Hsbc Holdings Plc · LSE:HSBA
Hsbc — Debt Investor Presentation (August 2018)
37 slides from Hsbc's debt investor presentation, Aug 6, 2018
Slide 1: HSBC Holdings plc 1H18 Results Fixed Income Investor Presentation
HSBC Holdings plc 1H18 Results Fixed Income Investor Presentation Date: 6 August 2018
Slide 2: Contents
Contents 1 HSBC Key Credit Messages 2 2 HSBC Group Strategy and 1H18 Performance 4 3 HSBC’s Capital Structure and Debt Issuance 17 4 Establishing the UK Ring-Fenced Bank 22 5 Appendix 25 1
Slide 3: HSBC Key Credit Messages
HSBC Key Credit Messages ep Hssc
Slide 4: HSBC Key Credit Messages: Diversified businesses, capital strength, robust funding and liquidity
HSBC Key Credit Messages Diversified businesses, capital strength, robust funding and liquidity As at 1H18 Conservative approach to risk management 8bps ECL as a % of gross customer 1.4% Stage 3 loans as a % of advances (annualised) gross customer advances Europe Other GB&M RBWM Asia Diversified rev
Slide 5: HSBC Group Strategy and 1H18 Performance
HSBC Group Strategy and 1H18 Performance 4
Slide 6: Our strategic priorities and financial targets
Our strategic priorities and financial targets Strategic priorities Financial targets Accelerate growth from our Asian franchise 1 Build on strength in Hong Kong Invest in PRD, ASEAN, and Wealth in Asia (incl. Insurance and Asset Management) RoTE1 >11% by 2020 Be the leading bank to support driv
Slide 7: Key messages
Key messages 2Q18 key messages 1st half 2018 Reported PBT (1H17: $10.2bn) 1 Reported PBT of $6.0bn, 13% higher than 2Q17; $6.1bn adjusted PBT, in line with 2Q17 $10.7bn 5% Adjusted PBT (1H17: $12.4bn) Total adjusted revenue increased $0.2bn to $13.7bn vs. 2Q17; good business momentum with $12.1bn 2%
Slide 8: Key financial metrics
Financial overview Key financial metrics Key financial metrics 1H17 1H18 Return on average ordinary shareholders’ equity2 8.8% 8.7% Return on average tangible equity2 9.9% 9.7% Jaws (adjusted)4 0.5% (5.6)% Dividends per ordinary share in respect of the period $0.20 $0.20 Earnings per share5 $0.35 $0
Slide 9: Reconciliation of Reported to Adjusted PBT
Financial overview Reconciliation of Reported to Adjusted PBT Discrete quarter Half year 2Q17 2Q18 ∆ 2Q17 1H17 1H18 ∆ 1H17 Reported profit before tax 5,282 5,957 675 10,243 10,712 469 Includes: Currency translation (118) - 118 (289) - 289 Significant items: Fair value movements on financial instrume
Slide 10: 1H18 Profit before tax
Financial overview 1H18 Profit before tax 1H18 ∆ 1H17 Adjusted revenue by global business, $m adverse favourable +8% Revenue $27,535m 578 2% 11,065 10,283 +1% LICs / ECL $(407)m 250 38% +12% 8,192 8,265 7,439 Operating (1,175) (8)% +6% $(16,370)m 6,622 >(100)% expenses 874 929 986 Share of profits i
Slide 11: 2Q18 Profit before tax
Financial overview 2Q18 Profit before tax 2Q18 ∆ 2Q17 Adjusted revenue by global business, $m adverse favourable +6% Revenue $13,685m 233 2% 5,396 5,070 +2% LICs / ECL $(237)m 180 43% +14% 4,052 4,117 3,740 Operating (554) (7)% $(8,125)m 3,274 +2% >(100)% expenses 617 Share of profits in 439 447 ass
Slide 12: Revenue performance
Financial overview Revenue performance Revenue performance, $m7 +7% Global 13,760 13,700 businesses 12,909 12,835 12,855 477 447 430 439 438 12,324 420 4,074 4,117 4,066 4,052 3,913 3,399 GPB GB&M 3,635 3,740 3,292 3,274 3,352 3,467 CMB RBWM 5,121 5,070 5,152 5,038 5,574 5,396 1Q17 2Q17 3Q17 4Q17 1Q
Slide 13: Credit outlook remains stable
Loan impairment charges and expected credit losses Credit outlook remains stable Loan impairment charges and expected credit losses, $m Analysis by stage as at 30 Jun 2018 Stage 3 as IAS 39 IFRS 9 $bn Stage 1 Stage 2 Stage 3 Total8 a % of Total 2Q17 1Q18 2Q18 30 Jun 2018 Loans and advances to custom
Slide 14: Investing in growth and technology while maintaining cost discipline
Operating expenses Investing in growth and technology while maintaining cost discipline 2Q18 vs. 2Q17, $bn excluding UK bank levy Cost discipline and control to continue appropriate investment in the future of the firm, predicated on our commitment to deliver positive jaws for FY2018 Near and medium
Slide 15: Strong capital base: CET1 ratio of 14.2%
Capital adequacy Strong capital base: CET1 ratio of 14.2% Regulatory capital and RWAs, $bn CET1 ratio movement, % 2Q17 4Q17 1Q18 2Q18 Common equity tier 1 capital 128.9 126.1 129.6 122.8 (0.2) Total regulatory capital 183.9 182.4 185.2 176.6 0.4 Risk-weighted assets 876.1 871.3 894.4 865.5 (0.2) 14.
Slide 16: Customer lending
Balance sheet Customer lending 2Q18 Loans and advances to customers11 2Q18 growth by global business and region excluding red-inked and CML balances Balances increased by $26bn from 1Q18, reflecting: Continued lending growth in Asia ($16bn) primarily in Hong Kong in term lending in line with our s
Slide 17: Customer accounts
Balance sheet Customer accounts 2Q18 Customer accounts11, $bn Customer accounts13, US$bn Balances increased $21bn in 2Q18: Growth in Europe of $9bn, all in the UK from higher GLCM deposits 6% CAGR (Demand Growth in Asia of $11bn mainly from Hong Kong ($6bn or 1%) largely from term deposits) 1,02
Slide 18: HSBC's Capital Structure and Debt Issuance
HSBC’s Capital Structure and Debt Issuance 17
Slide 19: Group CET1 requirements
HSBC’s Capital Structure and Debt Issuance Group CET1 requirements Common Equity Tier 1 ratio, versus Maximum Distributable Amount (“MDA”) Buffer to $22bn MDA14 2.5% 11.7% 0.7% 14.2% CET1 ratio, down 40bps from 1 Jan 2018 (after the IFRS9 2.0% transitional day 1 impact) Combined buffer of 5.2% $
Slide 20: Total capital and estimated MREL requirements
HSBC’s Capital Structure and Debt Issuance Total capital and estimated MREL requirements16 Regulatory capital and MREL-eligible HoldCo Senior versus regulatory requirements as a % of RWAs AT1 and Senior MREL increased in 1H18 due to 23.2% planned issuance 6.1% Tier 2 increased due to the change
Slide 21: Issuance strategy and plan
HSBC’s Capital Structure and Debt Issuance Issuance strategy and plan Issuance Strategy HSBC Holdings is the Group’s principal issuing entity for AT1, T2 and Senior MREL MREL debt will be downstreamed, where appropriate, in a form compliant with local regulations MREL issuance is expected to b
Slide 22: Redemption profile
HSBC’s Capital Structure and Debt Issuance Redemption profile Contractual maturity profile, $bn As at 30 June 2018 21.0 19.4 4.0 16.5 15.6 8.0 14.4 4.6 10.0 12.6 8.2 12.4 8.0 9.3 6.1 2.0 0.9 2.1 1.4 3.5 2.0 2.1 2.0 2.5 1.5 2018 2019 2020 2021 2022 2023 Other term senior (HSBC Group)20 MREL-eligible
Slide 23: Establishing the UK Ring-Fenced Bank
Establishing the UK Ring-Fenced Bank 22
Slide 24: HSBC has completed the ring-fencing of its UK retail banking activities
Establishing the UK Ring-Fenced Bank HSBC has completed the ring-fencing of its UK retail banking activities Illustrative future structure Milestones completed in 1H18 Holding company In January 2018, the Ring Fence Transfer Scheme (‘RFTS’) court process was initiated with the submission of an Ope
Slide 25: HSBC UK Bank plc and HSBC Bank plc disclosures as at 1 July 2018
Establishing the UK Ring-Fenced Bank HSBC UK Bank plc and HSBC Bank plc disclosures as at 1 July 2018 Source: HSBC Bank plc Interim Report 2018 HSBC UK Bank plc (our ring-fenced bank) HSBC Bank plc (our non-ring fenced bank) Consolidated balance sheet, £bn Consolidated balance sheet post transfers,
Slide 26: Appendix
Appendix
Slide 27: Credit quality remains robust reflecting the Group's conservative approach to risk management
Appendix Credit quality remains robust reflecting the Group’s conservative approach to risk management Gross loans and advances to Loans and advances to customers Stage 3 and impaired loans and Change in expected credit losses and Customers - $982bn of ‘Strong’ or ‘Good’ credit advances to customers
Slide 28: UK customer advances
Appendix UK customer advances Total UK22 gross customer advances - RBWM residential mortgages23, £bn RBWM unsecured lending25, £bn £223bn 81.8 83.8 85.6 86.7 88.6 As at 30 Jun 2018 79.7 80.7 Of which £88.6bn Wholesale relates to RBWM 6.5 6.5 6.7 6.8 6.0 5.4 Mortgages Dec-16 Mar-17 Jun-17 Sep-17 Dec-
Slide 29: Mainland China drawn risk exposure
Appendix Mainland China drawn risk exposure26 Total China drawn risk exposure of ‒ Total China drawn risk exposure of $165bn $165bn As at 30 Jun 2018 ‒ Wholesale: $155bn (of which 53% is onshore); Retail: $10bn Wholesale – ‒ Gross loans and advances to customers of c$41bn in Mainland China (by count
Slide 30: Legal proceedings and regulatory matters
Appendix Legal proceedings and regulatory matters This slide should be read in conjunction with Note 12 and Note 10 of the HSBC Holdings plc Interim Report 2018. Provisions relating to legal proceedings and regulatory matters, $m Commentary on selected items27 ♦ In December 2017, the AML DPA expired
Slide 31: Current credit ratings for key entities
Appendix Current credit ratings for key entities Long term senior ratings as at 5 August 2018 Fitch Moody’s S&P Rating Outlook Rating Outlook Rating Outlook HSBC Holdings plc AA- Stable A2 Stable A Stable The Hongkong and Shanghai Banking Corporation Ltd AA- Stable Aa3 Stable AA- Stable HSBC Bank pl
Slide 32: Simplified structure chart - principal entities as at 1 July 2018
Appendix Simplified structure chart - principal entities as at 1 July 2018 Holding company HSBC Intermediate holding company Holdings Operating company plc Associate UK 99% HSBC HSBC The Hongkong HSBC HSBC HSBC HSBC & Shanghai HSBC North Bank (China) Bank 95% Bank HSBC UK Mexico Bank Banking Bank Am
Slide 33: Establishing the UK Ring-Fenced Bank: Evolution of legal entity structure
Appendix Establishing the UK Ring-Fenced Bank Evolution of legal entity structure Historical structure Current structure Illustrative future structure Legal entity structure pre ring- Post the ring-fencing of the qualifying components of UK During 2H18 HSBC Bank plc will be transferred to HSBC fenci
Slide 34: Glossary
Appendix Glossary AT1 Additional Tier 1 PBT Profit before tax Basis points. One basis point is equal to one-hundredth of a POCI Purchased or originated credit-impaired Bps percentage point RBWM Retail Banking and Wealth Management, a global business CET1 Common Equity Tier 1 RFTS Ring fence transfer
Slide 35: Footnotes
Appendix Footnotes 1. A targeted reported RoTE of 11% is broadly equivalent to a reported return on equity of 10%; assumes a Group CET1 ratio greater than 14% 2. Annualised 3. Unless otherwise stated, risk-weighted assets and capital are calculated using (i) the CRD IV transitional arrangement as im
Slide 36: Disclaimer
Appendix Disclaimer Important notice The information, statements and opinions set out in this presentation and subsequent discussion do 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 financial
Slide 37: Issued by HSBC Holdings plc Group Investor Relations
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ Cover image: Guangzhou is located at the heart of China’s Pearl River Delta, one of the United Kingdom country’s fastest growing economic regions. www.hsbc.com Photography: Getty Images 36
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