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
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