HSBC Holdings plc 2Q20 Results Presentation to Investors and Analysts
Noel Quinn Group Chief Executive
Strategy 2Q20 results Appendix Highlights Resilient Asia and strong Global Markets performance; 1H20 profits challenged in Europe, the US and the 1 NRFB due to high ECL. Reported 2Q20 PBT of $1.1bn, down 82% vs. 2Q19; adjusted PBT of $2.6bn down 57% 2 2Q20 ECL of $3.8bn, primarily reflecting forward economic guidance updates, particularly in the UK 3 Good cost control and discipline, 2Q20 adjusted costs of $7.3bn down 7% vs. 2Q19 Strong funding, liquidity and capital; adjusted deposit growth of $85bn vs. 1Q20, CET1 ratio 1 of 15.0% 4 We are implementing the 2020 – 2022 plan at pace; reducing costs and RWAs, and redeploying 5 investment and capital into areas of faster growth and higher returns A reconciliation of reported results to adjusted results can be found on slide 18, the remainder of the presentation unless otherwise stated, is presented on an adjusted basis 2
Strategy 2Q20 results Appendix Global recovery has been uneven; 1H20 performance reflected our strength and resilience in Asia Largely resilient activity in Asia Revenue has held up in Asia Certain markets have been less Adjusted revenue, $bn Real GDP x% impacted by the pandemic 4Q19 1Q20 2Q20 Trade finance Corporate client Hong Kong retail growth YoY 4 market share 2 , FX volumes, card transaction Mainland China 5 Hong Kong Countries which experienced the negative Asia-Pacific Asia-Pacific, $bn volume, impacts of the Covid-19 pandemic earlier and indexed YoY 3 reacted quickly / firmly were largely able to 0.8 4.7 4.6 10.2% 0.8 4.4 0.7 exit lockdown earlier 9.6% 257253 105 101 1H20 performance in Asia supported by: 220 Loans: up $3bn (1%) to $475bn vs. 1H19 72 Deposits: up $47bn (7%) to $723bn vs. 1H19 6.0 (6.8) 3.2 (3.0) (8.9) (6.5) 4 Wealth balances from our Wealth business ASEAN 6 India 5 stable at $0.7tn Strong GBM performance with gains in DCM 0.8 0.8 0.8 0.8 0.7 0.7 and ECM market shares Asia ECL of $1.8bn, which includes $0.8bn in Singapore, largely from a single client 1Q 1Q 4Q 1Q 2Q Jan AprJun (7.0) 4 (25.1) 7 4.2 1.1 4.1 3.1 ‘19 ‘20 ‘19 2020 2020 3
Strategy 2Q20 results Appendix The Group has responded to the challenges posed by the pandemic, demonstrating our resilience in supporting clients, employees, communities and the economies we serve Supporting our employees, communities, and economies Supporting our clients remotely HSBC’s strengths HSBCnet* mobile downloads, 000s Restructuring activity paused for most of 2Q to focus on supporting employees and customers 157% Strong Strong share of government and other payment 52.1 balance sheet schemes ; provided c.$52bn of relief to wholesale 20.3 customers and c.$30bn of relief to retail customers through CET1 ratio 1 : 15.0%, lending (including government) schemes and deferrals Total capital ratio 1 : 20.7% 1H19 1H20 Total capital 1 : $177bn Supported clients’ funding and liquidity needs with Mobile payments value increased over $1.15tn of loan, DCM and ECM financing raised for 220% vs. 2Q19 to $71.4bn GBM and CMB clients in 1H20 8 Digital wealth sales, % change YoY 12 ESG: continued leadership in sustainable finance; ranked #1 +76% Canada in Sustainable Finance Bonds; $48bn raised from 24 social and Covid-19 relief bonds 8 ; awarded Asia, Middle East and Singapore +44% Deep liquidity Western Europe’s Best Bank for Sustainable Finance 9 HK +38% US +33% High Quality Liquid Assets of $654bn, Customer satisfaction jumped : double-digit Net LCR of 148%, Promoter Score (NPS) rises in several WPB markets 10 ; Malaysia +30% Deposits up $133bn YTD to $1.5tn Trade, GLCM servicing and UK MME achieved their Mainland China +29% highest ever NPS in 2Q; voted #1 Standout Dealer for UAE +25% Global Corporates in FX 11 *HSBCnet is a HSBC digital platform for corporate clients 4
Strategy 2Q20 results Appendix Transformation programme: Groundwork laid in 1H20 to accelerate our plans as the global economic recovery strengthens Group-level transformation milestones Transformation programmes in Europe, US, GBM Adjusted costs: 1H20 down 5% vs 1H19; 2Q20 down 7% vs 2Q19 GBM: • $300m cost programme saves realised to date, with a further Formed RWA Optimisation Unit and reduced RWAs by $21bn in 1H20 as estimated $500m expected in 2H20 part of our $100bn Group RWA reduction programme • Restructuring-related headcount reductions were paused for most De-layered organisational structure by removing regional management of 2Q20, but resumed in late June; will continue to manage structure and central management, and combined Global Markets and responsibly Securities Services businesses WPB: US: • Creation of Wealth and Personal Banking from the combination Reduced branch footprint by 80, exceeding original 30% reduction target of RBWM and GPB is complete, leveraging expertise and for 2020 technological capabilities for >39m customers On track to consolidate select fixed income activities with those in London, • Wealth balances grew 3% vs. 1H19 to over $1.4tn despite market and to reduce Global Markets RWAs in the US by c.$5bn / c.45% by end- volatility 2020 Integration of CMB and Global Banking’s back-office infrastructure Europe / NRFB: is progressing well: Simplified new management structure is in place • International account openings were up 12% vs.1H19, while on- Committed to RWA targets announced in Feb 2020; execution to ramp up boarding times have reduced by 32% as economies recover from Covid-19 5
Strategy 2Q20 results Appendix Our footprint and newly formed WPB business positions us to capture the global wealth opportunity; Pinnacle platform launched to step up our wealth business in mainland China Launched Pinnacle, our digital wealth planning and insurance services in WPB positioned to drive growth from the global wealth opportunity mainland China Wealth balances 13 Customer growth , m WPB, $tn Jade and Premier Initial focus is on New-to-Bank affluent clients in China through personal wealth planner business 6% 3% 4.3 1.4 1.4 4.1 First batch of 100 digitally-enabled wealth planners on-boarded in Rest of Guangzhou and Shanghai; plan is to reach 2,000-3,000 planners within Rest of World World four years 0.7 0.7 Asia 1.6 Asia 1.5 Amplified by the new Greater Bay Area (‘GBA’) Wealth Connect programme 14 , which facilitates cross-boundary investment by GBA 1H19 1H20 1H19 1H20 residents in wealth management products distributed by banks in the GBA HSBC Asset Management AUM up 5% (1H20 vs 1H19) to $521bn Aim to ramp up expansion in GBA and Yangtze River Delta by 2021; Private Banking client assets up 4% (1H20 vs 1H19) to $353bn platform licenses will enable HSBC wealth businesses to collaborate in order to better serve clients 6
Ewen Stevenson Group Chief Financial Officer
Strategy 2Q20 results Appendix 2Q20 results summary $m 2Q20 2Q19 Δ Net interest income of $6.9bn, down $0.7bn (9%) vs. 2Q19 NII 6,871 7,541 (9)% impacted by 1Q20 rate cuts Non interest income 6,279 6,125 3% Non interest income of $6.3bn, up $0.2bn (3%), reflecting strong trading revenue in GBM and positive market impacts in Revenue 13,150 13,666 (4)% insurance manufacturing ECL (3,832) (519) >(100)% Adjusted revenue of $13.2bn, down $0.5bn (4%) was positively Costs (7,262) (7,828) (7)% impacted by $0.5bn increase in volatile items Associates 537 708 (24)% ECL of $3.8bn, reflects updates to forward economic guidance. Adjusted PBT 2,593 6,027 (57)% particularly in the UK ring-fenced bank Significant items and FX translation (1,504) 167 >(100)% Adjusted costs of $7.3bn down $0.6bn (7%), reflecting Reported PBT 1,089 6,194 (82)% management actions, partly offset by continued investments Profit attributable to ordinary shareholders 192 4,373 (96)% Adjusted PBT of $2.6bn, down $3.4bn (57%); Reported PBT of $1.1bn, down $5.1bn (82%), 2Q20 significant items included a EPS 15 , $ 0.01 0.22 $(0.21) write down of software intangibles of $1.2bn 17 2Q20 lending down $29bn (3%) as customers repaid 1Q20 $bn 2Q20 1Q20 Δ drawdowns and retail balances fell as customers saved more and Customer loans 1,019 1,048 (3)% spent less; Strong deposit growth of $85bn (6%) vs. 1Q20 as Customer deposits 1,532 1,447 6% customers built and maintained liquidity balances Reported RWAs 854.6 857.1 (0)% 1H20 RoTE of 3.8% 18 CET1 ratio 1 , % 15.0 14.6 0.4ppt TNAV per share decreased by $0.10 vs. 1Q20, including a decrease TNAV per share 16 , $ of $0.18 per share in own credit adjustments 7.34 7.44 $(0.10) 8
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