Hsbc Holdings Plc · LSE:HSBA
Hsbc — FY2019 Earnings Presentation
44 slides from Hsbc's earnings presentation, Feb 18, 2020
Slide 1: HSBC Holdings plc 4Q19 Results Presentation to Investors and Analysts
HSBC Holdings plc 4Q19 Results Presentation to Investors and Analysts
Slide 2: 4Q19 highlights
4Q19 performance 4Q19 highlights 1 4Q19 reported loss before tax of $3.9bn impacted by a goodwill impairment1 of $7.3bn 4Q19 adjusted revenue up 9% to $13.6bn vs. 4Q18 and adjusted PBT up 29% to $4.3bn vs. 4Q18 2 Hong Kong 4Q19 adjusted PBT up 3% to $2.6bn Cost discipline: 4Q19 adjusted costs of $9.
Slide 3: Strong performing franchises: FY19 selected highlights
FY19 performance Strong performing franchises: FY19 selected highlights Hong Kong revenue up 7% to Revenue up 9% to $23.4bn, PBT up $19.4bn, PBT up 5% to $12.1bn 15% to $8.0bn Asia excl. Hong Kong revenue up 8% RoTE2 of 20.5% Asia to $11.0bn RBWM $16bn growth in mortgage book in Asia GB&M revenue up
Slide 4: Strong performing franchises: Hong Kong business performance
FY19 performance Strong performing franchises: Hong Kong business performance Financials Key selected financial data, $m Resilient performance despite softening macroeconomic environment: 4Q19 Ή4 Ή )< Ή)< Ή • FY19 revenue up 7% to $19.4bn Revenue 4,591 233 5% 19,438 1,196 7% • FY19 adjusted PBT up
Slide 5: Underperforming franchises: FY19 summary
FY19 performance Underperforming franchises: FY19 summary Revenue down 3% to $4.7bn Revenue down by 3% to $7.8bn PBT down 39% to $0.6bn (largely Adjusted PBT down to $0.8bn driven by non-recurrence of FY18 ECL releases) RoTE2 of 0.6% CER of 84% Total assets of $842bn and RWAs of $166bn RoTE2 of 1.5%
Slide 6: FY19 adjusted revenue performance
FY19 performance FY19 adjusted revenue performance FY19 revenue FY19 vs. FY18, $m $15,840m Retail Banking 974 $2.0bn RBWM $23,400m $6,746m Wealth Management 760 9% $814m Other 292 $5,978m GLCM 331 $1,833m GTRF 26 CMB $15,292m $0.8bn 6% $5,441m Credit and Lending 273 $2,040m Other 197 Global Markets,
Slide 7: 4Q19 adjusted revenue performance
4Q19 performance 4Q19 adjusted revenue performance 4Q19 revenue 4Q19 vs. 4Q18, $m $3,989m Retail Banking 85 $0.8bn RBWM $5,852m $1,655m Wealth Management 536 15% $208m Other 150 $1,425m GLCM (92) $432m GTRF (15) CMB $3,686m $0.0bn 0% $1,328m Credit and Lending 4 $501m Other 117 Global Markets, Secur
Slide 8: Net interest income and NIM
4Q19 performance Net interest income and NIM Reported quarterly 7,709 7,468 7,772 7,568 7,654 Adjusted NII of $7.7bn, stable vs. 3Q19 and up 1% vs. 4Q18; FY19 NII, $m adjusted NII of $30.6bn, up 3% or $1bn vs. FY18 4Q19 NIM 1.56% unchanged vs. 3Q19, driven by: +1% (0)% • 4bps favourable impact f
Slide 9: Adjusted costs
4Q19 performance Adjusted costs 4Q19 vs. 4Q18, $bn Excl. UK bank levy Adjusted costs +2.7% Adjusted costs excluding UK bank levy up 2.7% to $8.1bn 0.1 0.1 4Q19 investment spend of $1.2bn, up 4% vs. 4Q18 (0.2) 0.2 8.1 FY19 investment spend up 10% to 7.9 $4.5bn vs. $4.1bn in FY18 FY19 technolo
Slide 10: Credit performance
4Q19 performance Credit performance Adjusted ECL charge trend 4Q19 ECL as a % of gross loans and 0.17 0.27 advances to customers was 0.28% 0.34 0.33 4Q19 adjusted ECL of $733m, down 0.28 $144m (16%) vs. 3Q19, of which 0.19 0.23 0.21 $401m was in RBWM and $276m was 0.06 0.08 in CMB 4Q19 UK ECL
Slide 11: Capital adequacy
4Q19 performance Capital adequacy Capital progression CET1 ratio of 14.7% up 0.4ppts from 4Q18 1Q19 2Q19 3Q19 4Q19 14.3% in 3Q19, mainly due to RWA reductions Common equity tier 1 capital, $bn 121.0 125.8 126.9 123.8 124.0 RWAs decreased by $22bn vs. Risk-weighted assets, $bn 865.3 879.5 886.0 8
Slide 12: RWA and RoTE walks
FY19 performance RWA and RoTE walks Group RWA walk, FY18 vs. FY19, $bn Total RWA reductions of $22bn, of which 3.7 (7.7) GB&M: $23bn vs. FY18 865.3 9.0 Renewed focus on customer profitability in CMB and GB&M (32.2) 843.4 Expect ~$10bn of regulatory RWA inflation 5.0 and additional ~$10bn of bu
Slide 13: Summary
FY19 performance Summary 1 FY19 adjusted revenue up 6% to $55.4bn and adjusted PBT up 5% to $22.2bn FY19 adjusted jaws of 3.1%. FY19 adjusted cost growth of 2.8%, well below FY18 adjusted 2 cost growth of 5.6% Reported PBT of $13.3bn impacted by a 4Q19 goodwill impairment1 of $7.3bn, primarily 3 in
Slide 14: Appendix
Appendix
Slide 15: Improving Group returns by addressing underperforming franchises
Appendix Improving Group returns by addressing underperforming franchises RoTE (excluding significant items and UK bank levy) by major legal entity2, (2019 Tangible Equity as size) RoTE (%) 22 20 18 16 Asia Mexico 14 Canada UK RFB 15 MENA Group 2022 12 target 10-12% 10 8 6 4 US 2 0 -2 NRFB in Europe
Slide 16: Key financial metrics
Appendix Key financial metrics Key financial metrics FY19 FY18 Ή)< Return on average tangible equity14 8.4% 8.6% (0.2)ppt Return on average ordinary shareholders’ equity 3.6% 7.7% (4.1)ppt Jaws (adjusted)16 3.1% (1.2)% 4.3ppt Dividends per ordinary share in respect of the period $0.51 $0.51 - Earnin
Slide 17: Significant items
Appendix Significant items $m 4Q19 3Q19 4Q18 FY19 FY18 Reported PBT (3,897) 4,837 3,256 13,347 19,890 Revenue Currency translation - 110 (102) - (1,617) Customer redress programmes 45 118 (7) 163 (53) Disposals, acquisitions and investment in new businesses 55 4 (29) (768) 113 Fair value movements o
Slide 18: Certain revenue items and Argentina hyperinflation
Appendix Certain revenue items and Argentina hyperinflation Certain items included in adjusted revenue 4Q19 3Q19 2Q19 1Q19 4Q18 FY19 FY18 highlighted in management commentary20, $m Insurance manufacturing market impacts in RBWM 201 (210) (33) 182 (185) 129 (325) Credit and funding valuation adjustme
Slide 19: Volatile items analysis
Appendix Volatile items analysis RBWM: Insurance manufacturing market GB&M: Credit and funding valuation adjustments Corporate Centre: Valuation differences on long- impacts revenue, $m revenue, $m term debt and associated swaps revenue, $m 201 191 182 93 67 76 50 37 47 21 (15) (39) (33) (73) (52) (
Slide 20: Global business management view of adjusted revenue
Appendix Global business management view of adjusted revenue Group, $m 4 4 4 4 4 Ή4 )< GB&M, $m 4 4 4 4 4 Ή4 )< Total Group revenue 12,464 14,203 13,991 13,381 13,647 9% 55,409 Global Markets 1,092 1,720 1,413 1,366 1,247 14% 5,763 Adjusted revenue as previously FICC 877 1,346 1,180 1,158 1,073 22%
Slide 21: Retail Banking and Wealth Management
Appendix Retail Banking and Wealth Management FY19 highlights Revenue performance20, $m Balance sheet24, $bn +15% +6% +3% +7% 5,398 5,205 5,676 5,081 5,875 5,912 5,688 5,852 649 674 689 Adjusted PBT (FY18: $7.0bn) 182 368 390 395 Wealth 201 $8.0bn 15% Mgt. 1,797 1,579 1,626 1,304 1,711 1,734 1,702 1
Slide 22: Commercial Banking
Appendix Commercial Banking FY19 highlights Revenue performance20, $m Balance sheet24, $bn +0% Customer lending: (4)% +3% 3,501 3,592 3,688 3,672 3,871 3,870 3,823 3,686 (1)% Adjusted PBT Adjusted revenue 351 (FY18: $7.5bn) 346 337 Markets products, 493 576 457 $7.3bn Insurance and 463 461 384 501 2
Slide 23: Global Banking and Markets
Appendix Global Banking and Markets FY19 highlights Revenue performance20, $m Management view of adjusted +23% revenue +7% $m 4 ΉQ18 Adjusted revenue 3,915 3,943 4,116 3,039 4,016 3,612 3,495 3,740 Global Markets 1,247 14% Credit and 191 FICC 1,073 22% 21 37 47 Adjusted PBT Funding - FX 669 12% (FY1
Slide 24: Global Private Banking
Appendix Global Private Banking Reported client assets, $bn FY19 highlights Revenue performance20, $m +$52bn +7% (+17%) (5)% 361 309 Adjusted PBT 466 440 430 424 451 473 477 452 Adjusted revenue (FY18: $339m) Other $402m 43 48 46 19% 46 50 43 45 43 Deposit 120 119 113 4Q18 4Q19 122 120 111 125 126 R
Slide 25: Corporate Centre
Appendix Corporate Centre FY19 highlights Revenue performance20, $m Legacy credit adjusted RWAs, $bn 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 5.4 Central Treasury (41) 190 93 269 270 280 312 (23) Of which: Adjusted PBT (6)% (FY18: $0.5bn) Balance Sheet Management 566 675 530 628 611 587 625 450 2.5 2
Slide 26: Insurance: Strong contribution to Group earnings, mainly from Asia
Appendix Insurance: Strong contribution to Group earnings, mainly from Asia Strong contribution to Group earnings Manufacturing Value of New Business (VNB), $m Adjusted manufacturing revenue of $2.7bn up 35% vs. FY18, driven by Total VNB, $m FY19 vs. FY18 VNB growth, % market impacts and new busin
Slide 27: Wealth
Appendix Wealth Scope of Wealth Strong wealth business with $1.4tn of balances31 and is one of the world’s largest investment management and Private wealth businesses Bank Global Private Banking Serving High Net Worth (‘HNW’, $5-30m client assets) and Ultra RBWM Wealth Distribution High Net Worth (‘
Slide 28: Sustainable Finance & ESG Highlights
Appendix Sustainable Finance & ESG Highlights Target 2019 Progress Highlights Environment 2019 Awards Euromoney Awards World's Best Bank for Sustainable Sustainable finance Provide & facilitate $52.4bn for Excellence and investment $100bn cumulative progress Finance by the end of 202536 since 2017
Slide 29: Net interest margin and net interest income sensitivity
Appendix Net interest margin and net interest income sensitivity Net interest margin analysis Variance FY18 FY19 Group NIM FY19 vs. FY18 Average Average Average $bn Yield/Cost Yield/Cost Yield Impact balance balance balance Loans and advances to customers 973 3.42% 1,022 3.48% 49 0.06% 4bps Short-te
Slide 30: RoTE by global business excluding significant items and UK bank levy
Appendix RoTE by global business excluding significant items and UK bank levy FY19 $m Corporate RBWM CMB GB&M GPB Group Centre Reported profit before tax 6,428 4,272 1,047 9 1,591 13,347 Tax expense (1,111) (1,548) (1,013) (81) (886) (4,639) Reported profit after tax 5,317 2,724 34 (72) 705 8,706 le
Slide 31: Equity drivers
Appendix Equity drivers 4Q19 vs. 3Q19 Equity drivers Basic number Shareholders’ Tangible TNAV per of ordinary Equity, $bn Equity, $bn share, $ shares, million As at 30 September 2019 189.5 141.8 7.02 20,191 Profit attributable to: (5.3) 2.1 0.11 - Ordinary shareholders42 (5.5) 2.1 0.11 - Other equit
Slide 32: Equity drivers
Appendix Equity drivers FY19 vs. FY18 Equity drivers Basic number Shareholders’ Tangible TNAV per of ordinary Equity, $bn Equity, $bn share, $ shares, million As at 31 December 2018 186.3 140.1 7.01 19,981 Profit attributable to: 7.4 12.9 0.65 - Ordinary shareholders42 6.0 12.9 0.65 - Other equity h
Slide 33: Total shareholders’ equity to CET1 capital
Appendix Total shareholders’ equity to CET1 capital Total equity to CET1 capital, as at 31 December 2019, $m Total equity to CET1 capital walk, $m 4Q18 4Q19 Total equity (per balance sheet) 194,249 192,668 Total Equity 192,668 - Non-controlling interests (7,996) (8,713) Total shareholders’ equity 18
Slide 34: Balance sheet – customer lending
Appendix Balance sheet – customer lending 4Q19 Net loans and advances to customers, $bn 4Q19 adjusted lending growth by global business and region, $bn Adjusted customer lending decreased by $13bn (1%) vs. 3Q19 Customer lending in Asia decreased by $7bn (1%), of which $4bn in Growth since 3Q19 $bn
Slide 35: Balance sheet – customer accounts
Appendix Balance sheet – customer accounts 4Q19 Customer accounts, $bn Reported average customer accounts, $bn Adjusted customer accounts increased by $24bn (2%) vs. 3Q19 Customer accounts in Asia grew by $17bn, of which $10bn in CMB (mainly 1,026 in Hong Kong and mainland China), and $10bn in RBW
Slide 36: Asset quality
Appendix Asset quality Gross loans and advances to Loans and advances to Stage 3 and impaired loans and LICs/ECL, $bn customers - $1,045bn customers of ‘Strong’ or ‘Good’ advances to customers, $bn credit quality, $bn Total gross customer loans and 23.8 advances to customers by credit 783 IAS 39 IFR
Slide 37: UK customer loans and advances
Appendix UK customer loans and advances Total UK gross customer loans and advances RFB RBWM gross residential mortgages, £bn RFB RBWM unsecured lending*, £bn As at 31 December 2019 92.7 93.8 95.4 97.0 99.1 86.9 89.9 Of which £99.1bn relates to RBWM in the RFB Wholesale £110bn £104bn Mortgages 6.7 7.
Slide 38: Mainland China drawn risk exposure
Appendix Mainland China drawn risk exposure China drawn risk exposure includes wholesale lending where the ultimate parent and beneficial owner is based in mainland China44 Total China drawn risk exposure of $170bn Total China drawn risk exposure (including Sovereigns, Banks and Customers) of $170
Slide 39: Hong Kong drawn risk exposure
Appendix Hong Kong drawn risk exposure Hong Kong drawn risk exposure represents lending booked in Hong Kong Total gross loans and advances Total gross loans and advances to customers and banks of $327bn as at 31 December 2019 by booking location to customers and banks (wholesale: $207bn; personal:
Slide 40: RWAs by global business and geography
Appendix RWAs by global business and geography RWAs as at 31 December 2019, $bn Corporate RBWM CMB GB&M GPB Total Centre Europe 37.6 116.0 106.1 7.7 13.6 281.0 Asia 65.7 129.3 102.0 3.2 66.2 366.4 Middle East and North Africa 5.0 13.5 12.9 - 26.1 57.5 North America 16.2 47.7 42.8 3.1 12.2 122.0 Lati
Slide 41: Footnotes
Appendix Footnotes 1. The goodwill impairment of $7.3bn arose from an update to long-term growth assumptions reflecting the more challenging revenue outlook impacting a number of our businesses, and specifically to GB&M arising from the reshaping of the business 2. RoTE excludes significant items an
Slide 42: Footnotes
Appendix Footnotes 31. Wealth balances includes RBWM Premier and Jade deposits (inc. HASE Prestige), RBWM Wealth distribution and Insurance balances, GPB client assets and Asset Management assets distributed through third parties and managed for institutional clients. Figure excludes Personal Bankin
Slide 43: Glossary
Appendix Glossary AIEA Average interest earning assets A portfolio of assets including securities investment conduits, asset- Legacy credit backed securities, trading portfolios, credit correlation portfolios and AUM Assets under management derivative transactions entered into directly with monoline
Slide 44: Disclaimer
Appendix Disclaimer Important notice 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 applicable law or an offer to se