HSBC Holdings plc 3Q18 Results Presentation to Investors and Analysts Date: 29 October 2018
Our strategic priorities and financial targets Strategic priorities Financial targets Accelerate growth from our Asian franchise 1 Build on strength in Hong Kong Invest in PRD, ASEAN, and Wealth in Asia (incl. Insurance and Asset Management) RoTE 1 >11% by 2020 Be the leading bank to support drivers of global Deliver growth investment: China-led Belt and Road Initiative and the from areas of transition to a low carbon economy strength Complete establishment of UK ring-fenced bank, 2 increase mortgage market share, grow commercial customer base, and improve customer service Positive adjusted Gain market share and deliver growth from our Costs 3 jaws international network Turn around our US business Turnaround of 4 low-return Improve capital efficiency ; redeploy capital into higher businesses 5 return businesses Create capacity for increasing investments in growth and 6 technology through efficiency gains Sustain dividends Build a bank for Enhance customer centricity and customer service through long-term 7 the future that through investments in technology Capital earnings capacity puts the customer Invest in digital capabilities to deliver improved customer and of the businesses at the centre service dividend Share buy-backs Expand the reach of HSBC, including partnerships subject to Safeguard our customers and deliver industry-leading regulatory approval financial crime standards Empower our 8 Simplify the organisation and invest in future skills people 1
Key messages 3Q18 key messages 9M18 Reported PBT (9M17: $14.9bn) 1 Reported PBT of $5.9bn, 28% higher than 3Q17; $6.2bn adjusted PBT, 16% higher than 3Q17 $16.6bn 12% Adjusted PBT (9M17: $17.7bn) Total adjusted revenue increased $1.1bn to $13.8bn vs. 3Q17; good business momentum with $18.3bn 2 4% revenue up $1.6bn or 12% across our global businesses; Corporate Centre down $0.4bn RoE 2 (9M17: 8.2%) 9.0% Adjusted operating costs of $7.7bn were $0.2bn or 2% higher than 3Q17, reflecting increased 0.8ppt 3 investment in growth and technology; in line with guidance Reported RoTE 2 (9M17: 9.3%) 10.1% 0.8ppt $15bn or 2% lending growth compared with 2Q18, and $58bn or 6% compared with 1.1.18, on a 4 constant currency basis and excluding red-inked balances A/D ratio (9M17: 70.7%) 73.0% 2.3ppt CET1 ratio 3 5 Strong capital base with a common equity tier 1 ratio of 14.3% (9M17: 14.6%) 14.3% 0.3ppt 2
Financial overview Key financial metrics 9M17 9M18 Key financial metrics Return on average ordinary shareholders’ equity 2 8.2% 9.0% Return on average tangible equity 2 9.3% 10.1% Jaws (adjusted) 4 (1.3)% (1.6)% Dividends per ordinary share in respect of the period $0.30 $0.30 Earnings per share 5 $0.50 $0.56 Common equity tier 1 ratio 3 14.6% 14.3% Leverage ratio 6 5.7% 5.4% Advances to deposits ratio 70.7% 73.0% Net asset value per ordinary share (NAV) $8.35 $8.13 Tangible net asset value per ordinary share (TNAV) $7.29 $7.01 Reported results, $m Adjusted results, $m 3Q18 ∆ 3Q17 ∆ % 9M18 ∆ 9M17 ∆ % 3Q18 ∆ 3Q17 ∆ % 9M18 ∆ 9M17 ∆ % Revenue 13,798 820 41,085 1,941 Revenue 13,841 1,123 41,376 1,698 6% 5% 9% 4% LICs / ECL (507) (59) (914) 197 LICs / ECL (507) (78) (914) 172 (13)% 18% (18)% 16% Costs (7,966) 580 (25,515) (526) Costs (7,738) (155) (24,108) (1,330) 7% (2)% (2)% (6)% Associates 597 (39) 1,978 159 Associates 597 (29) 1,978 94 (6)% 9% (5)% 5% PBT 5,922 1,302 16,634 1,771 PBT 6,193 861 18,332 634 28% 12% 16% 4% 3
Financial overview Reconciliation of Reported to Adjusted PBT 9M18 vs. 9M17 3Q18 vs. 3Q17 3Q17 3Q18 ∆ 3Q17 9M17 9M18 ∆ 9M17 Reported profit before tax 4,620 5,922 1,302 14,863 16,634 1,771 Currency translation (104) - 104 187 - (187) Significant items: Fair value movements on financial instruments 45 43 (2) 290 195 (95) Revenue- Disposals, acquisitions and investment in new businesses 5 - (5) (353) 142 495 related Other 4 - (4) 11 (46) (57) Settlements and provisions in connection with legal matters (104) (1) 103 (426) 840 1,266 Costs to achieve (CTA) 677 - (677) 2,347 - (2,347) Customer redress programmes 84 62 (22) 383 162 (221) Cost-related Costs of structural reform 109 89 (20) 289 300 11 Other (4) 78 82 107 105 (2) Adjusted profit before tax 5,332 6,193 861 17,698 18,332 634 The remainder of the presentation, unless otherwise stated, is presented on an adjusted basis 4
Financial overview 9M18 Profit before tax 9M18 ∆ 9M17 Adjusted revenue by global business, $m adverse favourable +10% 4% Revenue 1,698 $41,376m 16,825 15,332 +4% 16% LICs / ECL 172 $(914)m +13% 12,449 12,002 11,189 Operating (6)% +4% (1,330) $(24,108)m 9,893 expenses >(100)% 1,309 1,361 1,142 Share of profits in 5% 94 associates and $1,978m joint ventures (448) RBWM CMB GB&M GPB Corporate Centre 9M17 9M18 4% 634 $18,332m Profit before tax Adjusted PBT by global business, $m 9M17 9M18 ∆ 9M17 ∆ % Adjusted PBT by geography, $m 9M17 9M18 ∆ 9M17 ∆ % RBWM 5,077 5,726 649 Europe 2,638 1,372 (1,266) 13% (48)% CMB 5,183 5,999 816 Asia 12,176 13,810 1,634 16% 13% GB&M 5,043 5,379 336 Middle East and North Africa 1,177 1,157 (20) 7% (2)% GPB 200 285 85 North America 1,297 1,576 279 43% 22% Corporate Centre 2,195 943 (1,252) Latin America 410 417 7 (57)% 2% Group 17,698 18,332 634 Group 17,698 18,332 634 4% 4% 5
Financial overview 3Q18 Profit before tax 3Q18 ∆ 3Q17 Adjusted revenue by global business, $m adverse favourable +14% 9% Revenue 1,123 $13,841m 5,760 +10% 5,049 (18)% LICs / ECL (78) $(507)m +15% 4,184 3,810 3,750 Operating 0% (2)% (155) $(7,738)m 3,271 expenses >(100)% 434 432 Share of profits in 154 (5)% (29) associates and $597m joint ventures (285) RBWM CMB GB&M GPB Corporate Centre 3Q17 3Q18 16% 861 $6,193m Profit before tax Adjusted PBT by global business, $m 3Q17 3Q18 ∆ 3Q17 ∆ % Adjusted PBT by geography, $m 3Q17 3Q18 ∆ 3Q17 ∆ % RBWM 1,681 2,096 415 Europe 536 908 372 25% 69% CMB 1,619 1,888 269 Asia 3,953 4,450 497 17% 13% GB&M 1,500 1,811 311 Middle East and North Africa 361 323 (38) 21% (11)% GPB 55 95 40 North America 353 472 119 73% 34% Corporate Centre 477 303 (174) Latin America 129 40 (89) (36)% (69)% Group 5,332 6,193 861 Group 5,332 6,193 861 16% 16% 6
Financial overview Revenue performance Revenue performance, $m 7 +12% Global 14,126 businesses 13,450 13,376 432 12,612 12,533 12,564 467 443 12,052 425 434 434 416 4,184 3,965 4,002 3,956 3,810 3,939 GPB 3,312 GB&M 3,750 3,550 3,648 3,271 3,212 3,194 3,387 CMB RBWM 5,760 5,468 5,283 5,019 5,049 4,966 4,937 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Corporate Centre 154 564 67 322 (198) (285) (48) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Group 12,934 13,097 12,718 12,119 13,252 13,328 13,841 revenue 7
Retail Banking and Wealth Management Strong revenue growth driven by deposit margins Balance Sheet, $bn 8 Revenue performance, $m 7 9M18 highlights +14% +3% +9% +8% 633 637 618 5,019 4,966 5,049 4,937 5,468 5,283 5,760 Adjusted PBT 349 356 (9M17: $5.1bn) 329 134 88 40 Wealth $5.7bn 1,815 Mgt. 1,595 1,642 1,522 1,515 1,469 1,406 13% (13) (40) (54) (47) 3Q17 2Q18 3Q18 Customer Customer Adjusted revenue 235 lending accounts (9M17: $15.3bn) Retail 62 181 150 141 108 118 banking 3,512 3,680 3,930 3,353 3,394 3,301 $16.8bn Customer deposits up 3% vs. and 10% 3Q17, notably in the UK and other Hong Kong 3,245 Lending up 8% vs. 3Q17, mainly Adjusted LICs/ECL 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 from mortgage growth in Hong (9M17: $0.8bn) Wealth Management excl. Insurance manufacturing Kong and the UK Adjusted revenue Retail banking Other market impacts market impacts $0.8bn Asset Management – AUM, $bn 3Q18 vs. 3Q17: Adjusted revenue up 14% 3Q18 vs. 2Q18: Adjusted revenue up 9% charge / (net release) +1% Higher margins and balances driving deposit Higher deposit revenues (up $331m) from higher Adjusted costs revenues (up $758m) margins, notably in Hong Kong and the UK 445 449 (9M17: $9.5bn) Higher insurance manufacturing ($116m), driven by Insurance manufacturing (up $105m), reflecting $10.3bn higher annualised new business premiums (up 11%) strong sales and positive actuarial assumption 9% 3Q17 3Q18 and actuarial assumption changes changes (up $54m - 3Q18: $88m, 2Q18: $34m) and Insurance – annualised new positive market impact Lower lending revenue (down $181m) driven by business premiums, $m margin compression despite higher lending balances Lower lending revenue (down $81m) driven by RoTE 9 (up $27bn or 8%) mortgage margin compression +11% Investment distribution (down $78m), due to lower Lower investment distribution revenue (down $46m), 22.8% 815 sales in Hong Kong driven by weaker investor 736 due to lower sales in Hong Kong sentiment 3Q17 3Q18 8
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