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HSBC Goldman Sachs European Financials Conference in Berlin

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HSBC Goldman Sachs European Financials Conference in Berlin

  1. 1. HSBC Holdings plc Resilience in the face of uncertainty MICHAEL GEOGHEGAN GROUP CHIEF EXECUTIVE GOLDMAN SACHS CONFERENCE JUNE 2008
  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 2
  3. 3. • Market turmoil and outlook • Resilience of HSBC’s strategy • Challenges and opportunities ahead 3
  4. 4. Financial market dislocation • Industry’s recent US commercial paper: shrinking ABCP market propensity for high USDbn leverage 1,200 1,100 Asset-backed • Growth models that 1,000 depended on such leverage are now 900 unsustainable 800 700 Financial 600 500 400 2001 2002 2003 2004 2005 2006 2007 2008 Source: The Federal Reserve 4
  5. 5. Outlook for rest of 2008 • US will be weak and may move into recession • Europe will be relatively weak • Asia and other emerging markets will probably exhibit reasonable growth • Future risk from demand led inflationary pressure • Illiquidity in the markets is a continuing concern • Deleveraging of the financial system • Tighter regulation 5
  6. 6. • Market turmoil and outlook • Resilience of HSBC’s strategy • Challenges and opportunities ahead 6
  7. 7. Resilience of HSBC’s strategy The world’s leading international emerging markets bank Generating sustainable and profitable growth through strategies that focus on: • Being positioned in fast-growing markets • Having good customer relationships based on fairness • Running efficient operations • A strong capital base and balance sheet 7
  8. 8. Strategy aligned with trends that will shape the global economy Align ourselves with three We will long-term trends • Emerging markets growing faster than • Invest primarily in fast-growing markets mature ones • Use our unique global network for the • World trade and investment grow faster benefit of our internationally connected than the world economy customers in developed markets • Longevity is increasing • Maintain financial strength 8
  9. 9. We are reshaping to focus primarily on fast growing economies 2004 2005 2006 2007 Trending towards… 37% 40% 42% 42% 47% 53% 58% 58% 60% 63% Mature economies* Fast growing economies Based on PBT (excluding the gains on dilution of interests in associates in 2007) * USA, Canada, Japan, Australia, New Zealand, EU15, Switzerland, Malta 9
  10. 10. Business models that define our ‘right to win’ 1 Businesses with international Global Banking Private and Markets Banking customers where 4,200 96,000 Emerging Markets HNWI customers customers connectivity is critical (PB) Personal Mass Commercial Financial Corporates 2 Businesses with Affluent Banking Services (PFS) local customers 2.8 million 125 million customers where efficiency customers Small & Medium can be achieved Mass Market Sized Businesses (PFS) through global scale (CMB) 3 Products where global scale is critical Global Product Platforms (eg Cards, HSBC Direct) to effectiveness: efficiency, expertise and brand 10
  11. 11. We are defining business models that determine how we will participate in markets Today Business models Aspiration (# of countries/territories) • Measured increase Full Full service • 14 PFS mainly in CMB bank across all • 20 CMB • Sharpened deployment Customer Groups of business model Targeted Selective propositions in • 31 PFS • Realign countries specific • 30 CMB between selective and customer network models segments • Measured increase in country coverage Network Small presence • Sharpened deployment • 8 PFS complementing of business models • 14 CMB the global network 11
  12. 12. Intra regional trade growing faster than world trade New Japan US$54b Zealand [2.1] Australia US$266b US$161b US$248b Philippines Indonesia Taiwan Hong Kong China US$519b US$110b US$149b US$53b [49] [13.4] Thailand Malaysia Singapore Korea Vietnam US$247b Numbers in brackets give the number of times trade flows have increased from 1990-2006 Source: IMF 12
  13. 13. Signature capital strength Tier 1 capital ratios (%) Basel 2 Tier 1: 9.0% 10% 9.4% 9.3% 9.0% 8.9% 9% 0.9 1.1 1.1 1.3 8% 7% 6% 5% 8.4 8.3 4% 7.9 7.6 3% 2% 1% 0% 2004 2005 2006 2007 Shareholders' equity, minority interest and preference shares less deductions Innovative Tier 1 capital 13
  14. 14. HSBC’s strong deposit base US$ billion, 31 December 2007 % Growth, 2007 vs 2006 1,200 25 1,096 +22% 982 1,000 20 800 15 +13% 600 10 400 5 200 0 0 Customer Deposits Customer Loans and Advances Money market/CP funding costs below Libor for main Group entities 14
  15. 15. Benefits of diversification by geography and customer group 2007 Profit before tax: US$24.2bn, up 10% Geography % share % change 2007 vs 2006 +57 Asia-Pacific (50% ) +26 36% Middle East (5% ) +26 50% Latin America (9% ) +23 Europe (36% ) -98 North America (0% ) 9% 5% -130 -100 -70 -40 -10 20 50 80 Customer group % share % change 2007 vs 2006 15% -38 24% Personal Financial Services +19 6% Commercial Banking +5 Global Banking and Markets +24 Private Banking 25% n/a Other 30% -50 -20 10 40 70 15
  16. 16. Performance in 1Q 2008 1Q 08 key highlights • Q1 2008 profit ahead of Q1 2007 • Pre-tax profits up in all emerging markets in Asia-Pacific, the Middle East and Latin America • European businesses performed well with the UK retail business increasing pre-tax profit • US profit down as a result of higher consumer finance loan impairments and additional write-downs in Global Banking and Markets • Resilient profitability in Global Banking and Markets • Group underlying revenue comfortably ahead of 1Q 2007 16
  17. 17. • Market turmoil and outlook • Resilience of HSBC: strategy • Challenges and opportunities ahead 17
  18. 18. Financial targets Return on total shareholders’ Cost efficiency equity (through the cycle) ratio 15-19% 48-52% Tier 1 capital Total shareholder return (Basel 2) Above peer 7.5-9.0% group average 18
  19. 19. Restructuring in the US consumer finance business Actions taken include: • Discontinued wholesale and correspondent originated mortgages • Reduced mortgage services portfolio from US$50bn to US$34bn • Reduced branch based business Achievements • US credit card business remains profitable • HFC contribution breakeven since beginning of 2006 • Provisions have been increased 19
  20. 20. Continue to build out organically and selectively through acquisition in emerging markets Strong growth in Rest of Asia Acquisitions 2005-2007 • Customer loans up by US$32bn to • KEB outstanding US$102bn • Strategic partnerships in Vietnam • Incremental operating expense up by (Techcombank and Bao Viet) US$2bn • Integration of the Chinese Bank and • Operating profit up by US$1.5bn rebranded Chailese Credit Card Services in Taiwan • 50% joint venture with National Trust Ltd in China • IL&FS Investsmart in India, retail brokerage (agreed to acquire 73%) 20
  21. 21. Mainland China – Expanding the network • 67 service outlets • Regional focus: Bohai Rim, Yangtze River Delta, Pearl River Delta and Western region Shenyang Dalian Beijing Tianjin Qingdao Zhengzhou Xi’an Suzhou Shanghai Chengdu Hangzhou Wuhan Chongqing Changsha Xiamen Cities with branches and sub-branches Dongguan Guangzhou Cities with branches only Shenzhen Branch approved, to be opened this year Regions of focus 21
  22. 22. Progress in joining up the company • HSBC Premier – on the way to achieving 6m target by 2011 • Global links system servicing global inter-connectivity for Commercial Banking customers • Focused alignment in Global Banking Markets resulted in many awards including, Best Risk Management House – both globally and in Asia • Staff engagement • Monitor customer service • One HSBC – continue to streamline our underlying processes through development of common systems for common products and services on a global basis Strengthen the brand 22
  23. 23. HSBC: the world’s local bank Leading international emerging markets bank Widespread international network Uniquely international customer base Signature financial strength Diversity works 23

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