HSBC SFH (France) Investor Presentation September 2018 1 Content - PowerPoint PPT Presentation

HSBC SFH (France) Investor Presentation – September 2018 1

Content 1 HSBC SFH (France) key messages 2 2 HSBC Group 1H18 performance 4 3 HSBC France key facts 12 4 French home loan market 20 5 HSBC SFH (France) 25 6 Appendix 38 2

HSBC SFH (France) key messages 3

Issuer Cover pool • Specialised credit institution licensed as a • 100% prime home loans, all fixed-rate, 100% HSBC France Société de Financement de l'Habitat with first-lien mortgage (16%) or Prime Home Loans guaranteed by Crédit Logement (84%) 1 18 • Fully-owned by HSBC France • All originated by HSBC France (rated AA- • Jointly regulated by the European Central AA- / Aa3 / AA- ECB / ACPR / Aa3 / AA- by S&P / Moody’s / Fitch 1 ) Bank (ECB) and the Autorité de Contrôle with 100% income verification and focus Prudentiel et de Résolution (ACPR) on affluent and high net worth individuals • Programme rated AAA/Aaa by S&P and 111.1% AAA / Aaa Moody’s • Granular pool with 39k loans 1 Committed OC • Full recourse obligation of the Issuer • Voluntary over-collateralisation of 111.1%, against HSBC France above the regulatory minimum of 105% Specialised 61.0% • Weighted average indexed LTV at 61.0% Credit Inst. Average Indexed LTV 1 Supervision Market standards • Cover pool compliance monitored by an • Member of the European Specific independent Specific Controller Covered Bond Council Controller • Regulatory limits on ALM risks measured • Compliant with the Covered between the cover pool and the covered Bond Label 180 Days bonds for: • Quarterly Harmonised Liquidity - 180 days liquidity requirements Transparency Template published and monthly Asset - Maturity mismatch Maturity Cover Test published on hsbc.fr HTT • Stress tests on the renewal of the cover Mismatch • Series in EUR eligible to the level pool 1B LCR HQLA and to the • Bankruptcy remoteness of the covered Stress Tests Level 1B HQLA favourable risk-weighting 2 bonds 4

HSBC Group 1H18 performance 5

HSBC Group Key messages 2Q18 key messages 1 st half 2018 Reported PBT (1H17: $10.2bn) 1 Reported PBT of $6.0bn, 13% higher than 2Q17; $6.1bn adjusted PBT, in line with 2Q17 $10.7bn 5% Adjusted PBT (1H17: $12.4bn) Total adjusted revenue increased $0.2bn to $13.7bn vs. 2Q17; good business momentum with $12.1bn 2 2% revenue up $0.9bn or 7% in all four global businesses; Corporate Centre down $0.6bn RoE 3 (1H17: 8.8%) 8.7% Adjusted operating costs of $8.1bn were $0.6bn or 7% higher than 2Q17, reflecting increased 0.1ppt 3 investment in growth and technology; in line with 1Q18 and guidance Reported RoTE 3 (1H17: 9.9%) 9.7% 0.2ppt $26bn or 3% lending growth compared with 1Q18 and $43bn or 5% compared with 1.1.18 (on a 4 constant currency basis) A/D ratio (1H17: 70.1%) 71.8% 1.7ppt 5 Strong capital base with a common equity tier 1 ratio of 14.2% CET1 ratio 4 (1H17: 14.7%) 14.2% 0.5ppt 6

HSBC Group - Financial overview 1H18 Profit before tax 1H18 ∆ 1H17 Adjusted revenue by global business, $m adverse favourable +8% 2% Revenue 578 $27,535m 11,065 10,283 +1% 38% LICs / ECL 250 $(407)m +12% 8,265 8,192 7,439 Operating (8)% (1 175) +6% $(16,370)m 6,622 >(100)% expenses 986 929 874 Share of profits in 10% 122 associates and $1,381m joint ventures (163) RBWM CMB GB&M GPB Corporate Centre 1H17 1H18 (2)% (225) $12,139m Profit before tax Adjusted PBT by global business, $m 1H17 1H18 ∆ 1H17 ∆ % Adjusted PBT by geography, $m 1H17 1H18 ∆ 1H17 ∆ % RBWM 3,397 3,630 233 7% Europe 2,100 464 (1,636) (78)% CMB 3,564 4,111 547 15% Asia 8,223 9,360 1,137 14% GB&M 3,543 3,568 25 1% Middle East and North Africa 816 834 18 2% GPB 144 190 46 32% North America 944 1,104 160 17% Corporate Centre 1,716 640 (1,076) (63)% Latin America 281 377 96 34% Group 12,364 12,139 (225) Group 12,364 12,139 (225) (2)% (2)% 7

HSBC Group - Loan impairment charges and expected credit losses Credit outlook remains stable Loan impairment charges and expected credit losses, $m Analysis by stage as at 30 Jun 2018 Stage 3 as IAS 39 IFRS 9 Total 5 $bn Stage 1 Stage 2 Stage 3 a % of Total 2Q17 1Q18 2Q18 30 Jun 2018 Loans and advances to customers 898.9 68.8 14.2 982.2 1.4% 417 Allowance for ECL 1.3 2.0 5.3 8.7 237 161 31 Mar 2018 By global business 296 Loans and advances to customers 906.3 68.1 15.4 990.5 1.6% RBWM 254 240 CMB Allowance for ECL 1.3 2.2 5.7 9.4 119 119 GB&M 63 GPB 20 Corporate  Expected credit losses of $237m in 2Q18 related mainly to charges in RBWM, (3) (1) (2) (19) Centre (66) notably in Mexico and the UK, against our unsecured lending portfolios (86) (119)  North America ECLs benefited from a release in the oil and gas sector By region, $m Europe (14) 60 125  The credit environment remains stable - of which UK (16) 56 99 Asia 282 32 84 - of which Hong Kong 231 14 6 MENA 65 3 99 North America (32) (47) (187) Latin America 116 113 116 Total 417 161 237 8

HSBC Group - Capital Structure and Debt Issuance Group CET1 requirements Common Equity Tier 1 ratio, versus Maximum Distributable Amount (“MDA”) $22bn Buffer to 2.5% MDA 6 11.7% 14.2% CET1 ratio, down 40bps  0.7% from 1 Jan 2018 (after the IFRS9 transitional day 1 impact) 2.0% Combined buffer of 5.2% $7.2bn of profit attributable to  ordinary shareholders in the half 2.5% 14.2% $36.5bn of distributable reserves  2.0% Throughout the period from 2018  to 2020, our plan assumes our CET1 ratio will be above 14% 4.5% Fully phased CET1 ratio as requirements 7 at 30 Jun 2018 Countercyclical Buffer (CCYB) G-SII Buffer Capital Conservation Buffer (CCB) Pillar 2A Pillar 1 9

HSBC Group - Capital Structure and Debt Issuance Total capital and estimated MREL requirements 8 Regulatory capital and MREL-eligible HoldCo Senior versus regulatory requirements as a % of RWAs AT1 and Senior MREL increased in 1H18 due to  23.2% planned issuance 6.1% Tier 2 increased due to the change in regulatory capital  recognition of selected capital securities 6.5% HSBC group MREL requirement 9 for 2022 is the  3.2% greater of: − 18% of RWAs 2.4% 2.9% 18% of − 6.75% of leverage exposures RWAs 2.2% − The sum of requirements relating to each of its resolution groups We are currently evaluating HKMA proposals, and await  final rules 14.2% 11.7% Based on current assumptions, HSBC Senior MREL  issuance requirement 10 is estimated to fall in the range $60-80bn Combined buffer of 5.2% HSBC manages its capital and debt securities to meet  end-point regulatory requirements, as well as funding Known end-point Capital structure as at and other business needs requirements 2022 30 June 18; on an end- HSBC has a Multiple Point of Entry resolution strategy point basis  MREL-eligible HoldCo Senior Tier 2 AT1 CET1 10

HSBC Group - Balance sheet Customer lending 2Q18 Loans and advances to customers 11 2Q18 growth by global business and region excluding red-inked and CML balances Balances increased by $26bn from 1Q18, reflecting: Continued lending growth in Asia ($16bn) primarily in Hong Kong in term lending in  line with our strategic focus; Hong Kong mortgage growth of $2.4bn Growth since 1Q18 Growth since 1Q18 UK mortgage growth of $2.4bn Europe 8 2%  $349bn 8 RBWM $351bn 2% Loan growth compared with 1.1.18 of $43bn or 5% o/w UK 7 3% $265bn CMB $324bn 11 3% Asia 16 4% $446bn 9 4% o/w Hong GB&M $230bn 11 4% $283bn Kong 973 947 (1)% 0 944 MENA $29bn 1 2% 931 931 GPB $41bn 919 893 North 1 1% $104bn 25 America Corporate (3) (57)% 25 $2bn 25 25 Centre 25 Latin 21 1 6% $20bn America 18 1 26 3% Total $948bn 26 3% $948bn 13 Total 898 906 919 906 906 922 948 GTRF funded assets, $bn 874 1Q17 2Q17 3Q17 4Q17 IFRS 9 1.1.18 1Q18 2Q18 transition impact 258 265 268 269 263 258 265 UK Hong 235 252 258 268 268 273 283 87 81 81 82 83 Kong 75 75 Total on a Red-inked Balances excl. CML constant balances 12 balances red-inked currency basis balances 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 11

HSBC Group - Balance sheet Customer accounts 2Q18 Customer accounts 11 , $bn Customer accounts 13 , US$bn Balances increased $21bn in 2Q18: 6% CAGR Growth in Europe of $9bn, all in the UK from higher GLCM deposits  (Demand Growth in Asia of $11bn mainly from Hong Kong ($6bn or 1%) largely from term deposits)  1,025 deposits 1,000 663 1,356 1,340 1,336 1,335 1,320 1,311 0 1,293 2010 2011 2012 2013 2014 2015 2016 2017 25 25 25 25 Demand and other - non-interest bearing and Savings Time and other 25 21 demand - interest bearing 18 4 Average GLCM deposits, US$bn (Includes banks and affiliate balances) 1,275 1,290 1,295 1,315 1,311 1,311 1,310 1,331 c5% CAGR c560 c540 c500 1Q17 2Q17 3Q17 4Q17 IFRS 9 1.1.18 1Q18 2Q18 transition impact 366 361 363 359 366 370 379 UK Hong 454 465 471 475 475 472 478 Kong Total on a Red-inked Balances excl. constant balances 12 red-inked 1H16 1H17 1H18 currency basis balances 12

HSBC France key facts 13

HSBC France HSBC Group Legal Structure – Principal entities as of 1 st July 2018 14