HSBC Holdings PLC · LSE:HSBA
HSBC — ESG Presentation (June 2012)
46 slides from HSBC's sustainability presentation, June 2012
Slide 1: Sustainability at HSBC
Sustainability at HSBC Francis Sullivan: Adviser on the Environment and Deputy Head of Group Corporate Sustainability Tristram Roberts: Group Head of Performance & Reward, HR Global Functions and HTS Guy Lewis: Senior Manager, Investor Relations June 2012
Slide 2: Forward-looking statements
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 fu
Slide 3: Agenda
Agenda Sustainability delivered through long term results and distinctive position Strategy update Section 1 Strong and conservative management philosophies Section 2 Values and remuneration Section 3 Corporate Sustainability is core to how we manage our business Section 4
Slide 4: Overriding accountability of the Group Management Board
‘The overriding accountability of the Group Management Board, led by the Group Chief Executive is to deliver sustainable long term value for shareholders through consistent performance delivery and safe and compliant execution of the Group’s business in a manner that, at the same time, maintains the
Slide 5: Strategy update
Strategy update HSBC €X>
Slide 6: Group Strategy
Group Strategy Strategy aligned with two long-term trends International trade and capital flows Economic development and wealth creation Build on Most relevant international trade markets for wealth and commercial creation banking heritage Retail banking only International where we can netwo
Slide 7: Progress against May 2011 Report Card
Progress against May 2011 Report Card Key execution elements May 2011 Report Card Metrics Progress to date Disposals and closures of non- 28 transactions to dispose of or close strategic / underperforming businesses Capital Deployment businesses c.USD55bn expected reduction in RWAs 1 Five Filt
Slide 8: HSBC Vision
HSBC Vision We enable businesses to thrive and economies to Reason why we Purpose prosper, helping people fulfil their hopes and dreams exist and realise their ambitions Act with courageous integrity Dependable and do the right thing How we behave and Values Open to different ideas and cultures
Slide 9: Four integrated Global Businesses
Simplify I Four integrated Global Businesses Senior manager Fast growth company first gains invests for retirement access to Debt or Equity markets Exporter requires a International corporate pays its employees Commercial USD futures contract HR manager establishes Banking Agricultural producer buys
Slide 10: Cohesive portfolio of markets
Vision Cohesive portfolio of markets Hong Kong and Middle East and rest of Asia Pacific Europe North Africa North America Latin America ‘Home United Hong Kong1 markets’ Kingdom Australia France Egypt Canada Argentina Mainland China Germany Saudi Arabia USA Brazil India Sw
Slide 11: Committed to delivering on our financial targets
Vision Committed to delivering on our financial targets Capital Profitability Efficiency Common equity tier 1 ROE target of CER target of ratio of 12 - 15% 48 - 52% 9.5 - 10.5% 6
Slide 12: Priorities going forward
Priorities going forward Key actions Aggressively run-off legacy assets Fragmentation – Continue to dispose non-strategic businesses I Simplify through Five Filters Four Programmes – Make HSBC easier to manage and control Reposition elements of GPB business model Reposition the US for grow
Slide 13: Simplifying the organisation and our approach to talent and values
Simplifying HSBC I Simplifying the organisation and our approach to talent and values How we will achieve it . . . Continue to establish 8x8 8 by 8 Maximum of 8 layers between Group CEO and frontline structure Increased spans of control (8 reports per manager) Group FTE Target business and o
Slide 14: Reshaping the US business to focus on core activities
Restructure II We are reshaping the US business to focus on core activities Reposition the US towards international Major US transactions announced to date businesses Consideration: USD2.4bn Commercial Banking focused on 5 hubs concentrating over 50% of US corporate Transferred FTEs: c.5k impo
Slide 15: GB&M is taking the necessary actions
Restructure II GB&M is taking the necessary actions Industry changes in product profitability Actively managing down legacy exposure In 2011, disposal actions taken to mitigate USD7bn RWA GM Legacy increase; but RWAs increased USD24bn largely due to regulatory changes Clear economic framework
Slide 16: Integration should deliver another USD1bn revenue upside
Organic Growth III Integration should deliver another USD1bn revenue upside in the short to medium term Collaboration areas Description Total upside Revenues, USDbn Original collaboration target from May 2011 Previous target c.USD500m achieved in 2011 1 CMB and GB&M Additional Enhanced coverag
Slide 17: HSBC has been shifting towards faster growing regions
Organic Growth III HSBC has been shifting towards faster growing regions Fast Growers Developed Faster growing regions1 as share of Group 2007, % 2011, % 2007 – 2011 Difference, 2007 – 2011 Difference percentage points PBT 64% 78% 14 USD 1.6bn Revenues2 39% 49% 10 USD 4.8bn Gross loans and advances
Slide 18: Report Card
Report Card Actions (examples) By the end of 2013 . . . Release capital from run-off (CML, Additional transactions announced and GB&M) and non-strategic executed Capital Deployment businesses RWAs increase in ‘Growth HSBC’ and Five Filters Mitigate regulatory RWA increase material reduction
Slide 19: Financial strength
Financial strength Key Metrics 20111 Q1 20121 Core Tier 1 Ratio (%) 10.1 10.4 Capital & Dividends (USD per 1 0.41 0.09 Liquidity ordinary share)2 ADR (%) 75.0 74.8 PBT (USDbn) 21.9 4.3 2 Returns RoE (%) 10.9 6.4 RoRWA (%) 1.9 1.4 CER (%) 57.5 63.9 3 Efficiency CER (%) (underlying) 61.0 55.5 Sustaina
Slide 20: Strong and conservative management philosophies
Strong and conservative management philosophies
Slide 21: How we manage our business
How we manage our business Our values, robust risk management, good governance, and commitment to operating sustainably guide the way we manage our business and help us deliver value to our shareholders and customers.
Slide 22: Capital strength and generation
Capital strength and generation1 Tier 1 ratio (%) Notes: 1 Reported basis
Slide 23: Values and remuneration
Values and remuneration HSBC €X>
Slide 24: HSBC values and business principles
HSBC values and business principles In all we do, each of us should act with courageous integrity standing firm for what is right HSBC Values HSBC Business Principles Dependable and do the right thing Financial strength: maintain capital strength and liquidity – stand firm for what is right, del
Slide 25: Variable Pay – alignment with performance
Variable Pay – alignment with performance Global variable pay pools considered as follows: – PBT performance assessed; – Risk-adjusted PBT performance assessed (economic profit); – Performance within the context of HSBC’s Risk Appetite Statement In addition the Group Remuneration Committee (RemC
Slide 26: Retained Earnings/Dividends/Variable Pay
Retained Earnings/Dividends/Variable Pay The application of the funding methodology together with the stated dividend policy results in the following typical distribution of post tax profits: Low point of economic High point of economic cycle cycle 13% 20% Retained Retained Earnings/Capital Earnin
Slide 27: Variable Pay – annual bonus awards
Variable Pay – annual bonus awards Annual bonus awards determined against: – Annual performance scorecard – Financial and non-financial measures – HSBC Values assessment – Senior management has separate values rating for 2011 – Minimum “2” rating required in order to be considered for variable pay
Slide 28: Executive Directors
Executive Directors Composition of package remains consistent – Maximum Annual Bonus 300% of salary – Maximum GPSP award 600% of salary – 1:3:6 remuneration model – CRD IV No increases in fixed salaries Subject to the same reviews by Risk & Compliance as other senior executives and FSA Code St
Slide 29: Corporate Sustainability is core to how we manage our business
Corporate Sustainability is core to how we manage our business
Slide 30: Why long-term thinking is important
Why long-term thinking is important Environmental footprint Reduces cost Sustainability risk Reduces risk Business development Increases revenues Community investment Supports long term value Sustainability reporting Engages stakeholders and manages reputation
Slide 31: Efficiency as part of the HSBC Technology & Services strategy
Efficiency as part of the HSBC Technology & Services strategy - Reduces cost
Slide 32: Operational sustainability strategy – driving efficiency
Operational sustainability strategy – driving efficiency
Slide 33: LEED certified buildings
LEED certified buildings HSBC Global HQ, United Kingdom HSBC HQ, North America HSBC GLT, Egypt HSBC HQ, China HSBC HQ, Mexico HSBC Building Shanghai, China
Slide 34: How we are doing
How we are doing tonnes kWh/FTE CO2 /FTE 14,000 8 kWh/FTE 12,000 7 CO2 /FTE 6 10,000 5 8,000 4 6,000 3 4,000 2 2,000 1 0 0 HSBC Stan Char Santander Barclays RBS Citi UBS Source: Various company reports (2010)
Slide 35: Management of sustainability risk
Management of sustainability risk - Reduces risk
Slide 36: Sustainability is embedded in our risk systems
Sustainability is embedded in our risk systems Our approach Policies Processes People Adopted Equator Principles in 2004 Sustainability Risk Policies for Metals and mining Forest land and forest products Chemicals Energy Freshwater infrastructure + Defence equipment
Slide 37: Percentage of non-compliant customers reduced in 2011
Percentage of non-compliant customers reduced in 2011 Levels of compliance by number of clients (%) 2010 2011 Leader 2.5 2.5 95.4 Compliant 94.3 Near compliant 3.0 1.8 Non compliant 0.2 0.15
Slide 38: How are we doing
How are we doing Indices and ratings Carbon Disclosure Bank BankTrack ranking Project (CDP) Score What was the sum of the What was the company's company's scores on all its published CDP score (out policies (as per Mind the of 100)? Gap)? Barclays 87 18 Citigroup 79 16 HSBC 95 22 RBS 93 15 Standard
Slide 39: Positioned to capture opportunities from low carbon economy
Positioned to capture opportunities arising from transition to low carbon economy - Increases revenues
Slide 40: Strategic oversight from HSBC's Climate Business Council
Strategic oversight from HSBC’s Climate Business Council 160 climate and cleantech research notes, HSBC What is ‘climate business’? Global Research Thomson Reuters Extel aware – number 1 for Increasing the share of low carbon energy integrated climate change production, such as bio-energy, nuc
Slide 41: HSBC Climate Change Centre of Excellence
HSBC Climate Change Centre of Excellence Helping HSBC and its clients integrate climate change into investment strategy Macro Markets Analysing key Evaluating market economic, political, implications in terms scientific and of risks & technological opportunities by drivers. sector & theme Equities W
Slide 42: How are we doing
How are we doing Number 1 team Number 1 analyst Number 3 team 3rd biggest For integrated For renewable Overall for Underwriter of green climate change energy, 2011 (Nick sustainability bonds (HSBC Bank research and Robins) research, 2011 plc) renewable energy research, 2010 and 2011, 2012 Best Green
Slide 43: Investing in communities and long-term socio-economic development
Investing in communities and long-term socio-economic development - Supports long term value
Slide 44: Community investment donations and employee volunteering (2011)
Community investment donations and employee volunteering (2011) Donations in 2011: USD 96 million Employee volunteering: 746,093 hours Estimated value: USD 8.5 million Volunteering in Education own time (54%) (56%) Environment (28%) Volunteering in Other (18%) work time (44%)
Slide 45: Conclusion
Conclusion ‘The overriding accountability of the Group Management Board, led by the Group Chief Executive is to deliver sustainable long term value for shareholders through consistent performance delivery and safe and compliant execution of the Group’s business in a manner that, at the same time, ma
Slide 46: Contacts and further information
Contacts and further information Guy Lewis Senior Manager, Investor Relations [email protected] +44 (0) 207 992 1938