HSBC Holdings PLC · LSE:HSBA
HSBC — Goldman Sachs European Financials Conference 2016
40 slides from HSBC's conference presentation, June 2016
Slide 1: Retail Banking and Wealth Management
June 2016 Retail Banking and Wealth Management Goldman Sachs European Financials Conference
Slide 2: Important notice and forward-looking statements
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 other finan
Slide 3: Group highlights
Group highlights 1st Quarter 2016 ‒ Reported PBT of $6.1bn; a resilient performance despite challenging market conditions ‒ Adjusted PBT down 18%: ‒ Lower revenue of $0.5bn (4%): Client-facing GB&M and BSM down 10% and Principal 1Q16 Reported PBT RBWM down 5% in challenging market conditions (1Q15:
Slide 4: 1Q16 Key metrics
1Q16 Key metrics Discrete quarter 2015 Full Year Key financial metrics 1Q15 4Q15 1Q16 Target Return on average ordinary shareholders’ equity1 11.5% (3.4)% 9.0% >10% Return on average tangible equity1 13.1% (4.0)% 10.3% n/a Jaws (adjusted) - - (2.8)% Positive Dividends per ordinary share in respect o
Slide 5: RBWM overview
RBWM overview Active customers2 Customer deposits3 Retail Banking (USD) Wealth Management Asset Management Insurance Net operating income4 Loans and advances3 – 45 million customers (USD) (USD) – Consistent global proposition model – Significant domestic scale in Hong Kong and UK – Strong local mark
Slide 6: Since 2011, we have simplified and repositioned the business
Since 2011, we have simplified and repositioned the business for high quality sustainable revenues 62 disposals / Common organisation A simplified global Headcount reduced closures of business design and target business by c.18,000 FTE1,2 lines or markets1 operating model Updated financial planning
Slide 7: RBWM's strategy
RBWM’s strategy Relationship-led Personal Lending Wealth Management Digital Transformation Continued Portfolio Optimisation 7
Slide 8: UK customer redress is at the lowest level since 2010
UK customer redress is at the lowest level since 2010 3,274 Principal RBWM LICs1 UK customer redress / CCA provisions2 2,805 2,737 2,624 Credit 1,906 1,877 1,751 and conduct 1,5602 risk cost (USDm) 953 875 563 78 2010 2011 2012 2013 2014 2015 8
Slide 9: We are maintaining our credit discipline – Example RBWM UK
We are maintaining our credit discipline – Example RBWM UK PRA stress Stressed mortgage impairments1,2 (%) Stressed non-mortgage impairments1,2 (%) tests 4% 25% 20% 3% 15% 2% 2014 10% 1% 5% 0% 0% LBG Co-op San UK RBS Nation- Barclays HSBC Barclays Co-op LBG San UK RBS Nation- HSBC wide wide 4% 25% 2
Slide 10: We have the capacity to take more credit risk in RBWM
We have the capacity to take more credit risk in RBWM and the business is showing signs of volume growth Personal lending balances1 (USD) Sales volumes2 Cards Loans Mortgages +2% +14% +30% +17% 1Q’15 1Q’16 2Q’14 – 2Q’15 – 2Q’14- 2Q’15 – 2Q’14 – 2Q’15 – 1Q’15 1Q’16 1Q’15 1Q’16 1Q’15 1Q’16 10
Slide 11: Our customer base is positioned towards affluent clients
Our customer base is positioned towards affluent clients Customer base compared to market Revenue per customer by segment Premier Advance Personal 6x 8% 21% 35% 2x 1x Existing New Market1,3 Personal Advance Premier customers2 customers2 11
Slide 12: Our investment in a differentiated Wealth offering is driving good performance
Our investment in a differentiated Wealth offering is driving good performance in the face of market headwinds Financial reviews c.USD44bn Net New Net New Money in Activity Investments, Insurance and Money2,3 Liabilities from 2Q’15 - 14% 1Q’16 2Q15 – 1Q16 vs 2Q14 – 1Q15 Would recommend their USD3.3b
Slide 13: We are transforming our business to adapt to customer preferences
We are transforming our business to adapt to changes in our customers’ preferences and behaviour Digital sales volumes1 (million) Branch area2 (million sq.m.) c.75% c. -17.5% 2014 2015 2016 2017 2014 2015 2016 2017 Product and service Digital transformation Channel simplification automation Simplifi
Slide 14: Principal RBWM – Balance sheet
Principal RBWM – Balance sheet Loans and advances to customers Customer deposits (USDbn, Constant currency basis1) (USDbn, Constant currency basis1) USD5.4bn or 1.7% USD38.3bn or 6.9% increase increase 322.6 583.9 594.8 316.7 319.6 321.9 322.5 565.4 569.8 574.3 8.9 5.5 556.5 569.8 574.3 583.9 594.8
Slide 15: Within our portfolio of businesses, returns are driven by domestic scale
Within our portfolio of businesses1, returns are driven by a combination of domestic scale and focus on affluent customers 15
Slide 16: Principal RBWM 1Q16 Financial Performance
Principal RBWM 1Q16 Financial Performance Adjusted revenue2 (USDm) Adjusted PBT1,2 (USDm) 5,341 5,325 5,071 Reported 1,580 889 1,250 Retail Banking products 1,718 23.2% decrease Wealth Management products 1,408 1,335 3.0% increase Other 1Q15 4Q15 1Q16 Adjusted operating expenses2 Adjusted LICs2 (USD
Slide 17: Notes to slides
Notes to slides Slide 3 1. On an annualised basis 2. From 1 Jan 2015 the transitional CET1 and end point CET1 capital ratios became aligned for HSBC Holdings plc due to the recognition of unrealised gains on investment property and available-for-sale securities 3. We plan to maintain a corporate pre
Slide 18: Appendix – RBWM 1Q16
June 2016 Appendix – RBWM 1Q16 Investor Presentation
Slide 19: Group highlights
Group highlights 2015 Full Year ‒ Reported PBT up 1%: net favourable movement in significant items ‒ Adjusted PBT fell 7%: 2015 ‒ Higher revenue of $0.5bn (1%) from growth in client-facing GB&M (7%), CMB (3%) Reported PBT Financial and Principal RBWM (2%) (2014: $18.7bn) Performance ‒ Higher costs (
Slide 20: Group 2015 key metrics
Group 2015 key metrics 2015 Full Year Key financial metrics FY14 FY15 Target Return on average ordinary shareholders’ equity 7.3% 7.2% >10% Jaws (adjusted) - (3.7)% Positive Dividends per ordinary share in respect of the year $0.50 $0.51 Progressive Earnings per share $0.69 $0.65 n/a Common equity t
Slide 21: Key strategic priorities
Key strategic priorities Retail Banking and Wealth Management Key messages Principal RBWM financial outlook1 2015, USDbn Capital accretive – Consistently strong returns, accretive to Group RoE Revenue 22.7 – Client base positioned towards affluent customers Operating expenses 14.9 Sustainable high q
Slide 22: RBWM is now a simpler business, delivering sustainable, diversified revenues
RBWM is now a simpler business, delivering sustainable, diversified revenues RBWM Investment Case Business transformation Principal RBWM Revenue and PBT1 Principal RBWM Revenue by (USDbn) region1 – Simplified our portfolio with 62 Revenue PBT MENA 4% disposals / closures of business North 8% lines o
Slide 23: Through Premier and Advance, we attract an affluent client base
Through Premier and Advance, we are able to attract an affluent client base, with higher revenue per customer RBWM Investment case Customers and markets Positioned towards affluent customers Premier Advance Personal Selected markets4 HSBC customer GPB base 8% % Premier Market5 21% Customer 35% China
Slide 24: Conduct risk is redefining how retail banks engage with customers
Conduct risk is redefining how retail banks engage with and serve their customers. We have proactively repositioned the business for this… RBWM Investment case UK customer redress and CCA provisions at their lowest since 2010 (USDm) Numerous actions to significantly reduce conduct risk starting in 2
Slide 25: … and we are maintaining our credit discipline – Example RBWM UK
… and we are maintaining our credit discipline – Example RBWM UK RBWM Investment case PRA stress tests: Projected cumulative three-year PRA stress tests: Projected cumulative three-year impairment charge rates on UK individuals mortgage impairment charge rates on UK individuals non- lending in the s
Slide 26: The repositioning impacted the rate of revenue growth in 2013 and 2014
The repositioning impacted the rate of revenue growth in 2013 and 2014, but we are confident the quality of revenues is improving… RBWM Investment Case Principal RBWM revenue progress 2011 to 2015 (USDm) Design and policy (2012) Implementation (2013) Implementation (2014) – Business Risk Review – Gl
Slide 27: Signs that repositioning is improving customer experience – RBWM Mexico
... and there are signs that the repositioning is leading to improved customer experience – Example RBWM Mexico RBWM Investment Case Conduct Agenda Business performance 2014 2015 Revenues1 Sales volumes2 +7% +90% – In 2013-24, a new incentive framework was implemented across the Group, remunerating
Slide 28: Our growth priorities have not changed
Our growth priorities have not changed and we continue to optimise our portfolio of markets and businesses Growth Priorities Strategic actions Targeted outcome 2014-17 2015 Progress 1 Relationship-led Personal Lending – Invest in marketing, customer relationship management, analytics – Principal RBW
Slide 29: We have the capacity to take more credit risk in RBWM
We have the capacity to take more credit risk in RBWM and the business is showing signs of volume growth Relationship-led Personal Lending Principal RBWM lending balances and sales volume growth Actions to date – Global analytics capability improving the identification of customer needs +3% – New tr
Slide 30: Differentiated Wealth offering driving improved performance
Our investment in a differentiated Wealth offering is driving improved performance, with further opportunities for growth Wealth Management Strong customer satisfaction with improving sales momentum We have built a clearly differentiated Wealth offering Appointments Financial reviews – We operate a
Slide 31: Asset Management delivers attractive returns, positioned for Asia growth
Our Asset Management business delivers attractive returns, and is positioned to benefit from managed asset growth in Asia Asset Management Managed asset pools are forecast to grow strongly (USD) This growth provides opportunities for us Global AUM1 Total Middle East – Distribution footprint aligned
Slide 32: Insurance is accretive to the Group, with majority of exposure to Asia
Insurance is accretive to the Group, with majority of exposure to Asia Insurance Profitable and accretive returns for Group (USD) Significant growth opportunity, particularly in Asia Gross premium annual Emerging Asia life – Asia’s share of the global middle class will almost double by 20204, drivin
Slide 33: Digital transformation will enable process simplification and channel migration
Digital transformation will enable process simplification and accelerate channel migration, improving productivity and customer experience Digital Changing customer behaviour The Group’s streamlining programme will sustainably reduce RBWM’s costs c.75% Investment brings 2017 exit costs to 2014 level
Slide 34: Digital transformation is well under way
Digital transformation is well under way Digital Active digital users Key achievements – Examples – Branch optimisation programme delivering cost savings as per plan3 – Mortgages live connect video roll out in the UK with completion of 1st c.250k customers remote mortgage drawdown in December 2015 3
Slide 35: Within our portfolio of businesses, returns are driven by domestic scale
Within our portfolio of businesses, returns are driven by a combination of domestic scale and focus on affluent customers… Portfolio Scale and returns for RBWM priority markets1 Strategic actions RBWM revenue2 x% of customers are Premier – Maintain and increase existing scale RoRWA3 Protect Premier
Slide 36: RBWM is focused on growth, and will invest to offset rising costs
RBWM is focused on growth, and will invest to offset rising costs while optimising our portfolio of businesses Conclusion Focus areas – Our growth priorities have not changed. We will continue to focus our investment on relationship-led lending, wealth management and digital Growth priorities – We w
Slide 37: Appendix
June 2016 Appendix 2
Slide 38: Financial overview
Financial overview Reconciliation of Reported to Adjusted PBT for HSBC Group Discrete quarter 2015 Full Year $m 1Q15 4Q15 1Q16 vs. 1Q15 vs. 4Q15 Reported profit before tax 7,059 (858) 6,106 (953) 6,964 Includes Currency translation 296 47 - (296) (47) Significant items: Fair value gains / (losses) o
Slide 39: Appendix
June 2016 Appendix 3
Slide 40: Total RBWM 1Q16 Financial Performance
Total RBWM 1Q16 Financial Performance PBT down reflecting lower insurance manufacturing revenue in Asia and France following unfavourable market updates, and higher LICs partly offset by cost control Adjusted PBT1,2 (USDm) Adjusted revenue2 (USDm) -6% Total RBWM 1Q15 4Q15 1Q16 Total RBWM 1,844 1,516
HSBC Holdings — Goldman Sachs European Financials Conference 2016 on 6ix