Slide 1: HSBC Holdings plc 2Q20 Results
HSBC Holdings plc 2Q20 Results Presentation to Investors and Analysts
Slide 2: Noel Quinn, Group Chief Executive
Noel Quinn Group Chief Executive
Slide 3: Highlights
Strategy 2Q20 results Appendix Highlights Resilient Asia and strong Global Markets performance; 1H20 profits challenged in Europe, the US and the 1 NRFB due to high ECL. Reported 2Q20 PBT of $1.1bn, down 82% vs. 2Q19; adjusted PBT of $2.6bn down 57% 2 2Q20 ECL of $3.8bn, primarily reflecting forward
Slide 4: Global recovery uneven; resilience in Asia
Strategy 2Q20 results Appendix Global recovery has been uneven; 1H20 performance reflected our strength and resilience in Asia Largely resilient activity in Asia Revenue has held up in Asia Adjusted revenue, $bn Certain markets have been less Real GDP Trade finance Corporate client Hong Kong retail
Slide 5: Responding to the challenges posed by the pandemic
Strategy 2Q20 results Appendix The Group has responded to the challenges posed by the pandemic, demonstrating our resilience in supporting clients, employees, communities and the economies we serve Supporting our employees, communities, and economies Supporting our clients remotely HSBC’s strengths
Slide 6: Transformation programme: groundwork laid in 1H20
Strategy 2Q20 results Appendix Transformation programme: Groundwork laid in 1H20 to accelerate our plans as the global economic recovery strengthens Group-level transformation milestones Transformation programmes in Europe, US, GBM Adjusted costs: 1H20 down 5% vs 1H19; 2Q20 down 7% vs 2Q19 GBM: •
Slide 7: Footprint and WPB positioned to capture global wealth opportunity
Strategy 2Q20 results Appendix Our footprint and newly formed WPB business positions us to capture the global wealth opportunity; Pinnacle platform launched to step up our wealth business in mainland China Launched Pinnacle, our digital wealth planning and insurance services in WPB positioned to dri
Slide 8: Ewen Stevenson, Group Chief Financial Officer
Ewen Stevenson Group Chief Financial Officer
Slide 9: 2Q20 results summary
Strategy 2Q20 results Appendix 2Q20 results summary $m 2Q20 2Q19 Δ Net interest income of $6.9bn, down $0.7bn (9%) vs. 2Q19 NII 6,871 7,541 (9)% impacted by 1Q20 rate cuts Non interest income 6,279 6,125 3% Non interest income of $6.3bn, up $0.2bn (3%), reflecting Revenue 13,150 13,666 (4)% stro
Slide 10: 2Q20 adjusted revenue performance
Strategy 2Q20 results Appendix 2Q20 adjusted revenue performance 2Q20 revenue 2Q20 vs. 2Q19 Revenue by global business, $bn Retail Banking $3,063m (809) WPB $5,630m (12)% Wealth Management $2,183m o/w insurance market 24 1% impacts: $389m 13.7 13.1 13.2 Other $384m 8 0.2 GLCM $1,014m (486) 3.6 3.7 4
Slide 11: Net interest income
Strategy 2Q20 results Appendix Net interest income Reported NIM progression, bps 154 (1) Reported NII of $6.9bn, down $0.7bn (20) 133 0 (9%) vs. 1Q20 and down $0.9bn (11%) vs. 2Q19 due to the impact of lower rates NIM of 1.33% down 21bps vs. 1Q20, 1Q20 Change in Reduction in rates Argentina 2Q20
Slide 12: Adjusted costs
Strategy 2Q20 results Appendix Adjusted costs Operating expenses trend, $m Costs decreased $0.6bn (7%) vs. 2Q19 due to management actions, reduced discretionary spending and performance related pay accrual, 8,867 despite continued investment; costs decreased by $0.3bn (3%) vs. 1Q20 7,828 7,418 988
Slide 13: Credit performance
Strategy 2Q20 results Appendix Credit performance ECL charge trend 0.27 1.33 ECL as a % of 2Q20 ECL charge of $3.8bn was average gross 1.48 $0.9bn (30%) higher vs. 1Q20, due to 1.14 loans and advances (annualised) higher charges in the UK RFB 0.21 0.32 0.27 ECL, $m UK RFB 2Q20 ECL charge of $1.5
Slide 14: Capital adequacy
Strategy 2Q20 results Appendix Capital adequacy CET1 ratio, % 15.0 0.1 CET1 ratio increased by 0.4ppts to 15.0%, 0.0 0.1 including a PVA benefit of $0.6bn (0.05ppts) 14.6 0.0 o/w PVA22: 0.1 $0.6bn Positive CET1 impact of $1.0bn (0.1ppts) from IFRS9 transitional arrangements; IFRS9 transitional r
Slide 15: RWA movements
Strategy 2Q20 results Appendix RWA movements 2Q20 RWA movement by key driver, $bn 2Q20 vs. 1Q20: o/w CRR migration: $13.6bn Reported RWAs decreased by $2.5bn in 2Q20, 857.1 excluding FX translation differences RWAs decreased by (0.4) 854.6 $6.8bn, as management actions offset the impact of CRR (6.
Slide 16: Summary
Strategy 2Q20 results Appendix Summary Adjusted PBT of $2.6bn, down 57% vs. 2Q19 due to lower revenues and a higher ECL charge, partly 1 offset by a good cost performance, with adjusted costs down 7% Continued resilience in Asia; recovery of activity evident, costs of $3.1bn down 4% and ECL of $0.8b
Slide 17: Appendix
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Slide 18: Key financial metrics
Strategy 2Q20 results Appendix Key financial metrics Reported results, $m 2Q20 1Q20 2Q19 Balance sheet, $m 2Q20 1Q20 2Q19 NII 6,897 7,612 7,772 Total assets 2,922,798 2,917,810 2,751,273 Other Income 6,162 6,074 7,172 Net loans and advances to customers 1,018,681 1,040,282 1,021,632 Revenue 13,059 1
Slide 19: Reconciliation of reported and adjusted results
Strategy 2Q20 results Appendix Reconciliation of reported and adjusted results $m 2Q20 1Q20 2Q19 Reported PBT 1,089 3,229 6,194 Revenue Currency translation — (277) (424) Customer redress programmes (26) — — Disposals, acquisitions and investment in new businesses 1 7 (827) Fair value movements on f
Slide 20: Certain items and Argentina hyperinflation
Strategy 2Q20 results Appendix Certain items and Argentina hyperinflation Certain items included in adjusted revenue highlighted in 2Q20 1Q20 4Q19 3Q19 2Q19 management commentary25, $m Insurance manufacturing market impacts in WPB 356 (689) 207 (205) (33) Credit and funding valuation adjustments in
Slide 21: Certain volatile items analysis
Strategy 2Q20 results Appendix Certain volatile items analysis WPB: Insurance manufacturing market impacts GBM: Credit and funding valuation adjustments Corporate Centre: Valuation differences on long- revenue, $m revenue and bid-offer adjustment, $m term debt and associated swaps, $m 356 199 240 25
Slide 22: Global business management view of adjusted revenue
Strategy 2Q20 results Appendix Global business management view of adjusted revenue Group, $m 2Q19 3Q19 4Q19 1Q20 2Q20 ∆2Q19 GBM, $m 2Q19 3Q19 4Q19 1Q20 2Q20 ∆2Q19 Total Group revenue 13,666 13,068 13,300 13,055 13,150 (4)% Global Markets 1,384 1,346 1,221 2,099 2,139 55% Adjusted revenue reported at
Slide 23: 1H20 adjusted revenue performance
Strategy 2Q20 results Appendix 1H20 adjusted revenue performance 1H20 revenue 1H20 vs. 1H19 Revenue by global business, $bn Retail Banking $6,896m (753) (1)% WPB $11,251m (13)% Wealth Management $3,606m (900) o/w insurance market impacts: $(482)m 27.8 26.6 26.5 Other $749m 43 0.0 GLCM $2,347m 7.6 (6
Slide 24: Wealth and Personal Banking
Strategy 2Q20 results Appendix Wealth and Personal Banking 2Q20 financial highlights Balance sheet31 $bn 2Q20 vs. 2Q19 Revenue $5.6bn (12)% 9% Revenue down $777m (12%) driven by: (2Q19: $6.4bn) 4% • Retail Banking down $809m (21%), primarily from lower NII due to 752 776 1Q20 rate cuts ECL $(1.1)b
Slide 25: Commercial Banking
Strategy 2Q20 results Appendix Commercial Banking 2Q20 financial highlights Balance sheet31, $bn 2Q20 vs. 2Q19 (14)% Revenue down $512m (14%): Revenue $3.3bn (2Q19: $3.8bn) Customer lending • GLCM down $486m (32%), reflecting the impact from lower interest rates, partly offset by higher balances a
Slide 26: Global Banking and Markets
Strategy 2Q20 results Appendix Global Banking and Markets 2Q20 financial highlights View of adjusted revenue 2Q20 vs. 2Q19 Revenue $4.4bn 24% $m 2Q20 ∆2Q19 Revenue up $863m (24%), excl. XVAs up $840m (23%): (2Q19: $3.6bn) Global Markets 2,139 55% • Global Markets up $755m (55%) as higher client ac
Slide 27: Corporate Centre
Strategy 2Q20 results Appendix Corporate Centre 2Q20 financial highlights Revenue performance25, $m Revenue $(166)m >(100)% 2Q19 3Q19 4Q19 1Q20 2Q20 (2Q19: $(76)m) Central Treasury 116 88 (47) 265 (64) ECL $(14)m >(100)% (2Q19: $6m) Of which: >100% Valuation differences on long-term debt and Costs $
Slide 28: HSBC Wealth
Strategy 2Q20 results Appendix HSBC Wealth HSBC Wealth Balances 13 of $1,418bn comprise Private Bank client Private Bank Net New Money, $bn Premier and Jade Deposits, $bn assets of $353bn, Retail wealth balances of $357bn, Premier and Jade deposits of $445bn and AMG funds distributed to third partie
Slide 29: GBM and CMB IRB RWA inflation and mitigating actions
Strategy 2Q20 results Appendix GBM and CMB IRB RWA inflation and mitigating actions Wholesale counterparty IRB RWAs and exposures GBM and CMB wholesale performing IRB book: All CRR Bands FY19 2Q20 ∆ RWA, $bn 341 353 12 • Includes: corporates, sovereigns and financial institutions EAD, $bn 695 695
Slide 30: ECL analysis
Strategy 2Q20 results Appendix ECL analysis ECL charge by global business, $m ECL charge by geography, $m 2,151 1,450 1Q20 2Q20 1Q20 2Q20 1,346 984 1,065 1,094 818 552 565 657 620 505 536 573 379 247 14 (2) Asia UK RFB20 NRFB20 NAM Other WPB CMB GBM Corporate Centre Analysis by stage 2Q20 vs. 1Q20 g
Slide 31: Customer relief and lending support programmes
Strategy 2Q20 results Appendix Customer relief and lending (including government) support programmes Other Hong We have granted personal customers more than 700,000 UK US major Total Kong payment holidays on loans, credit cards and mortgages, and As at 30 June 2020 markets provided c.$30bn of reli
Slide 32: Net interest margin supporting information
Strategy 2Q20 results Appendix Net interest margin supporting information Quarterly NIM by key legal entity Key rates (quarter averages) % of 2Q20 % of 2Q20 3Q19 4Q19 1Q20 2Q20 Group NII Group AIEA The Hongkong and Shanghai Banking 2.05% 2.00% 1.96% 1.69% 54% 42% 2.40% Corporation (HBAP) 2.20% 2.16%
Slide 33: Hong Kong and UK WPB customer activity data
Strategy 2Q20 results Appendix Hong Kong and UK WPB customer activity data Hong Kong Credit card spend* Mortgage applications* Retail sales units39 Increases in credit card spending towards the end of 2Q20 as 140 500 movement restrictions eased in key 120 markets 400 100 UK mortgages: Strong mom
Slide 34: RoTE by global business excluding significant items and UK bank levy
Strategy 2Q20 results Appendix RoTE by global business excluding significant items and UK bank levy 1H20 $m Corporate WPB CMB GBM Group Centre Reported profit before tax 1,491 77 1,914 836 4,318 Tax expense (269) (147) (650) (127) (1,193) Reported profit after tax 1,222 (70) 1,264 709 3,125 less att
Slide 35: Total shareholders' equity to CET1 capital
Strategy 2Q20 results Appendix Total shareholders’ equity to CET1 capital Total equity to CET1 capital, as at 30 June 2020, $m Total equity to CET1 capital walk, $m 2Q20 4Q19 Total equity (per balance sheet) 195,221 192,668 Total Equity 195,221 - Non-controlling interests (8,185) (8,713) Total share
Slide 36: 2Q20 vs. 1Q20 equity drivers
Strategy 2Q20 results Appendix 2Q20 vs. 1Q20 equity drivers Shareholders’ Tangible Equity, TNAV16 per Basic number of ordinary Equity, $bn $bn share, $ shares, million As at 31 March 2020 189.8 150.0 7.44 20,172 Profit attributable to: 0.4 1.5 0.08 — Ordinary shareholders41 0.2 1.5 0.08 — Other equi
Slide 37: Balance sheet
Strategy 2Q20 results Appendix Balance sheet Net loans and advances to customers Customer accounts $bn $bn Net loans and advances to customers 13% 2% decreased by $29bn (3%) vs. 1Q20 as wholesale 6% clients repaid credit facilities drawn over 1Q20 (3)% 1,532 1,048 1,447 Customer accounts increas
Slide 38: Balance sheet – customer lending
Strategy 2Q20 results Appendix Balance sheet – customer lending Adjusted customer lending (on a constant currency basis), $bn 2Q20 adjusted customer lending growth by global business and region, $bn 1,022 1,018 1,037 1,040 1,019 Growth since 1Q20 Growth since 1Q20 UK mortgages Hong Kong 1,003 1,019
Slide 39: Balance sheet – customer accounts
Strategy 2Q20 results Appendix Balance sheet – customer accounts Adjusted customer accounts (on a constant currency basis), $bn 2Q20 adjusted customer account growth by global business and region, $bn 1,380 1,374 1,439 1,441 1,532 Growth since 1Q20 Growth since 1Q20 1,532 1,376 1,400 1,447 Europe $5
Slide 40: Oil and gas exposures
Strategy 2Q20 results Appendix Oil and gas exposures45 Drawn risk exposure46 by region, $bn Credit quality 2Q20 1Q20 As at 30 June 2020 As at 31 March 2020 Asia 8.2 8.7 Europe 5.8 6.3 9% 3% 3% 7% Middle East and North Africa 3.9 3.8 North America 5.2 5.5 30% $24.6bn 28% $25.7bn Latin America 1.4 1.4
Slide 41: Sectors particularly affected by Covid-19
Strategy 2Q20 results Appendix Sectors particularly affected by Covid-19 Aviation47 Restaurants and leisure Retail As at 30 June 2020 As at 30 June 2020 As at 30 June 2020 CRR 1-3 CRR 4-6 CRR 7-8 Defaulted 1% 2% 1% 9% 3% 4% 39% 39% 36% $10.4bn $2.7bn $26.7bn 59% 57% 50% $27.8bn Drawn risk exposure 4
Slide 42: Consumer credit
Strategy 2Q20 results Appendix Consumer credit Gross personal lending (excl. first lien mortgages), $m As at 30 June 2020 Of which: Of which: Unsecured Total UK Hong Kong Retail credit cards, primarily in Hong Kong and the Crédit Logement 17,585 — — UK Motor vehicle finance 1,523 c.$29bn unsecur
Slide 43: Asset quality
Strategy 2Q20 results Appendix Asset quality Gross loans and advances to Loans and advances to customers Stage 3 and impaired loans and LICs/ECL customers of ‘Strong’ or ‘Good’ credit advances to customers By credit quality classification quality 6.9 IAS 39 IFRS 9 IAS 39 IFRS 9 As at 30 June 2020 78
Slide 44: Mainland China drawn risk exposure
Strategy 2Q20 results Appendix Mainland China48 drawn risk exposure China drawn risk exposure (including Sovereigns, Banks and Customers) of $177bn comprising: Wholesale $167bn (of which China drawn risk exposure, $bn 54% is onshore); Retail: $10bn Gross loans and advances to customers of $44bn
Slide 45: Hong Kong drawn risk exposure
Strategy 2Q20 results Appendix Hong Kong drawn risk exposure Total gross loans and advances to customers and banks of $331bn as at 30 June 2020 by booking location (wholesale: $210bn; personal: Total gross loans and advances, $bn $121bn) During 1H20, ECL and Stage 2 balances increased due to the
Slide 46: UK RFB disclosures
Strategy 2Q20 results Appendix UK RFB disclosures Total RFB lending, £bn Personal As at 30 June 2020 WPB gross residential mortgages, £bn WPB gross unsecured lending, £bn 94.9 96.0 97.9 99.5 101.6 102.4 104.2 Wholesale 89.5 92.5 70.2 8.4 7.4 8.2 8.8 £188bn 104.2 Personal 7.3 5.7 mortgages Jun-18 Sep
Slide 47: Glossary
Strategy 2Q20 results Appendix Glossary AIEA Average interest earning assets A portfolio of assets including securities investment conduits, asset-backed securities, trading Legacy credit portfolios, credit correlation portfolios and derivative transactions entered into directly with AUM Assets unde
Slide 48: Footnotes
Strategy 2Q20 results Appendix Footnotes 1. Unless otherwise stated, risk-weighted assets and capital amounts at 30 June 2020 are calculated in accordance with the revised Capital Requirements Regulation and Directive, as implemented (‘CRR II’), and specifically using its transitional arrangements f
Slide 49: Footnotes
Strategy 2Q20 results Appendix Footnotes 27. In Europe, where observable long-tenor interest rates are at or close to zero, the -100bps stress sensitivity allows for the impact of negative rates; in other regions the calculation floors rates at zero 28. Equity market investments in the Insurance man
Slide 50: Disclaimer
Strategy 2Q20 results Appendix Disclaimer Important notice The information, statemen ts and opinions set out in this presen tation and accomp anying discussion (“this Pres entation”) are for informational and reference purposes only and do not constitute a public offer for the purposes of any applic
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