HSBC Holdings PLC · LSE:HSBA
HSBC — Debt Investor Presentation (August 2021)
43 slides from HSBC's debt investor presentation, August 2021
Slide 1: HSBC Holdings plc 1H21 Results Fixed Income Investor Presentation
HSBC Holdings plc 1H21 Results Fixed Income Investor Presentation
Slide 2: 1H21 highlights
Capital structure 1H21 results Appendix and debt issuance 1H21 highlights Reported PBT of $10.8bn up $6.5bn vs. 1H20; adjusted PBT of $12.0bn up $6.3bn vs. 1 1H20, primarily reflecting material ECL releases; 1H21 RoTE1 of 9.4%, up 5.6ppt vs. 1H20 Net ECL release of $0.7bn as forward economic outlook
Slide 3: Strategic delivery
Capital structure 1H21 results Appendix and debt issuance Strategic delivery Progress against targets Shift to higher return areas and growth opportunities Target 1H21 progress6 Reported Wealth Balances3 RWAs by region $bn Adjusted costs of ≤$31bn in 2022 on Dec Costs 2020 average FX rates; $5-5.5bn
Slide 4: Focus: Delivering growth in our areas of strength
Capital structure 1H21 results Appendix and debt issuance Focus: Delivering growth in our areas of strength Wealth and Personal Banking Commercial Banking Global Banking & Markets Strong traction in growing our Asia Wealth business Lending pipeline starting to translate into growth Repositioning our
Slide 5: Focus: Lending pipeline starting to translate into growth
Capital structure 1H21 results Appendix and debt issuance Focus: Lending pipeline starting to translate into growth WPB loans, $bn Wholesale 3% CMB loans up $6bn (2%) QoQ; now starting to see Strong quarter for mortgages, $6bn of growth drawdowns of term loans 476 491 globally; Hong Kong11 mortg
Slide 6: Focus: Rebound in profits in the US and Europe
Capital structure 1H21 results Appendix and debt issuance Focus: Rebound in profits in the US and Europe even as we reshape our portfolio to support international clients US HSBC Bank plc (UK NRFB and Europe) PBT of $0.5bn in 1H21 (up from $0.1bn in 1H20) PBT of $1.4bn in 1H21 (up from loss of $0.6b
Slide 7: 1H21 results summary
Capital structure 1H21 results Appendix and debt issuance 1H21 results summary $m 1H21 1H20 Δ NII 13,081 15,042 (13)% Non interest income 12,716 12,555 1% Reported PBT of $10.8bn up $6.5bn vs. 1H20, Revenue 25,797 27,597 (7)% primarily from lower ECL, partly offset by lower revenue ECL 719 (7,287)
Slide 8: Improved earnings diversity as the global economy recovers
Capital structure 1H21 results Appendix and debt issuance Improved earnings diversity as the global economy recovers PBT by region, $bn PBT and reported RoTE15 by business 1H20 1H21 1H20 1H21 Europe (2.1) 2.7 PBT, $bn RoTE, % PBT, $bn RoTE, % o/w UK RFB (0.5) 2.3 WPB 1.7 6.0% 3.9 17.9% o/w HSBC Bank
Slide 9: 1H21 adjusted revenue performance
Capital structure 1H21 results Appendix and debt issuance 1H21 adjusted revenue performance 1H21 revenue 1H21 vs. 1H20 Revenue by global business, $bn o/w insurance market Wealth $4,822m 1,122 impacts: $764m (7)% WPB $11,401m (3)% Personal Banking $6,144m (1,051) 27.6 0.0 25.8 Other $435m (364) 24.5
Slide 10: Net interest income
Capital structure 1H21 results Appendix and debt issuance Net interest income Reported NIM progression, bps 121 120 (4) 3 1Q21 Asset yields Liability 2Q21 costs 2Q21 reported NII was $0.1bn (1%) higher vs. 1Q21, primarily due to day count Reported NIM trend 2Q21 NIM of 1.20% down 1bp vs. 1Q21; d
Slide 11: Non-NII
Capital structure 1H21 results Appendix and debt issuance Non-NII WPB, $m Net fees Other income 4% (2)% WPB non-NII up by $77m (4%) vs. 2Q20, driven by increased investment distribution income, particularly mutual fund sales Fees increased across all 2,069 2,193 2,146 2Q21 fees down $218m (13%
Slide 12: Credit performance
Capital structure 1H21 results Appendix and debt issuance Credit performance Adjusted ECL charge/(release) trend ECL, $m ECL 4,170 charge/(release) 2Q21 net ECL release of $0.3bn; Stage as a % of 3 charges of $0.1bn, Stage 1 – 2 releases 1,212 average of $0.5bn 825 gross loans and (439) (284) Unus
Slide 13: Adjusted costs
Capital structure 1H21 results Appendix and debt issuance Adjusted costs Operating expenses trend, $m 9,288 Cost targets on track, while increasing higher investment and higher 802 8,238 8,019 performance-related pay (PRP) 7,722 7,692 1,459 1,580 1,469 2Q21 costs of $8.0bn, up $0.3bn (4%) vs. 2Q
Slide 14: Balance sheet
Capital structure 1H21 results Appendix and debt issuance Balance sheet Customer lending, $bn Customer accounts, $bn +2% +2% 1,642 1,669 1,074 1,060 1,609 1,037 1 1 1 1 1 1 341 357 336 254 223 216 Customer lending of $1.1tn was $23bn (2%) higher than FY20, as customers used short-term 486 borrowin
Slide 15: Asset quality
Capital structure 1H21 results Appendix and debt issuance Asset quality Gross loans and advances to Loans and advances to customers Stage 3 and impaired loans and Reported ECL customers of ‘Strong’ or ‘Good’ credit advances to customers By credit quality classification quality At 30 June 2021 783 76
Slide 16: Funding and liquidity
Capital structure 1H21 results Appendix and debt issuance Funding and liquidity Loans to deposits ratio, % Principal operating entities LCR NSFR % 1H21 2020 1H21 2020 72.0% 72.0% HSBC UK Bank plc (RFB) 223 198 177 164 63.2% 63.5% HSBC Bank plc (NRFB) 145 136 116 124 The Hongkong and Shanghai Banking
Slide 17: Customer loan book
Capital structure 1H21 results Appendix and debt issuance Customer loan book At 30 June 2021 Personal loan book ($bn, gross loans and advances to customers) Wholesale loan book ($bn, gross loans and advances to customers) Motor vehicle finance Credit cards 0.3% Non-bank financial institutions 4.6% M
Slide 18: Capital position
Capital structure 1H21 results Appendix and debt issuance Capital position 1H21 vs. FY20 CET1 ratio movement, % CET1 ratio of 15.6% down 0.3ppts vs. FY20 Software capitalisation benefits of c.25bps expected to reverse (0.4) on 1st Jan 2022 0.7 (0.1) 15.9 0.0 Expect 15-20bps impact from disposa
Slide 19: Capital position versus requirements
Capital structure 1H21 results Appendix and debt issuance Capital position versus requirements CET1 ratio as a % of RWAs, vs. MDA hurdle Regulatory capital vs. regulatory requirements as a % of RWAs 21.0% Buffer to $41bn 19.8% 2.6% MDA hurdle 4.7% 1.6% 10.9% 2.8% 2.6% 15.7% 0.2% 2.0% 2.7% Combined 2
Slide 20: MREL/TLAC position versus requirements
Capital structure 1H21 results Appendix and debt issuance MREL/TLAC position versus requirements MREL/TLAC position versus estimated 1-Jan-22 regulatory requirements26 as a % of Group RWAs 30.6% The greater of: 27.9% 28.0% 9.4% 4.7% 4.7% HSBC Group’s 2022 MREL requirement27 is the greater 22.7% of
Slide 21: Issuance plan
Capital structure 1H21 results Appendix and debt issuance Issuance plan Issuance plan31 Limited net new issuance going forward 2021 2022 onwards HoldCo Senior gross and net issuance, $bn-equivalent Gross Issuance HoldCo Expect to issue c.$15bn Broadly limited to Senior on a gross basis refinancing c
Slide 22: 1H21 issuance and redemptions
Capital structure 1H21 results Appendix and debt issuance 1H21 issuance and redemptions 1H21 issuance and redemptions Issuance plan Issued Redeemed HoldCo Expect to issue c.$15bn $7bn $4bn Senior on a gross basis 2H21 gross issuance expected to be $7-9bn, in line with guidance from FY20. From 2022
Slide 23: Approach to issuance
Capital structure 1H21 results Appendix and debt issuance Approach to issuance HSBC Holdings plc External Investors Since 2015, HSBC Holdings has been the Group’s issuing entity for external AT1, T2 and MREL/TLAC-eligible Senior Issuance over time to broadly match group currency exposures Extern
Slide 24: Appendix
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Slide 25: Key financial metrics
Capital structure 1H21 results Appendix and debt issuance Key financial metrics Reported results, $m 2Q21 1Q21 2Q20 Balance sheet, $m 2Q21 1Q21 2Q20 NII 6,584 6,514 6,897 Total assets 2,976,005 2,958,629 2,922,798 Other Income 5,981 6,472 6,162 Net loans and advances to customers 1,059,511 1,040,207
Slide 26: Reconciliation of reported and adjusted results
Capital structure 1H21 results Appendix and debt issuance Reconciliation of reported and adjusted results $m 2Q21 1Q21 2Q20 Reported PBT 5,060 5,779 1,089 Revenue Currency translation — 50 724 Customer redress programmes — (18) (26) Disposals, acquisitions and investment in new businesses — — 1 Fair
Slide 27: Certain items and Argentina hyperinflation
Capital structure 1H21 results Appendix and debt issuance Certain items and Argentina hyperinflation Certain items included in adjusted revenue 2Q21 1Q21 4Q20 3Q20 2Q20 1H21 1H20 highlighted in management commentary, $m Insurance manufacturing market impacts in WPB 336 78 299 126 364 413 (351) Credi
Slide 28: Net interest margin supporting information
Capital structure 1H21 results Appendix and debt issuance Net interest margin supporting information NII sensitivity to instantaneous change in yield curves (12 months) Quarterly NIM by key legal entity At 30 June 2021 % of 2Q21 % of 2Q21 2Q20 3Q20 4Q20 1Q21 2Q21 Group NII Group AIEA Currency Change
Slide 29: ECL analysis
Capital structure 1H21 results Appendix and debt issuance ECL analysis Stage 1 & 2 allowances for ECL, $bn ECL charge / (release) by global business, $m 2Q21 1Q21 $3.9bn 1 $(1.5)bn 7.9 (18) (19) (7) 7.3 7.5 (34) 6.9 6.3 3.3 (190) 3.0 3.1 (224) 5.1 2.9 (232) 2.6 WPB CMB GBM Corporate Centre 4.0 2.4 A
Slide 30: Balance sheet – customer lending
Capital structure 1H21 results Appendix and debt issuance Balance sheet – customer lending Balances by global business, $bn Balances by region, $bn Growth since 1Q21 Europe $403bn $(4)bn Adjusted customer lending of (1)% (1)% o/w: mortgages $1,060bn up $16bn (2%) vs. 1Q21 2% $(1)bn 1,074 o/w: UK $31
Slide 31: Balance sheet – customer accounts
Capital structure 1H21 results Appendix and debt issuance Balance sheet – customer accounts Balances by global business, $bn Balances by region, $bn Growth since 1Q21 4% $18bn Europe $664bn 3% 1% Adjusted customer accounts of 1,654 1,669 $19bn $1,669bn increased by $15bn (1%) 1,609 o/w: UK $534bn 4%
Slide 32: Hong Kong drawn risk exposure
Capital structure 1H21 results Appendix and debt issuance Hong Kong drawn risk exposure Total gross loans and advances, $bn Total gross loans and advances to customers and banks of $351bn as at 30 June 2021 (2Q20: $332bn) by booking location (wholesale: 6% Corporate $212bn; personal: $139bn) 13% M
Slide 33: Mainland China drawn risk exposure
Capital structure 1H21 results Appendix and debt issuance Mainland China drawn risk exposure China drawn risk exposure35, $bn Total China drawn risk exposure (including Sovereigns, Banks and Customers) of $194bn comprising: Wholesale $183bn (of which 53% is onshore); Retail: $11bn Gross loans an
Slide 34: UK RFB disclosures
Capital structure 1H21 results Appendix and debt issuance UK RFB disclosures Business performance WPB CMB 1H21 financial highlights Personal gross mortgage balances, £bn Mortgages: Wholesale gross customer loans, £bn 90+ day delinquency trend38, % (2)% 114.3 Revenue £3.0bn (1H20: £3.1bn) 110.7 70.2
Slide 35: Transformation programme – RWA saves
Capital structure 1H21 results Appendix and debt issuance Transformation programme – RWA saves Programme cumulative RWA savings2, $bn Strong progress to date – on track to meet FY22 target 84.5 $84.5bn of cumulative saves to 1H212, primarily in GBM 10.1 HSBC Bank plc (UK NRFB and Europe) saves
Slide 36: Retail banking businesses to be disposed
Capital structure 1H21 results Appendix and debt issuance Retail banking businesses to be disposed US France 1Q21 US WPB balance sheet FY20 HSBC Continental Europe WPB balance sheet of which: disposed of which: disposed $bn operations $bn40 operations Customer lending 23.8 c.3.0 Customer lending 28.
Slide 37: Credit ratings for main issuing entities
Capital structure 1H21 results Appendix and debt issuance Credit ratings for main issuing entities Long term senior ratings as at 02 August 2021 S&P Moody’s Fitch Rating Outlook Rating Outlook Rating Outlook HSBC Holdings plc A- STABLE A3 STABLE A+ NEG The Hongkong and Shanghai Banking Corporation L
Slide 38: Outstanding instruments
Capital structure 1H21 results Appendix and debt issuance Outstanding instruments Outstanding instruments by currency (notional) HoldCo senior Tier 2 Additional Tier 1 USD EUR EUR EUR 11% 15% 18% GBP 11% 25% GBP 10% GBP $83.1bn $27.1bn $24.3bn 4% JPY 3% 63% 5% 67% Other 67% SGD USD 1% USD Other 37
Slide 39: Simplified structure chart
Capital structure 1H21 results Appendix and debt issuance Simplified structure chart Holding company Associate Intermediate holding company Resolution entity HSBC Operating company Holdings plc 99.9% HSBC HSBC Private HSBC HSBC HSBC HSBC Asia 94.5% Bank HSBC UK Bank Banking Mexico, North America Ban
Slide 40: Glossary
Capital structure 1H21 results Appendix and debt issuance Glossary AIEA Average interest earning assets LTV Loan to value BAU Business as usual MDA Maximum distributable amount Bps Basis points. One basis point is equal to one-hundredth of a percentage point MENA Middle East and North Africa CCyB Co
Slide 41: Footnotes
Capital structure 1H21 results Appendix and debt issuance Footnotes 1. YTD, annualised. RoTE methodology annualises Profits Attributable to Shareholders, including ECL, in order to provide a 23. CET1 capital requirements and buffers as at 30 June 2021; and subject to change returns metric. Expected
Slide 42: Disclaimer
Capital structure 1H21 results Appendix and debt issuance Disclaimer 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
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