HSBC Holdings PLC · LSE:HSBA
HSBC — FY2016 Earnings Presentation
37 slides from HSBC's earnings presentation, Feb 21, 2017
Slide 1: HSBC Holdings plc Annual Results 2016
Reduce Group RWAs by c. $290bn and re-deploy towards 1 higher performing businesses; return GB&M to Group target profitability 2 Optimise global network 3 Rebuild NAFTA profitability 4 Set up UK Ring-Fenced Bank Realise $4.5-5.0bn cost savings, deliver an exit rate in 2017 equal 5 to 2014 operating
Slide 2: Our highlights
Our highlights 2016 Full Year ‒ Reported PBT of $7.1bn was $11.8bn lower than 2015 and impacted by significant items of $12.2bn, mainly: ‒ non-cash items of $8.9bn including the write-off of GPB goodwill ($3.2bn), fair value own credit spread losses on own debt ($1.8bn) ‒ cash items of $3.3bn includ
Slide 3: 2016 Key financial metrics
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)1, 2 (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 equ
Slide 4: Key financial performance
Key financial performance 4Q16 and full year ROE impacted by GPB goodwill write-off, cost to achieve investment (CTA) and FVOD; Adjusted PBT up 39% on 4Q15 Quarterly 4Q15 4Q16 Includes: $(858)m $(3,445)m $2.4bn write- We have written off the remaining goodwill in the European private banking off of
Slide 5: Financial overview
Financial overview Reconciliation of Reported to Adjusted PBT Discrete quarter 2016 4Q15 4Q16 vs. 4Q15 2015 2016 vs. 2015 Reported profit before tax (858) (3,445) (2,587) 18,867 7,112 (11,755) Includes: Currency translation 139 - (139) 840 - (840) Significant items: FVOD Fair value gains / losses on
Slide 6: 4Q16 Profit before tax performance
4Q16 Profit before tax performance Higher profit before tax from reduced costs and lower LICs 4Q16 vs. 4Q15 PBT analysis Adjusted PBT by item Adjusted PBT by global 4Q15 4Q16 vs. 4Q15 % business, $m 4Q16 vs. 4Q15 adverse favourable RBWM 1,323 1,140 (183) (14)% Includes valuation differences on long-
Slide 7: Revenue performance
Revenue performance Revenue from our global businesses increased by $0.6bn in 4Q16 2016 vs. 2015 adjusted revenue analysis3 For more information on our re-segmentation and the valuation differences on long-term debt and associated swaps, please see slides 24 and 25 in the appendix 2015: 2016: 4Q16 v
Slide 8: Retail Banking and Wealth Management performance
Retail Banking and Wealth Management performance Increased revenue in 4Q16 from Retail Banking products 4Q16 vs. 4Q15 2016 vs. 2015 Revenue Quarterly performance3 Full year performance Adjusted revenue up 1% Adjusted revenue down 2% $m (unless − Retail Banking up 2% - current − Retail Banking of $12
Slide 9: Commercial Banking performance
Commercial Banking performance 4Q16 revenue stable supported by strong balance sheet growth; 1% revenue growth year-on-year 4Q16 vs. 4Q15 Revenue3 $12.8bn +1% $12.9bn Adjusted revenue broadly stable $m (unless otherwise stated) − GLCM up 5% from balance sheet growth and 3,098 3,077 3,079 3,091 3,158
Slide 10: Global Banking & Markets performance
Global Banking & Markets performance Higher revenue driven by our Foreign Exchange, Rates, Global Banking and Global Liquidity and Cash Management businesses 4Q16 vs. 4Q15 Management view of adjusted Revenue Quarterly performance3 Full year performance Adjusted revenue up 23%, with revenue revenue $
Slide 11: Global Private Bank performance
Global Private Bank performance Lower revenue reflecting repositioning and reduced client activity 4Q16 vs. 4Q15 Revenue3 $2.0bn (11)% $1.8bn Adjusted revenue down $43m or 10% $m (unless otherwise stated) − Repositioning of the business substantially 528 complete 499 456 442 454 436 − Lower revenue
Slide 12: Corporate Centre performance
Corporate Centre performance Lower revenue reflecting valuation differences on long-term debt and associated swaps and continued run-off in the US; higher BSM revenue 2016 vs. 2015 adjusted revenue analysis3 vs. Revenue $m 4Q15 3Q16 4Q16 2015 2016 4Q15 vs. Corporate centre $bn 2015 % 4Q16 vs. 4Q15 %
Slide 13: Net interest margin
Net interest margin Lower net interest margin partly reflecting the effects of our disposal in Brazil and adverse currency translation Net interest income and margin Customer lending and deposit base rate and term analysis Gross customer Customer deposits: Mortgages lending: $869bn Hong Kong RBWM $1
Slide 14: Operating expenses
Operating expenses Lower adjusted costs; $3.7bn of annualised savings achieved Adjusted operating expenses ($bn) Saves UK bank levy Run Rate P&L Saves Saves 0.4 1.4 Saves, $bn 2015 2016 Life to date Life to date 0.7 (2.2) 0.9 Global Businesses 0.1 0.8 0.9 1.1 30.3 0.4 29.6 Operations and Technology
Slide 15: Operating expenses
Operating expenses We will beat our original Investor Update 2017 exit run-rate target by c$0.6bn while continuing to invest in regulatory programmes and compliance Cost walk: 2014 to 2017 exit run-rate revised target ($bn) UK bank levy Increase in savings or reduction in costs 37.9 (5.9) Increase i
Slide 16: Loan impairment charges
Loan impairment charges Lower impairment charges in 4Q16 Loan impairment charges and other credit risk provisions (LICs) analysis Q416 benign environment 4Q15 3Q16 4Q16 vs.4Q15 vs. 3Q16 2015 2016 − Better economic conditions Group, $m 1,293 551 468 825 83 2,604 2,652 − LICs as a % of gross loans are
Slide 17: 2016 Profit before tax performance
2016 Profit before tax performance 1% lower profit before tax with reduced costs more than offset by a fall in revenue 2016 vs. 2015 PBT analysis Adjusted PBT by item Adjusted PBT by global 2015 2016 vs. 2015 % business, $m 2016 vs. 2015 adverse favourable RBWM 5,690 5,333 (357) (6)% CMB 5,423 6,052
Slide 18: Reduce RWAs by $290bn
Reduce RWAs by $290bn13 $38bn reduction through RWA initiatives Key movements in Group RWAs ($bn) 4Q16 achieved reduction Progress since Dec-14 Dec-15 1,103 Target (FX % rebased)13 achieved GB&M and 17 Legacy Sep-16 904 GB&M and 118 133 89% Legacy14 US CML 8 run-off RWA (38) US CML Target initiati
Slide 19: Capital adequacy
Capital adequacy Strong capital base: common equity tier 1 ratio – 13.6% Regulatory capital and RWAs ($bn) CET1 ratio movement (%) 13.9 31 Dec 30 Sep 31 Dec (0.4) 0.4 (0.1) 13.6 2015 2016 2016 (0.2) Common equity tier 1 capital 130.9 125.8 116.6 Total regulatory capital 189.8 181.6 172.4 Risk-weight
Slide 20: Looking ahead
Looking ahead Good medium term prospects Group financial targets − Loan growth in Asia and the UK ROE >10% − Continued strong deposit growth − Steepening US / Hong Kong yield curves and rising rates Positive jaws Costs − Well positioned to capture opportunities (adjusted) − Encouraging start to the
Slide 21: Progress on our actions to capture value
On track to meet 2017 target Progress on our actions to capture value Strategic actions Targeted outcome by 2017 Progress during 2016 Status Actions to re-size and simplify Reduce Group RWAs by ‒ Group RWA reduction: $290bn c.$290bn ‒ GB&M <1/3 of Group RWAs ‒ 97% of our target achieved ‒ Comple
Slide 22: Conclusion
Conclusion Delivering our strategy Low-risk model with low earnings volatility − Our International network supports more than 45% of our client revenue and continues to deliver growth and market share gains − Unrivalled footprint in Asia with strong returns and good business momentum A / D ratio 91%
Slide 23: Appendix
Appendix 23
Slide 24: Re-segmentation
Appendix Re-segmentation Re-segmentation of our businesses: Established our Corporate Centre Reportable During the year, we have changed our reportable segments under IFRS 8 from regions to global businesses. We also moved certain business segments portfolios and functions into the newly created Cor
Slide 25: Corporate centre
Appendix Corporate centre Valuation differences on long-term debt and associated swaps Key principles ‒ Issued debt designated at fair value of $81bn of which $72bn is in Corporate Centre Valuation differences included in Corporate ‒ Most of this debt is fixed rate and swapped to floating rate using
Slide 26: Tangible Net Asset Value
Appendix Tangible Net Asset Value 4Q16 vs. 3Q16 Tangible Net Asset Value TNAV per $7.37 $(0.09) $(0.28) $(0.09) $(0.10) $0.11 $6.92 share Of which $(0.08) relates to FVOD 146.7 (1.8) (5.6) (1.8) 137.3 (2.2) 2.0 − Includes a negative $(4.4)bn relating to the carrying amount of financial liabilities a
Slide 27: Currency translation and significant items
Appendix Currency translation and significant items $m 4Q15 4Q16 2015 2016 Currency translation 139 - 840 - Significant items: Revenue Loss on disposal of operations in Brazil - - - (1,743) Trading results from disposed operations in Brazil 837 - 3,327 1,470 *Portfolio disposals (214) (112) (214) (1
Slide 28: Global business management view of adjusted revenue
Appendix Global business management view of adjusted revenue Global business management view of adjusted revenue RBWM GB&M $m 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 $m 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Retail 3,032 3,060 3,069 3,064 3,117 3,105 3,064 3,130 Markets 1,841 1,745 1,221 1,101 1,50
Slide 29: 2016 CET1 ratio movement
Appendix 2016 CET1 ratio movement 2016 CET1 ratio movement (%) 13.6 0.2 − $121bn reduction in RWAs − $5.6bn threshold deduction from capital 1.0 11.9 0.7 – (0.2) 31 Dec 2015 Capital generation Share buy-back Disposal of Brazil BoCom change Other 31 Dec 2016 (excluding in treatment disposal of Brazil
Slide 30: Oil and gas
Appendix Oil and gas Oil and gas, $bn ‒ Oil prices improved throughout 2016 and in early 2017, particularly after Opec Overall $2bn lower than $28bn September 2016 agreed to cut supply levels drawn risk ‒ $28bn represents c. 2% of wholesale drawn risk exposures exposure ‒ Large integrated producers
Slide 31: Metals and mining
Appendix Metals and mining Metals and mining, $bn Overall $1bn lower than ‒ $16bn represents c.1% of wholesale drawn risk exposure $16bn drawn risk September 2016 ‒ In line with expectations precious metals, copper, nickel and zinc prices exposure improved during 2016 ‒ Bulk and steel related commod
Slide 32: UK loans and advances to customers
Appendix UK loans and advances to customers UK loans and advances to customers UK Personal lending of $120bn (vs. $124bn at UK Mortgage lending of $102bn (vs. $106bn at September 16 on a reported basis) September 16 on a reported basis) ‒ Total UK lending of $266bn which Scotland Northern Ireland Ea
Slide 33: Mainland China exposure
Appendix Mainland China exposure Mainland China drawn risk exposure24 Wholesale lending by type: ‒ Total China exposure of $146bn of which Our top 5 exposures to banks 55% is onshore amounted to $25bn CRRs 1-3 4-6 7-8 9+ Banks 33.3 - - - Sovereigns $33.3bn 24% NBFI ‒ Wholesale: $138bn; Retail: $8bn
Slide 34: Balance sheet
Appendix Balance sheet Loans and advances to customers, $bn (constant currency) Customer accounts, $bn (constant currency) Key messages vs. September 16 Key messages vs. September 16 ‒ 2% mortgage growth in Asia, mainly Hong Kong and mainland China; 1% ‒ Growth in customer accounts driven primarily
Slide 35: Footnotes
Appendix Footnotes 1. Includes the impact of UK bank levy 2. 2015 Jaws as reported in 2015 3. Where a quarterly trend is presented on the Income Statement, all comparatives are re-translated at average 4Q16 exchange rates 4. Where a quarterly trend is presented on Balance sheet data, all comparative
Slide 36: Important notice and forward-looking statements
Appendix Important notice and forward-looking statements Important notice The information set out in this presentation and subsequent discussion does not constitute a public offer for the purposes of any applicable law or an offer to sell or solicitation of any offer to purchase any securities or ot
Slide 37: Issued by HSBC Holdings plc Group Investor Relations
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ Cover image: The Hong Kong-Zhuhai-Macau Bridge: one of the most ambitious United Kingdom infrastructure projects in the Pearl River. 37 www.hsbc.com Photography: courtesy of Dragages-China Harbour-VSL JV