Hsbc Holdings Plc · LSE:HSBA
Hsbc — Q2 2023 Earnings Presentation
50 slides from Hsbc's earnings presentation, Aug 1, 2023
Slide 1: HSBC Holdings plc 2Q23 Results
HSBC Holdings plc 2Q23 Results Presentation to Investors and Analysts
Slide 2: Strategic progress
Strategic progress Noel Quinn Group Chief Executive
Slide 3: Our purpose, values and ambition support the execution of our strategy
Strategy 4Q22 results Summary Appendix Our purpose, values and ambition support the execution of our strategy Our purpose Opening up a world of opportunity Our ambition To be the preferred international financial partner for our clients Our values We value difference We succeed together We take resp
Slide 4: Summary of our performance in 1H23 (vs. 1H22)
Strategy 2Q23 results Appendix Summary of our performance in 1H23 (vs. 1H22) Reported PBT of $21.7bn, up $12.9bn. Up $13.3bn on a constant currency basis (158%) vs. 1H22 Revenue of $36.9bn, up $13.2bn (56%) on a constant currency basis. NII of $18.3bn, up $5.4bn (42%). Non-NII of $18.6bn, up $7.8bn
Slide 5: Good progress in delivering our strategy, supported by strong balance sheet
Strategy 2Q23 results Appendix We are making good progress in delivering our strategy, supported by a strong balance sheet and capital generation International Grow and protect our leading position in international connectivity, leveraging our deep liquidity pools in the UK and HK connectivity Cap
Slide 6: We continue to leverage our strong international connectivity
Strategy 2Q23 results Appendix We continue to leverage our strong international connectivity Strong growth in Wholesale cross-border Sustained growth in WPB Continued momentum in client business international business Transaction Banking revenue Wholesale cross-border client business6, $bn Internati
Slide 7: We continue to redeploy capital to reposition our portfolio
Strategy 2Q23 results Appendix We continue to redeploy capital to further reposition our portfolio Disposals in the pipeline Portfolio repositioning Pinnacle: c.1.4k Personal Wealth planners now digitally Planned sale of retail banking operations to My Money enabled; positive momentum in VNB gro
Slide 8: Revenue base diversified with growth from fee income and collaboration
Strategy 2Q23 results Appendix Our revenue base continues to be diversified with growth from fee income and collaboration revenues NNIA in Asia grew by 21%; NNIA in RoW Good momentum in CMB fee Strong cross-sell of GBM lower due to liquidity outflows in the US income products to WPB clients Net new
Slide 9: Retained strong cost discipline whilst investing in digitisation
Strategy 2Q23 results Appendix We have retained strong cost discipline whilst investing in digitisation Managed costs whilst increasing tech spend Mobile active WPB customers crossed half of our client base 1H22 to 1H23 cost movements, % Mobile active WPB customers15, % +6ppts 45% 51% Global +3.3% b
Slide 10: Enabler of the net zero transition by supporting customers
Strategy 2Q23 results Appendix Continued to build on our position as an enabler of the net zero transition by supporting our customers’ transition Sustainable finance and investments, $bn18 Transition to net zero +2% 44.1 45.0 Top tier underwriter of GSSS bonds globally in 1H23, taking a 4.4% mark
Slide 11: 2Q23 results update
2Q23 results update Georges Elhedery Group Chief Financial Officer
Slide 12: 2Q23 results summary
Strategy 2Q23 results Appendix 2Q23 results summary $m 2Q23 2Q22 Δ NII 9,305 6,758 38% NII of $9.3bn, up $2.5bn (38%) vs. 2Q22 and up $0.3bn vs. Non-NII 7,400 5,318 39% 1Q23 due to rising interest rates Revenue 16,705 12,076 38% ECL (913) (442) >(100)% Non-NII of $7.4bn, up $2.1bn (39%), primari
Slide 13: Revenue performance
Strategy 2Q23 results Appendix Revenue performance 2Q23 revenue 2Q23 vs. 2Q22 Revenue by global business, $bn Wealth $1,960m 312 19% +38% WPB $7,217m 41% Personal Banking $5,250m 1,783 51% 20.4 o/w notable items $3.7bn Other $7m 11 >100% 16.7 GTRF $516m (18) (3)% 4.4 o/w notable items $(0.2)bn Credi
Slide 14: Net interest income and margin
Strategy 2Q23 results Appendix Net interest income and margin NIM progression, bps Reported NII of $9.3bn, up $0.3bn (4%) vs. 1Q23 due to rising interest rates and higher interest 169 45 (42) 172 earning assets $11.6bn Banking NII19, up $1.3bn vs. 1Q23 $2.4bn interest expense representing cent
Slide 15: Non-NII
Strategy 2Q23 results Appendix Non-NII Group non-NII, $bn vs. 2Q22 Constant currency non-NII: 5.3 11.4 7.4 +39% Notable items and FX: (0.5) 3.7 (0.2) Offset from central costs of 0.3 1.4 2.4* funding trading income: Constant currency non-NII up $2.1bn (39%) vs. 2Q22, primarily 0.5 due to the offse
Slide 16: Credit performance
Strategy 2Q23 results Appendix Credit performance ECL charge trend, $m 1,464 1,101 ECL 913 442 438 ECL charge as a % of average gross loans and 2Q22 3Q22 4Q22 1Q23 2Q23 advances22 Mainland China 0.17 0.42 0.56 0.17 0.35 CRE charge* 151 363 598 62 259 $0.9bn charge, including $0.3bn relating to mai
Slide 17: Mainland China commercial real estate update
Strategy 2Q23 results Appendix Mainland China commercial real estate update Mainland China CRE exposures by booking location and credit quality At 30 June 2023 Total mainland China CRE exposure $14.3bn, down Memo: $2.5bn vs. 4Q22, reflecting ongoing de-risking measures Mainland and repayments in t
Slide 18: Costs
Strategy 2Q23 results Appendix Costs Operating expenses trend, $m +1% +3% Constant currency basis: 7,821 7,927 9,029 7,644 7,871 2Q23 constant currency costs of $7.9bn, up 1% 588 716 1,219 63 10 vs. 2Q22. Lower notable items and impairment write- backs were offset by higher technology spending, hi
Slide 19: Capital adequacy
Strategy 2Q23 results Appendix Capital adequacy CET1 ratio23, % 0.8 0.0 14.7 (0.4) (0.1) 14.7 (0.3) 0.0 CET1 ratio remained stable as profit generation was 1Q23 PAOS Dividend Change in FX 1Q23 Other 2Q23 offset by dividend accrual and the share buyback accrual RWAs translation buyback announced at
Slide 20: Summary
Strategy 2Q23 results Appendix Summary 1 PBT up 92% vs. 2Q22, NII up $0.3bn vs. 1Q23 $0.9bn ECL charge, of which $0.3bn relates China CRE. FY23 guidance of c.40bps of average loans22 2 unchanged 3 On track to meet FY23 cost growth target of 3%1 4 Revised guidance: now expect FY23 NII >$35bn and targ
Slide 21: Appendix
Appendix
Slide 22: Group guidance summary
Strategy 2Q23 results Appendix Group guidance summary Revised guidance Previous guidance Revised guidance FY23 NII ≥$34bn. NII guidance assumes the interest expense for FY23 NII >$35bn and the revenue offset into non-NII from the central NII centrally allocated funding costs associated with funding
Slide 23: Key financial metrics
Strategy 2Q23 results Appendix Key financial metrics Reported results, $m 2Q23 1Q23 2Q22 Alternative performance measures, $m 2Q23 1Q23 2Q22 NII 9,305 8,959 6,910 Constant currency NII 9,305 8,999 6,758 Other Income 7,400 11,212 5,330 Constant currency other income 7,400 11,355 5,318 Revenue 16,705
Slide 24: Notable items (reported basis)
Strategy 2Q23 results Appendix Notable items (reported basis) $m 2Q23 1Q23 4Q22 3Q22 2Q22 Revenue (241) 3,577 (320) (2,691) (471) o/w: Disposals, acquisitions and related costs (241) 3,562 (71) (2,378) (288) o/w: Fair value movements on financial instruments — 15 35 (282) (171) o/w: Restructuring an
Slide 25: Interest rate sensitivity
Strategy 2Q23 results Appendix Interest rate sensitivity 1 year NII sensitivity The reduction in NII sensitivity to a (100)bps parallel shift in interest rates, from At 30 June 2023, assumes a static balance sheet (no assumed migration from current account to time $(4.0)bn at FY22 to $(2.6)bn at 2
Slide 26: Net interest margin
Strategy 2Q23 results Appendix Net interest margin Quarterly NIM by key legal entity Key rates (quarter averages), bps Source: Bloomberg * At 31 July 2023 512 % of 2Q23 % of 2Q23 499 507 500 2Q22 3Q22 4Q22 1Q23 2Q23 Group Group NII 452 445 AIEA 368 392 385 400 The Hongkong and Shanghai Banking 1.32%
Slide 27: Cost target basis reconciliation
Strategy 2Q23 results Appendix Cost target basis reconciliation $m 2Q23 1Q23 4Q22 3Q22 2Q22 1H23 1H22 FY22 Reported 7,871 7,586 8,781 7,793 7,949 15,457 16,127 32,701 Currency impact — 58 248 134 (128) — (595) (195) Constant currency 7,871 7,644 9,029 7,927 7,821 15,457 15,532 32,506 Notable items (
Slide 28: Wealth and Personal Banking
Strategy 2Q23 results Appendix Wealth and Personal Banking 2Q23 financial highlights Balance sheet, $bn 2Q23 vs. 2Q22 Revenue $7.2bn 41% 848 850 845 Revenue up $2.1bn (41%). Personal Banking up $1.8bn (51%) (2Q22: $5.1bn) 1 primarily due to higher NII. Wealth up $0.3bn (19%) due to 35 35 (5)% 483
Slide 29: Commercial Banking
Strategy 2Q23 results Appendix Commercial Banking 2Q23 financial highlights Balance sheet, $bn 2Q23 vs. 2Q22 49% Revenue up $1.8bn (49%)31 with growth across all our main Revenue $5.5bn Customer lending (2Q22: $3.7bn) legal entities, notably in Asia and the UK RFB. GPS was up 354 350 346 $1.7bn du
Slide 30: Global Banking and Markets
Strategy 2Q23 results Appendix Global Banking and Markets 2Q23 financial highlights Management view of revenue 2Q23 vs. 2Q22 8% $m 2Q23 ∆2Q22 Revenue of $4.1bn, up $0.3bn (8%)31 Revenue $4.1bn (2Q22: $3.8bn) MSS 2,205 (8)% MSS revenue of $2.2bn, down $0.2bn (8%): Securities Services 635 34% >(10
Slide 31: Corporate Centre
Strategy 2Q23 results Appendix Corporate Centre 2Q23 financial highlights Revenue performance, $m Revenue $(114)m (77)% (2Q22: $(499)m) 2Q22 3Q22 4Q22 1Q23 2Q23 0% Central Treasury (189) (352) (12) 101 (20) ECL $0m (2Q22: $(0)m) Legacy Portfolios 25 (7) (175) (2) (9) Costs $64m >100% (2Q22: $(430)m)
Slide 32: Insurance manufacturing
Strategy 2Q23 results Appendix Insurance manufacturing Insurance manufacturing* Reported CSM liability walk, $bn ANP and NB CSM, $m Income statement, $m 1H23 1H22 ∆ +17% +25% Revenue 780 556 40% (0.5) 10.6 Of which: NII 155 187 (17)% 1.3 +44% CSM unwind 524 431 22% 1,890 9.1 0.7 Onerous contracts 13
Slide 33: Wealth and Personal Banking: Global invested assets
Strategy 2Q23 results Appendix Wealth and Personal Banking: Global invested assets Global reported invested assets Asia reported invested assets Reported invested assets managed by AM $bn $bn $bn +8% +13% +7% 1,097 470 503 595 628 1,014 1,015 443 585 46 72 384 23 310 340 137 141 151 419 411 440 311
Slide 34: 2Q23 vs. 1Q23 equity drivers
Strategy 2Q23 results Appendix 2Q23 vs. 1Q23 equity drivers Shareholders’ Tangible equity, TNAV per share, Basic number of ordinary equity, $bn $bn $ shares, millions At 31 March 2023 190.1 159.5 8.08 19,736 Profit attributable to: 6.8 7.0 0.35 — Ordinary shareholders38 6.6 7.0 0.35 — Other equity h
Slide 35: Total shareholders' equity to CET1 capital
Strategy 2Q23 results Appendix Total shareholders’ equity to CET1 capital 2Q23 total equity to CET1 capital, $m Total equity to CET1 capital walk4, $m Total equity 191,651 2Q23 1Q23 4Q22 Total equity (per balance sheet) 191,651 197,523 185,197 Non-controlling interests (7,481) (7,428) (7,364) Non-co
Slide 36: Balance sheet
Strategy 2Q23 results Appendix Balance sheet 2Q23 funding mix Strong liquidity base Debt instruments measured at amortised cost, $bn +8% $1.6tn 132% 276.7 Deposits (1Q23: $1.6tn) Group liquidity coverage ratio (1Q23: 132%) 255.7 Other 60% 6% Loan to deposit ratio (1Q23: 60%) Cumulative financial a
Slide 37: Balance sheet – customer lending
Strategy 2Q23 results Appendix Balance sheet – customer lending Balances by global business, $bn Balances by entity Growth since 1Q23 Total 1,038 1,026 1,020 $(0)bn Asia (HBAP) $465bn (0)% Customer lending of $960bn, down $9bn 57 60 (1%) vs. 1Q23, including the impact of $4bn HFS 0 o/w: Hong $(3)b
Slide 38: Balance sheet – customer accounts
Strategy 2Q23 results Appendix Balance sheet – customer accounts Balances by global business, $bn Balances by entity Growth since 1Q23 Total 1,673 1,677 1,662 $2bn Asia (HBAP) $775bn 0% HFS 63 66 o/w: Hong $(5)bn 2 $530bn Kong (1)% Customer accounts of $1,596bn, down 1,671 $18bn (1%) vs. 1Q23, inc
Slide 39: Hong Kong loans and advances
Strategy 2Q23 results Appendix Hong Kong loans and advances Hong Kong loans and advances Total gross loans and advances to customers and banks of $318bn (2Q22: $332bn) by booking location (wholesale: $181bn; personal: $137bn) 8% 10% 2Q23 average LTV on new retail mortgage lending was 67% (2Q22:
Slide 40: Mainland China risk exposure
Strategy 2Q23 results Appendix Mainland China risk exposure Mainland China risk exposure, $bn Mainland China risk exposure is defined as lending booked in mainland China plus wholesale lending booked offshore where the ultimate parent and beneficial owner is in mainland China Mainland China risk
Slide 41: Global CRE exposures
Strategy 2Q23 results Appendix Global CRE exposures Commercial real estate exposure, $m40 HBAP o/w HK HBUK HBEU HNAH HBMX HBME Other Total Gross loans and 59,560 44,068 14,805 5,045 4,643 976 1,604 928 87,561 Actively reducing exposure in the USA; exposure of advances $4.6bn plus $0.5bn classified
Slide 42: Hong Kong
Strategy 2Q23 results Appendix Hong Kong 1H23 financial performance Revenue up 64% vs. 1H22. Non-NII #1 in card spend; up $2.1bn, including $1.9bn offset #1 retail NPS amongst $m 1H23 1H22 Δ market share 48.4%, up into non-NII from the central costs of major banks42 NII 4,955 3,036 63% 1.4ppts vs.
Slide 43: UK ring-fenced bank
Strategy 2Q23 results Appendix UK ring-fenced bank 1H23 financial performance WPB CMB 67% Personal gross mortgage balances, £bn 90+ day mortgages delinquency Revenue £6.0bn Wholesale gross customer loans, £bn (1H22: £3.6bn) 125.5 126.4 trend47, % 24% 122.5 o/w: WPB £2.4bn 0.23 (1H22: £2.0bn) 0.25 0.
Slide 44: EPS excluding material notable items reconciliation
Strategy 2Q23 results Appendix EPS excluding material notable items reconciliation $m 2Q23 1Q23 2Q22 1H23 PAOS 6,639 10,327 5,211 16,966 Impact of acquisition of SVB UK 4 (1,511) — (1,507) Reversal of impairment loss relating to France — (1,629)* — (1,629)* Impact of agreed Canada sale 54 (108) — (5
Slide 45: Legal entity financials
Strategy 2Q23 results Appendix Legal entity financials Reported PBT by legal entity, $m Group 1H23 profit of $21.7bn 1H23 2Q23 1Q23 2Q22 HSBC UK Bank plc (HBUK) 4,791 1,660 3,131 1,100 $10.9bn PBT, o/w $6bn in Hong Kong, c.$5bn $3.5bn PBT, HSBC Bank plc (HBEU) 3,498 784 2,714 275 outside Hong Kong H
Slide 46: Glossary
Strategy 2Q23 results Appendix Glossary AIEA Average interest earning assets HFS Held-for-sale AM Asset management HKSAR Hong Kong Special Administrative Region ANP Annualised new business premiums HQLA High-quality liquid assets Banking net interest income is defined as Group net interest income af
Slide 47: Footnotes
Strategy 2Q23 results Appendix Footnotes 1. Our cost target reflects costs on constant currency, excluding notable items and the effect of re-translating prior YTD 2023 periods in hyperinflationary economies. The target also excludes costs associated with our acquisition of SVB UK 17. Amount of soft
Slide 48: Footnotes
Strategy 2Q23 results Appendix Footnotes 35. Customer lending shown is as reported in loans and advances to external customers and does not include lending to financial institutions 36. Between 4Q22 and 1Q23, $4.3bn deposits were transferred from GBM to CMB in Australia and Indonesia. At 2Q23, c.$5b
Slide 49: Disclaimer
Strategy 2Q23 results Appendix Disclaimer Important information The information, statements and opinions set out in this presentation and accompanying discussion (this “Presentation”) are for informational and reference purposes only and do not constitute a public offer for the purposes of any appli
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