HSBC Holdings, plc.

Good morning in London and good afternoon in Hong Kong. I've got Ewan with me today and I'll hand over to him shortly to go through the detail of our Q2 performance. First though, I'll start with a summary of the key highlights, our progress against our transformation plans, and in particular, what we're seeing with respect to growth. For the second quarter, A good operating performance supported by a net release of expected credit losses delivered reported pre-tax profits of $5.1 billion, up $4 billion on last year's second quarter. We saw a return to profitability in all our regions in the first half, including good performances in both Europe and the U.S. our UK business performed well with a record quarter for mortgages in Q2. We've generated good momentum behind our growth and transformation plans and made important decisions on exiting our mass market retail business in the US and our retail business in France. Our RWA and cost reduction programs are both on track. Our Asia wealth strategy is gaining traction with strong growth in wealth balances. We're seeing promising signs of early growth in both lending volumes and fee income, particularly in Asia. And we retained a strong capital ratio of 15.6%, which enables us to declare an interim dividend of 7 cents per share for the first half of the year. The next two slides look at the growth we're starting to see, particularly in Asia. In wealth and personal banking, we've already seen strong traction in our Asia wealth business with global wealth balances up more than $250 billion or 18% in the last 12 months. This was driven chiefly by growth in assets under management rather than deposits. We've extended expanded our Asia wealth franchise, recruiting around 600 new frontline colleagues and growing affluent and high network customers in Asia by 7%. While it's early days, we've seen promising productivity data from our pinnacle wealth planners in mainland China with exciting momentum within the business. Because of that, we're accelerating the rollout of Pinnacle to five new cities in mainland China and planning to hire 100 more wealth planners this year than we had originally planned. In commercial banking, pipeline growth is starting to translate into lending, with $8 billion of loan volume growth since the start of the year. Our approved lending limits in Asia are up 100% on last year's second half, and 70% on pre-pandemic levels. These include renewals, refinancing and new facilities. There are also signs of a recovery in Asia trade, with $6.7 billion of trade finance lending growth in the first half. In global banking and markets, we've made good progress repositioning the franchise for growth. The proportion of RWAs allocated to Asia in GBNM is now six percentage points higher than the same point last year, with around a third of non-Asia RWAs supporting revenue booked in Asia. Collaboration with other businesses is a big part of the GBNM growth story, with collaboration revenue up 6% against last year's first half. This was supported by investment in new digital market platforms, which are helping to support our Asia Wealth Strategy. Slide four goes deeper on the lending growth we're starting to see. We've seen strong mortgage growth globally, with Hong Kong drawdowns up 56% year on year, and a record quarter for UK mortgages. Card balances are starting to recovering Hong Kong and the UK and elsewhere, up around a billion dollars quarter on quarter. In commercial banking, we're seeing approved lending limit growth translating into term lending with loans up 2% versus the first quarter. Trade balances are up 9% and we continue to capture market share in both Hong Kong and Singapore. We're also continuing to grow our lending pipeline in Hong Kong and Asia, which bodes well for future quarters. Moving to slide five. Both our US and European businesses saw a rebound in profits, and both are now well advanced in their transformations. The US made around half a billion dollars of pre-tax profits, up from around $100 million in last year's first half. Risk weighted assets in the US are now 16% lower than at the same point last year and costs are down around $100 million year on year. We've announced the sale of our US mass market retail business, which is an important milestone in the reshaping of our US portfolio. And we've also now completed the migration of fixed income derivatives trading book from New York to London. In Europe, We delivered $1.4 billion of pre-tax profits after recording a loss in last year's first half. Compared with a year ago, we've reduced RWAs by 16% and costs by 3%, which includes a $149 million increase in variable pay. We've also signed a memorandum of understanding to sell our French retail business. Both our US and European businesses are much better positioned to grow than at the start of the year. Slide six looks at our second pillar, digitize at scale. Our technology spending is now 18% higher than the same period in 2018 and 4% higher than last year's first half. This is making us a better and stronger bank, both operationally and in terms of the customer experience. and providing material operating leverage as we grow the business. The proportion of payments that go straight through without manual intervention now stands at 96.7%. We're reducing account opening times. For example, including First Direct, where it now takes 10 minutes to open an account instead of 10 days. And we've introduced e-signature for over 200 processes in Hong Kong, substantially reducing both processing time and the use of physical forms. We're launching and scaling new digital products. Our multi-currency global money account launched last year in the US and is now live in both Singapore and the UAE. We've launched Kinetic in the UK, which already has more than 10,000 users, and a 4.8 App Store rating. And we're simplifying and automating trade finance. By 2023, our digital trade transformation aims to reduce 60 bespoke systems down to just five. Clients and counterparties can already agree the wording of guarantees digitally, which is then fulfilled seamlessly in our back office, significantly reducing both time and effort. In supply chain finance, we can now digitally onboard suppliers in two days rather than eight, helping clients to support their suppliers and increase the resilience of their supply chains. These are big innovations with a real-world impact for our customers. Slide seven looks at Energise for Growth, our third pillar. Our move to hybrid work-in is now well underway, with a 10% reduction in our global office footprint since the start of 2020. Three of our global business CEOs are in the process of relocating to Asia, and we made a number of key leadership appointments in Asia in the first half of the year. We're aiming to build a more diverse business. We've signed up to the WEFS partnership for racial justice in business. and the UN LGBTI standards of conduct for business. We've also increased the proportion of female leaders to more than 31%. But we still have much more to do. And we've hired more than 650 new graduates from 48 different countries, more than half of whom are female. Slide 8 looks at our final pillar, the transition to net zero. I was delighted and grateful that 99.7% of our shareholders backed our special resolution on climate change at our AGM in May. That was a strong endorsement of our climate strategy, which has at its core a commitment to support our customers on their transition to low carbon. We're continuing to provide strong support to our customers on their transition journeys, taking part in more sustainable financing in the first half of 2021 than in the whole of 2020. We're working closely with our own suppliers to help them improve their climate reporting so that we can become net zero in our operations and supply chain by 2030. And we're building partnerships to unlock new climate solutions and make them investable. Join in forces with WWF and the World Resources Institute to bring new projects and technologies into commercial scale. Overall, it's still relatively early in the life of our growth and transformation plans, but I'm pleased with our progress so far. Ewan will now take you through our results and update you on our targets.

Thanks, Noel, and good morning or afternoon all. We had another solid quarter, reported pre-tax profits of $5.1 billion. That's up almost fivefold on last year's second quarter with an annualised return on tangible equity of 9.4% for the first half. Adjusted revenues were down 10% on last year's second quarter due largely to the impact of the current rate environment. together with the comparison against a very strong global market second quarter last year. Importantly, we think we're now close to the trough in year-on-year revenues, with volume growth in our lending businesses and our wealth franchises driving a recovery in the coming quarters. Expected credit losses were a $284 million net release, second quarter in a row of net releases, This reflects a continued improvement in the economic outlook for our central scenarios, less extreme downside scenarios given the progress in global vaccinations and exceptionally low Stage 3 charges in both the first and second quarters. We still retain $2.4 billion of the Stage 1 and 2 ECL reserve build-up we made in 2020. Operating expenses were up 4%. This was due to both higher performance-related pay accrual and higher technology spend. Despite this, we remain on track to deliver our target of broadly stable operating costs for the year, ex the bank levy, subject of course to final decisions on the variable pay pool later in the year. Lending and deposit balances were up 2% and 1% respectively as lending growth spread for us beyond mortgages and retail banking and trade, finance and commercial banking, with increased confidence in higher loan growth in the second half of the year. Our core tier one ratio was down nearly 30 basis points at 15.6%, due primarily to our dividend accrual. Our tangible net asset value per share of $7.81 was up 3 cents on the first quarter, and we've declared an interim dividend of 7 cents per share for the first half of the year. We remain on track to deliver all of our medium-term targets, including rebuilding to a return on tangible equity of at least 10%. Turning to slide 10, we're continuing to shift the balance of the group's focus towards Asia through capital reallocation and the buildup of capabilities and people. However, as other regions start to recover from COVID-19 lows, we're also seeing much improved earnings diversity with profitability in all regions during the half. Europe has gone from loss-making in last year's first half to generating 22% of group profits in the first half of this year. This included a strong contribution from our UK ring-fence bank, which saw revenue growth of 12% in wealth and personal banking and 7% in commercial banking. There were also good signs of recovery elsewhere, including the Middle East, the US and Mexico We're also now seeing more balanced profitability across our global businesses, each business now generating roughly a third of group profits in the first half with a particularly strong recovery in commercial banking. Turning to slide 11 and looking at the second quarter adjusted revenues across the three global businesses, in wealth and personal banking, revenues were down 4% on a year ago. Wealth management revenues grew by $187 million due mainly to an increase in the value of new business written in insurance and mutual fund sales growth in Hong Kong. Personal banking revenues fell by $161 million due to the impact of low interest rates on deposit margins. Commercial banking revenues were 4% lower due mainly to the impact of low interest rates on global liquidity and cash management. but with good growth in trade balances in the quarter and early signs of growth across other commercial lending. In global banking and markets, revenues were down 23%. This was largely due to slower customer activity and lower volatility in the fixed income markets, as compared with a particularly strong global markets performance in the same period last year. On slide 12, net interest income was $6.6 billion, down 5% against the second quarter of 2020 on a reported basis, but stable compared with the first quarter of 2021. On rates, the net interest margin was 120 basis points down one basis point on the first quarter, primarily reflecting lower asset yields, which more than offset lower funding costs. On volumes, we saw continued good loan growth in mortgages in Hong Kong and the U.K., and strong commercial applications that have started to translate into drawdowns. For the remainder of the year, we're seeing signs that net interest income has now stabilised and we expect loan growth to support net interest income in the second half. On the next slide, non-interest income was $5.9 billion, down 11% against last year's second quarter due to the exceptionally strong global markets performance in the second quarter last year. However, we saw good fee income progression in all our businesses against last year's second quarter with strong performances in wealth, global liquidity and cash management, and capital markets and advisory. We expect customer activity and fee income to continue to strengthen as economic activity recovers, although the recovery path obviously remains uncertain as a result of COVID-19 variants. On the next slide, we reported a net release of $284 million of expected credit losses in the quarter, compared with a $4.2 billion charge in the second quarter of 2020. The net release was across all global businesses. This reflected an improved economic outlook, together with Stage 3 charges that remained very low in the quarter. Recognising that The risks that still exist from the pandemic were continuing to hold around $2.4 billion of our 2020 COVID-19 uplift to Stage 1 and 2 ECL reserves. Based on the current economic outlook, we now expect the ECL charge for the full year to be materially lower than our medium term through the cycle planning range of 30 to 40 basis points, with the potential even for a net release for full year 2021. and further Stage 1 and 2 releases in the first half of 2022. Turning to slide 15, second quarter adjusted operating costs were $297 million higher than the same period last year. This was driven by higher performance-related pay accrual of $367 million and a $204 million increase in technology investments. We made a further $484 million of cost program savings compared with the prior year, with an associated cost to achieve of $499 million. To date, our cost programs have achieved savings of $2 billion relative to our year-end 2022 target of $5 to $5.5 billion, with accumulated cost to achieve spend of $2.7 billion. Despite higher second quarter costs, we continue to expect our 2021 adjusted operating costs, excluding the benefit from a reduced bank levy, to be broadly in line with 2020. Turning to capital, on slide 16, our quarter one ratio was 15.6%, down 27 basis points in the quarter. This reflected an increase in RWAs from lending growth including a short-term increase of around $10 billion from IPO loans in Hong Kong, together with a decrease in capital, including a $3.5 billion accrual for dividends. As signalled at the time of our first quarter results, we will include a deduction each quarter for dividend accruals. For the half year, that deduction was $0.17, based on 47.5% of our first half EPS of 36 cents, which is the midpoint of our 40% to 55% target payout ratio. To reiterate my comments from last quarter, this shouldn't be read as a signal or a forecast of our 2021 dividend intentions. The dividend accrual is purely a formulaic calculation that will true up at the full year based on the results and outlook at the time. Reflecting the current improved economic outlook and improved operating environment in many of our markets, we now expect to move to our target payout range in 2021. We retain the flexibility to adjust earnings per share for non-cash significant items. And in 2022, we also intend to exclude the losses on the sale of our French retail banking operations. When thinking about the payout ratio for 2021, will attach a lower weight to unusually low ECL charges or credits as part of this year's earnings per share, together with a desire to see further progress from 2021 in dividends per share in 2022 and beyond. Excluding FX movements, risk-weighted assets rose by $13.5 billion in the second quarter, driven by growth in Asia and the IPO loans already mentioned. We now expect low single-digit percentage growth in risk-weighted assets for the full year. On the next slide, due to changes in the underlying calculation methodology, we've updated our risk-weighted asset savings targets on a like-for-like basis from $100 billion to $110 billion. So far, we've made around $85 billion of transformation saves and remain fully on track to meet our targets. On slide 18, it's still early days in terms of our 2022 targets, but we've made good progress so far. We're on track to meet our cost and risk weighted asset savings targets and we remain confident that we're on track for a return on tangible equity at or above 10% over the medium term. The shift to higher return areas is underway and we're starting to see results from the growth opportunities we've identified. As mentioned, we now intend to move to our target payout ratio in 2021. As a reminder, our dividend policy aims to deliver sustainable cash dividends while retaining the flexibility to invest and grow in the business in the future, supplemented by additional shareholder distributions if appropriate. So in summary, this was another solid quarter for us, a near five-fold increase in pre-tax profits on the same period last year. with good earnings diversity across the group and evidence of strong execution in all areas of strategy. While the results were materially flattered by net release of ECLs, we can see early signs of a broadening recovery in lending with volume growth translating into revenue growth as our net interest margin stabilises and growth in fee income across our businesses. Despite uncertainty on the pace of recovery from here, we remain on track with all of our medium-term targets, and with that, our ability to achieve cost-of-capital returns and to fund attractive growth. With that, Sharon, if we could please open up for questions.

Thank you, Mr. Stevenson. If you'd like to ask a question today, please press star 1 on your telephone keypad and please limit yourselves to two questions only. Please ensure that the mute function on your telephone is switched off. If you find your question has been answered, you may remove yourself from the queue by pressing star and two. Once again, to ask a question, please press star and one and please limit yourselves to two questions only. Please ensure that the mute function on your telephone is switched off. We will take our first question from Martin Leibgeb from Goldman Sachs. Please go ahead, your line is open.