Hsbc Holdings Plc · LSE:HSBA
Hsbc — 2Q18 Earnings Presentation
49 slides from Hsbc's earnings presentation, Aug 6, 2018
Slide 1: HSBC Holdings plc 2Q18 Results Presentation to Investors and Analysts
HSBC Holdings plc 2Q18 Results Presentation to Investors and Analysts Date: 6 August 2018
Slide 2: 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 3: 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 4: 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 5: 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 6: 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 7: 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 8: 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 9: Retail Banking and Wealth Management: 2Q18 revenue growth driven by deposit revenues
Retail Banking and Wealth Management 2Q18 revenue growth driven by deposit revenues 1H18 highlights Revenue performance, $m7 Balance Sheet, $bn8 +6% +3% -3% +8% 618 639 636 5,121 5,070 5,152 5,038 5,574 5,396 Adjusted PBT (1H17: $3.4bn) 325 343 351 134 88 56 Wealth $3.6bn 7% Mgt. 1,544 1,490 1,521 1
Slide 10: Commercial Banking: Broad based growth across all products
Commercial Banking Broad based growth across all products 1H18 highlights Revenue performance, $m7 Balance Sheet, $bn8 +14% +3% Customer lending: +8% +3% Adjusted revenue 3,292 3,274 3,352 3,467 3,635 3,740 Adjusted PBT (1H17: $3.6bn) 329 319 Other 304 475 $4.1bn 15% 438 373 351 405 546 477 Global T
Slide 11: Global Banking and Markets: Strong performance in key products offset by reduced Markets activity
Global Banking and Markets Strong performance in key products offset by reduced Markets activity Management view of adjusted revenue 1H18 highlights Revenue performance, $m7 $m 2Q18 ∆ 2Q17 Adjusted revenue 4,066 4,052 3,913 3,399 4,074 4,117 Global Markets 1,610 (13)% - FX 811 10% 22 Adjusted PBT Cr
Slide 12: Global Private Bank: $9bn of positive inflows in 1H18
Global Private Bank $9bn of positive inflows in 1H18; progress in building revenues in areas targeted for growth Client assets, $bn 1H18 highlights Revenue performance, $m7 316 327 330 331 330 +2% 306 13 14 13 23 21 20 -6% 283 295 307 317 317 317 Adjusted revenue 430 439 438 420 477 447 Adjusted PBT
Slide 13: Corporate Centre: Lower revenue in 2Q18
Corporate Centre Lower revenue in 2Q18 from valuation differences, loss on sale of legacy portfolios and higher interest expenses 1H18 highlights Revenue performance, $m7 Legacy Credit adjusted RWAs: 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Central Treasury 361 435 308 256 (78) 163 Adjusted PBT Of which: (1H17
Slide 14: Net interest margin rose by 3bps to 1.66% in 1H18
Net interest margin Net interest margin rose by 3bps to 1.66% in 1H18 NII sensitivity as at 30 June 2018, $m: Sensitivity of NII to a Reported YTD 1.64% 1.63% 1.66% 25bps / 100bps instantaneous change in yield curves (12 months), NIM, % for further commentary and information, refer to pages 66 and 6
Slide 15: 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 Total11 a % of Total 2Q17 1Q18 2Q18 30 Jun 2018 Loans and advances to custo
Slide 16: 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 17: 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 18: Return metrics
Return metrics Return metrics Group RoTE walk, 1H18 vs. 1H17 RBWM 0.3 (0.2) 11.6% 0.1 11.5% Strong RoTE as we continue to (0.3) invest in growth including in marketing, increasing front-line 1.7 employees, and technology (1.8) CMB 9.9% 9.7% Strong growth across the business with RoTE also benefi
Slide 19: In summary
In summary Financial targets RoTE1 >11% by 2020 Good business momentum, $0.9bn or 7% revenue growth vs 2Q17 1 from our 4 global businesses Positive adjusted Investing in growth and technology; strong cost discipline and Costs jaws 2 control; positive adjusted jaws on an annual basis 3 Balance sh
Slide 20: Appendix
Appendix
Slide 21: Global business management view of adjusted revenue
Appendix Global business management view of adjusted revenue $m 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 GB&M, $m 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Total Group revenue 13,261 13,452 13,046 12,416 13,593 13,685 Global Markets 2,029 1,842 1,699 1,300 1,832 1,610 Total adjusted revenue as Equities 354 336 335 265 418
Slide 22: Currency translation and significant items included in the Income Statement
Appendix Currency translation and significant items included in the Income Statement $m 2Q17 1Q18 2Q18 1H17 1H18 Revenue Currency translation (241) 258 - (897) - Customer redress programmes - - 46 - 46 Disposals, acquisitions and investment in new businesses 202 (112) (30) 358 (142) Fair value movem
Slide 23: RoTE by global business
Appendix RoTE by global business 1H18 $m Corporate RBWM CMB GB&M GPB Group Centre Reported profit before tax 3,512 4,149 3,725 146 (820) 10,712 Reported profit before tax - Annualised 7,083 8,367 7,511 294 (1,654) 21,601 Significant items 237 (76) (314) 88 2,945 2,880 Bank levy - - - - 83 83 BSM all
Slide 24: Balance sheet – Customer lending
Appendix Balance sheet – Customer lending 2Q18 Loans and advances to customers20 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
Slide 25: Balance sheet – Customer accounts
Appendix Balance sheet – Customer accounts 2Q18 Customer accounts20, $bn Customer accounts22, US$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 dep
Slide 26: Net interest margin analysis and net interest income sensitivity
Appendix Net interest margin analysis and net interest income sensitivity Net interest margin analysis Variance 1H17 FY17 1H18 Group NIM 1H18 vs. 2017 Average Average Average Average $bn Yield Yield Yield Yield Impact balance balance balance balance Loans and advances to customers 871 3.23% 902 3.19
Slide 27: Net interest margin supporting information
Appendix Net interest margin supporting information Gross customer lending analysis - $982bn Of our customer lending: HIBOR / LIBOR 1 month rate25 As at 30 Jun 2018 As at 31 Dec 2017 UK RBWM 9% mortgages, $117bn Due less − Fixed 63% than 1 year Due over 1 year 12% − Variable 37% but not more than 5
Slide 28: Equity drivers
Appendix Equity drivers 2Q18 vs. 1Q18 Equity drivers No. of shares (excl. Shareholders’ Tangible TNAV per treasury Equity, $bn Equity, $bn share, $ shares), million As at 31 March 2018 195.9 145.8 7.29 20,013 Profit to shareholders 4.3 4.0 0.20 - Dividends net of scrip26 (2.1) (2.1) (0.12) 39 FX (7.
Slide 29: Total Shareholders' Equity to CET1 Capital
Appendix Total Shareholders’ Equity to CET1 Capital Total Equity to Common equity tier 1 capital, as at 2Q18, $m Total Equity to CET1 walk, $m 4Q17 2Q18 Total equity (per balance sheet) 197,871 191,294 191,294 - Non-controlling interests (7,621) (7,687) Total Equity Total shareholders’ equity 190,25
Slide 30: UK customer advances
Appendix UK customer advances Total UK27 gross customer advances - RBWM residential mortgages28, £bn RBWM unsecured lending30, £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 31: Mainland China drawn risk exposure
Appendix Mainland China drawn risk exposure31 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 32: Fixed Income
Fixed Income
Slide 33: HSBC Key Credit Messages
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 34: 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 MDA32 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 35: Total capital and estimated MREL requirements
HSBC’s Capital Structure and Debt Issuance Total capital and estimated MREL requirements34 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 36: 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 37: 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)38 MREL-eligible
Slide 38: 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 39: 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 40: 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 41: 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 items40 ♦ In December 2017, the AML DPA expired
Slide 42: 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 43: 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 44: 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 45: Glossary
Appendix Glossary AIEA Average interest earning assets IFRS International Financial Reporting Standard AT1 Additional Tier 1 The difference between the rate of growth of revenue and the rate of growth of costs. Positive jaws is where the revenue growth rate AUM Assets under management Jaws exceeds t
Slide 46: 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 47: Footnotes
Appendix Footnotes 32. Pro forma buffer to MDA trigger based on RWAs and CET1 capital resources at 30 June 2018 33. Pillar 2A requirements are shown as applicable on 30 June 2018 and are subject to change, held constant for illustrative purposes. The capital buffers on an end point basis include: a)
Slide 48: 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 49: 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. 48 www.hsbc.com Photography: Getty Images