HSBC Holdings PLC · LSE:HSBA
HSBC — FY2015 Earnings Presentation
32 slides from HSBC's earnings presentation, February 2016
Slide 1: 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 2: Our highlights
Our highlights 2015 Full Year ‒ Reported PBT up 1%: net favourable movement in significant items ‒ Adjusted PBT fell 7%: 2015 ‒ Higher revenue of $0.5bn (1%) from growth in client-facing GB&M (7%), CMB (3%) Reported PBT Financial and Principal RBWM (2%) (2014: $18.7bn) Performance ‒ Higher costs (up
Slide 3: 2015 Key metrics
2015 Key metrics 2015 Full Year Key financial metrics FY14 FY15 Target Return on average ordinary shareholders’ equity 7.3% 7.2% >10% Jaws (adjusted) - (3.7)% Positive Dividends per ordinary share in respect of the year $0.50 $0.51 Progressive Earnings per share $0.69 $0.65 n/a Common equity tier 1
Slide 4: Financial overview
Financial overview Reconciliation of Reported to Adjusted PBT 2015 Full Year Discrete quarter Full year $m 4Q14 4Q15 vs. 4Q14 2014 2015 vs. 2014 Reported profit before tax 1,730 (858) (2,588) 18,680 18,867 187 Includes Currency translation 19 - (19) 853 - (853) Significant items: Fair value gains /
Slide 5: 4Q15 Profit before tax performance
4Q15 Profit before tax performance Lower PBT driven by LICs and higher bank levy charge 4Q15 vs. 4Q14 PBT analysis Adjusted PBT by account line Adjusted PBT by global business, 4Q14 4Q15 vs. 4Q14 $m 4Q15 vs. 4Q14 adverse favourable RBWM 1,664 1,524 (140) Revenue $12,950m (120) (1)% CMB 1,828 1,376 (
Slide 6: 4Q15 Loan impairment charges
4Q15 Loan impairment charges Drivers of LICs Adjusted LICs by type $m 2014 2015 vs. 2014 2015 vs. 2014 Loan impairment charges in our wholesale book remain low Personal 1,492 1,833 (341) Collective 1,456 1,740 (284) Wholesale 4Q15: Specific 36 93 (57) ‒ Increase driven by charges in the oil and gas
Slide 7: Oil and gas
Oil and gas Limited exposure to service companies and pure producers Oil and gas5, $bn ‒ Overall exposure of $29bn represents c. 2% of wholesale drawn risk exposures Overall drawn ‒ Large integrated producers remain resilient $29bn 15% down risk exposure on 2014 ‒ 3% of the portfolio is CRR 7-8, the
Slide 8: Loan impairment charges and other credit risk provisions
Loan impairment charges and other credit risk provisions LICs remain at low levels; diversified portfolio LICs progress Reported LICs and coverage %: Loan impairments remain low 2015 gross loans and advances: Diversified lending portfolio HSBC Finance Corporation ($bn) Wholesale: impairment allowanc
Slide 9: 2015 Profit before tax performance
2015 Profit before tax performance Progress on revenue and LICs remain at low levels; investments in growth, regulatory programmes and compliance and higher bank levy drive costs Full year PBT analysis Adjusted PBT by account line PBT by global business, $m 2014 2015 vs. 2014 2015 vs. 2014 adverse f
Slide 10: 2015 Revenue performance
2015 Revenue performance Higher revenue driven by Client-facing GB&M, CMB and Principal RBWM 2015 vs. 2014 adjusted revenue analysis adverse favourable Personal lending 2015 vs. 2014 adverse favourable Current account, savings and deposits Principal 2% RBWM Wealth Management Principal RBWM $22,687m
Slide 11: 2015 operating expenses
2015 operating expenses 2H15 costs in line with 1H15: tight cost control and initial effect of cost saving plans Adjusted operating expenses ($bn) 1H15: 2H15: Adjusted quarterly costs excl. bank levy vs. same quarter prior year, UK bank levy3 Brazil operating expenses $17.0bn $16.9bn % excluding ban
Slide 12: Operating expenses
Operating expenses Rebased Investor update target Rebased Investor Update 2015 target ($bn) Investor Update Quarterly run 37.9 (5.9) rate excluding the bank levy is (2.3) FX translation7 c. $7.6bn Brazil & Turkey 3.6 32.6 32.0 32.1 0.6 (0.5) (1.6) 30.5 2014 Adj. Brazil and FX 2014 proforma Turkey 20
Slide 13: Capital adequacy
Capital adequacy Strong capital base: common equity tier 1 ratio – 11.9% Quarterly CET1 ratio2 end-point basis progression, % CET1 ratio2 movement % 4Q15 movement in common equity tier 1 ratio 11.9 11.8 11.9 11.8 0.1 11.6 (0.1) 0.4 (0.3) 11.2 11.1 30 Sep 2015 Loss for the Dividends9 RWA initiatives
Slide 14: Return metrics
Return metrics Drivers of returns Group ROE, % 9.6 0.2 (0.6) 0.6 9.1 (0.2) 0.1 (1.1) 1.7 (0.8) 7.3 7.2 2014 Reported Significant Items Bank Levy 2014 Revenue Operating LICs Additional Tier 2015 Significant items Bank Levy 2015 & currency excl. significant Increase expenses Increase 1 and Lower excl.
Slide 15: Progress on our actions to capture value
Progress on our actions to capture value Strategic actions Targeted outcome by 2017 Progress during 2015 Actions to re-size and simplify ‒ Group RWA reduction: $290bn Reduce Group RWAs by c.$290bn ‒ 45% of our rebased target achieved; $124bn reduction through management initiatives ‒ GB&M <1/3 of Gr
Slide 16: Reduce RWAs by $290bn
Reduce RWAs by $290bn 45% of our rebased target achieved Key movements in Group RWAs ($bn) RWA initiatives YTD vs. Investor Update target Dec-14 1,220 (Actual) 290 15 275 FX 52 translation 45% of 2017 target achieved RWA 124 initiatives Investor FX translation Re-baselined Update target target Regul
Slide 17: Revenue growth from our international network
Revenue growth from our international network Growth above GDP from our international network Transaction Banking15 Revenue Synergies16,17 International Client Revenue18 Revenue growth 2015 vs 2014 Revenue growth 2015 vs 2014 Revenue growth 2015 vs 2014 4% 6% International 5% Transaction Revenue inc
Slide 18: Outlook
Outlook Invest selectively, achieve cost target, optimise capital 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 ar
Slide 19: Appendix
Appendix 19
Slide 20: Currency translation and significant items
Appendix Currency translation and significant items $m 4Q14 4Q15 2014 2015 Currency translation 19 - 853 - Significant items: Revenue Gain / (Loss) on sale of several tranches of real estate secured accounts in the US 92 (214) 168 (214) Gain on the partial sale of shareholding in Industrial Bank - -
Slide 21: Reported Consolidated Income statement
Appendix Reported Consolidated Income statement $m 4Q14 4Q15 2014 2015 Net interest income 8,547 8,059 34,705 32,531 Net fee income 3,718 3,471 15,957 14,705 Net trading income 1,190 1,408 6,760 8,723 Net income from financial instruments designated at fair value 557 (250) 2,473 1,532 Gains less los
Slide 22: Reported Consolidated Income statement by global business
Appendix Reported Consolidated Income statement by global business $m RBWM CMB GB&M GPB Other Total22 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 Net interest income 17,130 15,926 10,158 9,859 7,022 6,931 994 870 (501) (710) 34,705 32,531 Net fee income 6,836 6,218 4,570 4,190 3,560
Slide 23: Reported Consolidated Balance Sheet
Appendix Reported Consolidated Balance Sheet $m At 31 Dec 2014 At 30 Jun 2015 At 31 Dec 2015 Assets Cash and balances at central banks 129,957 144,324 98,934 Trading assets 304,193 283,138 224,837 Financial assets designated at fair value 29,037 25,168 23,852 Derivatives 345,008 296,942 288,476 Loan
Slide 24: Where the profit goes
Where the profit goes Pre-tax variable pay Growing ordinary dividends (in respect of the year), $bn $m Group GB&M 2014 2015 2014 2015 Ordinary dividend, shares in lieu Ordinary dividend, cash Total variable pay pool 3,660 3,462 1,120 1,086 10.0 9.6 Variable compensation incentive 9.2 pool as a % of
Slide 25: Metals and mining sector
Metals and mining sector Metals and mining, $bn Overall drawn ‒ $18bn represents c.1.5% of wholesale drawn risk exposure risk exposure $18bn ‒ Precious metals, copper, nickel and zinc prices are generally forecast to improve slightly in 2016 ‒ The outlook for steel, aluminium and bulk metals is more
Slide 26: Mainland China
Mainland China Portfolio continues to perform well Mainland China drawn risk exposure26 Wholesale lending Wholesale lending type (%) Corporate real estate credit quality (%) 1% Sovereign 22% Banks 1% Strong and good Corporates 22% Satisfactory Offshore 46% Non-banking $143bn 54% Onshore 51% financia
Slide 27: Group capital structure
Group capital structure Progressing to end state capital structure Evolution of Group capital structure in % of RWA27 End point requirements 2019 - assumptions ‒ Loss absorption Pillar 1 and capital buffer requirements per CRD IV; Pillar 2A CET1 Additional tier 1 Tier 2 TLAC debt > 1 year requiremen
Slide 28: Footnotes
Appendix Footnotes 1. We plan to maintain a corporate presence in Brazil to serve our international clients 2. From 1 January 2015 the CRD IV transitional CET1 and end-point CET1 capital ratios became aligned for HSBC Holdings plc due to recognition of unrealised gains on investment property and ava
Slide 29: Footnotes
Appendix Footnotes 7. Effect of translating the 2014 adjusted operating expenses to 1Q15 foreign exchange rates as per Investor Update 2015 8. Effect of translating the Investor Update target to 2015 foreign exchange rates 9. This includes dividends on ordinary shares, quarterly dividends on prefere
Slide 30: Footnotes
Appendix Footnotes 27. Based on our interpretation of the Financial Stability Board’s (‘FSB’) ‘Principles on Loss-absorbing and Recapitalisation Capacity of G-SIBs in Resolution’ (published in November 2015). Estimate is based on the higher of 16% of Group consolidated third party RWAs (excluding as
Slide 31: 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 32: 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