Hsbc Holdings Plc · LSE:HSBA
Hsbc — Investor Day (September 2004)
24 slides from Hsbc's investor day presentation, Sep 2, 2004
Slide 1: Managing for Growth in India
Managing for Growth in India Niall Booker Group General Manager and Chief Executive Officer (India)
Slide 2: Forward looking statements
Forward looking statements This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning fu
Slide 3: Contents
Contents 1. HSBC History in India 2. India Potential 3. Competition and market summary 4. What is our strategy? 5. How have we done so far? September 2004 3
Slide 4: HSBC History in India
HSBC History in India • 1853 : The Mercantile Bank of India, • 2000 : Establishment of HSBC London & China - in Bombay Electronic Data Processing (India) Private Limited (HDPI) • 1958 : The Mercantile Bank of India acquired globally by The Hongkong • 2002 : Establishment of HSBC and Shanghai Banking
Slide 5: Asia's Share of World GDP
Asia’s Share of World GDP* - On the decline since the early 19th century but has picked up as economies have globalised 60 7 50 3 % of World GDP 40 16 Other Asia 7 30 2 13 Japan India 12 5 20 9 7 China 3 33 7 8 5 3 8 10 17 4 3 12 9 5 5 0 Source: Maddison 1820 1870 1913 1950 1973 2001 • India’s GDP g
Slide 6: Demographics: High proportion of young population favours growth
Demographics: High proportion of young population favours growth 1,500 • India shows most rapid growth potential of the Population (Millions) 1,000 463 BRICs 428 417 415 • Potential to raise USD 500 800 income per capita in 2050 to 678 735 519 35 times the current level of USD 514 0 1996 2006e 2010e
Slide 7: Political, Economic and Regulatory Risks
Political, Economic and Regulatory Risks Disjointed Incrementalism . . . • Policy direction is mixed • The Governments Common Minimum Program expenditure requirements could widen the fiscal deficit • Inflation danger from commodity inputs and growth in monetary base • Institutions e.g rule of law, r
Slide 8: Political, Economic and Regulatory Risks - cont.
Political, Economic and Regulatory Risks - cont. • China has been able to attract significantly higher FDI. • Legacy of large bureaucracy which has not been particularly market focussed. • “ If even with the constraints of the neta babu raj it can achieve one of the highest growth rates, imagine how
Slide 9: Indian Commercial Banking Sector
Indian Commercial Banking Sector - Foreign Banks on the pitch but playing uphill and into the wind • 93 Scheduled Commercial Banks of which 36 are foreign banks • Market share (Total Assets) split up as follows: – Public Sector 76% – Private Sector 17% – Foreign 7% • HSBC has a market share (Total A
Slide 10: HSBC Position vs Local Peers
HSBC Position vs Local Peers Improving Results - best growth amongst peers is helping us close the gap 600 +87% +42% -11% +51% +33% N/A 500 429 400 PBT (USDM) 300 217 212 189 200 127 153 160 95 120 68 100 63 -86 0 -100 HSBC Citi SCGB UTI HDFC ICICI 2003 2004 Source: Audited financial statements for
Slide 11: HSBC Position vs Local Peers
HSBC Position vs Local Peers Cost : Income Ratio (%) - strategic initiatives have helped 59 60 57 52 49 50 45 45 45 45 44 38 40 35 36 30 HSBC Citi SCGB UTI HDFC ICICI % Net NPA to Net Advances - credit portfolio relatively clean 6 5.2 4 2.4 2.2 1.4 2 1.0 0.7 1.2 1.3 0.3 0.5 0.4 0.2 0 HSBC CITI SCGB
Slide 12: Market Summary
Market Summary • HSBC leads in Treasury, Custody & Clearing (HSS) and Trade, with strong position in CIB and Mutual funds • HSBC lags in - PFS / Cards versus Citi and - CMB versus local banks • You must be a low cost processor! • It is a myth that all inputs in India are cheap. Property in Delhi, Bo
Slide 13: Managing for Growth - PFS
Managing for Growth - PFS • Key Challenge balance long term investment vs. short term returns • Top tier focus driven by what customers want not what bank can deliver • More branches: 4 - 5 next year • Reduction of reliance on Direct Sales Agents and increased emphasis on Direct Sales Force and bran
Slide 14: Managing for Growth - Cards
Managing for Growth - Cards • Increase Cards in Force to a market share of 10% (from 7% in 2003) by 2006 • Fast and low cost processing • Improve product to encourage utilization • Focus on those who have not got cards • Drive up approval rates from 12% towards 50% • Test beds for credit substitutes
Slide 15: Managing for Growth - CMB
Managing for Growth - CMB • The way forward will be acquisition of new customers and this is being implemented through: – Expansion of the Emerging Business units handling customers of turnover between USD20m and USD40m – Develop the SME customer base through asset-backed strategy – Develop a profit
Slide 16: Managing for Growth - CIBM
Managing for Growth - CIBM • Focus on investment banking services to banks • Leverage strengths in Treasury and Capital Markets • Future growth is targeted through: – Providing solutions through structured products – Large ticket origination opportunities that will emerge from government divestment
Slide 17: Managing for Growth - HR and Operations
Managing for Growth - HR and Operations • Revitalise compensation packages to emphasise performance • Proactive talent management. Mixture of ‘breed our own’ and outside hires • Utilise tools like Six Sigma to drive improvements in productivity and service – “I am quite prepared to run the division
Slide 18: How have we done so far?
How have we done so far? September 2004 18
Slide 19: NII has grown 42% Y-O-Y
NII has grown 42% Y-O-Y Monthly (USDm) 20 15 • Although interest rates have declined, volume growth has 10 enhanced NII 5 0 • Home Loans have grown 73% J 03 APR JUL OCT J04 APR and total lending 25% Quarterly (USDm) 50 48 • Growth of 35% in Savings 43 Deposits 45 40 37 • Corporate current accounts 3
Slide 20: Fee Income has grown 46% Y-O-Y
Fee Income has grown 46% Y-O-Y Monthly (USDm) 8 Areas of Growth in the past 12 months 6 4 2 • Branches have increased 0 insurance and investment income J 03 APR JUL OCT J04 APR 238% and 400% respectively Quarterly (USDm) 18 • Assets under custody have grown 17 18 81% 17 16 15 14 14 • Cards in force
Slide 21: Income growing faster than cost
Income growing faster than cost US$m Cost : Income Ratio (%) 200 180 45 42.2% 42.6% 150 129 126 40 37.2% 100 67 55 53* 35 50 0 30 1H03 2H03 1H04 INCOME (LHS) COST (LHS) Cost : Income Ratio (RHS) • Strategic cost control initiatives undertaken: – Voluntary Separation Scheme to processing staff – Cent
Slide 22: Improving Results
Improving Results Strong 1H04 growth . . . but we can do better USDm 1H03 2H03 1H04 Operating Income 129 126 180 Operating Expenses (55) (53)* (67) Operating Profit before Provisions 74 73 113 Provisions (B&D etc.) (14) (20) (27) Gains on disposals 5 9 0 Profit before Tax 65 62 86 Number of Branches
Slide 23: Going forward . . .
Going forward . . . “India is not a tiger and change will always be slower than in East Asia. India is an elephant which has stirred from its slumber and has finally begun to move ahead with a degree of determination. However unlike a sprinting tiger that runs out of steam, the elephant has stamina.
Slide 24: Managing for Growth in India
Managing for Growth in India HSBC &)