HSBC Holdings, plc.

Good morning, good afternoon, good evening, ladies and gentlemen, and welcome to the Investor and Analyst webinar for HSBC Holdings PLC's 2023 annual results. For your information, this webinar is being recorded. At this time, I will hand over to Noel Quinn, Group Chief Executive.

Good afternoon to those in Hong Kong and great to see you all. Good morning to those watching in London and around the world. Before George takes you through the Q4 numbers, I'll make some opening comments. First, I'm really pleased with the performance that the team delivered in 2023. We reported $30 billion of PBT for the first time ever. And we delivered a return on tangible equity of 14.6% or 15.6% excluding material notable items. Second, there were some items in the fourth quarter which make it harder to understand the underlying performance. George will take you through them in detail. But I want to stress there was still good underlying growth in the fourth quarter. Excluding the impact of notable items and Argentina hyperinflation, our profit before tax was $7.3 billion. Third, we distributed $19 billion of capital returns to our shareholders in respect of 2023. This included a full year dividend of 61 cents per share, which is the highest since 2008, and $7 billion of share buybacks, which have reduced the share count by over 4% at completion of the current buyback. Fourth, we still expect to have substantial distribution capacity going forward. We've announced a further share buyback of up to $2 billion. We're committed to considering a special dividend of 21 cents per share as a priority use of the Canada proceeds, subject to the completion of the transaction. And we finished the year with a strong CET1 ratio of 14.8%. which will be further boosted by the Canada deal. Fifth, we remain committed to cost discipline. We have flow through impact of 2023 inflation on our costs this year, but expect a downward trend in inflationary pressures in 2025 and beyond. We continue to invest in growth opportunities and the digitization of our business to drive incremental efficiencies. We remain very focused on funding much of that investment through cost-saving initiatives. Finally, we expect to have further opportunities to grow revenue, even in a lower-rate environment. George will take you through how we're reducing our sensitivity to rate movements. And we do acknowledge the downside risks to NII. but we're confident that we have the levers for growth that allow us to deliver mid-teen returns in 2024. I'll take you through some of these levers later, but let me now hand over to George.

Thank you, Noel. Warm welcome to everyone here in Hong Kong. For those of you watching in London, good morning and thank you for joining our full year 2023 results call. We delivered a good underlying business performance in the fourth quarter. Let me first start by clarifying that our reported profit before tax was impacted by $5.8 billion of notable items and the further $0.5 billion from Argentina hyperinflation, including the more than 50% devaluation of the peso in December. Let me unpack three of those notable items. First, we reinstated the impairment on the sale of our France retail business as signaled at the third quarter. Second, we booked a $0.4 billion of Treasury disposal losses in the quarter, again in line with the guidance at the third quarter, to extend the duration of hedges in anticipation of rate decreases. And finally, as you know, each quarter we conduct a value and use test on the carrying value of our investment in Bocom, described in detail in our annual report and accounts. Following the outcomes of that test in Q4, we took a charge of $3 billion in the quarter against our carrying value. the charge had an insignificant impact on CT1 capital and our CT1 ratio, and no impact on our dividends or share buyback. And just to be clear, this has no impact on our strategy in mainland China, has no impact on our strategic relationship with Bocom, and it has no impact on HSBC's or Bocom's operation, strategy, or outlook. So on a reported basis, our profit before tax was $1 billion in the fourth quarter, down $4 billion from the fourth quarter of 2022. Excluding the $6.3 billion impact of notable items in Argentina hyperinflation, our profit before tax was $7.3 billion, up $0.7 billion versus the fourth quarter of 2022, primarily due to growth in banking NII. On the next slide, so on a reported basis, fourth quarter revenue was down $1.6 billion compared to the same period last year due to the impact of notable items in Argentina hyperinflation. Excluding these, our revenue was up $1.5 billion, primarily banking NII. The strength of our deposit franchise, our access to 2D pools of liquidity in the UK and Hong Kong, and our enviable balance sheet made it possible for us to benefit from the more favourable rate environment. On the next slide, fourth quarter NII and banking NII were again impacted by Argentina hyperinflation, and a reclassification of cash flow hedge revenue between NII and non-NII. Excluding these, both NII and banking NII were broadly stable on the third quarter, and NIM was down three basis points, primarily due to higher time deposit costs and deposit migration in Hong Kong. Turning to the outlook, taking our fourth quarter banking NII, And adjusting for Argentina hyperinflation and the reclassification of cash flow hedge revenue and the disposal of our France retail and Canada businesses gives you an annualized run rate of just above $43 billion. That should be your starting point for modeling our 2024 banking NII. We expect four key variables to drive our banking NII from that starting point in 2024. Changes in interest rates, the reinvestment of maturing structural hedge assets at higher yield, deposit migration, particularly here in Hong Kong, and balance sheet movements. There is a degree of uncertainty inherent in all of these. We're guiding towards the banking NII of at least $41 billion in 2024. This is our current estimate of the bottom end of the range of reasonable outcomes and is intended to help you with your modeling. We will continue updating further as the year unfolds. And before turning to non-NII, I'd like to direct your attention to the chart on the bottom right of the slide. Over the last 18 months, our banking NII sensitivity has reduced by around $3.5 billion. More than one third of this reduction is due to increased structural interest rate hedging. Subject to market conditions, we expect to increase both the notional and the duration of our structural hedge in the coming quarters in order to reduce our banking NII sensitivity still further. Non-NII was down $0.9 billion compared to the same quarter last year due to notable items in Argentina hyperinflation. And again, excluding these, non-NII was up $1.7 billion versus the same quarter last year. This was primarily due to the revenue offset into non-NII from the central cost of funding global banking and markets trading activity, which is included in banking NII. and from the cash flow hedge income reclassification between NII and non-NII I referred to previously. Other non-NII was up modestly versus the same quarter last year, including an increase of $0.1 billion in net fee income, primarily in commercial banking and wealth and personal banking. Looking at non-NII from our two strategic activities of wholesale transaction banking and wealth, In wholesale transaction banking, non-NII was up 2% on the fourth quarter of 2022. There was good growth in global payment solution, in trade and in foreign exchange, reflecting the strength of our international network and transaction banking capabilities, as well as increased client activity and repricing initiatives. This was partly offset by a relatively small decrease in security services. in wealth, non-NII in both asset management and private banking grow by double digits versus the fourth quarter of last year due to an increase in assets under management, partly driven by net new invested assets. However, total wealth non-NII was down $0.1 billion as a result of a $0.2 billion correction to historical valuation estimates in our insurance business. For the full year, non-NII in wholesale transaction banking was $10.6 billion, up 5% on 2022, and $6 billion in wealth up 7%. Turning now to credit, our fourth quarter ECL charge was $1 billion, primarily in wholesale. This brought our full year ECL charge to $3.4 billion, which was 33 basis points of average customer loans, including those held for sale, or 36 basis points excluding those, and within our full year 2023 guidance. Due to ongoing macroeconomic uncertainty, we're guiding towards ECLs of around 40 basis points for 2024. We took an ECL charge of $0.2 billion for mainland China commercial real estate in the fourth quarter as part of the $1 billion charge for the quarter referenced in the last slide. This brought the full year charge on this portfolio to $1 billion, crystallizing the plausible downside scenario that we set out last February. Our main area of focus remains the portfolio booked in Hong Kong, That exposure is now $6.3 billion, down $1.2 billion in the quarter, and down $3.1 billion compared to full year 2022. We continue to monitor the sector closely, and we are comfortable with our current level of provisions. Turning to costs, full year 2023 costs on a constant currency basis were down 1%. On a target basis, full year 2023 costs came in 1% higher than our Q3 guidance, driven by three items that unexpectedly landed in the fourth quarter. First, the FDIC special assessment, which we expected to be incurred over 2024 and 2025. Second, the UK bank levy was higher than forecast, primarily due to adjustments relating to prior years. And third, there was an offsetting benefit from Argentina hyperinflation in the quarter. Looking ahead, We are aiming to limit cost growth to around 5% in 2024 on a target basis, which excludes the reduction in 2024 costs from the France retail and Canada disposals. This will be driven by the flow through impact of 2023 inflation to 2024 costs. investment and volume growth, and partly offset by cost-saving initiatives. On the next slide, customer lending and deposits were broadly stable versus the third quarter once you exclude the sale of our France retail business. Without that, there was $35 billion of deposit growth of which $27 billion was in Asia, with around half of this in Hong Kong. Deposit growth in Asia benefited from seasonality, and we would expect at least some of that growth to reverse in the course of Q1. Turning now to capital, our CT1 ratio at the end of 2023 was 14.8%, which was down 0.1 percentage points on the third quarter. There are three things I'd like to draw your attention to. First, as I said earlier, the BOCOM charge had an insignificant impact on CT1 capital and our CT1 ratio due to the compensating reduction in regulatory capital threshold deductions. And it had no impact on dividends or share buybacks. Second, we expect the share buyback announced today to have an impact of around 25 basis points on our CET1 ratio in the first quarter of 2024. And finally, we expect the Canada sale to generate around 1.2 percentage points of CET1 in the first quarter of 2024. We remain committed to consider a 21 cent per share special dividend in the first half of 2024 as a priority use of the sale proceeds which equates to around 0.5 percentage points of C81. Before I hand back to Noel, I am pleased to share some enhancements that we have made with regard to our international disclosures. There are two sets of data, and Noel will also comment further on them. Starting with our wholesale business, let me walk you through the data on this slide. In 2023, We generated $33.5 billion of client revenue across commercial banking and global banking markets. Of this, $20.4 billion was generated from multi-jurisdictional clients. By this, we mean clients that bank with us in more than one market. The charts on the right show that two-thirds of the client revenue we generate from those clients comes from providing them with services and markets outside their home market where they also bank with us. It is also worth pointing out that two-thirds of multi-jurisdictional client revenue or 13.4 billion dollars was generated from client whose home market is in the West, with the remaining $7 billion from clients whose home market is in the East. Turning now to WPB international revenue, more than $10 billion or 40% of our WPB revenue comes from international customers, around two-thirds of which is generated in Asia. So to summarize, both the wholesale and WPB client revenue data clearly demonstrates the strength of our international network and our unique capability to serve international clients. Our network and further investments into our international proposition position us to capture an even greater share of this vital, fast-growing segment. Let me now hand back to Noor.