HSBC Holdings plc Morgan Stanley, European Financials Conference 1 - PowerPoint PPT Presentation

HSBC Holdings plc Morgan Stanley, European Financials Conference 1

HSBC is a leading universal and global bank Our global footprint Diversified global businesses and regions 1 Priority Network Rep office 2016: by global business RBWM CMB GB&M GPB Adjusted revenue $18.9bn $12.9bn $14.9bn $1.7bn $50.2bn RWAs $857bn $115bn $276bn $300bn $15bn Adjusted PBT $19.3bn $5.3bn $6.1bn $5.6bn $0.3bn Customer advances $862bn $306bn $282bn $226bn $36bn Customer deposits $1,272bn $591bn $342bn $256bn $70bn By region Europe Asia MENA NAM LAM $17.3bn $23.3bn $50.2bn Adjusted revenue 2 $857bn $298bn $334bn RWAs $862bn Customer advances $337bn $365bn $1,272bn Customer deposits $447bn $632bn Middle East and North Latin PBT by region Europe Asia > 45 % 70 90 % 4 North America America Inter- Africa connected global RBWM, CMB, GB&M businesses $17.3bn $4.1bn $10.6bn $1.0bn $1.1bn $0.5bn and GPB Our network covers share balance sheets markets $2.0bn countries accounting Our international and liquidity in Corporate Centre $(2.5)bn $3.6bn $0.6bn $0.3bn $0.0bn for more than 90% of network supports addition to strong global GDP, trade and more than 45% of our $19.3bn commercial links Total $1.6bn $14.2bn $1.6bn $1.3bn $0.6bn capital flows client revenue 1. Metrics relate to 2016 and are on an adjusted basis unless otherwise stated, totals provided are for the Group and include Corporate Centre. 2 Details of reported results and a reconciliation of reported to adjusted results are included in the Appendix. 2. Amounts are non-additive across regions due to intra-HSBC items

Our universal banking model connects customers to opportunities… Total revenue synergies by Global Business Revenue 1 2016, USDbn  Global Liquidity and Cash Management from CMB 2  GTRF solutions from CMB GB&M clients 3.0  Asset management products from RBWM  FX, derivatives, and capital financing from GB&M  Investment and insurance from RBWM CMB clients 2.5  Asset Management products from RBWM  GB&M products for retail and business banking 1.1 RBWM clients solutions  Referrals from three other global businesses  Global Markets products to private clients GPB clients 0.4  Insurance and Asset Management products from RBWM Total cross-business synergies revenue 7.0  Securities services / custody (HSS) In-business  Asset management (manufacturing) 3.5 synergies 3  Insurance (manufacturing) Total revenue synergies 10.5 Cost and funding synergies 1. Cross-business synergies are presented as gross revenue and do not reflect any revenue sharing arrangement between Global Businesses 2. GLCM is now managed under GB&M. The GB&M portion is included as a revenue synergy to be a consistent with the treatment of GTRF 3 3. In-business synergies include separately managed operations that are reported within a global business line

…as does our global footprint Breakdown of international revenues by Global Group revenue classification Business Adjusted revenue Growth % of GB revenue Examples 2016 2015-16  Revenue from Total clients with an Inter- + >45% national international of client revenue presence  Liquidity and cash Client represents management solutions revenue c. 90% for a US- HQ’d GB&M 1 multinational across of GB&M revenue  Revenue from 15+ international - Domestic domestic markets businesses represents  Trade financing for a c .50% CMB 2 Canadian corporate for its operations in Hong of CMB revenue Kong  Revenue from BSM, Principal Non- Investments, Corporate represents  International account RBWM 3 / client Risk c. 20% Centre transfers with a GPB revenue Management, thumbprint of RBWM/GPB HBIO revenue 1. Excludes Principal Investments 4 2. Excludes CMB business banking 3. Excludes HASE and all insurance manufacturing revenue

Gained market share CMB and GB&M market shares RBWM market shares Global FICC Hong Kong 33.5% 34.1% market 6.5% 6.2% mortgages 6 share 1 GB&M Dec-15 Dec-16 Dec-15 Aug-16 Hong Kong UK 8.2% Trade 13.0% 7.3% 10.8% mortgages 7 Finance 2 Improving Dec-15 Dec-16 Dec-15 Dec-16 market shares RBWM Singapore Hong Kong in key market Trade 12.9% personal 27.7% 28.8% 8.6% sectors Finance 3 lending 8 Dec-15 Dec-16 Dec-15 Dec-16 Global Mexico 10.8% Cross personal 6.4% CMB 7.2% 4.2% border M&A 4 lending 9 Aug-15 Aug-16 Dec-15 Dec-16 Offshore Hong Kong RMB deposit 30.7% 30.8% 18.8% 15.1% bonds 5 share 10 Dec-15 Dec-16 2015 2016 1. Source: Citi Research 6. Market share of counts; source: mReferral Mortgage Brokerage Services 2. Source: Hong Kong Monetary Authority 7. Market share of approvals; source: Council of Mortgage Lenders, UK 5 3. Source: Monetary Authority of Singapore (MAS) Monthly Statistical bulletin 8. Source: Transunion report, Hong Kong 4. Source: Dealogic 9. Source: National Commission of Banking and Securities and based on 6 major banks in Mexico 5. Source: Bloomberg 10. Source: Hong Kong Monetary Authority; represents HSBC Group

Revenue growth Adjusted revenue by global business 2014-16 Corporate Centre USDm USDbn 51,129 During 2016, we established the Corporate Centre, to better reflect the way we manage our businesses. 50,153 Corporate centre includes Central Treasury (which (57)% 1,665 3,899 includes Balance Sheet Management) and our legacy businesses.  1,757 GPB restructuring (15)% 2014 3.9 2,079 US run-off (0.9)  Momentum in GB&M Central (0.5) treasury and CMB; RBWM broadly unchanged 45,151 46,731 Property 3% (0.1) revaluations  5% lending growth Mainly valuation Intra-group financing  differences on long- 10% growth in (0.2) transaction term debt and customer deposits associated swaps and increased interest Industrial Bank expense from TLAC / (0.1) MREL; BSM revenues dividend up during the period Other (0.4) movements 2014 2016 2016 1.7 Corporate Centre GPB RBWM, CMB and GB&M 6

Strong balance sheet Strong leverage ratio, % Strong Common equity tier 1 capital ratio, % Conservative Advances to deposits ratio, % 72.2 71.7 13.6 5.4 67.7 11.9 5.0 11.1 4.8 2014 2015 2016 2014 2015 2016 2014 2015 2016 7

Delivered consistent earnings and a stable dividend Consistency of profitability, 2007 to 2016 Consistency of dividends, 2007 to 2016 80% 65% In addition we completed $2.5bn share repurchases in the second half of 2016 and announced a further repurchase of up to $1.0bn to be completed in the first half of 2017 43% 38% 28% 32% HSBC North American peers European peers HSBC North American peers European peers Source: Individual company reports 8 1. Consistency defined as 1-10yr standard deviation / 10yr average, with a floor of zero. Profitability = reported PBT. Dividends = aggregate dividends declared. North American peers: Bank of America, Citi, JPM, RBC, Wells Fargo. European peers: Barclays, BNP, CS, Deutsche, Lloyds, Santander, Soc Gen, Standard Chartered, UBS, Unicredit

Conclusion Medium term prospects remain promising Group financial targets Despite geopolitical uncertainties, medium term prospects ROE >10% remain promising − 3% to 4% loan growth in 2017 Positive jaws Costs − Rising rates and steepening yield curves in USD and HKD (adjusted) will benefit the Group − Well positioned to capture opportunities − Encouraging start to the year for our global businesses ‒ Sustain dividend through long-term earnings capacity of the businesses 1 ‒ Contemplate share buy- Dividend and backs as and when capital appropriate, subject to the execution of targeted capital actions and regulatory approval 1. Dividend per ordinary share 9

Appendix 10 10

Appendix: 2016 Key financial metrics Key financial metrics 2015 2016 Return on average ordinary shareholders’ equity 7.2% 0.8% Return on average tangible equity 8.1% 2.6% Jaws (adjusted) (3.7)% 1.2% Dividends per ordinary share in respect of the period $0.51 $0.51 Earnings per share $0.65 $0.07 Common equity tier 1 ratio 11.9% 13.6% Leverage ratio 5.0% 5.4% Advances to deposits ratio 71.7% 67.7% Net asset value per ordinary share (NAV) $8.73 $7.91 Tangible net asset value per ordinary share (TNAV) $7.48 $6.92 Reported Income Statement, $m Adjusted Income Statement, $m 4Q16 vs. 4Q15 2016 vs. 2015 4Q16 vs. 4Q15 2016 vs. 2015 Revenue 8,984 (24)% 47,966 (20)% Revenue 11,000 (3)% 50,153 (2)% LICs (468) 72% (3,400) 9% LICs (468) 64% (2,652) (2)% Costs (12,459) (8)% (39,808) 0% Costs (8,411) 3% (30,556) 4% Associates 498 (10)% 2,354 (8)% Associates 498 (6)% 2,355 (4)% (Loss) / Profit before tax (3,445) <(200)% 7,112 (62)% Profit before tax 2,619 39% 19,300 (1)% 11