HSBC Latin America Barclays investor roadshow Sao Paulo Victor - PowerPoint PPT Presentation

HSBC Latin America Barclays investor roadshow Sao Paulo Victor Jimenez Chief Financial Officer, HSBC Latin America 6 November 2012

Forward-looking statements This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in HSBC Holdings plc Interim Report 2012 and Interim Management Statement issued on 05 November 2012. Past performance cannot be relied on as a guide to future performance. 1

Agenda World economic outlook 1 The Latin America region 2 Importance of the region to HSBC 3 Strategic direction 4 Business performance and progress in the region 5 Closing remarks 6 2

1. World economic outlook

Economic indicators Improved Latin American fundamentals beyond world average GDP growth Export growth (%) End of year (%) 4.4 2.4 Fiscal budget balance Consumer spending (domestic demand) (% of GDP) Growth y-o-y (%) 2.2 4 Source: HSBC Global research, Global economics 4Q12

World economy size GDP 2010: USDbn 40,160 2050: USDbn 122,722 Economic growth in Asia and Latin America will rebalance the world economy 5 Source: HSBC Research – The World in 2050 1 The World in 2010 and 2050 using 2000 exchange rates

Importance of Latin America in the future Income per capita in 2050 Top economies by 2050 Multiple over GDP (USDtn) 2010 income 24.6 China 7.3x 22.3 US 1.5x 8.2 India 6.4x Japan 6.4 1.6x 3.7 Germany 2.1x UK 3.6 1.8x 3.0 2.9x Brazil 2.8 3.5x Mexico France 2.8 1.7x 2.3 2.0x Canada 2.1 4.3x Turkey 2.5 6 Source: HSBC Research – The World in 2050

2. The Latin America region

Latin America Macroeconomics Economic recovery and positive perspectives 8 Source: HSBC Global Research, Latin America economics 4Q12

Latin America Macroeconomics Sound government and monetary policies 9 Source: HSBC Global Research, Latin America economics 4Q12

Latin America Demography 550 million people in 2010… 600 million people in 2020… 90 - 94 90 - 94 80 - 84 80 - 84 70 - 74 70 - 74 60 - 64 30 million 60 - 64 additional 50 - 54 50 - 54 economically 40 - 44 40 - 44 active 30 - 34 population 30 - 34 (20-64 years) 20 - 24 20 - 24 10 - 14 10 - 14 0 - 4 0 - 4 0 10 20 30 40 50 60 0 10 20 30 40 50 60 Demographic bonus: increase in the levels of economically active population Upward mobility: poverty reduction, growth of middle and upper classes 10 Source: UN population projections and HSBC estimates

Latin America The region has increased its openness to trade and is well diversified US Europe Asia Other Argentina 5.5 17.0 14.7 62.8 Brazil 10.1 20.7 21.6 47.6 Chile 11.3 18.2 26.5 44.1 Colombia 42.4 17.1 5.4 35.1 Mexico 78.7 5.9 4.1 11.3 Panama 15.2 12.7 10.1 62.0 Peru 15.3 20.7 20.7 43.3 Uruguay 3.0 18.8 16.1 62.0 Venezuela 39.9 5.0 16.6 38.5 1 LatAm 36.6 13.1 13.5 36.8 11 Source: HSBC Global Research, Latin America economics 4Q12 1 Other: Africa, Oceania and intra-regional trade

Latin America Connectivity fast growing • Trade between Latin America and other regions was USD1.6 trillion 1 in 2011 (5% of world trade) • Latin America trade will grow from USD1.6 to USD3.0 trillion by 2020 (7.0% CAGR) 1% 42% 17% 25% 4% 11% 1 • Latin America includes some of the fastest growing cross regional trade corridors (e.g. China to Brazil, 37% CAGR and Latin America to Asia, 20% CAGR) 1 Intra-regional using exports only. 12 Source: International Trade Centre. Figures considering merchandise trade and continental LatAm.

Latin America Credit penetration opportunity Domestic credit (% GDP) 214% 127% 85% 81% 49% LatAm average 19% 13% Argentina Mexico Brazil Chile Panama China United Kingdom Low financial domestic credit / GDP penetration, but improving following economic growth and stable environment 13 Source: International Monetary Fund

Latin America Political outlook Latin America elections Brazil Year: 2010 President elected: Dilma Rousseff  The current Latin American political outlook for 2012 and 2013 is one of continuity, due to the general positive economic Mexico Year: 2012 environment President elected: Enrique Peña Nieto Argentina  All presidential and local elections in the region took place Year: 2011(re-elected) under a peaceful environment, without any social consequence President elected: Cristina Fernandez Panama  Public safety has been an active matter on the political and Year: 2009 President elected: Ricardo electoral agenda of most of the countries throughout the region Martinelli Chile Year: 2010  Consolidation of independent and solid institutional entities President elected: (Central Banks, electoral institutes) Sebastian Piñera Colombia Year: 2010 President elected: Juan Manuel Santos 14

3. Importance of the region to HSBC

Brazil and Mexico are strategically important countries for HSBC • Brazil, Mexico and Argentina have been included in HSBC´s Strategy as "Priority Growth Markets" Brazil and Mexico are the 4 th and 7 th largest PBT • contributors to the Group in 1H12 • The Brazilian and Mexican Retail Banking and Wealth Management footprints are amongst the largest in the Group... • 2nd and 3rd largest branch networks • Large ATM network (more than 6,000 in Mexico and more than 5,000 in Brazil) 1 16 1.Figures as of June 2012 Source: HSBC Mexico and Brazil interim press releases

Importance of Latin America to the Group Share of GDP 2012e (%) 1 No. of offices per country 2 Country profit contribution 1H12 USDm 3 Top 3 Latin Latin countries: America: America: ~68% ~33% ~10% Sources: 17 1. IMF, World Economic Outlook, April 2012 2. HSBC International Network 3. 2012 HSBC Holdings plc Interim report, Figures in USD million underlying basis

4. Strategic direction

Group Strategy Key execution metrics Progress to date  Disposals and closures of non-strategic /  6 transactions to dispose of Capital Deployment underperforming businesses or close businesses Five Filters  Turnaround of strategically relevant businesses  c. USD220m sustainable savings in 2011 and c. USD200m for 2012 YTD.  Sustainable cost saves by 2013 Cost Efficiency  Global functions re-engineering  Simplify and delayer organisation across the Region  Continue to invest in best-in-class  New organisational culture Compliance and operational risk focused on the mitigation and capabilities management of risks  3Q12 yoy revenue growth in  Revenue growth in faster growing Brazil and Argentina Growth markets  Higher yielding portfolio mix in RBWM  Higher average lending balances in CMB 19

Group Strategy Committed to delivering on our financial targets Efficiency Profitability Capital Common equity tier 1 ROE target of CER target of ratio of 12 – 15% 48 – 52% 9.5 – 10.5% 20

Five Filters Reduced fragmentation in Latin America Costa Rica Full exit El Salvador Full exit Honduras Full exit Priority Markets Exit RBWM; become network market to  Argentina Chile Footprint support CMB, GBM  Brazil simplification Onshore exit; move to rep office model Colombia  Mexico Onshore exit; move to rep office model* Peru Onshore exit; move to rep office model Uruguay Full exit Paraguay Disposal of general insurance Disposal of Argentina non-core Disposal of pensions funds management Mexico businesses (Afore); general insurance 21 * Planned

Latin America Footprint June 2012: More than 2,400 branches throughout June 2012: Approximately 2,100 branches throughout 15 countries 4 countries Presence in: Main presence in: Mexico Mexico Guatemala Panama El Salvador Brazil Honduras Argentina Nicaragua Costa Rica Panama Colombia Peru Venezuela Brazil Paraguay Impact: Uruguay - Reduced RWA’s and FTE’s Chile - No general insurance businesses - Capital availability Argentina - Reduced impact in PBT and Branch network 22

Latin America Strategic direction and actions overview Retail Banking and Wealth Commercial Banking Global Banking and Markets Management  Move from a product  Connect corporate  Develop unique offerings based oriented approach to a customers throughout Latin on international network, e.g., client centric strategy America and main global RMB settlements centres  Invest in distribution  Capture growth opportunities in  Develop tailored financial channels Corporate and Business Banking solutions for high growth segments, particularly in  Leverage Global companies international customers Propositions (Premier,  Cross-selling between  Drive collaboration revenues with advance) segments, products and all other Global Businesses  Strong cross referrals geographies  Continue optimising centralised among business lines business platforms: Dedicated inter-regional desks 23