Slide 1: Business Update and Results Presentation to Investors and Analysts
HSBC Holdings plc Business Update and Results Presentation to Investors and Analysts
Slide 2: Agenda
Agenda 4Q & FY19 results Business update Restructuring for growth Financial implications Conclusion
Slide 3: 4Q19 highlights
4Q19 performance 4Q19 highlights 1 4Q19 reported loss before tax of $3.9bn impacted by a goodwill impairment1 of $7.3bn 4Q19 adjusted revenue up 9% to $13.6bn vs. 4Q18 and adjusted PBT up 29% to $4.3bn vs. 4Q18 2 Hong Kong 4Q19 adjusted PBT up 3% to $2.6bn Cost discipline: 4Q19 adjusted costs of $9.
Slide 4: Strong performing franchises: FY19 selected highlights
FY19 performance Strong performing franchises: FY19 selected highlights Hong Kong revenue up 7% to Revenue up 9% to $23.4bn, PBT up $19.4bn, PBT up 5% to $12.1bn 15% to $8.0bn Asia excl. Hong Kong revenue up 8% RoTE2 of 20.5% Asia to $11.0bn RBWM $16bn growth in mortgage book in Asia GB&M revenue up
Slide 5: Strong performing franchises: Hong Kong business performance
FY19 performance Strong performing franchises: Hong Kong business performance Financials Key selected financial data, $m Resilient performance despite softening macroeconomic environment: 4Q19 Ή4 Ή )< Ή)< Ή • FY19 revenue up 7% to $19.4bn Revenue 4,591 233 5% 19,438 1,196 7% • FY19 adjusted PBT up
Slide 6: Underperforming franchises: FY19 summary
FY19 performance Underperforming franchises: FY19 summary Revenue down 3% to $4.7bn Revenue down by 3% to $7.8bn PBT down 39% to $0.6bn (largely Adjusted PBT down to $0.8bn driven by non-recurrence of FY18 ECL releases) RoTE2 of 0.6% CER of 84% Total assets of $842bn and RWAs of $166bn RoTE2 of 1.5%
Slide 7: FY19 adjusted revenue performance
FY19 performance FY19 adjusted revenue performance FY19 revenue FY19 vs. FY18, $m $15,840m Retail Banking 974 $2.0bn RBWM $23,400m $6,746m Wealth Management 760 9% $814m Other 292 $5,978m GLCM 331 $1,833m GTRF 26 CMB $15,292m $0.8bn 6% $5,441m Credit and Lending 273 $2,040m Other 197 Global Markets,
Slide 8: 4Q19 adjusted revenue performance
4Q19 performance 4Q19 adjusted revenue performance 4Q19 revenue 4Q19 vs. 4Q18, $m $3,989m Retail Banking 85 $0.8bn RBWM $5,852m $1,655m Wealth Management 536 15% $208m Other 150 $1,425m GLCM (92) $432m GTRF (15) CMB $3,686m $0.0bn 0% $1,328m Credit and Lending 4 $501m Other 117 Global Markets, Secur
Slide 9: Net interest income and NIM
4Q19 performance Net interest income and NIM Reported quarterly 7,709 7,468 7,772 7,568 7,654 Adjusted NII of $7.7bn, stable vs. 3Q19 and up 1% vs. 4Q18; FY19 NII, $m adjusted NII of $30.6bn, up 3% or $1bn vs. FY18 4Q19 NIM 1.56% unchanged vs. 3Q19, driven by: +1% (0)% • 4bps favourable impact f
Slide 10: Adjusted costs
4Q19 performance Adjusted costs 4Q19 vs. 4Q18, $bn Excl. UK bank levy Adjusted costs +2.7% Adjusted costs excluding UK bank levy up 2.7% to $8.1bn 0.1 0.1 4Q19 investment spend of $1.2bn, up 4% vs. 4Q18 (0.2) 0.2 8.1 FY19 investment spend up 10% to 7.9 $4.5bn vs. $4.1bn in FY18 FY19 technolo
Slide 11: Credit performance
4Q19 performance Credit performance Adjusted ECL charge trend 4Q19 ECL as a % of gross loans and 0.17 0.27 advances to customers was 0.28% 0.34 0.33 4Q19 adjusted ECL of $733m, down 0.28 $144m (16%) vs. 3Q19, of which 0.19 0.23 0.21 $401m was in RBWM and $276m was 0.06 0.08 in CMB 4Q19 UK ECL
Slide 12: Capital adequacy
4Q19 performance Capital adequacy Capital progression CET1 ratio of 14.7% up 0.4ppts from 4Q18 1Q19 2Q19 3Q19 4Q19 14.3% in 3Q19, mainly due to RWA reductions Common equity tier 1 capital, $bn 121.0 125.8 126.9 123.8 124.0 RWAs decreased by $22bn vs. Risk-weighted assets, $bn 865.3 879.5 886.0 8
Slide 13: RWA and RoTE walks
FY19 performance RWA and RoTE walks Group RWA walk, FY18 vs. FY19, $bn Total RWA reductions of $22bn, of which 3.7 (7.7) GB&M: $23bn vs. FY18 865.3 9.0 Renewed focus on customer profitability in CMB and GB&M (32.2) 843.4 Expect ~$10bn of regulatory RWA inflation 5.0 and additional ~$10bn of bu
Slide 14: Summary
FY19 performance Summary 1 FY19 adjusted revenue up 6% to $55.4bn and adjusted PBT up 5% to $22.2bn FY19 adjusted jaws of 3.1%. FY19 adjusted cost growth of 2.8%, well below FY18 adjusted 2 cost growth of 5.6% Reported PBT of $13.3bn impacted by a 4Q19 goodwill impairment1 of $7.3bn, primarily 3 in
Slide 15: Agenda
Agenda 4Q & FY19 results Business update Restructuring for growth Financial implications Conclusion
Slide 16: Actions to deliver our 2022 financial targets
Restructuring for growth Actions to deliver our 2022 financial targets RWAs Costs Capital Reduce RWAs Cut costs in low return franchises (US and Sustain the dividend the NRFB in Europe and the UK, and simplify the organisation Suspend buyback particularly GB&M) Cost programme in 2020 and 2021 Reinve
Slide 17: We continue to build on our differentiated, globally integrated network
Restructuring for growth We continue to build on our differentiated, globally integrated network Serving wholesale and personal clients in and into high growth markets #1 Best Global Transaction Bank15 Leading and differentiated propositions for mid-market businesses globally #1 World’s Best Bank fo
Slide 18: Europe: Our plan is to reduce RWAs in the Non Ring-Fenced Bank
Restructuring for growth: Non Ring-Fenced Bank in Europe and the UK Europe: Our plan is to reduce RWAs in the Non Ring-Fenced Bank in Europe and the UK by c.35% by end of 2022 Actions RWAs $bn c.35% Focus on client coverage of key international European clients 166 and connecting them to Asia and
Slide 19: US: To generate sufficient returns, we need a new approach
Restructuring for growth: US US: To generate sufficient returns, we need a new approach Actions RWAs $bn Stable Reposition US business as an international client-focussed 89 corporate bank with a targeted retail offering for international and affluent clients Other 52 Business Focus Commercial B
Slide 20: GB&M: Sharpen focus on serving international clients
Restructuring for growth: GB&M GB&M: Sharpen focus on serving international clients in and into our high- growth and franchise markets Actions RWAs by region $bn, % Serve those corporate and institutional clients with global 258 operations who value our international network, in particular Others
Slide 21: Invest in growth opportunities and reallocate >$100bn RWAs
Restructuring for growth: Redeploying RWAs We will continue to invest in growth opportunities, leveraging our strengths; and plan to reallocate >$100bn RWAs Aspiration Leading International International Wealth Continue to invest in HSBC UK (UK RFB) - Bank for Transaction and Affluent Bank - Asia an
Slide 22: Three levers to achieve adjusted costs target, c.$4.5bn cost programme
Restructuring for growth: Costs 7KHUHDUHWKUHHOHYHUVWRDFKLHYHDGMXVWHGFRVWVRIΌEQLQUHSUHVHQWLQJ a cost reduction programme of c.$4.5bn Implications Portfolio Ceasing business activities decisions Remove / reduce costs of exiting businesses Automation Investing in technology to Reduce processing cos
Slide 23: Simpler, more efficient and empowered organisation
Restructuring for growth: Simplification As a result, we will create a simpler, more efficient and empowered organisation Implications Consolidate number of businesses from 4 to 3 – GPB and RBWM to form Wealth and Personal Banking (WPB) Implement unified wholesale middle and back office Leaner a
Slide 24: Planned shape of the Group post restructuring
Restructuring for growth: Shape of the Group Planned shape of the Group post restructuring Shifts in the Group’s RWA allocation RWAs, $bn By Global Business Stable By region Stable NRFB in RBWM 16% Europe and 19% WPB the UK GPB 2% US 10% CMB 37% Other23 16% UK 13% RFB GB&M 31% <25% c.50% Asia 42% Co
Slide 25: To conclude, we plan to…
Restructuring for growth To conclude, we plan to… Restructure to address Europe and the US Reposition GB&M to leverage its strengths in Transaction Banking and Asia Reallocate freed-up capital into higher growth and higher return businesses and markets Simplify our organisation and reduce costs 25
Slide 26: Agenda
Agenda 4Q & FY19 results Business update Restructuring for growth Financial implications Conclusion
Slide 27: Actions to deliver our 2022 financial targets
Financial implications Actions to deliver our 2022 financial targets RWAs Costs Capital Reduce RWAs Cut costs in low return franchises (US and Sustain the dividend the NRFB in Europe and the UK, and simplify the organisation Suspend buyback particularly GB&M) Cost programme in 2020 and 2021 Reinvest
Slide 28: RWAs – gross RWA reduction of at least $100bn
Financial implications RWAs – We aim to make a gross RWA reduction of at least $100bn by 2022 RWAs, $bn >$100bn c.850 843 Total management actions: >$100bn 2019 NRFB in Europe US GB&M (ex. Other mgt Business Other (including the 2022 and the UK NRFB & US) actions growth net day 1 impact from Basel I
Slide 29: RWAs – planned gross RWA reduction
Financial implications RWAs – planned gross RWA reduction Gross RWA saves (2020-22), $bn Deleveraging activities across all global >$100bn businesses, clients and products, primarily in Europe and the US Deleveraging includes some client exits for those who have purely domestic activities and/or
Slide 30: RWAs – increasing revenue on a stable RWA base
Financial implications RWAs – increasing revenue on a stable RWA base Adjusted revenue, $bn Net benefit of $1-1.5bn 55.4 As full benefit of reinvestment flows through c.$0.5bn c.$1.1bn Of which Of which GB&M GB&M 2019 Non-repeat Interest Gross RWA RWA Organic growth 2022 2023 of certain rates reduct
Slide 31: Capital – impact of restructuring programme
Financial implications Capital – impact of restructuring programme Illustrative CET1 ratio evolution, % c.15% 14.7% >$100bn >$100bn RWAs RWAs 2019 CTA and asset Revenue loss27 Gross RWA Business Other RWA Profit after 2022 disposals25 saves growth growth dividends Plan assumes share buybacks suspe
Slide 32: Costs – plan to reduce Group adjusted costs
Financial implications &RVWV͙ ZHSODQWRUHGXFH*URXSDGMXVWHGFRVWVWRΌEQLQ Adjusted costs, $bn c.(10)% c.34 32.8 c.$0.7bn Ό c.$4.5bn 2019* Inflation Bank levy 2019 cost 2020-22 cost Other BAU Software Business Other 2022 initiatives programme saves28 amortisation growth & investment The cost programme
Slide 33: Costs – phasing and nature of restructuring charges
Financial implications Costs – phasing and nature of restructuring charges Cost of restructuring, $bn Losses on asset c.$1.2bn Costs to achieve P&L charge of c.$6bn disposals* Other 10% Technology 20% Software write-offs 15% Costs to >50% achieve: 40% CRE write-offs 15% c.$6bn Severance 40% <10% 202
Slide 34: Path to achieve a RoTE of 10-12% by 2022
Financial implications Path to achieve a RoTE of 10-12% by 2022, while sustaining the dividend and maintaining a CET1 ratio >14% RoTE walk by Global Business and geographic drivers 10-12% 8.4% 2019 NRFB in Europe US GB&M (ex. Other Businesses Bank levy & 2022 and the UK NRFB & US) & geographies Sign
Slide 35: Agenda
Agenda 4Q & FY19 results Business update Restructuring for growth Financial implications Conclusion
Slide 36: To conclude
Conclusion To conclude 1 We delivered strong revenue growth in our targeted areas with improving cost discipline in 2019 2 Our immediate aims are to increase returns, create the capacity to invest in the future, and build a platform for sustainable growth 3 We will restructure in the US and Europe,
Slide 37: Appendix
Appendix
Slide 38: Improving Group returns by addressing underperforming franchises
Appendix Improving Group returns by addressing underperforming franchises RoTE (excluding significant items and UK bank levy) by major legal entity2, (2019 Tangible Equity as size) RoTE (%) 22 20 18 16 Asia Mexico 14 Canada UK RFB 30 MENA Group 2022 12 target 10-12% 10 8 6 4 US 2 0 -2 NRFB in Europe
Slide 39: Assumptions and basis of preparation
Appendix Assumptions and basis of preparation Assumed no changes from 2019 in IFRS accounting rules; RoTE target of 10-12% in FY22 excludes the potential impact of IFRS17 Assumed no changes from 2019 in Common law Losses on asset disposals expected to be reported as a revenue significant item
Slide 40: Macro-economic and geopolitical uncertainty, opportunities for growth
Appendix The macro-economic and geopolitical remains uncertain, but we still see significant opportunities for growth World Nominal GDP Growth, 2019-203032 World Trade Growth, 2019-203032 +5.4% CAGR +5.4% CAGR Asia 7.1% Asia 6.7% Middle East 5.7% Middle East 4.6% Africa 7.8% Africa 7.3% Latin Americ
Slide 41: Collaboration: Drive more growth through cross-selling
Appendix Collaboration: Drive more growth through cross-selling across businesses Total revenue synergies, $bn Revenue synergies by global business FY19 revenue +8% GB&M products for retail and business RBWM 17.2 31% 1 clients banking solutions $1.7bn 16.0 Payroll products to CMB and GB clients 29%
Slide 42: Simplifying the wholesale businesses (GB&M and CMB)
Appendix Simplifying the wholesale businesses (GB&M and CMB) to deliver greater revenue synergies and cost efficiencies Overview of our wholesale banking Ambition: one wholesale support business today model Create central product teams mandated Two separate wholesale banking to serve both busine
Slide 43: Four levers to simplify RBWM and GPB business
Appendix We have four main levers to simplify our RBWM and GPB business to capture value Consolidate RBWM and GPB into one new global business Strong Wealth business with $1.4tn of called Wealth and Personal Banking (WPB) under a balances37 and is one of the world’s largest single accountable exec
Slide 44: Simplifying the organisation and setting up capacity to execute
Appendix Simplifying the organisation and setting up capacity to execute the plan GCEO GCFO GCRO Three Global Businesses Four Geographies Wealth and Global Commercial HSBC UK Rest of the Personal Banking & Asia Pacific US Banking (RFB) World38 Banking Markets Other Global Functions Transformation of
Slide 45: Key financial metrics
Appendix Key financial metrics Key financial metrics FY19 FY18 Ή)< Return on average tangible equity14 8.4% 8.6% (0.2)ppt Return on average ordinary shareholders’ equity 3.6% 7.7% (4.1)ppt Jaws (adjusted)39 3.1% (1.2)% 4.3ppt Dividends per ordinary share in respect of the period $0.51 $0.51 - Earnin
Slide 46: Significant items
Appendix Significant items $m 4Q19 3Q19 4Q18 FY19 FY18 Reported PBT (3,897) 4,837 3,256 13,347 19,890 Revenue Currency translation - 110 (102) - (1,617) Customer redress programmes 45 118 (7) 163 (53) Disposals, acquisitions and investment in new businesses 55 4 (29) (768) 113 Fair value movements o
Slide 47: Certain revenue items and Argentina hyperinflation
Appendix Certain revenue items and Argentina hyperinflation Certain items included in adjusted revenue 4Q19 3Q19 2Q19 1Q19 4Q18 FY19 FY18 highlighted in management commentary43, $m Insurance manufacturing market impacts in RBWM 201 (210) (33) 182 (185) 129 (325) Credit and funding valuation adjustme
Slide 48: Sustainable Finance & ESG Highlights
Appendix Sustainable Finance & ESG Highlights Target 2019 Progress Highlights Environment 2019 Awards Euromoney Awards World's Best Bank for Sustainable Sustainable finance Provide & facilitate $52.4bn for Excellence and investment $100bn cumulative progress Finance by the end of 202545 since 2017
Slide 49: Glossary
Appendix Glossary AIEA Average interest earning assets A portfolio of assets including securities investment conduits, asset- Legacy credit backed securities, trading portfolios, credit correlation portfolios and AUM Assets under management derivative transactions entered into directly with monoline
Slide 50: Footnotes
Appendix Footnotes 1. The goodwill impairment of $7.3bn arose from an update to long-term growth assumptions reflecting the more challenging revenue outlook impacting a number of our businesses, and specifically to GB&M arising from the reshaping of the business 2. RoTE excludes significant items an
Slide 51: Footnotes
Appendix Footnotes 34. Prior period revenue synergies presented on constant currency basis where available and the rest are on reported basis. 35. Cross-business synergies are presented as gross revenue and do not reflect any revenue sharing arrangement between Global Businesses 36. In-business syne
Slide 52: Disclaimer
Appendix 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 purposes of any applicable law or an offer to se