HSBC Holdings plc: Q3 2019 EARNINGS RELEASE AUDIO WEBCAST AND CONFERENCE CALL


Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

HSBC Holdings plc

Overseas Regulatory Announcement

The attached announcement has been released to the other stock exchanges on which HSBC Holdings plc is listed.

The Board of Directors of HSBC Holdings plc as at the date of this announcement comprises: Mark Tucker*, Noel Quinn, Kathleen Casey , Laura Cha , Henri de Castries , Irene Lee , José Meade , Heidi Miller , Marc Moses, David Nish , Ewen Stevenson, Jonathan Symonds , Jackson Tai and Pauline van der Meer Mohr .

* Non-executive Group Chairman

  • Independent non-executive Director
    Hong Kong Stock Code: 5

HSBC Holdings plc

Registered Office and Group Head Office:

8 Canada Square, London E14 5HQ, United Kingdom Web: www.hsbc.com

Incorporated in England with limited liability. Registered in England: number 617987

28 October 2019

HSBC HOLDINGS PLC

Q3 2019 EARNINGS RELEASE

AUDIO WEBCAST AND CONFERENCE CALL

There will be an audio webcast presentation and conference call today for investors and analysts. The speakers will be Noel Quinn, Group Chief Executive, and Ewen Stevenson, Group Chief Financial Officer.

A copy of the presentation to investors and analysts is attached and is also available to view and download at https://www.hsbc.com/investors/results-and-announcements/all-reporting/group. Full details of how to access the conference call appear below and details of how to access the webcast can also be found at http://www.hsbc.com/investors/results-and-announcements

Time: 7.30am (London); 3.30pm (Hong Kong); and 3.30am (New York).

Conference call access numbers:

Restrictions may exist when accessing freephone/toll-free numbers using a mobile telephone.

Passcode: 7958307

Toll-free

Toll

UK

0808 238 1616

0844 822 8904

US

+1 866 551 9263

+1 917 382 4013

Hong Kong

800 967 131

5808 0001

International

+44 207 192 8727

Replay access details from 28 October 2019 09:00 GMT – 28 November 2019 09:00 GMT

Passcode: 7958307

Toll-free

Toll

UK

0808 238 0667

0871 700 0471

US

+1 917 677 7532

Hong Kong

5808 5596

International

+44 333 300 9785

Note to editors:

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. HSBC serves customers worldwide from offices in 65 countries and territories in our geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of US$2,728bn at 30 September 2019, HSBC is one of the world’s largest banking and financial services organisations.

ends/all

Registered Office and Group Head Office:

8 Canada Square, London E14 5HQ, United Kingdom Web: www.hsbc.com

Incorporated in England with limited liability. Registered number 617987

HSBC Holdings plc 3Q19 Results

Presentation to Investors and Analysts

Highlights

1

3Q19 reported PBT down 18% to $4.8bn versus 3Q18; adjusted PBT down 12% to $5.3bn

Reported PBT in Asia up 4% to $4.7bn in 3Q19, with a resilient performance in Hong Kong

2 Growth in adjusted loans and advances to customers and customer accounts, up 7% and 5% respectively, compared with 3Q18

3

CMB and RBWM performed well compared with 3Q18. Continued momentum in GPB with net new money of $19bn in 9M19

HSBC UK was adversely impacted by additional customer redress charges in 3Q19

GB&M performance continued to reflect low levels of client activity in Global Markets, although our transaction banking

  1. franchises delivered resilient performance
    In 3Q19 adjusted revenue in Asia increased 9% versus 3Q18, and represented >50% of total GB&M adjusted revenue
  2. Continued strong capital levels, with a CET1 ratio of 14.3%, including the completion of a $1bn share buy-back

1

Business update

Inherent strengths

Market conditions have changed

Business update

Drivers of growth and returns:

    • Leading global transaction bank, supported by strong international wholesale bank
    • Powerful and profitable retail banking and wealth management businesses in our biggest markets
    • Heritage in Asia and faster-growing markets
  • Conditions reflected in 3Q19 performance, with lower interest rates, lower capital market activity levels, wealth and insurance headwinds
  • The revenue environment is more challenging than in the first half of 2019, and the outlook for revenue growth is softer than we anticipated at 1H19

Parts of the portfolio not delivering acceptable returns:

  • Too much capital in Continental Europe and UK NRFB, notably GB&M
  • Insufficient returns from US activities – notably GB&M and Retail Banking

Organisation design to be remodelled:

  • Simplify the bank
  • Better role definitions
  • Reduce costs associated with running the Group
  • Protect and grow core business
  • Update plans and accelerate execution

No longer expect to reach RoTE target of >11% by 2020

  • Improve returns, rebalance capital allocation away from low-return businesses
  • Redeploy capital to faster growth and higher return markets
  • Adjust cost base in line with these actions

We will provide an update on these plans and announce new financial targets at (or before) FY19 results

2

Financial performance

Key financial metrics

Key financial metrics

9M19

9M18

∆ 9M18

Return on average tangible equity (annualised)1

9.5%

10.1%

(0.6)ppts

Return on average ordinary shareholders’ equity (annualised)

9.2%

9.0%

0.2ppts

Jaws (adjusted)2

2.2%

(1.6)%

nm

Dividends per ordinary share in respect of the period

$0.30

$0.30

Earnings per share (basic) 3

$0.57

$0.56

$0.01

Common equity tier 1 ratio4

14.3%

14.3%

Leverage ratio5

5.4%

5.4%

Advances to deposits ratio

74.1%

73.0%

1.1ppts

Net asset value per ordinary share (NAV)

$8.21

$8.13

$0.08

Tangible net asset value per ordinary share (TNAV)

$7.02

$7.01

$0.01

Reported results, $m

3Q19

∆ 3Q18

∆ %

9M19

∆ 9M18

∆ %

Revenue

13,355

(443)

(3)%

42,727

1,642

4 %

ECL

(883)

(376)

(74)%

(2,023)

(1,109)

(>100)%

Costs

(8,147)

(181)

(2)%

(25,296)

219

1%

Associates

512

(85)

(14)%

1,836

(142)

(7)%

PBT

4,837

(1,085)

(18)%

17,244

610

4%

PAOS*

2,971

(928)

(24)%

11,478

(407)

(4)%

* Profit attributable to ordinary shareholders of the parent company

Adjusted results, $m

3Q19

∆ 3Q18

∆ %

9M19

∆ 9M18

∆ %

Revenue

13,267

(219)

(2)%

41,762

1,894

5%

ECL

(883)

(394)

(81)%

(2,023)

(1,177)

(>100)%

Costs

(7,548)

(61)

(1)%

(23,711)

(608)

(3)%

Associates

512

(70)

(12)%

1,836

(59)

(3)%

PBT

5,348

(744)

(12)%

17,864

50

0%

A reconciliation of reported results to adjusted results can be found on slide 11, the remainder of the presentation unless otherwise stated, is presented on an adjusted basis

3

Financial performance

Adjusted revenue performance

Adjusted revenue analysis

3Q19 revenue

3Q19 vs. 3Q18, $m

9M19 vs. 9M18, $m

$3,981m

$171m

$1,506m

$464m

CMB$3,791m

$1,367m

$454m

$1,352m

Retail Banking

Wealth Management

Other

GLCM

GTRF

Credit and Lending

Other

Global Markets

149

60

9

74

(5)

(393)

$0.0bn

0%

$0.1bn

4%

223

144

424

42

270

79

(668)

887

$1.3bn

8%

$0.8bn

8%

$1,082m

GB&M$3,470m

$1,403m

$(367)m

GPB$472m

Global Banking, Principal

Investments

GLCM, GTRF, Securities Services

Other

(254)

17

30

45

$(0.6)bn

(15)%

(209)

269

(202)

62

$(0.8)bn

(7)%

Corporate

Centre$(94)m

Group $13,267m

(219) (44)

194

(175)

(2)%

Excluding certain items included in adjusted revenue

4

For further information please see appendix, page 12

Financial performance

Net interest income and NIM

Net interest income

Reported

quarterly

7,456

7,644

7,680

7,709

7,468

7,772

7,568

NII, $m

+3%

0%

7,686

7,601

7,670

7,275

7,492

7,330

Adjusted

6,992

quarterly

NII, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

+7%

(0)%

Quarterly

1,867

1,875

1,903

1,922

1,920

average

1,812

1,803

interest

earning

assets

(AIEA),

$bn

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

(6)bps

Reported

quarterly

1.63%

1.59%

1.62%

1.56%

NIM, %

  • Adjusted NII of $7.7bn stable versus 2Q19; up $0.2bn (3%) versus 3Q18
  • Reported NII of $7.6bn down $0.2bn (3%) versus 2Q19, primarily due to provisions in relation to customer remediation programmes in the UK of c.$135m, of which $118m were included in significant items
  • 3Q19 NIM of 1.56% down 6bps versus 2Q19:
    • 3bps for provisions in relation to customer redress programmes in the UK RFB (18bps impact on HSBC UK NIM)
    • 2bps in relation to hyperinflation accounting in Argentina

Discrete NIM by key legal entity, %

FY18

1Q19

2Q19

3Q19

% of 3Q19

% of 3Q19

Group NII Group AIEA

The Hongkong and

Shanghai Banking

2.06%

1.99%

2.05%

2.05%

56%

43%

Corporation (HBAP)

HSBC Bank plc

0.37%

0.34%

0.45%

0.47%

7%

23%

(NRFB)6

HSBC UK Bank plc

2.16%

2.21%

2.13%

1.93%

19%

15%

(RFB)6

HSBC North

America Holdings,

1.08%

1.05%

1.01%

0.87%

6%

11%

Inc

5

Financial performance

Adjusted costs

3Q19 vs. 3Q18, $bn

+61m, 0.8%

0.1

0.2

(0.2)

(0.3)

0.1

7.5

0.1

7.5

Argentina

Hyperinflation

3Q18

Cost

Inflation

Performance

Investments

Other Cost

3Q19

Saves

Costs

Growth

Adjusted operating expenses trend, $m

Adjusted costs

7,627

7,672

7,487

8,725

7,860

7,951

7,548

41

923

76

24

Argentina hyperinflation

986

855

996

1,069

1,184

1,178

1,122

UK bank levy

Investments

Other Group costs

6,731

6,676

6,557

6,542

6,880

6,749

6,479

(139)

(5)

(53)

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Adjusted costs

  • Adjusted costs of $7.5bn in 3Q19 broadly stable versus 3Q18 and down $0.4bn (5%) versus 2Q19
  • Compared to the prior quarter, 3Q19 benefitted from a $0.2bn release of YTD variable pay, savings from the current cost programmes of $0.1bn, and $0.1bn from Argentina hyperinflation
  • YTD growth constrained to 2.6%, versus 5.6% in FY18
  • We expect 4Q costs to include the UK bank levy charge of c.$950m, as well as higher investment spend of c.$0.2bn versus 3Q19

Reported costs

  • 3Q19 reported costs of $8.1bn include customer redress of $488m, of which $388m relates to the mis-selling of PPI
  • Restructuring costs* of $140m in 3Q and $427m YTD, arising from cost- efficiency measures across our global businesses and functions
  • FY19 severance costs expected to be c.$650m – $700m, with annualised savings of c.$650m – $700m

* For further information please see appendix, page 11

6

Financial performance

Credit performance

  • Adjusted ECL of $883m, compared with $545m in 2Q19 primarily reflecting higher charges in RBWM and CMB:
    • RBWM adjusted ECL of $449m, up from $231m in 2Q19, primarily driven by: unsecured lending in the US, Mexico and the UK, and charges related to updated economic outlook in Hong Kong
    • CMB adjusted ECL of $413m, up from $244m in 2Q19, driven by: an increase in Stage 2 loans in Hong Kong (due to the updated economic outlook and a model update). Specific charges related to customers in the UK and a single name in Hong Kong
  • The change in economic outlook led to a total charge of $90m in Hong Kong; there was no material change in the quarter to allowances relating to economic uncertainty in the UK
  • ECL as a percentage of average gross loans and advances to customers was 0.34% in 3Q19, compared with 0.22% in 2Q19
  • Stage 3 loan book stable at 1.3% of total gross loans and advances to customers

Adjusted ECL charge trend

0.18

0.34

0.34

0.20

0.23

0.22

0.06 0.08

829

883

489

563

545

144

198

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Quarterly ECL as a % of average gross

FY18 ECL as a % of average

loans and advances (annualised)

gross loans and advances

ECL, $m

Analysis by stage

Stage 3

Reported basis, $bn

Stage 1

Stage 2

Stage 3

Total7

as a %

of Total

3Q19

Gross loans and advances

941.1

71.7

13.3

1,026.4

1.3%

to customers

Allowance for ECL

1.3

2.2

4.9

8.6

2Q19

Gross loans and advances

955.5

61.3

13.0

1,030.2

1.3%

to customers

Allowance for ECL

1.3

2.1

5.0

8.5

4Q18

Gross loans and advances

915.2

61.8

13.0

990.3

1.3%

to customers

Allowance for ECL

1.3

2.1

5.0

8.6

7

Financial performance

Capital adequacy: CET1 ratio of 14.3%

Capital progression

4Q18

1Q19

2Q19

3Q19

Common equity tier 1 capital, $bn

121.0

125.8

126.9

123.8

Risk-weighted assets, $bn

865.3

879.5

886.0

865.2

CET1 ratio, %

14.0

14.3

14.3

14.3

Leverage ratio, %

5.5

5.4

5.4

5.4

3Q19 CET1 movement, $bn

At 30 June 2019

126.9

Capital generation

1.6

Profit attributable to ordinary shareholders of the parent

3.0

company

Regulatory adjustments

(0.2)

Ordinary share dividends net of scrip

(1.2)

Foreign currency translation differences

(2.6)

Share buy-back

(1.0)

Other movements

(1.1)

At 30 September 2019

123.8

CET1 ratio movement, %

(0.2)

0.4

(0.1)

(0.1)

0.1

14.3

(0.1)

14.3

2Q19 Profit for the Ordinary

Share

Change

Foreign

Other

3Q19

period incl.

share

buy-back

in RWAs

currency

regulatory dividends

translation

adjustments

net of

differences

scrip

  • CET1 ratio stable at 14.3%, with profits and reduction in RWAs offset by dividends and the share buy-back, as well as adverse currency and other movements
  • RWAs decreased by $21bn during 3Q19, including a decrease of $13bn due to FX, $14bn due to methodology and policy changes, partly offset by asset growth and asset quality changes
  • Currently expect FY19 RWAs to be broadly stable versus 3Q19
  • As of the 14th October, the Hong Kong countercyclical buffer (CCyB) was reduced from 2.5% to 2.0%. This reduced the Group consolidated CCyB from 0.7% to 0.6%, reducing the minimum CET1 requirement from 11.4% to 11.3%

8

Summary

3Q19 results demonstrate the resilience of our international transaction banking network and the strength of our Asian

  1. franchise
    The revenue environment is more challenging than in the first half of 2019, and the outlook for revenue growth is softer than we
  2. anticipated at 1H19
    We no longer expect to reach our RoTE target of >11% by 2020

3

We will act to rebalance our capital away from low-returnbusinesses and adjust the cost base in line with the actions we take;

we are reviewing our plans and expect to update the market at (or before) our FY19 results in February 2020

4

These actions, or any continuing deterioration in the revenue environment, could result in significant charges in 4Q19 and subsequent periods, including the possible impairment of goodwill and additional restructuring charges

Addressing low-return businesses and reducing RWAs will allow redeployment of capital and resource into our faster growth

5 and higher return markets

We intend to sustain the dividend and maintain a CET1 ratio of >14%

9

Appendix

Appendix

Significant items

$m

3Q19

2Q19

3Q18

9M19

9M18

Reported PBT

4,837

6,194

5,922

17,244

16,634

Revenue

Currency translation

(208)

(355)

(1,514)

Customer redress programmes

118

118

(46)

Disposals, acquisitions and investment in new businesses

4

(827)

(823)

142

Fair value movements on financial instruments

(210)

(28)

43

(260)

195

Currency translation on significant items

6

(88)

(1,063)

(312)

(965)

(1,217)

ECL

Currency translation

10

18

68

Operating expenses

Currency translation

176

261

1,030

Cost of structural reform

35

38

89

126

300

Customer redress programmes

488

554

62

1,098

162

Disposals, acquisitions and investment in new businesses

51

54

Restructuring and other related costs

140

237

27

427

51

Settlements and provisions in connection with legal and regulatory matters

(64)

(2)

(1)

(66)

840

Currency translation on significant items

(27)

(10)

(25)

599

976

479

1,585

2,412

Share of profit in associates and joint ventures

Currency translation

(16)

(15)

(83)

Total currency translation and significant items

511

(93)

170

620

1,180

Adjusted PBT

5,348

6,101

6,092

17,864

17,814

  • Customer redress programmes include PPI provisions of $1,003m in 9M19 (3Q19 $388m). The increase in PPI provisions is mainly driven by the volume of information requests and inbound complaints received in the period to 29 August 2019 which significantly exceeded than forecast at 30 June 2019. This was partially offset by the lower quality of the information requests
  • 9M19 restructuring and other related costs of $427m includes $407m of severance costs (3Q19 $120m) arising from cost efficiency measures

11

Appendix

Certain revenue items and Argentina hyperinflation

Certain items included in adjusted revenue highlighted

3Q19

2Q19

3Q18

9M19

9M18

in management commentary8, $m

Insurance manufacturing market impacts in RBWM

(225)

(33)

(48)

(72)

(140)

Credit and funding valuation adjustments in GB&M

(160)

(32)

36

(147)

(4)

Legacy Credit in Corporate Centre

(40)

(13)

25

(124)

(78)

Valuation differences on long-term debt and associated

76

93

(15)

219

(380)

swaps in Corporate Centre

Argentina hyperinflation9

(132)

15

(304)

(173)

(304)

RBWM disposal gains in Latin America

133

CMB disposal gains in Latin America

24

GB&M provision release in Equities

106

Total

(481)

30

(306)

(34)

(906)

Argentina hyperinflation9 impact included in adjusted

3Q19

2Q19

3Q18

9M19

9M18

results (Latin America Corporate Centre), $m

Net interest income

(61)

24

(106)

(45)

(106)

Other income

(71)

(9)

(198)

(128)

(198)

Total revenue

(132)

15

(304)

(173)

(304)

ECL

12

(3)

20

10

20

Costs

53

(24)

139

34

139

PBT

(67)

(12)

(145)

(129)

(145)

12

Appendix

Volatile items analysis

RBWM: Insurance manufacturing

GB&M: Markets excl. Foreign

GB&M: Credit and funding valuation

Corporate Centre: Valuation

market impacts revenue, $m

Exchange revenue, $m

adjustments revenue, $m

differences on long-term debt and

associated swaps revenue, $m

183

1,088

1,021

21

36

46

93

933

67

76

50

802

803

639

(32)

490

(15)

(39)

(33)

(58)

(52)

(48)

(124)

(184)

(160)

(225)

(173)

(241)

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

FY18 sensitivity of HSBC’s insurance manufacturing

Effect on

Effect on

profit after

total

subsidiaries to market risk factors

tax, $m

equity, $m

+100 basis point parallel shift in yield curves

9

(61)

-100 basis point parallel shift in yield curves

(28)

46

10% increase in equity prices

213

213

10% decrease in equity prices

(202)

(202)

10% increase in USD exchange rate compared with all currencies

36

36

10% decrease in USD exchange rate compared with all currencies

(36)

(36)

Source: HSBC Holdings plc Annual Report and Accounts 2018, page 145

Stock market indices performance10

115

4Q18

1Q19

2Q19

3Q19

0%

110

+11%

3%

(14)%

(9)%

(2)%

105

(7)%

+11%

100

95

90

85

80

Jan-18Apr-18

Jul-18

Oct-18

Jan-19Apr-19

Jul-19

Oct-19

MSCI World

Hang Seng

Source: Bloomberg

13

Appendix

Global business management view of adjusted revenue

Group, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Δ%

3Q18

Total Group revenue

12,935 12,994 13,486 12,359

14,087 13,881

13,267

(2)

Adjusted revenue as previously disclosed11

13,850

13,685

13,841

12,564

14,406

14,089

RBWM, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Δ%

3Q18

Retail Banking

3,424

3,585

3,832

3,862

3,768

3,943

3,981

4

Current accounts, savings and deposits

1,758

1,956

2,285

2,291

2,161

2,423

2,422

6

Personal lending

1,666

1,629

1,547

1,571

1,607

1,520

1,559

1

Mortgages

536

485

408

403

418

396

379

(7)

Credit cards

680

692

691

709

752

677

711

3

Other personal lending

450

452

448

459

437

447

469

5

Wealth Management

1,753

1,519

1,570

1,114

1,888

1,695

1,476

(6)

Investment distribution

1,011

839

792

664

846

849

839

6

Life insurance manufacturing

477

418

522

205

787

586

395

(24)

Asset management

265

262

256

245

255

260

242

(5)

Other

176

58

222

62

186

231

171

(23)

Total

5,353

5,162

5,624

5,038

5,842

5,869

5,628

0

Adjusted revenue as previously disclosed11

5,669

5,396

5,760

5,110

5,971

5,949

CMB, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Δ%

3Q18

GTRF

438

454

455

444

459

465

464

2

Credit and Lending

1,234

1,268

1,293

1,307

1,327

1,363

1,367

6

GLCM

1,268

1,374

1,446

1,505

1,479

1,519

1,506

4

Markets products, Insurance and

526

462

459

382

574

492

454

(1)

Investments and other

Total

3,466

3,558

3,653

3,638

3,839

3,839

3,791

4

Adjusted revenue as previously disclosed11

3,699

3,740

3,750

3,696

3,921

3,894

GPB, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Δ%

3Q18

Investment

203

175

164

161

183

197

207

26

Lending

98

95

94

92

96

107

109

16

Deposit

119

121

124

125

120

118

112

(10)

Other

43

47

45

43

49

49

44

(2)

Total

463

438

427

421

448

471

472

11

Adjusted revenue as previously disclosed11

482

447

432

424

450

473

GB&M, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Δ%

3Q18

Global Markets

1,791

1,578

1,745

1,084

1,703

1,405

1,352

(23)

FICC

1,391

1,308

1,465

871

1,336

1,173

1,145

(22)

Foreign Exchange

703

776

812

594

682

602

713

(12)

Rates

446

361

404

204

479

392

300

(26)

Credit

242

171

249

73

175

179

132

(47)

Equities

400

270

280

213

367

232

207

(26)

Securities Services

454

479

491

480

469

518

509

4

Global Banking

1,006

1,068

957

932

920

990

989

3

GLCM

600

619

671

675

677

693

692

3

GTRF

185

189

211

196

206

198

202

(4)

Principal Investments

70

98

108

(59)

80

38

93

(14)

Other revenue

(173)

(147)

(149)

(112)

(121)

(218)

(207)

(39)

Credit and funding valuation adjustments

(58)

21

36

(173)

46

(32)

(160)

nm

Total

3,875

3,905

4,070

3,023

3,980

3,592

3,470

(15)

Adjusted revenue as previously disclosed11

4,148

4,117

4,184

3,063

4,068

3,638

Corporate Centre, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Δ%

3Q18

Central Treasury

(41)

187

91

268

284

263

313

>200

Balance Sheet Management

566

672

528

627

610

586

626

19

Holdings interest expense

(313)

(305)

(358)

(360)

(338)

(348)

(321)

10

Valuation differences on long-term debt

(241)

(124)

(15)

67

50

93

76

nm

and associated swaps

Other

(53)

(56)

(64)

(66)

(38)

(68)

(68)

(6)

Legacy Credit

1

(101)

25

(15)

(69)

(13)

(40)

(260)

Other

(182)

(155)

(404)

(14)

(237)

(140)

(367)

9

Total

(222)

(69)

(288)

239

(22)

110

(94)

67

Adjusted revenue as previously disclosed11

(148)

(15)

(285)

271

(4)

135

14

Appendix

Retail Banking and Wealth Management

9M19 highlights

Adjusted PBT

(9M18: $5.7bn)

$6.1bn

8%

Adjusted revenue

(9M18: $16.3bn)

$17.5bn 8%

Adjusted ECL

(9M18: $0.8bn)

$1.0bn

24%

Revenue performance8, $m

0%

(4)%

5,353

5,162

5,624

5,038

5,842

5,869

5,628

Wealth

183

Mgt.

1,792

1,571

1,618

1,298

1,705

1,728

1,701

(39)

(52)

(48)

(33)

(184)

(225)

222

231

171

62

186

Retail

58

176

banking

3,585

3,832

3,862

3,768

3,943

3,981

and

other

3,424

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Adjusted revenue

Retail banking

Other

Wealth Management excl.

Insurance manufacturing

market impacts

market impacts

Balance sheet13, $bn

+5%

+9%

623650656

345368376

3Q18 2Q19 3Q19

Customer Customer

lending accounts

  • Customer accounts up $33bn or 5% vs. 3Q18, notably in Hong Kong ($10bn) and the UK ($7bn)
  • Lending up $31bn or 9% vs. 3Q18, mainly from mortgages in Hong Kong ($11bn) and the UK ($9bn)

Assets under management, $bn

Adjusted costs

(9M18: $9.9bn)

$10.5bn 6%

RoTE12

(9M18: 22.8%)

19.3%

3Q19 vs. 3Q18: adjusted revenue stable

  • Lower insurance manufacturing revenue (down $127m) driven by $(177)m of adverse market impacts (3Q19: $(225)m 3Q18: $(48)m) particularly in France, Hong Kong and Argentina, partly offset by positive actuarial assumption changes
  • Higher retail banking revenue (up $149m) driven by balance growth with customer accounts growth of $33bn, and customer lending growth of $31bn
  • Higher investment distribution revenue (up $47m) driven by higher mutual fund sales in Hong Kong and higher FX revenue in Latin America

3Q19 vs. 2Q19: adjusted revenue down 4%

  • Lower insurance manufacturing revenue (down $191m) driven by $(192)m of adverse market impacts (3Q19: $(225)m, 2Q19: $(33)m) particularly in France, Hong Kong, and Argentina
  • Higher retail banking revenue (up $38m) as growth in balances of customer lending (up $8bn) and customer accounts (up $5bn) was partly offset by lower interest rates
  • Wealth distribution revenue broadly stable (down $10m) despite challenging market conditions as marginally lower revenue in Hong Kong was partly offset by higher revenue in the UK and Argentina

438502

3Q183Q19

Insurance value of new business written, $m

+1%

272275

3Q183Q19

15

Appendix

Commercial Banking

9M19 highlights

Adjusted PBT

(9M18: $5.8bn)

$5.7bn

3%

Adjusted revenue

(9M18: $10.8bn)

$11.6bn 8%

Adjusted ECL

(9M18: $0.3bn)

$0.9bn >100%

Revenue performance8, $m

+4%

(1)%

3,466

3,558

3,653

3,638

3,839

3,839

3,791

Adjusted revenue

Markets products,

382

574

492

454

Insurance and

462

459

526

Investments, and

465

464

455

444

459

Other

454

438

Global Trade and

Receivables Finance

1,446

1,505

1,479

1,519

1,506

(GTRF)

1,268

1,374

Global Liquidity and

Cash Management

(GLCM)

1,234

1,268

1,293

1,307

1,327

1,363

1,367

Credit and Lending

(C&L)

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Balance sheet13, $bn

Customer lending:

+5%

0%

341341

324

3Q18 2Q19 3Q19

  • YoY increase reflecting growth across all regions, notably in Europe, Asia and North America
  • QoQ broadly stable

Customer accounts:

+3%

0%

Adjusted costs

(9M18: $4.7bn)

$5.0bn 7%

RoTE12

(9M18: 14.5%)

13.0%

3Q19 vs. 3Q18: Adjusted revenue up 4%

  • GLCM up 4%, notably in Hong Kong and Argentina from improved margins and the UK from growth in average balances
  • C&L up 6%, notably in Asia and North America due to balance growth in Hong Kong and Canada
  • GTRF up 2% as growth in Europe, MENA, North and Latin America driven by higher fees was partly offset by Asia due to lower balances in Hong Kong

3Q19 vs. 2Q19: Adjusted revenue down 1%

  • GLCM down by 1%, notably in Hong Kong due to lower average overnight HIBOR rates
  • C&L broadly in line with prior quarter as increases in North America from higher fees were partly offset by a redress provision and margin compression in the UK
  • GTRF broadly in line with prior quarter as reduction in Hong Kong from margin compression was offset by growth in all other regions
  • Other down 8% due to lower insurance revenues primarily in Asia and a redress provision in the UK

352353

344

  • Year-on-yeargrowth driven by the UK and North America, partly offset by a reduction in Hong Kong
  • QoQ broadly stable

16

Appendix

Global Banking and Markets

9M19 highlights

Adjusted PBT

(9M18: $5.2bn)

$4.1bn (22)%

Adjusted revenue

(9M18: $12.0bn)

$11.2bn (7)%

Adjusted ECL

(9M18: $(0.1)bn)

Revenue performance8, $m

(15)%

Adjusted revenue

3,875

3,905

4,070

3,023

3,980

3,592

3,470

Credit and

21

36

46

(32)

Funding

(58)

(173)

(160)

Valuation

(10)%

Adjustments

0%

3,933

3,884

4,034

3,934

3,630

3,624

3,196

Global Markets

2,245

2,057

2,236

2,172

and Securities

1,923

1,861

Services

1,564

Global Banking,

1,827

1,798

1,769

GLCM, GTRF, PI

1,688

1,632

1,762

1,701

and Other

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Management view of adjusted revenue

$m

3Q19

∆3Q18

Global Markets

1,352

(23)%

FICC

1,145

(22)%

– FX

713

(12)%

– Rates

300

(26)%

– Credit

132

(47)%

Equities

207

(26)%

Securities Services

509

4%

Global Banking

989

3%

GLCM

692

3%

GTRF

202

(4)%

Principal

93

(14)%

Investments

Other

(207)

(39)%

Credit and Funding

Valuation(160) >(100)%

Adjustments

$0.1bn >(100)%

charge / (net release)

Adjusted costs

(9M18: $6.9bn)

$7.0bn 2%

RoTE12

(9M18: 12.5%)

9.6%

3Q19 vs. 3Q18: revenue exc. XVAs down (10)%

  • 3Q19 comparatives against a strong 3Q18, particularly in Global Markets which experienced reduced client activity and lower volatility
  • Global Banking revenue up due to increased Lending balances and the widening of credit spreads on portfolio hedges partly offset by prior year gains on corporate restructuring and lower event-driven revenue
  • Investment in GLCM, Securities Services and GTRF has delivered continued momentum with single digit growth in average balances

3Q19 vs. 2Q19: revenue exc. XVAs stable

  • Continuation of wider macro uncertainty and regional tensions impacting trade flows, economic growth and investor appetite
  • Global Markets impacted by reduced client activity as well as spread compression
  • Global Banking revenue broadly stable due to increased event-driven revenue and the widening of credit spreads on portfolio hedges partly offset by a reduction in financing activity
  • Client balances continue to grow in all our Transaction Banking products although revenues were broadly stable

Adjusted RWAs, $bn

  • RWAs down $4bn, reflecting continuing focus on capital management

17

Appendix

Global Private Banking

9M19 highlights

Adjusted PBT

(9M18: $280m)

$319m

14%

Adjusted revenue

(9M18: $1,334m)

$1,396m 5%

Adjusted ECL

(9M18: $(16)m)

$25m

<100%

Revenue performance8, $m

+11%

+0%

Adjusted revenue

463

438

427

421

448

471

472

Other

43

49

44

47

45

43

49

Deposit

119

120

118

112

121

124

125

Lending

98

96

107

109

95

94

92

Investment

203

175

164

161

183

197

207

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Return on client

58

54

52

54

56

56

56

asset (bps)

Reported client assets

+29bn

331

330

326

335

341

338

309

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

  • Increase of Client Assets of $29bn in 9M19 mainly due $19bn positive NNM and $10bn favourable market movements

Net new money (NNM)

charge / (net release)

Adjusted costs

(9M18: $1,070m)

$1,052m 2%

RoTE12

(9M18: 10.9%)

12.1%

3Q19 vs. 3Q18: adjusted revenue up 11%

Higher revenues mainly driven by $43m higher investment revenue and $15m higher lending NII, partly offset by $15m lower deposit NII from lower spreads.

  • Asia, revenue up $43m driven by Hong Kong, mainly from $28m higher brokerage & trading, $5m higher annuity fees and $6m higher lending NII from strong credit demand for investment (+$6.4bn)
  • Europe, revenue up $11m notably driven by $11m higher lending NII and $8m higher brokerage & trading. This is partly offset by $8m lower deposit NII from lower spreads
  • US, revenue decreased by $9m mostly from lower deposit NII from lower spreads and lower balances

3Q19 vs. 2Q19: adjusted revenue stable

  • Investment revenue increased by $9m in Asia notably from the launch of the HSBC Fixed Maturity Bond in 3Q19. This is coupled with $3m higher lending NII mainly in Europe from higher spreads (+5bps)
  • These are offset by $6m lower deposit NII across all regions from interest rate cuts and $6m negative movement on PVIF in France

10.2

5.0

3.1

3.1

2.4

3.5

1.0

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

  • Positive inflows of $19bn in 9M19, mainly driven by $14bn inflows in Asia and $3bn in Europe.
  • More than 50% of 9M19 NNM came from collaboration with our other global businesses

18

Appendix

Corporate Centre

9M19 highlights

Adjusted PBT

(9M18: $0.9bn)

$1.7bn 95%

Adjusted revenue

(9M18: $(0.5)bn)

$36m 107%

Adjusted ECL

(9M18: $(0.1)bn)

Revenue performance8, $m

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

Central Treasury

(41)

187

91

268

284

263

313

Of which:

Balance Sheet Management

566

672

528

627

610

586

626

Holdings Interest expense

(313)

(305)

(358)

(360)

(338)

(348)

(321)

Valuation differences on long-term

(241)

(124)

(15)

67

50

93

76

debt and associated swaps

Other central treasury

(53)

(56)

(64)

(66)

(38)

(68)

(68)

Legacy Credit

1

(101)

25

(15)

(69)

(13)

(40)

Other

(182)

(155)

(404)

(14)

(237)

(140)

(367)

of which Argentina hyperinflation

(304)

73

(56)

15

(132)

Total

(222)

(69)

(288)

239

(22)

110

(94)

Legacy credit adjusted RWAs, $bn

5.5

-3.8%

2.62.5

3Q18 2Q19 3Q19

Adjusted RWAs, $bn

$(19)m 83%

Charge / (net release)

Adjusted costs

(9M18: $0.6bn)

$0.2bn 74%

RoTE12

(9M18: 4.8%)

(3.6)%

3Q19 vs. 3Q18: adjusted revenue up $194m

  • Less adverse impact of Argentina hyperinflation of $(132)m versus $(304)m
  • Other revenue, excluding the impact of Argentina hyperinflation, (down $135m) due to the impact from change a in accounting treatment of the lease expense following IFRS 16 implementation, FX revaluation in Holdings and China and revaluation of properties
  • BSM (up $98m) mainly driven by gains on disposal of assets and revaluations
  • Valuation differences (up $91m) due to favourable differences on long term debt and associated swaps
  • Legacy credit (down $65m) reflecting fair value movements and non-recurrence of gain on disposal of assets in 3Q18

3Q19 vs. 2Q19: adjusted revenue down $207m

  • Unfavourable impact of Argentina hyperinflation (down $147m)
  • Other revenue, excluding the impact of Argentina hyperinflation, (down $80m) revaluation of properties and non-recurrence of items in 2Q19
  • BSM (up $40m) mainly driven by gains on disposal of assets and revaluations
  • Legacy credit (down $27m) reflecting fair value movements

19

22

26

50

51

48

6

3

3

1

1

2

46

49

48

3Q18

2Q19

3Q19

Other

US run-off

BSM

Associates

Legacy Credit

19

Appendix

RoTE by global business excluding significant items and UK bank levy

9M19 $m

RBWM

CMB

GB&M

GPB

Corporate

Group

Centre

Reported profit before tax

4,891

5,602

3,866

365

2,520

17,244

Tax expense

(801)

(1,190)

(766)

(64)

(691)

(3,512)

Reported profit after tax

4,090

4,412

3,100

301

1,829

13,732

less attributable to: preference shareholders, other equity holders, non-controlling interests

(656)

(652)

(465)

(14)

(467)

(2,254)

Profit attributable to ordinary shareholders of the parent company

3,434

3,760

2,635

287

1,362

11,478

Increase in PVIF (net of tax)*

(1,238)

(51)

1

(2)

(1,290)

Significant items (net of tax) and UK bank levy

911

40

148

(37)

(614)

448

BSM allocation and other adjustments

406

432

677

49

(1,404)

160

Profit attributable to ordinary shareholders excluding PVIF, significant items and UK bank levy

3,513

4,181

3,460

300

(658)

10,796

Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments14

24,310

43,134

48,206

3,305

24,337

143,292

RoTE excluding significant items and UK bank levy (annualised)

19.3%

13.0%

9.6%

12.1%

(3.6)%

10.1%

9M18 $m

RBWM

CMB

GB&M

GPB

Corporate

Group

Centre

Reported profit before tax

5,544

6,034

5,535

182

(661)

16,634

Tax expense

(983)

(1,272)

(1,212)

(28)

(207)

(3,702)

Reported profit after tax

4,561

4,762

4,323

154

(868)

12,932

less attributable to: preference shareholders, other equity holders, non-controlling interests

(630)

(642)

(429)

(19)

(141)

(1,861)

Profit attributable to ordinary shareholders of the parent company

3,931

4,120

3,894

135

(1,009)

11,071

Increase in PVIF (net of tax)*

(300)

(16)

(1)

(317)

Significant items (net of tax) and UK bank levy

134

(25)

(110)

81

1,522

1,602

BSM allocation and other adjustments

399

418

641

61

(1,519)

Profit attributable to ordinary shareholders excluding PVIF, significant items and UK bank levy

4,164

4,497

4,425

276

(1,006)

12,356

Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments14

24,462

41,324

47,340

3,392

28,230

144,748

RoTE excluding significant items and UK bank levy (annualised)

22.8%

14.5%

12.5%

10.9%

(4.8)%

11.4%

*Excludes the increase in PVIF (net of tax) attributable to non-controlling interests. The increase in PVIF, as reported in ‘other operating income’, was $1,770m in 9M19 and $422m in 9M18

20

Appendix

Return metrics

Group RoTE (annualised) walk, 9M19 vs. 9M18, %

11.4

1.3

(1.3)

10.1

0.1

(0.2)

0.1

10.1

(0.6)

9.5

9M18 Reported

Significant items

9M18 excl.

Change in PBT

Change in tax

NCI & AT1/

Change in Equity

9M19 excl.

Significant

9M19 Reported

RoTE

and UK bank levy

signficant items

Preference Coupons

and Other

significant items

items and UK

RoTE

and UK bank levy

and UK bank levy

bank levy

Group return metrics

9M18

9M19

RoE

9.0%

9.2%

Reported revenue / RWAs15

6.3%

6.5%

Reported RoTE

10.1%

9.5%

9M19 RoTE includes an adverse impact of 0.8ppts

(3Q19 1.5ppts) reflecting lower discount rates on Insurance liabilities, but excludes a broadly offsetting favourable movement in PVIF1,17

Global business and Corporate Centre RoTE12

9M18

9M19

RBWM

22.8%

19.3%

CMB

14.5%

13.0%

GB&M

12.5%

9.6%

GPB

10.9%

12.1%

Corporate Centre

(4.8)%

(3.6)%

21

Appendix

Equity drivers

3Q19 vs. 2Q19 Equity drivers

Shareholders’

Tangible

TNAV per

Basic number

of ordinary

Equity, $bn

Equity16, $bn

share, $

shares, million

As at 30 June 2019

192.7

145.4

7.19

20,221

Profit attributable to:

3.5

2.5

0.12

Ordinary shareholders

3.0

2.5

0.12

Other equity holders

0.5

Dividends gross of scrip

(4.5)

(4.0)

(0.20)

On ordinary shares

(4.0)

(4.0)

(0.20)

On other equity instruments

(0.5)

Scrip

1.2

1.2

0.00

155

FX

(3.8)

(3.3)

(0.16)

Cancellation of shares

(1.0)

(1.0)

(0.00)

(136)

Actuarial gains/(losses) on defined benefit plans

0.8

0.8

0.04

Fair value movements through ‘Other Comprehensive Income’

0.6

0.6

0.03

Other16

0.0

(0.4)

0.00

(49)

As at 30 September 2019

189.5

141.8

7.02

20,191

$7.00 on a

20,267 million

fully diluted

on a fully diluted

basis

basis

22

Appendix

Balance sheet – customer lending

3Q19 Net loans and advances to customers

Adjusted customer lending increased by $16bn (2%) vs. 2Q19:

  • Customer lending growth was primarily in Asia (up $10bn), reflecting an increase in GB&M (up $7bn), due to higher term lending from our continued strategic focus on growth throughout Asia. Customer lending increased in RBWM by $4bn, primarily in Hong Kong (up $3bn), where we maintained a leading position in mortgages. This was partly offset by a decrease in CMB (down $2bn)
  • In Europe, customer lending increased by $7bn, with HSBC UK up $3bn, primarily reflecting growth in mortgage balances (up $2bn), due to our focus on broker- originated mortgages. We also increased lending to our corporate clients within HSBC UK mainly through term lending. The remaining increase in Europe primarily reflected growth in the UK in GB&M

981

973

981

982

1,005

1,022

1,018

941 955 964 981 1,002 1,018

915

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

UK

265

272

280

277

280

283

289

Hong

273

284

284

290

296

303

308

Kong

Reported net loans and advances to customers

Adjusted net loans and advances to customers (on a constant currency basis)

3Q19 adjusted lending growth by global business and region $bn

Growth since 2Q19

$bn

Growth since 2Q19

$bn

UK mortgages

RBWM

$376n

Other

Europe

$377bn

7

2%

3

2

3

2%

HK mortgages

o/w UK

$289bn

7

2%

CMB

$341bn

1 0%

6

3%

Asia

$478bn

10

2%

$252bn

GB&M

o/w Hong

$308bn

2%

5

Kong

MENA

$28bn

(2)%

GPB

$46bn

1 2%

-1

North

$112bn

(0)%

0

Corporate

America

$2bn

0

8%

Centre

Latin

$23bn

0

2%

America

Total

$1,018bn

16

2%

16

2%

Total

$1,018bn

GTRF funded assets, $bn

86

84

85

85

87

87

82

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

23

Appendix

Balance sheet – customer accounts

3Q19 Customer accounts

Adjusted customer accounts increased by $19bn (1%) vs. 2Q19:

  • Customer accounts increased in Europe by $9bn, driven by an increase in CMB and RBWM balances, notably in HSBC UK (up $6bn) within current accounts and savings. In addition, current accounts increased in GB&M mainly in the UK
  • Customer accounts also increased in North America (up $8bn), primarily in GB&M (up $4bn), reflecting an increase in interest-bearing demand deposits, and in CMB (up $2bn), from an increase mainly in time deposits. In addition, customer accounts grew in RBWM (up $2bn), reflecting an increase in savings deposits arising from promotional rates.

1,380

1,356

1,345

1,363

1,357

1,380

1,374

1,316

1,312

1,340

1,326

1,355

1,374

1,296

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

UK

370

378

378

386

381

386

396

Hong

472

478

477

484

476

486

487

Kong

Reported customer accounts

Adjusted customer accounts (on a constant currency basis)

Reported average customer accounts, $bn

6% CAGR

(Demand

deposits)

1,054

1,000

663

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

Demand and other – non-interest bearing and

Savings

Time and other

demand – interest bearing

Average GLCM deposits (includes banks and affiliate balances), $bn

c.4% CAGR

c.520

c. 540

c. 560

24

Appendix

UK customer loans and advances

Total UK gross customer loans and advances

RFB RBWM residential mortgages, £bn

RFB RBWM unsecured lending, £bn

93.7

95.3

97.0

As at 30 September 2019

85.1

86.8

89.8

92.6

Of which £97.0bn

relates to RBWM

in the RFB

7.0 6.8

6.9

6.7

6.2

Wholesale

5.4

£240bn

£102bn

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

0.7 0.8 0.7

£123bn

Credit cards

Personal loans

Overdrafts

By LTV

90+ day delinquency trend, %

Oct-19

2017

2018

9M19

Mortgages

Of which £68.6bn

Less than 50%

£45.1bn

£10bn

0.20

relates to the RFB

50% – < 60%

£15.4bn

Credit cards: 90-179 day delinquency trend, %

£7bn

0.15

60% – < 70%

£14.1bn

Personal loans Credit cards

0.10

Oct-19

70% – < 80%

£12.5bn

and overdrafts

80% – < 90%

£7.9bn

0.8

0.05

0.6

90% +

£1.7bn

0.00

0.4

RFB wholesale gross loans and advances to

Jul-18

Oct-18

Jan-19

Apr-19

Jul-19

0.2

customers, £bn

c.27% of mortgage book is in

LTV ratios:

0.0

As at 30 September 2019

Jan-18

Jul-18

Jan-19

Jul-19

Greater London

c.47% of the book < 50% LTV%

Non-bank financial

Buy-to-let mortgages of £2.9bn

new originations average LTV of

90-179 day delinquencies

remain within

Mortgages on a standard

66%

institutions

Other

expectations. The rise seen over the last 6

2.8

Real estate

variable rate of £2.9bn

average LTV of the total

months largely reflects a return to more

Health and care

5.2

12.1

Interest-only mortgages of

portfolio of 52%

normal credit conditions

Transportation

£18.9bn18

and storage

1.6

Publishing and

1.8

Expansion into the broker channel

broadcasting

2.2

Agriculture, forestry

3.8

Broker coverage

and fishing

£68.6bn

Wholesale

8%

43%

70%

84%

88%

(by value of market share)

10.8 and retail

Professional,

3.8

trade

c. £22bn

scientific activities

Gross lending

c. £16bn

c. £19bn

35%

4.1

21%

c. £15bn

Broker channel c. £13bn

7%

Construction

8.1

45%

4.7

Direct channel

Adminstrative and

Manufacturing

7.7

support services

Accommodation

2015

2016

2017

2018

9M19

and food

25

Appendix

US geographical region

Reported by global business, $m

RBWM

CMB

GB&M

GPB

Corporate

9M19

Centre

Income statement

Net interest income

639

595

227

102

28

Net fee income

172

170

547

50

(12)

Other income

48

10

671

5

282

Revenue

859

775

1,445

157

298

ECL

(85)

(33)

17

(1)

0

Operating expenses

(963)

(442)

(1,122)

(162)

(265)

Profit before tax

(189)

300

340

(6)

33

Revenue significant items

(4)

(4)

(2)

Cost significant items

(8)

(2)

(8)

(1)

(20)

Balance sheet

Loans and advances to customers (net)

17,343

26,130

16,602

5,910

Total external assets

18,596

27,773

165,654

7,066

77,701

Customer accounts

34,871

25,334

21,830

7,704

3

Risk-weighted assets

Cost efficiency ratio

112.1%

57.0%

77.6%

103.2%

89.9%

US total

1,591

927

1,016

3,534

(102)

(2,954)

478

(10)

(39)

65,985

296,790

89,742

97,700

83.6%

26

Appendix

HSBC Bank plc (NRFB)

Reported by global business, $m

RBWM

CMB

GB&M

GPB

Corporate

HSBC

9M19

Centre

Bank plc

Income statement

Net interest income

628

711

697

77

(726)

1,387

Net fee income

278

345

568

95

(12)

1,274

Other income

58

71

2,194

654

2,977

Revenue

964

1,127

3,459

172

(84)

5,638

ECL

(1)

(90)

(56)

15

(132)

Operating expenses

(935)

(618)

(3,443)

(140)

(249)

(5,385)

Share of profit in associates and JVs

16

16

Profit before tax

28

419

(40)

32

(302)

137

Revenue significant items

(12)

2

(10)

Cost significant items

(3)

(5)

(117)

(3)

(92)

(220)

Balance sheet

Loans and advances to customers (net)

28,273

36,499

73,698

5,067

595

144,132

Total external assets

61,594

38,493

574,395

5,526

134,409

814,417

Customer accounts

39,417

43,313

126,593

9,835

4,533

223,691

Risk-weighted assets

182,400

Cost efficiency ratio

97.0%

54.8%

99.5%

81.4%

nm

95.5%

27

Appendix

Footnotes

  1. Due to falling interest rates in the year to date, the regulator-prescribed ‘Valuation Interest Rate’ parameters used to discount the insurance liabilities in Hong Kong and Singapore were reduced. This led to an increase in the liabilities under insurance contracts of USD 1.3bn, and a corresponding increase in the Present Value of In-Force business (‘PVIF’) of USD 1.2bn. Because the increase in PVIF is excluded from both the numerator and denominator of the Group’s RoTE calculation, the reduction in the discount rates lowered 9M19 RoTE by 0.8 ppts
  2. 9M18 Jaws (adjusted) is as reported at 9M18
  3. 20,149 million weighted average basic ordinary shares outstanding during the period
  4. Unless otherwise stated, risk-weighted assets and capital amounts at 30 September 2019 are calculated using (i) the transitional arrangement within the revisions to the Capital Requirements Regulation
    (‘CRR II’) as implemented in the UK by the Prudential Regulation Authority; and (ii) EU’s regulatory transitional arrangements for IFRS 9 in article 473a of CRR II
  5. Leverage ratio at 30 September 2019 is calculated using the CRR II end-point basis for additional tier 1 capital
  6. FY18 NIM relates to 2H18 only. HSBC UK Bank plc (RFB) started operations on 1st July 2018
  7. Total includes POCI balances and related allowances
  8. Where a quarterly trend is presented on the Income Statement, all comparatives are re-translated at average 3Q19 exchange rates
  9. From 1st July 2018, Argentina was deemed a hyperinflationary economy for accounting purposes
  10. Equity market investments in the Insurance manufacturing business are mainly benchmarked to MSCI World index (c.50%), MSCI Asia excl. Japan (c.50%); rebased to 100
  11. 2Q19 as reported at 2Q19 Results; 1Q19 as reported at 1Q19 Results; 4Q18 as reported at 4Q18 Results; 3Q18 as reported at 3Q18 Results; 2Q18 as reported at 2Q18 Results; 1Q18 as reported at 1Q18 Results
  12. RoTE is annualised and excludes significant items and the UK bank levy. RBWM RoTE includes an adverse impact reflecting lower discount rates on Insurance liabilities, but excludes a broadly offsetting favourable movement in PVIF
  13. Where a quarterly trend is presented on the Balance Sheet and Funds Under Management, all comparatives are re-translated at 30 September 2019 exchange rates
  14. Tangible Equity is allocated to global businesses at a legal entity level, using RWAs, or a more suitable local approach, where appropriate
  15. Revenue/RWAs is calculated using annualised reported revenues and reported average risk-weighted assets
  16. Differences between shareholders’ equity and tangible equity drivers reflect adjustments primarily for PVIF movements and amortisation expense within ‘Profit Attributable to Ordinary shareholders’, FX on goodwill and intangibles within ‘FX’, and intangible asset additions within ‘Other’.
  17. Due to falling interest rates in the third quarter, the regulator-prescribed ‘Valuation Interest Rate’ parameters used to discount the insurance liabilities in Hong Kong and Singapore were reduced. This led to an increase in the liabilities under insurance contracts of USD 0.7bn, and a corresponding increase in the Present Value of In-Force business (‘PVIF’) of USD 0.7bn. Because the increase in PVIF is excluded from both the numerator and denominator of the Group’s RoTE calculation, the reduction in the discount rates lowered 3Q19 RoTE by 1.5 ppts
  18. Includes offset mortgages in first direct, endowment mortgages and other products

28

Appendix

Glossary

AIEA

Average interest earning assets

ASEAN

Association of Southeast Asian Nations

AUM

Assets under management

Bps

Basis points. One basis point is equal to one-hundredth of a percentage

point

BREEAM

Building Research Establishment Environmental Assessment Method

BRI

Belt & Road Initiative

BSM

Balance Sheet Management

CET1

Common Equity Tier 1

In December 2016, certain functions were combined to create a Corporate

Centre. These include Balance Sheet Management, legacy businesses and

Corporate Centre

interests in associates and joint ventures. The Corporate Centre also

includes the results of our financing operations, central support costs with

associated recoveries and the UK bank levy

CMB

Commercial Banking, a global business

CRD IV

Capital Requirements Directive IV

CRR

Customer risk rating

Expected credit losses. In the income statement, ECL is recorded as a

change in expected credit losses and other credit impairment charges. In

ECL

the balance sheet, ECL is recorded as an allowance for financial

instruments to which only the impairment requirements in IFRS 9 are

applied.

ESG

Environmental, social and governance

FICC

Fixed Income, Currencies and Commodities

GB&M

Global Banking and Markets, a global business

GLCM

Global Liquidity and Cash Management

GPB

Global Private Banking, a global business

GTRF

Global Trade and Receivables Finance

IAS

International Accounting Standards

IBOR

Interbank Offered Rate

IFRS

International Financial Reporting Standard

The difference between the rate of growth of revenue and the rate of

Jaws

growth of costs. Positive jaws is where the revenue growth rate

exceeds the cost growth rate. Calculated on an adjusted basis

A portfolio of assets including securities investment conduits, asset-backed

Legacy credit

securities, trading portfolios, credit correlation portfolios and derivative

transactions entered into directly with monoline insurers

LTV

Loan to value

MENA

Middle East and North Africa

NAV

Net Asset Value

NBFI

Non-Bank Financial Institutions

NCI

Non-controlling interests

NII

Net interest income

NIM

Net interest margin

NRFB

Non ring-fenced bank

PAOS

Profit attributable to ordinary shareholders

PBT

Profit before tax

POCI

Purchased or originated credit-impaired

Ppt

Percentage points

PRD

Pearl River Delta

PVIF

Present value of in-force insurance contracts

RBWM

Retail Banking and Wealth Management, a global business

HBUK (RFB)

Ring-fenced bank, established July 2018 as part of ring fenced bank

legislation

RoE

Return on average ordinary shareholders’ equity

RoTE

Return on average tangible equity

RWA

Risk-weighted asset

TNAV

Tangible net asset value

29

Appendix

Disclaimer

Important notice

The information, statements and opinions set out in this presentation and accompanying discussion (“this Presentation”) are for informational and reference purposes only and do 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 financial instruments or any advice or recommendation in respect of such securities or other financial instruments.

This Presentation, which does not purport to be comprehensive nor render any form of legal, tax, investment, accounting, financial or other advice, has been provided by HSBC Holdings plc (a company incorporated with limited liability in England, and together with its consolidated subsidiaries, the “Group”) and has not been independently verified by any person. You should consult your own advisers as to legal, tax investment, accounting, financial or other related matters concerning any investment in any securities. No responsibility, liability or obligation (whether in tort, contract or otherwise) is accepted by the Group or any member of the Group or any of their affiliates or any of its or their officers, employees, agents or advisers (each an “Identified Person”) as to or in relation to this Presentation (including the accuracy, completeness or sufficiency thereof) or any other written or oral information made available or any errors contained therein or omissions therefrom, and any such liability is expressly disclaimed.

No representations or warranties, express or implied, are given by any Identified Person as to, and no reliance should be placed on, the accuracy or completeness of any information contained in this Presentation, any other written or oral information provided in connection therewith or any data which such information generates. No Identified Person undertakes, or is under any obligation, to provide the recipient with access to any additional information, to update, revise or supplement this Presentation or any additional information or to remedy any inaccuracies in or omissions from this Presentation. Past performance is not necessarily indicative of future results. Differences between past performance and actual results may be material and adverse.

Forward-looking statements

This Presentation may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking statements with respect to the financial condition, results of operations, capital position, strategy and business of the Group which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “seek”, “intend”, “target” or “believe” or the negatives thereof or other variations thereon or comparable terminology (together, “forward-looking statements”), including the strategic priorities and any financial, investment and capital targets described herein. Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant stated or implied assumptions and subjective judgements which may or may not prove to be correct. There can be no assurance that any of the matters set out in forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. Certain of the assumptions and judgements upon which forward-looking statements regarding strategic priorities and targets are based are discussed under “Targeted Outcomes: Basis of Preparation”, available separately from this Presentation at www.hsbc.com. The assumptions and judgments may prove to be incorrect and involve known and unknown risks, uncertainties, contingencies and other important factors, many of which are outside the control of the Group. Actual achievements, results, performance or other future events or conditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks, uncertainties and other factors (including without limitation those which are referable to general market conditions or regulatory changes). Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at the date the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to update, revise or supplement them if circumstances or management’s beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. No representations or warranties, expressed or implied, are given by or on behalf of the Group as to the achievement or reasonableness of any projections, estimates, forecasts, targets, prospects or returns contained herein.

Additional detailed information concerning important factors that could cause actual results to differ materially from this Presentation is available in our Annual Report and Accounts for the fiscal year ended 31 December 2018 filed with the Securities and Exchange Commission (the “SEC”) on Form 20-F on 20 February 2019 (the “2018 Form 20-F”) and in our Interim Report for the six months ended 30 June 2019 furnished to the SEC on Form 6-K on 5 August 2019 (the “2019 Interim Report”).

Non-GAAP financial information

This Presentation contains non-GAAP financial information. The primary non-GAAP financial measures we use are presented on an ‘adjusted performance’ basis which is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the underlying trends in the business.

Reconciliations between non-GAAP financial measurements and the most directly comparable measures under GAAP are provided in our 2018 Form 20-F, our 1Q 2019 Earnings Release furnished to the SEC on Form 6-K on 3 May 2019, the 2019 Interim Report and our 3Q 2019 Earnings Release available at www.hsbc.com and which we expect to furnish to the SEC on Form 6-K on 28 October 2019, and the corresponding Reconciliations of Non-GAAP Financial Measures document, each of which are available at www.hsbc.com.

Information in this Presentation was prepared as at 28 October 2019.

30

Disclaimer
HSBC Holdings plc published this content on 28 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2019 04:04:01 UTC




Source link

Leave a Comment

Your email address will not be published. Required fields are marked *