HSBC Holdings, plc.

Good morning in London. It's great to see everybody in the room with us today. Thank you for coming. And good afternoon to everyone watching and listening in Hong Kong and elsewhere. Ewan will take you through our Q4 numbers very shortly. But I'd like to begin with a summary of how we delivered against our strategic plan in 2021. As you know, we refreshed our core purpose as an organisation a year ago. Opening up a world of opportunity draws heavily on HSBC's past, but it also encapsulates what we need to focus on to succeed now and in the future. By keeping our purpose and the values that underpin it firmly in mind, we've delivered good progress against our four strategic pillars. focus on our strengths, digitise at scale, energise for growth and transition to net zero. And this has contributed to a strong financial performance which was supported by the global economic recovery. Starting now with a few highlights. I'm pleased with the progress we've made on both our transformation and growth agendas. And I want to pay tribute to the whole HSBC team for the job they've done in 2021. Underlying growth in key revenue streams came through strongly in Q4 to offset the drag effect of declining rates, resulting in reported revenue growth of 2% in the quarter. Coupled with tailwinds from higher interest rates, this provides strong revenue momentum for the future. We're also well on our way through a number of announced exits and acquisitions that materially alter our capital allocation to areas where we have distinctive competitive advantage. Reported profits before tax for the full year were up 115% to $18.9 billion. all regions were profitable. Asia led the way with $12.2 billion of reported profits, including $1.1 billion from India, up 90 million on the year. There was also strong contributions of $2.2 billion of adjusted profits from our non-ring-fenced bank operations in the UK and Europe. and $900 million of adjusted profits from the US business. I was also pleased there was strong fee income growth across all businesses, which overall was above pre-COVID levels. Plus, international account opening in commercial banking was up 13%, and trade balances were up 23% overall, and today stand higher than pre-COVID levels. We increased spending on technology and performance-related pay, but I'm pleased we kept costs stable, able to do so due to the savings from our transformation programs, which are ahead of plan. If rates follow the path currently implied by the market, we now expect to reach at least 10% ROTI in 2023. That's a year earlier than we had previously signalled. We took a charge on expected credit losses in Q4, primarily due to change in market conditions in the mainland China commercial real estate sector. Yuen will go into this in more detail. But I'm pleased to say we have seen some positive movements in market sentiment since the year end. Finally, we've announced full-year dividends of 25 cents per share, up 67%, as well as our intention to initiate an incremental share buyback of up to $1 billion. on top of the existing buyback of up to $2 billion announced earlier in the year. This slide sets out how this translates into progress against our ambitions. It shows good progress in key areas. Revenue growth for the year as a whole was impacted by the low interest rate environment, particularly in Asia, where we experienced lower high ball rates in 2021. But we turned the corner in Q4 as net interest income grew year on year for the first time since the pandemic began. And all our global businesses grew fee income in 2021 by high single digits. Costs were down slightly year on year and we expect 2022 adjusted costs to be stable on that position. Roti was 8.3%. Our capital ratio remains strong at 15.8%. And we expect to move into our CET1 target range of 14 to 14.5% in 2022. And we've made over $104 billion of RWA saves across the group over the last two years, against our original three-year target of $110 billion. Given this progress, we now expect to achieve $120 billion of cumulative RWA saves by the end of this year. The next slides go through key metrics on our four strategic pillars. The first pillar is focus on our strengths, which is about capitalizing on the unique advantages we have as an institution. Wealth and personal banking is one of those areas, particularly in Asia. Our investment in people, technology and capabilities yielded strong returns. We had a strong year in net new invested assets, especially in Asia, greatly helped by a strong flow of referrals from our wholesale banking clients. This is an inherent strategic advantage that we are investing in. Overall wealth balances grew to $1.7 trillion and within that funds under management increased by 5%, supported by more than 30 new asset management products in Asia. Asia wealth revenue also grew by 10%, mainly due to the improvement in equity markets and customer sentiment. while we also saw strong mortgage growth in Hong Kong and the UK. Finally on this slide, I was pleased that the value of new insurance business in Asia in Q4 was higher than the same period in both 2019 and 2018. This is the cumulative effect of a significant investment program and turnaround in that business over the last three to four years. It is also particularly encouraging given the border between Hong Kong and mainland China remains closed. Slide five focuses on wholesale banking. We saw strong fee income growth across our wholesale franchises, even as we exited clients and shrunk our capital base in global banking and markets. This offset lower trading income when compared to the exceptionally strong performance we saw in 2020. International connectivity remains key to our strategy. As I said earlier, trade balances were up 23% overall and above pre-COVID levels. JLCM balances were up $54 billion, or 8% year-on-year, to over $750 billion. And collaboration revenues were also up 8%, with referrals between commercial banking and global banking and markets up 12%. I've been pleased with the way that Global Banking and Markets has performed for the past two years, even while we've been repositioning that business. Adjusted RWAs were down 10% as we continue to transfer resources, mainly from Europe, into Asia and the Middle East. Slide 6 shows how we've exited non-strategic businesses in the West. while accelerating customer acquisition in the East. I'm pleased by the progress we've made in transforming the US and continental Europe business, but also by their good profit performance in 2021. The transactions for the sale of the US retail business have closed on schedule in the last two weeks. Meanwhile, we expect to close the sale of our French retail business in the second half of 2023. We also accelerated the development of our Asia wealth capabilities through the acquisition of AXA Singapore, which was completed earlier this month on schedule. The acquisition of L&T Investment Management in India, which we hope to complete towards the end of this year. And regulatory approval to take full ownership of our HSBC Life joint venture in China, all on top of the organic build-out of our pinnacle business in mainland China, which continues ahead of schedule. Slide seven looks at our second pillar, digitize at scale, which is about making it easier for our customers to bank with us and making our processes more efficient. We've continued to invest heavily in technology while managing costs spending around $6 billion in 2021, which is equivalent to around 19% of our adjusted operating expenses, which was up one percentage point on the prior year. Our ambition is to keep increasing technology spending to more than 21% of our operating expenses by 2025. This investment provides us with significant operating leverage as we grow the business in the future. It is also enabling us to deploy solutions at scale globally and to further leverage agile working and cloud technology. While our usage of both agile and cloud increased in 2021, we have ambitions to drive further growth in the years to come. Digital penetration levels have also increased. With today 84% of trade transactions globally initiated through digital channels. A 58% increase in the share of digital payments made through HSBCnet mobile app by wholesale customers. And 43% of retail customers are now mobile active. Although this figure was up five percentage points on the prior year, I still see a significant opportunity to grow it much further. Our third strategic pillar is about creating a dynamic, inclusive culture where people want to work and they feel empowered. In our most recent staff survey, our employee engagement score was 72%, unchanged on 2020, We're encouragingly five percentage points up on 2019 and four percentage points above the financial services benchmark. We're aiming to build a more diverse business. We were pleased to exceed our target of 30% of women in leadership roles globally in 2020. And we've set ourselves a new target of 35% by 2025. We've also made progress on ethnicity representation, especially for black colleagues. But we still have a way to go to get to where we want to be and need to be on both of these measures. and we're helping our colleagues to develop future-ready skills. Over 115,000 colleagues used the new degreed learning platform last year, with the average time spent on training for full-time employee up 16%, despite the pressures of COVID. An increasing share of this time was spent on areas like digital, data and sustainability, all of which are essential for our future. I also want to add that another important part of our culture is that we remain cost conscious. I am absolutely determined we won't go back to the days when rising interest rates loosened our grip on costs. Slide 9 looks at the transition plan to net zero, our fourth pillar. Our ambition is to provide and facilitate between $750 billion and $1 trillion of sustainable financing and investment by 2030. I truly believe this will enable us to play a leading role in the transition, and we've made a very strong start. Since the beginning of 2020, we've provided and facilitated $127 billion of sustainable financing and investment to our clients. We are committed to working with our clients to develop valid, science-based transition plans to understand sector by sector, client by client, how we move to net zero by 2050. These transition plans and the targets within them must be predicated on the science relevant to the individual sectors. We will use them as a basis for further engagement and decision making, including how we drive change within our portfolio constructs. As part of this process, we have today disclosed interim targets for on-balance sheet financed emissions in the oil and gas and power and utility sectors. In the year ahead, we plan to set interim targets for financed emissions across a range of other sectors. And we will work on our Climate Transition Plan, which will be published in 2023. And we'll bring together in one place how we embed our net zero targets into our strategy, our processes, our policies, and our governance, informed by bottom-up transition plans. I'm pleased by the progress we've made reducing greenhouse gas emissions from our own operations. A combination of less travel and sustainable energy deals enable us to halve our Scope 1 and Scope 2 emissions compared to 2019. As the world normalises, we have to be clear that we do not expect our route to net zero to be linear. But we do believe that many of these changes are embedded for future years. Overall, there's more to do, but I'm pleased with the progress we've made so far. I'll now hand over to Ewan for the Q4 numbers.

Thanks, Noel. Good morning or afternoon, Noel. Great to see so many of you in the room today with us. We had another good quarter of reported Reported pre-tax profits of $2.7 billion, up 92% on last year's fourth quarter. Adjusted revenues were modestly up on last year's fourth quarter. This reinforces what I said at the third quarter. We think we're now past the trough in revenues. ECLs were a $450 million net charge in the quarter. Operating expenses were down $800 million on last year's fourth quarter due to a lower bank levy and continuing good cost discipline. Our return on tangible equity for 2021 was 8.3%. Our quarter one ratio remained strong at 15.8%. Tangible net asset value per share of $7.88 was up 7 cents on the third quarter. We've announced full year 2021 dividends of 25 cents per share. That's up 67% on the prior year. We also intend to initiate an incremental buyback of up to $1 billion. This will begin after the buyback of up to $2 billion is concluded in April. Turning to slide 11, as a headline, we're pleased with the lending and fee income growth that we're now seeing. Lending balances were up 1% overall on the third quarter. Underlying this was 5% growth for our personal and commercial banking businesses combined, equivalent to $38 billion in total, which was partially offset by planned reductions in global banking and markets. There was strong lending growth in wealth and personal banking, up 27 billion or 6% on the fourth quarter of last year, reflecting another strong mortgage performance in the UK and Hong Kong. Lending was up $11 billion in commercial banking, mainly in trade and term lending in Asia. Fee income increased by 5% versus the fourth quarter of 2020. Within this, commercial banking increased fee income by 15%, reflecting both good volume growth and repositioning in some areas towards fee income. On the next slide, despite the impact of lower rates, We've been seeing a recovery in revenues for commercial banking for a few quarters now, and this continued in the fourth quarter. Global banking and markets had another good quarter driven primarily by good performance in FX and capital markets and advisory. And we saw our first quarter of year on year revenue growth in personal banking since the onset of COVID-19. And in wealth, strong new business growth was offset by adverse insurance market impacts. To note, for the current quarter, we expect some weakness in our Asian wealth revenues. As highlighted previously, our revenues will be impacted by the adoption of IFRS 17 in 2023. We continue to expect an initial downward adjustment to our insurance profits of around two thirds. As we said at the third quarter, we are planning for an around $3 billion adjustment to our insurance's tangible equity, and we intend to provide further detail on IFRS 17 in the third quarter of this year. On slide 13, net interest income was $6.8 billion, up 3% against the third quarter on a reported basis. This was mainly driven by high yields on customer loans, as well as underlying asset growth. On rates, the net interest margin was 119 basis points, unchanged on the third quarter, with higher asset yields offset by changes in the asset mix. Based on the current interest rate expectations for 2022, we expect net interest income to now grow materially with further material growth in 2023. We think we've given you the building blocks to model this, including modelling the sensitivity as rate curves shift. Turning to slide 14 and recognising the higher gearing we have to a better rate environment, I wanted to say a few words and I disclosed interest rate sensitivity analysis. As a reminder, our high interest rate sensitivity is driven by our balance sheet structure, namely a deposit surplus of around $700 billion and the short tenure of our lending portfolios and trade franchise. For illustration purposes, our tables now assume a simplified pass-through rate for all interest-bearing deposits. In reality, for the first few rate rises, we assume we'll see a lower pass-through rate rising towards or above 50% of rates continue to rise. On the next slide, we reported a net charge of $450 million of ECLs in the quarter. This included Stage 2 charges primarily relating to commercial real estate in mainland China, a substantial part of which is booked in Hong Kong. As Noel says, there has been some positive sentiment since the year end. We expect this to begin to help ease the current tight liquidity for the sector. Stage 3 charges remained low and the quarter also included COVID-19 related releases. We're continuing to hold around $600 million of COVID-19 uplift to stage one and two ECL reserves, equivalent to about 15% of the initial reserve. The overall quality of our loan book remains good. Stage three loans as a percentage of total loans are stable at around 1.8%. We expect ECLs to normalize towards 30 basis points of average loans in 2022. with upside from potential COVID-19 releases in the first half of 2022 and potential risk from continued uncertainty in mainland China commercial real estate. Turning to slide 16, fourth quarter adjusted operating costs excluding the bank levy were modestly down on the same period last year. 2021 costs were broadly stable on 2020 as per our third quarter guidance. The fourth quarter performance was driven by continued good cost control, together with a lower performance-related pay accrual in the quarter relative to the fourth quarter last year. The bank levy came in at $116 million. This was lower than expected due to an offset in credit for bank levy fees paid in prior years. We expect the bank levy to normalize at around $300 million per year from this year onwards. We made a further $600 million of cost program savings during the fourth quarter, with an associated cost to achieve of around $600 million. Turning to the next slide, in the first two years of our three-year cost program, we've achieved savings of $3.3 billion, with cumulative cost to achieve spend to date of $3.6 billion. We now expect to exceed our overall target of $5 to $5.5 billion of cost savings, with at least a further $2 billion of cost savings in 2022, and at least a further $500 million of savings in 2023. We expect to fully utilise our $7 billion cost to achieve budget by the end of 2022. So please model a final cost to achieve spend of $3.4 billion this year. Despite inflationary pressures, Noel and I are committed to continuing to deliver tight cost control. For 2022, we aim to keep adjusted costs, again, broadly stable. And in 2023, we intend to manage adjusted cost growth to be within a 0% to 2% range. A few things to note for 2023 costs and beyond. Firstly, on recent M&A activity, we expect the net impact to be broadly neutral on costs in 2023 and modestly positive in 2024 following the completion of the sale of our French retail bank in the second half of 2023. Secondly, there will be a reduction in operating costs as a result of the shift to IFRS 17, but also an associated reduction in revenues. And thirdly, from 2023 onwards, we intend to move away from reported adjusted numbers with any further restructuring costs absorbed above the line and any large distorting items disclosed under notable items. Turning to capital, on slide 18, our quarter year one ratio was 15.8%, down 10 basis points on the third quarter. Reported risk-weighted assets were down $1 billion on the third quarter. Risk-weighted asset saves and improving asset quality, offsetting risk-weighted asset growth from lending and regulatory change. Our cumulative risk-weighted asset saves are now $104 billion, against the three-year target of $110 billion by the end of 2022. Given this progress, we now have an ambition to achieve $120 billion of cumulative risk-weighted asset sales by this year end. On the next slide, we're expecting to be within our core Tier 1 ratio of 14% to 14.5% during this year. As shown on this table, we expect around 125 basis points of total impact during 2022 from notable items including regulatory change and M&A, a large part of which will be in the first quarter. It will also include the planned sale of our French retail bank in the third quarter. Once within our 14 to 14.5% range, we intend to actively manage to be within this range. But please recognise that due to normal capital volatility, you could see us above or below this range in some quarters. In addition, and in line with PRA regulatory guidance, the dividend will accrue at 55% of reported profits for each quarter of 2022. This is not a signal of future dividend intentions. And finally, for clarity on our two buyback programs, the $2 billion buyback program that is currently underway has to complete by 20th of April under its six-month regulatory authorization. Post the AGM in late April, we intend to then launch the billion-dollar buyback program that we announced today. So to conclude, in the context of a continued challenge macro environment, these were a good set of fourth quarter and full year 2021 results. Heading into this year with strong core momentum underpinned by increasingly robust growth and continued tight cost discipline. If the current rates outlook is maintained, we're on track to deliver a return on tangible equity of at least 10% in 2023. That's a year earlier than our expectations of the third quarter. And finally, and importantly, healthy capital distributions have now been restored. With that, Martin, can we please open up for questions in the room and on the line? And Richard's coming up to host Q&A. Thank you.

Thank you, Mr. Stevenson. If you would like to ask a question today on the line, please press star 1 on your telephone keypad. 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 the hash key. Once again, to ask a question, please press star 1. Please ensure that the mute function on your telephone is switched off. The first few questions will be taken in the room, so I will now head over to Mr. Richard O'Connor.