HSBC Holdings, plc.

Welcome, ladies and gentlemen, to the Analyst and Investor webinar on the first quarter results for HSBC Holdings PLC. For your information, this webinar is being recorded. I will now hand over to Georges El Hedery, Group CEO.

Welcome all to today's call. I'm joined here in London by Pam. Before Pam takes you through the numbers, I would like to begin with some opening remarks. Overall, there was a strong quarter marked by three key drivers. Momentum in our earnings, discipline in our execution, and confidence in our ability to deliver our targets. First, we have strong momentum in our business. We had a strong first quarter with profit before tax up 11% and an annualized return on tangible equity of 18.4%, both excluding notable items. We had our fifth consecutive quarter of double-digit growth in wealth and attracted net new invested assets of $22 billion, as well as another 300,000 new-to-bank customers in Hong Kong continuing the trend from last year. We also had a strong performance in transaction banking, in particular in FX, and in our equities and debt trading businesses, benefiting from higher client activity on the back of higher volatility. Second, we remain focused on executing our strategy with discipline and are on track to deliver the cost actions we set out in February. We are progressing at pace to deliver on the simplification related cost saves as well as the strategic cost reallocations. We also continue to take a disciplined approach to our investments and capital allocation to drive growth across our four businesses. We will provide you with a full update on this at the half year results in July. Third, The external macroeconomic environment is less favourable and more uncertain than it was in February, as the uncertainty around trade policy dampens business confidence and constrains investment. However, we remain confident in our ability to deliver our targets. Our balance sheet is strong. This is reflected in the deposit surpluses we hold in every major currency in each of our four businesses in every geography in which we operate. This is why our clients place their trust in us during times of predictability and even more so during times of unpredictability. These provide us with a steady recurring income stream and underpin the lion's share of our banking NII. Growing our structural hedge has reduced the sensitivity of these revenues to interest rate cuts. Our balance sheet is also underpinned by a strong capital position and a high-quality credit portfolio. We also have resilient recurring fee income from stable flow-based activities in transaction banking and in wealth. with a much smaller contribution from investment banking event-driven business. I encourage you to keep the diversity and quality of our earnings in mind when considering how changes in trade policy will affect our business. Our wholesale transaction banking business covers much broader activities than those related to cross-border trade. And within our trade finance business, we have diverse products and cover all major global and intra-regional corridors. To assess the impact higher tariffs could have on our business, we modelled scenarios that contemplate significant but plausible increases in tariffs by the world's largest trading blocs resulting in a notable slowdown in global trade as well as a slowdown in global GDP growth. In a plausible downside tariff scenario, we estimate that there would be a low single-digit percentage impact on the group's revenues. Separately, our consensus downside scenario models a slowdown in global trade and GDP growth as a result of an increase in tariffs. The impact of this scenario would be incremental ECLs of $0.5 billion. On this basis, we remain confident in delivering a mid-teens return on tangible equity for 2025, 2026 and 2027 and are reaffirming all of the guidance that we gave in February. We recognize, though, that the broader impacts of the current conditions are more difficult to quantify, and we will continue to monitor these as we formulate our ongoing outlook. Importantly, in the current environment, customers look for the strength, stability, and expertise of a trusted partner. We are extremely well positioned to support all of our customers wherever they are, however their needs evolve, and whatever the market conditions. Finally, we're also pleased to announce an up to $3 billion share buyback and a $0.10 per share interim dividend, reflecting our continued focus on capital return to our investors. With that, let me hand over to Pat.

Thank you, George. Thank you everyone for joining. The momentum in our business has enabled us to deliver a strong first quarter performance, headlined by an annualized return on tangible equity of 18.4%, excluding notable items. We had very good underlying profit and revenue performances, credit remained stable and we maintained a disciplined approach to cost management. We are pleased to announce a first interim dividend of 10 cents per share and a share buyback of up to $3 billion. The buybacks we completed over the last 12 months have helped take us closer to our target range of 14 to 14.5% CET1. We will continue to return surplus capital to shareholders with buybacks remaining our preferred method. As always, a decision on any share buyback will be made on a quarterly basis. It will depend on organic capital generation and the capital needs of the business. Unpacking the revenue story, excluding notable items, revenue of $17.7 billion was up $1.1 billion on the first quarter of last year, driven by fee and other income. It also included a $0.3 billion increase in debt and equity markets driven by higher volatility and a favorable impact of $0.2 billion in the quarter from the disposal of Argentina, which we completed at the end of last year. On banking NII, excluding the impact of Argentina and other notable items, the banking NII run rate remained broadly stable on the fourth quarter. The impact of interest rate cuts and two fewer days in the quarter were offset by the repricing of liabilities and structural hedge assets and some favorable changes in asset mix. We continue to expect banking NII of around $42 billion in 2025. As previously stated, this is not an underpin. It remains our expectation at the present time based on the current market rates outlook and our own projections. Moving to fee and other income, wholesale transaction banking was up 13% on last year's first quarter. This was driven by a strong FX performance as elevated volatility drove substantial volumes of client hedging activity. Excluding the impact of disposals, global payment solutions was up 3% year on year and global trade solutions was up 6%. In wealth, the strong momentum from the fourth quarter continued as we delivered our fifth consecutive quarter of double-digit year-on-year growth. High client activity levels in Asia, primarily Hong Kong, were the key driver and there was broad-based growth. We are pleased that the investment we are making in our wealth products, distribution channels, and customer journeys is translating into results. A record new business CSM, 101,000 new to bank customers in Hong Kong, and $22 billion of net new invested assets, $16 billion of which was in Asia. The CSM balance, which is a store future value, was up again this quarter. As you know, the CSM balance is subject to market fluctuations and sensitivities to key indices are in the earning release. On credit, our first quarter ECL charge of $0.9 billion, equivalent to an annualized charge of 37 basis points as a percentage of loans and advances. This included a $150 million provision to reflect heightened economic uncertainty. Excluding this, the first quarter charge was broadly the same as in the first quarter of 2024. The credit risk matrix that we track remains stable, and we continue to monitor them closely. Thinking about the potential impact of tariffs on credit performance, ECLs will be sensitive to macroeconomic performance, the outlook for which remains uncertain. We consider a variety of scenarios as part of our ECL calculation. One of these is the consensus downside scenario in which an increase in tariffs results in a global economic slowdown. In this scenario, there would be an incremental ECL charge of around $0.5 billion. On costs, we are taking a disciplined approach to cost management and are on target to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. We are also on track to deliver $0.3 billion of simplification savings into the P&L in 2025. On loans and deposits, loan balances for broadly stable quarter on quarter as growth in corporate and institutional banking was offset by the reclassification of our retained French home loan portfolio. Deposits were also broadly stable quarter on quarter with a partial reversal of some of the seasonal inflows we saw in Q4. Year on year, deposits were up 6% with growth in all entities and businesses. Our CET1 ratio was 14.7%. The reclassification of our retained French home loan portfolio led to a $1.3 billion pre-tax loss in the quarter recognized in fair value through other comprehensive income. This had a capital impact of around 0.2 percentage points of CET1. Looking ahead, we expect the buyback we announced today to have an impact of around 0.4 percentage points in the second quarter. You will have seen that BOCOM has announced that it has approved a share issuance of up to 120 billion renminbi. Upon completion, we expect to recognize an accounting impact dilution loss of between $1.2 billion and $1.6 billion on our stake. This will be treated as a material notable item and will have no material impact on CET1 and no impact on the dividend. Let me end by summarizing. First, we have momentum in our earnings. We had a strong first quarter performance with an annualized return on tangible equity of 18.4%, excluding notable items. We have also continued to perform well in the quarter to date. Second, we have discipline in our execution. We are on track to deliver the cost actions we set out in February. Third, although the external environment is more uncertain, we are confident in our ability to deliver and we are reaffirming our existing targets and guidance. This includes a mid-teens return on tangible equity in 2025, 2026 and 2027. Louise, can we go to Q&A, please?