Our objective is to become the world’s leading international bank. Our strategic direction is aligned to two long-term trends:
- International trade and capital flows: the world economy is becoming more connected. Financial flows between countries and regions are highly concentrated, and over the next decade we expect 35 markets to generate 90 per cent of world trade growth with a similar degree of concentration in cross-border capital flows.
Economic development and wealth creation: we expect the GDP of economies currently deemed ‘emerging’ to have increased five-fold by 2050, benefiting from demographics and urbanisation, by which time they will be larger than the developed world. By then, we expect 19 of the 30 largest economies will be markets that are currently described as emerging.
HSBC is one of the few truly international banks. Our advantages lie in the extent to which our network corresponds with markets relevant to international financial flows, our access and exposure to high-growth markets and businesses, and our strong balance sheet, which helps to generate a resilient stream of earnings.
Based on these long-term trends and our competitive position, our strategy has two parts:
- A network of businesses connecting the world: HSBC is well positioned to capture the growing international financial flows. Our global reach and range of services place us in a strong position to serve corporate clients as they grow from small enterprises into large and international corporates.
Wealth management and retail with local scale: we will capture opportunities arising from social mobility and wealth creation in the faster-growing markets in which we are present. We will invest in retail businesses in markets only where we can achieve profitable scale.
To implement this strategy we have set three priorities for the Group: grow the business and dividends; implement global standards; and streamline processes and procedures.
Grow the business and dividends
We continue to position HSBC for growth, generating capital to invest in mostly organic opportunities in our home and priority growth markets, while progressively growing the dividend.
We have adopted six filters, which serve as a tool to determine which businesses fit in our portfolio. They help to address fragmentation in our portfolio by identifying which non-strategic businesses to dispose of.
In deciding where to invest additional resources, we will follow this stringent framework to assess investment opportunities using strategic, risk and financial criteria. Decisions on how we allocate our resources are made by the Group Management Board under authority delegated from the Board.
Implement global standards
We are adopting and enforcing the highest global standards across HSBC. This means building a more sustainable business model by investing in world-leading risk and compliance, while seeking to reduce overall risk. We believe that implementing global standards in these areas gives HSBC a distinct competitive advantage.
The three primary areas of focus are:
- Customer due diligence: developing an integrated framework to manage financial crime risk more effectively across the complete customer lifecycle. This includes Know Your Customer programmes, affiliate due diligence programmes and work on areas such as tax transparency and bearer shares.
Financial crime compliance: creating a consistent, flexible and scalable compliance organisation and the financial crime risk controls to make sure we meet all Deferred Prosecution Agreement (DPA) and other regulatory obligations. This includes implementing a comprehensive anti-money laundering and sanctions compliance programme globally.
Financial intelligence: building our capabilities in the capture and use of customer and transaction data to identify suspicious transactions, activity or connections.
Streamline processes and procedures
We have put in place a structure to manage the bank globally, rather than on a federated basis. Our aim is to continue to streamline, globalise and simplify processes and procedures to generate sustainable savings. This will release capacity to further invest in growing the business.
We have defined financial targets to achieve a return on equity of between 12 per cent and 15 per cent with a Basel III Common Equity tier 1 ratio above 10 per cent, and achieve revenue growth in excess of cost growth (“positive jaws”). We will also aim to maintain a cost-efficiency ratio in the mid-50s.
Taken together, we are confident that these measures will deliver consistent and superior financial results and move us closer to achieving our ambition of being the world’s leading international bank.