HSBC Holdings PLC · LSE:HSBA
HSBC — FY2017 Earnings Presentation
46 slides from HSBC's earnings presentation, Feb 20, 2018
Slide 1: HSBC Holdings plc 4Q17 Results
HSBC Holdings plc 4Q17 Results Presentation to Investors and Analysts
Slide 2: Our highlights
Our highlights ‒ Reported PBT of $2.3bn was $5.7bn higher than 4Q16 2017 Full Year ‒ Adjusted PBT of $3.6bn up $0.8bn vs. 4Q16: highlights ‒ Revenue of $12.4bn up $1.1bn or 10% ‒ RBWM up $366m or 8% primarily from increased deposit revenue; excluding favourable market impacts in insurance manufactur
Slide 3: 2017 Key financial metrics
2017 Key financial metrics Key financial metrics 2016 2017 Return on average ordinary shareholders’ equity 0.8% 5.9% Return on average tangible equity 2.6% 6.8% Jaws (adjusted)2, 3 1.2% 1.0% Dividends per ordinary share in respect of the period $0.51 $0.51 Earnings per share $0.07 $0.48 Common equit
Slide 4: Financial overview
Financial overview Reconciliation of Reported to Adjusted PBT Discrete quarter Full Year 4Q16 4Q17 2016 2017 Reported profit before tax (3,445) 2,304 7,112 17,167 Includes: Currency translation (102) - 499 - Significant items: FVOD4 Fair value gains / losses on own debt (1,648) - (1,792) - Brazil di
Slide 5: 2017 Profit before tax
2017 Profit before tax Revenue growth in our three main global businesses 2017 ∆ 2016 Adjusted revenue by global business, $m adverse favourable +9% Revenue $51,524m 2,234 5% 20,287 Jaws2 18,542 LICs $(1,769)m 825 32% +3% 1.0% +5% 14,715 15,091 Operating $(31,140)m (1,056) (4)% 13,223 -3% expenses 1
Slide 6: 4Q17 Profit before tax
4Q17 Profit before tax Higher adjusted PBT from increased revenue, partly offset by increased LICs and higher costs 4Q17 vs. 4Q16 Adjusted PBT by item Adjusted PBT by global business, $m 4Q16 4Q17 ∆ 4Q16 ∆% 4Q17 ∆ 4Q16 adverse favourable RBWM 1,162 1,420 258 22% CMB 1,431 1,694 263 18% Revenue $12,4
Slide 7: Revenue performance
Revenue performance 4Q17 revenue up vs. 4Q16 in RBWM and CMB partly offset by subdued trading conditions in GB&M Revenue performance, $m6 +3% Global 12,887 12,817 12,846 businesses 11,807 12,058 12,307 11,940 426 438 436 12,340 450 439 420 466 412 4,037 4,023 3,890 3,390 3,742 3,799 3,713 3,646 GPB
Slide 8: RBWM performance
RBWM performance 4Q17 revenue growth driven by deposit revenues and wealth management Revenue performance, $m6 Balance Sheet, $bn7 2017 Full Year +8% +5% highlights -2% +7% 612 631 640 4,453 4,644 4,883 4,695 5,136 5,086 5,171 5,061 324 339 346 Adjusted PBT 0 141 79 40 23 (2016: $5.2bn) Wealth Mgt.
Slide 9: CMB performance
CMB performance Continued positive performance, driven by GLCM Revenue performance, $m6 Balance Sheet, $bn7 2017 Full Year Customer lending: highlights +11% +7% +4% -0% 318 317 Adjusted PBT 3,242 3,222 3,186 3,120 3,288 3,270 3,349 3,469 295 (2016: $5.9bn) 353 410 440 373 $6.8bn 15% 424 477 429 464
Slide 10: GB&M performance
GB&M performance All GB&M businesses grew revenues in 2017. Resilient 4Q17 performance as our diverse product offering enabled us to weather subdued trading conditions Revenue performance, $m6 2017 Full Year -9% Management view of adjusted revenue highlights $m 4Q17 ∆ 4Q16 Adjusted revenue 3,646 3,7
Slide 11: GPB performance
GPB performance 2017 revenue up 10% in areas targeted for growth; $15bn of positive inflows in 2017 Revenue performance, $m6 Client assets, $bn 2017 Full Year +2% 316 327 330 highlights 298 306 21 20 13 35 23 -4% Adjusted PBT 283 295 307 317 (2016: $0.3bn) 263 466 450 439 412 426 438 436 420 $0.3bn
Slide 12: Corporate Centre performance
Corporate Centre performance Lower revenue in 2017 from the run-off of CML and other legacy portfolios Balance Sheet, $bn7 2017 Full Year Revenue performance, $m6 US run-off portfolio (CML): highlights 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 5.5 Assets held for sale Central Treasury 745 632 364 (267
Slide 13: Net interest margin
Net interest margin Net interest margin of 1.63%; well positioned to benefit as rates move higher Net interest income and margin Main drivers, bps: Reported 170 YTD NIM10, 1.70% 1.64% 1.64% 1.63% 1.63% (3) % 4 (3) (3) YTD (2) 163 average 1,724 1,683 1,691 1,711 1,726 interest earning assets, $bn FY1
Slide 14: Loan impairment charges
Loan impairment charges Loan impairment charges by global business Credit environment remains stable 4Q16 3Q17 4Q17 ∆ 4Q16 ∆ 3Q17 Group, $m 470 440 658 188 218 − 4Q17 LICs are $218m higher than 3Q17, largely driven by two individual corporate exposures in Europe. Excluding these, LICs were as a % of
Slide 15: Operating expenses
Operating expenses Delivered positive jaws for 2017 while continuing to invest in growth 4Q17 vs. 4Q16 excluding UK bank levy, $bn 0.1 − FY positive jaws of 1.0% for the Group; all four global businesses delivered FY positive 0.3 (0.6) 0.4 0.4 jaws 0.1 − $0.3bn investment for growth in 4Q17 mainly 7
Slide 16: Capital adequacy
Capital adequacy Strong capital base: Common Equity Tier 1 ratio of 14.5% Regulatory capital and RWAs, $bn: CET1 ratio movement, %: 3Q17 4Q17 0.2 Common equity tier 1 capital 129.8 126.1 14.6 (0.5) 0.1 (0.1) 14.5 Total regulatory capital 186.4 182.4 Risk-weighted assets 888.6 871.3 0.3 (0.1) 4Q17 CE
Slide 17: Return metrics
Return metrics 2017 Group RoE walk, 2017 vs. 2016 RoE to RoTE walk, % 9.3* 0.9 (0.8) 8.2 7.9 0.2 2.5 (2.3) 6.8 7.1 0.9 5.9 0.8 2016 Significant 2016 PBT excluding US DTA Equity 2017 ex. Sig Significant 2017 Goodwill, 2017 RoTE Significant 2017 RoTE Reported RoE items & UK ex. Sig items & significant
Slide 18: Strategy Update
Strategy Update
Slide 19: Achieved eight out of ten of the actions we set out at our 2015 Investor Update
Achieved eight out of ten of the actions we set out at our 2015 Investor Update Strategic actions Targeted outcome by 2017 Outcomes Status Actions to re-size and simplify Reduce Group RWAs by c.$290bn ‒ Group RWA reduction: $290bn ‒ RWA: $338bn gross reduction through management actions (>100% of ou
Slide 20: Realised RWA reductions, strengthened capital position while delivering strong dividends
Realised RWA reductions, strengthened capital position while delivering strong dividends RWA reduction target achieved Strong capital, funding and liquidity position Robust shareholder returns Group Reported RWAs, $bn Group CET1 ratio, % Dividend and share buyback since 201516, $bn +360bps RoRWA 1.5
Slide 21: US profitability improved; US CML run-off completed; Mexico turnaround delivered
US profitability improved; US CML run-off completed; Mexico turnaround delivered USA20 Mexico21 Adjusted PBT, $m Adjusted PBT $m +98% 10x 920 440 464 494 274 387 42 47 2014 2015 2016 2017 2014 2015 2016 2017 Adjusted 0.4% 0.4% 0.3% 0.9% Retail loan market share24, % RoRWA 7.5% 7.0% 6.5% +0.8 − Compl
Slide 22: Delivered on operating expenses; 2017 exit run-rate in line with 2014 adjusted cost base
Delivered on operating expenses; 2017 exit run-rate in line with 2014 adjusted cost base Cost walk: 2014 to 2017 exit run-rate ($bn) UK bank levy 37.9 Increase in savings or reduction in costs Delivered on our 2015 Investor Increase in costs Update commitment (2.3) FX Change vs. Investor $1.1 - $0.1
Slide 23: Increased international connectivity and strengthened global market position
Increased international connectivity and strengthened global market position International connectivity Market share and rank, % External recognition 2015 2017 − #1 global trade International client revenue23, − Trade Finance – #1 #1 finance bank % rank25 +3ppt Global Trade − Best global cash and −
Slide 24: Pivot to Asia
Pivot to Asia Pivot to Asia Growth initiatives External recognition Revenue, $bn % of Group − Loan growth up 27% since 201434 − Asia’s best bank − Insurance annualised new business +15% Hong Kong premiums up 31% since 2014; regained #1 25.9 position in 3Q1735 22.6 − Credit cards launched at end of 2
Slide 25: Looking ahead
Looking ahead Group financial targets unchanged Our strategy is working...continue to evolve and deliver it at pace ROE >10% Invest in growing the business, subject to positive jaws Improve customer satisfaction across the board Positive jaws Costs (adjusted) Accelerate digitalisation to make
Slide 26: Appendix
Appendix
Slide 27: Key movements in Group RWAs
Appendix Key movements in Group RWAs ($bn) 4Q17 achieved reduction Progress since Dec-14 Target (FX % rebased)39 achieved GB&M and 3Q17 20 889 Legacy Credit GB&M and Legacy 160 136 Target achieved Credit US CML 3 RWA (29) run-off initiatives US CML 52 run-off 40 Target achieved Currency CMB 4 tr
Slide 28: Global business management view of adjusted revenue
Appendix Global business management view of adjusted revenue RBWM, $m 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 GB&M, $m 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Retail Banking 3,228 3,217 3,184 3,223 3,331 3,389 3,443 3,476 Global Markets 1,538 1,935 1,698 1,589 2,013 1,824 1,685 1,289 Current account
Slide 29: Currency translation and significant items
Appendix Currency translation and significant items $m 4Q16 4Q17 2016 2017 Revenue Currency translation (336) - 736 - Trading results from disposed operations in Brazil - - (273) - Portfolio disposals (112) 5 (163) (158) (Adverse) / Favourable debit valuation adjustment on derivative contracts (70)
Slide 30: RoTE by global business
Appendix RoTE by global business 2017 $m Corporate RBWM CMB GB&M GPB Group Centre Reported profit before tax 5,823 6,623 5,435 121 (835) 17,167 Significant items 655 157 339 175 2,497 3,823 Bank levy - - - - 916 916 BSM allocation and other adjustments42 713 727 652 127 (2,219) - Profit before tax e
Slide 31: RoTE: basis of preparation
Appendix RoTE: basis of preparation Return on Profit Attributable to Ordinary Shareholders tangible equity Average Tangible Shareholders’ Equity = − Profit Attributable to Ordinary Shareholders excludes significant items, UK bank levy, change in present value of in force insurance contracts (PVIF),
Slide 32: Balance sheet – Customer lending
Appendix Balance sheet – Customer lending 4Q17 Loans and advances to customers46, $bn Growth since 4Q16 Growth since 3Q17 Balances increased by $13bn vs. 3Q17. Excluding CML and red-inked balances, lending increased by $12bn or 1%: RBWM $346.1bn 22 7% 7 2% - Growth in term lending in Asia - $1.5bn o
Slide 33: Balance sheet – Customer accounts
Appendix Balance sheet – Customer accounts 4Q17 Customer accounts46, $bn Customer accounts48, US$bn Excluding red-inked balances, customer accounts increased by $20bn vs. 3Q17 and $36bn vs. 4Q16 notably in the UK and Hong Kong 6% CAGR (Demand deposits) 1,025 1,000 663 1,364 1,329 1,335 1,344 1,314 1
Slide 34: Net interest income sensitivity
Appendix Net interest income sensitivity Net interest income sensitivity For further commentary and information, refer to pages 108 and 109 of the Annual Report and Accounts 2017 NII sensitivity 25 basis point shift in yield curves at the beginning of each NII sensitivity following a 25bps and 100bp
Slide 35: Net interest margin supporting information
Appendix Net interest margin supporting information Gross customer lending analysis - $970bn Of our customer lending: HIBOR / USD 1 month rate As at 31 Dec 2017 As at 31 Dec 2017 UK RBWM 2.00 mortgages, $116bn Due less 9% − Fixed 60% than 1 year Due over 1 year 12% − Variable 40% but not more 1.50 t
Slide 36: Completed CTA transformation programme; achieved $6.1bn of annualised savings
Appendix Completed CTA transformation programme; achieved $6.1bn of annualised savings Saves ($bn) Key Transformation Programmes: Realised Savings Run Rate Significantly improved customer service and clients’ ability to self- (savings recognised in the Income Statement during Saves serve – through
Slide 37: Equity drivers
Appendix Equity drivers 4Q17 vs. 3Q17 Equity drivers No. of shares (excl. Shareholders’ Tangible TNAV per treasury Equity, $bn Equity, $bn share, $ shares), million As at 30 September 2017 191.0 146.1 7.29 20,031 Profit to shareholders excluding impact of US tax reform 1.3 1.3 0.07 - Dividends net o
Slide 38: Total Shareholders' Equity to CET1 Capital
Appendix Total Shareholders’ Equity to CET1 Capital Total Equity to Common equity tier 1 capital, as at 4Q17, $m Total Equity to CET1 walk, $m 2Q17 4Q17 Total equity (per balance sheet) 195,786 197,871 - Non-controlling interests (7,390) (7,621) Total Equity 197,871 Total shareholders’ equity 188,39
Slide 39: UK credit quality
Appendix UK credit quality Total UK52 gross customer advances - RBWM residential mortgages53, £bn RBWM unsecured lending54, £bn Commercial real estate, £bn £220bn 78.9 79.7 80.7 81.8 83.8 85.6 Of which £85.6bn relates Commercial Wholesale to RBWM Other UK Wholesale real estate £103bn £14bn lending,
Slide 40: Mainland China drawn risk exposure
Appendix Mainland China drawn risk exposure55 Total China drawn risk exposure of ‒ Total China drawn risk exposure of $160bn of which 58% of wholesale is onshore. $160bn ‒ Wholesale: $150bn; Retail: $10bn Wholesale - $150bn ‒ Gross loans and advances to customers of c$41bn in Mainland China (by coun
Slide 41: Glossary
Appendix Glossary AUM Assets under management LICs Loan Impairment charges and other credit risk provisions AMG Asset Management Group MENA Middle East and North Africa BSM Balance Sheet Management MREL Minimum requirement for own funds and eligible liabilities CET1 Common Equity Tier 1 NAV Net Asse
Slide 42: Footnotes
Appendix Footnotes 1. Unless otherwise stated, risk-weighted assets and capital are calculated and presented on a transitional CRD IV basis as implemented in the UK by the Prudential Regulation Authority 2. Includes the impact of UK bank levy 3. 2016 jaws as reported in our 2016 Results 4. ‘Own cred
Slide 43: Footnotes
Appendix Footnotes 22. Awarded Best Domestic Cash Manager for Corporates in the US by Euromoney Market Leader Cash Management 2017; awarded Best Bank for Transactions Services in North America by Euromoney Awards for Excellence 2017 23. Revenue from international clients is derived from an allocatio
Slide 44: Footnotes
Appendix Footnotes 49. Assumes the 2017 split of fixed and variable for commercial lending including lending to banks with greater than 1 year maturity as published in ‘Form 20-F’ 50. Customer accounts as at 31 December 2017 51. Includes dividends to preference shareholders and other equity holders
Slide 45: Important notice and forward-looking statements
Appendix Important notice and forward-looking statements Important notice The information, statements and opinions set out in this presentation and subsequent discussion do not constitute a public offer for the purposes of any applicable law or an offer to sell or solicitation of any offer to purcha
Slide 46: Issued by HSBC Holdings plc
Issued by HSBC Holdings plc Group Investor Relations 8 Canada Square London E14 5HQ Cover image: Guangzhou is located at the heart of China’s Pearl River Delta, one of the United Kingdom country’s fastest growing economic regions. 45 www.hsbc.com Photography: Getty Images