HSBC HOLDINGS PLC HSBC Holdings plc 4Q20 Results Opening up a world of opportunity
Presentation to Investors and Analysts
Agenda | |
Results | |
FY20 highlights and achievements | Noel Quinn |
FY20 and 4Q20 results | Ewen Stevenson |
Opening up a world of opportunity | |
Our Strategy | Noel Quinn |
Driving growth in Asia | Peter Wong |
Pivot to Wealth | Nuno Matos |
Digital Business Services | John Hinshaw |
Financial snapshot | Ewen Stevenson |
Conclusion | Noel Quinn |
Noel Quinn
Group Chief Executive
FY20: A strong base to deliver future growth
Continued support for customers and communities through Covid-19 restrictions
1
>$52bn of wholesale lending support through government schemes and moratoria, with >$26bn of additional relief granted to personal customers1
Profits down, strong balance sheet
2
FY20 reported PBT of $8.8bn, down $4.6bn (34%) vs. FY19; adjusted PBT of $12.1bn down $10.0bn (45%), driven by higher ECL charges and lower revenue
Strong funding, liquidity and capital; CET1 ratio2 of 15.9%
3
DPS of $0.15, to be paid in cash, with no scrip alternative, and policy designed to provide sustainable dividends going forward; transitioning towards a payout ratio of 40-55%3 from 2022
A reconciliation of reported results to adjusted results can be found on slide 55, the remainder of the presentation unless otherwise stated, is presented on an adjusted basis
A refreshed purpose, values and ambition to 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 valuesOur strategy
We value difference
We succeed together
We take responsibility
We get it done
Delivering against our February 2020 Update
Progress against our financial targetsCostsFY22 target
(as announced at Feb20)
Adjusted costs ≤$31bn; $4.5bn of cost programme saves
FY20 progress4
$1bn cost savesRWAs
>$100bn gross RWA reduction
$52bn gross reductionCapital
CET1 ratio >14%; manage in 14-15% range
CET1 ratio of 15.9%RoTE
10% - 12%
3.1%
Ewen Stevenson
Group Chief Financial Officer
FY20 results summary
$m
FY20 27,599 22,767 50,366
FY19
Δ
NII
30,339 (9)%
Non interest income
24,605 (7)%
Revenue
54,944 (8)%
ECL Costs Associates Adjusted PBT
(8,817) (31,459)
(2,627)
>(100)%
(32,519) 3%
2,059 12,149 (3,372) 8,777
2,351 (12)%
22,149 (45)%
Significant items and FX translation Reported PBT
(8,802) 62%
13,347 (34)%
Reported profit after tax
6,099 3,898
8,708 (30)%
Profit attributable to ordinary shareholders Reported EPS, $
5,969 (35)%
Memo: impact of significant items on EPS, $ DPS, $
0.19 (0.13) 0.15
0.30 (0.43) 0.30
$(0.11) $0.30 $(0.15)
$bn
Customer loans Customer deposits Reported RWAs CET1 ratio, % TNAV per share, $
FY20 1,038 1,643 858
FY19
Δ
1,063 (2)%
1,470 12%
843 2%
15.9 7.75
14.7 7.13
1.2ppt $0.62
Reported PBT of $8.8bn down $4.6bn (34%) vs. FY19, primarily from lower revenue and higher ECL, offset by lower costs and lower significant items
FY20 adjusted costs decreased $1.1bn (3%) vs. FY19 including $1.4bn of cost saves5; continued investment was offset by reductions in discretionary spending
Significant items of $3.4bn, includes $0.3bn of losses on disposal, decreased by $5.4bn vs. FY19
Customer loans decreased $25bn (2%) vs. FY19, declines in CMB and GBM were offset by mortgage growth in WPB
Customer deposits increased $173bn (12%) vs. FY20 as customers held liquidity
DPS of $0.15 per share, with policy designed to provide sustainable dividends going forward3
4Q20 results summary
$m
4Q20 6,620 5,204
4Q19
Δ
NII
7,751 (15)%
Non interest income
6,031 (14)%
Revenue
11,824 (1,174) (9,106)
13,782 (14)%
ECL Costs Associates Adjusted PBT
(696) (69)%
(9,176) 1%
666
546 22%
2,210 (825) 1,385 935 562 0.03
4,456 (50)%
Significant items and FX translation Reported PBT
(8,353) 90%
(3,897) >100%
Reported profit after tax
(5,024) >100%
Profit attributable to ordinary shareholders Reported EPS, $
(5,509) >100%
(0.27) $0.30
DPS, $
0.15
-
n.m.
$bn
Customer loans Customer deposits Reported RWAs CET1 ratio, % TNAV per share, $
4Q20 1,038
3Q20
Δ
1,074 (3)%
1,643 858 15.9 7.75
1,615 2%
857 0%
15.6 7.55
0.3ppt $0.20
Adjusted revenue down $2.0bn (14%) vs. 4Q19, primarily due to lower global interest rates, partly offset by higher revenue in Global Markets
ECL up by $0.5bn (69%) vs. 4Q19, from higher stage 3 charges in CMB, and continued economic uncertainty in the UK
Costs down $0.1bn (1%) vs. 4Q19, cost programme saves were offset by increased performance-related pay and increased technology spending
Significant items of $0.8bn decreased by $7.5bn vs. 4Q19, due to the non-recurrence of a $7.3bn impairment of goodwill
4Q20 TNAV per share of $7.75 up $0.20 vs. 3Q20, due primarily to retained profits and FX movements
4Q20 adjusted revenue performance
WPBCMBGBMCorp. Centre
Group
4Q20 revenue
4Q20 vs. 4Q19
NIINon-NII
Revenue by global business, $bn
3Q20
4Q19
WPBGBM
4Q20
CMBCorporate Centre
Totals may not cast due to rounding
Net interest income
Reported NIM progression, bps
4Q20
3Q20
Asset yields
Reported NIM trend
Asset volumesLiability costsLiability volumes
Discrete quarterly reported NIMReported NII, $mof which: significant items
Average interest earning assets, $bn
4Q19 1,946
FY20 reported NII of $27.6bn was down $2.9bn (9%) vs. FY19 due to global reductions in interest rates, partly offset by increases in AIEAs
FY20 NIM of 1.32% was down 26bps vs. FY19 with decreases in market rates on AIEAs more than offsetting lower funding costs
4Q20 reported NII of $6.6bn was $0.2bn (3%) higher vs. 3Q20 as liability costs decreased more than asset yields
4Q20 reported NII was $1.0bn (14%) lower vs. 4Q19 primarily from reductions in global interest rates; 4Q20 adjusted NII was $1.1bn lower vs. 4Q19
1Q20 1,992
2Q20 2,078
3Q20 2,141
4Q20 2,159
Non-NII
Group, $m
WPB, $m
CMB, $m
GBM, $m
Net fees
2,989
3,017
2,966
4Q19
3Q20
4Q20
Net fees: broadly stable vs. 4Q19
Other income
4Q19
3Q20
4Q20
Other income: down $0.8bn (26%)
vs. 4Q19, mainly lower interest earned on securities in the trading book, and from lower XVAs
Net fees
1,372
1,406
1,327
4Q19
3Q20
4Q20
WMRBOther
Net fees: seasonality and lower market activity and unsecured lending vs. 3Q20
Other income
4Q19
3Q20
4Q20
Other income: lower insurance from reduced client activity vs. 4Q19
Net fees
804
797
808
4Q19
3Q20
4Q20
GLCMGTRFC&LOther
Net fees: higher corporate card spend and payment volumes vs. 3Q20
Other income
174
129
157
4Q19
3Q20
4Q20
Other income: lower fair value gain on shares
Net fees
828
828
840
4Q19
3Q20
4Q20
GBHSSGLCMGTRFOther
Net fees resilient despite fee compression and seasonality vs. 3Q20
Other income
4Q20
4Q19
3Q20
Other income (incl. trading income): down vs. 3Q20 due to lower client activity and seasonality
Credit performance
Adjusted ECL charge trend
4Q20 ECL charge by stage, $bn
ECL by geography, $m
(119) Other
Hong Asia
Kong ex. HK
Stage 1-2
Stage 3
Total
Wholesale 0.2 0.8 | 0.9 |
Personal 0.1 0.2 | 0.3 |
Total 0.3 0.9 | 1.2 |
Totals may not cast due to rounding
FY20 ECL charge of $8.8bn, up $6.2bn vs. FY19, due to deteriorations in forward economic outlook from the global impact of the Covid-19 pandemic
4Q20 ECL charge of $1.2bn up $0.4bn (46%) vs. 3Q20, primarily from higher Stage 3 charges; 3Q20 charge also benefitted from higher releases (c.$0.3bn)
Stage 1-2 ECL reserve build in FY20 was $3.9bn (mostly in 1H20); total Stage 1-2 ECL reserve was $7.9bn at 4Q20 (4Q19: $4.0bn reported Stage 1-2 ECL reserve)
Cautious on outlook due to continued uncertainty, but expect FY21 ECL charge to be materially lower than in FY20
UK RFBNRFBMexico
Expect normalisation of ECL charge to at or below the lower end of 30-40bps range by 2022
Adjusted costs
Operating expenses trend, $m
4Q19
1Q20
2Q20
3Q20
UK bank levyTechnology6Other Group costs
FY20 costs of $31.5bn down $1.1bn (3%) vs. FY19 primarily from cost programme saves and reductions in performance-related pay (PRP), partially offset by increases in technology spend and inflation
4Q20 costs (ex. levy) of $8.3bn up $0.8bn (10%) vs. 3Q20 primarily from increased performance-related pay, technology spend, marketing and other BAU cost increases
4Q20 costs (ex. levy) of $8.3bn up $0.1bn (1%) vs. 4Q19; cost programme saves were offset by increased technology spend, performance-related pay and other BAU cost increases
4Q20
FY20 cost saves* of $1.4bn, includes $1.0bn from the 2020-22 cost programme with associated CTA of $1.8bn
Expect broadly stable costs (excluding the bank levy) in 2021
FY20 vs. FY19 (ex. levy), $m
FY19
InflationCost saves*DiscretionaryTechnology7 spend
Other items
*Note: cost saves include 2020-22 cost programme saves as announced at Feb-20 and 2019 cost initiatives
4Q20 vs. 4Q19 (ex. levy), $m
FY20
Inflation
4Q19
Cost saves*Discretionary Technology7 spend
Other items
4Q20
Transformation programme - RWA saves
FY20 RWA savings, $bn
$51.5bn of saves over FY20*, primarily in GBM
51.5
NRFB saves of $24.4bn, with $17.0bn in Global Markets. UK NRFB reductions of $16.5bn includes $15.6bn related to Global Markets.
US reductions of $9.9bn, mainly in Global Markets and from client optimisation
Other RWAs of $7.8bn mainly in CMB in UK RFB and Asia
Expect c.$30bn of saves over FY21
o/w client optimisation: $5.4bn o/w Global Markets: $17.0bn
24.4
NRFB in Europe and the UK
US
GBM ex. US and NRFB
Saves by global business
Total GBM reductions of $37.4bn8; c.60% in Global Markets primarily from novation and exits of positions and c.40% in Global Banking primarily from client exits and remediation
Other
FY20 saves
CMB reductions of $12.9bn largely in Europe, the UK RFB, Asia and US from portfolio and client optimisation
*Note: In 2020, we achieved gross RWA reductions of $51.5bn, taking our cumulative RWA reductions to $61.1bn when including accelerated transformation saves of $9.6bn made over 4Q19
Capital adequacy
CET1 ratio, %
15.6
(0.0)
(0.4)
15.9
3Q20
Change in RWAs
CET1, $bn
RWAs, $bn
133.4
857.0 (22.7)
Capital progression
FX translation differencesSoftware capitalisation benefit9
4.3 2.1
OtherDividend 4Q20
(0.6)
(3.1) 136.1
20.9 2.3 857.5
4Q19
1Q20
2Q20
3Q20
4Q20
Common equity tier 1 capital, $bn 124.0 125.2 128.4 133.4 | 136.1 |
Risk-weighted assets, $bn 843.4 857.1 854.6 857.0 | 857.5 |
CET1 ratio, % 14.7 14.6 15.0 15.6 | 15.9 |
Leverage ratio exposure, $bn 2,726.5 2,782.7 2,801.4 2,857.4 | 2,897.1 |
Leverage ratio10, % 5.3 5.3 5.3 5.4 | 5.5 |
CET1 ratio of 15.9%, up 0.3ppts vs. 3Q20; including the impact of software capitalisation benefits and favourable FX movements
CET1 ratio increased 1.2ppts from 14.7% at FY19, mainly from cancellation of the 4Q19 dividend, increases in retained profits and other comprehensive income
Reported RWAs up $14.1bn (2%) vs. 4Q19 from credit migration of $29.7bn and FX movements of $13.1bn, offset by $52bn of gross RWA saves
Expect increase in RWAs from regulatory changes of c.5% over 2022-23, including the impact of Basel 3 reform, amendments to CRR and changes to internal models under the IRB approach, before any mitigating actions
Agenda | |
Results | |
FY20 highlights and achievements | Noel Quinn |
FY20 and 4Q20 results | Ewen Stevenson |
Opening up a world of opportunity | |
Our Strategy | Noel Quinn |
Driving growth in Asia | Peter Wong |
Pivot to Wealth | Nuno Matos |
Digital Business Services | John Hinshaw |
Financial snapshot | Ewen Stevenson |
Conclusion | Noel Quinn |
Noel Quinn
Group Chief Executive
We recognise some fundamental shifts and have aligned our strategy accordingly
Lower for longer interest rates globallyThe digital experience economy as a new normIncreased focus on sustainability
Evolution of major interbank rates11, %
Digital banking usage up ~30%12 % customers increasing digital usage, mid-2020 vs. pre-Covid-19
Green, Social and Sustainability (GSS) bond market14, $bn
3.0
USUKHK
1.5
0.0
Industry
US
UK
2018
2019
2020
2021
HSBC
125%
increase in HSBCnet mobile downloads13
ChinaIndia
253%
increase in HSBCnet mobile payments13
GSS share of Global DCM14 Companies with
2018
disclosed climate 228 action targets15
2019
5x increase
2020
1,106
Our response
Our response
Our response
A refreshed purpose, values and ambition to support the execution of our strategy
Our purposeOur valuesOur ambitionOur strategy
Focus on our strengths
Opening up a world of opportunity We value difference
To be the preferred international financial partner for our clients
Be the global leader in cross-border banking flows aligned to major trade and capital corridors
Lead the world in serving mid market corporates globally
Become a market leader in Wealth management, with a particular focus on Asia
Invest at scale domestically where HSBC's opportunity is greatest
We succeed together
Digitise at scale
Deliver an easy and excellent customer experience
Ensure the bank is resilient and secure
Automate to improve services and reduce cost
Partner more often to deliver customer benefits
We take responsibility
Energise for growth
Inspire a dynamic culture where the best want to work
Encourage an inclusive culture fostering diversity
Be a leaner, simpler organisation
Help colleagues develop future-ready skills
We get it done
Transition to net-zero
Become a net-zero bank by reducing, replacing and resolving our operational emissions
Support our customers in their transition to a low carbon future, especially in carbon challenged industries
Accelerate development of new climate solutions
Focus on our strengths: Drivers of growth
Wealth and Personal Banking (WPB)Commercial Banking (CMB)
Global Banking & Markets (GBM)
Lead in Wealth with a particular focus on Asia and the Middle East while investing in scale retail markets e.g. HK, UK
Accelerate international client acquisition and deepen share of wallet in cross-border services
Lead in Asia and the Middle East with a Global network to support trade and capital flows
Investing >$3.5bn16 in Asia…
Investing c.$2bn16 across global platforms17…
Investing c.$0.8bn16 in Asia…
To capture HNW and UHNW segments across Asia, especially in mainland China, Hong Kong, Singapore and Southeast Asia by serving their wealth needs globally across key booking centres
To deploy our manufacturing capabilities at scale in Insurance and Asset Management across customer solutions, e.g. health and wellness, sustainability etc. - particular focus on mainland China, Hong Kong, India and Singapore
To build propositions that facilitate origination from our distinctive CMB and GBM "feeder channels" e.g. three quarters of $53bn in asset management NNM originated from GBM and CMB clients in FY20
To develop front end ecosystems to drive customer acquisition at scale with international mid market clients globally
To improve SME proposition in key scale markets with digital sales and service journeys
To continue to invest in GLCM, GTRF and FX front end platforms to drive more fee income and accelerate asset distribution
To enhance digital platforms for Asian Wealth
(e.g. FX, structured products, investment opportunities for HNW/UHNW clients and family offices)
To develop market access and execution capabilities (digitise on-boarding, execution and servicing) in Global Markets and Securities Services
To expand our coverage in key sectors and countries across Asia - especially to facilitate cross Asian and global inbounds flows
Focus on our strengths: A focused international business in the US and NRFB
US: leading international corporate business and a new wealth management platform
CMB and Global Banking18 revenue, $bn
mid single 1.9 digit CAGR
2020
Key initiatives
Costs19, $bn
Medium-term20
2019
2020
2022
Continuing to invest in serving internationally-connected wholesale clients
Maintaining a leading position in USD clearing, trade and FX and continue to drive outbound revenues
Focusing on an international Wealth platform to connect our clients to the US Wealth market
Enhancing a limited number of branches to also serve as wealth management centres for our globally mobile and affluent clients
Exploring organic and inorganic options for the retail banking franchise
Non Ring-Fenced Bank in Europe and the UK: a leaner, simpler operating model
RWAs19, $bn
2019
2019
Key initiatives
Costs19, $bn
202021
2022
202021
2022
Focusing on a Wholesale footprint that serves international customers both inbound and outbound to our network, especially Asia and the Middle East
Continuing to invest in transaction banking franchise with strong linkage to Asia
Simplified operating model with two hubs (London & Paris) with reduced complexity in cost and RWA consumption
Continuing with the strategic review of our retail banking operations in France and are in negotiations in relation to a potential sale although no decision has yet been taken. If any sale is implemented, given the underlying performance of the French retail business, a loss on sale is expected
Digitise at scale: by unlocking investment capacity
Accelerating technology investment
Delivering excellent customer experience throughout our network
Building platforms for higher front end productivity
Automating our middle and back office
Building solutions to free up office footprint
Driving down our cost base
≤$30bn based on FY20 average FX rates
Adjusted costs $bn
2019
2022
Medium to long-term20
*Note: Impact of the weakening USD at end-2020. Target of ≤$30bn is based on average FX in FY20 (consistent with the results presented); using the average December 2020 FX rates, the target would be retranslated to ≤$31bn. Using average December 2020 FX rates, 2020 adjusted revenue would increase by c.$1.5bn
Investment22BAU costsFX impact*
Energise for growth: to be 'fit for the future'
Inspire a dynamic culture
Champion inclusion
Develop future skills
Reenergise our culture to succeed with purpose
Bring our values to life, everywhere
Adopt future ways of working
Increase diverse representation, particularly at senior levels
Close gaps in employee engagement in under-represented groups
Improve our diversity data and benchmark our actions
Source and build future skills and capabilities
Deepen the prevalence of digital, professional and enabling skills across HSBC
Secured inputs from ~120K colleagues and engaged with over 2.5K customers to shape our refreshed Purpose and Values
Launching new leadership expectations to:
"Give life to our purpose"
"Unleash our potential"
"See it through"
Group Executive Committee: c.75% members in post for just over a year or less
Achieved >30% female leaders in 2020
Increase to >35% female leaders by 2025
Published new Race Commitments, including to more than double our black senior leadership population by 2025
Recognised within Top Global Employers index for LGBT staff (Stonewall) in 2020
Founding Partner, Global Business Collaboration for Better Workplace Mental Health
Expanding HSBC University, our in-house technical and performance academy for Future Skills, Digital, and Sustainability
Launching new and leading enabling technologies (Learning Experience Platform and Talent Marketplace)
Transition to net zero: we have set out an ambitious plan
Our ambitions
Our actionsBecome a net zero bankSupport for customersUnlock new climate solutions
Align our financed emissions23 to net zero by 2050 or sooner
Net zero in our operations and supply chain by 2030 or sooner
Support our clients in the transition with $750bn to $1tn of financing and investment over the next 10 years
Unlock investments into the next horizon of climate solutions that are currently not accessible for investors
Set out clear and measurable pathways to net zero, using the Paris Agreement Capital Transition Assessment tool (PACTA)
Provide transparency through our TCFD disclosures
Engage with the financial services industry to develop standards and comparability
A climate resolution to be put to shareholders at AGM in May-21 to help our customers to transition to Paris Agreement goals
Maintain market leadership in sustainable finance; #1 underwriter of GSSS bonds in 2020 and 201924
Increase portfolio of transition finance and our advisory solutions building new capabilities in structuring for climate, new technology and risk management
Apply a climate lens to financing decisions
Created HSBC Pollination Climate Asset Management
Enable $100m CleanTech investment; launch a $100m philanthropic programme for key initiatives25
Lead FAST-Infra26 initiative to establish sustainable infrastructure principles and investment vehicles
Accelerating the shift to our highest return and growth opportunities, to deliver above cost of capital returns
Capital allocation
Asia as % of
Group TE27
WPB as % of Group TE28
Fees + Insurance
% of total revenues
Revenue growth rateGroup targets, dividend and capital policy
From…
Costs
c.50
Adjusted costs of ≤$31bn in 2022 on Dec 2020 average FX rates ≤$30bn using FY20 average FX rates
c.42
c.35
c.35
RWA
Gross RWA reduction of >$100bn by end-202219
c.29
c.25
To…
Capital
CET1 ratio ≥14% manage in a 14-14.5% range over medium term; manage range down further long-term
From… (2020)
(medium to long-term)20
To…
Dividends
Sustainable dividends
Payout ratio of 40-55%3 from 2022 onwards
RoTE
≥10% over the medium-term
Peter Wong
Chief Executive Officer, Asia-Pacific
Economic growth and wealth creation make Asia the largest banking opportunity in the world
Asia forecasted to represent c.50% of global economy by 202530
GDP based on PPP share of world total (%)
AsiaRoW
2010
2019
2025e
Asia contributed 71% of global growth in 201930
Trade flows in Asia growing faster than world average32
Trade growth, % CAGR
RoWAsia 8.6%
2010-15
2015-20
2020-25e
Wealth assets to double by 202531
2019 Personal Financial Assets, $tn
20192025E
CAGR, %
~12% 24.3
Mainland China
Hong Kong
India
Southeast Asia
More investments are flowing into Asia33
Total client assets and AUM, $tn
Total client assetsAUM
92
2015
2020e
2025e
Over the past 10 years, we have a strong track record of growth in Asia
Recent growth drivers
Expanding in South Asia38
Growing Asian Wealth
Sustained market leadership34: #1 in deposits (29%), #1 in Cards (46%), #1 in Mortgages (34%)
Leadership in Global Transaction Banking35
#1 for Investment Banking fees for the past 3 years36
4X growth in active WPB customers since 2016
37% growth in CMB customers37 since 2016
Total ASEAN markets revenue grew to c.$3.5bn in 2019, with all markets now >$175m revenue
India delivering 20% growth in revenues in wholesale banking in 2020
#1 in Hong Kong for Wealth, #2 for Insurance39
Top 3 Private Bank in Asia40
Incremental growth of c.800 new staff hires from 2017-2019
Asia reported revenue, $bn
Greater China, Southeast Asia, and India will be key drivers of our future growth
Hong Kong
Defend and grow from our
#1 position
Solidify #1 in Wealth position
Grow from our current #2 Insurance position (current share of c.19%)
$16.4bn adjusted revenue
Further develop our retail digital banking, starting from a strong position with 1 out of 2 Hong Kong adults already digital banking customers41
Enhance Digital Banking for SMEs and expand customer base in Greater Bay Area
Grow Global Transaction Banking wallet share
Grow Capital Markets and Investment Banking
India
Grow Wealth and International Wholesale
$3.0bn adjusted revenue42
Mainland China
Develop mainland China into a more meaningful market
Drive SME and retail customer acquisition by serving cross-border needs across Greater Bay Area (population: 72.7m, GDP $1.7tn43)
Scale digital hybrid mobile wealth planning for affluent customers by hiring 3K wealth managers
Deepen CMB and GBM coverage in key sectors with focus on key China trade corridors
Leadership in Capital Financing and Securities Investment services
Singapore
Build out as a global Wealth hub and Wholesale gateway to ASEAN
$3.1bn adjusted revenue42
$1.8bn associate income
$1.3bn adjusted revenue
| Grow market share in Transaction Banking including trade and FX, driven by Digital (e.g. | Further develop as international wealth hub for HSBC to address growing offshore asset |
UTB, Omni-collect) and new supply chain solutions | pool (estimated $1.48tn by 202344) | |
| In Wealth, expand Insurance and Asset Management and build position as #1 foreign bank | Scale client coverage teams in key growth sectors for the >4,200 multinational regional |
for Non-Resident Indian ("NRI") and top 10 Insurance player; digitise the client journey | headquarters45 | |
including cross-border | ||
Enhance regional product and coverage expertise to ASEAN markets and South Asia | ||
| For Overseas Indian customers, grow NRI hubs, enabled by digital and remittance | |
proposition, addressing significant NRI footprint across HSBC |
Note: numbers as at FY20
Future growth in Asia will be driven by c.$6bn of additional growth investment in Wealth and International Wholesale over the next 5 years
Leading bank for Asian Wealth ManagementLeverage the network
Leading International Bank in Asia for Wholesale
Grow international Wealth franchise, build on strength in HK, increasing the number of advisers, and exporting digital product innovations to key markets
Grow in Asia beyond HK, including mainland China where we are launching new wealth platforms, and Singapore to capture Asian and Western offshore wealth
Capture greater share of global offshore business from key diasporas (e.g. global Chinese and Indian communities)
Grow fee income through cross-sell of Insurance, Asset Management, FX and structured products to our 13.5m clients
Expect to grow WPB revenue and lending balances by high-single digit CAGR
WPB revenue $bn
High single-digit CAGR
2020
Long term22
Connectivity to the HSBC global network
c.55% of CMB and Global Banking client revenue booked in Asia is driven by cross-border46
Of which: Intra Asia: c.20% Europe and N. America: c.30%
Collaboration across lines ofbusiness to fully serve clientspectrum, e.g.:
Enhance wholesale coverage in CMB and GBM to deepen relationships and grow client base, serving more multi-national corporates and international SMEs
Invest significantly to enhance Digital Transaction Banking capabilities in Trade, Cash Management, Custody, and FX
Strengthen market access and execution capabilities, including Capital Financing, Structured Finance, and Equity offerings
Expect to grow wholesale (CMB + GBM) revenue and lending balances by mid-single digit CAGR
Wholesale referrals into Private Bank
Serving Wealth clients with FX and structured products
Extending capital financing solutions into middle market client base
Wholesale revenue $bn
2020
Ambition: Drive double digit PBT growth in Asia47
Mid single-digit CAGR
Long term22
Nuno Matos
Chief Executive Officer, Wealth and Personal Banking
Strongly positioned to capture the wealth opportunity
Wealth is the most attractive segment for growth and profitability
Significant potential to accelerate growth of our c.$8bn Wealth Management revenues* based on HSBC's strengths
Wealth is a distinctive source of structural growth in financial services
A growing affluent and HNW population globally, particularly in Asia
Lower for longer rate environment coupled with higher liquidity resulting in greater client demand to diversify into wealth products
Capital light, higher return with a higher proportion of recurring revenue
Wealth AUM48
2019
*Note: of which c.50% is net fee income
APAC49 8.5%
(ex-Japan)
CAGR
N. America 4.4%
MENA 3.9%
W. Europe 2.4%
2025E
Rest of World 3.7%
Capture growth across our full 'client continuum' from >4m mass affluent to Ultra High Net Worth clients. $1.6tn50 in wealth balances growing by >$160bn in 2020; 2nd largest wealth manager in Asia51
Capitalise on our international network - booking centres across major global hubs to capture both on-shore and offshore wealth (mainland China, Channel Islands, Hong Kong, Singapore, Switzerland, UK, US)
Take advantage of our significant wholesale franchise to acquire and deepen GPB relationships and significantly increase current 18%52 penetration
Leverage full range of in-house manufacturing capabilities - Insurance, Asset Management and Global Markets
Build on our integrated hybrid digital and RM wealth capabilities for all segments
Our wealth ambition
Enabled by significant >$3.5bn growth investment, including in technology and hiring >5,00053 client facing wealth planners over the next 3-5 years
PremierJade
$780bn wealth balances54
$776m VNB
Create a more seamless client continuum extending bespoke wealth products to Jade clients
Improve customer engagement with mobile-first hybrid digital-RM journeys
Grow Jade franchise in high growth markets, particularly mainland China and Singapore
Scale digitally enabled health and wellness platforms (Well+ launched in HK)
Expand professional wealth planner platform in mainland China
Remote advice and digital fulfillment models
$394bn client assets
Scale the business with strategic core platforms and enhance client experience
Expand UHNW client relationships with dedicated coverage, bespoke products and seamless cross-border accounts
Build out presence in mainland China, deepen leading proposition in HK and grow Singapore as a key hub
Ambition
Grow Asian wealth AUM faster than the market56
Grow wealth revenues at >10% CAGR56
Note: numbers as at FY20; VNB: Value of New Business
$602bn AUM55
Pivoting towards high conviction products (Alternatives, ESG, thematic Fixed income and Active Equities)
Expand footprint in emerging Asia (India, Malaysia) and deliver solutions to wealth channels in core markets (mainland China, HK, Singapore)
Building on our strength in Hong Kong to grow onshore and offshore Asian Wealth in mainland China and internationally
Hong Kong
Objective
Strengthen our leadership position in Hong Kong
Our Credentials
Strong 10% AUM CAGR over last five years
#1 wealth, #2 Insurance market share39
Launched Well+, Benefits+ and FlexInvest digital propositions
Mainland China
Become a leading international wealth manager57 with new wealth platforms
Launched insurance-led financial planning platform (Pinnacle); hired c.200 of our c.3K goal over the medium term
Building out full service GPB platform58 leveraging offshore HK proposition strength
Moving toward fully owned Asset Management franchise
International
Grow Asian wealth internationally leveraging our network and platforms
Growing Singapore, Switzerland, UK, Channel Islands and the US as our key international wealth hubs; become #1 foreign bank in India for NRIs
Our international market share is 7.2% (5.6m customers) and of this, c.2m are mass affluent59
Market share of 8-9% of the Overseas Chinese diaspora currently60
Our platform launches
HSBC Global Money
Mobile-based international account to spend, send, and receive money in multiple currencies
John Hinshaw
Group Chief Operating Officer
Investing to digitise, automate and innovate
Accelerating investments in technologyInvesting and digitising at scale
Technology spend, $bn
InvestmentsBAU
2018
2019
2020
2022
Delivering excellent customer experience throughout our network Drive straight through processing with a target for 99% of payments to be processed with 'no-touch'46 >100 key partnerships across the globe established to support innovation - e.g. Google,
Amazon, Apple, Microsoft, Alibaba as well as many smaller FinTechs
Building platforms for higher front end productivity Data analytics and visualisation tools to provide our front-line staff key insight
Launch Digital Credit Portal which, through automation, the time-to-decision for judgmental lending will reduce from 25 to 5 days (going live in Hong Kong in 2021)
Automating our middle and back office Integrating machine learning to improve the performance of analytics >725 automation solutions deployed processing more than 21.5m transactions in 2020
Building solutions to free up office footprint Moving to an agile way-of-working and driving efficiencies to reduce headcount
Driving customer experience through our global platforms and partnerships
Mobile X, our flagship banking app
Global Money Account without borders
Kinetic, mobile-first, cloud-first business banking
Standardised our core digital platforms to achieve global economies of scale
Accelerating rollout throughout 2021
Successful launch of Mobile X marketing campaign in HK with record credit card spending in Jan-21 (up 20% month on month and 6% year on year)
# of markets where Mobile X has been deployed
% of global customer base in deployed markets in 2021
82%
28
Mobile-first proposition for customers with international banking needs
Single global account to Manage, Send and Spend in multiple currencies with real time FX rates
Built on common global platform, improving our feature set and market coverage in 2021
HSBC Kinetic, the new UK mobile banking service built on the cloud, designed for small businesses
The app is simple, fast and intuitive and built on feedback from over 3,000 business owners
Intend to leverage Kinetic capabilities in Asia
c.4k
users61
Apply for an account in minutes
4.7
iOS App Store
Rating
Stay on top of everyday expenses
93%
satisfaction rating62
Plan ahead with cashflow insights
Driving operational efficiency through automation and innovation
Example outcomes47
Drive STP with a target for 99% of payments to be processed with 'no-touch'
Finance function FTE reduction of c.1/3
Future of Work - enabling 40% reduction in office footprint long-term
Reduction in Technology headcount63
49k
2020
Long-term20
Reduction in Operations headcount64
74k
2020
Long-term20
Ewen Stevenson
Group Chief Financial Officer
Rebuilding equity returns above the cost of capital
Drivers to achieve RoTE target
Indicative reported RoTE walk by driver
4 reduction target and plan to keep costs stable from 2022, while increasing the proportion of investment and technology spend
Expect normalisation of ECL charge from $8.8bn
1 (81bps) in FY20 to at or below the lower end of 30-
40bps normalised range by 2022
NII growth driven by mid-single digit volume growth, and a
2 better mix of higher returning lending relationships; with no base rate changes assumed before 2024
3 and Transaction Banking; Non-NII expected to grow mid
Incremental Non-NII growth driven by Wealth Management single-digit CAGR in the medium-term
Increased commitment on costs, with a $1bn increased costActive capital management to allocate more capital
5 towards Asia and WPB, reduce levels of stress, and reduce "trapped capital" in subsidiaries (e.g. US)
3.1%
Revenue growth
Cost efficiency
Capital actions
ECL
2020
ECL normalisation & lower bank levy
*Year 1 impact of 100bps increase globally. In year 1 the impact is +$5.3bn, in year 2 +$6.5bn, in year 3 +$7.1bn, in year 4 +$7.4bn. For further detail please refer to the NII sensitivity on p69 Bars in the chart are illustrative
Bank levyManagement actions
≥10%
Medium-term20
Interest rate rise*
Group targets, dividend and capital policy
Costs
Adjusted costs of ≤$31bn in 2022 on Dec 2020 average FX rates ≤$30bn using FY20 average FX rates, a $1bn increase in our cost reduction target Plan to keep costs broadly stable from 2022, while increasing the proportion of technology spend
RWAs
Gross RWA reduction of >$100bn by end-202221 Whilst allocating more capital and tangible equity to WPB and Asia, away from the US and NRFB
Capital
CET1 ratio ≥14% Manage in a 14-14.5% range over medium-term; manage range down further long-term20
Dividends
Sustainable cash dividends
Transition towards a payout ratio of 40-55% from 2022 onwards3
Dividends could be supplemented by buybacks or special dividends, over time and not in the near-term65
We will no longer offer a scrip dividend option, and will pay dividends entirely in cash
We will not be paying quarterly dividends during 2021 but will consider whether to announce an interim dividend at 1H21 results66
RoTE
≥10% over the medium-term
Noel Quinn
Group Chief Executive
Conclusion
In summary
• In 2020, we set our strategy in motion and supported our customers and communities through the Covid-19 pandemic
• We will significantly increase the Group's capital and resource allocation to faster growing markets in Asia
• We will capitalise on the opportunity offered by our network and our franchise to drive growth from fee generating products in Wealth and platform businesses in wholesale banking
• We will leverage technology to help transform our cost position, offering significantly higher operating leverage and freeing up resources for investments
• As a result, we expect to deliver returns above the cost of capital while driving revenue growth from Asia and supporting sustainable dividends
Appendix
Assumptions and basis of preparation
Medium term is defined as 3-4 years; long term is defined as 5-6 years
'Wholesale' refers to CMB plus GBM
Assumed no changes from 2020 in IFRS accounting rules, and excludes the potential impact of IFRS17
Losses on asset disposals expected to be reported as a revenue significant item
Costs to achieve expected to be reported as a cost significant item
Bank levy forecast based upon levy rates effective 31 December 2020. From 2021, the bank levy will be chargeable only on the UK balance sheet equity and liabilities of banks and building societies. The bank levy is forecast to reduce from $0.8bn to c.$0.3bn
Group effective reported tax rate of c.25% is assumed in 2021. Assumed Group adjusted effective tax rate of 19-20% in the medium-term. Note the tax rates are highly sensitive to the overall profitability of the UK group entities
Assumed that where targeted reduction on RWAs require regulatory approvals (e.g. model changes), these will be received
Absolute targets presented in this document will be restated for prevailing foreign exchange rates in subsequent updates to the market
Basel III Reform assumed implementation date is on 1 January 2023, including the capital requirements of the new FRTB, CVA and Operational Risk rules. Other regulatory changes assumes UK and EU maintain broad equivalence
Macro planning assumptions
2021e | 2022e | 2023e | 2024e | 2025e |
World GDP growth | 3.96 | 3.37 | 3.06 | 2.72 | 2.80 |
US Fed. funds upper bound rate (year-end) | 0.25 | 0.25 | 0.25 | 0.50 | 0.75 |
Bank of England base rate (year-end) | 0.00 | 0.00 | 0.00 | 0.00 | 0.25 |
1 month HIBOR (year-end) | 0.43 | 0.47 | 0.60 | 0.78 | 0.95 |
Update on guidance versus Feb-20 update
Adjusted costsCTACost savesInvestments
Feb-20 guidance
≤$31bn in FY22
$6bn FY19-22
(phasing: 40%/>50%/<10% in 2020-22)
$4.5bn
(cumulative phasing: c.$1bn / c.$3bn / c.$4.5bn in 2020-22)
Increase from FY19 base
New guidance
≤$31bn in FY22 on Dec 2020 average FX rates* ≤$30bn using average FY20 FX rates
$7bn FY19-22
(phasing: 25%/50%/25% in 2020-22)
$5-5.5bn FY19-22
(cumulative phasing: c.$1bn / c.$3bn / c.$5-5.5bn in 2020-22)
c.7-10% CAGR in investments
FY19-22
As at FY20
$31.5bn
Disposal losses
$1.2bn
(phasing: c.40% / c.40% / c.20% in 2020-22)
$1.2bn
(phasing: 25% / c.50% / c.25% in 2020-22)
RWAs
>$100bn gross RWA reduction FY19-22
>$100bn gross RWA reduction FY19-22
CET1
CET1 ratio >14%; manage in 14-15% range over the medium-term
CET1 ratio ≥14%; manage in 14-14.5% range medium-term manage range down further long-term
Dividends / buybacks
Sustain the dividend
($0.51 annually)Transition towards a payout ratio of 40-55% from 2022 onwards3
RoTE
10-12% in FY22
≥10% over the medium-term
(defined as 3-4 years)
* Note: Impact of the weakening USD at end-2020. Target of ≤$30bn is based on average FX in FY20 (consistent with the results presented); using the average December 2020 FX rates, the target would be retranslated to ≤$31bn. Using average December 2020 FX rates, 2020 adjusted revenue would increase by c.$1.5bn)
$1.8bn
$1.0bnn.a.
$0.3bn
$52bn
15.9%
$0.15
3.1%
How we will succeed
A strategy already in motionDriven by a renewed operating model and a fresh leadership teamSignificant capital and funding strength to drive high returns growth in Asia
Key initiatives already kicked off in 2020
Simplified organisation empowered to executePutting HSBC's weight behind Asia
Transformation initiatives well underway to unlock growth capacity; decisive actions in US and NRFB
Key initiatives focused on client acquisition already launched (e.g. Pinnacle in China)
GBM pivot to Asia strategy already in motion both from a capital and talent reallocation perspective
Refreshed management team with new performance measures aligned to our strategy
Three global businesses: merged GPB and RBWM to form WPB; combined middle and back office of CMB and Global Banking
Senior management personnel down 17%67 in 2020 driving simplification and faster decision making
Group Executive Committee: c.75% members in post for just over a year or less
Material step up in growth investments of c.$6bn planned in Asia to boost growth through new customer platforms and talent
Accelerating capital re-allocation to Asia: committing to allocate 800bps additional capital to Asia (vs. 42% at FY20) over the medium to long-term
WPB Wealth expansion into Greater China and Rest of Asia to serve international needs of our Asian customers
GBM rebalancing of capital, investments and talent from West to East68
A GBM refocused on the high-growth East
Reallocating resources RWAs
Accelerate investment in Asia Asia market positioning69
Leverage network and serve clients across the Group Global revenues
East68West68
2022
GLCM #1
GTRF #1
Securities Services #1
FX #2
Fixed Income #1
DCM #1
2019
2020
Loans #3
M&A #5
EastWest
Prioritise serving clients into and within Asia and the Middle East
Provide global institutions with access to developed and emerging markets
2020
Reducing exposure to low-return clients and businesses
Re-deploying capital to high-growth opportunities
Rebalancing financial resources, talent and risk appetite to support growth in the East
Be the preeminent corporate and investment bank in Asia to capture:
Rise in Wealth creation
Reconfiguration of trade and capital flows
Deepening of capital markets and a transition to a low-carbon economy
Deeper presence in Greater China, ASEAN and India
Collaboration revenues71
2020
FX for CMB & WPB
Wealth & Risk ManagementCapital Markets & AdvisoryReferrals
Providing product capabilities to support
client relationships in
WPB and CMB
Asset light, fee-driven business model
The value of our international network
CMB and Global Banking client revenue72
FY20
c.75% of CMB and Global Banking client revenue is linked to HSBC's international network
This focus enables leading positions in transaction banking and cross-border transactions
West-East connectivity is a key differentiator; we provide access to Western capital markets and USD clearing
Access to product, technology and innovation expertise in the West, enables strength in our higher return Eastern franchise
Our network positions us to be the international bank of choice and capture high-value affluent Retail and Wealth clients
Taking further action to reduce the Group's cost base, whilst increasing investment
Adjusted costs, $bn
32.5
c.7-10%
CAGR increase
2019
Investment
InflationCost programme saves
Bank levyOther
BAU costs
c.4-5% CAGR decrease
Impact of FX*
2022
Increasing the cost ambition by $1bn, with a new cost target of ≤$31bn in 2022 (≤$30bn based on average FY20 FX rates), vs. ≤$31bn target in Feb-20 Update
Expected gross cost saves increased to $5-5.5bn and Costs to Achieve (CTA) increased to $7bn for 2020-22
Expect to keep costs broadly stablefrom 2022 onwards
≤31*
2022
Expect to drive positive operating leverage through broadly stable costs, whilst delivering mid-single digit revenue and volume growth in the medium to long-term
* Note: Impact of the weakening USD at end-2020. Target of ≤$30bn is based on average FX in FY20 (consistent with the results presented); using the average December 2020 FX rates, the target would be retranslated to ≤$31bn. This impact of FX would increase revenue by c.$1-1.5bn
Stable costs
Medium to long-term
Increasing capital allocation to higher returning and higher growth franchises
Accelerating pace of Tangible Equity allocation to Asia and WPB
Tangible Equity, % of Group
By legal entity27
AsiaNRFBUSUK RFBOthers
By global business28
WPBCMBGBM
2018
2020
Medium to long-term
Expect to double pace of TE allocation to Asia from 1ppt to c.2ppts pa
TE further reduced inUS by upstreaming capital to Group
2018
2020
Medium to long-term
TE allocation to increase by c.10ppts
TE allocation to reduce by c.10ppts
February 2020 Business Update progress and business highlights
Detail on progress against our FY22 financial targets
Other business highlights
FY22 target
(as announced at Feb20)
CostsRWAsCapitalRoTE
Adjusted costs ≤$31bn; $4.5bn of cost programme saves
>$100bn gross RWA reduction
CET1 ratio >14%; manage in 14-15% range
10% - 12%
$1.0bn of cost programme saves delivered in FY20
FY20 costs in the US decreased by $302m (8%) vs. FY19
FY20 progress4
$1.0bn cost saves
$52bn gross reduction
15.9%
3.1%
Global number of branches reduced by c.5%; US retail branch footprint reduced by over 30%, exceeding 2020 reduction target
FTE and contractors down by c.11k, from c.243k to c.232k, despite pauses in our redundancy programme in 1H20; US FTE down by c.1,400 and NRFB FTE down c.1,100
Gross RWA reductions of $51.5bn; $24.4bn of reductions in the NRFB; $37.4bn in GBM
WPB
Wealth balances increased $0.2tn (12%) to $1.6tn vs. FY19
Asset Management AUM of $602bn grew by $96bn (19%) YoY; Net New Money of $53bn over FY20, with 75% of NNM coming from collaboration with GBM and CMB
Premier customer numbers up by 124k (3%) to 4.2m and Jade client numbers up by 18k (12%) to 175k
5 minute wealth account opening now live in Hong Kong
Wholesale (CMB and GBM)
HSBC has helped raise $1.9tn of financing for clients over FY20, including $125bn of Social and Covid-19 relief bonds75
Solid GBM performance, notably in FICC and Capital Markets; best GM 4Q20 performance since 2016 with revenue of $1.4bn; FY20 Capital Markets gross revenue of $1.8bn, up 21% vs. FY1976
FY20 international customer account openings up 8% YoY
Asia
Asia Trade market share of 9.3% at 9M2077, up 0.3ppt YoY
GBM retained #1 rank in Asia Transaction Banking69
PayMe has been the leading P2P wallet in Hong Kong for 3 years running78; PayMe customer numbers grew 25% to 2.3m over FY20
UK RFB Strong mortgage lending: FY20 gross market share of 10.3%, leading to a YoY increase in stock market share of 0.4ppts to 7.479%; mortgage balances up $13bn (9%) vs. FY19 First Direct named 'Best British brand'80 out of 271 companies in the 2020 Institute of
Customer Service Customer Satisfaction Index with a score of 85.1 vs. 76.8 average
ESG highlights81
Environmental
Target
ProgressSocial TargetProgress
Governance Target
Progress
Sustainable finance
$93bn
cumulative progress since 2017
Customer satisfaction
7WPB and 5 CMB markets sustained top-3 rank82 and/or improved in customer satisfaction
Conduct outcomes
93% of staff completed annual conduct training
Reduce operational CO2 emissions
1.8 tonnes used per FTE
Employee advocacy
71% of employees would recommend HSBC as a great place to work
Long-term incentives
25%
of executivedirector scorecard measures aligned with climate ambitions
Climate related disclosures
Published our
4th TCFD
Gender diversity
30.3% female employees in senior leadership roles by end-2020
Board of Directors reduced from 17 to 14 members since end-2017 with 3 new appointments in 2020
Key financial metrics
Reported results, $m
4Q20
Adjusted results, $m
NII | 6,619 | 6,450 7,654 |
Other Income | 5,138 | 5,477 5,717 |
Revenue | 11,757 | 11,927 13,371 |
ECL | (1,174) | (785) (733) |
Costs | (9,864) | (8,041) (17,053) |
Associates | 666 | (27) 518 |
Profit before tax | 1,385 | 3,074 (3,897) |
Tax | (450) | (1,035) (1,127) |
Profit after tax | 935 | 2,039 (5,024) |
Profit attributable to ordinary shareholders | 562 | 1,359 (5,509) |
Profit attributable to ordinary shareholders excl. goodwill and other intangible impairment and PVIF | 751 | 1,109 1,882 |
Basic earnings per share, $ | 0.03 | 0.07 (0.27) |
Diluted earnings per share, $ | 0.03 | 0.07 (0.27) |
Dividend per share (in respect of the period), $ | 0.15 | - - |
Return on avg. tangible equity (annualised), % | 1.9 | 2.9 5.2 |
Return on avg. equity (annualised), % | 1.3 | 3.2 (13.3) |
Net interest margin, % | 1.22 | 1.20 1.56 |
4Q20
NII | 6,620 | 6,590 7,751 |
Other Income | 5,204 | 5,655 6,031 |
Revenue | 11,824 | 12,245 13,782 |
ECL | (1,174) | (806) (696) |
Costs | (9,106) | (7,524) (9,176) |
Associates | 666 | 450 546 |
Profit before tax | 2,210 | 4,365 4,456 |
Cost efficiency ratio, % | 77.0 | 61.4 66.6 |
ECL as a % of average gross loans and advances to customers | 0.44 | 0.29 0.26 |
3Q20
4Q19
Balance sheet, $m
4Q20
Total assets | 2,984,164 | 2,955,935 2,715,152 |
Net loans and advances to customers | 1,037,987 | 1,041,340 1,036,743 |
Adjusted net loans and advances to customers | 1,037,987 | 1,074,491 1,062,696 |
Customer accounts | 1,642,780 | 1,568,714 1,439,115 |
Adjusted customer accounts | 1,642,780 | 1,614,877 1,470,207 |
Average interest-earning assets | 2,159,003 | 2,141,454 1,945,596 |
Reported loans and advances to customers as % of customer accounts | 63.2 | 66.4 72.0 |
Total shareholders' equity | 196,443 | 191,904 183,955 |
Tangible ordinary shareholders' equity | 156,423 | 152,260 144,144 |
Net asset value per ordinary share at period end, $ | 8.62 | 8.41 8.00 |
Tangible net asset value per ordinary share at period end, $ | 7.75 | 7.55 7.13 |
3Q20
4Q19
5.2
Capital, leverage and liquidity
4Q20
3Q20
4Q19
Risk-weighted assets, $bn | 857.5 | 857.0 843.4 |
CET1 ratio, % | 15.9 | 15.6 14.7 |
Total capital ratio (transitional), % | 21.5 | 21.2 20.4 |
Leverage ratio, % | 5.5 | 5.4 5.3 |
High-quality liquid assets (liquidity value), $bn | 677.9 | 654.2 601.4 |
Liquidity coverage ratio, % | 139 | 147 150 |
3Q20
4Q19
Share count, m
4Q20
Basic number of ordinary shares outstanding | 20,184 | 20,173 20,206 |
Basic number of ordinary shares outstanding and dilutive potential ordinary shares | 20,272 | 20,227 20,280 |
Average basic number of ordinary shares outstanding, QTD | 20,179 | 20,166 20,433 |
3Q20
4Q19
Reconciliation of reported and adjusted results
$m
4Q20 1,385
3Q20 3,074
4Q19
Reported PBT Revenue
(3,897)
Currency translation Customer redress programmes
-
178
134
(1)
48 -
45
Disposals, acquisitions and investment in new businesses Fair value movements on financial instruments Restructuring and other related costs Currency translation on significant items
2
46
55
(11)
176
20 - 67
101
-
2 318
1 411
ECL
Currency translation
- - -
(21)
37
Operating expenses
Currency translation Cost of structural reform Customer redress programmes
(107)
(120)
(152)
-
32
3
183
Impairment of goodwill and other intangibles
Past service costs of guaranteed minimum pension benefits equalisation Restructuring and other related costs o/w: costs to achieve
17 836 810
8
57 -
7,349 -
565
567
400 -
Settlements and provisions in connection with legal and regulatory matters Currency translation on significant items
4 -
3
5
758
7 517
60 7,877
Share of profit in associates and joint ventures
Currency translation
Impairment of goodwill
Total currency translation and significant items
- - -
825
1,291
15 462 477
28 - 28 8,353
FY20
8,777 13,347
- (471)
21 163
10 (768)
(264) (84)
170 - (63)
- 129
- 223
- 158
(54) 1,281
1,090 7,349
17 1,908 1,839
12 (61)
- 53
2,973 9,830
- (3)
462 462
3,372
Adjusted PBT | 2,210 | 12,149 | 22,149 | |
Memo: tax on significant items (at reported FX rates) | (381) | (161) (84) | (660) | (255) |
FY19
- 6 (1,154)
- 827 -
-
(3) 8,802
Tax impacts of significant items
FY20
$m | PBT | Tax | ETR |
Reported | 8,777 | 2,678 | 30.5% |
Less: | |||
Significant items | 3,372 | 660 | - |
Tax-only significant items | - | 117 | - |
Adjusted basis | 12,149 | 3,455 | 28.4% |
Adjusted tax charge includes: | |||
Impact of tax rate and law changes | - | 58 | - |
Write-off/write-back of opening DTAs | - | 279 | - |
Adjustments in respect of prior periods' tax liabilities | - | 78 | - |
Impacts of hyperinflation accounting | - | 65 | - |
FY20 reported ETR primarily driven by the regional mix of profits and losses taxed at different local statutory rates and the write-off and ongoing non-recognition of elements of deferred tax assets
The impact of ongoing non-recognition of deferred tax is a consequence of the profits and losses arising in these jurisdictions each year
Group effective reported tax rate of c.25% is assumed in 2021. Assumed Group adjusted effective tax rate of 19-20% in the medium-term. Note the tax rates are highly sensitive to the overall profitability of the UK group entities
Appendix | Strategy | |
Certain items and Argentina hyperinflation | ||
FY20 | FY19 | |
90 | 128 | |
(252) | 41 | |
(17) | (111) | |
150 | 146 | |
(124) | (143) | |
(8) | 4 | |
- | 133 | |
- | 24 | |
- | 106 | |
(161) | 328 | |
FY20 | FY19 | |
(9) | (12) | |
(115) | (131) | |
(124) | (143) | |
2 | (0) | |
6 | 8 | |
(116) | (135) |
Certain items included in adjusted revenue highlighted in management commentary83, $m
Insurance manufacturing market impacts in WPB Credit and funding valuation adjustments in GBM Legacy Credit in Corporate Centre
126
362
(710) 200
33
(9)
(354) 194
3
28
42
(92) 13
Valuation differences on long-term debt and associated swaps in Corporate Centre
(12)
(32)
(64)
259 (73)
Argentina hyperinflation*84 Bid-offer adjustment in GBM*
(42)
(31)
(29)
(22) 30
WPB disposal gains in Latin America* CMB disposal gains in Latin America* GBM provision release in Equities* Total
18 - - - 335
35 - - - 159
249 - - - 551
(310) 15
- - - (1,229)
- - - 379
Argentina hyperinflation84 impact included in adjusted results, $m
4Q20
3Q20
2Q20
1Q20
4Q19
Net interest income Other income
2 (44)
(1) (30)
(7) (22)
(3) 33
(19) (3)
Total revenue ECL
(42)
(31)
(29)
(22) 30
-
(2) 1 (32)
2 5 (22)
2 (10)
Costs PBT
(2)
2 (26)
(44)
(18) (6)
*Comparative figures have not been retranslated for foreign exchange movements
Certain volatile items analysis
GBM: Credit and funding valuation adjustments revenue and bid-offer adjustment, $m
209
240
(664) 1Q20
4Q19
2Q20
Sensitivity of HSBC's insurance manufacturing subsidiaries to market risk factors85
Effect on profit Effect on totalafter tax, $mequity, $m
+100 basis point parallel shift in yield curves
(67) (188)
-100 basis point parallel shift in yield curves
(68) 58
10% increase in equity prices
332 332
10% decrease in equity prices
(338) (338)
10% increase in $ exchange rate compared with all currencies
84 84
10% decrease in $ exchange rate compared with all currencies
(84) (84)
Corporate Centre: Valuation differences on long-term debt and associated swaps, $m
259
3Q20
4Q20
Stock market indices performance86
12/18
03/19
06/19
MSCI WorldHang Seng
09/19
12/19
03/20
06/20
09/20
Source: Bloomberg
12/20
FY20 adjusted revenue performance
WPBCMBGBMCorp. Centre
Group
$22,013m(14)% Wealth Management
FY20 revenue
Retail Banking
FY20 vs. FY19
Other
GTRF
Credit and Lending
$13,312m(12)%
$15,303m
GLCM
$(262)m
Other
3%
Global Markets, Securities Services Global Banking, GLCM, GTRF Principal Investments, XVA, Other
$50,366m
(8)%
NIIOther
Revenue by global business, $bn
FY19
FY18
WPBGBM
FY20
CMBCorporate Centre
Totals may not cast due to rounding
Global business management view of adjusted revenue
Group, $m
Total Group revenue
4Q19 13,782 13,647
1Q20 13,508 13,327
2Q20 13,625 13,150
3Q20 12,245
4Q20 11,824
∆4Q19
(14)%
Adjusted revenue reported at original FX rates87
12,065
WPB, $m
Retail Banking
4Q19 4,015
1Q20 3,878
2Q20 3,185
3Q20 3,052
4Q20
∆4Q19
3,043 (24)%
Net Interest Income
3,598
3,527
2,928
2,734
2,721 (24)%Non-interest income Wealth Management
417 2,144
351 1,438
257 2,234
318 2,178
322 (23)%
2,053 (4)%
Investment distribution
727
893
733
879
736 1%
Life insurance manufacturing Private banking
685
(221)
805
605
628 (8)%
468
526
425
422
407 (13)%
Net interest income
223
219
165
143
156 (30)%
Non-interest income Asset management Other
245
307
260
279
251 2%
264 213
240 132
271 155
272 100
282 7%
73 (66)%
Markets Treasury, Holdings interest expense and Argentina hyperinflation
101
241
249
190
152
Total
6,473
5,689
5,823
5,520
5,321
50 % (18)%
Adjusted revenue reported at original FX rates87
6,409
5,621
5,630
5,441
GBM, $m Global MarketsFICC
Foreign ExchangeRates
Credit Equities Securities Services Global Banking GLCM
1,069 (1)%
998
958
1,038
967
907 (9)%
GTRF
Principal Investments
Credit and funding valuation adjustments Other
676 201 46 194 (114)
613 197 (239)
(354) (132)
(9) (142)
499 208 228
462 195 53 33 (150)
469 (31)%
185 (8)%
74
61 %
70 (64)%
(121) (6)%
Markets Treasury, Holdings interest expense and Argentina hyperinflation
(23)
102
113
88
58 >100%
Total
3,765
3,830
4,591
3,672
3,511 (7)%
Adjusted revenue reported at original FX rates87
3,715
3,759
4,419
3,614
CMB, $m
4Q19
1Q20
2Q20
3Q20
4Q20
∆4Q19
GTRF
Credit and Lending GLCM
438 1,349
475 1,408
437 1,412
434 1,461
423 (3)%
1,457 8%
Markets products, Insurance and Investments and other Markets Treasury, Holdings interest expense and Argentina hyperinflation
1,436 506
1,345 491
1,043 436
946 349
895 (38)%
364 (28)%
(12)
75
64
19
8 >100%
Total
3,717
3,794 3,733
3,392
3,209
3,147 (15)%
Adjusted revenue reported at original FX rates87
3,678
3,267
3,165
Corporate Centre, $m
Central Treasury
4Q19
1Q20 265 259
2Q20
3Q20
4Q20
∆4Q19
Of which: Valuation differences on long-term debt and associated swaps
(47) (73)
(64) (64)
(32) (32)
(12) (12)
74 %
84 %
Legacy Credit Other
13 (139)
(92) 22 195
42 (159)
28 (152)
3 (77)%
(146) (5)%
Total
(173)
(181)
(156)
(155)
10 %
Adjusted revenue reported at original FX rates87
(155)
214
(166)
(155)
Wealth and Personal Banking
4Q20 financial highlights
Revenue
$5.3bn
(18)%
(4Q19: $6.5bn)
ECL
$(0.3)bn
21%
(4Q19: $(0.4)bn)
Costs
$(4.0)bn
0%
(4Q19: $(4.0)bn)
PBT
$1.0bn
(51)%
(4Q19: $2.1bn)
RoTE88
9.1%
10.6ppt
(FY19: 19.7%)
Revenue performance83, $m
6,473 200
(18)%
5,689
(710)
5,823
5,520
362 126
5,321 298
4Q20
4Q19
1Q20
2Q20
3Q20
Other*
Wealth management excl. market impactsRetail bankingInsurance manufacturing market impacts
*Other includes MT, Holdings interest expense and Argentina hyperinflation
Balance sheet89 $bn
3Q20
4Q19
4Q20
CustomerCustomerlendingaccounts
Global Private Banking
Client Assets
Retail Wealth BalancesPremier and Jade deposits
Asset Management third party distribution
4Q20 vs. 4Q19
Revenue down $1,152m (18%) driven by lower Retail Banking (down $972m) following interest rate cuts, lower Insurance Manufacturing (down $57m) primarily from lower VNB partially offset by positive insurance market impacts of $98m
ECL down $84m (21%) to $310m, as a result of an Insurance ECL charge in Argentina in 4Q19
Costs stable with reductions in discretionary spend offsetting increases in performance-related pay and a one off real estate impairment
Customer lending up $14bn (3%) driven by growth in mortgages ($22bn) particularly in the UK and Hong Kong, partially offset by lower cards spending ($4bn) and reduced unsecured lending ($4bn)
Customer accounts up $67bn (9%) mainly from higher inflows and reduced spending across all markets most notably UK / Hong Kong
Wealth balances up $167bn (12%) driven by inflows into both liquidity and long-term products as well as higher market levels
4Q20 vs. 3Q20
Revenue down $199m (4%) driven by Wealth Management ($125m) from seasonality and reduced market activity, which included $172m of favourable insurance market impacts
ECL down $49m (14%) to $310m, underlying performance has remained resilient as we continue to support our customers with payment holidays
Costs up $257m (7%) following a one off real estate impairment and seasonal cost increases including targeted marketing campaigns
Customer lending down $6bn (1%) with underlying growth in mortgages ($6bn) and a recovery in card spend offset by the repayment of Hong Kong IPO short term lending activity in 3Q20 ($12bn)
Customer accounts up $21bn (3%) from higher inflows and reduced spending, particularly in the UK and Hong Kong
Commentary above is based on unrounded figures
Commercial Banking
4Q20 financial highlights
Revenue
$3.1bn
(15)%
(4Q19: $3.7bn)
ECL
$(0.9)bn
>(100)%
(4Q19: $(0.3)bn)
Costs
$(1.8)bn
2%
(4Q19: $(1.8)bn)
PBT
$0.5bn
(69)%
(4Q19: $1.6bn)
RoTE88
1.3%
(11.7)ppt
(2019: 13.0%)
Revenue performance83, $mBalance sheet89, $bn
Customer lending
354
354
4Q20
4Q19
3Q20
4Q19
4Q19
Customer accounts
343
1Q20
2Q20
3Q20
Markets products, InsuranceGTRF and Investments and Other*
Credit and Lending
4Q20
4Q20 vs. 4Q19
Revenue down $570m (15%), reflecting the impact of lower global interest rates in GLCM and other products partially offset by higher deposits
ECL up $592m reflecting a small number of specific client charges in Asia and updated forward economic guidance in the UK
Costs down $42m (2%) due to controlled discretionary spend, while continuing to invest in digital and transaction banking capabilities
Customer lending down $11bn (3%) primarily due to lower trade and overdraft balances, partly offset by government scheme lending
Customer accounts up $73bn (18%) as customers raised and retained liquidity across all regions
4Q20 vs. 3Q20
Revenue down $62m (2%), reflecting the impact of lower interest rates partially offset by higher balances and fees in GLCM
ECL up $515m reflecting a small number of specific client charges in Asia and updated forward economic guidance in the UK
Costs up $106m (6%) mainly due to increased investment and performance-related pay
Customer lending down $11bn (3%) from the repayment of short-term IPO related loans and reductions in the US and Europe
GLCM
3Q20
4Q20
Customer accounts up $26bn (6%) as customers raised and retained liquidity notably in Hong Kong and the UK
*Other includes MT, Holdings interest expense and Argentina hyperinflation
Commentary above is based on unrounded figures
Global Banking and Markets
4Q20 financial highlights
Revenue
$3.5bn
(7)%
(4Q19: $3.8bn)
ECL
$0.0bn
>100%
(4Q19: $(0.0)bn)
Costs
$(2.5)bn
2%
(4Q19: $(2.5)bn)
PBT
$1.1bn
(13)%
(4Q19: $1.2bn)
RoTE88
6.7%
(3.1)ppt
(FY19: 9.8%)
Revenue performance83, $m
3,765 194
3,830
(7)% | (4)% |
4,591
(354)
(9)
3,672
33
3,511 70
4Q20
4Q19 1Q20
2Q20
Global MarketsGlobal Banking,and Securities ServicesGLCM, GTRF, PI and Other*
3Q20
Credit and funding valuation adjustments
*Other includes MT, Holdings interest expense and Argentina hyperinflation
View of adjusted revenue
$m | 4Q20 ∆4Q19 |
Global Markets | 1,430 13 % |
FICC | 1,069 (1)% |
- FX | 689 2% |
- Rates | 151 (45)% |
- Credit | 229 76 % |
Equities | 361 >100% |
Securities Services | 439 (17)% |
Global Banking | 907 (9)% |
GLCM | 469 (31)% |
GTRF | 185 (8)% |
Principal Investments | 74 61 % |
Credit and Funding Valuation Adjustments | 70 (64)% |
Other | (121) (6)% |
MT, Holdings interest expense and Argentina hyperinflation | 58 >100% |
Total
3,511
(7)%
Adjusted RWAs90, $bn
277
273
265
4Q19
4Q20 vs. 4Q19
Management have delivered net RWA reductions of $12bn (4%) and lower costs
Revenue down $254m (7%) driven by lower global interest rates:
• Global Markets up $170m (13%) with the best fourth quarter since 2016 as a result of volatility and increased client activity with stable trading VaR; FICC performance driven by strong Credit performance, with Equities also benefitting from increased derivatives trading;
• GLCM and Securities Services negatively impacted by lower global interest rates, but both grew average balances and Securities Services grew fees;
• Global Banking impacted by lower investment banking fees, compared with strong prior period, and tightening credit spreads on portfolio hedges.
ECL in 4Q20 included a small number of specific Stage 3 client charges offset by release in Stage 1&2 ECL from a marginal recovery in economic outlook in Asia
Costs down $46m (2%) primarily driven by managed cost reduction initiatives, more than offsetting higher investments in technology, regulatory costs and performance costs
4Q20 vs. 3Q20
Revenue down $161m (4%):
• Global Markets revenue lower primarily due to seasonality
• Global Banking down driven by seasonal decline in fees, mostly in DCM and Advisory and decline in corporate lending NII due to lower balances
ECL down $110m as 3Q20 ECL included a small number of specific client charges.
3Q20
4Q20
RWAs down $8bn (3%), from active management actions, with lower trading VaR
Commentary above is based on unrounded figures
Corporate Centre
4Q20 financial highlights
Revenue
$(155)m
10%
(4Q19: $(173)m)
ECL
$1m
(94)%
(4Q19: $16m)
Costs
$(876)m
3%
(4Q19: $(854)m)
Associates
$663m
23%
(4Q19: $541m)
PBT
$(367)m
22%
(4Q19: $(470)m)
RoTE88
3.1%
2.3ppt
(FY19: 0.8%)
Associate income detail83, $m
3Q20
4Q19
1Q20
2Q20
4Q20
OthersSABBBank of Communications
Revenue performance83, $m
4Q19
Central Treasury Of which:
(47)
1Q20 265
2Q20
(64)
3Q20
4Q20
(32) (12)
Valuation differences on long-term debt and associated swaps
(73)
259
(64)
(32) (12)
Other central treasury
Legacy Credit
26 13 (139)
6 (92) 22
- 42 (159)
- 28
- 3
Other
(152) (146)
Of which: FX revaluation on Holdings balance sheet and net investment hedge
31
105
23
(25) (4)
Total
(173)
195
(181)
(156) (155)
Not included in Corporate Centre revenue: Markets Treasury revenue allocated to global businesses
380
770
796
673 610
4Q20 vs. 4Q19
Associates up $122m (23%), primarily due to higher income and share of profit from associates in MENA and the UK
4Q20 vs. 3Q20
Revenue down $1m, largely due to lower revenue from Legacy Portfolio driven by non-recurrence of favourable fair value adjustments in 3Q20 Associates up $223m (51%), primarily due to higher income and share of profits associates in Asia, MENA and the UK
Central costs
$0.8bn reduction in Holdings retained costs, from $2.5bn to $1.7bn vs. FY19; targeting c.$1bn over time $0.3bn of retained cost reduction from cost savings, $0.5bn from increased reallocation of Holdings costs
Insurance
Key financial metrics
Adjusted income statement, $m
FY20
Net operating income | 1,977 | 2,720 2,020 |
Of which: Net interest income (NII) | 2,408 | 2,308 2,217 |
Of which: market impacts | 102 | 127 (334) |
ECL | (92) | (86) (1) |
Operating expenses | (509) | (497) (462) |
Share of profit in associates and JVs | 1 | 43 31 |
Profit before tax | 1,377 | 2,180 1,588 |
Memo: distribution income* | 801 | 1,041 1,040 |
FY19
FY18
Financial highlights:
Strong growth in EV91 (8% CAGR) since FY17; reflecting consistent VNB generation and margins; FY20 RoEV of 7.4% (2019: 13.3%)
Adjusted revenue of $2.0bn, down 27% vs. FY19, from lower sales due to the global impact of the Covid-19 outbreak, including border closures
Distribution revenue of $0.8bn, down 23% as a result of lower sales vs. FY19
Manufacturing operating expenses of $0.5bn, up 2% vs. FY19
Limited adverse short term Covid-19 effects on policy lapses, morbidity/mortality and other assumptions
*Distribution income (HSBC Life and partnerships) through HSBC bank channels
Reported Embedded value91, $bn
15.4
FY17
FY18
FY19
Reported ANP and VNB, $m
ANPVNB
FY20
VNB margin
FY17
FY18
FY19
FY20 VNB by region
FY20
Hong KongEurope
Other Asia
Strategic delivery in 2020:
Announced agreement to acquire the remaining 50% equity interest in HSBC Life China, subject to regulatory approvals
Launched HSBC Pinnacle (our digital wealth planning and insurance services) and obtained a FinTech licence in China
Launched HSBC Life Well+: core retail Health & Wellbeing proposition; and Benefits+: B2B2C employee benefits and Wellness platform in Hong Kong
UK Life Protection sales reached 44k policies (+89% PY)
Launched new core platform in Mexico
Pivoted to remote customer engagement in all markets
Strong momentum for future growth:
Hong Kong insurance market share of 19.2%39, (incl.
Hang Seng) up from 12.8% at FY16
HK: Life Insurance Company of the Year Award92;
Seven Bloomberg Awards including Brand of the year and Bancassurance of the Year93
UK: Ranked #3 in Onshore Investment Bond, with 11.0% market share94 (AUM of $1.5bn)
LATAM
Hong Kong and UK WPB customer activity data
We continue to support home buyers and have seen a pickup in 4Q20; the UK RFB increased its gross mortgage market share to 10.3% over FY20, up from 8.1% in FY1979
Credit card spending has recovered partially, however it remains below 2019 levels. Hong Kong down 3% YoY, with the UK down 17% YoY
Hong Kong card spend in Jan-21 up by 6% vs. prior year and up 20% vs. Dec-20; a 10 year record driven by successful marketing campaigns delivered on Mobile X
Continued digital adoption with UK digital sales increasing by 5% to 75% since start of social distancing. Hong Kong digital sales mix marginally increased by 1% to 28%
*Excludes Hang Seng **Rebased to 100
Hong Kong*
Credit card spend**
150
100
50
0
0
Mar
UK
Credit card spend**
Jun
Sep
Dec
20192020
200
Mortgage drawdowns**
250
200
150
100
50
MarStart of social distancing
Mortgage drawdowns**
Jun
Sep
Dec
0
150 100 50 0
250
200
150
100
50
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
GBM and CMB IRB RWA inflation and mitigating actions
Wholesale counterparty IRB RWAs and exposures
All CRR Bands | FY19 | FY20 | ∆ | |
RWA, $bn | 341 | 346 | ||
EAD, $bn | 695 | 680 | GBM & CMB wholesale performing IRB book: | |
RWA density, % | 49.0 | 50.8 | 1.8ppt | • includes: corporates, sovereigns and financial institutions. |
Weighted average PD, % | 0.9 | 1.2 | 0.3ppt | |
• excludes: slotting exposures, Markets Treasury allocations and | ||||
exposures in default | ||||
Some growth in RWAs due to credit risk migration over FY20 | ||||
Of which: CRR 1.1 - 5.3 | FY19 | FY20 | ∆ | |
RWA, $bn | 318 | 314 | c.90% of the book is higher quality (CRR1-5) with RWAs stable vs. | |
FY19 | ||||
EAD, $bn | 678 | 655 | ||
RWA density, % | 46.8 | 48.0 | 1.2ppt | Total RWA inflation is being mitigated through actions to maintain |
Weighted average PD, % | 0.6 | 0.7 | 0.1ppt | book quality, namely maintenance of the CRR 1-5 book size and its |
RWA density, including targeted saves under the transformation | ||||
Of which: CRR 6.1+ | FY19 | FY20 | ∆ | |
programme | ||||
RWA, $bn | 23 | 32 | ||
Of the higher risk bands, 56% of exposures sit in the top two bands (6.1 | ||||
EAD, $bn | 17 | 25 | and 6.2). As at 31 December 2019, this percentage was 60% | |
RWA density, % | 138.3 | 129.3 | (9.0)ppt | |
Weighted average PD, % | 14.2 | 13.5 | (0.7)ppt |
CRR: Customer risk rating. CRR 1-3 considered Strong to Good credit quality (roughly equivalent to an S&P credit rating of AAA to BBB-); CRR 4-5 considered Satisfactory (BB+ to BB-); CRR 6+ considered Sub-standard, broadly equivalent to a rating of B- or below
ECL and personal lending relief
ECL charge by geography, $m
499
(119) Other
Hong KongAsia ex. HKUK RFB
NRFB
4Q20 vs. 3Q20 geographic analysis
Mexico
Asia ECL charge increased by $0.2bn from higher wholesale Stage 3 charges
UK RFB ECL charge increase of $0.3bn driven by deterioration in forward economic outlook due to market uncertainty
NRFB ECL charge increase of $0.2bn from higher wholesale Stage 1 & 2 charges compared to a net release in 3Q20
Analysis by stage
Reported basis, $bn
Stage 1
Stage 2
Stage 3
Total95
Stage 3 as a % of Total
4Q20
Gross loans and advances to customers Allowance for ECL
869.9
2.0
163.2
5.0
19.1 7.4
1,052.5 1.8% 14.5
3Q20
Gross loans and advances to customers Allowance for ECL
878.6
2.0
157.8
4.6
18.4 7.0
1,055.0 1.7% 13.7
4Q19
Gross loans and advances to customers Allowance for ECL
951.6
1.3
80.2 2.3
13.4 5.1
1,045.5
8.7
1.3 %
UK personal lending relief, $m
UK secured lending UK unsecured lending
At 31 December 2020
98% 88%
1,419
140
11,933 11,709
1,166 1,025
224 140
In the UK, 97% of balances that have exited payment holiday agreements are up to date with their payments
Levels of Covid-19 customer relief in 17 major markets down 79% vs. 2Q20, c.90% of customers exiting their agreements are current on their payments; c.95% of secured customers are current97
Net interest margin supporting information
NII sensitivity to instantaneous change in yield curves (12 months)NII sensitivity to instantaneous change in yield curves (5 years), $m
(9,959)
+25bps parallel -25bps parallel +100bps parallel -100bps parallel
(1,508)
(1,986)
(2,307)
(2,045)
(2,113)
5,348
6,538
7,083
7,444
7,736 34,149
(4,854)
(6,174)
(7,087)
(7,660)
(8,323) (34,098)
Quarterly NIM by key legal entity
4Q19 1Q20 2Q20 3Q20 4Q20 %Groofu4pQN2I0I G%rouopf 4AQIE2A0
The Hongkong and Shanghai Banking Corporation (HBAP) 2.00% 1.96% 1.69% 1.44% | 1.42% | 49% 42% |
HSBC Bank plc (NRFB) 0.46% 0.48% 0.54% 0.50% | 0.53% | 10% 23% |
HSBC UK Bank plc (UK RFB) 1.95% 2.01% 1.68% 1.60% | 1.60% | 23% 17% |
HSBC North America Holdings, Inc 0.99% 0.91% 0.85% 0.83% | 0.95% | 7% 9% |
Key rates (quarter averages), basis points
4Q19
*At 19 February 2021
1Q20
2Q20
3Q20
4Q20
1Q21 QTD*
Source: Bloomberg
RoTE by global business excluding significant items and UK bank levy
FY20 $m
WPB
CMB
GBMCorporate
CentreGroup
Reported profit before tax Tax expense
Reported profit after tax less attributable to: preference shareholders, other equity holders, non-controlling interests Profit attributable to ordinary shareholders of the parent company
3,704 (509) 3,195 (736) 2,459 (242) 190 20 2,427 26,551 9.1 %
(661) 978 (673) 305 (10) 208 (14) 489 37,826 1.3 %
1,639
3,616 (977) 2,639 (784) 1,855 - 958 (25) 2,788 41,566 6.7 %
(182)
(713)
(531)
8,777 (2,678) 6,099
(8) (2,201)
(721) 3,898
Increase in PVIF (net of tax)*
(1) (253)
Significant items (net of tax) and UK bank levy Markets Treasury allocation and other adjustments
2,041 3,397
60 41
Profit attributable to ordinary shareholders excluding PVIF, significant items and UK bank levy Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments RoTE excluding significant items and UK bank levy (annualised), %
1,379 7,083
44,580 3.1 %
150,523 4.7 %
FY19 $m
WPB
CMB
GBMCorporate
Centre 1,427 (1,957)
Group
Reported profit before tax Tax expense
Reported profit after tax less attributable to: preference shareholders, other equity holders, non-controlling interests Profit attributable to ordinary shareholders of the parent company
Increase in PVIF (net of tax)*
Significant items (net of tax) and UK bank levy Markets Treasury allocation and other adjustments
6,819 (720) 6,099 (1,279) 4,820 (1,207) 1,641 1 5,255 26,627 19.7 %
(40) 3,036 - 4,807 36,856 13.0 %
4,159 (1,502) 2,657 (846) 1,811
- 4,218 - 3,916 39,999 9.8 %
(302)
942 (460) 482 (784)
170 (360)
(530)
(1) 702 2
13,347 (4,639) 8,708 (2,739) 5,969 (1,248) 9,597 3
Profit attributable to ordinary shareholders excluding PVIF, significant items and UK bank levy Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments RoTE excluding significant items and UK bank levy (annualised), %
343 14,321
40,397 143,879
0.8 %
10.0 %
*Excludes the increase in PVIF (net of tax) attributable to non-controlling interests. The increase in PVIF (net of tax), including those attributable to non-controlling interest, was $338m in FY20 and $1,431m in FY19 Note: Tangible Equity is allocated to global businesses at a legal entity level, using RWAs, or a more suitable local approach, where appropriate
4Q20 vs. 3Q20 equity drivers
Shareholders'
Equity, $bnTangible Equity, TNAV per share,$bn
$
Basic number of ordinary shares, millionAs at 30 September 2020
Profit attributable to:
Ordinary shareholders98
Other equity holders Dividends gross of scrip
On ordinary shares
On other equity instruments
191.9
(0.2)
(0.2)
0.8
0.6
0.2
-
152.3
1.0 1.0 - - - -
7.55 0.05 0.05 - - - -
20,173 - - - - - -
Scrip
FX98
Actuarial gains/(losses) on defined benefit plans
Fair value movements through 'Other Comprehensive Income'
Of which: changes in fair value arising from changes in own credit risk
Of which: Debt and Equity instruments at fair value through OCI Other98
As at 31 December 2020
0.0 196.4
(0.0)
(1.5)
(1.7)
5.4
0.2
-
(0.4) 156.4
(0.0)
(1.5)
(1.7)
5.0
0.2
-
(0.00)
(0.07)
(0.03) 7.75
(0.09)
0.25
0.01
-
- - - - - - 11 20,184
Average basic number of shares outstanding during 4Q20: 20,179 million
4Q20 TNAV per share increased by $0.20 to $7.75 per share including retained profits of $0.05 and FX of $0.25; TNAV includes $(0.11) per share of own credit risk reserves (3Q20: $(0.03))
FY20 vs. FY19 equity drivers
Shareholders'
Equity, $bnTangible Equity, TNAV per share,$bn
$
Basic number of ordinary shares, millionAs at 31 December 2019
Profit attributable to:
Ordinary shareholders98
Other equity holders Dividends gross of scrip
On ordinary shares
On other equity instruments
184.0
(1.3)
(1.3)
5.2
3.9
1.3
-
144.1
5.6 5.6 - - - -
7.13 0.28 0.28 - - - -
20,206 - - - - - -
Scrip
FX98
Actuarial gains/(losses) on defined benefit plans
Fair value movements through 'Other Comprehensive Income'
Of which: changes in fair value arising from changes in own credit risk
Of which: Debt and Equity instruments at fair value through OCI Other98
As at 31 December 2020
0.8 196.4
4.8
0.8
2.1
0.2
1.9
-
(0.6) 156.4
4.4
0.8
2.1
0.2
1.9
-
(0.02) 7.75
0.22
0.04
0.10
0.01
0.09
-
- - - - - - (22) 20,184
Average basic number of shares outstanding during FY20: 20,169 million
FY20 TNAV per share increased by $0.62 to $7.75 per share including retained profits of $0.28 and FX movements of $0.22 per share; TNAV includes $(0.11) per share of own credit risk reserves (FY19: $0.13)
Total shareholders' equity to CET1 capital
Total equity to CET1 capital, as at 31 December 2020, $m
Total equity204,995
Total shareholder's equity196,443
Non-controlling interestsPreference shares and other equity instruments
Total ordinary shareholder's equity
Foreseeable dividend
IFRS 9 transitional add-back
Deconsolidation of insurance / SPEs
Allowable NCI in CET1
Other movements
CET1 before regulatory adjustments
Regulatory adjustments
174,029
165,479
CET1 capital136,050
Total equity to CET1 capital walk, $m
Total equity (per balance sheet)
204,995
4Q20
4Q19 192,668
- Non-controlling interests
Total shareholders' equity - Preference share premium
(8,552) 196,443
(8,713) 183,955
- (1,405)
- Additional Tier 1
(22,414) (20,871)
Total ordinary shareholders' equity
174,029
161,679
- Foreseeable dividend
(3,055) 2,351
(3,391)
- IFRS 9 transitional add-back
809
- Deconsolidation of insurance / SPEs
(11,977)
(10,682)
- Allowable NCI in CET1
- Other movements
CET1 before regulatory adjustments
4,079 52 165,479
4,865 - 153,280
- Additional value adjustments (PVA)
(1,175) (1,327)
- Intangible assets
(9,590) (12,372)
- Deferred tax asset deduction
(1,741) (1,281)
- Cash flow hedge adjustment
(365) (1,462) 2,101
(41)
- Excess of expected loss
(2,424)
- Own credit spread and debit valuation adjustment
2,450
- Defined benefit pension fund assets
(7,885)
(6,351)
- Direct and indirect holdings of CET1 instruments
(40)
(40)
- Threshold deductions
(9,272) (7,928)
Regulatory adjustments CET1 capital
(29,429) (29,314)
136,050
123,966
Sectors particularly affected by Covid-19
At 31 December 2020
Oil and Gas99
3% | 8% |
27% $23.0bn
62%
Drawn risk exposure100 by region, $bn
Aviation101
CRR 1-3CRR 4-6CRR 7-8Defaulted
Drawn risk exposure100 by region, $bn
Restaurants and leisure
Drawn risk exposure100 by region, $bn
Retail
Drawn risk exposure100 by region, $bn
Asia | 7.3 | Asia | 3.8 |
Europe | 5.7 | Europe | 3.8 |
Middle East and North Africa | 3.8 | Middle East and North Africa | 1.9 |
North America | 4.5 | North America | 0.9 |
Latin America | 1.6 | Latin America | 0.1 |
Total | 23.0 | Total | 10.5 |
Slight improvement in book | |||
quality from 2Q20; higher | |||
percentage of CRR 1-3 |
Asia | 0.6 | Asia | 12.6 |
Europe | 2.2 | Europe | 9.0 |
Middle East and North Africa | 0.0 | Middle East and North Africa | 0.7 |
North America | 0.5 | North America | 2.1 |
Latin America | 0.0 | Latin America | 1.0 |
Total | 3.3 | Total | 25.4 |
Lower proportion of CRR 1-3 vs. | CRR 1-6 broadly stable over | CRR 1-6 broadly stable over | |
2Q20; >50% of exposures | 2H20 | ||
benefit from credit risk mitigation | |||
via collateral and guarantees |
2H20; category excludes hotels
Totals may not cast due to rounding
Balance sheet
Customer lending, $bn
Customer accounts, $bn
4Q19
3Q20
LDR: 63.2%
Totals may not cast due to rounding
4Q20
4Q19
WPBCMBGBMCorporate Centre
HQLA: $678bn
3Q20
4Q20
LCR*: 139%
*The methodology used in the Group consolidated LCR in relation to the treatment of part of our HQLA is currently under review with our regulators
4Q20 customer lending decreased $25bn (2%) vs. 4Q19 despite mortgage growth in WPB, particularly in the UK and Hong Kong
4Q20 customer accounts increased $173bn (12%) vs. 4Q19 from corporate clients building liquidity and personal customers reducing spending
Loan to deposit ratio of 63.2% decreased by 3.3ppts vs. 3Q20 and decreased by 9.1ppts vs. 4Q19 as customers raised and retained liquidity
Balance sheet - customer lending
Adjusted customer lending (on a constant currency basis), $bn
1,037
1,040
1,019 1,041
1,038
3Q20 4Q20 Reported net loans and advances to customers
4Q19
1Q20
2Q20
OtherUKHong Kong
Adjusted customer lending of $1,038bn decreased by $37bn (3%) vs. 3Q20
WPB lending down $6bn (1%) with growth in mortgages ($6bn) offset by short term Hong Kong IPO lending being repaid
CMB lending decreased by $11bn (3%), primarily due to repayments
GBM lending decreased by $19bn (8%), from lower term lending in Asia, Europe and the US and lower overdrafts in Europe
4Q20 adjusted customer lending growth by global business and region, $bn
Growth since 3Q20
WPBCMBGBMCorporate CentreTotal
Totals may not cast due to rounding
$469bn
$343bn
$224bn
$1bn
$1,038bn
UK mortgages
Growth since 3Q20
Europeo/w: UKAsiao/w: Hong KongMENANorth Americao/w: USLatin AmericaTotal
$408bn
$315bn
$473bn
$302bn
$29bn
$108bn
$58bn
$20bn
$1,038bn
(3)%
Balance sheet - customer accounts
Adjusted customer accounts (on a constant currency basis), $bn
1,439
1,441
1,532 1,569
1,643
3Q20 4Q20
4Q19
1Q20
2Q20
OtherUKHong KongReported customer accounts
Adjusted customer accounts of $1,643bn increased by $28bn (2%) vs. 3Q20
WPB customer accounts increased as a result of higher inflows and lower spending
CMB increased by $26bn (6%) as customers raised and retained liquidity across all regions
GBM customer accounts decreased by $18bn (5%) due to lower demand for time deposits
4Q20 adjusted customer accounts growth by global business and region, $bn
Growth since 3Q20
WPBCMBGBMCorporate CentreTotal
Totals may not cast due to rounding
$835bn
$470bn
$337bn
$1bn
$1,643bn
Growth since 3Q20
Europeo/w: UKAsiao/w: Hong KongMENANorth Americao/w: USLatin AmericaTotal
$630bn
$504bn
$762bn
$531bn
$41bn
$182bn
$117bn
$27bn
$1,643bn
Balance sheet - deposits by type
Group customer accounts by type, $bn
Average balances
2015
2016
Demand and
2017
Other - Non-interest bearing and Demand - Interest bearing
2018
2019
SavingsTime and other
2020
Group government bond exposures in key markets, $bn
At 30 June 2020
USUKHK
104.7
1-3Y
Group loans and deposits by currency
At 31 December 2020
Loans and advances to customersCustomer accounts
Hong Kong system deposits by currency at 31 December: 50% HKD; 36% USD; 13% Non-US foreign currencies. Source: HKMA
<1Y
3-5Y
5-10Y
>10Y
Asset quality
Gross loans and advances to customers
Loans and advances to customers of 'Strong' or 'Good' credit quality
2016
2017
2018
2019
2020
'Strong' or 'Good' loans as a % of gross loans and advances to customers (%)
'Strong' or 'Good' loans ($bn)
Strong or Good loans as a % of gross loans and advances to customers decreased to 70.3% due to the impact of Covid-19
Stage 3 and impaired loans and advances to customers
Impaired loans as % of average gross loans and advances to customers (%)
Stage 3 loans as a % of average gross loans and advances to customers (%)
Impaired loans ($bn)
Stage 3 loans ($bn)
Stage 3 loans as a % of gross loans and advances to customers of 1.8% at FY20
Reported LICs/ECL
LICs as a % of average gross loans and advances to customers (%)
ECL as a % of average gross loans and advances to customers (%)
LICs ($bn)
ECL ($bn)
ECL charge of $8.8bn in 2020; ECL as a % of average gross loans and advances to customers of 81bps at FY20
UK RFB disclosures
Total RFB lending to customers, £bn
Wholesale
Gross wholesale loans and advances to customers, £bn
At 31 December 2020
Personal
Residential mortgage balances, £bn
09/19
12/18
03/19
06/19
By LTV
50% - < 60% £17.1bn
80% - < 90% £10.4bn
Broker coverage
(by value of market share)
8%
12/19
03/20
06/20
09/20
12/20
c.26% of mortgage book is in Greater London
Buy-to-let mortgages of £2.8bn
Mortgages on a standard variable rate of £3.3bn
Interest-only mortgages of £19.4bn102
LTV ratios:
• c.43% of the book <50% LTV%
• new originations average LTV of 70%
• average portfolio LTV of 51%
43%
70%
84%
93%
>93%
2020
Unsecured lending balances, £bn
7.3 | 7.4 | 8.2 | 8.8 | 7.7 |
5.9 |
Credit cards
Other personal lending
201820192020
Delinquencies103
Credit cards: 90-179 day delinquency trend, %
1.0
0.88
0.5
0.0
12/18
06/19 12/19 06/20 12/20
Change in spending due to Covid-19, with a 20% fall in balances vs. 2019. Drop in delinquencies following the introduction of payment holidays
Mortgages: 90+ day delinquency trend, %
0.3
2015
2016
2017
2018
2019
0.2
0.1
0.0
12/18
06/19
12/19
06/20
12/20 80
Glossary
AIEA
Average interest earning assets
ANP
Annualised new business premiums
B2B2C
Business to Business to CustomerBAU
Business as usual
Bps
Basis points. One basis point is equal to one-hundredth of a percentage point
CAGR
Compound annual growth rate
CET1
Common Equity Tier 1
Corporate Centre
Corporate Centre comprises Central Treasury, our legacy businesses, interests in our associates and joint ventures, central stewardship costs and the UK bank levy
CMB
Commercial Banking, a global business
CRD IV
Capital Requirements Directive IV
CRR
Customer risk rating. CRR 1-3 considered Strong to Good credit quality (roughly equivalent to an external credit rating of AAA to BBB-); CRR 4-5 considered Satisfactory (BB+ to BB-); CRR 6+ considered Sub-standard, broadly equivalent to an external rating of B- or below
CRR II
The amending Regulation to the CRD IV package which implements changes to the own funds regime and to MREL and elements of the Basel III Reforms in EU legislation. These changes follow a phased implementation from June 2019
CTA
Costs to achieveC&L
Credit and Lending
ECL
Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied.
FICC
Fixed Income, Currencies and CommoditiesGBM
Global Banking and Markets, a global businessGLCM
Global Liquidity and Cash ManagementGPB
Global Private Banking, a former global business now part of Wealth and Personal BankingGroup
HSBC Holdings plc and its subsidiary undertakingsGTRF
Global Trade and Receivables Finance
HIBOR
Hong Kong Interbank Offered Rate
IFRS
International Financial Reporting Standard
IRB
Internal ratings-based
LCR
Liquidity coverage ratio
LDR
Loan-to-deposit ratio
Legacy credit
A portfolio of assets including securities investment conduits, asset-backed securities, trading portfolios, credit correlation portfolios and derivative transactions entered into directly with monoline insurers
MENA
Middle East and North Africa
MT
Markets Treasury. Formerly known as Balance Sheet Management (BSM)
NCI
Non-controlling interests
NII
Net interest income
NIM
Net interest margin
NRFB
Non ring-fenced bank in Europe and the UK
PBT
Profit before tax
PD
Probability of default
POCI
Purchased or originated credit-impairedPpt
Percentage points
PVIF
Present value of in-force insurance contractsRBWM
Retail Banking and Wealth Management, a former global business now part of Wealth and Personal Banking
UK RFB
HSBC UK, the UK ring-fenced bank, established July 2018 as part of ring fenced bank legislationRoEV
Return on Embedded ValueRoTE
Return on average tangible equityRWA
Risk-weighted assetTNAV
Tangible net asset valueVNB
Value of new business writtenWPB
Wealth and Personal Banking. A global business created from the consolidation of RBWM and GPB
XVAs
Credit and Funding Valuation Adjustments
Footnotes
1. A number of our clients were in need of financial relief as a result of the economic slowdown brought on by the Covid-19 pandemic, which we sought to address in a responsible way. This included extending our own relief measures such as payment holidays and loan moratoria, in addition to other market-wide and government-backed schemes to our customers. As reported at 2Q20, over 898 thousand accounts were impacted by these measures in 17 major markets, including over
$52bn of relief extended to wholesale customers and over $26bn extended to personal customers
2. Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation in force at the time. These include the regulatory transitional arrangements for IFRS 9 'Financial Instruments'. Following the end of the transition period after the UK's withdrawal from the EU, any reference to EU regulations and directives (including technical standards) should be read as a reference to the UK's version of such regulation and/or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018
3. We intend to transition towards a target payout ratio of between 40% and 55% of reported earnings per ordinary share ('EPS') from 2022 onwards, with the flexibility to adjust EPS for non-cash significant items, such as goodwill or intangibles impairments
4. Ticks and crosses refer to progress in FY20 against the FY20 plans, as communicated in the Feb-20 Update
5. Cost saves include 2020-22 cost programme saves as announced at Feb-20 and 2019 cost initiatives
6. Technology costs in operating expenses trends include transformation saves and are presented on a net basis
7. Technology cost increases in full-year and quarterly walks are presented on a gross basis (excl. saves)
8. Includes $1.1bn of gross RWA saves recognised following the transfer of certain customers to CMB. These saves have not been includes as part of the Group's gross RWA saves
9. The PRA has published a consultation on the reversal of the revised regulatory treatment of software assets; as such we have not considered these related capital benefits in our distributions
10. Leverage ratio at 31 December 2020 is calculated using the CRR II end-point basis for additional tier 1 capital and the CRR regulatory transitional arrangements for IFRS9; Leverage ratio includes CET1 benefit from the change in treatment of software assets, however the impact is immaterial
11. Source: Datastream. 3 month interbank offered rates
12. Source: Bain Covid-19 Pulse Survey, July 2020; Overall sample = 10k
13. 4Q20 v 4Q19
14. Source: Dealogic
15. Number of companies that have set or committed targets under the Science Based Targets Initiative (SBTi)
16. Expected. 'Growth investment': investment in strategic business growth (including build-out of front line staff). Over 5 years,
2020 - 2025
17. CMB platforms will be tested in Asia and rolled out across globally thereafter
18. Including GLCM and GTRF revenue
19. Excludes any inorganic actions
20. Medium-term defined as 3-4 years; long-term is defined as 5-6 years
21. Gross RWA saves of $24.4bn achieved in 2020, largely offset by changes in asset size and quality, and updates to models, methodology and policy. 2020 costs included a number of adverse items including real estate asset impairments, litigation costs, an increase in the Single Resolution Fund contribution and reduced capitalisation following the write-off of intangible assets
22. 'Investment' includes strategic business growth (including build-out of front line staff), and other strategic, regulatory, and technology investment (including amortisation)
23. The carbon emissions associated with our portfolio of our customers
24. Source: Environmental Finance Bond Database
25. Key initiatives of philanthropic programme include scaling climate innovation, renewable energy in emerging markets and nature-based solutions
26. Finance to Accelerate the Sustainable Transition-Infrastructure ('FAST-Infra') in partnership with the IFC, the OECD, theGlobal Infrastructure Facility (World Bank), and Climate Policy Initiative under the auspices of the One Planet Lab
27. Based on tangible equity of the Group's major legal entities excluding Associates, Holdings Companies, consolidation adjustments, and any potential inorganic actions
28. WPB TE as a share of TE allocated to the Global Businesses (excluding Corporate Centre). Excludes Holdings Companies, consolidation adjustments any potential inorganic actions
29. 2015-19 adjusted revenue CAGR
30. Source: IMF, October 2020
31. Source: internal and external benchmarks, data and industry experts. CAGR from 2019 to 2025
32. Source: IHS Markit Comparative World Overview, October 2020
33. Source: PwC, January 2019. Total client assets include pension funds, insurance companies, sovereign wealth funds, high net worth individual and mass affluent. AUM represents estimated share of total client assets managed on behalf of clients
34. Deposits: including HASE; Source HKMA, December 2020. Mortgage by Legal mortgage units, Source: mReferral, Nov 2020 YTD; Credit Card market share in terms of Receivables; September 2020
35. HK Trade Financing market share of 19.1% (including HASE); December 2020, Source: HKMA; Rank #1 based on other banks' disclosures in their annual reports
36. Source: Dealogic, including M&A, ECM, DCM and Loans for years 2018, 2019, 2020
37. Ultimate Parent Companies i.e. 'Mastergroups'
38. HSBC presence in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. Reported Revenue FY19, including revenue from recoveries by the Group's Service and Technology centres from other Group entities
39. HK Wealth includes Mandatory Provident Fund and Mutual Funds AUM, incl. HASE. source: Mercer October 2020; Insurance: including HASE. Source: Hong Kong Insurance Authority; September 2020
40. By AUM. Source: Asian Private Banker; 2019
41. Excluding HASE; December 2020
42. Includes revenue from recoveries by the Group's Service and Technology centres from other Group entities
43. Statistics Bureau of Guangdong Province, Guangdong Sub-Administration of Customs General Administration, Census and Statistics Department of the Government of Hong Kong SAR, Statistics and Census Service of Macao SAR
44. Boston Consulting Group, 2017 / Scorpio; 2019
45. Singapore Economic Development Board / Cushman Wakefield analysis; 2016
46. Client revenue is based on HSBC internal client management information and differs from reported revenue. Client revenue is the revenue from banking clients in GBM and CMB and excludes Global Markets trading revenue, Principal Investments, Business Banking and non-customer revenue, for example allocations from Corporate Centre. Inbound revenue, which is client revenue booked in a country where the relationship is managed in a different country, as a percentage of total client revenue booked in Asia
47. To be achieved over the medium to long term. Medium-term defined as 3-4 years; long-term is defined as 5-6 years
48. Source: internal and external benchmarks, data and industry experts, 2019. N. America and Japan only include Private Banking; AuM number are inclusive of Insurance
49. Includes APAC ex-Japan onshore and offshore (booked in HK, Singapore and global centres)
50. Inclusive of Premier & Jade deposits and AUM, GPB client assets and AMG AUM
51. On a wealth AUM and GPB client assets basis
52. Of target client base within CMB
53. Comprised of 3K Pinnacle wealth planners and >2K client facing wealth managers
54. Wealth balances include Premier & Jade deposits and AUM
55. AMG AUM also included as part of Premier, Jade and GPB balances
56. To be achieved over the medium to long term, including doubling GPB PBT and RoTE
57. By AUM in the medium to long-term
58. With presence in 10 cities (3 hubs and 7 satellite cities)
Footnotes
59. International market share calculated using RfI Group - 20H1 International Banking Report. Mass affluent proportion refers to Jade and Premier
60. Source: World Bank, 2019
61. As at 16 February 2021
62. In January 2021
63. Technology headcount includes: full time equivalent (FTE) employees, contractors and third party service providers
64. Includes Operations within global business and functions, as well as in the Digital Business Services function
65. Should the Group find itself in an excess capital position absent compelling investment opportunities to deploy that excess
66. The Group will review whether to revert to paying quarterly dividends at or ahead of its 2021 results announcement in February 2022
67. Senior Management 'personnel represented by: Layer 3 i.e. direct reports of the Global Executive Committee (GEC); and Layer 4 i.e. direct reports of Layer 3
68. Eastern franchise is comprised of Asia Pacific and the Middle East. Western franchise is the rest
69. Based on latest available rankings; GLCM & GTRF source Oliver Wyman/Coalition benchmarking report as of FY19; Securities Services and FX source Coalition as of 1H20; Fixed Income source Coalition as of 1H20; DCM, Loans and M&A source Dealogic FY20, focus Emerging Asia (Asia ex-Japan DCM G3 Volume by Bookrunner, Loans Asia ex-Japan marketed revenues by Bank and M&A APAC Volume by Advisor excluding Japan, Australia, Korea and China domestic). Footnote Source: Coalition Greenwich Competitor Analysis. Analysis based on HSBC internal business structure and internal revenues. GLCM as of FY19, based upon the following peer group: Barc, BofA, BNPP, CACIB, Citi, DB, LBG, JPM, UniCredit, SCB, SG, WFC. GTRF as of FY19, based upon the following peer group: Barc, BofA, BNPP, CACIB, Citi, DB, MUFG, ING, JPM, SANT, SCB, SG, STANB, WFC. Securities Services as of 1H20, based upon the following peer group: BNPP, BNYM, BBH, CACEIS, Citi, DB, JPM, NT, RBC, SCB, State Street. FX and Fixed Income as of 1H20, based upon the following peer group: Barc, BofA, BNPP, Citi, CS, DB, GS, JPM, MS, SCB, SG, NWM, UBS, NOM.
70. Client revenue from transactions booked in the East where client relationships are managed in the West
71. Capital markets and Advisory: all Banking products to CMB. FX: all Markets products to CMB + FX products to Retail. Wealth: all Markets products to Private Banking + rest of Markets products to Retail. Referrals includes AMG products to GBM customers, EBS and Private Banking referrals
72. Client revenue is based on HSBC internal client management information and differs from reported revenue. Client revenue is the revenue from banking clients in GBM and CMB and excludes Global Markets trading revenue, Principal Investments, Business Banking and non-customer revenue, for example allocations from Corporate Centre. Analysis considers all CMB Business Banking clients to be domestic clients
73. For GBM, a client is considered as international if they hold a relationship with HSBC in two or more markets, and generate over $10k annually in client revenue across all products; for CMB, a client is considered as international if they either hold a relationship with HSBC in two or more markets, or provide GTRF and FX product revenue greater than or equal to $10k annually
74. Domestic client revenue is client revenue that is booked in the same market in which the primary client relationship is managed. Cross-border client revenue is client revenue that is booked in a different market from where the primary client relationship is managed
75. Source: Dealogic. Volume shows the full (non-apportioned) amount of financing raised in transactions in which HSBC led or co-led
76. Excludes FY20 Corporate Risk Solutions revenue. Including this, Capital markets gross revenue increased by $228m or 13%
77. Oliver Wyman Coalition Global Transaction Banking benchmarking survey 2020; December 2020
78. Source: HKMA
79. Source: Bank of England
80. Source: The Institute of Customer Service
81. For a number of the metrics outlined, 2020 was a transition year. For further details, including the high-level framework for how we are looking to measure the progress on our new climate ambition, see the ESG review on page 42 of the 2020 Annual Report and Accounts.
82. Our customer satisfaction performance is based on improving from our 2017 baseline. Our scale markets are Hong Kong, the UK, Mexico, the Pearl River Delta, Singapore, Malaysia, the UAE and Saudi Arabia
83. Where a quarterly trend is presented on the Income Statement, all comparatives are re-translated at average 4Q20 exchange rates
84. From 1st July 2018, Argentina was deemed a hyperinflationary economy for accounting purposes
85. Where observable long-tenor interest rates are at or close to zero, the -100bps stress sensitivity allows for the impact of negative interest rates. Additionally, the inverse impacts on profit after tax and total equity from interest rate changes is due to changes in risk discount rates which impact the present value of in-force long-term insurance business
86. Equity market investments in the Insurance manufacturing business are mainly benchmarked to MSCI World index (c.50%), MSCI Asia excl. Japan (c.50%); rebased to 100
87. A change in reportable segments was made in 2Q20. Comparative data have been re-presented accordingly
88. YTD, annualised. RoTE by Global Business excludes significant items and the UK bank levy. RoTE methodology annualises Profits Attributable to Shareholders, including ECL, in order to provide a returns metric. RoTE by Global Business for 4Q20 considers AT1 Coupons on an accruals basis, vs. Reported RoTE where it is treated on a cash basis
89. Where a quarterly trend is presented on the Balance Sheet, all comparatives are re-translated at 31 December 2020 exchange rates
90. A reconciliation of reported RWAs to adjusted RWAs can be found in the 'HSBC Holdings plc 4Q 2020 Datapack'
91. Embedded value in insurance manufacturing is equal to the overall balance sheet equity, including PVIF (present value in-force)
92. Asian Life Insurance company of the year Award at 24th Asia Insurance Industry Awards 2020
93. Bloomberg Businessweek Financial Institution Awards 2020
94. Association of British Insurers, as at Q3 2020
95. Total includes POCI balances and related allowances
96. 'Exited payment holidays' is defined as customers leaving a payment holiday agreements without requiring further lending relief and with payment behaviour.
97. Based on customers exiting payment holiday agreements that have passed one regularly scheduled payment date in 5 markets (the UK, Malaysia, Mexico, the US and Australia)
98. Differences between shareholders' equity and tangible equity drivers primarily reflect goodwill and other intangible impairment, PVIF movements and amortisation expense within 'Profit Attributable to Ordinary shareholders', FX on goodwill and intangibles within 'FX', and intangible additions and other movements within 'Other'
99. HSBC's insurance business has exposure to the oil and gas industry via investment-grade bond holdings which are excluded from these charts and tables. The majority of the credit risk of these instruments is borne by policyholders
100. Risk measure, excludes repos and derivatives. Guarantees are excluded from tables and charts. Oil & gas excludes 4Q20 guarantees of $5.2bn (3Q20: $4.9bn); Aviation excludes 4Q20 guarantees of $0.5bn (3Q20: $0.5bn); Restaurants and leisure excludes 4Q20 guarantees of $0.2bn (3Q20: $0.2bn); Retail excludes 4Q20 guarantees of $4.6bn (3Q20: $3.9bn)
101. Includes aircraft lessors. Aircraft lessors that are part of a banking group are not included in aviation exposures
102. Includes offset mortgages in first direct, endowment mortgages and other products
103. Excludes Private Bank
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 sell or solicitation of any offer to purchase any securities or other financial instruments or any advice or recommendation in respect of such securities or other financial instruments.
This Presentation, which does not purport to be comprehensive nor render any form of legal, tax, investment, accounting, financial or other advice, has been provided by HSBC Holdings plc (together with its consolidated subsidiaries, the "Group") and has not been independently verified by any person. You should consult your own advisers as to legal, tax investment, accounting, financial or other related matters concerning any investment in any securities. No responsibility, liability or obligation (whether in tort, contract or otherwise) is accepted by the Group or any member of the Group or any of their affiliates or any of its or their officers, employees, agents or advisers (each an "Identified Person") as to or in relation to this Presentation (including the accuracy, completeness or sufficiency thereof) or any other written or oral information made available or any errors contained therein or omissions therefrom, and any such liability is expressly disclaimed.
No representations or warranties, express or implied, are given by any Identified Person as to, and no reliance should be placed on, the accuracy or completeness of any information contained in this Presentation, any other written or oral information provided in connection therewith or any data which such information generates. No Identified Person undertakes, or is under any obligation, to provide the recipient with access to any additional information, to update, revise or supplement this Presentation or any additional information or to remedy any inaccuracies in or omissions from this Presentation. Past performance is not necessarily indicative of future results. Differences between past performance and actual results may be material and adverse.
Forward-looking statements
This Presentation may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking statements with respect to the financial condition, results of operations, capital position, strategy and business of the Group which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "project", "plan", "estimate", "seek", "intend", "target" or "believe" or the negatives thereof or other variations thereon or comparable terminology (together, "forward-looking statements"), including the strategic priorities and any financial, investment and capital targets described herein. Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant stated or implied assumptions and subjective judgements which may or may not prove to be correct. There can be no assurance that any of the matters set out in forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. The assumptions and judgments may prove to be incorrect and involve known and unknown risks, uncertainties, contingencies and other important factors, many of which are outside the control of the Group. Actual achievements, results, performance or other future events or conditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks, uncertainties and other factors (including without limitation those which are referable to general market conditions, regulatory changes or due to the impact of the Covid-19 outbreak). Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at the date the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to update, revise or supplement them if circumstances or management's beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. No representations or warranties, expressed or implied, are given by or on behalf of the Group as to the achievement or reasonableness of any projections, estimates, forecasts, targets, prospects or returns contained herein.
Additional detailed information concerning important factors that could cause actual results to differ materially from this Presentation is available in our Annual Report and Accounts for the fiscal year ended 31 December 2019 filed with the Securities and Exchange Commission (the "SEC") on Form 20-F on 19 February 2020 (the "2019 Form 20-F"), our 1Q 2020 Earnings Release furnished to the SEC on Form 6-K on 28 April 2020 (the "1Q 2020 Earnings Release"), our Interim Financial Report for the six months ended 30 June 2020 furnished to the SEC on Form 6-K on 3 August 2020 (the "2020 Interim Report"), our 3Q 2020 Earnings Release furnished to the SEC on Form 6-K on 27 October 2020 (the "Q3 2020 Earnings Release") as well as in our Annual Report and Accounts for the fiscal year ended 31 December 2020 available atwww.hsbc.comand which we expect to file with the SEC on Form 20-F on 24 February 2021 (the "2020 Form 20-F").
Alternative Performance Measures
This Presentation contains non-IFRS measures used by management internally that constitute alternative performance measures under European Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with SEC rules and regulations ("Alternative Performance Measures"). The primary Alternative Performance Measures we use are presented on an "adjusted performance" basis which is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the underlying trends in the business.
Reconciliations between Alternative Performance Measures and the most directly comparable measures under IFRS are provided in our 2019 Form 20-F, our 1Q 2020 Earnings Release, our 2020 Interim Report, our 3Q 2020 Earnings Release and our 2020 Form 20-F, when filed, each of which are available atwww.hsbc.com.
Information in this Presentation was prepared as at 23 February 2021.
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HSBC Holdings plc published this content on 23 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 February 2021 08:51:07 UTC.
