HSBC Holdings, plc.

Welcome to the analyst and investor presentation on the third quarter results for HSBC Holdings plc. This webinar is being recorded. I will now hand over to Pam Kerr, Group CFO.

Welcome everyone. Thank you for joining. It has been another positive quarter. We are confident in meeting the targets we set out to you at the full year and are on track to meet all our guidance, which remains unchanged today. On performance, revenues are up 5% and profit before tax was strong, up 10%, excluding notable items. I'll talk more about these shortly. And our continued discipline saw us action Not point two billion dollars of simplification saves, taking us to one point nine billion dollars of the two billion dollars we set out at the half year. We announced an up to one billion dollar share buyback. Let's turn to the income statement. My comments will exclude notable items which adversely impacted profits by $0.4 billion this quarter. These are set out on slide 28. The comparisons I will make, unless otherwise stated, will be year on year on a constant currency basis. I'm pleased with the performance in the third quarter. Revenue grew 5% to $18.7 billion. This was broad based across businesses and income lines. We delivered strong profit before tax growth up 10% to $10 billion. Earnings per share excluding notable items is up 17%, in part benefiting from the reduction in minority interests following the privatization of Hang Seng Bank. Deposits increased $105 billion, including health for sale balances. The annualized return on tangible equity was 18.8% year-to-date, 1.1% higher than last year. Our CET1 ratio is 13.9%. Today we are giving you our estimated Basel 3.1 impact of 40 to 50 basis points which will apply from 1st January 2027. Turning now to our business segment performance. All four of our businesses grew deposits. Each delivered annualized return on tangible equity in excess of 17%, excluding notable items. Revenue grew 5%, showing the breadth of our franchise and consistent execution of our strategy. IWPB revenue fell slightly year-on-year. There are two things I will call out here. First, the $0.1 billion impact of our strategic transactions. We set this out on slide 20. Second, this time last year, I highlighted the positive one-off impacts in insurance in the third quarter of 2025 of around $0.1 billion. As expected, those did not recur. Taken together, both more than offset revenue growth in IWPB. Our other three businesses grew consistently in the quarter with CIB the standout. This broad-based performance across our four businesses shows that our strategy is very much on track. Moving to Banking NII. Banking and I.I. increased $0.6 billion year on year to $11.7 billion. The quarter-on-quarter increase reflects continued balance sheet growth, both in loans and deposits. It also reflects $0.1 billion of one-offs, A $0.1 billion benefit from our structural hedge and $0.1 billion from day count. We benefited from a couple of rate hikes, although I would say that these were in line with expectations a few months ago. As you would expect, our structural hedge is being reinvested at higher yields. In terms of emerging trends, in Hong Kong we saw increased time deposit margin pressure this quarter. Most of our strong growth has been in time deposits. In the UK, the deposit market has become increasingly competitive. We have the lowest loan to deposit ratio of the major banks and the highest portion of instant access deposits. This leaves us well placed to manage changing competitive market dynamics. As you look forward, I would also just remind you of the impact of our strategic transactions. We reiterate our full-year banking NII guidance of at least $46 billion. Next, Wholesale Transaction Banking. The strength of our franchise has been demonstrated over the last 12 months and again in this quarter. We grew fee and other income 11% year on year as customers continued to turn to us to help them navigate market complexity. Our balance sheet and franchise strength are particularly valuable in times like these. In the quarter, trade fees grew 5%, driven by continued growth in guarantees in Asia and the US. We are gaining market share in Asia. This is a core strength of the firm and lies at the heart of our network business. Payments increased by 4% on higher volumes and increased card fees. While this slide focuses on fees, I would point you to the data pack. Wholesale transaction banking revenues, which give you the full picture of our world-leading trade and payments franchises, are up In security services, we grew fee and other income 3%, reflecting new mandates and higher market valuations. Some of this growth was offset by strategic transactions. Foreign Exchange had a particularly strong quarter, up 19%, as we saw client demand in a period of higher market volatility. Next to wealth. Wealth net new money at $38 billion in Asia this quarter brings our year-to-date flow to more than $95 billion. We set this out on slide 24. Our wealth business continues to perform, and as you will see on slide 23, we saw good inflows of new-to-bank customers in the quarter. Fee and other income itself was flat year on year. Investment distribution performed well, up 7% on higher mutual fund and structured product sales. This reflects the strength of our customer franchise in Hong Kong. On insurance, as I mentioned, we had a one-off impact in the third quarter of last year. Together with the strategic transactions, notably UK Life and French Life, the $0.2 billion dominated the year-on-year comparison. Private banking grew 16%. We are really pleased our strategic focus is paying off. This quarter, we saw growth in mandates and higher trading activity. In asset management, AUM growth was offset by margin compression. The consistent investments we are making in our wealth products, distribution channels, and customer experience are translating into real results. Turning next to credit. Our third quarter ECL charge was $0.8 billion, equivalent to an annualized charge of 31 basis points as a percentage of loans and advances. In Hong Kong commercial real estate, we had a very low net charge in the quarter. Overall performance remains broadly stable. You will see our usual detailed breakdown on slide 27. We maintain our full-air 2026 credit guidance of around 45 basis points. The fourth quarter runs longer, but there is nothing of concern we are calling out today. Next to costs. We continue to take a disciplined approach to cost management. Cost growth this quarter is 1% year on year on a target basis. We are on track to achieve our target of 1% cost growth in 2026 compared to 2025 on a target basis, as we continue to deliver the benefits of our organizational simplification savings through the remainder of the year. Updating for FX, the target cost baseline is $33.9 billion. As we said at the half year, if our strong business performance continues, we may consider increasing variable pay, which would increase costs modestly. Turning next to customer deposits and loans. Our deposit growth continued with $105 billion including HFSA balances over the last 12 months. In the quarter, Hong Kong saw another strong performance with $21 billion of growth. Following the privatization of Hang Seng Bank, we have announced the combined management team and are now building common technology platforms to simplify operations, improve efficiency, and deliver a better experience for our customers. We are benefiting from being full owners of the two iconic banks. From the growth of Hong Kong and from our focus on protecting our leading market position. In the UK, as I referenced, we are seeing strong competition for retail deposits. Time deposit rates in the market are often above policy rates. Given our loan to deposit ratio, we have a range of choices to match market presence with profitability. A stable book, this quarter reflects these choices. In CIB, I said at the half-year that about half of the CIB deposit growth in the second quarter was large and short-term, that these balances come and go. Indeed, we have seen some of those balances flowing out this quarter. The $42 billion year-on-year growth is more representative of the profile of CIB. For IWPB, we were pleased to be the largest international participant in the Reserve Bank of India's foreign currency non-resident bank deposit scheme, the second largest bank overall. We captured $14.5 billion of FCNR deposits, and you will also see growth in the related loans on the other side of this slide. Against this strong inflow, we saw more runoff of the Australia book, which we expect to continue following our announcement to wind down our retail banking business. Next, lending. We continue to grow in Hong Kong. The housing market is up 14% year on year, which is translating into mortgage growth, where we have a competitive range of fixed and floating products. In the UK, we are particularly pleased with the 13% commercial lending growth year on year. You will hear more from our UK team in November, including how our leading position with UK companies provides us with great opportunities. CIB continued to grow with balance sheet discipline, particularly in Asia. In IWPB this quarter, you can clearly see the move of our $26 billion Australian retail portfolio to help for sale. This was partly offset by the Indian FCNR lending I just mentioned. Next to capital, our CET1 capital ratio was 13.9%, down 20 basis points in the quarter. Our regulatory profits were again strong. We generated 90 basis points of CET1 in the quarter. As usual, we accrue a 50% dividend. You can see the impact of last quarter's buyback and strategic initiatives. We grew RWAs as we put capital to work in the business. I previously flagged negative movements through other comprehensive income from our hedge portfolio. Today we are giving you the anticipated day one benefit from the adoption of Basel 3.1 in January next year. Based on our latest modelling, This benefit should be 40 to 50 basis points. This remains an estimate which is subject to changes in portfolio size, composition and further model refinements, including regulatory permissions prior to adoption. As always, we judge our capital position on a current and forward-looking basis. That positions us to deliver a further up to $1 billion buyback today after continuing to provide the resources to support our growth. Let's now turn to targets and guidance. First, targets. We are confident in our targets. As George and I previously said, we are always pleased to exceed them in any given year should circumstances be supportive. To remind you of those targets, revenue rising to 5% year-on-year growth by 2028, excluding notable items, Return on Tangible Equity of 17% or better, excluding notable items each year. Dividends 50% of earnings per share, excluding material notable items and related impacts. Finally, all our other guidance set out on this slide remains unchanged. To conclude, The intent with which we are executing our strategy is reflected in our third quarter performance, which is broad based. It shows discipline, performance, and delivery. Discipline in the way we are applying strong cost control and investing to deliver focused, sustainable growth. We are on track to achieve our target of around 1% cost growth in 2026 compared to 2025 on a target basis. As we said in the half year, should strong performance continue, we may consider additional business performance related pay, which would increase 2026 costs modestly. and we are reallocating costs from non-strategic or low-returning businesses towards growth opportunities while upgrading our operating model. Performance in our earnings. All four of our businesses grew deposits and each also delivered annualized return on tangible equity in excess of 17%, excluding notable items. And delivery. Our third quarter results show we are creating a simple, more agile, growing HSBC. That is why we remain confident in delivering against our targets or exceeding them if circumstances allow. With that, I'm happy to take your questions.

Thank you Pam. As a reminder, if you would like to ask a question today, please use the raise hand function in Zoom. When you are invited to ask a question, please accept the prompt to a mutual line. If you find your question has been answered, You may remove yourself from the queue by lowering your hand. Our first question today comes from Guy Stebbings at BNP Paribas. Please accept the prompt to a mutual line.