HSBC Holdings plc Interim Results 2016

 

Key highlights

We are one of the most international banking and financial services organisations in the world.

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

For the half-year to 30 June 2016

Reported profit before tax
(1H15: US$13.6bn)

US$9.7bn

Adjusted profit before tax
(1H15: US$12.6bn)

US$10.8bn

Reported revenue
(1H15: US$32.9bn)

US$29.5bn

At 30 June 2016

Risk-weighted assets
(31 Dec 2015: US$1,103bn)

US$1,082bn

Common equity tier 1 ratio
(31 Dec 2015: 11.9%)

12.1%

Total assets
(31 Dec 2015: US$2,410bn)

US$2,608bn

At a glance

  • Reported profit before tax fell by US$3.9bn or 29%, reflecting a US$3.5bn fall in revenue.
  • On a reported basis, revenue decreased by US$3.5bn (11%) and loan impairment charges increased by US$0.9bn. This was partly offset by lower operating expenses of US$0.6bn or 3%.
  • Adjusted revenue fell by 4%, with continued momentum in Commercial Banking more than offset by Global Banking and Markets and Retail Banking and Wealth Management, reflecting challenging market conditions.
  • Adjusted operating expenses fell by 4%, reflecting the continuing effects of our cost-saving initiatives and focus on cost management.
  • Through management initiatives, we reduced our risk-weighted assets (RWAs) by a further US$48bn.

Group Chairman’s Statement

Douglas Flint, HSBC Group Chairman

“Amid a turbulent period, nothing cast doubt on the strategic direction and priorities we laid out just over a year ago.”

Douglas Flint, HSBC Group Chairman
3 August 2016

Share buy-back

The Board has determined to return to shareholders US$2.5bn, approximately half of the capital released through the sale of our business in Brazil, by way of a share buy-back to be executed during the second half of the year.

Group Chief Executive’s Review

Stuart Gulliver, HSBC Group Chief Executive

Strategic actions

Capturing value from our international network

We have made significant progress against the actions outlined in our June 2015 Investor Update.

Resizing and simplifying

Refining our businesses

We continue to make progress in resizing and simplifying our business, including a further reduction in risk-weighted assets. We completed the sale of HSBC Bank Brazil on 1 July 2016. In the NAFTA region, we grew adjusted revenues in Mexico by 12%, compared with 1H15. In the US, we grew revenues and increased cost efficiency while continuing to support our clients internationally.

Cost-saving initiatives

Our cost-saving programme has shown good progress and we are on track to meet our target set for the end of 2017. We have also increased efficiency in our processes. For example, we have shortened the average time it takes to open accounts for Commercial Banking clients by 30 per cent since the first half of 2015.

Redeploying capital for growth

Our international network

At the heart of our business is our international network. In the first half of 2016, we increased revenues in Global Liquidity and Cash Management. We also continue to invest for growth in Asia. We are, for example, using our network to connect clients into and out of China, including Chinese investments linked to the government’s Belt and Road initiative.

A leader in renminbi services

We continue to be recognised as the leading bank for international renminbi (RMB) products and services. We were the first bank to facilitate overseas institutional investment into the China interbank bond market under newly relaxed regulations. We were also among the first foreign banks to complete RMB cross-border settlement for individuals, as permitted in the Guangdong Free Trade Zone.

Financial targets

Delivering on our Group financial targets

Return on equity
(%)

Jun 2016 7.4%
Dec 2015 3.8%
Jun 2015 10.6%


Our medium-term target is to achieve a return on equity (RoE) of more than 10%. This target is modelled on a common equity tier 1 (CET1) ratio in the range of 12% to 13%.

In 1H16, we achieved an RoE of 7.4%, compared with 10.6% in 1H15.

Adjusted jaws
(to 30 June 2016)

Adjusted jaws in per cent to 30 June 2016; 1Q16 negative 2.8 per cent; 2Q16 positive 1.4 per cent; 1H16 negative 0.5 per cent



Our target is to grow revenue faster than operating expenses on an adjusted basis. This is referred to as positive jaws. In 1H16, adjusted revenue decreased by 4.5%, whereas our adjusted operating expenses fell by 4.0%. Jaws was therefore negative 0.5%.

Adjusted revenue fell by 3.8% in 1Q16 compared with 1Q15. This had increased to 4.5% by the end of 1H16, reflecting the challenging economic environment.

However, adjusted operating expenses fell by 1.0% in 1Q16. This increased to a fall of 4.0% by the end of 1H16, as we continued with our progress on our cost-saving plans.

In 2Q16, our adjusted jaws was positive 1.4%. While our adjusted revenue fell by 5.3% compared with 2Q15, adjusted operating expenses were 6.7% lower.

Dividends per ordinary share in respect of the half-year
(US$)

Jun 2016 US$0.20
Dec 2015 US$0.31
Jun 2015 US$0.20


In the current uncertain environment, we plan to sustain the annual dividend in respect of the year at its current level for the foreseeable future. Growing our dividend in the future depends on the overall profitability of the Group, delivering further release of less efficiently deployed capital and meeting regulatory capital requirements in a timely manner. Actions to address these points are core elements of the Investor Update in June 2015.

Video

Iain Mackay, Group Finance Director, HSBC, discusses the bank's Interim Results, share buy-back and progress made in implementing its strategic actions.

Iain Mackay, Group Finance Director, HSBC