HSBC Holdings PLC · LSE:HSBA
HSBC — 1H 2017 Earnings Presentation
47 slides from HSBC's earnings presentation, Jul 31, 2017
Slide 1: HSBC Holdings plc Interim Results 2017
World’s Best Bank HSBC Holdings plc Interim Results 2017 Presentation to Investors and Analysts HIGHLY RESTRICTED
Slide 2: Our highlights
Our highlights 1st Half 2017 ‒ Reported PBT of $10.2bn was $0.5bn higher than 1H16 ‒ Adjusted PBT of $12.0bn up $1.3bn; up in all three of our largest global businesses ‒ Revenue of $26.1bn up $0.8bn or 3%: ‒ RBWM up $1.1bn or 12% primarily from increased deposit revenue and included favourable mark
Slide 3: 1H17 Key financial metrics
1H17 Key financial metrics Key financial metrics 1H16 1H17 Return on average ordinary shareholders’ equity1 7.4% 8.8% Return on average tangible equity1 9.3% 9.9% Jaws (adjusted)2, 4 (0.5)% 0.5% Dividends per ordinary share in respect of the period $0.20 $0.20 Earnings per share $0.32 $0.35 Common e
Slide 4: Financial overview
Financial overview Reconciliation of Reported to Adjusted PBT Discrete quarter Half year 2Q16 2Q17 ∆ 2Q16 1H16 1H17 ∆ 1H16 Reported profit before tax 3,608 5,282 1,674 9,714 10,243 529 Includes: Currency translation 245 - (245) 520 - (520) Significant items: FVOD5 Fair value gains / losses on own de
Slide 5: 1H17 Profit before tax
1H17 Profit before tax Adjusted PBT higher from increased revenue and reduced LICs 1H17 vs. 1H16 Adjusted PBT by item Adjusted PBT by global 1H16 1H17 ∆ 1H16 ∆% business, $m 1H17 ∆ 1H16 adverse favourable RBWM 2,539 3,355 816 32% CMB 2,945 3,443 498 17% Revenue $26,053m 818 3% GB&M 2,558 3,403 845 3
Slide 6: 2Q17 Profit before tax
2Q17 Profit before tax Adjusted PBT up in all regions 2Q17 vs. 2Q16 Adjusted PBT by item Adjusted PBT by global 2Q16 2Q17 ∆ 2Q16 ∆% business, $m 2Q17 ∆ 2Q16 adverse favourable RBWM 1,324 1,574 250 19% CMB 1,457 1,648 191 13% Revenue $13,210m 546 4% GB&M 1,296 1,694 398 31% GPB 96 73 (23) (24)% Jaws2
Slide 7: Revenue performance
Revenue performance Revenue up across our three largest businesses vs. 2Q16 Quarterly revenue trend6, $m Global +6% businesses 12,692 12,618 11,889 12,130 11,747 421 11,639 431 442 434 406 459 3,953 3,937 GPB 3,676 3,735 3,636 3,583 GB&M CMB 3,131 3,233 3,216 3,187 3,170 3,067 RBWM 4,410 4,601 4,830
Slide 8: Retail Banking and Wealth Management performance
Retail Banking and Wealth Management performance Strong revenue growth in 1H17 1H17 highlights Revenue performance, $m6 Balance Sheet, $bn7 Customer lending: 4,410 4,601 4,830 4,638 5,085 5,034 +5% Adjusted PBT 2 139 +2% (1H16: $2.5bn) 79 Wealth 1,436 1,522 1,530 1,488 $3.4bn Mgt. 1,343 1,343 (46) 3
Slide 9: Commercial Banking performance
Commercial Banking performance Growth in GLCM and Lending; Trade stabilising 1H17 highlights Revenue performance, $m6 Loan impairment charges, $m +1% -55% -1% ∆ 2Q16 ∆ 1Q17 267 Adjusted PBT (1H16: $2.9bn) 121 3,187 3,170 3,131 3,233 3,216 $3.4bn 3,067 418 426 379 297 434 367 -14% -15% (5) 472 459 45
Slide 10: Global Banking & Markets performance
Global Banking & Markets performance Strong YTD PBT performance driven by 8% revenue growth Management view of adjusted revenue 1H17 highlights Revenue performance, $m6 3,583 3,676 3,735 3,636 3,953 3,937 $m 2Q17 ∆ 2Q16 Adjusted PBT 3,772 3,813 3,956 4,028 3,434 3,661 Markets 1,786 (6)% (1H16: $2.6b
Slide 11: Low volatility GB&M business delivering stable and growing revenues
Low volatility GB&M business delivering stable and growing revenues Quarterly GB&M Revenue8 c.30% Revenue Total ‒ Equities GB&M ‒ M&A revenue ‒ Rates & Credit quarterly ‒ ECM average ‒ Principal Investments Stable ‒ Other Revenue GB&M revenue c.70% Revenue quarterly ‒ FX average ‒ Lending ‒ DCM ‒ Gl
Slide 12: Global Private Bank performance
Global Private Bank performance Business now positioned for growth; $7.8bn of positive inflows in 1H17 Revenue performance, $m6 Client assets, $bn 1H17 highlights +6% 317 315 298 306 316 51 44 23 21 35 +2% Adjusted PBT 266 271 263 283 295 (1H16: $0.2bn) 459 442 434 406 421 431 $0.1bn 64 65 63 59 56
Slide 13: Corporate Centre performance
Corporate Centre performance Lower revenue from the run-off of the CML portfolio and lower valuation differences on long term debt and associated swaps 1H17 highlights Quarterly revenue performance, $m6 Balance Sheet, $bn7 US run-off portfolio (CML): 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Adjusted PBT Assets
Slide 14: Net interest margin
Net interest margin Net interest margin has stabilised since FY16; well positioned for NII to benefit as rates move higher Net interest income and margin Main drivers, %: 1.70 0.03 (0.04) 1.70% 1.64% 1.64% (0.03) 0.02 29,813 (0.04) 28,862 1.64 13,777 13,777 6,787 6,787 FY16 1Q17 1H17 Average interes
Slide 15: Operating expenses
Operating expenses Delivered positive jaws; on track to deliver targeted saves whilst we continue to invest in growth 2Q17 vs. 2Q16, $bn Operating Expenses 0.1 7.4 7.2 0.2 Delivered positive jaws in (0.5) 0.4 1H17; continued focus on delivering positive jaws in FY17 2Q16 Inflation Regulatory Cost
Slide 16: Loan impairment charges
Loan impairment charges Credit standards remain robust; stable outlook Adjusted loan impairment charges and other credit risk provisions (LICs) analysis 2Q16 1Q17 2Q17 vs.2Q16 vs.1Q17 Credit environment remains stable Group, $m 757 249 427 330 (178) LICs by as a % of gross loans and advances to 0.34
Slide 17: Capital adequacy
Capital adequacy Strong capital base: common equity tier 1 ratio – 14.7% Regulatory capital and RWAs ($bn) CET1 ratio movement (%) 14.7 Reported basis 1Q17 2Q17 (0.1) 0.1 Common equity tier 1 capital 122.4 128.9 (0.1) 0.1 Total regulatory capital 173.3 183.9 0.4 Risk-weighted assets 857.9 876.1 14.3
Slide 18: Return metrics
Return metrics 1H17 Group ROE1, % 0.2 10.4 0.1 0.8 (0.2) (1.6) 8.8 0.7 8.8 1.4 7.4 1H16 Reported Significant 1H16 Revenue LICs Cost ex Tax Ordinary 1H17 ex. Significant 1H17 Reported Items & ex. Sig items bank levy shareholders’ Sig items & Items & Bank Levy & Bank levy equity, FX Bank levy Bank Lev
Slide 19: Significant progress in the execution of the Strategic Actions
Significant progress in the execution of the “Strategic Actions to capture value from our international network” announced in June 2015 On track to meet target Strategic actions Targeted outcome by 2017 Progress Status Actions to re-size and simplify Reduce Group RWAs by c.$290bn ‒ Group RWA reduc
Slide 20: Good progress on RWA reductions, capital management, and cost discipline
Good progress on RWA reductions, capital management, and cost discipline RWA reduction target achieved Strong capital position Cost discipline Group Reported RWAs, $bn Group CET1 ratio, % Group Operating Expenses12, $bn +27% -2% -27% 1,193 14.7 14.9 14.6 876 11.6 1H15 1H17 1H15 1H17 1H15 1H17 GB&M R
Slide 21: Increased international connectivity and further strengthened global position
Increased international connectivity within Group and further strengthened global position Increased international connectivity and Market share and rank, % 1H15 1H17 transaction banking revenue Revenue from international clients14, % GLCM rank16 #3 #3 – Global Liquidity GLCM market share16 2.8%
Slide 22: Shifted the Group's business mix towards Asia
Shifted the Group’s business mix towards Asia Pivot to Asia Drivers of growth Total $bn Hong Kong Total customer loan growth across both retail and corporate segment, up 19% 1H17 vs. 1H16 Adjusted Adjusted PBT, Trade finance market share grew from 10.6% to 12.6% over past year21 Revenues, % of G
Slide 23: Our award winning global franchise is the key driver of shareholder returns
Our award winning global franchise is the key driver of our robust shareholder returns with higher dividends than peers HSBC dividend Dividend23 Buyback Dividend and share TSR since July 201524 buyback in 2015 & 201623, Local currency, % $bn HSBC25 20 3 43 World’s Best Bank European Bank 1 7 -17 Asi
Slide 24: Looking ahead
Looking ahead Delivering our strategy Group financial targets ♦ Unrivalled footprint in Asia and the Middle East driving strong returns and good business momentum ROE >10% ♦ Investing for growth ; 4% revenue growth and > 7% ($62bn) loan growth28 compared with Q2 2016 ♦ Deliver Global Standards, fulf
Slide 25: Appendix
Appendix 25
Slide 26: Global business management view of adjusted revenue
Appendix Global business management view of adjusted revenue RBWM, $m 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 ∆ 2Q16 ∆ 1Q17 GB&M, $m 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 ∆ 2Q16 ∆ 1Q17 Retail Banking 3,181 3,172 3,132 3,177 3,286 3,334 5% 1% Global Markets 1,510 1,893 1,671 1,555 1,970 1,786 (6)% (9)% Current account
Slide 27: Currency translation and significant items
Appendix Currency translation and significant items $m 2Q16 2Q17 1H16 1H17 Revenue Currency translation 522 - 994 - Trading results from disposed operations in Brazil 748 - 1,470 - *Portfolio disposals 68 (42) 68 (32) (Adverse) / Favourable debit valuation adjustment on derivative contracts (7) (178
Slide 28: Net interest margin supporting information
Appendix Net interest margin supporting information Gross customer lending analysis - $927bn: Of our customer lending: HIBOR / USD 3 month rate33 As at 31 Dec 2016 UK RBWM 1.40 mortgages, $104bn Due less 9% − Fixed 54% than 1 year Due over 1 year 1.20 12% − Variable 46% but not more than 5 years 1.0
Slide 29: Transformation Programme: $4.7bn of annualised savings achieved
Appendix Transformation Programme: $4.7bn of annualised savings achieved; on track to achieve our target Saves ($bn) Examples of Q2 achievements US customers can receive instant help with online banking Realised Savings Run Rate through Live Chat and Live Share; contact centre agents can see (savi
Slide 30: Balance sheet
Appendix Balance sheet 2Q17 Loans and advances to customers, $bn Customer accounts, $bn Excluding red-inked balances, customer accounts increased Balances increased by $27bn vs. 1Q17. Excluding 920 by $16bn vs. 1Q17, notably in Hong Kong and the UK CML and red-inked balances, lending increased by To
Slide 31: Exceeded our FX rebased RWA target
Appendix Exceeded our FX rebased RWA target35 Key movements in Group RWAs ($bn) 2Q17 achieved reduction Progress since Dec-14 Target (FX % rebased)35 achieved GB&M and 1Q17 9 858 Legacy GB&M and 131 135 97% Legacy36 US CML 1 (15) run-off RWA US CML 48 initiatives run-off 40 Target achieved Currenc
Slide 32: Equity drivers
Appendix Equity drivers 2Q17 vs. 1Q17 Equity drivers No. of shares (excl. Shareholders’ Tangible TNAV per treasury Equity, $bn Equity, $bn share, $ shares), million As at 31 March 2017 178.8 140.2 7.08 19,793 Profit to shareholders 4.0 4.0 0.20 - Dividends net of scrip38 (1.4) (1.4) (0.15) 241 AT1 i
Slide 33: Total Shareholders' Equity to CET1 capital
Appendix Total Shareholders’ Equity to CET1 capital Total Equity to Common equity tier 1 capital, as at 2Q17 $m 4Q16 2Q17 Total equity (per balance sheet) 182,578 195,786 - Non-controlling interests (7,192) (7,390) Total shareholders’ equity 175,386 188,396 Total Equity 195,786 - Preference share pr
Slide 34: UK credit quality
Appendix UK credit quality Total UK39 gross customer advances - RBWM residential mortgages40, RBWM unsecured lending41, £bn Commercial real estate, £bn £221bn £bn 76.4 76.2 79.7 80.7 81.8 Of which £81.8bn relates Commercial Wholesale to RBWM Other UK Wholesale real estate £108bn £14bn lending, excl.
Slide 35: Oil and gas
Appendix Oil and gas Oil and gas, $bn ‒ $28bn represents c. 2% of wholesale drawn risk exposures Overall $28bn (Dec 2016: $28bn) drawn risk ‒ 3% of the portfolio is CRR (credit risk rating) 7-8, the majority of which is in service companies and pure producers exposure ‒ 5% of the portfolio is impair
Slide 36: Metals and mining
Appendix Metals and mining Metals and mining, $bn Overall ‒ $15bn represents c.1% of wholesale drawn risk exposure $15bn (Dec 2016: $16bn) drawn risk ‒ Specific impairment allowances of c. $0.5bn, concentrated on a few exposure counterparties ‒ Loan impairment charges and other credit risk provision
Slide 37: China
Appendix China Mainland China drawn risk exposure42 Wholesale lending by type: ‒ Total China exposure of $158bn of which 54% is Our top 5 exposures to banks onshore CRRs amounted to $26bn 1-3 4-6 7-8 9+ Banks Sovereigns 32.8 - - - $32.8bn 24% NBFI ‒ Wholesale: $149bn; Retail: $9bn 1% Banks 35.6 0.3
Slide 38: Appendix – Fixed Income
Appendix – Fixed Income 38
Slide 39: HSBC capital structure
Appendix HSBC capital structure43 HSBC capital structure as at End-point (1 Jan 2022) regulatory 30 June 2017 (% of RWAs) requirements, including buffers − HSBC meets its 2019 MREL requirements 25.3% 22.6% 22.9% − HSBC had $37bn of senior MREL in issue 4.3% 4.3% at 30 June 2017 3.6% 7.1% 1.9% 2.7% 1
Slide 40: Simplified structure chart
Appendix Simplified structure chart Holding company HSBC Intermediate holding company Holdings Operating company plc Associate UK 99% HSBC HSBC The Hongkong HSBC HSBC HSBC Private HSBC HSBC & Shanghai HSBC North Bank (China) Bank 94% Bank Banking Mexico Bank Banking Bank America Company Corporation
Slide 41: Establishing the UK Ring-Fenced Bank
Appendix: Establishing the UK Ring-Fenced Bank Changes to the legal structure in Europe and to the business of HSBC Bank plc as at 30 June 2017 HSBC’s ring-fenced bank, HSBC UK Bank plc, will be a new entity and will not be a subsidiary of HSBC Bank plc We intend to transfer into HSBC UK Bank pl
Slide 42: Legal proceedings and regulatory matters
Appendix Legal proceedings and regulatory matters This slide should be read in conjunction with Note 10 and Note 13 of the HSBC Holdings plc Interim Report 2017. Provisions relating to legal proceedings and regulatory matters, $m Commentary on selected items44 Foreign As at 30 June 2017, HSBC he
Slide 43: Footnotes
Appendix Footnotes 1. Annualised 2. Includes the impact of UK bank levy 3. Unless otherwise stated, risk-weighted assets and capital are calculated and presented on a transitional CRD IV basis as implemented in the UK by the Prudential Regulation Authority 4. 1H16 jaws as reported in 1H16 5. ‘Own cr
Slide 44: Footnotes
Appendix Footnotes 23. Total dividend paid in cash and scrip; Peers include: Banco Santander, Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, JP Morgan Chase & Co, Standard Chartered, UBS, Lloyds; Source: Bloomberg and HSBC Annual Reports 24. Date range 01/07/2015 - 30/06/2017 25.
Slide 45: Footnotes
Appendix Footnotes 43. The following should be read in conjunction with slide 39: − End-point MREL requirements calculated as a % of Group consolidated RWAs. The Bank of England (BOE) has written to HSBC outlining its current expectation with regard to the Group’s Multiple Point of Entry resolution
Slide 46: 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 47: Issued by HSBC Holdings plc Group Investor Relations
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ Cover image: The Hong Kong-Zhuhai-Macau Bridge: one of the most ambitious United Kingdom infrastructure projects in the Pearl River. 47 www.hsbc.com Photography: courtesy of Dragages-China Harbour-VSL JV