, US$bn Financing & Advisory1 RWAs Guided by overall GB&M required return and assessed at US$bn deal, client level +4% CAGR c.-45bn2 Deal-by-deal reviews of new capital commitments
Slide 29: Universal banking model enables solutions throughout the client lifecycle
Client coverage Universal banking model enables us to provide solutions throughout the client lifecycle Positioned to bank the client throughout its lifecycle, from basic banking services through to international cash management and capital markets solutions Case study 1 2005 2015 2016 2017 Became T
Slide 30: Growth opportunity in Asia and Americas, well positioned in Europe
Regions – Outlook Growth opportunity in Asia and Americas and well positioned in Europe despite ring-fencing and Brexit Trends Initiatives Unrivalled position in Asia Macro – Strong GDP and trade growth Pivot to Asia – continue re-deployment of resources and investment Infrastructure – Infrast
Slide 31: Financing and Advisory: historically stable revenue growth and market share gains
Financing and Advisory - Profile and track record Historically stable revenue growth and market share gains DCM, ECM, Advisory, IRG, Credit and Equity financing revenue growth1 With positive momentum in a number of strategic areas2 Revenue, US$bn +6% CAGR +6% CAGR Technology client revenues +9% CAGR
Slide 32: Financing and Advisory outlook
Financing and Advisory - Outlook Well placed to continue to grow share of client event wallet Industry revenue forecast1 Initiatives US$bn 1 Regions +3% CAGR Asia: Maintain leadership – Grow assets in the Pearl River Delta – Retain leadership in Investment Banking revenues in Hong Kong – Invest in
Slide 33: Progress in Sectors: Global Chemicals case study
Financing and Advisory Progress in Sectors Case study: Global Chemicals sectors Supported by best in class Acquisition financing Capital markets Advisory research team1 Apr 2017 Apr 2017 Apr 2017 Nov 2016 Ongoing Jun 2017 EUR26.9bn EM EMEA EUR0.7bn & US$1.2bn US$2.1bn US$2.1bn EUR4.0bn Financial Adv
Slide 34: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 35: Global Liquidity and Cash Management: profile and track record
Global Liquidity and Cash Management – Profile and track record Historically strong revenue and deposit growth enabled by key deals and recognised by industry awards Balanced geographical footprint1 Product suite1 Track Record2 2016, Revenue % 2016, Revenue % Revenue, US$bn Deposits3, US$bn Others +
Slide 36: Leading provider of Liquidity and Cash Management solutions
Global Liquidity and Cash Management - Outlook Continue to be leading provider of Liquidity and Cash Management solutions globally for our customers Industry revenue forecast1 Initiatives US$bn 1 +5% CAGR Geographies Extend proven coverage model to better penetrate key corridors (e.g. Asia to US,
Slide 37: Trade is pivotal to the value of HSBC's network
Global Trade and Receivables Finance - Profile and track record Trade is pivotal to the value of HSBC’s network GTRF GB&M Track Record Global Trade Finance Solution Revenue1, US$m Case Study 693 702 Structured a receivables finance facility in the US UK with HK Structured a receivables finance f
Slide 38: Global Markets: sustained revenue growth, RWA reduction and market share gains
Global Markets – Profile and track record Sustained revenue growth, RWA reduction and market share gains Delivering solutions, financing, emerging market and network to Track Record corporate and institutional clients Revenue2, US$bn Client profile1 Product suite2 +11% CAGR 2016, Revenue % 2016, Rev
Slide 39: Global Markets outlook: defined plans to continue growth momentum
Global Markets – Outlook Defined plans to continue growth momentum Industry revenue forecast1 Initiatives US$bn 1 Client Financing and Solutions opportunities +2% CAGR Grow higher margin businesses aligned to HSBC strengths Credit – leverage our franchise for origination opportunities and build
Slide 40: HSBC Securities Services: market share gains in Asia and Middle East
HSBC Securities Services – Profile and track record Market share gains enabled by leadership position in Asia and Middle East Client base1 Product Suite2 Track record 2016, Revenue % 2016, Revenue % US$bn, Revenue2 US$tn, AUC3 Hedge Sovereign & Funds Issuer services +3% CAGR +3% CAGR Public Sector 1
Slide 41: Securities Services outlook
HSBC Securities Services – Outlook Invest to capture market growth, automate our platforms and deliver enhanced client experience Industry revenue forecast1 Initiatives US$bn 1 Invest in Digital & Data +3% CAGR Increased investment in digital & data programmes Improve client experience through A
Slide 42: Invest in digital and innovation for efficiency and growth
Digital – Outlook Invest in digital and innovation for efficiency and growth Client and Market Connectivity Strategic Investments and Partnerships HSBC Evolve 10+ Investments in technology start ups to date Across four key themes Data and Security Artificial Intelligence Open Banking Operational
Slide 43: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 44: Further scope to improve RoRWA to greater than 2.5%
Outlook Further scope to improve RoRWA to greater than 2.5% GB&M RoRWA % >2.5% 1.8% Revenue Operating Costs RWAs RoRWA Mid single digit Continue Continued RoRWA 2016 revenue growth disciplined discipline capital Outlook2 driven by key approach to costs allocation to trends and to achieve achieve a f
Slide 45: Revenue – mid single digit growth driven by macro and competitive advantages
Outlook Revenue – Mid single digit growth driven by macro and competitive advantages GB&M revenue1 Drivers US$bn 1 Macro factors Economic growth As per Investor update 20152 Mid single Interest rate rises digit CAGR Banking Industry wholesale revenue growth c.5% CAGR Monetise competitive advantag
Slide 46: Costs – continue disciplined approach to achieve positive jaws
Outlook Costs - Continue disciplined approach to costs to achieve positive jaws Cost walk1 US$bn <2% CAGR Positive jaws 8.9 8.53 Run rate cost • On track to deliver US$1.1bn in saves c.US$0.5bn run rate savings by end 20172 2014 Adjusted Inflation and Cost Saves 2016 Inflation and Cost Saves Outlook
Slide 47: Capital – continued discipline to achieve further US$20bn RWA reduction
Outlook Capital – Continue disciplined capital allocation to achieve a further US$ 20bn RWA reduction GB&M Risk Weighted Assets US$bn Further US$20bn+ reduction3 350 46 96 300 Target for 2017: gross 171 • Managing client profitability reduction of US$100bn4 Credit risk • Further improved data qualit
Slide 48: GB&M well positioned to grow whilst improving returns
Outlook Global Banking & Markets is well positioned to continue to grow whilst improving returns Re-affirming Investor commitments Market trends ‒ Positive growth for the medium term Revenue Mid single digit growth ‒ Improving returns Proven track record in execution Operating Positive Jaws Cost
Slide 49: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 50: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 51: Agenda for the day
GB&M Investor Update Agenda for the day Introduction 9:35AM – 9:40AM 1 Industry and Global Banking & Markets overview 9:40AM – 10:00AM GB&M clients and businesses 10:00AM – 10:20AM 2 Break 10:20AM – 10:40AM GB&M clients and businesses 10:40AM – 11:00AM 3 Outlook 11:00AM – 11:20AM Q&A 11:20AM – 11:45
Slide 52: RoRWA 2014 to 1Q 2017
Appendix – Track record RoRWA 2014 to 1Q 2017 Global Banking & Markets RoRWA % 0.3% 2.3% 0.7% -0.2% 1.5% RoRWA Revenue Costs RWAs RoRWA 2014 + LICs 1Q 20171 1. As disclosed in the 1Q17 HSBC Earnings release. 1Q17 has been annualised and on a 2pt Average. Revenues include LICs 40 52
Slide 53: Costs 2014 to 2016
Appendix – Track record Costs 2014 to 2016 Update on progress1 GB&M Adjusted Operating Expenses1 GB&M cost reductions US$bn FX related to significant items US$bn, run-rate basis Adjusted Operating Expenses2 1.1 9.0 8.9 8.5 0.3 8.2 Year End 2016 Plan for 2017 Target 2017 20143 2015 2016 Note: Numbers
Slide 54: RWAs 2014 to 2016
Appendix – Track record RWAs 2014 to 2016 Update on progress1 RWAs1 Cumulative Gross RWA reductions2 US$bn US$bn 100 Total Gross RWA reductions US$96bn of which: 96 350 • Global Banking c.US$45bn • Global Markets c.US$50bn 82 300 96 73 46 63 57 32 19 4 4Q14 Reduction Growth & other 4Q16 1Q15 2Q15 3Q
Slide 55: Balance sheet assets of US$663bn, smaller than most major peers
Appendix – Track record Balance sheet assets of US$663bn, smaller than most major peers GB&M assets Peer estimated CIB assets3 US$bn US$bn Derivatives not set off Loans and advances Trading assets Other 925 (262) 729 663 2014 GB&M 2016 GB&M Derivatives 2016 GB&M US US US European European assets1 Ex
Slide 56: Presenters
Appendix Presenters Samir Assaf Gerard Mattia Robin Phillips Matthew Westerman Chief Executive Officer Chief Finance Officer Co-Head of Co-Head of Global Banking & Markets Global Banking & Markets Global Banking Global Banking Thibaut De Roux Diane Reyes Cian Burke Richard O’Connor Global Head of Gl
Slide 57: Basis of Preparation
Appendix Basis of Preparation Assumed no changes from 2014 in ‒ IFRS accounting rules ‒ Regulatory capital / RWA rules ‒ Common law Figures are presented on an adjusted basis and exclude the effects of significant items, currency translation and acquisitions and disposals Assumed that where ta
Slide 58: Definitions (1/4)
Appendix Definitions (1/4) Adjusted performance excludes the year-on-year effects of foreign currency translation differences and significant items which distort the year-on-year comparison of reported results. The term significant items collectively describes the Adjusted performance group of indiv
Slide 59: Definitions (2/4)
Appendix Definitions (2/4) Change the Bank - defined as costs that drive change (excluding transformation), e.g. regulatory changes. Once a CTB programme is implemented, ongoing running costs are no longer classed as CtB Credit Valuation Adjustment - An adjustment to the valuation of OTC derivative
Slide 60: Definitions (3/4)
Appendix Definitions (3/4) The adoption and deployment the highest or most effective financial crime controls everywhere that we operate. Global Standards include policies set out these controls for anti-money laundering (‘AML’) and sanctions. They are our Global Global Standards Standards. We are t
Slide 61: Definitions (4/4)
Appendix Definitions (4/4) Pearl River Delta is located in Guangdong Province, Mainland China. It includes 9 prefectures: Guangzhou, Shenzhen, Pearl River Delta Foshan, Dongguan, Zhongshan, Huizhou, Zhuhai, Jiangmen and Zhaoqing PRA Prudential Regulation Authority RBWM Retail Banking and Wealth Mana