HSBC Holdings PLC · LSE:HSBA
HSBC — Debt Investor Presentation (February 2019)
39 slides from HSBC's debt investor presentation, February 2019
Slide 1: HSBC Holdings plc FY18 Results Fixed Income Investor Presentation
HSBC Holdings plc FY18 Results Fixed Income Investor Presentation
Slide 2: Contents
Contents 1 Key credit messages 2 2 Group FY18 performance 4 3 Capital structure and debt issuance 15 4 Appendix 22 1
Slide 3: Key credit messages
Key credit messages ep Hssc
Slide 4: Key credit messages
Key credit messages Diversified businesses, strong capital, funding and liquidity position As at FY18 Conservative and consistent approach to risk 18bps ECL as a % of gross 1.3% Stage 3 loans as a % of customer advances gross customer advances Other GB&M RBWM Europe Asia Diversified revenue streams,
Slide 5: Group FY18 performance
Group FY18 performance ep Hssc
Slide 6: Progress on our strategic priorities
Group FY18 performance Progress on our strategic priorities Strategic priorities Targeted 2020 outcomes FY18 performance highlights, YoY 1 Accelerate growth from Asia High single digit revenue Asia adjusted revenue of $28.7bn (+11%); Wealth in Asia Build on strength in Hong Kong growth per annum r
Slide 7: Outlook
Group FY18 performance Outlook Financial targets RoTE7 >11% by 2020 1 Growing revenues in areas of strength Continue to redeploy capital into higher return businesses and invest Costs Positive adjusted jaws 2 in technology to improve customer service and competitiveness 3 Long term drivers of re
Slide 8: Key financial metrics
Group FY18 performance Key financial metrics Reported profit before tax of $19.9bn, up $2.7bn or 16% vs. FY17 Adjusted profit before tax of $21.7bn, up $0.6bn or 3% vs. FY17 Group Return on average tangible equity of 8.6% vs. 6.8% FY17 Key financial metrics FY17 FY18 ∆ FY17 Return on average o
Slide 9: Credit performance
Group FY18 performance Credit performance $1,767m ECL in FY18; $1,713m LICs in FY17 ECL as a percentage of average gross loans and advances of 0.18% in FY18 4Q18 ECL of $853m was $358m higher than 3Q18; including a 4Q18 $165m charge in the UK relating to the current economic uncertainty Stag
Slide 10: Asset quality
Group FY18 performance Asset quality Gross loans and advances to Loans and advances to customers Stage 3 and impaired loans and Change in LICs/ECL, $bn Customers - $990bn of ‘Strong’ or ‘Good’ credit advances to customers, $bn quality, $bn Total gross customer loans and IAS 39 IFRS 9 29.3 3.9 advanc
Slide 11: Loans and advances to customers by type
Group FY18 performance Loans and advances to customers by type Retail Mortgage average LTVs (portfolio, indexed) Wholesale loan book ($bn, gross loans and advances to customers) UK: 49 New lending: 65% % HK: 42 New lending: 48% % Non-bank financial institutions 10.3% Manufacturing 17.7% Other 12.9%
Slide 12: Diversified revenue streams, pivoting to Asia
Group FY18 performance Diversified revenue streams, pivoting to Asia Diversified revenue streams by global business, region and type Strategic priority 1 is to accelerate growth from our Asia franchise and be the leading bank to support drivers of global investment 2018 adjusted revenue by globa
Slide 13: Funding and liquidity
Group FY18 performance Funding and liquidity Group consolidated LCR15 High Quality Liquid Assets16 (HQLA) as at 31 Dec 18 154% 142% 136% Level 2b 116% Level 2a 2% 13% $ 567 bn 2015 2016 2017 2018 85% Level 1 Advances to deposits ratio, % 71.7% 70.6% 72.0% 67.7% Short term wholesale funding 13 % CP,
Slide 14: Capital position
Group FY18 performance Capital position FY18 vs. FY17 CET1 ratio movement, % 14.0% CET1 ratio, down 0.5ppts from 31 1.5 (1.2) December 2017, mainly as a result of: 14.5 14.6 (0.2) 0.1 (0.3) (0.2) − Dividends net of scrip (-1.2ppts) (0.2) 14.0 − RWA growth (-0.3ppts) − Share buyback (-0.2ppts) − Ad
Slide 15: Capital position versus requirements
Group FY18 performance Capital position versus requirements Common Equity Tier 1 ratio, versus Maximum Distributable Amount (“MDA”) 14.0% CET1 ratio as at 31 December 2018 Buffer to $22bn MDA17 2.6% From 1 January 2019, our Pillar 2A requirement is 11.4% 3.0% of RWAs, of which 1.7% must be met b
Slide 16: Capital structure and debt issuance
Capital structure and debt issuance 15
Slide 17: Progress toward meeting MREL requirements
Capital structure and debt issuance Progress toward meeting MREL requirements $62bn stock of MREL-eligible HoldCo Senior built in 3 years Outstanding MREL-eligible senior by currency $bn-equivalent 62.1 EUR 19% 42.6 6% GBP 31.1 $ 62 bn 5% JPY 66% 4% USD Other 2016 2017 2018 Maturity profile of HoldC
Slide 18: Total capital and estimated MREL/TLAC requirements
Capital structure and debt issuance Total capital and estimated MREL/TLAC requirements20 Regulatory capital and MREL-eligible HoldCo Senior versus regulatory requirements as a % of RWAs HSBC comfortably meets its 2019 MREL 26.6% requirements 23.2% Good progress made in meeting expected end- 7.2%
Slide 19: Indicative summary MREL/TLAC requirement
Capital structure and debt issuance Indicative summary MREL/TLAC requirement24 On current assumptions, HSBC expects the ‘sum-of-the-parts’ MREL/TLAC calculation will be binding. SoTP sums our local subsidiaries’ MREL/TLAC requirements to give the group’s overall MREL requirement HSBC Group Group Con
Slide 20: Indicative timeline of MREL/TLAC requirement
Capital structure and debt issuance Indicative timeline of MREL/TLAC requirement Expected binding constraint 2019 2020 2021 2022 The greater of: Indicatively, the greater of: HSBC 16% of RWAs 18% of RWAs Group 6% of leverage exposures 6.75% of leverage exposures Sum-of-the-parts ♦ Sum-of
Slide 21: Approach to issuance – single point of issuance, multiple point of entry
Capital structure and debt issuance Approach to issuance – single point of issuance, multiple point of entry HSBC Holdings plc External Investors Since 2015, HSBC Holdings has been the Group’s issuing entity for external AT1, T2 and MREL/TLAC-eligible Senior Issuance over time to broadly match g
Slide 22: Issuance strategy and plan
Capital structure and debt issuance Issuance strategy and plan Executed against 2018 targets Issued $19bn of HoldCo Senior debt and $6bn of AT1, in line with plan and partially pre-funding our 2019 need Maintained buffer above regulatory minimums for AT1 and Total Capital Issuance into local m
Slide 23: Appendix
Appendix
Slide 24: Currency translation and significant items included in the income statement
Appendix Currency translation and significant items included in the income statement $m 4Q17 3Q18 4Q18 FY17 FY18 Reported PBT 2,304 5,922 3,256 17,167 19,890 Revenue Currency translation 450 147 - (133) - Customer redress programmes (105) - 7 (108) 53 Disposals, acquisitions and investment in new bu
Slide 25: Balance sheet – customer lending
Appendix Balance sheet – customer lending 4Q18 Net loans and advances to customers31 Customer lending* increased by $12bn or 1.3% vs. 3Q18, reflecting: 4Q18 lending growth by global business and region (excluding red-inked balances) Lending growth in Hong Kong of $6bn (of which $3bn RBWM mortgage
Slide 26: Balance sheet – customer accounts
Appendix Balance sheet – customer accounts 4Q18 Customer accounts31, $bn Average Customer accounts33, US$bn Customer accounts* increased by $31bn or 2.4% vs. 3Q18: Growth in Asia of $13bn notably RBWM ($6bn) and GB&M ($5bn) primarily in savings 6% CAGR reflecting higher customer inflows due to com
Slide 27: UK customer advances
Appendix UK customer advances Total UK34 gross customer advances - RBWM residential mortgages35, £bn RBWM unsecured lending37, £bn £226bn 86.7 88.6 91.6 94.2 As at 31 Dec 2018 79.7 80.7 81.8 83.8 85.6 Of which £94.2bn Wholesale relates to RBWM 6.5 6.5 6.7 6.9 6.1 Mortgages Dec-16 Mar-17 Jun-17 Sep-1
Slide 28: Mainland China drawn risk exposure
Appendix Mainland China drawn risk exposure38 Total Mainland China drawn risk Total mainland China drawn risk exposure of $161bn exposure of $161bn Wholesale: $151bn (of which 51% is onshore); Retail: $10bn Wholesale - $151bn Gross loans and advances to customers of c.$39bn in mainland China (
Slide 29: Current credit ratings for main issuing entities
Appendix Current credit ratings for main issuing entities Long term senior ratings as at 18 February 2019 Fitch Moody’s S&P Rating Outlook Rating Outlook Rating Outlook HSBC Holdings plc AA- Stable A2 Stable A Stable The Hongkong and Shanghai Banking Corporation Ltd AA- Stable Aa3 Stable AA- Stable
Slide 30: HSBC has completed the ring-fencing of its UK retail banking activities
Appendix HSBC has completed the ring-fencing of its UK retail banking activities New structure Milestones completed in FY18 Holding company In January 2018, the Ring Fence Transfer Scheme (‘RFTS’) court process was initiated with the submission of an Operating entities HSBC Holdings plc applicatio
Slide 31: HSBC UK Bank plc (our ring-fenced bank)
Appendix HSBC UK Bank plc (our ring-fenced bank) Source: HSBC UK Bank plc Annual Report and Accounts 2018 Pro forma adjusted results, £m Consolidated balance sheet, £bn FY18 FY17 ∆ FY17 ∆% As at 31 Dec 2018 Revenue 6,449 6,009 440 7% 239 239 ECL / LICs (399) (229) (170) (74%) 7 Other liabilities Oth
Slide 32: HSBC Bank plc (our non ring-fenced bank)
Appendix HSBC Bank plc (our non ring-fenced bank)42 Source: HSBC Bank plc Annual Report and Accounts 2018 The 2018 results include the income and expenses associated with transferred activities (to HSBC UK Bank plc) during the six months to 30 June 2018 Adjusted results, £m Consolidated balance shee
Slide 33: Legal proceedings, regulatory matters and customer remediation
Appendix Legal proceedings, regulatory matters and customer remediation This slide should be read in conjunction with Note 27 and Note 35 of the HSBC Holdings plc Annual Report and Accounts 2018. Provisions relating to legal proceedings and regulatory matters, $m Commentary on selected items44 ♦ In
Slide 34: Simplified structure chart
Appendix Simplified structure chart Holding company Associate HSBC Intermediate holding company Holdings plc Resolution entity UK Operating company 99.9% HSBC HSBC HSBC Private HSBC HSBC HSBC Asia North 94.5% Bank HSBC UK Banking Mexico, Bank Holdings Ltd America Egypt Holdings Ltd Holdings S.A. Can
Slide 35: Footnotes
Appendix Footnotes 1. Commitment by 2025 2. HSBC completed the set up of its ring-fenced bank, HSBC UK Bank plc, on 1 July 2018; pro forma results are extracted from the HSBC UK Bank plc Annual Report and Accounts, used for 2017 and 1H18 to enable an understanding of year-on-year performance 3. Mark
Slide 36: Footnotes
Appendix Footnotes 22. End-point MREL requirements calculated as a % of Group consolidated RWAs. The Bank of England has written to HSBC confirming the preferred resolution strategy for HSBC Group remains a multiple- point-of-entry (‘MPE’) resolution strategy and setting out the 2019 and indicative
Slide 37: Glossary
Appendix Glossary ABCP Asset-backed commercial paper HoldCo Holding Company ASEAN Association of Southeast Asian Nations HQLA High Quality Liquid Assets AT1 Additional Tier 1 iMREL Internal MREL Basis points. One basis point is equal to one-hundredth of a percentage LTV Loan-to-value ratio Bps point
Slide 38: Disclaimer
Appendix Disclaimer Important notice The information, statements and opinions set out in this presentation and accompanying discussion (“this Presentation”) are for informational and reference purposes only and do not constitute a public offer for the purposes of any applicable law or an offer to se
Slide 39: Issued by HSBC Holdings plc Group Investor Relations
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ United Kingdom www.hsbc.com 38
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