HSBC Holdings plc 1Q 2016 Earnings Release

 

At a glance

Our operating model consists of four global businesses and five geographical regions supported by 11 global functions.

Reported profit before tax
(1Q 2015: US$7,059m)

US$6,106m

Adjusted revenue
(1Q 2015: US$14,457m)

US$13,914m

Adjusted profit before tax
(1Q 2015: US$6,596m)

US$5,434m

Adjusted loan impairment charges
(1Q 2015: US$469m)

US$1,161m

Key highlights

  • Resilient performance despite challenging market conditions: adjusted profit before tax down 18%
  • Costs broadly unchanged, reflecting tight cost control and continued impact of cost saving plans
  • Strong capital position with a common equity tier 1 (CET1) ratio of 11.9%

  • Dividends per ordinary share in respect of 1Q 2016 were $0.10

Group Chief Executive

Our strategy

Capturing value from our international network

Our ambition is to be recognised as the world's leading and most respected international bank.

Distinctive advantages

Unrivalled global presence

Our network provides access to more than 90% of global GDP, trade and capital flows. We use it to offer products that facilitate trade and investment, and help clients participate in global growth opportunities. Our global presence helps us build deeper and more enduring relationships with businesses and individuals with international needs.

Universal banking model

Our four global businesses serve the full range of banking customers, from individual savers to large multinational companies. This universal banking model enables us to meet clients’ diverse financial needs effectively. Our balanced mix of businesses supports a strong capital and funding base, reduces our risk profile and volatility, and generates stable shareholder returns.

Long-term strategy

Develop our international network

We have an unparalleled presence in, and a long-term commitment to, our strategic markets. We aim to develop our network of businesses to support future growth and increasing global connectivity. Our global reach and range of services place us in a strong position to connect customers to opportunities, helping both businesses and individuals to grow and prosper.

Invest in wealth management and select retail businesses

We aim to capture opportunities arising from social mobility, wealth creation and long-term demographic changes in our priority markets. We invest in full-scale retail businesses in markets where we can achieve profitable scale.

Increasing global connectivity

The international flow of goods, services and finance continues to expand, aided by the development of technology and data in personal and commercial exchanges.

The international flow of goods, services and finance, 2012 to 2025

Source: McKinsey Global Institute, ‘Global flows in a digital age’ (2014)

Major trade and economic zones

Exports, compound annual growth rate 2014 to 2025

6.2%

Greater China

5.7%

Middle East and North Africa

5.5%

ASEAN

4.7%

NAFTA

4.4%

Trans-Pacific Partnership

3.5%

European Economic Area

Source: Oxford Economics

Note: Data as reported in the HSBC Holdings plc Annual Report and Accounts 2015

Financial targets

Delivering on our Group financial targets

Return on average ordinary shareholders’ equity
(Annualised basis)

Target
more than

>10%

Return on equity

Our medium-term target is to achieve a return on equity of more than 10%. This target is modelled on a CET1 ratio in the range of 12% to 13%. Return on equity on an annualised basis was 9.0% in 1Q 2016, compared with 11.5% in 1Q 2015.

Adjusted jaws
1Q 2016 adjusted jaws

-2.8%

Target

Positive

Adjusted jaws

Our target is to grow revenue faster than operating expenses on an adjusted basis. This is referred to as positive jaws. In the first three months of 2016 jaws were negative. This was mainly due to a 4% decline in adjusted revenue, which exceeded a 1% fall in adjusted costs.

Dividends declared in respect of the quarter
(US$ per ordinary share)

Target

Progressive

We are committed to increasing the dividend we pay to shareholders. This is measured by dividends per ordinary share declared in respect of the calendar year. Prospective dividend growth remains dependent upon the long-term overall profitability of the Group and delivering further release of less efficiently deployed capital. Actions to address these points are core elements of the Investor Update provided last June.

Dividends

The first interim dividend for 2016 was $0.10 per ordinary share.