Hsbc Holdings Plc · LSE:HSBA
Hsbc — HSBC UK Bank — Investor Day (June 2022)
79 slides from Hsbc's investor day presentation, Jun 16, 2022
Slide 1: HSBC UK Seminar for Investors and Analysts
HSBC UK Seminar for Investors and Analysts 16 June 2022
Slide 2: Important notice and forward-looking statements
Important notice and forward-looking statements Important notice The information, statements and opinions set out in this presentation and accompanying discussion (this “Presentation”) are for informational and reference purposes only and do not constitute a public offer for the purposes of any appl
Slide 3: Reported and adjusted income statement
Reported and adjusted income statement Key financial metrics FY21 FY20 Reported results Reported revenue (£m) 6,250 6,031 Reported profit before tax (£m) 3,480 163 Reported profit after tax (£m) 2,368 80 Profit attributable to the shareholders of the parent company (£m) 2,363 76 Return on average ta
Slide 4: Agenda
Agenda Introduction to HSBC UK 05 Commercial Banking (CMB) 18 Wealth and Personal Banking (WPB) 29 Chief Operating Office (COO) 43 Risk 52 Finance 59
Slide 5: Opening up a world of opportunity
“Opening Section title up a world of Que everisque iminvendis et accusdam ipsa volesto tatemod ioribus et eum qui resti aute volupta cum apit quatisquunt quate volorepel is incium assi ilibere ssitat. opportunity” 4
Slide 6: Introduction to HSBC UK
Introduction to HSBC UK Ian Stuart CEO, HSBC UK
Slide 7: HSBC UK: A dynamic bank focused on supporting our customers and community
Intro CMB WPB COO Risk Finance HSBC UK: A dynamic bank focused on supporting our customers and community We are… Well positioned to capture growth opportunities in an attractive but challenging UK market An internationally connected franchise Acutely aware we are operating in uncertain times
Slide 8: Opening up a world of opportunity means helping individuals and businesses make the most of their money
Intro CMB WPB COO Risk Finance For us, opening up a world of opportunity means helping individuals and businesses to make the most of their money Opening up a world of opportunity Purpose Helping individuals and businesses to make the most of their money – now and into the future Inclusion Capabilit
Slide 9: We play a key societal role in the UK
Intro CMB WPB COO Risk Finance We play a key societal role in the UK Inclusion Capability >3k people with no fixed home address supported in >300k young people helped to build financial capability opening a bank account across our programmes and support1 >4k Ukrainian refugees supported in opening b
Slide 10: HSBC UK is a material, and growing, contributor to HSBC Group
Intro CMB WPB COO Risk Finance HSBC UK is a material, and growing, contributor to HSBC Group HSBC UK contribution to Group The UK is one of HSBC’s home markets; through Midland Share of adjusted revenue and profit before tax, FY21 Bank, we have conducted business in the UK since 1836 Adj. revenue Ad
Slide 11: Good performance in 2021, strong start to 2022
Intro CMB WPB COO Risk Finance Good performance in 2021, strong start to 2022 (ahead of 2019 run-rate in 1Q221) Adjusted P&L and balance sheet, £bn Revenue Costs +3% (4)% Revenue was up 3% vs. FY20, 1Q22 run- 6.6 6.2 3.7 3.6 rate ahead of 20191 6.0 3.5 Two years of cost discipline coming through
Slide 12: Focus on our strengths: Driving growth across our 9 (+1) growth priorities
Intro CMB WPB COO Risk Finance Focus on our strengths: Driving growth across our 9 (+1) growth priorities Our 9 (+1) Customer needs we seek to meet Ambition1 1 Unsecured Give me easy, quick access to credit, when and how I need it Grow balances Give me a hassle-free home buying experience with incre
Slide 13: The UK market is challenging but attractive, and we are well positioned
Intro CMB WPB COO Risk Finance The UK market is challenging but attractive, and we are well positioned Despite uncertainty, the UK market remains attractive HSBC UK is well positioned to capture opportunities Impact of rising inflation and higher cost of living Challenges Heightened geopolitical
Slide 14: A truly customer-centric culture is vital to delivering our growth priorities
Intro CMB WPB COO Risk Finance A truly customer-centric culture is vital to delivering against our growth priorities For us, a customer-centric culture: A virtuous cycle for customers and colleagues Brings the voice of the customer into all aspects of the business Builds affinity Places the cust
Slide 15: Digitise at scale: Building towards our digital vision
Intro CMB WPB COO Risk Finance Digitise at scale: Building towards our digital vision Our vision Frictionless journeys Human touch 1 Digital-first 2 when it matters 3 with necessary safeguards Key enablers A smart bank in your pocket; personalised, Modern physical network, with fewer, Key cust
Slide 16: Energise for growth: new ways of working and upskilling
Intro CMB WPB COO Risk Finance Energise for growth: Harnessing the opportunities from our new ways of working and upskilling Employee engagement1 Female leaders2 Current focus areas Impacted by restructuring and +3.0ppts Preparing our colleagues for the branch closures future of work 75% 36.7% 33.
Slide 17: Transition to net zero: A trusted partner for our customers and community
Intro CMB WPB COO Risk Finance Transition to net zero: A trusted partner for our customers and community Key HSBC Group Provide and facilitate between $750bn to $1tn in sustainable financing and investment by 2030 ambitions Achieve net zero in our own operations and supply chain by 2030 or sooner Al
Slide 18: HSBC UK is well positioned to capture opportunities in the UK
Intro CMB WPB COO Risk Finance HSBC UK is well positioned to capture opportunities in the UK We have a vital societal role to play, particularly in supporting financial health and the transition to net zero 1 Ambitious plans to be a trusted partner for our clients and customers during the transiti
Slide 19: Commercial Banking
Commercial Banking Stuart Tait Head of CMB, HSBC UK
Slide 20: Strong commercial franchise, highly connected with the rest of HSBC
Intro CMB WPB COO Risk Finance Strong commercial franchise, highly connected with the rest of HSBC A profitable business that’s well positioned for the future 1 Highly cost efficient; FY21 cost efficiency ratio of 43% Prudent loan book and continued RWA optimisation supports accretive returns Fu
Slide 21: Broad customer base from start-ups through to multinationals
Intro CMB WPB COO Risk Finance Broad customer base from start-ups through to multinationals 770k total active customers, from start-ups through to Global FY21 segment multinational corporates1 Banking4 revenue, % 4 core segments2 plus 2 specialist teams Large Corporates Corporates generate >60
Slide 22: FY21 financial performance
Intro CMB WPB COO Risk Finance FY21 financial performance £m FY21 FY20 Δ Revenue up 5% vs. FY20, despite significant headwinds Net interest income 1,858 1,871 (1)% Non interest income 890 750 19% Non interest income growth driven by strong capital financing fees Revenue 2,748 2,621 5% ECL net
Slide 23: Subdued loan demand across the industry; multiple growth actions underway
Intro CMB WPB COO Risk Finance Subdued loan demand across the industry; multiple growth actions underway Customer loans and deposits 2022 asset growth initiatives £bn 1Q22 FY21 FY20 FY19 £500m fund with 1% cashback offer, subject to use of Trade Finance 6.4 5.7 3.9 6.1 Green SME proceeds evidence
Slide 24: Highly connected global franchise and the bank of choice for cross border needs
Intro CMB WPB COO Risk Finance Highly connected global franchise and the bank of choice for clients’ cross border needs International market penetration (2021)4 Important relationships Increasing to 67% for corporates with 67% Lead provider 59% turnover between £500m-£1bn 20% 20% 20% 43% 14% 14% 13%
Slide 25: Universal banking model supports holistic product offering and revenue opportunities
Intro CMB WPB COO Risk Finance Universal banking model supports holistic product offering and revenue opportunities Markets and Securities Services Global Banking Collaboration with HSBC Asset FY21 client business1: $0.4bn (+13% FY21 client business1: $0.2bn (+132% Management to develop a vs. FY
Slide 26: Leveraging transaction banking as a core strength, underpinned by HSBCnet
Intro CMB WPB COO Risk Finance Leveraging transaction banking as a core strength, underpinned by the HSBCnet digital platform Trade Finance Cash Management Surveyed usage of Trade Finance products1 Surveyed usage of International Cash Management products1 UK CMB 56% UK CMB 67% 50% 64% 47% 47% 44% 43
Slide 27: Market-leading customer experience scores in Corporate
Intro CMB WPB COO Risk Finance Market-leading customer experience scores in Corporate with improvements now emerging in the SME business which should support future uplift in scores UK CMB Net Promoter Score (NPS) by segment1 #1 in the market for: Overall penetration, with 64% across all relations
Slide 28: Digitising at scale to meet changing SME customer needs
Intro CMB WPB COO Risk Finance Digitising at scale to meet changing SME customer needs, particularly through mobile Digital Business Banking HSBC Kinetic Logons, 000’s Logons, 000’s Cumulative customers onboarded, 000’s 6,667 482 c.1.6x 37.1 23.7 4,435 4,179 10.3 3,768 3.4 Jan-21 Mar-21 May-21 Jul-2
Slide 29: Specialist sector teams providing deep expertise across 10 areas
Intro CMB WPB COO Risk Finance Specialist sector teams providing deep expertise across 10 particular areas UK CMB specialisms Education & Not Agrifoods for Profit Segment wide specialist sector teams, fully embedded within the business, providing: Organisations Industry brand profile Thought l
Slide 30: Wealth and Personal Banking
Wealth and Personal Banking Stuart Haire Head of WPB, HSBC UK
Slide 31: Ambitious growth plan supported by clear strategic opportunities
Intro CMB WPB COO Risk Finance Ambitious growth plan supported by clear strategic opportunities Delivered resilient financial growth in 2021 1 PBT of £1.6bn benefitted from a net ECL release, supported by good revenue growth and active cost reductions Strong mortgage performance drove a 6% incre
Slide 32: Business overview: Growing market share and catering for all customer segments
Intro CMB WPB COO Risk Finance Business overview: Growing market share and catering for all customer segments UK WPB snapshot UK WPB customer relationships c.14m active customer relationships and 14k full-time equivalent staff Underweight in market share of key product areas Eligibility3 Custome
Slide 33: WPB UK has a commercially attractive customer base
Intro CMB WPB COO Risk Finance WPB UK has a commercially attractive customer base Across UK high street banks, HSBC UK… …has the highest proportion of …has the highest % of customers Millennial & Gen Z customers1 whose account is their primary account …has the most affluent customer base2 % of custo
Slide 34: FY21 financial performance
Intro CMB WPB COO Risk Finance FY21 financial performance £m FY21 FY20 Δ Net interest income 2,774 2,703 3% WPB UK is 54% of HSBC UK’s revenue and 67% of customer loans Non interest income 595 573 4% Revenue 3,369 3,276 3% FY21 adjusted PBT of £1.6bn supported by a £0.4bn ECL release ECL 439 (84
Slide 35: Mortgages: Continued growth and potential in buy-to-let market
Intro CMB WPB COO Risk Finance Mortgages: Continued growth realisation and potential in buy-to-let market Mortgage portfolio FY21 portfolio summary Gross UK mortgage balances, £bn Average LTV of total portfolio 51% +25% 110.7 118.1 Average LTV of new originations 67% 94.7 101.5 % of book in Greater
Slide 36: Unsecured lending: Resilient performance with new proposition development
Intro CMB WPB COO Risk Finance Unsecured lending: Resilient performance with new proposition development Gross unsecured balances, £bn Unsecured lending market share impacted by deleveraging during Covid-19 Credit cards Unsecured lending balances materially decreased during periods of restrictions
Slide 37: Wealth: Growth despite lockdowns, digital and sustainable ambitions
Intro CMB WPB COO Risk Finance Wealth: Growth despite lockdowns, strong digital and sustainable ambitions with focus on HNW opportunity 2021 performance 2022 proposition development UK Wealth increased during periods of lockdown as a result of a lack of spending opportunities and low interest rate c
Slide 38: International: Connecting customers and geographies
Intro CMB WPB COO Risk Finance International: Connecting customers and geographies as the UK’s international bank of choice UK WPB international customers by status, millions International ambitions Strong starting base, with c.25% of International Non-UK national customers banking with HSBC UK in
Slide 39: Digital: Strong adoption, driven through mobile
Intro CMB WPB COO Risk Finance Digital: Strong adoption, driven through mobile with a robust platform established Mobile active1 Mobile NPS2 Closed servicing and acquisition gaps % of customers using mobile in last 30 days Including: +4ppts +5pts Balance transfers Dispute transactions 48% 52% 53
Slide 40: Digital: Supporting significant customer experience improvements
Intro CMB WPB COO Risk Finance Digital: Supporting significant customer experience improvements As part of a broad digitisation and automation agenda, we are making specific investments aiming to deliver a truly differentiated customer experience Personal and relevant experiences Data-led, targete
Slide 41: Customer experience improving but more to do
Intro CMB WPB COO Risk Finance Customer experience improving but more to do FY21 performance Strategic priorities, 2022-2023 Customer satisfaction (as measured through NPS), reached its highest level for the HSBC ‘Red Brand’ in 2H21, since implementing this system 1 Build emotional (brand) equity
Slide 42: first direct: 2021 built the foundations for scale growth
Intro CMB WPB COO Finance Risk – 2021 built the foundations for scale growth first direct FY21 snapshot £361m in revenue, stable vs. FY20; £15.3bn of customer lending, £28.1bn of customer deposits c.1.5m active customers, 120k new accounts opened; highest in 10 years Our new digital journey ta
Slide 43: first direct: doubling customer base by 2026
Intro CMB WPB COO Finance Risk first direc – doubling customer base by 2026, reducing cost to serve, number 1 for customer service 2022+ delivery through 4 strategic pillars Grow Amaze Target a new generation of 18 – 34 Become a digital innovation centre customers Deliver fast, easy, digital c
Slide 44: Chief Operating Office
Chief Operating Office Jennifer Strybel COO, HSBC UK
Slide 45: Simplifying and digitising our business to meet the future needs of our customers
Intro CMB WPB COO Risk Finance Simplifying and digitising our business to meet the future needs of our customers We are here to serve our customers 1 Make it easy for our customers to bank with us by accelerating digitisation efforts and simplifying journeys Ensure our customers’ money and data
Slide 46: Simplifying our business to make banking easier for our customers
Intro CMB WPB COO Risk Finance Simplifying our business to make banking easier for our customers Our focus on simplifying our business… …is delivering results for our customers Improved our digital registration journey 27pt increase in our digital registration NPS, for our retail customers since t
Slide 47: Protecting our customers and improving resiliency across HSBC UK
Intro CMB WPB COO Risk Finance Focusing on protecting our customers and improving resiliency across HSBC UK Protecting customers Improving resilience We are a safe bank, recognised by Which? as the safest New, resilient, and secure digital mobile and browser bank out of 15 UK banks tested for on
Slide 48: Investing in our technology to support our business objectives
Intro CMB WPB COO Risk Finance Investing in our technology to support our business objectives Investing in our business Leveraging HSBC Group’s capabilities and strengths Investments in our technology and operational HSBC UK is a beneficiary of HSBC Group’s global capabilities to help drive oper
Slide 49: Executing on our multi-year technology strategy
Intro CMB WPB COO Risk Finance Executing on our multi-year technology strategy to help ensure we are fit for the future Migrating from multiple mortgage platforms to one core platform Multi-year Speed Improving our time Enhancing ways of working to accelerate delivery for technology solutions,
Slide 50: Leveraging partnerships to accelerate growth
Intro CMB WPB COO Risk Finance Leveraging partnerships to accelerate growth Taking advantage of partners’ new services and experiences to complement core systems and capabilities Innovating to improve customer experience, make our bank more efficient, and enable our growth priorities Leveragin
Slide 51: Playing our part on the transition to net zero
Intro CMB WPB COO Risk Finance Playing our part on the transition to net zero HSBC Group wants to be net zero in its own operations and supply chain by 2030 or sooner 100% renewable electricity by 2023 – Innovative Power Purchase Agreement (PPA) to develop the Sorbie Wind Farm Project in Ayrshire,
Slide 52: Providing innovative propositions for our customers
Intro CMB WPB COO Risk Finance Providing innovative propositions for our customers Today we are showcasing six innovation examples Digital Business Banking & Digital Channels Enhancing our digital capabilities to address evolving Kinetic customer needs and deliver excellent digital experiences Bui
Slide 53: Risk
Risk Julia Dunn CRO, HSBC UK HSBC UK
Slide 54: Robust risk management framework and prudent approach to lending
Intro CMB WPB COO Risk Finance HSBC UK’s ambitions of safe and sustainable growth are supported by its robust risk management framework and prudent approach to lending Well-diversified, high quality loan portfolio 1 Low risk retail secured portfolio, with delinquencies below peers and pre-pandemic
Slide 55: Well-diversified, high quality loan portfolio
Intro CMB WPB COO Risk Finance Well-diversified, high quality loan portfolio Personal lending gross loans & advances to customers, £bn Wholesale gross loans & advances to customers, £bn At 31 December 2021 At 31 December 2021 Health and care Other 7.2 Transportation Real estate 6.0 and storage 5.3 P
Slide 56: Strong retail mortgage portfolio vs. competitors
Intro CMB WPB COO Risk Finance Strong retail mortgage portfolio vs. competitors FY21 average LTVs1 Mortgages over 3 months in arrears3, % HSBC UK Firm A Firm B Firm C 0.8 0.7% 0.7 Portfolio 51% 53% 54% 51% 0.6 21% 47% 59% 0.5 0.4 0.4% New business 67% 70% 66% 70% 0.3 0.2 HSBC UK Peer group average 0
Slide 57: Headroom to risk appetite available to support growth
Intro CMB WPB COO Risk Finance Headroom to risk appetite available to support growth Credit quality distribution of our portfolio Gross loans & advances to customers, £bn 124.4 Personal Strong credit quality across personal, Corporate and commercial corporate and commercial portfolios. 76% Non-ban
Slide 58: Overview of credit risk
Intro CMB WPB COO Risk Finance Overview of credit risk Retail Wholesale Delinquencies remain at a low level, and better Portfolio than before Covid-19 Improving portfolio trends observed across a performed well Financial health of our customers has, on average, broad spectrum of metrics as the
Slide 59: We are well prepared to manage key external risks
Intro CMB WPB COO Risk Finance We are well prepared to manage key external risks Conflict Credit Covid-19 Climate The current and potential Monitoring impact of rising Impact continues to Increasing focus for HSBC risks to HSBC UK arising inflation and higher cost of reduce, with all restric
Slide 60: Finance
Finance Claire Baird CFO, HSBC UK and Global WPB
Slide 61: HSBC UK is a strong dividend contributor well positioned for growth
Intro CMB WPB COO Risk Finance HSBC UK is a strong dividend contributor that is well positioned for growth We are a strong dividend payer to Group, and expect to increase our contribution over time 1 Good FY21 performance; net ECL release supported by revenue growth and cost reductions vs. FY20
Slide 62: Good performance in 2021, strong start to 2022
Intro CMB WPB COO Risk Finance Good performance in 2021, strong start to 2022 (ahead of 2019 run-rate in 1Q221) £m 1Q22 FY21 FY20 FY19 Δ FY21 vs. 20 Net interest income 1,308 4,642 4,567 4,878 2% Non interest income 398 1,597 1,480 1,735 8% Delivered FY21 adjusted PBT of £3.8bn, Revenue 1,706 6,23
Slide 63: Strong revenue growth across WPB and CMB
Intro CMB WPB COO Risk Finance Strong revenue growth across WPB and CMB Adjusted revenue by global business, £m FY21 revenue up £0.2bn (3%) vs. FY20, primarily from higher mortgages and CMB lending revenue, partially offset by lower deposit income from lower 2020 3,276 2,621 150 6,047 interest rat
Slide 64: Balance sheet positioned to support further lending growth
Intro CMB WPB COO Risk Finance Balance sheet positioned to support further lending growth HSBC UK loans and deposits, £bn HSBC UK WPB credit card spend1 +31% 120 +9% 282 284 110 105 259 216 100 191 196 199 183 90 84 80 70 60 FY19 FY20 FY21 1Q22 47 2022 2021 2020 85% 74% 69% 70% 0 Jan Feb Mar Apr May
Slide 65: NIM is expected to increase in 2022 following base rate increases
Intro CMB WPB COO Risk Finance NIM is expected to increase in 2022 following base rate increases Margin evolution, % HSBC UK NII sensitivity, £m At 31 December 2021. Change from 1 Jan 2022 to 31 December 2022 2.69 Total Sensitivity table uses an illustrative +25bps parallel 230 pass-through rate o
Slide 66: Continued cost discipline, with reduction in physical infrastructure
Intro CMB WPB COO Risk Finance Continued cost discipline, with reduction in physical infrastructure supporting investment in technology 59.5% 56.5% 55.5% Cost efficiency ratio FY21 adjusted costs down £0.1bn (4%) vs. FY20 and £0.3bn Adjusted costs, £bn 3.7 (7%) vs. FY19 due to: 3.6 3.5 Reduced s
Slide 67: FY21 balance sheet strength: A simple, diversified, low-risk balance sheet
Intro CMB WPB COO Risk Finance FY21 balance sheet strength: A simple, diversified, low-risk balance sheet Consolidated balance sheet, £bn Breakdown of customer loans and deposits Key metrics FY21 FY19 Net customer loans, £bn Liquidity coverage ratio 241% 165% 346 346 Other 24 18 Other Net stable fun
Slide 68: Strong FY21 capital build enabling total distribution of £1.1bn
Intro CMB WPB COO Risk Finance Strong FY21 capital build of 263bps, enabling total distribution of £1.1bn (132bps) CET1 ratio vs. requirements, % 13.6% CET1 ratio, post 1 Jan 2022 (1.3) regulatory changes, with 3.0ppts of 15.2 2.6 15.3 current headroom to MDA1 (1.4) 0.2 (1.7) 13.6 1 Jan 2022 reg
Slide 69: Outlook: well-positioned to capture opportunities and deliver profitable growth
Intro CMB WPB COO Risk Finance Outlook: We are well-positioned to capture opportunities and deliver economically profitable growth in a competitive market Outlook £m 1Q22 FY21 1Q21 (2yr) Net interest income 1,308 4,642 1,116 Revenue growth driven by economically profitable lending, Non interest in
Slide 70: Conclusion
Conclusion ZX) usec uk
Slide 71: HSBC UK is well-positioned to capture significant opportunities in the UK
HSBC UK is well-positioned to capture significant opportunities in the UK 1 Delivered a robust financial performance in 2021 2 HSBC UK is well-positioned to capture opportunities in an attractive but competitive market 3 Clear strategy to deliver on the growth opportunity ahead of us 4 We have a vit
Slide 72: Appendix
Appendix ZX) usec uk
Slide 73: Today's speakers
Appendix Today’s speakers Ian Stuart Ian was appointed CEO of HSBC UK Bank plc, with effect from April 2017, and is a member of HSBC Holdings plc’s Group Executive Committee. Ian joined HSBC as head of its Commercial Banking business in the UK and Europe in CEO, HSBC UK 2014. He has ~40 years’ exper
Slide 74: CMB has an extensive product suite through collaboration with other business lines
Appendix CMB has an extensive product suite through collaboration with other business lines Credit and Lending Global Liquidity and Cash Management (GLCM) FY21 management view of adjusted Cross Border Cash revenue Deposit & Current Accounts Pooling Term Loans Corporate Cards Electronic Payme
Slide 75: CMB: Reducing RWAs through client optimisation and management actions
Appendix CMB: Reducing RWAs through client optimisation and management actions FY19 – FY21 RWA walk, £bn Asset size (5)% 60.1 Reductions achieved under our transformation programme and other management actions Government guaranteed Covid-19 lending schemes contributed to further reductions in FY
Slide 76: Risk: Government lending in focus
Appendix Risk: Government lending in focus Government loan schemes At 4 May 2022 BBLS CBILS CLBILS HSBC was one of the only high street banks that provided BBLS for Drawn balances new-to-bank customers, as requested by HM Treasury and the Chancellor £bn 7.3 3.1 0.9 of the Exchequer We supported
Slide 77: Risk: Commercial real estate (CRE) in focus
Appendix Risk: Commercial real estate (CRE) in focus Total CRE1 allowances for ECL by stage, £m 1Q22 vs. 1Q22 FY21 FY20 FY19 FY19 Stage 1 48 78 76 29 19 ECL Stage 2 66 133 191 40 26 In 2020 and 2021, modelled provisions were supplemented with judgmental overlays in anticipation of elevated default
Slide 78: Glossary
Appendix Glossary BB Business Banking GTRF Global Trade and Receivables Finance Bounce Back Loan Scheme. A UK Government-introduced measure to support businesses IAS International Accounting Standard BBLS affected by the Covid-19 pandemic IFRS International Financial Reporting Standard Bps Basis poi
Slide 79: Slide 79