HSBC HK$51.60 - UNDERPERFORM C o

Asheefa Sarangi Making a statement m [email protected] p

HSBC to embark on share buyback; maintain dividend a

+852 2600 8300 n

HSBC’s 2Q16 result was weaker than expected on both an underlying and y

reported basis. We trim 16-18CL NPAT by 2-9% and hold 16-18CL u

Lester Lim p

+852 2600 8380 dividend at US$0.51 per share. HSBC abandoned the timing of 10%+ ROE d a

delivery but softened the blow by announcing a share buyback. Given the t e stock’s resilience post-Brexit and its underwhelming earnings/ROE outlook during our forecast time horizon, we reiterate our Underperform recommendation with a revised HK$47.75 (from HK$48) target price. Below expectation 2Q16 PBT of US$3.6bn was down 41% QoQ and 45% YoY. This was materially 4 August 2016 below our expectation of US$6.5bn. The miss was driven by weak revenues, Hong Kong one-off costs/impairments and higher bad debts in Latam/commodities. The 2Q16 DPS was in line with expectation at US$0.10 but a US$2.5bn buyback was announced. The 1H16 ROE was 7.4%. Lack of momentum ex-capital Reuters 0005.HK Bloomberg 5 HK Both customer advances and deposits fell on a reported basis in 1H16. On a ADR HBC.N constant currency basis, loans fell 1.5% driven by Asia and run-off/sales of Priced on 3 August 2016 legacy portfolios in the US while deposits grew by 2.6%. The LDR is 68.8%. HK HSI @ 21,739.1 The gross NPL ratio fell to 2.4% (2H15: 2.5%) driven mainly by the run- off/sales of legacy portfolios in the US. The coverage ratio is 40.8% (2H15: 12M hi/lo HK$71.40/45.80 40.3%). The end point CET1 advanced by 20bps to 12.1%. The leverage ratio 12M price target HK$47.75 is 5.1%. BVPS was negatively impacted by FX and other moves, which kept it ±% potential -7% broadly stable to 2H15 at US$8.75.

Shares in issue 19,813.0m Reducing 17-18CL NPAT by 5-9% Free float (est.) 86.0% HSBC has retained its 10%+ ROE target but removed the timeline of delivery (previously 2017). It has also altered its dividend policy from progressive to Market cap US$132,480m sustaining the dividend at current levels for the foreseeable future. The 3M average daily volume operating environment remains difficult and this will likely weigh on revenue HK$1,570.3m (US$202.3m) generation and asset quality. We cut 16-18CL NPAT by 2%-9% per annum to reflect this. The incorporation of a US$2.5bn share buyback in 2H16 narrows Foreign s'holding 68.5% the EPS impact to 0-8%. Our 16-18CL DPS remains flat to 2015 at US$0.51 Major shareholders per share. JP Morgan & Chase 7.1% Blackrock 7.0% Reiterate Underperform with a revised target price of HK$47.75 We value HSBC on a target PB multiple derived using the Gordon Growth Model, which is based upon underlying ROE of 8.7%, COE of 10.4% and terminal growth rate of 4%, for a target multiple of 0.7x. We apply this to 17CL BVPS of US$8.51, adjusted for an impairment on its stake in Bocom. We Stock performance (%) retain our U-PF recommendation, but revise our target price from HK$48 to 1M 3M 12M HK$47.75 to reflect the reduction in BVPS. Absolute 9.0 0.2 (27.4) Relative 4.2 (4.7) (18.4) Financials Abs (US$) 8.9 0.2 (27.4) Year to 31 December 14A 15A 16CL 17CL 18CL 100 (HK$) (%) 150 Operating profit (US$m) 16,148 16,311 14,748 17,661 18,713 89 Net profit (US$m) 13,115 12,572 8,358 10,568 12,500 100 78 NP forecast change (%) - - (9.2) (2.3) (5.2) EPS (US$) 0.69 0.64 0.42 0.53 0.60 67 50 CL/consensus (19) (EPS%) - - 70 82 87 56 EPS growth (% YoY) (17.9) (6.4) (34.5) 24.5 14.8 45 0 PE (x) 9.7 10.3 15.8 12.7 11.0 Aug-11 Dec-12 Apr-14 Aug-15 HSBC (LHS) Adjusted EPS (US$) 0.69 0.64 0.55 0.64 0.65 Rel to HSI (RHS) Adjusted PE (x) 9.7 10.3 12.0 10.4 10.2 Dividend yield (%) 7.5 7.7 7.7 7.7 7.7 Source: Bloomberg PB (x) 0.7 0.8 0.8 0.8 0.8 www.clsa.com Source: CLSA

Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com For important disclosures please refer to page 11.       Making a statement HSBC - U-PF

Making a statement HSBC’s 2Q16/1H16 performance is summarised in the tables below.

Figure 1 HSBC Group: 1H16 P&L US$m 1H15 2H15 1H16 HoH YoY NII 16,444 18,261 15,760 (13.7) (4.2) Fee income 7,725 8,232 6,586 (20.0) (14.7) Other income 8,774 364 7,124 n/a (18.8) Revenues 32,943 26,857 29,470 9.7 (10.5) Expenses 19,187 20,581 18,628 (9.5) (2.9) Pre-impairment profit 13,756 6,276 10,842 72.8 (21.2) Bad debts 1,439 2,282 2,366 3.7 64.4 JVs and associates 1,311 1,245 1,238 (0.6) (5.6) Other income 0 0 0 0.0 0.0 Reported PBT 13,628 5,239 9,714 85.4 (28.7) Adjustments (626) 2,177 1,081 Underlying PBT 13,002 7,416 10,795 45.6 (17.0) Tax 2,907 864 2,291 n/a (21.2) Minorities 1,103 471 511 8.5 (53.7) Reported NPAT 9,618 3,904 6,912 77.0 (28.1) Other 428 522 556 6.5 29.9 Attributable NPAT 9,190 3,382 6,356 87.9 (30.8) Source: CLSA, Company

Figure 2 HSBC Group: Quarterly P&L P&L (US$m) 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 QoQ YoY Total Income 15,283 15,775 14,306 15,892 17,051 15,085 11,772 14,976 14,494 (3) (15) Op. Expenses 9,414 11,091 11,892 8,845 10,342 9,039 11,542 8,264 10,364 25 0 Pre-Impairment Profit 5,869 4,684 2,414 7,047 6,709 6,046 230 6,712 4,130 (38) (38) Credit charges 1,043 760 1,250 570 869 638 1,644 1,161 1,205 4 39 Associates 729 685 567 582 729 689 556 555 683 23 (6) Other 0 0 0 0 0 0 0 0 0 Pre-Tax Profit 5,555 4,609 1,731 7,059 6,569 6,097 (858) 6,106 3,608 (41) (45) Adjusted Pre-Tax Profit 6,179 6,424 2,830 6,892 6,110 5,512 1,857 5,434 0 (100) (100) Taxation 747 987 966 1,367 1,540 634 230 1,571 720 (54) (53) Profit After Tax 4,808 3,622 765 5,692 5,029 5,463 (1,088) 4,535 2,888 (36) (43) Minorities 273 191 254 433 670 234 237 234 277 18 (59) Reported NPAT 4,535 3,431 511 5,259 4,359 5,229 (1,325) 4,301 2,611 (39) (40) Source: CLSA, Company

Figure 3 HSBC Group: Reported PBT by business 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 QoQ YoY RBWM 1,333 1,307 1,299 1,623 1,739 1,160 445 1,133 1,249 10 (28) Commercial Banking 2,351 2,291 1,682 2,281 2,242 2,226 1,224 2,050 2,254 10 1 GBM 2,162 941 (85) 3,041 1,713 2,141 1,015 2,121 1,885 (11) 10 GPB 163 190 72 65 115 81 83 110 (667) (706) (680) Other (454) (120) (1,237) 49 760 489 (3,625) 692 (1,113) (261) (246) Total 5,555 4,609 1,731 7,059 6,569 6,097 (858) 6,106 3,608 (41) (45) Source: CLSA, Company

4 August 2016 [email protected] 2

      Making a statement HSBC - U-PF

Figure 4 HSBC Group: Reported PBT by geography US$m 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 QoQ YoY Europe 498 493 (2,155) 1,564 641 1,568 (3,130) 1,688 (109) (106) (117) Asia 4,130 3,475 3,256 4,330 5,070 3,548 2,815 3,530 3,625 3 (29) ME and N. Africa 487 487 350 457 444 359 277 519 466 (10) 5 North America 376 58 534 477 213 479 (555) 364 (314) (186) (247) Latin America 64 96 (254) 231 201 143 (265) 5 (60) (1,300) (130) Total 5,555 4,609 1,731 7,059 6,569 6,097 (858) 6,106 3,608 (41) (45) Source: CLSA, Company

Figure 5 HSBC Group: Key Ratios Key ratios (%) 1H15 2H15 1H16 Margin (%) 1.92 1.85 1.83 C/I ratio (%) 67.3 76.6 63.2 Bad debts as a % of avg loans 79.0 48.1 51.7 Effective tax rate (%) 21.3 16.5 23.6 Pre-tax RoRWA (%) 2.3 0.9 2.3 ROE (%) 10.6 3.8 7.4 Gross NPL ratio (%) 2.3 2.5 2.4 Coverage (%) 41.4 40.3 40.8 LDR (%) 71.0 71.7 68.8 End point CET1 (%) 11.3 11.9 12.1 Gross advances 963,725 934,009 896,509 HoH loan growth (%) (2.4) (3.1) (4.0) Average gross loans 975,361 948,867 915,259 Customer deposits 1,335,800 1,310,643 1,290,958 HoH deposit growth (%) (1.1) (1.9) (1.5) Weighted avg shares 19,249 19,380 19,672 EPS (HK$) 0.48 0.17 0.32 DPS (HK$) 0.20 0.31 0.20 NAV (US$) 9.11 8.73 8.75 Comprehensive income (7,540) (6,409) (948) Source: CLSA, Company

Earnings Revisions Following the release of CP16/20 on 2 August, we reduced our 16-18CL NPAT by 4-5% per annum or a cumulative US$2.1bn to incorporate additional one- off costs in relation to legacy issues. Please see our note HSBC - U-PF (The Neverending Story) for more detail.

On the back of 1H16 results, we have revised our numbers to reflect 1H16 performance, softer revenue momentum (margins, fee income and other income) in Asia, Europe and the US and higher bad debts in Europe. The net result is a 2-9% reduction in 16-18CL NPAT.

Our 16-18CL DPS remains flat to 2015 at US$0.51 per share. This is in-line with HSBC’s revised dividend policy.

4 August 2016 [email protected] 3

      Making a statement HSBC - U-PF

Figure 6 HSBC: Earnings Revisions 16CL 17CL 18CL Reported Net Profit - previous (US$m) 9,205 10,812 13,180 Reported NPAT attributable - revised (US$m) 8,358 10,568 12,500 Change (9%) (2%) (5%) Reported EPS - previous (US$) 0.46 0.53 0.64 Reported EPS - revised (US$) 0.42 0.53 0.61 Change (8%) 0% (3%) DPS - previous (US$) 0.51 0.51 0.51 DPS - revised (US$) 0.51 0.51 0.51 Change 0% 0% 0% Source: CLSA

The difference between NPAT and EPS is due to HSBC’s announcement that it will return half of the equity from the Brazil transaction to shareholders in the form of a share buyback. The programme will commence in 2H16. The purchase amount is US$2.5bn, which is 2% of the ’s share capital or 19% of the group’s share buyback mandate. Please see our note HSBC - U- PF (Wish upon a star) for more details on HSBC’s share buyback mandate.

Figure 7 HSBC has announced it will commence a US$2.5bn share buyback in 2H16 Shares outstanding (#) 19,813 19% mandate used 376 % of share count 1.9 Last close price (GBPp) - 3/8/3016 504 FX 1.3 US$m 2,522 Source: CLSA, Company, Bloomberg

Valuation details We value HSBC using a target price/book multiple of 0.7x on 17CL book value adjusted for a ~US$4.6bn impairment in the carrying value of its associate BoCom. Our target multiple is derived using the Gordon Growth Model and appropriate assumptions on adjusted underlying 18CL ROE (8.7%), cost of equity (10.6%) and terminal growth rate (4%).

Our valuation inputs are summarised in the table below.

Figure 8 HSBC Valuation GGM valuation assumptions (%) Target PB = (ROE-g) Risk-free rate, Rf 5.0 (COE-g) Equity-risk premium, ERP 5.5 = 8.7%-4.0% Beta, B 1.0 10.4%-4.0% Cost of equity, COE 10.4 = 0.7 ROE 8.7 17CL BVPS (US$) 8.51 Terminal growth rate, g 4.0 Less: BoCom impairment 0.26 Adjusted 17CL BVPS 8.25 12m Valuation (US$) 6.15 12m Valuation (HK$) 47.75 12m Valuation (GBP) 4.63 Source: CLSA, Bloomberg

4 August 2016 [email protected] 4

      Making a statement HSBC - U-PF

We retain our U-PF recommendation, but revise our target price from HK$48 to HK$47.75 to reflect the reduction in BVPS. We prefer HSBC over (SELL).

Figure 9 Valuation summary Name CCY Price Mkt Cap Rec Target 16 17 16 17 16 17 16 (US$bn) Price PB PB PE PE ROE ROE YLD (x) (x) (x) (x) (%) (%) (%) Regional 5 HK HSBC HKD 51.60 132.5 U-PF 47.75 0.8 0.8 15.8 12.7 4.9 6.1 7.7 2888 HK Standard Chartered HKD 61.70 26.3 SELL 45.00 0.6 0.6 (20.0) 27.3 (3.0) 2.2 0.0 Average 0.7 0.7 (2.1) 20.0 1.0 4.2 3.8 USA C US USD 42.99 126.2 BUY 61.00 0.6 0.5 9.4 8.1 6.4 6.8 1.0 JPM US JPMorgan Chase USD 63.65 233.3 BUY 71.00 0.9 0.9 11.3 10.5 8.4 8.4 2.9 Average 0.8 0.7 10.4 9.3 7.4 7.6 1.9 UK* BARC LN Barclays GBp 148.30 33.4 NR NR 0.4 0.4 13.2 8.8 3.0 4.7 2.0 LLOY LN Lloyds Bank GBp 52.99 50.5 NR NR 0.9 0.8 7.4 8.2 12.5 10.6 6.0 RBS LN RBS GBp 190.60 29.9 NR NR 0.5 0.5 14.0 10.6 3.6 4.1 0.0 Average 0.6 0.6 11.5 9.2 6.4 6.4 2.7 EU* BNP FP BNP EUR 42.04 58.5 NR NR 0.6 0.5 7.4 7.4 7.9 7.9 6.1 DBK GR EUR 11.26 17.4 NR NR 0.3 0.3 20.3 6.7 (0.7) 3.4 0.0 Average 0.4 0.4 13.8 7.0 3.6 5.6 3.1 Source: CLSA, *BBG consensus for stocks not in CLSA coverage universe

Investment risks HSBC is one of the world's largest and most truly global banking groups with operations diversified across a wide range of regions, principally UK/Europe, Hong Kong & Asia, North America, Latin America and the Middle East. It is thus exposed to a number of macro-economic risks which affect its P&L and balance sheet, notably the economic/business cycle (and interaction with the credit cycle), interest rates and currency risk. As a large international bank, HSBC is exposed to market risk, through its involvement in capital markets as both agent and principal, and operational risk given the wide range of its financial processing and intermediation activities. Company-specific risks include further sizeable and unexpected fines or litigation as well as inability of the management to execute on the 2015-2017 transformation plan.

4 August 2016 [email protected] 5

      Making a statement HSBC - U-PF

Valuation details - Citigroup Inc C US We believe the valuation of Citigroup should take into account the earnings potential within its core franchise (Citicorp) and the potential for increased consolidated returns on assets and equity if and when the company undertakes a more aggressive look at its business model and capital allocation. On the other hand, this valuation also needs to reflect the company's earnings prospects over the next two to three years due to its evolving business model (as Citigroup looks to shed its businesses in Citi Holdings), as well as ongoing country and regulatory/political risks in the USA and abroad. With these conditions in mind, we use a simple average of six valuation techniques (PE, price-to-book, discount dividend model, PE/G ratio analysis and sum of the parts for both PE and PB). This average yields a target price of US$61, which reflects a little more than 0.9x 16CL tangible book value of US$65 per share.

Investment risks - Citigroup Inc C US Citigroup has material high-risk exposures within the core franchise (regardless of asset/business sales). A sluggish economic recovery in developed markets will likely lead to persistently high unemployment, which negatively impacts global consumer performance in terms of asset levels (less demand for credit and spending volumes) and losses (more bankruptcies). The company also faces significant regulatory and political risks over the near and long terms given the types of business activities in which the company undertakes and the geographies in which these activities are located.

Valuation details - JPMorgan Chase & Co JPM US We believe the current valuation of JPMorgan Chase mostly reflects its strategic positioning in capital-markets-related activities (about half of the firm) as well as long-term growth potential in consumer banking (projected cost savings, cross sale potential, etc), mitigated by ongoing concerns about the global economy, the uncertainty associated with future interest rate increases by central and the tougher regulatory environment in the US and abroad. We arrive at a target price of $71 based on the simple average of six valuation techniques (PE, price-to-book, discount dividend model, PEG ratio analysis and sum of the parts for both PE and PB). Our target implies 11.7x our 2017 EPS estimate of US$6.05, above the five-year average of 10.0x largely due to compressed asset yields that would be much higher a normalized rate environment. On a tangible book value basis, our target implies a price-to-tangible book value of 1.4x (YE17 = US$52), roughly in line with the 10-year average of 1.5x.

Investment risks - JPMorgan Chase & Co JPM US Macro downside risk factors include a slowdown in global economic activity, greater-than-expected increases in unemployment and bankruptcies (in the US and abroad), and adverse changes in US and foreign laws and regulations. Company-specific downside risks include higher-than-projected credit losses (especially in credit cards and home equity but also other consumer areas and commercial lending), market and interest-rate risks (which can affect JPMorgan's businesses and portfolios in a variety of ways, especially MSRs and investment securities), and operational risks (primarily associated with regulatory compliance across the firm's domestic consumer and global wholesale businesses). On the upside, if the US and other major economies grow faster than expected and/or unemployment levels are lower than expected, then JPMorgan's credit quality, revenue and earnings growth are likely to be better than projected.

4 August 2016 [email protected] 6

      Making a statement HSBC - U-PF

Valuation details - Standard Chartered PLC 2888 HK Our 12-month target price of HK$45.00 is a probability weighted target price. There is a 25% weight for a takeout valuation of 0.7x 17CL book value and a 75% weight for our fundamental Gordon Growth model-derived PB target of 0.4x on 17CL book value. The PB multiple for our fundamental valuation is based on the following inputs: an ROE of 6.6%, a cost of equity of 11.3% and a terminal growth rate of 4%. While GGM doesn't really apply when ROE is below COE, our valuation is equivalent to valuing the bank at an ROE towards the top of our 16-18CL adjusted forecast against 11.3% COE with no growth.

Investment risks - Standard Chartered PLC 2888 HK StanChart is a bank with operations diversified across a wide range of countries, principally Asia, the Middle-East and Africa. It is thus exposed to a number of macro-economic risks which affects its P&L and balance sheet, notably the economic/business cycle (and interaction with the credit cycle), interest rates and currency risk. As a large international bank StanChart is exposed to market risk, through its involvement in capital markets as both agent and principal, and operational risk given the wide range of its financial processing and intermediation activities. Aside from macro risk, there is regulatory risk in the form of stress tests and potential changes in RWAs. There is also risk that Standard Chartered's new management team's execution of the 2016-2018 strategic plan is materially better or worse than market expectation.

4 August 2016 [email protected] 7

      Making a statement HSBC - U-PF

Appendix: Significant items Figure 10 Summary of significant items in 2Q16 Revenue (US$m) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Disposal costs of Brazilian operations 0 0 0 (18) (14) (18) DVA on derivative contracts 98 67 251 (186) 158 (7) Fair value movements on non-qualifying hedges (285) 240 (308) 26 (233) (164) (Loss)/gain on sale of several tranches of real 0 17 (17) (214) 0 68 estate secured accounts in the US Gain on the partial sale of shareholding in 363 1,009 0 0 0 Industrial Bank Gain on Visa Europe 584 Own credit spread 298 352 1,125 (773) 1,151 75 (Provisions)/releases arising from the ongoing 12 0 (10) (12) 0 2 review of compliance with the Consumer Credit Act in the UK Total 486 1,685 1,041 (1,177) 1,062 540 Operating expenses (US$m) Costs-to-achieve 0 0 (165) (743) (341) (677) Costs to establish UK ring-fenced bank 0 0 (28) (61) (31) (63) Disposal costs of Brazilian operations 0 0 (54) (56) (17) 6 Impairment of GPB Europe Goodwill (800) Regulatory provisions in GPB (139) (8) (7) (18) (1) (3) Restructuring and other related costs (43) (74) 0 0 0 0 Settlements and provisions in connection with 0 (1,144) (135) (370) 0 (723) legal matters UK customer redress programmes (137) 0 (67) (337) 0 (33) Total (319) (1,226) (456) (1,585) (390) (2,293) Net PiP 167 459 585 (2,762) 672 (1,753) Source: CLSA, Company

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      Making a statement HSBC - U-PF

Appendix: RWA reduction on track In June 2015, the group stated that it intended to reduce its RWAs by $290bn by the end of 2017. The re-baselined target is $281bn as of the end of June 2016. More than 60% of this target has been achieved.

Figure 11 Breakdown of HSBC’s RWA reduction by initiatives

GBM ex BSM US$94m 33%

US CML US$28m 10% Achieved Remainder US$172 39% 61% CMB US$34m 12% Other US$16m 6%

Source: CLSA, Company

Figure 12 CET1 progression between 4Q14 and 2Q16

12.2 % of RWAs End Point CET1 ratio 12.1

12.0 11.9 11.9 11.8 11.8 11.6 11.6

11.4 11.2 11.2 11.1

11.0

10.8

10.6 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Source: Company

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      Making a statement HSBC - U-PF

Summary Financials Figure 13 HSBC Group: Summary Financials

Company: HSBC Holdings plc Profit & Loss (US$m) 2014 2015 16CL 17CL 18CL Short name: HSBC Recommendation: UNDERPERFORM Interest revenue 50,955 47,189 45,890 45,552 47,167 B'berg code: 5 HK Price target: HK$47.75 Interest expense 16,250 14,658 15,093 15,043 15,368 Share price: HK$51.60 Upside/(downside): -7.5% Net Interest 34,705 32,531 30,797 30,509 31,800 Share price (US$): US$6.65 Implied cash PE: 11.8x Other Income 26,543 27,269 24,133 23,650 24,123 No. of shares (m): 19,793 Implied P/B: 0.72x Total Income 61,248 59,800 54,930 54,159 55,923 Market cap (US$bn): 130 Op. Expenses 41,249 39,768 35,924 32,387 32,995 Yr to 31 Dec 2014 2015 16CL 17CL 18CL Underlying Profit 19,999 20,032 19,006 21,772 22,928 Reported NPAT (US$m) 13,688 13,522 9,536 11,815 13,747 Credit charges 3,851 3,721 4,258 4,111 4,216 Growth (%) -15.5 -1.2 -29.5 23.9 16.4 Associates 2,532 2,556 2,425 2,350 2,275 NPAT (US$m) 13,115 12,572 8,358 10,568 12,500 Debt Value Adj (DVA) 0 0 0 0 0 Adj NPAT (US$m) 13,249 10,748 10,732 10,527 10,960 Exceptional items 0 0 -3,406 -3,065 -1,270 Growth (%) -28.7 -18.9 -0.1 -1.9 4.1 Pre-Tax Profit 18,680 18,867 13,767 16,946 19,718 EPS (US$) 0.69 0.64 0.42 0.53 0.60 Taxation 3,975 3,771 3,235 3,898 4,535 Growth (%) -17.9 -6.4 -34.5 24.5 14.8 Profit After Tax 14,705 15,096 10,532 13,049 15,183 Adj EPS (US$) 0.70 0.55 0.54 0.52 0.53 Minorities 1,017 1,574 996 1,234 1,436 Growth (%) -30.2 -20.8 -1.6 -3.4 1.1 Reported NPAT 13,688 13,522 9,536 11,815 13,747 DPS (US$) 0.50 0.51 0.51 0.51 0.51 Pref. dividends 573 950 1,178 1,247 1,247 NPAT attributable 13,115 12,572 8,358 10,568 12,500 Pricing & valuation 2014 2015 16CL 17CL 18CL LESS: DVA (after-tax) 0 0 0 0 0 Price/earnings ratio (x) 13.5 14.4 15.8 12.7 11.0 LESS: Excep. Items (net) 134 -1,824 2,375 -41 -1,541 Adj PE ratio (x) 13.4 16.9 12.3 12.7 12.6 Adj NPAT 13,249 10,748 10,732 10,527 10,960 Price/underlying profit (x) 8.8 9.0 6.9 6.1 6.0 Price/book ratio (x) 1.01 1.06 0.76 0.78 0.78 Drivers 2014 2015 16CL 17CL 18CL Dividend yield (%) 5.4% 5.5% 7.7% 7.7% 7.7% Net interest margin 1.94% 1.88% 1.81% 1.79% 1.83% Price/Deposits ratio (x) 0.13 0.14 0.10 0.11 0.11 Other revenue/AIEA 1.49% 1.58% 1.41% 1.39% 1.39% Revenue/AIEA 3.43% 3.46% 3.22% 3.19% 3.21% Key ratios 2014 2015 16CL 17CL 18CL AIEA/Avg. Assets 67.3% 68.5% 69.1% 66.8% 67.4% Growth Revenue/Avg. Assets 2.31% 2.37% 2.22% 2.13% 2.17% Spot asset growth (%) -1.4 -8.5 5.0 1.0 2.0 Cost/Avg. Assets 1.55% 1.58% 1.45% 1.27% 1.28% Avg. asset growth (%) -1.5 -4.9 -2.1 3.0 1.5 Underlying profit 0.75% 0.79% 0.77% 0.86% 0.89% Gross lending growth (%) -2.0 -5.4 -4.4 -0.4 2.4 B&DD/Avg. Assets 0.15% 0.15% 0.17% 0.16% 0.16% Loans/Deposit Ratio (%) 72.2 71.7 67.9 67.9 68.0 Associates/Avg. Assets 0.10% 0.10% 0.10% 0.09% 0.09% Margins Pretax ROA 0.70% 0.75% 0.56% 0.67% 0.76% Net Interest Spread (%) 1.80 1.73 1.69 1.68 1.71 Tax expense 0.15% 0.15% 0.13% 0.15% 0.18% Free Funds Benefit (%) 0.14 0.15 0.12 0.11 0.12 Post-tax ROA 0.55% 0.60% 0.43% 0.51% 0.59% Net Interest Margin (%) 1.94 1.88 1.81 1.79 1.83 Mins, prefs 0.06% 0.10% 0.09% 0.10% 0.10% Revenue ROA 0.49% 0.50% 0.34% 0.42% 0.48% Net interest growth (%) -2.3 -6.3 -5.3 -0.9 4.2 Avg. Assets/Avg. Equity 15.1x 14.4x 14.4x 14.8x 14.6x Non-int. rev. growth (%) -12.6 2.7 -11.5 -2.0 2.0 ROE 7.4% 7.2% 4.9% 6.1% 7.1% Revenue/Avg.Assets (%) 2.31 2.37 2.22 2.13 2.17 Non-int. rev/Revenue (%) 43.3 45.6 43.9 43.7 43.1 Balance sheet (US$bn) 2014 2015 16CL 17CL 18CL Efficiency Loans to banks 0 0 0 0 0 Cost/Avg.Assets (%) 1.55 1.58 1.45 1.27 1.28 Loans to customers 987 934 893 890 911 Cost/income (%) 67.3 66.5 65.4 59.8 59.0 B&DD provisions -12 -10 -9 -9 -9 Credit costs Cash and Securities 130 99 0 0 0 NPAs/RWAs (%) 2.66 2.54 1.99 #DIV/0! #DIV/0! Trading & FV assets 333 249 25 26 27 Total Provisions/NPAs (%) 38.1 34.1 36.4 #DIV/0! #DIV/0! Financial Invts 577 575 0 0 0 Loan Prov'ns/Gross Loans (%) 1.25 1.02 1.03 1.03 1.03 Derivative assets 345 288 0 0 0 Credit charges/Avg.Assets (%) 0.15 0.15 0.17 0.16 0.16 Associates/Investments 18 19 0 0 0 Profitability Property, Plant & Equ't 11 10 0 0 0 Underlying profitability (%) 0.75 0.79 0.77 0.86 0.89 Goodwill 22 19 0 0 0 Adj Return on Assets (%) 0.50 0.43 0.43 0.41 0.42 Other assets 223 226 1,621 1,649 1,678 Return on Equity (%) 7.4 7.2 4.9 6.1 7.1 Total Assets 2,634 2,410 2,530 2,555 2,607 Adj Return on Equity (%) 7.5 6.2 6.3 6.1 6.2 Capital Adequacy Deposits from banks 83 60 55 57 58 Tier 1 Ratio (%) 11.1 11.9 12.6 13.1 12.7 Deposits 1,351 1,290 1,302 1,298 1,326 Capital Adequacy Ratio (%) 12.8 14.1 17.3 17.8 17.1 Trading liabilities 267 208 0 0 0 RWA/Assets (%) 46.3 45.8 41.0 40.2 42.2 Debt issues 123 112 89 89 89 Other Insurance Liabilities 74 70 0 0 0 Tax ratio (%) 21.3 20.0 23.5 23.0 23.0 Derivative liabilities 341 281 281 281 281 Dividend payout (%) 72.6 79.2 120.9 97.0 84.5 Other Liabilities 196 192 607 631 647 Total Liabilities 2,434 2,212 2,334 2,356 2,402 Avg. balance sheet (US$bn) 2014 2015 16CL 17CL 18CL Avg. Int-Earning Assets 1,787 1,727 1,706 1,700 1,740 Ordinary share capital 10 10 171 174 179 Avg. Assets 2,653 2,522 2,470 2,543 2,581 Pref/hybrid capital 13 17 17 17 17 Reserves 20 7 0 0 0 Avg. Int-bearing Liabs 1,547 1,466 1,509 1,504 1,537 Retained Earnings 137 144 0 0 0 Avg. Liabilities 2,680 2,594 2,273 2,345 2,379 Equity (excl. mins) 180 177 187 191 196 Minorities 10 9 9 9 9 Avg. Equity 195 199 197 198 202 Equity (incl. mins) 189 187 196 200 205 Avg. Ordinary Equity 176 175 171 172 177 Source: CLSA, Company

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      Important disclosures HSBC - U-PF

Research subscriptions To change your report distribution requirements, please contact your CLSA sales representative or email us at [email protected]. You can also fine-tune your Research Alert email preferences at https://www.clsa.com/member/tools/email_alert/.

Companies mentioned HSBC (5 HK - HK$51.60 - UNDERPERFORM)¹ Barclays (N-R) BNP Paribas (N-R) Bocom (3328 HK - HK$5.29 - SELL)¹ Citigroup (C US - US$42.99 - BUY)² Deutsche Bank (N-R) JPMorgan Chase (JPM US - US$63.65 - BUY)² Lloyds (N-R) RBS (N-R) Standard Chartered (2888 HK - HK$61.70 - SELL)¹

¹ Covered by CLSA; ² Covered by CLSA Americas

Analyst certification The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures Recommendation history of HSBC Holdings PLC 5 HK Asheefa Sarangi BUY O-PF )

$ Other analysts U-PF SELL

K No coverage N-R

H 90 ( e c i r p 80 k c o t S 70

60

50

Sep 13 Jan 14 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16

Date Rec Target Date Rec Target LATEST U-PF 47.75 10 Sep 2015 O-PF 66.50 02 Aug 2016 U-PF 48.00 04 Aug 2015 O-PF 76.00 24 Apr 2016 U-PF 48.30 10 Jun 2015 U-PF 76.00 16 Mar 2016 O-PF 53.00 05 Jun 2015 O-PF 80.00 23 Feb 2016 O-PF 52.00 24 Feb 2015 O-PF 76.00 05 Feb 2016 O-PF 56.00 11 Feb 2015 O-PF 79.00 03 Nov 2015 O-PF 64.35 Source: CLSA

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      Important disclosures HSBC - U-PF

Recommendation history of Bank of Communications Co Ltd 3328 HK Patricia Cheng BUY O-PF )

$ Other analysts U-PF SELL

K No coverage N-R H ( e

c 8 i r p k c o t 7 S

6

5

Sep 13 Jan 14 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16

Date Rec Target Date Rec Target 07 Apr 2016 SELL 4.40 07 Jan 2015 U-PF 7.30 08 Jan 2016 SELL 4.70 01 Dec 2014 U-PF 6.70 07 Sep 2015 SELL 4.90 04 Sep 2014 U-PF 6.30 10 Aug 2015 U-PF 7.10 12 Aug 2014 U-PF 6.20 03 May 2015 U-PF 8.30 23 Jan 2014 U-PF 5.80 29 Mar 2015 U-PF 6.40 22 Aug 2013 O-PF 5.83 Source: CLSA

Recommendation history of Citigroup Inc C US Mike Mayo BUY O-PF )

$ Other analysts U-PF SELL S No coverage N-R U (

e 70 c i r p k c o t 60 S

50

40

Sep 13 Jan 14 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16

Date Rec Target Date Rec Target 18 Jul 2016 BUY 61.00 16 Dec 2014 BUY 73.00 09 Mar 2016 BUY 63.00 11 Sep 2014 BUY 66.00 19 Jan 2016 BUY 64.00 27 Mar 2014 BUY 58.00 01 Oct 2015 BUY 70.00 01 Mar 2014 BUY 60.00 Source: CLSA

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      Important disclosures HSBC - U-PF

Recommendation history of JPMorgan Chase & Co JPM US Mike Mayo BUY O-PF )

$ 80 Other analysts U-PF SELL S No coverage N-R U ( e c

i 75 r p k c

o 70 t S

65

60

55

Sep 13 Jan 14 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16

Date Rec Target Date Rec Target 24 Feb 2016 BUY 71.00 15 Jan 2015 O-PF 68.00 01 Oct 2015 BUY 75.00 11 Dec 2014 O-PF 70.00 25 Aug 2015 BUY 78.00 18 Jan 2014 U-PF 60.00 15 Jul 2015 O-PF 78.00 16 Sep 2013 U-PF 53.00 Source: CLSA

Recommendation history of Standard Chartered PLC 2888 HK Asheefa Sarangi BUY O-PF )

$ Other analysts U-PF SELL

K No coverage N-R H ( 200 e c i r p k c o t

S 150

100

50

Sep 13 Jan 14 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16

Date Rec Target Date Rec Target 24 Apr 2016 SELL 45.00 23 Nov 2015 SELL 58.00 16 Mar 2016 SELL 48.30 25 Sep 2015 SELL 65.00 24 Feb 2016 U-PF 47.50 03 Jul 2015 SELL 104.00 05 Feb 2016 U-PF 52.00 28 Oct 2014 BUY 180.00 18 Dec 2015 U-PF 62.00 08 Jul 2014 BUY 208.00 Source: CLSA

The policy of CLSA (which for the purpose of this Regulations or market practice of some disclosure includes subsidiaries of CLSA B.V. and CLSA jurisdictions/markets prescribe certain disclosures to be Americas, LLC ("CLSA Americas")), and Credit Agricole made for certain actual, potential or perceived conflicts of Securities (Taiwan) Company Limited (“CA Taiwan”) is to interests relating to a research report as below. This only publish research that is impartial, independent, research disclosure should be read in conjunction with clear, fair, and not misleading. Analysts may not receive the research disclaimer as set out at compensation from the companies they cover. www.clsa.com/disclaimer.html and the applicable

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      Important disclosures HSBC - U-PF

regulation of the concerned market where the analyst is As analyst(s) of this report, I/we hereby certify that stationed and hence subject to. This research disclosure the views expressed in this research report accurately is for your information only and does not constitute any reflect my/our own personal views about the securities recommendation, representation or warranty. Absence of and/or the issuers and that no part of my/our a discloseable position should not be taken as compensation was, is, or will be directly or indirectly endorsement on the validity or quality of the research related to the specific recommendation or views report or recommendation. contained in this report or to any relationship with the subject company covered in this To maintain the independence and integrity of CLSA’s report (for the past one year) or otherwise any other research, our Corporate Finance, Sales Trading and relationship with such company which leads to receipt of Research business lines are distinct from one another. fees from the company except in ordinary course of This means that CLSA’s Research department is not part business of the company. The analyst/s also state/s and of and does not report to CLSA Corporate Finance (or confirm/s that he/she/they has/have not been placed “investment banking”) department or CLSA’s Sales and under any undue influence, intervention or pressure by Trading business. Accordingly, neither the Corporate any person/s in compiling this research report. In Finance nor the Sales and Trading department supervises addition, the analysts included herein attest that they or controls the activities of CLSA’s research analysts. were not in possession of any material, nonpublic CLSA’s research analysts report to the management of information regarding the subject company at the time of the Research department, who in turn report to CLSA’s publication of the report. Save from the disclosure below senior management. (if any), the analyst(s) is/are not aware of any material conflict of interest. CLSA has put in place a number of internal controls The research analyst(s) or his/their household designed to manage conflicts of interest that may arise as member(s)/associate(s) or any employee of CLSA a result of CLSA engaging in Corporate Finance, Sales Americas, LLC who has the ability to influence research or and Trading and Research activities. Some examples of a member of his/her household has/have a financial these controls include: the use of information barriers interest in the securities or related securities of Citigroup and other information controls designed to ensure that Inc. confidential information is only shared on a “need to CLSA, CLSA Americas and/or CA Taiwan receives or know” basis and in compliance with CLSA’s Chinese Wall has received compensation from JPMorgan Chase & Co policies and procedures; measures designed to ensure for non-investment banking services (eg‚ brokerage that interactions that may occur among CLSA’s Research services) in the past 12 months. personnel, Corporate Finance and Sales and Trading Key to CLSA/CLSA Americas/CA Taiwan investment personnel, CLSA’s financial product issuers and CLSA’s rankings: BUY: Total stock return (including dividends) research analysts do not compromise the integrity and expected to exceed 20%; O-PF: Total expected return independence of CLSA’s research. below 20% but exceeding market return; U-PF: Total expected return positive but below market return; SELL: Neither analysts nor their household Total return expected to be negative. For relative members/associates/may have a financial interest in, or performance, we benchmark the 12-month total forecast be an officer, director or advisory board member of return (including dividends) for the stock against the 12- companies covered by the analyst unless disclosed month forecast return (including dividends) for the herein. In circumstances where an analyst has a pre- market on which the stock trades. existing holding in any securities under coverage, those holdings are grandfathered and the analyst is prohibited In the case of US stocks, the recommendation is from trading such securities. relative to the expected return for the S&P500 of 10%. Exceptions may be made depending upon prevailing Unless specified otherwise, CLSA/CLSA Americas/CA market conditions. We define as “Double Baggers” stocks Taiwan did not receive investment banking/non- we expect to yield 100% or more (including dividends) investment banking income from, and did not within three years at the time the stocks are introduced manage/co-manage a public offering for, the listed to our “Double Bagger” list. "High Conviction" Ideas are company during the past 12 months, and it does not not necessarily stocks with the most upside/downside, expect to receive investment banking compensation from but those where the Research Head/Strategist believes the listed company within the coming three months. there is the highest likelihood of positive/negative Unless mentioned otherwise, CLSA/CLSA Americas/CA returns. The list for each market is monitored weekly. Taiwan does not own a material discloseable position, and does not make a market, in the securities. Overall rating distribution for CLSA/CLSA Americas

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      Important disclosures HSBC - U-PF

only /CA Taiwan only Universe: licensing requirement within such jurisdiction.

Overall rating distribution : Buy / Outperform - CLSA: The information and statistical data herein have been 59.66%; CLSA Americas only: 57.77%; CA Taiwan only: obtained from sources we believe to be reliable. Such 76.81%, Underperform / Sell - CLSA: 40.34%; CLSA information has not been independently verified and we Americas only: 42.23%; CA Taiwan only: 23.19%, make no representation or warranty as to its accuracy, Restricted - CLSA: 0.00%; CLSA Americas only: 0.00%; completeness or correctness. Any opinions or estimates CA Taiwan only: 0.00%. Data as of 30 June 2016. herein reflect the judgment of CLSA, CLSA Americas and/or CA Taiwan at the date of this Investment banking clients as a % of rating category: publication/communication and are subject to change at Buy / Outperform - CLSA: 2.13%; CLSA Americas only: any time without notice. Where any part of the 0.00%; CA Taiwan only: 0.00%, Underperform / Sell - information, opinions or estimates contained herein CLSA: 1.67%; CLSA Americas only: 0.00%; CA Taiwan reflects the views and opinions of a sales person or a only: 0.00%, Restricted - CLSA: 0.00%; CLSA Americas non-analyst, such views and opinions may not only: 0.00%; CA Taiwan only: 0.00% . Data for 12- correspond to the published view of CLSA, CLSA month period ending 30 June 2016. Americas and/or CA Taiwan. This is not a solicitation or any offer to buy or sell. This publication/communication is There are no numbers for Hold/Neutral as CLSA/CLSA for information purposes only and does not constitute any Americas/CA Taiwan do not have such investment recommendation, representation, warranty or guarantee rankings. of performance. Any price target given in the report may be projected from one or more valuation models and For a history of the recommendations and price hence any price target may be subject to the inherent targets for companies mentioned in this report, as well as risk of the selected model as well as other external risk company specific disclosures, please write to: (a) CLSA factors. This is not intended to provide professional, Americas, Compliance Department, 1301 Avenue of the investment or any other type of advice or Americas, 15th Floor, New York, New York 10019-6022; recommendation and does not take into account the (b) CLSA, Group Compliance, 18/F, One Pacific Place, 88 particular investment objectives, financial situation or Queensway, Hong Kong and/or; (c) CA Taiwan needs of individual recipients. Before acting on any Compliance (27/F, 95, Section 2 Dun Hua South Road, information in this publication/communication, you Taipei 10682, Taiwan, telephone (886) 2 2326 8188). © should consider whether it is suitable for your particular 2016 CLSA Limited, CLSA Americas, and/or CA Taiwan. circumstances and, if appropriate, seek professional © 2016 CLSA Limited, CLSA Americas, LLC (“CLSA advice, including tax advice. CLSA, CLSA Americas Americas”) and/or Credit Agricole Securities Taiwan Co., and/or CA Taiwan do/does not accept any responsibility Ltd. (“CA Taiwan”) and cannot be held liable for any person’s use of or reliance on the information and opinions contained This publication/communication is subject to and herein. incorporates the terms and conditions of use set out on the www.clsa.com/disclaimer.html. Neither the To the extent permitted by applicable securities laws publication/communication nor any portion hereof may and regulations, CLSA, CLSA Americas and/or CA Taiwan be reprinted, sold, resold, copied, reproduced, accept(s) no liability whatsoever for any direct or distributed, redistributed, published, republished, consequential loss arising from the use of this displayed, posted or transmitted in any form or media or publication/communication or its contents. Where the by any means without the written consent of CLSA, CLSA publication does not contain ratings, the material should Americas and/or CA Taiwan. not be construed as research but is offered as factual commentary. It is not intended to, nor should it be used CLSA, CLSA Americas and CA Taiwan have produced to, form an investment opinion about the non-rated this publication/communication for private circulation to companies. professional, institutional and/or wholesale clients only. This publication/communication may not be distributed or Subject to any applicable laws and regulations at any redistributed to retail investors. The information, opinions given time, CLSA, CLSA Americas, CA Taiwan, their and estimates herein are not directed at, or intended for respective affiliates or companies or individuals distribution to or use by, any person or entity in any connected with CLSA/CLSA Americas/CA Taiwan may jurisdiction where doing so would be contrary to law or have used the information contained herein before regulation or which would subject CLSA, CLSA Americas publication and may have positions in, may from time to and/or CA Taiwan to any additional registration or time purchase or sell or have a material interest in any of

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      Important disclosures HSBC - U-PF

the securities mentioned or related securities, or may pension funds and corporates. CLSA and its associates currently or in future have or have had a business or may have debt holdings in the subject company. Further, financial relationship with, or may provide or have CLSA and its associates, in the past 12 months, may provided investment banking, capital markets and/or have received compensation for non-investment banking other services to, the entities referred to herein, their securities and/or non-securities related services from the advisors and/or any other connected parties. As a result, subject company. For further details of “associates” of investors should be aware that CLSA, CLSA Americas, CA CLSA India please contact [email protected]. Taiwan and/or their respective affiliates or companies or such individuals may have one or more conflicts of United States of America: Where any section of the interest. Regulations or market practice of some research is compiled by US analyst(s), it is distributed by jurisdictions/markets prescribe certain disclosures to be CLSA Americas. Where any section is compiled by non- made for certain actual, potential or perceived conflicts of US analyst(s), it is distributed into the United States by interests relating to research reports. Details of the CLSA solely to persons who qualify as "Major US disclosable interest can be found in certain reports as Institutional Investors" as defined in Rule 15a-6 under required by the relevant rules and regulation and the full the Securities and Exchange Act of 1934 and who deal details are available at with CLSA Americas. However, the delivery of this http://www.clsa.com/member/research_disclosures/. research report to any person in the United States shall Disclosures therein include the position of CLSA, CLSA not be deemed a recommendation to effect any Americas and CA Taiwan only. Unless specified otherwise, transactions in the securities discussed herein or an CLSA did not receive any compensation or other benefits endorsement of any opinion expressed herein. Any from the subject company covered in this research recipient of this research in the United States wishing to report. effect a transaction in any security mentioned herein should do so by contacting CLSA Americas. If investors have any difficulty accessing this website, please contact [email protected] on +852 2600 8111. Canada: The delivery of this research report to any If you require disclosure information on previous dates, person in Canada shall not be deemed a please contact [email protected]. recommendation to effect any transactions in the securities discussed herein or an endorsement of any This publication/communication is distributed for and opinion expressed herein. Any recipient of this research in on behalf of CLSA Limited (for research compiled by non- Canada wishing to effect a transaction in any security US and non-Taiwan analyst(s)), CLSA Americas (for mentioned herein should do so by contacting CLSA research compiled by US analyst(s)) and/or CA Taiwan Americas. (for research compiled by Taiwan analyst(s)) in Australia by CLSA Australia Pty Ltd; in Hong Kong by CLSA United Kingdom: In the United Kingdom, this research Limited; in India by CLSA India Private Limited (formerly is a marketing communication. It has not been prepared CLSA India Limited) (Address: 8/F, Dalamal House, in accordance with the legal requirements designed to Nariman Point, Mumbai 400021. Tel No: +91-22- promote the independence of investment research, and is 66505050. Fax No: +91-22-22840271; CIN: not subject to any prohibition on dealing ahead of the U67120MH1994PLC083118; SEBI Registration No: dissemination of investment research. The research is INZ000001735); in Indonesia by PT CLSA Indonesia; in disseminated in the EU by CLSA (UK), which is authorized Japan by CLSA Securities Japan Co., Ltd; in Korea by and regulated by the Financial Conduct Authority. This CLSA Securities Korea Ltd; in Malaysia by CLSA document is directed at persons having professional Securities Malaysia Sdn Bhd; in the Philippines by CLSA experience in matters relating to investments as defined Philippines Inc (a member of Philippine Stock Exchange in Article 19 of the FSMA 2000 (Financial Promotion) and Securities Investors Protection Fund); in Thailand by Order 2005. Any investment activity to which it relates is CLSA Securities (Thailand) Limited; in Taiwan by CA only available to such persons. If you do not have Taiwan; in Singapore by CLSA Singapore Pte Ltd and in professional experience in matters relating to United Kingdom by CLSA (UK). investments you should not rely on this document. Where the research material is compiled by the UK India: CLSA India Private Limited, incorporated in analyst(s), it is produced and disseminated by CLSA November 1994 provides equity brokerage services (UK). For the purposes of the Financial Conduct Rules this (SEBI Registration No: INZ000001735), research research is prepared and intended as substantive services (SEBI Registration No: INH000001113) and research material. merchant banking services (SEBI Registration No.INM000010619) to global institutional investors, Singapore: In Singapore, research is issued and/or

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      Important disclosures HSBC - U-PF

distributed by CLSA Singapore Pte Ltd (Company prior written permission of MSCI, this information and Registration No.: 198703750W), a Capital Markets any other MSCI intellectual property may not be Services license holder to deal in securities and an reproduced, redisseminated or used to create any exempt financial adviser, solely to persons who qualify as financial products, including any indices. This information institutional investor, accredited investor or expert is provided on an "as is" basis. The user assumes the investor, as defined in Section 4A(1) of the Securities and entire risk of any use made of this information. MSCI, its Futures Act (Cap 289). Pursuant to Regulations 33, 34, affiliates and any third party involved in, or related to, 35 and 36 of the Financial Advisers (Amendment) computing or compiling the information hereby expressly Regulations 2005 of the Financial Advisers Act (Cap 110) disclaim all warranties of originality, accuracy, with regards to an accredited investor, institutional completeness, merchantability or fitness for a particular investor, expert investor or overseas investor, Sections purpose with respect to any of this information. Without 25, 27 and 36 of the Financial Adviser Act (Cap 110) shall limiting any of the foregoing, in no event shall MSCI, any not apply to CLSA Singapore Pte Ltd. Please contact CLSA of its affiliates or any third party involved in, or related to Singapore Pte Ltd (telephone No.: +65 6416 7888) in computing or compiling the information have any liability connection with queries on the report. [MCI (P) for any damages of any kind. MSCI, 013/11/2015] Capital International and the MSCI indexes are service marks of MSCI and its affiliates. The Global Industry The analysts/contributors to this Classification Standard (GICS) was developed by and is publication/communication may be employed by any the exclusive property of MSCI and Standard & Poor's. relevant CLSA entity, CA Taiwan or a subsidiary of CITIC GICS is a service mark of MSCI and S&P and has been Securities Company Limited which is different from the licensed for use by CLSA. entity that distributes the publication/communication in the respective jurisdictions. EVA® is a registered trademark of Stern, Stewart & Co. Unless otherwise noted in the source, "CL" in charts MSCI-sourced information is the exclusive property of and tables stands for CLSA/CLSA Americas estimates and Morgan Stanley Capital International Inc (MSCI). Without “CT” stands for CA Taiwan estimates.

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