This document discusses HSBC's strategy of rebalancing towards developing markets and re-engineering its developed market businesses. It provides an overview of HSBC's strategic vision and positioning, with a focus on its geographic footprint and performance in key regions. It summarizes HSBC's outlook, highlighting trends of emerging markets outpacing developed economies in terms of GDP, trade, and consumption growth. The document also reviews HSBC's business performance and strategies across its key customer groups of Personal Financial Services, Commercial Banking, Corporate and Investment Banking, Private Banking, and Insurance.
2. 2
Forward-looking statements
This presentation and subsequent discussion may contain certain
forward-looking statements with respect to the financial condition, results
of operations and business of the Group. These forward-looking statements
represent the Group’s expectations or beliefs concerning future events and
involve known and unknown risks and uncertainty that could cause actual
results, performance or events to differ materially from those expressed or
implied in such statements. Additional detailed information concerning
important factors that could cause actual results to differ materially is
available in our Annual Report.
3. 3
The world as we see it evolving
Our strategic vision
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Rebalancing towards developing and fast growing markets
Re-engineering developed markets businesses
Leveraging our unique international connectivity through
customer groups and common platforms
Benefiting from global diversification, strong capital base and
continued prudent stance on risks
Global universal bank with
leading developing markets presence
4. 4
Our outlook
Our strategic vision
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
1. Emerging markets growing
faster than rich countries…
Source: HSBC estimates
Ten years ago… Share of
Global GDP
65%
35%
Today…
59%
41%
Ten years time…
50%50%
Non-G7
G7
2. World trade growing faster
than GDP…
Source: HSBC estimates
Level 1990 = 100
100
300
500
700
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Global GDP
World Trade
3. Longevity increasing
virtually everywhere…
Source: HSBC estimates
People aged 60 and over (%)
0
10
20
30
1980 2000 2025
More developed
World
Europe
Less developed
5. 5
Developing markets – economic context
Joining up our geographies
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
GDP growth
(2006 – 2020F)
Source: HSBC estimates
8.6%
7.5%
5.1%
3.5% 2.9% 2.3%
China India Asia Latin
America
USA Western
Europe
Trade growth
(2000 – 2020F)
Source: HSBC estimates
7.8%
6.9%
5.4% 5.1% 4.6%
Intra-Asia Asia Latin
America
Western
Europe
USA
Household consumption
(2006 – 2020F)
Source: HSBC estimates
9.9%
7.5%
5.2%
3.5% 2.9% 2.9%
China India Asia Latin
America
USA Western
Europe
6. 6
Rebalancing towards developing markets
Joining up our geographies
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Profit before tax split, average over last four half years1 Rebalancing over last two years1
58%
42%
1H05
53%
47%
Average over last four half years
Asia, Middle East and Latin America
North America and Europe
50%50%
1H07
8%8%
latinlatin americaamerica
21%21%
northnorth americaamerica
39%39%
asiaasia &&
the middle eastthe middle east
32%32%
europeeurope
(1) Excluding dilution gains
7. 7
Our positioning
Joining up our geographies
Strong presence in the world’s most dynamic economies
Largest international bank in mainland China, second largest in India
and growing impressively, fourth largest in Brazil
Unique global reach – a bridge between developed and
developing countries for our customers
HSBC is the largest and most profitable
international emerging markets bank
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
8. 8
Developing markets: Asia
Pre-eminent international bank
pbt up 30%to US$5.6bnex dilution gains (1H07)
• Hong Kong (profit before tax up 25%): gateway to China
• China: two-prong strategy with leading position
amongst international institutions
• Combination of organic and inorganic investments
• Focussed market expansion in key businesses using
direct channels
24%
4%
40%32%
PFS CMB CIBM PB
Joining up our geographies
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
9. 9
Developing markets: Middle East
Unrivalled historic presence
Joining up our geographies
pbt up 8%to US$606m (1H07)
• Onshore platform of over 208 branches and offices
across 15 countries, with almost 10,000 staff
• Strengthening presence in the Gulf States
• Additional organic investment in infrastructure
• First global bank to receive approval to set up UAE
brokerage
36%
7%
21%
36%
PFS CMB CIBM Other
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
10. 10
Developing markets: Latin America
A leading regional distribution network
Joining up our geographies
pbt up 16%to US$1.0bn (1H07)
• Expansion to 4,000 offices in less than 10 years in
14 countries
• Integration of Banistmo and BNL (Argentina)
• Replication of global businesses: credit cards,
consumer finance, foreign exchange, trade and
payments & cash management35%
1%
39%
25%
PFS CMB CIBM PB
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
11. 11
Developed markets: Europe
Driving links between developing and developed markets
Re-engineering our businesses
pbt up 13%to US$4.1bn (1H07)
• PFS continues to have challenges; focus is on clear
segmentation, enhanced channel capacity, and Global
Premier
• CMB revenues driven by customer recruitment and
cross-sales in the UK; expansion in Turkey, Spain,
Malta and Poland
• In CIBM, London and Paris are centres of excellence
driving global markets and global banking
• Private Banking: improved cooperation with other
businesses
1%
31%
12% 15%
41%
PFS CMB CIBM
PB Other
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
12. 12
Developed markets: North America
Re-shaping the business with our differentiated proposition
Re-engineering our businesses
pbt down 35%to US$2.4bn (1H07)
20%
2%
61%
18%
PFS CMB CIBM PB
• PFS: (1) restructuring mortgage services; and (2)
focussing on our strengths: credits cards ‘a top 5
player’ with growing market share; HSBC Direct; Global
Premier; and links to Latin America
• CMB: capitalising on international connectivity
• CIBM: focus on the distribution of Emerging Market
product into the U.S.
-1% Other
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
13. 13
Split of business by profit before tax1
Personal Financial Services
42%
preferred provider with top class
ethical sales & service culture
Commercial Banking
26%
to be the leading international
business bank
Corporate, Investment
Banking and Markets
28%
emerging markets-led and
financing-focussed
Private Banking
5%
outstanding international service
Opportunities in Wealth and Insurance
(1) Average over the last 4 half years (1H07, 2H06, 1H06 and 2H05), excluding dilution gains. Average pbt for other customer groups was -1%
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
14. 14
Personal Financial Services
Preferred provider with top class ethical sales
and service culture
Joining up our businesses
pbt down 20%to US$4.7bn (1H07)
• Global Premier
• Direct channels
• Focus on delivery of core products
• Consumer Finance in emerging markets
13%
48%
31%
8%
Asia Latin America
Europe North America
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
15. 15
Increasing customer recommendation
Through better propositions – Global Premier
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Full proposition
Future
Recent additions
France
Russia
New Zealand
Japan
Hungary
Slovakia
Poland
Czech Republic
Future (2008)
Saudi Arabia
Philippines
Panama
Pakistan
Qatar
Malta
Macau
Oman
Lebanon
Jordan
Indonesia
Egypt
Brunei
Bermuda
Bahrain
Australia
Brazil
Argentina
Recent additions
Thailand
Sri Lanka
Turkey
USA
UK
UAE
Taiwan
South Korea
Singapore
Mexico
Malaysia
Jersey (Offshore)
India
Hong Kong
Greece
China
Canada
Full proposition
We will add four million Premier customers
16. 16
Increasing customer recommendation
Through better propositions – the power of HSBC Direct
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
HSBC Direct USA
Customers: 568K
Launched: November 2005
HSBC Direct Canada
Launched: June 2007
HSBC Direct Taiwan
Customers: 73K
Launched: November 2006
HSBC Direct Korea
Customers: 49K
Launched: February 2007
We will expand up to four other countries in 2008
17. 17
Commercial Banking
To be the leading international business bank
pbt up 20%to US$3.4bn (1H07)
• Strengthening international links
• Expanded customer base to 2.7m with emphasis of
growth in emerging markets
• Strengthened network with increase in International
Banking Centres, Corporate International team and
Global Relationship managers
• Direct channel usage increased helped by enhanced
business internet banking platform expansion in
emerging markets
10%
14%
40%
36%
Asia Latin America
Europe North America
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
18. 18
Making our global distribution work
Na ssa u
To rto la (Briti sh V irg in Isla nds)
M iami
Ja cks onville
New York Cit yChic ag o
Pros pect Heig hts
Kan sas City
Houst on
Dallas
Oklahoma
Le wisvil le
Sioux F alls
Las Veg as
V ancouv er
C algar y
Saskat oon
Wi nni peg
Seattl e
Portl and
Ti g ar d
C ay man Is lands
Coló n
Pan am a Cit y
Boston
Glast onbury
Bri dge w at er
Fr ederi cton
St John’s
Vera cruz
Cook Isl a nds
Mérida
Me x ico Cit y Ca ncún
Acapulco
Puebl a
Guadalaj ara
To r reón
C ara ca s
Q uébec
Mont réal
Berm uda
Bu ffalo
Monte rrey
Tor onto
Ot tawa
Wa shi ng ton
Atl anta
Chesa peake
Colo mbo
Malé ( Ma ldives)
Mu mbai
Pune
Tri va ndru m
Port Louis ( Ma uriti us)
New Delhi
Ch a ndi garh
Muttrah
Sal alah
Jeddah
D amm am
Ku wait City
Bag hdad
Beirut Man am a
T ehran
Doha
A bu Dhabi
Amman
Cairo
Al e xa ndri a
Tel Aviv
Ni cosia
Is ta nbul A nk ara
Wa rsaw
Moscow
Ad ana
Pr ag ue
Zur ich
Lug ano Budap estPari s
Lu x embourg
Isle of Man
Leeds
Manchester
Edinburgh
London
Cha nnel I sla nds
Car diff
Val encia
B a rcel ona
B irmi ngha m
Belfast
Dü ssel dorf
F ra nkf urt
Br ussels
Stockhol m
Dublin
Madrid
At hens
Riy adh
Amst erda m
Dubai
Medan
VallettaAlgiers
Tr ipoli
Yere van
Ram allah
Durban
Johannes burg
Ca pe Town
K arachi
Ah m edabad
Ro me
Mila nGenev a
Monac o
Ban gal ore
Mysore
Hy derabad
Muscat
C hennai
Kolkat a
Bang kok
S y dney
A uckla nd
Manila
C ebu City
Tai pei
Hon g K ong
Maca u
Gu ang zhou
H a noi
Shenzhen
Wuhan
Qi ngdao
Suzhou
Ti anjin
Beij ing
Osaka
Toky o
Visa kh a patn a m
Ku ala Lumpur
Singa pore
Xia me n
Sha nghai
D alian
I nchon
Seou l
Daegu
Da ejeon
Al m aty
C heng du
C hongqing Pusan
Dhaka
Chittag ong
Wel lin gt on
Chri stchur ch
Brisbane
Perth A del aide
Ho Chi
Minh Cit y
Mel bourne
Ba ndar Seri Beg awan
Ko ta Kin abaluPenang
K uching
Jak arta
Ba ndung
Se marang
Surab aya
L abuan
B ratisl av a
Phil adel phia
Ne w Ca stle
White MarshVir ginia Beach
São Pa ulo
C ampo Gra nde
B rasília
R ibei rã o
Preto
Bueno s Aires
La Plat a
Perg amin o
Santiag o
Porto A legre
Monte video
M ar del Plata
Curiti ba
Co rri entes
Posa das
Par aná
R io de JaneiroSalta
Resist encia
Santa Fé
Ma naus
Cór doba
San Juan
Mendoza
Bahía Bla nc a
N euquén
San Francisco
Salinas
Bev erl y Hill s
Los A ngele s
San D iego
Ti juana
B ra ndon
Sa lva dor
R ecif e
Fortal eza
Belo Hor izonte
T ucumán
Belé m
Punta del E ste
I z mir
and territories
offices
over
in 83countries
10,000
Our global distribution is our key competitive advantage
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Global links
Increase in cross referrals
+37%
19. 19
Corporate, Investment Banking & Markets
Emerging markets-led and financing-focussed wholesale bank
pbt up 32%to US$4.2bn (1H07)
• Hub and spoke model
• Benefit from geographic network and strengthened
product capabilities
• Global Markets success broadly based
• Global Banking strength in financing and payments and
cash management
• Group Investment Businesses benefiting from expertise
in emerging markets
40%
43%
11%
6%
Asia Latin America
Europe North America
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Asia and Latin America contributed 49% of PBT
20. 20
Private Banking
Outstanding international service
pbt up 30%to US$0.8bn (1H07)
• Client assets increased by 11% to US$370bn
• Cross-referral business – close to US$2bn in ‘total
client assets’ referred into Private Banking
• Aim to increase contribution from wealth management
in affluent market
1%
8%
28%
63%
Asia Latin America
Europe North America
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Voted third best private bank in Euromoney in 2006 and 2007
21. 21
Insurance
A world class bancassurer and top ten player
contributed US$1.6bn or 11%to group pbt (1H07)
• Developing our income stream through distribution
• Three transactions initiated: acquired remaining 50% of
life & general insurer Erisa in France; J/V with Aviva in
UK and plan to create J/V with Oriental and Canara
banks in India
• Saudi Takaful IPO 7x over subscribed
• Established HSBC Insurance brand announced 10%
investment in Bao Viet in Vietnam (Sep07)
• To create J/V with National Trust in China
Europe
30%
Latin America
16% North America
21%
Asia
33%
pbt by region, 1H07
Manufacturing
50%
Other Incl
Ping An
17%
Distribution
33%
pbt by source of business, 1H07
Note: The results of Insurance are reported within customer groups, primarily PFS
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
22. 22
Our organisation
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Joining up our businesses
Fastest growing brand in
financial services
• 23rd most valuable brand in the world
• No. 4 financial service brand
Our brand Our people
• Breadth of experience at board level
• Seasoned Senior Management team
• Strong values, high integrity
Driving staff engagement
Source: Interbrand
23. 23
Global operations
Technology
Build once, deploy many
• One global network, self
managed
• 230,000 miles of fibre optic
cable
• 80 global group platforms
• 4 global data centre pairs, two
regional
• 42% of development in low
cost countries
Global Resourcing
Lift & shift to re-engineering
• 13 centres in 5 countries
• 28,000+ employees
• Wide range of processes: from
payments to collections to
analytics
Global Platforms
Linking up
• Credit cards: 116m cards
• HSBCnet: 33,000 clients
• Global transaction banking:
PCM; sub-custody; trade
• HSBC Direct: launched in the
US, Korea, and Canada
• CRM: Global Premier;
GlobalLinks in CMB; and
ClientVision in CIBM
Joining up our businesses
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
24. 24
The benefits of global diversification
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
31/12/91
(Before Midland
bank acquisition)
28/09/07
US$217bn
US$8bn
US$209bn increase in market capitalisation
25. 25
The benefits of global diversification
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
HSBC’s PositioningHSBC’s Positioning
0.41
0.49
0.61
0.69
0.54
0.66
0.80
0.63
0.76
0.99
1.18
1.36 1.40
0.31 0.35
0.15
0.81
0.73
0.66
0.60
0.53
0.48
0.44
0.340.310.28
0.22
0.16
0.08 0.10 0.12 0.14
0.00
0.50
1.00
1.50
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Earnings Per Share Dividends Per Share
(1) UK GAAP to 2003, IFRS basis from 2004
(2) Dividends per share in respect of each year
US$
Asian
Crisis
Argentinean
Crisis
US$2.2bn provision for
Mortgage servicesDividend per share
17% CAGR
1991-2006
26. 26
Our Strategy
Our Strategy Our Geographies Our Businesses Our Organisation Our Performance
Rebalancing towards developing and fast growing markets
Re-engineering developed markets businesses
Leveraging our unique international connectivity through
customer groups and common platforms
Benefiting from global diversification, strong capital base and
continued prudent stance on risks
Global universal bank with
leading developing markets presence