HSBC Holdings PLC · LSE:HSBA
HSBC — Investor Day (May 2011)
23 slides from HSBC's investor day presentation, May 11, 2011
Slide 1: HSBC Holdings plc Investor Day
Abc 11 May 2011 HSBC HOLDINGS PLC INVESTOR DAY The presentation given today by Iain Mackay, Group Finance Director, and Sean O’Sullivan, Group Chief Technology and Services Officer, is attached and will be available to view at www.hsbc.com. ends/all Registered Office and Group Head Office: This news
Slide 2: Financial Targets - Investor Day
11 May 2011 Financial Targets Investor Day Iain Mackay Group Finance Director Sean O’Sullivan Group Chief Technology and Services Officer
Slide 3: 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 f
Slide 4: Financial targets
Financial targets 1 Capital 2 RoE: 12-15% 3 CER: 48-52% 3
Slide 5: Capital impact: potential Basel impact
Potential Basel 3 impact Basel II → Basel III impacts Probable timing Potential bp impact VaR, Securitisation and correlation trading 40 to 45 impact By 2013 RWAs 100 to 115bp CVA charge and financial correlation By 2013 60 to 70 Dual impact Threshold deductions and other 2013 to 2018 70 to 80 95 to
Slide 6: Phased Basel 3 implementation and mitigations
Phased Basel 3 implementation and mitigations (Pro-forma) Basel II → Basel III detailed build-up Impact of mitigations and revised estimates Core/Common equity tier 1 capital ratio, % (pro-forma) 10.5 (0.6) c.120 bps 0.3 10.2 (0.9) 0.8 10.1 (1.3) 0.5 9.3 Continued run off non core portfolios and
Slide 7: Capital strength (and generation) throughout the crisis
Capital strength (and generation) throughout the crisis HSBC total capital ratio Tier 1 and Total Capital Ratios, % Attributable profit 19.1 5.7 5.8 13.2 USDbn 15.2 13.7 3.1 11.4 11.4 2.9 1.6 Tier 2 2.7 3.1 1.4 Other tier 1 1.2 1.3 10.5 9.4 Core tier 1 7.5 7.0 2007¹ 2008 2009² 2010 1 Basel II Pro fo
Slide 8: Whilst being one of the biggest dividend payers in the industry
Whilst being one of the biggest dividend payers in the industry Bank dividends declared USDbn 2007-20101 ICBC 34 HSBC 31 Santander 25 CCB 25 Strong track record BofA 22 Bank of China 21 Capital generation through Citi 17 Commonwealth 14 the cycle Westpac 13 JP Morgan 12 Robust subsidiary divid
Slide 9: Target RoE of 12-15%
Target RoE of 12-15% HSBC return on average ordinary shareholders’ equity Getting to 12-15% %, 2007 to 2010 Common Equity Tier 1 ratio of 9.5 to 10.5% assumed under Basel III 15.9 12-15 Basel III management actions Capital deployment 9.5 Presence in faster growing attractive markets 4.7 5.1
Slide 10: Strong underlying performance by key geographies enables 1.8-2.6% Group pre-tax RoRWA
Strong underlying performance by key geographies enables 1.8-2.6% Group pre-tax RoRWA 2010 results Target RoRWAs PBT RWAs1 RoRWAs % USDbn USDbn % Asia 11.6 324 3.8 3.4-4.2 Europe 4.3 302 1.3 1.3-1.8 Latin 1.8 96 2.0 2.6-3.3 America MENA 0.9 54 1.6 2.2-2.9 North 0.5 331 0.1 0.8-1.3 America Group 19.0
Slide 11: Strong underlying performance by key customer groups enables 1.8-2.6% Group pre-tax RoRWA
Strong underlying performance by key customer groups enables 1.8-2.6% Group pre-tax RoRWA 2010 results Target RoRWAs PBT RWAs1 RoRWAs % USDbn USDbn % GPB 1.1 25 4.0 4.2-4.8 GBM 9.5 358 2.5 2.0-2.2 CMB 6.1 322 2.0 2.2-2.5 RBWM 3.5 361 1.0 2.0-3.0 Group 19.0 1,103 1.7 1.8-2.6 1 As at 31 December 2010
Slide 12: CER drivers in 2010
CER drivers in 2010 2009-2010 CER evolution CER % – reported basis USD3.3bn increase in costs USD4.4bn decrease in 0.6 55.2 revenues2 0.7 0.6 0.4 1.5 52.0 (5.2) 1.0 Largely Includes 1.0 higher driven by amortisation 1.1 Sale & North and leaseback of 1.4 Wage inflation HQ America and discreti
Slide 13: Q4 2010 to Q1 2011 cost drivers
Q4 2010 to Q1 2011 cost drivers Cost base evolution Q4 2010 to Q1 2011 USDbn – reported basis 0.1 (0.1) 0.4 (0.1) (0.2) 10.4 0.4 Arising in North Lower 10.2 (0.3) America and marketing costs Mainly driven Latin America in Asia and by lower spend in Europe and Includes lower Higher North America depr
Slide 14: Sustainable cost saves key to achieving 48-52% CER
Sustainable cost saves key to achieving 48-52% CER Sustainable cost saves USD2.5 – 3.5bn of sustainable cost saves targeted over next 3 years through four key programmes Sustainable cost saves will facilitate: – Growth in key markets – Investment in new products, process and technologies – Provi
Slide 15: Cost efficiency objectives and approach
Cost efficiency objectives and approach Objectives Approach Improve CER from 55% to target range 48-52% by 2013 Support achievement of positive 1 2 jaws Become more dynamic and agile Implement Re-engineer Consistent Global Business Functions Models Principles Sustainable cost saves 3 4 Red
Slide 16: Implement Consistent Business Models
1 Implement Consistent Business Models Rationale Actions RBWM presence in 61 markets Implement consistent business models in RBWM and CMB presence in 65 markets CMB But inconsistent business models across Standardise RBWM and CMB global propositions markets across markets 20 key cost eff
Slide 17: Re-engineer Global Functions
2 Re-engineer Global Functions Rationale Actions Historical growth of the Group has led to Streamline global functions’ organisational structure, multiple layers and head office structures activities and size Opportunity to review local, regional and Right-size head offices and optimise the
Slide 18: Re-engineer Processes
3 Re-engineer Processes Rationale Actions Inconsistent processes across markets Implement standard activities and procedures Significant variance between best and Leverage best practice across the Group worst operational practices Drive greater straight through processing Track record Sele
Slide 19: Streamline IT
4 Streamline IT Rationale Actions Industry benchmarking shows: End-to-end review of ‘change the Bank’ IT to achieve – IT Operations ‘Run the bank’ are industry benchmarks in productivity and quality efficient and effective Further reduce regional and local ‘change the Bank’ IT – IT Development
Slide 20: Financial targets
Financial targets Strong capital generation with Core Tier 1 ratio of 10.5%1 1 Capital One of the biggest dividend payers in industry Assumed Common Equity Tier 1 ratio of 9.5-10.5% under Basel III 12-15% RoE over the cycle supported by 1.8-2.6% pre-tax RoRWA target Capital deployment, pre
Slide 21: Basis of preparation (1/2)
Basis of preparation (1/2) Actuals Actual numbers presented are on a reported basis and include the effect of movements in the fair value of HSBC’s own debt related to credit spreads AMG The Global Asset Management business formed part of GBM in 2010, but has been included in RBWM for the RoRWA targ
Slide 22: Basis of preparation (2/2)
Basis of preparation (2/2) RoE Return on equity (‘RoE’) is profit attributable to ordinary shareholders of the parent company divided by average ordinary shareholders’ equity RoRWA The metric, return on risk weighted assets (‘RoRWA’), is the profit before tax divided by average RWAs. The RWAs have b
Slide 23: Acronyms and definitions
Acronyms and definitions A/D ratio Ratio of customer advances to customer deposits ETF Exchange traded funds NYSE New York Stock Exchange Advance HSBC Advance, a global banking proposition for the EU European Union OCC Office of the Comptroller of Currency mass-affluent segment of customers AFS Avai