Hsbc Holdings Plc · LSE:HSBA
Hsbc — Q1 2016 Earnings Presentation
31 slides from Hsbc's earnings presentation, May 3, 2016
Slide 1: HSBC Holdings plc Overseas Regulatory Announcement
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Slide 2: First Quarter 2016 Earnings Release: Audio Webcast and Conference Call
3 May 2016 HSBC HOLDINGS PLC FIRST QUARTER 2016 EARNINGS RELEASE AUDIO WEBCAST AND CONFERENCE CALL There will be an audio webcast presentation and conference call today for investors and analysts. The speakers will be: Stuart Gulliver, Group Chief Executive; and Iain Mackay, Group Finance Direct
Slide 3: Value of the network
Value of the network Connecting customers to opportunities Reduce Group RWAs by c. $290bn and re-deploy towards 1 higher performing businesses; return GB&M to Group target profitability 2 Optimise global network 3 Rebuild NAFTA profitability 4 Set up UK Ring-Fenced Bank Realise $4.5-5.0bn cost savin
Slide 4: Our highlights
Our highlights 1st Quarter 2016 ‒ Reported PBT of $6.1bn; a resilient performance despite challenging market conditions ‒ Adjusted PBT down 18%: ‒ Lower revenue of $0.5bn (4%): Client-facing GB&M and BSM down 10% and Principal 1Q16 Reported PBT RBWM down 5% in challenging market conditions (1Q15: $7
Slide 5: 1Q16 Key metrics
1Q16 Key metrics Discrete quarter 2015 Full Year Key financial metrics 1Q15 4Q15 1Q16 Target Return on average ordinary shareholders’ equity1 11.5% (3.4)% 9.0% >10% Return on average tangible equity1 13.1% (4.0)% 10.3% n/a Jaws (adjusted) - - (2.8)% Positive Dividends per ordinary share in respect o
Slide 6: Financial overview: Reconciliation of Reported to Adjusted PBT
Financial overview Reconciliation of Reported to Adjusted PBT Discrete quarter 2015 Full Year $m 1Q15 4Q15 1Q16 vs. 1Q15 vs. 4Q15 Reported profit before tax 7,059 (858) 6,106 (953) 6,964 Includes Currency translation 296 47 - (296) (47) Significant items: Fair value gains / (losses) on own debt (cre
Slide 7: 1Q16 vs. 4Q15 performance
1Q16 vs. 4Q15 performance Significantly lower LICs and a decrease in costs excluding the bank levy 1Q16 vs. 4Q15 adjusted PBT analysis, $m RBWM Principal run-off CMB GB&M GPB Other6 Group RBWM portfolio 5,434 1Q16 5,071 238 3,623 4,316 487 179 13,914 Revenue 4Q15 5,325 297 3,547 3,559 477 (602) 12,6
Slide 8: 1Q16 vs. 1Q15 profit before tax performance
1Q16 vs. 1Q15 profit before tax performance $5.4bn of adjusted profit generated in the period 1Q16 vs. 1Q15 adjusted PBT analysis, $m Adjusted PBT by global 1Q15 1Q16 vs. 1Q15 business, $m RBWM 1,844 1,359 (485) CMB 2,232 2,076 (156) 1Q15 1Q16 vs. 1Q15 GB&M 2,787 2,000 (787) Group Group Group Group
Slide 9: 1Q16 vs. 1Q15 revenue performance
1Q16 vs. 1Q15 revenue performance Lower revenue, notably from Wealth Management and Markets; continued momentum in CMB 1Q16 vs. 1Q15 adjusted revenue analysis, $m Adjusted revenue by global business Key drivers ‒ Down in Wealth Management; ‒ life insurance manufacturing adversely impacted by 1Q15 1Q
Slide 10: 1Q16 LICs
1Q16 LICs Higher specific charges in 1Q16 across a number of countries Quarterly LICs $m 1Q15 4Q15 1Q16 vs. 4Q15 vs. 1Q15 1Q16 vs. 1Q15: increased by $692m Personal 348 500 549 (49) (201) ‒ Increase driven by specific charges: Collective 314 483 512 (29) (198) ‒ notably in the oil and gas and metals
Slide 11: 1Q16 operating expenses
1Q16 operating expenses Continued progress with our cost base: 1Q16 costs in line with 1Q15 Quarterly operating expenses trend ($bn) UK bank levy5 Brazil operating expenses Adjusted quarterly costs excl. bank levy vs. same quarter prior year, % 9.7 8.5 8.0 8.2 1.5 7.9 7.3 Discrete quarter cost growt
Slide 12: Capital adequacy
Capital adequacy Strong capital base: common equity tier 1 ratio2 – 11.9% Regulatory capital, RWAs, and leverage, $bn 1Q16 CET1 ratio movement % 4Q15 1Q16 (0.2) Common equity tier 1 capital 130.9 132.9 0.3 11.9 (0.1) 11.9 Total regulatory capital on a transitional basis 189.8 187.1 Risk-weighted ass
Slide 13: Reduce RWAs by $290bn
Reduce RWAs by $290bn 50% of our targeted reduction achieved, mainly from exits and disposals and improved modelling Key movements in Group RWA ($bn) RWA initiatives YTD vs. Investor Update target Dec-15 1,103 290 11 279 Book Size 16 50% of 2017 target achieved Movement in associates 3 Investor FX t
Slide 14: Return metrics
Return metrics Drivers of returns 1Q16 Group ROE1, % 11.5 (0.5) 11.0 (1.0) 0.0 (1.3) 9.0 (1.1) 1.4 7.6 1Q15 Sig Items & 1Q15 Revenue Costs LICs Increase in tax 1Q16 Sig Items & 1Q16 Reported Bank Levy ex. Sig items Ex Bank Levy rate & Other ex. Sig items Bank Levy Reported & Bank levy & Bank levy Gr
Slide 15: Progress on our actions to capture value
Progress on our actions to capture value Strategic actions Targeted outcome by 2017 Progress during 1Q16 Actions to re-size and simplify ‒ Group RWA reduction: $290bn ‒ $15bn further reduction in 1Q16, notably in GB&M Reduce Group RWAs by c.$290bn ‒ GB&M <1/3 of Group RWAs ‒ 50% of Group reduction t
Slide 16: Market share analysis
Market share analysis We have maintained and improved market share in key areas FY14 FY15 1Q16 Key awards received in 1Q16 ‒ GTRF (global): Documentary Credit and 3.7% 4.2% 4.2% ‒ Best Supply-Chain Finance Collections market share12 Bank Global Expanded ‒ Best Trade Bank in Hong Kong leadership in ‒
Slide 17: Outlook
Outlook Group financial targets Delivering our strategy ‒ Strong capital generation, well funded, very liquid Low-risk model with low earnings volatility balance sheet; resilient business model ROE > 10% ‒ Revenue opportunities in targeted areas; we continue to invest for growth and capture market s
Slide 18: Appendix
Appendix 16
Slide 19: Appendix – Balance sheet
Appendix – Balance sheet Loans and advances to customers (constant currency) 935.3 950.2 925.1 942.5 925.7 ‒ Customer lending down $8.6bn from Dec 15: 912.5 919.4 918.0 920.1 ‒ Reduction in US legacy portfolios, primarily CML ($4.9bn) and transfer of commercial loans in GB&M ($1.1bn) 92.1 52.1 37.9
Slide 20: Appendix - Group and Hong Kong LICs
Appendix - Group and Hong Kong LICs Group Hong Kong Reported LICs, $bn Reported LICs, $bn 40 HSBC Finance Corporation 1.2 35 Group excl. HSBC Finance Corporation 1.0 30 0.8 25 0.6 20 0.4 15 0.2 10 0.0 5 -0.2 0 -0.4 1997 2015 1997 2015 Reported LICs / gross loans and advances, % Reported LICs / gross
Slide 21: Appendix – Oil and gas
Appendix – Oil and gas Oil and gas24, $bn ‒ Overall exposure of $30bn represents c. 2% of wholesale drawn risk exposures Overall drawn ‒ Large integrated producers remain resilient 4% increase risk exposure $30bn on 2015 ‒ 4% of the portfolio is CRR 7-8, the majority of which is in service companies
Slide 22: Appendix – Metals and mining
Appendix – Metals and mining Metals and mining, $bn Overall drawn ‒ $19bn represents c.1.5% of wholesale drawn risk exposure risk exposure $19bn ‒ Precious metals, copper, nickel and zinc prices are generally forecast to improve slightly in 2016 ‒ The outlook for steel, aluminium and bulk metals is
Slide 23: Appendix - Operating expenses
Appendix - Operating expenses Rebased Investor update target Rebased Investor Update target ($bn) Investor Update Quarterly run 37.9 (5.9) rate excluding the bank levy is (2.3) FX translation c. $7.3bn Brazil & Turkey (3.6) 32.6 32.0 0.6 (1.9) 30.7 (1.6) 29.1 2014 Adj. Brazil, Turkey 2014 proforma T
Slide 24: Currency translation and significant items
Appendix Currency translation and significant items $m 1Q15 4Q15 1Q16 Currency translation 296 47 - Significant items: Revenue Loss on sale of several tranches of real estate secured accounts in the US - (214) - Gain on the partial sale of shareholding in Industrial Bank 363 (Adverse) / Favourable d
Slide 25: Reported Consolidated Income statement
Appendix Reported Consolidated Income statement $m 1Q15 4Q15 1Q16 Net interest income 8,274 8,059 7,913 Net fee income 3,684 3,471 3,197 Net trading income 2,583 1,408 2,836 Net income / (expense) from financial instruments designated at fair value 1,596 (250) 695 Gains less losses from financial in
Slide 26: Reported Consolidated Income statement by global business
Appendix Reported Consolidated Income statement by global business $m RBWM CMB GB&M GPB Other Total25 1Q15 1Q16 1Q15 1Q16 1Q15 1Q16 1Q15 1Q16 1Q15 1Q16 1Q15 1Q16 Net operating income before loan impairment charges and other 5,911 5,160 3,786 3,623 5,242 4,466 613 487 1,831 2,658 15,892 14,976 credit
Slide 27: Reported Consolidated Balance Sheet
Appendix Reported Consolidated Balance Sheet $m At 31 Dec 2014 At 31 Dec 2015 At 31 Mar 2016 Assets Cash and balances at central banks 129,957 98,934 126,265 Trading assets 304,193 224,837 268,941 Financial assets designated at fair value 29,037 23,852 23,957 Derivatives 345,008 288,476 342,681 Loan
Slide 28: Footnotes
Appendix Footnotes 1. On an annualised basis 2. From 1 January 2015 the transitional CET1 and end point CET1 capital ratios became aligned for HSBC Holdings plc due to the recognition of unrealised gains on investment property and available- for-sale securities 3. We plan to maintain a corporate pre
Slide 29: Footnotes
Appendix Footnotes 7. This includes dividends on ordinary shares, quarterly dividends on preference shares and coupons on capital securities, classified as equity 8. Adjusted RoRWAs are calculated using annualised adjusted PBT and reported RWAs at constant currency, adjusted for significant items 9.
Slide 30: 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 31: Issued by HSBC Holdings plc Group Investor Relations
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ United Kingdom Cover image: Tsing Ma Bridge carries road and rail traffic to Hong Kong International Airport and accommodates large Telephone: 44 020 7991 3643 container ships. At HSBC, we help customers across the w