Hsbc Holdings Plc · LSE:HSBA
Hsbc — Q3 2020 Earnings Presentation
44 slides from Hsbc's earnings presentation, Oct 27, 2020
Slide 1: HSBC Holdings plc 3Q20 Results
HSBC Holdings plc 3Q20 Results Presentation to Investors and Analysts
Slide 2: Noel Quinn, Group Chief Executive
Noel Quinn Group Chief Executive
Slide 3: Highlights
Strategy 3Q20 results Appendix Highlights Reported PBT of $3.1bn down $1.8bn (36%) vs. 3Q19; adjusted PBT of $4.3bn down $1.1bn (21%); 1 resilient 9M20 adjusted PBT of $9.9bn 2 3Q20 PBT supported by significantly reduced ECL charge and continued good cost management 3 Continued support of customers,
Slide 4: We are driving our strategy forward in three key areas
Strategy 3Q20 results Appendix We are driving our strategy forward in three key areas Accelerating in Asia Asian economy is rebounding strongly, led by a pick-up in manufacturing and trade Asia HSBC’s client activity has shown resilience into the third quarter We are stepping up investment in
Slide 5: Asia economic activity has proven resilient; we continue to elevate our ambition
Strategy 3Q20 results Appendix Asia economic activity has proven resilient; we continue to elevate our ambition in the region Asia is rebounding Client activity is resilient Stepping up our investment in Asia Manufacturing PMI index, Asia2 Trade finance Corp. client FX Monthly HK retail card market
Slide 6: We also continue to increase investment in technology
Strategy 3Q20 results Appendix We also continue to increase investment in technology, to drive improved customer experience and operational efficiency Changing the bank with technology investment Recent technology enhancements Technology spend 7 , $bn Including investments in… 5.8 Automated lending
Slide 7: Our restructuring in the US and Europe continues at pace
Strategy 3Q20 results Appendix Our restructuring in the US and Europe continues at pace Group-level transformation milestones US and the NRFB in Europe and the UK transformation milestones US: $41bn of RWA saves achieved vs. >$100bn gross reduction Reported RWAs down 8% YoY to $90bn; commenced nov
Slide 8: Progress update: 2020 to 2022 transformation programme on track
Strategy 3Q20 results Appendix Progress update 1 2020 to 2022 transformation programme on track 2 Expect to beat our Group cost target of ≤$31bn in 2022 Expect to exceed our $100bn gross RWA reduction target; c.$50bn expected to be achieved by end 3 FY20 4 Update on plans in France and the US expect
Slide 9: Ewen Stevenson, Group Chief Financial Officer
Ewen Stevenson Group Chief Financial Officer
Slide 10: 3Q20 results summary
Strategy 3Q20 results Appendix 3Q20 results summary $m 3Q20 3Q19 Δ NII 6,497 7,691 (16)% Non interest income 5,568 5,656 (2)% 3Q20 reported profit after tax of $2.0bn, up $1.4bn vs. 2Q20 Revenue 12,065 13,347 (10)% ECL (785) (843) 7% Adjusted revenue of $12.1bn, down $1.3bn (10%) vs. 3Q19; adjus
Slide 11: 3Q20 adjusted revenue performance
Strategy 3Q20 results Appendix 3Q20 adjusted revenue performance 3Q20 revenue 3Q20 vs. 3Q19 Revenue by global business, $bn Retail Banking $2,999m (991) (10)% WPB $5,441m (13)% Wealth Management $2,160m o/w insurance market impacts: $333m 177 13.3 13.4 Other $282m 25 12.1 GLCM $936m (574) 3.5 4.5 3.
Slide 12: Net interest income
Strategy 3Q20 results Appendix Net interest income Reported NIM progression, bps 133 (2) 120 (11) (1) 1 Reported NII of $6.5bn, down $0.4bn (6%) vs. 2Q20 and down $1.1bn (15%) vs. 2Q20 Change in Reduction Significant items FX 3Q20 3Q19 due to HIBOR reduction in 3Q20 balance in rates NIM of 1.20%
Slide 13: Other revenue (non-NII)
Strategy 3Q20 results Appendix Other revenue (non-NII) Group, $m WPB, $m CMB, $m GBM, $m (2)% (13)% 7% (4)% (10)% (7)% 15% (24)% 6,426 2,007 1,932 1,047 1,008 3,382 5,656 5,568 1,800 941 209 376 760 541 255 154 2,574 3,563 2,248 2,668 2,586 2,520 1,756 838 1,504 1,424 1,391 753 787 1,247 2,988 2,863
Slide 14: Adjusted costs
Strategy 3Q20 results Appendix Adjusted costs Operating expenses trend, $m Adjusted costs of $7.4bn down $0.2bn (3%) vs. 3Q19 driven by 9,055 reduced discretionary spending and cost programme saves; note 3Q19 7,605 988 7,711 7,440 7,411 costs benefitted from $0.2bn of variable pay releases 1,287 1
Slide 15: Credit performance
Strategy 3Q20 results Appendix Credit performance ECL charge trend 3Q20 ECL charge of $0.8bn (down 0.27 0.96 ECL as a % of $3.2bn, or 80% vs. 2Q20) 1.49 average gross 1.15 loans and advances Stage 1 and 2 allowances on customer 0.32 0.30 (annualised) lending at end of 3Q20 are $6.6bn 0.26 ECL, $
Slide 16: Capital adequacy
Strategy 3Q20 results Appendix Capital adequacy CET1 ratio, % 15.6 CET1 ratio increased by 0.6ppts to 15.6%; 0.2 0.1 Excluding FX, RWAs decreased by $11.8bn, 15.0 0.2 vs. 2Q20 primarily due to reduction in 0.1 asset size ($10.8bn) Ratings migration increased RWAs by $7.3bn over 3Q20; $25.6bn Y
Slide 17: Transformation programme – RWA saves
Strategy 3Q20 results Appendix Transformation programme – RWA saves YTD RWA savings, $bn $41.5bn of saves YTD, primarily in GBM. 3Q20 reductions of $11.8bn 41.5 Expect c.$50bn of FY20 saves NRFB saves of $18.6bn primarily from Global Markets ($11.1bn). 8.7 UK NRFB reductions of $13.7bn include
Slide 18: Summary
Strategy 3Q20 results Appendix Summary 1 Good quarter, with continued resilience in Asia and a more optimistic credit outlook 2 Low interest rates remain a headwind; moving to a revenue model less reliant on interest rates 3 Lower operating costs whilst increasing investment and benefiting from digi
Slide 19: Appendix
Appendix XP usec
Slide 20: Business highlights
Strategy 3Q20 results Appendix Business highlights Group Wholesale (GBM and CMB) Announced new climate statement to be operationally net zero by 2030 and Capital markets: gross revenue of $460m in 3Q20; YTD gross revenue align financed emissions from our portfolio of customers to net zero by 205
Slide 21: Key financial metrics
Strategy 3Q20 results Appendix Key financial metrics Reported results, $m 3Q20 2Q20 3Q19 Balance sheet, $m 3Q20 2Q20 4Q19 NII 6,450 6,897 7,568 Total assets 2,955,935 2,922,798 2,715,152 Other Income 5,477 6,162 5,787 Net loans and advances to customers 1,041,340 1,018,681 1,036,743 Revenue 11,927 1
Slide 22: Reconciliation of reported and adjusted results
Strategy 3Q20 results Appendix Reconciliation of reported and adjusted results $m 3Q20 2Q20 3Q19 Reported PBT 3,074 1,089 4,837 Revenue Currency translation — 279 76 Customer redress programmes 48 (26) 118 Disposals, acquisitions and investment in new businesses — 1 4 Fair value movements on financi
Slide 23: Certain items and Argentina hyperinflation
Strategy 3Q20 results Appendix Certain items and Argentina hyperinflation Certain items included in adjusted revenue 3Q20 2Q20 1Q20 4Q19 3Q19 9M20 9M19 highlighted in management commentary19, $m Insurance manufacturing market impacts in WPB 126 360 (704) 215 (207) (218) (59) Credit and funding valua
Slide 24: Certain volatile items analysis
Strategy 3Q20 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 360 205 240 25
Slide 25: Global business management view of adjusted revenue
Strategy 3Q20 results Appendix Global business management view of adjusted revenue Group, $m 3Q19 4Q19 1Q20 2Q20 3Q20 ∆3Q19 GBM, $m 3Q19 4Q19 1Q20 2Q20 3Q20 ∆3Q19 Total Group revenue 13,347 13,592 13,323 13,433 12,065 (10)% Global Markets 1,373 1,244 2,139 2,177 1,588 16% Adjusted revenue reported a
Slide 26: 9M20 adjusted revenue performance
Strategy 3Q20 results Appendix 9M20 adjusted revenue performance 9M20 revenue 9M20 vs. 9M19 Revenue by global business, $bn Retail Banking $9,895m (1,744) (6)% WPB $16,692m (13)% Wealth Management $5,765m o/w insurance market impacts: $(159)m (726) 41.2 38.5 Other $1,032m 70 11.1 GLCM $3,283m (1,214
Slide 27: Wealth and Personal Banking
Strategy 3Q20 results Appendix Wealth and Personal Banking 3Q20 financial highlights Balance sheet25 $bn 3Q20 vs. 3Q19 Revenue $5.4bn (13)% 8% Revenue down $789m (13%) driven by lower Retail Banking NII (3Q19: $6.2bn) (down $899m) and lower Private Banking deposit NII (down $64m), 6% 790 794 parti
Slide 28: Commercial Banking
Strategy 3Q20 results Appendix Commercial Banking 3Q20 financial highlights Balance sheet25, $bn 3Q20 vs. 3Q19 Revenue $3.2bn (17)% Revenue down $635m (17%), reflecting the impact from lower (3Q19: $3.8bn) Customer lending interest rates in GLCM and other products, lower fees predominantly 12% fro
Slide 29: Global Banking and Markets
Strategy 3Q20 results Appendix Global Banking and Markets 3Q20 financial highlights View of adjusted revenue 3Q20 vs. 3Q19 Revenue $3.6bn 3% $m 3Q20 ∆3Q19 Revenue up $99m (3%). Global Markets up $215m (16%) driven by (3Q19: $3.5bn) Global Markets 1,588 16% ongoing market volatility and high volume
Slide 30: Corporate Centre
Strategy 3Q20 results Appendix Corporate Centre 3Q20 financial highlights Revenue performance19, $m Revenue $(155)m 22% 3Q19 4Q19 1Q20 2Q20 3Q20 (3Q19: $(198)m) Central Treasury 88 (47) 265 (64) (32) ECL $12m >100% (3Q19: $5m) Of which: (31)% Valuation differences on long-term debt and Costs $188m 7
Slide 31: GBM and CMB IRB RWA inflation and mitigating actions
Strategy 3Q20 results Appendix GBM and CMB IRB RWA inflation and mitigating actions Wholesale counterparty IRB RWAs and exposures All CRR Bands FY19 3Q20 ∆ RWA, $bn 341 351 GBM & CMB wholesale performing IRB book: EAD, $bn 695 691 • includes: corporates, sovereigns and financial institutions. RWA
Slide 32: ECL analysis
Strategy 3Q20 results Appendix ECL analysis ECL charge by global business, $m ECL charge by geography, $m 2,212 1,510 1,128 2Q20 3Q20 831 2Q20 3Q20 592 633 504 595 384 343 354 144 160 100 15 (12) (9) (14) WPB CMB GBM Corporate Centre Asia UK RFB NRFB NAM Other Analysis by stage 3Q20 vs. 2Q20 geograp
Slide 33: Customer relief and lending support programmes
Strategy 3Q20 results Appendix Customer relief and lending (including government) support programmes Other Extant at 30 September 2020 UK Hong Kong US major Total markets* Personal lending Personal lending The gross carrying values of personal customers under relief was $14.9bn, down Number of cus
Slide 34: Net interest margin supporting information
Strategy 3Q20 results Appendix Net interest margin supporting information Quarterly NIM by key legal entity % of 3Q20 % of 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 HSBC Group customer accounts by currency Group NII Group AIEA The Hongkong and FY19 Others Shanghai Banking 2.05% 2.00% 1.96% 1.69% 1.44% 51% 42% U
Slide 35: Hong Kong and UK WPB customer activity data
Strategy 3Q20 results Appendix Hong Kong and UK WPB customer activity data Hong Kong* Credit card spend** Mortgage drawdowns** Retail sales units29 150 250 UK mortgages: strong momentum 200 as we continue to support 100 homebuyers. Additional growth 150 expected from lockdown easing 100 50 support
Slide 36: RoTE by global business excluding significant items and UK bank levy
Strategy 3Q20 results Appendix RoTE by global business excluding significant items and UK bank levy 9M20 $m Corporate WPB CMB GBM Group Centre Reported profit before tax 2,696 1,284 2,912 500 7,392 Tax expense (492) (527) (1,093) (116) (2,228) Reported profit after tax 2,204 757 1,819 384 5,164 less
Slide 37: 3Q20 vs. 2Q20 equity drivers
Strategy 3Q20 results Appendix 3Q20 vs. 2Q20 equity drivers Shareholders’ Tangible Equity, TNAV per share, Basic number of ordinary Equity, $bn $bn $ shares, million As at 30 June 2020 187.0 147.9 7.34 20,162 Profit attributable to: 1.8 1.3 0.06 — Ordinary shareholders31 1.4 1.3 0.06 — Other equity
Slide 38: Balance sheet
Strategy 3Q20 results Appendix Balance sheet Customer lending, $bn Customer accounts, $bn 12% (0)% 0% (0)% 1,565 1,569 Customer lending was stable at $1,041bn vs. 1,042 1,042 1,041 1 1 1 1 1 1,405 2Q20, with higher lending in WPB (up $19bn) 1 346 343 offset by lower lending in CMB (down $8bn) and
Slide 39: Balance sheet – customer lending
Strategy 3Q20 results Appendix Balance sheet – customer lending Adjusted customer lending (on a constant currency basis), $bn 3Q20 adjusted customer lending growth by global business and region, $bn 1,018 1,037 1,040 1,019 1,041 Growth since 2Q20 Growth since 2Q20 UK mortgages Hong Kong 1,042 1,030
Slide 40: Balance sheet – customer accounts
Strategy 3Q20 results Appendix Balance sheet – customer accounts Adjusted customer accounts (on a constant currency basis), $bn 3Q20 adjusted customer accounts growth by global business and region, $bn 1,374 1,439 1,441 1,532 1,569 Growth since 2Q20 Growth since 2Q20 1,565 1,569 1,429 1,478 Europe $
Slide 41: Glossary
Strategy 3Q20 results Appendix Glossary AIEA Average interest earning assets LCR Liquidity coverage ratio BAU Business as usual LDR Loan-to-deposit ratio BoCom Bank of Communications Co., Limited. An associate of HSBC Holding plc A portfolio of assets including securities investment conduits, asset-
Slide 42: Footnotes
Strategy 3Q20 results Appendix Footnotes 1. Unless otherwise stated, risk-weighted assets and capital amounts at 30 September 2020 are calculated in accordance with the revised Capital Requirements Regulation and Directive, as implemented (‘CRR II’), and specifically using its transitional arrangeme
Slide 43: Disclaimer
Strategy 3Q20 results 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
Slide 44: Slide 44