Our international network, access to high-growth markets and balance sheet strength deliver long-term value for customers and shareholders.
Our operating model consists of four global businesses and a Corporate Centre, supported by HSBC Operations, Services and Technology, and global functions.
- Continued growth in Asia
- Investments of $2.2bn, up 17% compared with 1H18, on near- and medium-term initiatives to grow the business and enhance digital capabilities
- Adjusted revenue up 8.0% on 1H18, with strong performances in Retail Banking and Wealth Management and Commercial Banking. Adjusted revenue was down 3% in Global Banking and Markets
- Adjusted costs up 3.5%; positive adjusted jaws of 4.5%
- Earnings per share of 42 cents. Return on average tangible equity (annualised) rose to 11.2%
- We intend to initiate a share buy-back of up to US$1bn, which is expected to commence shortly
Return on tangible equity (%)
Our target is to achieve a reported return on tangible equity (‘RoTE’) of more than 11% by the end of 2020, which is broadly equivalent to a reported return on equity of 10%. We intend to do this while maintaining a common equity tier 1 ratio of greater than 14%.
In the first half of 2019, we achieved a RoTE of 11.2% compared with 9.7% in 1H18. This included the favourable impact of the Saudi British Bank dilution gain of around 1.2 percentage points.
The outlook for the rest of 2019 has changed. Interest rates in the US dollar bloc are now expected to fall rather than rise, and geopolitical issues could impact a significant number of our major markets. In the near term, the nature and impact of the UK’s departure from the European Union remain highly uncertain. We are managing operating expenses and investment spending in line with the increased risks to revenue.
We expect some recovery from first-half market conditions in Global Banking and Markets in the second half of 2019 and into next year, and continue to target a RoTE above 11% in 2020.
Adjusted jaws (%)
Our target is to maintain on an annual basis, while noting the sensitivity of the metric to unexpected movements in revenue or operating expenses growth.
In 1H19, adjusted revenue increased by 8.0% and adjusted operating expenses increased by 3.5%. Adjusted jaws was therefore positive 4.5%.
Adjusted jaws in 1H19 were supported by favourable market impacts in life insurance manufacturing, the non-recurrence of a 1H18 swap mark-to-market loss on a bond reclassification and 1H19 disposal gains in Latin America.
We plan to sustain the annual dividend in respect of the year at its current level for the foreseeable future. Growing our dividend will depend on the overall profitability of the Group, delivering further release of less efficiently deployed capital and meeting regulatory capital requirements in a timely manner.
Group Chief Financial Officer Ewen Stevenson says that HSBC delivered a good set of results and continued strategic progress in the first six months of 2019.