HSBC Asia Seminar for Investors and Analysts Day 3 morning presentations
Date: 11 April 2018 HSBC Asia Seminar for Investors and Analysts Important notice and forward-looking statements
Important notice The information, statements and opinions set out in this presentation and subsequent discussion do not constitute a public offer for the purposes of any applicable law or an offer to sell or solicitation of any offer to purchase any securities or other financial instruments or any advice or recommendation in respect of such securities or other financial instruments. The information contained in this presentation and subsequent discussion, which does not purport to be comprehensive nor render any form of financial or other advice, has been provided by HSBC Holdings plc and its subsidiaries (the “Group”) and has not been independently verified by any person. No responsibility, liability or obligation (whether in tort, contract or otherwise) is accepted by the Group or any member of the Group or any of their affiliates or any of its or their officers, employees, agents or advisers (each an “Identified Person”) as to or in relation to this presentation and any subsequent discussions (including the accuracy, completeness or sufficiency thereof) or any other written or oral information made available or any errors contained therein or omissions therefrom, and any such liability is expressly disclaimed. No representations or warranties, express or implied, are given by any Identified Person as to, and no reliance should be placed on the accuracy or completeness of any information contained in this presentation, any other written or oral information provided in connection therewith or any data which such information generates. No Identified Person undertakes, or is under any obligation, to provide the recipient with access to any additional information, to update, revise or supplement this presentation or any additional information or to remedy any inaccuracies in or omissions from this presentation.
Forward-looking statements This presentation and subsequent discussion may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking statements with respect to the financial condition, results of operations, capital position and business of the Group (together, “forward-looking statements”). Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant assumptions and subjective judgements which may or may not prove to be correct and there can be no assurance that any of the matters set out in forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. Forward-looking statements are statements about the future and are inherently uncertain and generally based on stated or implied assumptions. The assumptions may prove to be incorrect and involve known and unknown risks, uncertainties, contingencies and other important factors, many of which are outside the control of the Group. Actual achievements, results, performance or other future events or conditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks, uncertainties and other factors (including without limitation those which are referable to general market conditions or regulatory changes). Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at the date the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to update, revise or supplement them if circumstances or management’s beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. No representations or warranties, expressed or implied, are given by or on behalf of the Group as to the achievement or reasonableness of any projections, estimates, forecasts, targets, prospects or returns contained herein. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report and Accounts for the fiscal year ended 31 December 2017 filed with the Securities and Exchange Commission on Form 20-F on 20 February 2018 (the “2017 20-F”). This presentation contains non-GAAP financial information. The primary non-GAAP financial measure we use is ‘adjusted performance’ which is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the underlying trends in the business. Reconciliations between non-GAAP financial measurements and the most directly comparable measures under GAAP are provided in the 2017 20-F and the Reconciliations of Non-GAAP Financial Measures document which are both available at www.hsbc.com. Information in this presentation was prepared as at 6 April 2018. HSBC Asia Seminar for Investors and Analysts Day 3 morning presentations
GB&M Asia 03
CMB Asia 21
Digital for corporates 34
Panel discussion and Q&A on collaboration 46
India 54
Australia 65
Appendix 81
Glossary 87 GB&M Asia
11 April 2018
Gordon French Head of Global Banking and Markets, Asia-Pacific GB&M Asia Agenda
Introduction
GB&M Asia positioning
Client and business strategy
Recap GB&M Asia: Introduction GB&M Asia franchise – distinctive competitive advantages and well- positioned for growth
Distinctive competitive advantages… …and well-positioned for sustainable growth
2016 rank 2017 rank
GLCM1 #1 #1
Transaction Diversified HSS2 #1 #1 Client Banking Base GTRF1 #1 #1
FX3 #1 #1
Global Credit3 #4 #3 Markets International Product Connectivity Breadth Rates3 #2 #2
DCM4 #1 #1 Global Banking Syndicated #2 #3 lending5
1. Source: Oliver Wyman, September 2017. 2017 APAC rank based on 2016 revenue data. 2016 APAC rank based on 2015 revenue data. 2. Source: EY, March 2018. Note: Estimated Asia Pacific rankings based on AUC data provided by HSBC and Tricumen. Refer to definitions in the Appendix for explanation on the EY methodology 3. Source: Coalition, FY 2017. Asia Pacific excluding Japan. Peer group comprises the Coalition Index: BoAML, BARC, BNPP, CITI, CS, DB, GS, HSBC, JPM, MS, SG and UBS. Rankings are based upon HSBC’s product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn. 5 4. Source: Dealogic, 2017 Fee Ranking. Asia Pacific excluding Japan & Chinese Onshore DCM 5. Source: Dealogic, 2017 Fee Ranking. Asia Pacific excluding Japan GB&M Asia: Introduction Strategic actions – 2017 achievements
Group strategic GB&M Asia strategic actions focus areas Objectives Achievements
• Grew GLCM revenue by 22% Y-o-Y1 Transaction Banking • Grow revenue • Grew HSS revenue by 12% Y-o-Y1
• Increase FIG revenue contribution • FIG client revenue from Asia managed clients grew more than FIG focus • Capture opportunities from Chinese 10% Y-o-Y2 Asset Managers Deliver • Awarded Best Overall International Bank for BRI by Asiamoney growth • Support Chinese corporates “going out” above GDP • Awarded Best Bank for Belt and Road at the FinanceAsia • Leverage Hong Kong’s unique position from Belt and Road Initiative Achievement Awards to capture BRI opportunities e.g. fund (BRI) • Established 25 China desks worldwide to facilitate China “going international raising capabilities, largest offshore out” strategy network RMB centre • Issued the first BRI Climate Bond
• Ranked #1 in Green issuance for Asia Pacific3 • Awarded Global Capital’s Sustainable and Responsible Capital • Become leader in green / sustainable Sustainable financing Markets Awards 2017 - Most Impressive Bank for Asia Pacific financing Green / SRI Capital Markets • Completed 13 Green Bonds4
Asset growth • Pivot to Asia • Grew Loans and Advances to Customers by 22% Y-o-Y1
Investment • 51% stake in HSBC Qianhai Securities Limited in Shenzhen in Asia • First foreign bank with a majority-owned securities JV China securities JV • Establish a securities JV in China • Commenced business in DEC17 and issued first research reports in both Chinese and English to international and domestic clients
1. Adjusted performance 2. Client revenue differs from reported revenue. Sourced from HSBC internal client MI 3. Source: Dealogic, YTD 19 Mar 2018, Ranking by Deal Value, Asia ex Japan 6 4. Source: Dealogic, 2017 to YTD 19 Mar 2018, Ranking by Deal Value, Asia ex Japan GB&M Asia: GB&M Asia positioning Asia – the engine of world growth
Global real GDP1 Global trade2 USDtn USDtn
3% 83 CAGR% 40 CAGR% 7% 76
33 30 4% 15 8% Asia-Pacific 26
Asia-Pacific 12 4% 4 2 9% MENA 3 MENA 2 23 2% Europe 21 15 7% Europe 12
North America 19 21 2% North America 5 5 5%
South America 6 6 3% South America 2 2 4% 2017 2020E 2017 2020E
Note: Numbers may not add up due to rounding 1. Source: Global Insight, January 2018. Note: Excludes Commonwealth of Independent States and Sub-Saharan Africa 2. Source: Global Insight, January 2018. Note: Sum of merchandise imports and exports. Excludes Commonwealth of Independent States and Sub-Saharan Africa 7 GB&M Asia: GB&M Asia positioning Asia revenue is the fastest growing in the wholesale banking industry
Wholesale banking industry revenue1 Asia Pacific Americas EMEA USDbn
+3% +1% 558 CAGR% 499 506 179 4% 155 158
215 3% 193 196
151 152 164 2%
2016 2017E 2020E
1. Source: BCG, Wholesale Banking and Global Markets, March 2018. Includes Investment Banking (Equities, FICC, and Advisory & Origination), Trade Finance & Payments, Lending (Large Corporates), and Securities Services 8 GB&M Asia: GB&M Asia positioning GB&M Asia – strong financial performance with diversified product and geographic mix
Strong financial performance1 Diversified revenue mix2
USDbn 2016 2017 Net operating income, 2017 Other Revenue +4% Net fee income 1% 22% 5.8 6.1 42% Net interest income
35% Net trading income PBT +5%
3.2 3.4 Diversified regional mix3 PBT, 2017
Rest of Asia 27%
Customer 43% Hong Kong loans and advances +22% 129 105 18% ASEAN4 12% China
1. Adjusted performance 2. Reported results 3. Internal MI aligned to reported results 9 4. ASEAN comprises Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam GB&M Asia: GB&M Asia positioning Diversified client base – balanced mix of corporates and financial institutions
Asia booked client revenue1 mix, 2017
Corporate segments % of client revenue1 Consumer & Retail Product distribution2 from corporates2 Capital Goods & Automotives HSS Telecoms, Media & Technology GTRF Real Estate Corporates Transport & Logistics GB c.50% Financial Sponsors Infrastructure GLCM Oil & Gas Conglomerates Chemicals Healthcare Power & Utilities Metals & Mining GM Financial Institution segments3 % of client revenue1 Product distribution2 from financial Banks GB Financial institutions Asset Managers & Pension Funds Institutions Insurance HSS c.50% Hedge Funds Securities & GFCs GM Governments & Public Sector Central Banks & Monetary Authorities GTRF GLCM AM GB&M Asia
1. Client revenue differs from reported revenue. Sourced from HSBC internal client MI 2. Excludes segment / product revenue which contributes less than 2% of total client revenue 3. Financial Institution segment includes Institutional Client Group clients 10 GB&M Asia: GB&M Asia positioning Product breadth – top 3 ranked products drive c.90% of revenue
Revenue by product with market ranking (Asia ex-Japan)
100% c.60% League tables1 2017 rank FX 1 DCM 1 GLCM 1 HSS 1 GTRF 1 Rates 2 Syndicated lending 3 c.30% Credit 3
c.10%
2017 #1 #2 and #3 Outside top 3 No market share available
1. Sources: GLCM and GTRF (Oliver Wyman, September 2017. 2017 APAC rank based on 2016 revenue data. 2016 APAC rank based on 2015 revenue data). HSS (EY, March 2018. Note: Estimated Asia Pacific rankings based on AUC data provided by HSBC and Tricumen. Refer to definitions in the Appendix for explanation on the EY methodology). FX, Rates, and Credit (Coalition, FY 2017. Asia Pacific excluding Japan. Peer group comprises the Coalition Index: BoAML, BARC, BNPP, CITI, CS, DB, GS, HSBC, JPM, MS, SG and UBS. Rankings are based upon HSBC’s product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn). 11 DCM (Dealogic, 2017 Fee Ranking. Asia Pacific excluding Japan & Chinese Onshore DCM). Syndicated Lending (Dealogic, 2017 Fee Ranking. Asia Pacific excluding Japan) used as a proxy for total Credit and Lending revenue. GB&M Asia: GB&M Asia positioning International connectivity – our network drives c.70% of GB&M Asia client revenue1
Asia booked client revenue1 by client region Asia booked GB&M cross-border client revenue1 by product 2017 2017 c.50% of GB&M Asia cross-border 1 1% client revenue is 3% 1% driven by 18% Transaction 19% 22% Banking products c.70% cross- 21% border
7% 25%
c.30% 28% domestic 32% 23%
Latin America Europe GB GLCM HSS MENA Intra-Asia GM GTRF Others North America Asia domestic
1. Client revenue differs from reported revenue. Sourced from HSBC internal client MI 12 GB&M Asia: Client and business strategy Client-centric approach enables us to serve our clients with more products in more countries
Client-centric approach Asia-managed client revenue3 multiplier by type of products 2017, revenue multiplier vs. type of products >10x
Securities Financing & Global Services Advisory Trade & Receivables Global 1 Finance Relationship Banker c.4x Collaboration Lending Client 1x
Asset Global Type of products <4 4-6 >6 Management2 Global Liquidity & Markets Cash Client Management c.35% c.40% c.25% distribution
Change from 2015 c.-5% - c.+5% (percentage points)
1. Managed by Commercial Banking 2. Managed by Retail Banking and Wealth Management 3. Client revenue differs from reported revenue. Sourced from HSBC internal client MI 13 GB&M Asia: Client and business strategy Leverage product strength in Hong Kong to serve our international clients
League table (Hong Kong)1 Growth initiatives
2016 rank 2017 rank 1 FIG: leverage Financial Institution client base to grow revenue M&A #6 #1 Financial sponsors: grow market ECM #5 #3 Sector share of large-scale financings and associated event fees DCM #1 #1 Technology: grow market share across event and transaction banking Syndicated lending #1 #1
2 Key awards DCM: maintain leadership position Syndicated loans: top 3 market share in Euromoney Awards for Excellence 2017 Asia Product Asia's Best Bank M&A: leading China outbound advisory and retain leadership in Hong Kong Hong Kong's Best Investment Bank ECM: achieve top 3 position in Hong Asiamoney Banking Awards 2017 Kong and ASEAN
Best Corporate and Investment Bank in Hong Kong
The Banker Deals of the Year 2017 3 Grow business in the Pearl River Delta
Bonds – Corporate – CK Hutchison EUR2bn dual-tranche Invest in ASEAN to grow market share issuance and improve returns Geography Capital Markets FIG – DBS USD750m AT1 Capitalise on the BRI Equities – Postal Savings Bank of China's USD7.6bn IPO Be the leading international bank in key network markets (e.g. Korea, Japan, Green Finance – Bank of China's USD500m green covered bond etc.) Loans – Intas Pharmaceuticals INR8.9bn loan
1. Source: Dealogic, Hong Kong ranking according to Volume. ECM / DCM and Syndicated Lending Volume based on bank bookrunner role only. 14 GB&M Asia: Client and business strategy Corporate example – our international network enables us to build stronger client relationships
>40 31 30 17 years of countries countries countries banking with banking with GLCM with GTRF relationship relationships business business
Debt financing in 2017 7 Bond issuances in 2017
HSBC acted as Global HSBC acted as Joint Coordinator and Physical Bookrunner and Joint Lead Bookrunner for Wind Tre Manager for issuances S.p.A. across the Cheung Kong €10.7bn refinancing Group for CK Hutchison, CK comprising of €7.3bn Assets, CK Infrastructure, equivalent of High Yield HPH Trust. issuance, €3.0bn TLA and Raised over c.USD5.9bn €0.4bn RCF equivalent in the form of Reg Largest high-yield bond sale S, 144A and hybrid by a European Company in HQ, Hong Kong perpetual. 2017 Wind Tre S.p.A. is a combined business of 3 Italia and WIND, a 50/50 JV between CK Hutchison and VEON Ltd.
HSBC coverage of Cheung Kong Group
15 GB&M Asia: Client and business strategy Corporate example – our broad product offering and international network enables us to support clients in their expansion
Product penetration Geographic penetration Type of products1
100% 8
4
Before 2014 Added 2014-16 2 Added 2017 2015 2017 (mainland China, Hong (Japan, Malaysia, (India) Kong, Vietnam, Singapore) USA)
1. HSBC internal client MI 2. Accumulated type of products offered between 2015-2017 16 GB&M Asia: Client and business strategy FIG example – our client-centric approach and breadth of product capabilities enables us to meet basic to sophisticated client needs
Client needs matched with product solutions
Strategic analysis of funding and Sophisticated MLA for balance sheet CLSA’s next structure club loan Led CLSA’s first club loan Implemented FX Solutions Client for G10 Provided currencies 16 needs committed and countries uncommitted with a loans to CLSA Implemented banking liquidity relationship solutions Relationship Basic only with HSS in China
Pre-2011 Current
Time
17 GB&M Asia: Client and business strategy Transaction banking capabilities continue to drive revenue growth
GB&M Asia – revenue performance1 Industry – revenue outlook2 Growth initiatives
2016 2017 2017E 2020E Focus Real Time Payment Systems, mobile payments and collection tools, solutions for liquidity management and corporate and virtual GLCM +22% cards Transaction +4% Introduce digital mobile applicationsBanking Innovation lab in Singapore in collaboration with Monetary Authority of Singapore, FinTechs and Corporates to develop next-generation digital solutions
HSS Invest in Funds Services products and +12% +8% platforms Enhance offering to cover multi-asset classes (e.g. ETF, alternatives) Increase investment in digital, data and analytics
Dedicated expertise in solution structuring and GTRF implementation to support complex global needs across supply chain and receivables finance +9% +4% Enhanced Financial Institutions proposition across Asia Pacific Specialised Client Service team to support clients and provide technical advisory service
1. Adjusted performance 2. Source: BCG, Wholesale Banking and Global Markets, March 2018 18 GB&M Asia: Client and business strategy Enhanced capabilities in China to accelerate revenue growth
League table HSBC Qianhai Securities – enhanced capabilities
Current Future 2016 Market share 2017 Market share
1 RQFII 52% 53% Underwriting and Sponsoring Financial Advisory4 Licence Brokerage Trading4 QFII 1 35% 36% offering Investment Advisory (Research) Asset Management4
Achievements 27 18.5
“Best Overall Provider of Offshore RMB Products and Services” in the Asiamoney Offshore RMB Poll Winner for six consecutive years Industry addressable 19 8 13.6 4.9 wallet5, Asiamoney Country Awards 2017 – Best USDbn International Bank in China FinanceAsia Country Awards 2017 – Best Foreign Bank in China Underwriting Asset Brokerage Trading and Sponsoring Management HKEX Stock Connect Awards 2017 - Top Assets Under Depository of the Year (Custodian Bank)2 Approved Bond Connect onshore dealer A settlement bank for RMB Staff # c. 120 c. 300
First foreign bank approved as joint lead underwriter for Panda bond issuances for offshore Research c. 20 c. 400 non-financial corporates in China Interbank Bond coverage Market 3
1. Source: SAFE / CSRC website. Custodian market share in terms of total approved QFII / RQFII quota. 4. Subject to regulatory approval 2. HKEX Stock Connect Awards for 2017: Top Assets Under Depository of the Year – Custodian Bank, Top 3 Custodian Participants according to 5. Source: Securities Association of China, based on 2017 figures their assets under deposit with Hong Kong Securities Clearing Company Limited, or HKSCC, under Stock Connect as of 31 December 2017 19 3. In addition to the current capabilities to act as joint lead underwriter for Panda bond issuance for foreign financial institutions and sovereigns. GB&M Asia: Conclusion GB&M Asia franchise is well-positioned for growth
Well positioned for growth…
1 Proven financial performance Opportunities in Asia
The engine of world 2 growth Diversified client base
The fastest revenue 3 growth in the wholesale Leading product capabilities banking industry
4 Strong international network and connectivity
5 Well-positioned to capture significant growth opportunities
20 CMB Asia
11 April 2018
Stuart Tait Head of Commercial Banking, Asia Pacific CMB Asia Agenda
CMB Asia overview
Financial performance
Key opportunities and enablers
Summary CMB Asia: Overview Serving breadth and depth of customers across Asia
CMB Asia customer segmentation CMB Asia participation model
(USD#-#) Denotes customer turnover1 # Number of customers2
Global South Korea Banking China Japan Large Bangladesh Corporate c.1.9k3 Taiwan Macau (USD500m-5bn) India Hong Kong Thailand Philippines Vietnam Mid Market Corporate 3 Sri Lanka Malaysia c.5.6k Singapore (USD50-500m) Maldives Indonesia
Business Banking Upper (USD5-50m) Mauritius Australia c.398k Business Banking Mass (USD0-5m) Corporate and Business Banking New Zealand Retail Business Banking Corporate only
1. Some local variation between segments. Excludes Retail Business Banking (managed by Retail Banking and Wealth Management) 2. Excludes Hang Seng 3. Includes non-Asia headquartered clients’ whose overseas subsidiaries have a relationship with HSBC in Asia 23 CMB Asia: Overview Each market plays a different but critical role
Incountry Inbound Outbound
Corporate revenue split between Focus areas Reported revenue domestic and cross-border2 2017, USDbn 2017, % of total corporate revenue Y-o-Y growth
Support both international and domestic customers Hong Kong 3.7 +15% 66% 25% 9% Full spectrum of clients served
6 countries1: Australia, China, India, Indonesia, Malaysia, Singapore Priority Internationally-focused 1.6 +5% 42% 29% 29% markets Selectively support SME and / or domestic customers where attractive
12 countries1: Bangladesh, Japan, Macau, Maldives, Mauritius, New Zealand, Philippines, Sri Lanka, Network 0.5 +8% South Korea, Taiwan, Thailand, 49% 33% 17% markets Vietnam
Primarily focussed on supporting the network
1. On the ground coverage supported by Relationship Managers 2. Source: HSBC internal reporting. Analysis relates to corporate client income excluding Hang Seng, which includes total income from GB&M synergy products, including Foreign Exchange and Debt Capital Markets. This 24 measure differs from reported revenue in that it excludes Business Banking and Other and internal cost of funds. In-country refers to domestic revenue (i.e. revenue booked in the client’s “home” country), and inbound / outbound refers to cross-border revenue (outbound refers to any client revenue booked outside the client’s “home” country, i.e. booked in the country of the client’s subsidiary, and vice versa for inbound) CMB Asia: Overview Broad product suite available to CMB customers, with c.13% of CMB revenue generated from products from other global businesses
Securities Services Global Liquidity and Cash Management (GLCM) Mid-Market Corporates offered the same treasury solutions as large Multi-Nationals Global Markets
Synergy products CMB products c.13% of 2017 CMB Project & Export Finance Commodity Finance reported revenue1, 10% Y-o-Y growth Dedicated resources serving CMB Global Trade and customers Receivables Finance (GTRF) Deeper product reach Comprehensive product suite into Mid Market of trade solutions providing Corporates customer flexibility Global Banking
Credit and Lending
1. Based on CMB’s proportion of revenue generated by CMB clients and shared between CMB and other Global Businesses (i.e. Global Markets, Global Banking, Insurance and Investments) 25 CMB Asia: Financial performance Delivering sustainable revenue and balance sheet growth
Select financial performance Performance highlights Reported basis CMB Asia CMB Hong Kong
USDbn 2016 2017 Y-o-Y 2016 2017 Y-o-Y Revenue growth of 12% in 2017, driven primarily by GLCM; demonstrates ability to capture Revenue 5.1 5.7 12% 3.2 3.7 15% growth opportunities across Asia
LICs (0.3) (0.3) (5)% (0.1) (0.2) (87)% Well-managed cost-base with CER Operating expenses (1.9) (2.1) 7% (0.9) (1.0) 15% at 36.0% and achieved positive jaws of 4.4% in spite of investments to Profit before tax 2.9 3.4 16% 2.2 2.5 12% position the business for future growth CER 37.5% 36.0% 28.3% 28.2%
Strong balance sheet growth with Jaws 4.4% 0.5% robust asset quality, with LICs / Advances c.20bps in 2017 Loans and advances to 129 146 14% 85 95 12% customers (net) PBT of USD3.4bn represents over Customer accounts 166 168 1% 126 125 (1)% 50% of Global CMB PBT
ADR 78% 87% 67% 75%
26 CMB Asia: Key opportunities and enablers Footprint enables capture of international connectivity opportunities
2016-17 growth in international Focus areas in capturing international connectivity client revenues1
Inter-and intra-region Greater Bay 15% 15%
Further penetrate existing Develop integrated proposition client base for customers in both Hong Kong
Regional coverage for and PRD, e.g. 2-hour express customers operating in multiple payment and cross-border markets across Asia financing requirements
Dedicated desks to service Target emerging opportunities Inbound Outbound customers from select corridors from innovative and technology (e.g. Germany) corporates 2017 composition of international client revenues1 Intra-ASEAN Belt and Road Initiative Inbound from
Enhance our offering for Collaborate with GB&M and other regions ASEAN corporates, including product partners to capture:
dedicated specialists based out end-to-end value chain of of Singapore infrastructure projects 41% 46% Intra- Asia Leverage product capability, broader overseas expansion to assist ASEAN based activities of Chinese customers customers expanding in 13% neighbouring countries Outbound to other regions
1. Source: HSBC internal reporting. Analysis relates to corporate client income, excluding Hang Seng which includes total income from GB&M synergy products, including Foreign Exchange and Debt Capital Markets. This measure differs from reported revenue in that it excludes Business Banking and Other and internal cost of funds. Inbound / outbound refers to cross-border revenue (outbound refers to any client revenue booked outside the client’s “home” country, i.e. booked in the country of the client’s subsidiary, and vice versa for inbound) 27 CMB Asia: Case study Supporting customers like VPower Group International Holdings Ltd in their expansion
As of June 2017, VPower operated 9 Distributive Company background Bangladesh Power Generation Stations across Southeast Asia’s leading owner and Hong Kong operator of distributed power Indonesia, Myanmar and generation (DPG) stations Myanmar Bangladesh, with an aggregate installed
Requiring a comparatively short capacity of 561.1 MW construction time and low investment, VPower’s DPG stations are ideal for Indonesia many countries along the Belt and Road route, where permanent energy How HSBC supported VPower Group resources are still under development
International network to provide local support as the customer enters into new Robust regional presence, and has markets formed strategic partnerships with Balance sheet to support customer’s growth ambitions some of China’s biggest players, e.g. CITIC, CRRC, China National Strong product capability
Technical Import and Export Trade finance expertise to enable the customer to bid on new projects in a timely manner Corporation (CNTIC) Digital platform to provide greater transparency over the customer’s cash and liquidity positions
Through GB&M, provide capital markets and global research coverage capabilities
28 CMB Asia: Key opportunities and enablers Market-leading GTRF capabilities well-positioned to capture further trade growth and to adapt to evolving market dynamics
Initiatives in place to maintain market-leading Trade volume in Asia is expected to grow further1 position
Merchandise trade, USDtn Imports Exports CAGR: 7% Continue to deepen penetration of GB&M and CMB client franchise 29 14 12 Defend and extend leading position in 6 15 Traditional Trade 6
2017 2030E Build and strengthen positions in supply chain finance and receivables finance, to Trade revenue from open account (supply chain finance) is expected to outpace traditional trade2 capture growing opportunities in structured trade Trade related revenue for banks, % of total
52% 36% Invest in new technologies to improve 19% customer experience and automate 15% operations 33% 45% 2014 2020E Adapt to future changes by leading in Traditional Trade Finance Supply Chain Finance digitisation of trade Payments
1. Global Insight 2. Accenture, 2015 29 CMB Asia: Key opportunities and enablers Transaction banking a core value proposition for our customers and a key revenue contributor Continued progress to further drive penetration GTRF and GLCM key contributors to CMB Asia revenue across both products
Represents c.55% of CMB Asia revenue Initiatives in place to further drive penetration in both GLCM and GTRF products: Combined Y-o-Y growth of c.22%1
Receivables finance and collection 98% of corporate clients have at least one GTRF or Enhancing proposition GLCM product; 55% have both products Account receivables / virtual account solutions Capabilities well recognised by customers and industry Supply chain finance and payment 2015 Current proposition
Asia Trade Finance rank2 #1 #1 Corporate cards and payables finance
Improving servicing and user Trade Hong Kong market share3 10.8% 13.8% experience through:
3 Singapore market share 8.6% 9.9% Consistent user experience of digital Improving capability, self servicing tools and channels techniques Cash manage- Asia GLCM rank2 #1 #1 Common / combined mobile ment capability in form of HSBCnet Mobile App
1. Y-o-Y growth within CMB Asia revenue only 2. Oliver Wyman analysis, Regional Ranking, YE2015 and YE2016 3. Hong Kong Monetary Authority statistics as of DEC15 and DEC17; Monetary Authority of Singapore, Monthly Statistical Bulletin as of DEC15 and DEC17 30 CMB Asia: Key opportunities and enablers Business Banking (BB) fundamental to capturing Asian growth opportunities
Significant opportunity in other markets to Improving capabilities to protect position in Hong Kong replicate success in Hong Kong and further capture scale in other markets
2017 Business Banking revenue contribution Scaling up dedicated coverage resources Coverage USDbn including relationship managers and product resources specialists
Hong Kong 4 Investing to simplify banking for customers Rest of Asia without needing material growth in physical branch network with BB 2 Digital platforms presence1 Refresh of Business Banking platform and and digital enhancements 0 4 Partnering with third parties to provide non- 2017 Business Banking deposits contribution financial services e.g. accounting software integration USDbn
Hong Kong 125 Connect SMEs to international opportunities Targeted propositions catering to local Rest of Asia market opportunities, such as: with BB 44 Distinctive Innovation Growth Fund to support leading presence1 offering names in the Pearl River Delta high-tech sector 0 150 Fast growth proposition in Singapore Business Banking Other customer segments
1. Other Asia markets with BB presence include China, India, Indonesia, Malaysia and Singapore 31 CMB Asia: Key opportunities and enablers Driving improvements in customer experience and operational efficiency through digital investments and innovation
Overview Example: Fast paced delivery of Digital Business Banking in Hong Kong during 2017
Direct bank feed to Digital investments and innovation to underpin AI Powered Online business Trade Transaction accounting improvements in customer Chatbot (‘Ask Amy’) connections hub Tracker software experience and operational efficiency
Strong pipeline of market- Q1 17 Q2 17 Q3 17 Q4 17 leading digital banking capabilities and solutions across Asia for customers and employees being Digital Summit Voice ID Customer pilot of delivered at pace: 2017 HSBC LinkScreen the new Business WeChat Internet Banking Digital platforms catering Notification Service Digital Onboarding to customer preference in Portal how they interact with us
Solutions to simplify and streamline core customer Leading to positive impact of digital banking on customer experience1 journeys e.g. onboarding and lending 92% 8/10 8/10 120k New value-adding Ask Amy accuracy Customer rating on Customer rating on WeChat notification capabilities being introduced new Business Internet HSBC Linkscreen to benefit customers Banking Platform in travel
32 CMB Asia: Summary Key takeaways: focused on delivering quality and sustainable growth
Well-positioned to capture Asia growth opportunities
CMB Asia highlights 1 Leverage our footprint and customer base to capture trade and financial connectivity opportunities
Customer centric model with a deep customer 2 base Provide best-in-class transactional banking capabilities to support customers’ working capital and trade needs
Unparalleled footprint 3 Offer extensive breadth of products from across the Group to further deepen and develop relationships in CMB, including with Business Market leading product Banking customers capabilities
4 Track record of delivering Continue to deliver prudent risk management and embed financial crime growth risk management
5 Invest for growth and improvement in customer experience and processes whilst maintaining cost discipline
33 Digital for Corporates
11 April 2018
Niall Cameron Head of Corporate & Institutional Digital Digital for corporates Why digital is important
Increased revenue
USD2.3bn Customer Digital investment between Business satisfaction efficiencies 2015 and 2017
Cost savings
35 Digital for corporates Corporate and Institutional digital
Set up in July 2016
Team covers Commercial Banking and Global Banking and Markets
Our Programmes Digital Transformation for Corporates (DTC)
Digital for Global Markets Best SME Banking Services Award February 2018: ET Net FinTech Awards Best Bank for a Mobile Treasury Solution AwardJanuary 2018: Financial Innovation Awards – tmi Digital Business Banking Customer-Focused Cultural Transformational Prize December 2017: Financial Innovation Awards - London Institute of Banking and Finance Best Business Online Banking Provider, Moneyfacts, March 2028..
36 Digital for corporates Our digital principles
We are client- We iterate at We are future- led pace proofing
We are efficient We seek out because simplicity we collaborate
37 Digital for corporates Our 2017 footprint
128,000 USD200bn global authorised 53 clients USD9tn of since 2011 transactions each year 48
87 million instructions each month USD5tn of transactions 67 each year
38 Digital for corporates Digital for corporates - video
39 Digital for corporates Growth journey
2017 +17% customers 2017 +25% customers 2017 +118% overall $ authorized +25% users +35% files processed per +364% payments +35% transaction month made volumes +41% +215% +38% transaction instructions per downloads of values month app +29% transaction +150% values transaction value of payments 2015 2015 2015 HSBC HSBCnet Mobile Connect
40 Digital for corporates Key DTC1 initiatives
HSBCnet New UI Move Money HSBCnet Track Payments Import Documentary Credits
HSBC GTRF Trade Transaction Tracker End To End Visibility Tracker Get Rate & Quick Quote ConnectTransformation
1. Digital transformation for Corporates 41 Digital for corporates Client innovation
Client innovation Pivot to revenues
Podium Alerts MyDeal
GoldenSource
42 Digital for corporates Digital information
Internal Internal & External External
Digital Marketplace DigitalDownload net Plus
43 Digital for corporates FinTech partnerships
Heckyl Tradeshift
Silobreaker Kyriba
44 Digital for corporates In summary
Combining the strength of digital with the power of our Catalysing transformation global network
Expertise – we have the Competitive advantage – knowledge, skills and being first experience to create and deliver more
The future
45 Panel discussion and Q&A on collaboration
11th April 2018
Matthew Lobner Head of International and Head of Strategy and Planning, Asia-Pacific
Gordon French Head of Global Banking and Markets, Asia-Pacific
Kevin Martin Head of Retail Banking and Wealth Management, Asia-Pacific
Siew Meng Tan Head of Global Private Banking, Asia-Pacific
Stuart Tait Head of Commercial Banking, Asia-Pacific Panel discussion - Collaboration Collaboration remains core to our strategy
What is collaboration? Bringing HSBC’s end-to-end franchise, across four global business to our customers
Benefits of RBWM provides payroll and banking GB&M helps CMB clients with FX, collaboration services to employees of CMB / derivatives hedging and gaining GB&M clients access to Debt / Equity markets Best outcomes for our customers
Sustainable revenue growth for HSBC
More durable client relationships with better returns
Enables us to bring more of HSBC, to more customers
RBWM provides Insurance and GPB fulfils Private Banking needs of Asset Management products to owners / senior management of CMB / GPB clients GB&M clients
47 Panel discussion - Collaboration Material contributor to revenue – c.USD6.4bn
Revenue synergies, Asia, USDbn Key observations Note: Revenue from collaboration captured as “revenue synergies”
18%
6.4 Revenue generated from Revenue synergies booked in separately managed operations Asia accounts for c.54% of 5.4 (Securities Services, Asset global revenue synergies (USD11.8bn, FY 2017) 2.7 Management and Life Insurance In-business Manufacturing) that are reported 1 2.2 synergies within a global business line1 Revenue synergies in Asia grew 18% Y-o-Y, faster than global revenue synergies Revenue generated from providing growth (13% Y-o-Y) and overall Cross-business 3.2 3.7 products from one global Asia reported revenue growth synergies businesses to the other 3 global (11% Y-o-Y) businesses – e.g. FX solutions (from GM) to CMB / RBWM / GPB 2016 2017 customers
1. Revenue from Asset Management products to GB&M, CMB and GPB customers that are included in cross-business synergies are excluded from manufacturing revenues in in-business synergies 48 Panel discussion - Collaboration Collaboration: Bringing this to life through a client example CLIENT EXAMPLE
Products / services Evolution of relationship provided by HSBC Client overview over past 12 years
CMB: Agile Group – Integrated Credit & Lending: Offshore conglomerate & onshore loan • HY bond principally engaged • Bi-lateral GB&M: in property loan • Convertible development Syndicated • Interest rate bond GLCM: Core offshore HY bond loan swap • Bi-lateral loan operating bank Headquartered in DCM: Led all offshore Hong Kong and bonds issuances mainland China 2006 2007 2009 2011 ECM: Hong Kong IPO of A- Living Services Presence in mainland China, Global Markets: For Malaysia and US • HY bond managing liability FX risk • Bi-lateral loan • Syndicated (JV) • Syndicated loan CTLA: Trustee for offshore bonds loan • RMB / USD • HY bond A-Living HSBC relationship • Perpetual hedging • Bi-lateral Services spin-off RBWM & GPB: in Hong Kong, bond contract loan IPO mainland China and RBWM: Banking services to Malaysia top executives
Global Private Banking: Global turnover of 2012-15 2016 2017 2018 Family office of controlling c.USD7.9bn (2016) shareholder
49 Panel discussion - Collaboration Cross-business synergies - GB&M and CMB
GB&M revenue synergies1, Asia CMB revenue synergies3, Asia USDbn USDbn
16% 2.3 2.0
In-business 1.0 0.9 5% synergies (HSS) 0.9 1.0 GLCM, GTRF solutions 1.1 1.3 GB&M products to GB&M clients to CMB clients
2016 2017 2016 2017
Key drivers of cross-business revenue synergies Key drivers of cross-business revenue synergies
Global Liquidity and Cash Management solutions2 Global Markets products (e.g. FX, derivatives)
GTRF solutions from CMB Global Banking solutions to CMB clients
1. This excludes Asset Management products to GB&M clients which form part of overall GB&M enabled synergies; which is covered on page 5. 2. Includes GB&M portion of GLCM revenues as revenue synergy to be consistent with the treatment of GTRF. 3. This excludes Asset Management and Insurance solutions to CMB clients, and referrals between GPB and CMB, which form part of overall CMB enabled synergies. These are covered in pages 51 and 52. 50 Panel discussion - Collaboration Cross-business synergies - RBWM perspectives
RBWM revenue synergies, Asia GM products for RBWM investment solutions USDbn What do we offer? Investment products and execution via GM (spanning Equities, FX, 25% Structured Products) 2.9 Examples of collaboration? Joint 2.3 implementation of “Flexrate technology” for In-business 1.7 1.3 FX to enable better execution, pricing, etc. synergies1 Opportunity areas? Digitise Wealth solutions, Cross-business 1.0 1.1 sophisticated solutions for Jade clients synergies2
2016 2017 Payroll products to CMB and GB clients
What do we offer? Payroll and banking services to Corporate Key drivers of cross-business revenue synergies employees GM products to RBWM customers for investment Examples of collaboration? Payroll Programme (Perks@Work) in Asset Management and Insurance solutions to other Businesses Malaysia supporting Chinese companies with GB / CMB relationship
Opportunity areas? Deepen penetration, expand services leveraging Other areas of revenue synergies (not captured above) digital capabilities Payroll products to CMB and GB clients
1. Revenue from Asset Management and Insurance Manufacturing. Revenue from Asset Management products to GB&M, CMB and GPB customers that are included in cross-business synergies are excluded from manufacturing revenues in in-business synergies 2. GM products to RBWM customers and Asset management and Insurance solutions to GB&M, CMB and GPB. 51 Panel discussion - Collaboration Cross-business synergies: GPB perspectives
GPB revenue synergies1, Asia 68% (USD5.2bn) of Net New Money (NNM) in GPB Asia from referrals USDbn % of total GPB NNM from referrals by Global business, Asia, 2017 68% 32% 20% 30% 0.23 17% 0.17 GB&M CMB RBWM Total Referrals between GPB % of total new and other businesses relationships 2% 28% 40% from referrals
2016 2017 Client examples
Example 1: Example 2: Senior executive of a Hong Joint pitch across RBWM Key drivers of revenue synergies Kong listed company and GPB to a large UHNWI Referrals from GB&M, CMB & RBWM banking with CMB for more client from mainland China than 10 years and Leveraging PB product GB&M products to private clients subsequently referred to specialists Provision of CMB banking solutions for GPB GPB Client brought in c.USD50m entrepreneurs Current AUM with PB is AUM (leveraged by a c.USD0.5bn further c.USD20m)
1. GPB enabled synergies includes Asset Management and Insurance solutions to GPB customers which has also been covered on slide 50 52 Panel discussion - Collaboration Summary: Collaboration remains a key growth priority
Sizeable contributor to HSBC Distinctive capabilities to Asia Revenues deliver collaboration Key priorities
Relationship-led approach, Seamless customer 6.4bn Revenue synergies in Asia starting from client needs experience across products (USD), FY17 and propositions Wide spectrum of corporate clients in Asia Product specialists embedded in the network Extensive capital markets product range Mainland China (e.g. greater Share of Asia in global revenue synergies, FY17 leverage of Qianhai securities) 54% Depth of Corporate banking franchise (e.g. c.400k End-to-end supply chain Business Banking / MME coverage clients in Asia) Employee banking (Your Universal banking model Financierge) Y-o-Y growth in revenue 18% (e.g. 12.5m retail banking synergies in Asia, FY17 clients in Asia) Digital enablement
53 India
11 April 2018
Hitendra Dave Acting Chief Executive and Head of Global Banking and Markets, India India: Introduction Key messages
1 Stable macro story
2 HSBC India’s heritage and business presence
3 Material opportunity for HSBC in the market
4 Strategy for growth in India India: Macroeconomic update Stable macro story
Key Indicators1
GDP USD 2.26 tn
External debt / GDP 21%
FX reserves / GDP 19%
Fiscal deficit / GDP 3.50%
Exports (2016-17) USD 275 bn
Remittances + Net service exports USD 112 bn
Current account deficit / GDP 1 – 2%
Local debt / GDP 63%
Inflation (CPI) 2 4 – 6%
Savings rate 32%
1. Source: HSBC Research, Bloomberg 2. CPI: Consumer Price Inflation 56 India: Macroeconomic update Impact of macro stability
Robust growth in FDI1 – 2017 highest across EMs Policy support provided USDbn 1. FDI and portfolio investor reforms
40 43 36 2. Digital JAM trinity – Jandhan, Aadhar and Mobile 31 24 22 3. ‘Make in India’ initiative
4. Modern bankruptcy law
FY13 FY14 FY15 FY16 FY17 Apr- 5. Goods and Services Tax platform Dec17
Other key impacts (2017) 2 Challenges needing resolution
India largest recipient of remittances, globally Banking sector stress (USD66bn) Overleveraged private sector balance sheets Portfolio investment inflows – USD31bn Muted private sector capex Equity market fund raising – USD31bn Low tax to GDP Offshore fund raising (bonds) – USD19bn Relatively low average purchasing power Inbound M&A transactions – USD67bn Infrastructural bottlenecks
57 1. FDI: Foreign Direct Investments. Source: DIPP, Ministry of Commerce, India. FY: Financial Year ending 31March. 2. Sources: Remittances – World Bank, Portfolio flows – NSDL, Equity fund raising – Dealogic, Prime database, Offshore bonds and Inbound M&A: Bloomberg India: Introduction to HSBC 165 years of presence
Full suite coverage4; 26 branches across 14 cities Rich heritage
26% of new Foreign Portfolio Investors (FPIs) registered in 2017
7% of India’s FX is traded by HSBC (SPOT FCY–INR) Asia’s 2nd branch outside Hong Kong & Shanghai 2018 - #1 Trade Finance 6% of India export trade flows handled by HSBC Bank – India 2% of India’s electronic payments3 2017 – Best Cash Management Bank - India #1 wealth manager by average value of systematic investment plans in Banking mutual funds Pioneer role - first ATM in 1987 to UPI (Unified Key strategic focus areas Payment Interface for mobiles) in 2017 International Corridors – US, UK, China & Germany
MNCs and their ecosystems – supply chain and employees 2017 – Best Mobile Treasury Solution - Mass-affluent proposition and NRI client-base India
4 Other highlights Part of regulatory committees and shareholder in key #1 in inbound M&A last 5 yrs. #3 foreign bank in IPOs since 2011 Investment Banking market infrastructures such as NSDL, CCIL and NPCI1 2nd largest wholly-owned foreign asset manager (AUM) with Asset Management mandate of sovereign provident fund (EPFO)
Global Resourcing & Technology 2 7 cities with 11 centres and c.36,000 staff
1. NSDL: National Securities Depositories Ltd, CCIL – Clearing Corporation of India Limited, NPCI – National Payments Corporation of India 2. Global Resourcing & Technology comprises of Service centres and Software development centres providing operational support and technology transformation to HSBC Group 3. Electronic payments include NEFT, RTGS, UPI, ACH, CTS and IMPS platforms; Source: RBI 58 4. Market share and ranking sources: FPI: SEBI, FX: RBI, Exports: Ministry of Commerce, Payments – RBI, Investment Banking: Bloomberg & Prime, Asset management.: AMFI: Life Insurance: IRDA; Wealth management: CAMS MFdex India: Financials HSBC India - a consistent contributor to Group
c.4-5% consistent PBT contribution to Group1 Contribution across metrics
PBT contribution to Group 5% 4% 4% 4% 3% 4% 4% 10% 5% India Group1 916 813 809 743 679 653 700 606 374 LICs / (0.2)% 0.2% Loans %
2009 2010 2011 2012 2013 2014 2015 2016 2017 A/D 68% 71% Contribution by global business2 Ratio % Reported PBT USDm1
2016 2017 GB&M CMB RBWM Jaws %3 2% 1% 355 362 355 305 255 205 159 123 155 63% 68% 105 CER % 55 15 21 5
% of Group total by 6.5% 6.7% 2.0% 2.4% 0.3% 0.4% Global Business 17,167
1. Source: HSBC Group Annual Report 2017. 2017 Reported PBT for Corporate Centre USD374m (2016- USD240m) 2. India Global Businesses excludes GPB as business wound down in 2016-17 3. Adjusted basis 59 India: Financials Peer comparison
Profit before tax Commentary
USDm Diversified base of multinational clients – 954 891 Europe, US and Asia 615 592 523 Opportunity to leverage retail franchise 173 Risk management reflected by low and FY16 FY17 FY16 FY17 FY16 FY17 stable LICs (Gross NPAs) Bank 1 HSBC Bank 3 Y-o-Y -2% 7% 18% 18% -76% N/A2 Growth% Consistent positive jaws
Leadership position in FX , transaction Gross NPA3 (31 March 2017) Jaws (31 March 2017) banking and inbound M&A
USDm 1671 % 1238 15.4
9.9 1• Maintain leadership in wholesale business
131 138 133 129 0.2 2• Focus on Retail growth opportunity FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 Bank 1 HSBC Bank 3 (4.9) (4.9) 3• Capture greater share of MNC ecosystem Y-o-Y 10% -2% 6% 7% 63% -26% Growth% (9.6) Bank 1 HSBC Bank 3 4• Maintain cost prudence and credit quality
1. Source: Reserve Bank of India, India financials based on local regulatory reporting / Indian Accounting Standards for the year ended 31 March 2017. HSBC represents India branches of the Hongkong and Shanghai Banking Corporation Ltd. 2. Small base for Bank3 PBT for FY16 given significant LICs. 60 3. Gross Non Performing Assets – RBI accounting terminology for impairments India: Financials Performance metrics
Key financials1 2 USDm 2017 2016 Balances composition , December 2017
2017 Loans and advances to Customer accounts Growth % customers (net) 2,397 Revenue 18% 20% 2,026 25%
916 Profit 23% before tax 743 80% 75%
Highlights
PBT growth across all entities 13,228 Customer 17% accounts 11,289 Liabilities franchise a key priority Wholesale assets self-funded Loans and 9,066 advances to 6% Retail growth not impacted by branch rationalisation customers 8,555 (net) Revenue growth trajectory despite interest rate decline (200 bps since January 2014)
1. All figures inclusive of India Global Service Centres (GSC) and HSBC Technology Services (HTS) 2. Retail represents RBWM, Wholesale represents GB&M and CMB 61 India: Opportunity and Strategy Opportunity for HSBC in India
Corporate Retail
FDI tailwind Rapid growth in affluent Indian population
Outbound India Inbound investments by Non Resident Indians
Indian capital markets Corporate employee proposition
Growth of MNCs Underleveraged consumers
Ecosystem of large corporate clients Growth in digital payments
India: a $5tn economy by 20251 Products . Franchise
Digitisation of corporate payments Balance sheet strength
Acquisition plans of global companies Corporate business model
Rise of the global Indian citizen and their banking Leading banker to the affluent segment needs Well recognised brand in India across segments Historically low credit spreads for Indian paper
1. Govt of India- Ministry of Commerce; World Economic Forum 2018 62 India: Opportunity and Strategy India strategy: maintain wholesale banking leadership, and grow retail franchise
Objective Drivers Strategy 1 Grow key international corridors: US, UK, China and Germany Increasing FDI and long-term investor interest Leadership in Maintain leadership in transaction banking - trade and cash management international banking (GB&M ‘Make in India’ initiative and CMB) Achieve leadership in sustainable financing
Leverage balance sheet strength Use global network to support Indian MNCs
2 Regulatory obligations for ‘Priority Build a material supply-chain financing business Sector Lending’ Grow Business Banking Upper Growing supply chain ecosystems Penetrate suppliers and distributors anchored around existing clients segment Credit demand in small and medium enterprises Leverage technology for growth - scorecard based lending
3 Growing retail mass-affluents and Realise benefits of branch rationalisation and streamlining wealth opportunity Retail opportunity Expand Retail digital proposition, focus on unsecured lending Digital India – geographical reach no longer limiting factor Launch Retail Business Banking and Wealth suite for Premier-Top Tier proposition
4 Rapid growth of mobile internet Accelerate digital investments: key launches scheduled for 2018 Digital leadership Digital India – level playing field Invest over 2018-20: track roadmap for execution to be leading digital foreign bank
63 India: Conclusion Key messages
1 Stable macro story
2 HSBC India’s heritage and business presence
3 Material opportunity for HSBC in the market
4 Strategy for growth in India
64 Australia
11 April 2018
Martin Tricaud Chief Executive Officer, Australia Australia Agenda
Key messages
Overview of the operating environment
HSBC position in Australia
HSBC Australia financials
HSBC strategic priorities
66 Australia: Key messages Key messages
1 Strong macroeconomic fundamentals. 26 years of continued GDP growth and robust demographic growth1
2 Australia’s strong international connectivity positions HSBC well for future growth. 71% of Australian exports go to Asia and half of Australia’s population growth is driven by inward migration2
3 Grow assets, revenues and returns, while increasing market share across our global businesses
4 HSBC Australia universal banking model: a credible alternative to the domestic banks
1. Source: Australian Bureau of Statistics 2. Australian Government - Department of Foreign Affairs and Trade 67 Australia: Overview of the operating environment Macroeconomic highlights
One of the world’s longest GDP booms Australia has just recorded 26 years of continuous GDP 3.9 growth without a technical recession, one of the world’s 3.2 longest booms 2.8 2.7 2.6 2.5 2.6 Much of that has been driven by Australia’s exposure to 2.2 2.4 Asia: 71% of exports go there, more than any other GDP1, % OECD country Navigated the end of the mining boom with commensurate growth in construction and services 2011 2012 2013 2014 2015 2016 2017 2018F 2019F Australia’s political and economic stability and relatively strong capital returns make it a top destination for FDI
4.25 2018 macroeconomic outlook 3 Rising global demand for exports of energy commodities, Central 2.5 2.5 2.25 high-quality food products, and tourism and education 2 1.75 Bank policy 1.5 1.5 GDP growth to be the most broad-based across regions 1 rate , % and industries in more than a decade Unemployment rate to fall to ‘full employment’ level (5- 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 5.25%), supporting a pick-up in wages growth RBA should lift its cash rate in 2018, with a first hike expected in Q4 3.3 Challenges 2.4 2.5 2.3 2.5 1.8 1.9 Although Australia’s housing construction boom is Inflation1, % 1.5 1.3 ending, we expect the drag to be more than offset by an overall pickup in investment We see house price growth slowing in 2018, after a five- year boom. However, we do not expect significant price 2011 2012 2013 2014 2015 2016 2017 2018F 2019F falls
1. Source: HSBC Research; Australian Bureau of Statistics; Reserve Bank of Australia 68 Australia: Overview of the operating environment - macroeconomic trends Asian countries account for 71% of Australia’s merchandise trade; China is lead trade partner, accounting for 28% of overall trade
% of region total Australia total merchandise trade (exports+imports) by key corridors, 2016 % of global total Value, AUDbn
Trade with Europe Germany 16.2 21% UK 14.0 19% France 6.8 9% Trade with NAFTA Europe 75.6 13% Trade with Asia-Pacific USA 42.7 86% Canada 3.8 8% China 157.2 39% Mexico 2.9 6% Japan 62.9 16% South Korea 35.5 9% NAFTA 49.4 9% India 19.6 5% Thailand 18.0 4% New Zealand 16.5 4% Malaysia 16.3 4% Trade with MENA Singapore 14.1 4% UAE 5.0 38% Hong Kong 13.8 3% Saudi Arabia 2.0 15% Taiwan 13.1 3% Turkey 1.7 13% Indonesia 11.1 3% MENA 24.2 2% Vietnam 9.1 2% Asia-Pacific 401.7 71%
Source: Australian Government – Department of Foreign Affairs and Trade 69 Australia: Overview of the operating environment Australia’s banking sector is one of the most attractive amongst the developed countries in Asia
2016 banking ROEs in developed markets in Asia1 Commentary
Australia’s banking sector is one of the most mature and competitive in Asia, but 15.2% at the same time providing strong growth and good returns 13.2% The country’s banking sector has been growing steadily, with bank profits increasing at a CAGR of 7.0% from 2005 to 20152, higher than other developed 9.8% countries in Asia 8.8% Banks in Australia have generated attractive ROEs and the market is one 7.2% the highest amongst developed markets 5.9% in Asia at 13.2% in 2016
2 Australian banks are among the top 20 banks in the world; Commonwealth Bank (CBA) and Westpac Bank (WBC) are ranked 10th and 17th largest banks in the world by market cap in 20173
Hong Kong Australia Singapore Taiwan South Korea Japan
1. Bloomberg, ROE based on weighted average ROE based on market capitlisation. 2016 FY year end data used 2. Mckinsey Asia-Pacific Banking Review 2016 3. Bloomberg, BanksDaily, as of APR17 70 Australia: HSBC’s position in Australia HSBC in Australia Key facts and figures
1965 HSBC branches and offices 40 across Australia Brisbane HSBC started Northern operations in Territory Australia Queensland
Western Australia
South Australia Universal Banking Model Sydney 1986 New South HSBC serves both retail and wholesale clients Wales through its four global businesses Australian Capital HSBC was awarded Territory Retail Banking and Wealth Perth Adelaide Victoria a commercial Commercial Banking banking licence Management Melbourne Canberra Global Banking and Markets Private Banking Tasmania
Full suite of products and services RBWM GB&M / CMB GTRF1 GLCM1 Research
Credit & debit cards Credit & Lending Export & Import Services Collection Products Debt Research Digital wallets Debt Capital Markets Receivables Finance Liquidity Management FX Research Home loans, personal Term Loan Supply Chain Finance Corporate Cards Economic & Investment loans Project & Export Finance Guarantees / Standby Letters Payment Products Strategy FX business M&A and Corporate Advisory of Credit Account services Transaction banking Loan Syndication Commodities & Structured Other Leverage & Acquisition Finance Trade Finance • Institutional asset Forex, Forex Options management Rates (incl. govt and interest rate derivatives) • Private Banking Credit (incl. corporate bonds, convertibles) Commodities
1. GTRF and GLCM products available to GB&M and CMB clients 71 Australia: HSBC’s position in Australia Competitive landscape remains dominated by domestic banks; HSBC is one of the largest foreign banks
Australia banking industry market share Commentary Challenges faced by competitors 2017 Slowing demand for housing credit (highly leveraged households, tightened regulatory conditions on banks) Market share Rank This has a much more profound impact on the majors5 who have large market shares (combined 81%) and historically less stringent credit policies compared to HSBC Australia Asset under custody for foreign st 1 75% 1 clients Regulatory pressure
Adverse media coverage and public opinion challenges Trade bank – Institutional2 16.7% 2nd Trade bank – Corporate2 17.5% 3rd Why HSBC has a distinct advantage International Debt Capital Global connectivity, especially into China and ASEAN countries 3 11.24% 1st Markets issuance HSBC’s global network is key to being the leading international bank in Australia Wholesale loans4 2.0% 7th Customers utilise HSBC’s capabilities and expertise across treasury / liquidity management, working capital and supply chain financing, GLCM2 8.0% 5th capital raising, retail and private banking
HSBC has a relatively small market share in housing loans (circa Retail deposits4 1.6% 9th 1%) but is growing significantly As at DEC17, HSBC grew 14% in housing loans Y-o-Y and 27% in owner occupied housing loans. HSBC has grown faster than any of Mortgages4 1% 11th our competitors (both local banks and internationals)6
Global and domestic investment in financial crime risk management Credit cards4 2.2% 6th capabilities and regulatory compliance leave us well positioned to adapt to the evolving regulatory landscape
1. Source: ACSA - Australian Custodial Services Association 5. CBA, NAB, ANZ and Westpac 2. Source: East and Partners 6. Underlying growth % are based on AUD balances sourced from APRA 3. Source: Bloomberg: DCM issuance 2016-2017 72 4. APRA Australia: HSBC’s position in Australia HSBC has consolidated its position as the “fifth commercial bank” as well as being recognised as the “leading international bank” in Australia1
Selected achievements
of the affluent market has a DCM house between 2016- 2017 for international bonds Retail relationship with HSBC; 28% DCM6 issued by AU / NZ 2 consider HSBC their “main customers 6% 1st borrowers. In 2012, we were bank” #10
system growth 2017. AUD1bn in mortgage Retail asset Loan Loans Bookrunner between applications since re-entering 2016-2017 for AU / NZ Loans. growth3 syndication7 2.7x broker channel with Aussie in 5th In 2012, we were #14 June 2017
Assets under custody, with 20% total market share; 75% ranked in Australia behind the 4 8 GLCM4 HSS AUD1.4tn 5th Majors penetration of cross border flows
share of mind for both Brand most improved company in 5 Australia for brand advocacy in GTRF corporates and institutions for advocacy9 9th 1st trade finance 2017
1. Peter Lee Associates 6. Bloomberg: DCM issuance 2016-2017. 2. RFI Research, Jan 2018. Affluent defined as households with >AUD150K pa 7. Bloomberg: Loan Syndication 2016-2017 3. APRA 8. Source: ACSA - Australian Custodial Services Association 73 4. East & Partners, H1 2018 9. YouGov BrandIndex Australia Top 10 Brand Advocacy Improvers 2017 5. East & Partners Trade Finance Market Analysis 2017 Australia: Financial performance Financial performance1
Key financials USDm 2017 financials by global business
2017 2016 2017 Growth 6% 37% 28% 30% Adjusted 892 8% 3% revenue 868 Revenue PBT Loans 45% 50% 20% 21% 25% 30% Adjusted 409 PBT 380 8% RBWM CMB GB&M Corp Centre
Achievements Loans and 26,852 Strong asset growth across all businesses in 2017: advances to 26% customers 21,387 Retail (RBWM) asset balances up USD1.5bn or 13% Wholesale (GB&M and CMB) loans and advances growth up USD4.0bn or 42% Customer 20,212 Low LICs reflective of strong credit quality accounts 19,513 4% CER is stable and managed within high 40s / low 50s
HSBC Australia has a balanced portfolio with its retail and wholesale businesses contributing to sustainable revenue Key ratios (2017) growth
2017 growth highlights: CER 52% LICs / 0.1% Advances – Retail double digit growth in NII. Revenue growth 12%.
– CMB generated revenue growth of 13%.
– Global Banking revenue growth of 7%. 1. All financial performance on an adjusted basis – excluding significant items & foreign currency translation – a reconciliation to reported results is shown in the appendix 74 Australia: Financial performance Customer lending / credit quality
Customer lending1 90 days past due / Gross Loans3 USDm USDm
26,852 0.5 21,387 0.4 Loans and 0.3 advances to customers 0.2 0.1 0.0 2016 2017 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17
Market 0.9% 1.0% HSBC Major Domestic Peer 3 share 13,381 Major Domestic Peer 1 Major Domestic Peer 4 11,885 Major Domestic Peer 2 Retail loans (RBWM)2 Housing loan annual growth (DEC17)4
Total Household Loan Growth 2016 2017 27.2% Owner Occupied Growth
Market 1.6% 2.0% share 13,471 13.6% 12.8% 6.3% Wholesale 9,501 9.1% 7.3% 6.9% 8.5% 8.6% (GB&M and 6.7% 5.9% 5.4% 3.8% 5.2% CMB)2 loans 2.1% 2.8%
HSBC Major Major Major Major Domestic Intl’ Intl’ Domestic Domestic Domestic Domestic Peer Peer 1 Peer 2 2016 2017 Peer 1 Peer 2 Peer 3 Peer 4
1. Adjusted basis which exclude the effect of foreign currency translation. 2016 balances on a reported basis: Loans and advances to customers $19,761m, RBWM $10,982m and CMB+GB&M $8,777 2. Market share for HSBC retail loans includes non-resident loans. Resident loans sourced from APRA, non-resident retail loans sourced internally from HSBC 3. As at SEP17 and sourced from Bank Pillar 3 disclosures 75 4. Underlying growth % are based on AUD balances sourced from APRA (which excludes non- resident loans) Australia: Strategic priorities Strategic priorities
1 RBWM: become the leading bank in Australia for affluent and mass affluent customers, whilst continuing to grow PBT and assets
Accelerate market share growth by increasing wallet share
Invest in distribution to grow assets
2 CMB: grow market share by growing the client base and providing a wider suite of services to existing clients Leverage Commercial Banking: leverage the international network to facilitate cross border access to HSBC’s both global and local clients international connectivity and Strategic focus on large corporate clients and mid-market enterprises, and International continue to Subsidiary Banking capture emerging 3 opportunities GB&M: target profitable growth by providing tailored financial solutions to global clients through HSBC’s network
Global Banking: leverage strategic lending / client relationships to win ancillary business
Global Markets: targeting clients ancillary business and leveraging HSBC’s asset growth with close collaboration across CMB / GB / RBWM
4 GPB: small onshore presence focussing on generating new business referrals to Hong Kong / Singapore offices, for high net worth individuals.
76 Australia: Strategic priorities HSBC Australia RBWM: To be the leading bank in Australia for affluent and mass affluent customers, whilst continuing to grow PBT and assets
Current position / Why are we here? Strategic initiatives
RBWM in Australia is an important contributor to the Group
Expanding mortgage broker partnerships, Accelerate th Australia has the investing in digital capabilities and expanding Australia is the 4 market th physical distribution footprint most profitable 5 largest share RBWM market mortgage book growth in the Group in the Group
By increasing proportion of customers which Increase wallet share regards HSBC as their main financial of the target institution and improving the premier HSBC continues to grow its HSBC’s mortgage growth in market proposition network presence 2017 outpaced the market
Number of branches Residential & Investment Home Loans Growth, DEC171 By improving the customer’s overall experience through transforming and 35 13.6% Reduce 32 streamlining key processes, creating greater attrition convenience and a consistent high quality 5.1% experience
2016 2017 HSBC Market
1. Underlying growth % are based on AUD balances sourced from APRA 77 Australia: Strategic priorities HSBC Australia CMB: Investing in coverage model to drive asset and customer growth and improve wallet share
Current position / Why are we here? Strategic initiatives
Business is on a growth cycle facilitated by Group investment Growth DEC15 to DEC17: Expand our corporate coverage model across Number of clients L&A to customers1 our National footprint, building sector coverage 24% 17% CAGR Client acquisition Focus on China and ASEAN corridors to and asset capture both inbound and outbound growth growth opportunities Strong intra-Group connectivity: 9th largest: 9th largest Outbound and the 10th largest Inbound site globally Focus on maintaining and improving returns and asset quality
Revenue growth 2016 to 2017: US corridor China corridor Collaborating with GB&M to enable clients to 17% 43% access international sources of capital across debt and equity Client The scope for increasing market share is compelling: HSBC proposition Expanding Global Trade and Receivables currently holds < 2% of Corporate Loans compared to and wallet Financing product offering and platforms to combined CBA / WBC of 37% (all four major banks hold 73%) share continue to increase trade penetration Building propositions to supports working Commercial Banking will focus on our strength as a leading capital and FX flow opportunities trade and cash management bank to further grow market share across our local corporate and inbound corporate clients
1. L&A to customers on an adjusted basis – excluding Significant items & foreign currency translation – reconciliation to reported results are shown in the appendix 78 Australia: Strategic priorities HSBC Australia GB&M: Strong growth in assets whilst improving efficiency and profitability, through investment in front-line resources
Current Position / Why are we here? Strategic Initiatives
HSBC Australia’s Global Banking business is embarking on a growth cycle Continue FIG focus (strategic lending / ABF) to enable growth in flow revenue (e.g. DCM)
Leverage momentum in corporate coverage to Growth DEC15 to DEC17: Strong and diversified business Global deepen wallet share for our global corporate Banking will clients Corporate DCM house between 2016- enhance 16% coverage Tap MNC opportunities with our universal customer CAGR #1 2017 for int’l bonds issued banking model value1 by AU / NZ borrowers. In intensity 2012, we were #103 across its CMB collaboration to cross sell GB’s financing L&A to 36% client base and advisory solutions to its client base customers CAGR th Syndicated loans Build on Project Finance Advisory strength to 5 Bookrunner 2016-174 (up target financing needs from AU infrastructure 2016-17 from #14 in 2012) investments CMB 58% growth synergies Asset under custody for Intensive Corporate and Institutional #1 foreign clients with 75% Global coverage Delivering FX product in line with market share5 Corridor revenue growth, Markets will client and group strategy (e.g. Transactional 2017 focus on FX in Education sector) GLCM ranked in Australia, th Technology, behind the 4 majors6 Leveraging the increase in flow FX and Hong Kong 35% 5 Collaboration Rates across key client segments to deepen and focus ASEAN2 6% wallet share via structuring & bespoke client GTRF-ranked in Australia for Institutional nd institutions for primary trade solutions 2 clients China 26% finance relationships7 Focusing on Outbound Institutional Client Offering 1. Customer value is client revenue data sourced HSBC internal client MI, which differs from reported revenue. Sum of in- 4. Bloomberg: Loan Syndication 2016-2017 country and inbound 5. Source: ACSA -Australian Custodial Services Association 2. ASEAN Markets include: Indonesia, Malaysia, Thailand, Vietnam, Singapore, Brunei, Philippines 6. Source: East & Partners, H1 2018 79 3. Bloomberg: DCM issuance 2016-2017 7. Source: East and Partners Australia: Key messages Key messages
1 Strong macroeconomic fundamentals. 26 years of continued GDP growth and robust demographic growth1
2 Australia’s strong international connectivity positions HSBC well for future growth. 71% of Australian exports go to Asia and half of Australia’s population growth is driven by inward migration2
3 Grow assets, revenues and returns, while increasing market share across our Global Businesses
4 HSBC Australia universal banking model: a credible alternative to the domestic banks
1. Source: Australian Bureau of Statistics 2. Australian Government - Department of Foreign Affairs and Trade 80 Appendix Appendix: GB&M GB&M Asia selected financial performance
USDm 2017 2016
Adjusted revenue 6,082 5,837
Adjusted PBT 3,389 3,217
Significant items & foreign currency translation (254) (6)
Reported PBT 3,135 3,211
82 Appendix: India India macro - Real GDP at market prices
Real GDP at market prices (% change)1
10
9 8.8 8 8 7.4 7.5 7.1 7 6.5
6
5
4
3
2
1
0 Avg 5 year pre financial Avg 5 year post financial 2014-15 2015-16 2016-17 2017-18 Est. crisis (03-08) crisis (09-14)
1. Source: Bloomberg 83 Appendix: India India macro - Gross fiscal deficit
Gross Fiscal Deficit (as a % of GDP)1
7
5.9 6
4.9 5 4.5 4.1 3.9 4 3.5 3.5 3.3
3
2
1
0 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (Est) 2018-19 (Est)
1. Source: Bloomberg 84 Appendix: India India macro – Current account deficit / GDP
Current Account Balances / GDP (%)1
Avg 5 year pre financial Avg 5 year post crisis (03-08) financial crisis (09-14) 2014-15 2015-16 2016-17 2017-18 Est. 0
-0.5 -0.3
-0.7 -1 -1.1
-1.5 -1.3
-2 -1.9
-2.5
-3
-3.5 -3.3
1. Source: Bloomberg 85 Appendix: Australia Reconciliation of financials - Australia
USDm 2017 2016
Reported revenue 852 842 Significant items & foreign currency translation (40) (26) Adjusted revenue 892 868
Reported operating expenses (460) (414) Significant items & foreign currency translation (4) 12 Adjusted operating expenses (456) (426)
Reported PBT 365 369 Significant items & foreign currency translation (44) (11) Adjusted PBT 409 380
86 Glossary Glossary Glossary of terms
Term Definition Term Definition
Ratio of loans and advances to customers to A/D ratio customer accounts AUM Assets under management
ADB Asian Development Bank BARC Barclays Bank PLC Adjusted performance excludes the year-on- year effects of foreign currency translation BCG Boston Consulting Group differences and significant items which distort the year-on-year comparison of reported results. The term significant items collectively bn billion describes the group of individual adjustments Adjusted performance excluded from reported results when arriving BoAML Bank of America Merrill Lynch at adjusted performance and which management and investors would ordinarily identify and consider separately when BRI Belt and Road Initiative assessing performance in order to better understand the trends of the business BSM Balance Sheet Management AIIB Asian Infrastructure Investment Bank CAGR Compound annual growth rate AM Asset Management CC Corporate Centre APAC Asia-Pacific CER Cost efficiency ratio ASEAN Association of Southeast Asian Nations
AU Australia
AUC Asset Under Custody
88 Glossary Glossary of terms
Term Definition Term Definition
Client revenue data sourced HSBC internal 1.Estimated Market share is calculated by client MI, which differs from reported revenue. taking HSS’s Asia Pacific AUC (provided by Client revenue Excludes synergies with other global HSS) divided by Total Asia Pacific AUC (using businesses and excludes internal costs of Tricumen data, which is estimated to cover c.60% of Asia Pacific AUC) funds Ernst & Young (“EY”) 2.Estimated Market Positioning is derived methodology CMB Commercial Banking comparing HSS’s AUC in Asia Pacific to 10 Asset Servicing Asia Pacific AUC values that EY holds data for, assuming these 11 Asset CNY Chinese Yuan Renminbi Servicing companies (including HSS) are the largest in Asia Pacific CS Credit Suisse Group AG ETF Exchange Traded Funds
CSRC China Securities Regulatory Commission FDI Foreign Direct Investment
DB Deutsche Bank AG FICC Fixed Income, Currencies & Commodities
DCM Debt capital markets FIG Financial Institutions Group
DTC Digital transformation for Corporates FUM Funds under management
ECM Equities capital markets FX Foreign Exchange
ECM Equity Capital Markets G10 currencies include United States dollar, Euro, Japanese yen, Pound sterling, Swiss G10 Currencies franc, Australian dollar, New Zealand dollar, EMEA Europe, Middle East and Africa Canadian dollar, Swedish krona, Norwegian krone
89 Glossary Glossary of terms
Term Definition Term Definition
GB Global Banking Industrial and Commercial Bank of China IDBC Limited GB&M Global Banking and Markets IMF International Monetary Fund
GBA Greater Bay Area Client revenue booked in Country A where the Inbound revenue primary relationship is managed outside of GDP Gross domestic product Country A Percentage change in revenue over the Jaws GFC Group Finance Companies percentage change in costs
GLCM Global Liquidity and Cash Management JPM JPMorgan Chase & Co
GM Global Markets JV Joint Venture
GPB Global Private Banking LATAM Latin America GS Goldman Sachs Group Inc Loan impairment charges and other credit risk LICs provisions GTRF Global Trade and Receivables Finance M&A Mergers and Acquisitions HKMA Hong Kong Monetary Authority
HKQAA Hong Kong Quality Assurance Agency
HSS HSBC Securities Services
90 Glossary Glossary of terms
Term Definition Term Definition
MENA Middle East and North Africa QFII Qualified Foreign Institutional Investor
MLA Mandated Lead Arranger RBWM Retail Banking and Wealth Management
MNCs Multi-national corporations RCF Revolving Credit Facility
MS Morgan Stanley Reported view of performance is determined on an International Financial Reporting NAFTA North American Free Trade Agreement Reported results Standards (“IFRS”) basis as reported in HSBC’s annual report and accounts and other NDB New Development Bank financial and regulatory reports RMB Renminbi NIM Net interest margin RMBI Reminbi Internationalisation NZ New Zealand RoRWA Return on risk-weighted assets ODI Outward Direct Investment
Organisation for Economic Co-operation and RoTE Return on tangible equity OECD Development Renminbi Qualified Foreign Institutional Client revenue relating to clients where the RQFII Investor primary relationship is managed in Country A, Outbound revenue but the revenue is booked outside of Country RWAs Risk-weighted assets A PBT Profit before tax SAFE State Administration of Foreign Exchange
PRD Pear River Delta SG Société Générale
91 Glossary Glossary of terms
Term Definition
TLA Term Loan A tn trillion
United Nations Conference on Trade and UNCTAD Development
USD US Dollar
VNB Value of new business
Y-o-Y Year-on-year
YTD Year-to-Date
92