hsbc holdings plc – the world's local bank
TRANSCRIPT
Stephen GreenGroup Chief Executive Officer
Morgan Stanley European Banks ConferenceMarch 2006
HSBC Holdings plcThe world’s local bank
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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.
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Agenda
A changing Group
Strategic overview
Managing the Group
Developing the platform for Growth
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Changed and expanded Group profile
1995 2005 CAGR%
Staff (FTE) 101,000 268,000 10%
Customers 25m 125m 17%
RWAs US$ 225bn US$ 827bn 14%
HSBC’s market cap. US$ 40bn US$ 182bn 16%
HSBC’s dividend yield - 10 March 4.2%
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21.6%
20.4%
34.5%
23.5%
HK UK US Rest of Group
The source of profits is much broader and better balancedContribution in 2005 from business outside three major markets similar size to those major markets in 2000Increased the contribution from emerging markets
2005 2000*
Change in geographic composition of group pretax profit has been dramatic
35.8%
7.4%
26.4%
30.4%
US$4,517m
US$757mUS$4,280m
US$4,935m
US$7,234m
US$2,724m
US$3,127m
US$3,692m
US$20,966m US$10,300m
*2000 figures, UK GAAP excluding goodwill amortisation
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HSBC brandMake HSBC one of the world’s leading brands for customer experience and corporate social responsibilityBrand Development
1998 Brand identity
2002 Brand identity with differentiated positioning
2005 Using the Brand to generate business growth
HSBC ranked No. 29 by Interbrand(Highest mover in top 40. Absent from top 100 in 2002.)
HSBC Amanah
HSBC Direct USA
HSBC France
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Strong underlying growth in 2005
* At constant currency and including IFRS impact
** Includes Bank of Bermuda, M&S Money, Bank of Communications and other acquisitions
US$m Acquisitions** Rest of Restated %2005 & other HSBC 2004* Change
investments
Net operating income beforeloan impairment charges 57,637 491 57,146 51,165 +11.7
Loan impairment and other(charges) 7,801 107 7,694 6,253 +23.0
Total operating expenses 29,514 296 29,218 26,794 +9.0
Associates 644 179 465 270 +72.2
Profit before tax 20,966 267 20,699 18,388 +12.6
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Platform for growth at HSBC- pretax profit by geography and Customer Group
30.3%
3.1%
32.8%
12.3% 21.5%
Europe
Hong Kong
Rest of Asia Pacific
North America
South America
US$6.4bnUS$6.9bn
US$4.5bnUS$2.6bn
125 million customers across our four Customer Groups
Operations in 76 countries and territories straddle virtually every area of growth in both mature and emerging markets.
Personal FinancialServices
Commercial Banking
Corporate, InvestmentBanking and Markets
Private Banking
US$5.2bn US$9.9bn
US$5.0bn
24.6%
4.4%
47.2%23.7%
2005 pretax profit US$20,966m
By geography By Customer Group*
* Other was 0.1% in 2005 vs 2.1% in 2004.
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Fundamental strategic thinkingA bank is a ‘leveraged’ play on the underlying economy, therefore the key challenge is to:• Select the better performing economies• Attract the most valuable clients in our chosen economies
HSBC aims to produce a blend of earnings from:• Developed mature-growth economies• Developing higher-growth economies (considered on a risk-adjusted basis)
Leveraging our internationality provides revenue generating and cost saving opportunities• Leveraging through our local presence the increasing trade and other links
between developed and developing economies• Transferring skills and best practice• Managing resources globally
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HSBC’s ‘Broadbrush’ 25-year scenario
Key economic areas will be:• NAFTA • Greater China
50% of the increase in world demand will come from developing countries such as:• China, India, Mexico and Brazil
Major opportunities within the diaspora of:• Chinese, Hispanic, Indian and many other expatriate
communities
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Germany
US
Demographic trends in selected economies
Source: U.S. Census Bureau International DatabasePopulation - 2000 (m)
Popu
latio
n gr
owth
-20
00 to
205
0 (%
)
<100m >100m >1,000m-25
>100
0
25
50India
China
BrazilMexico
Japan
Turkey
UKFrance
Saudi Arabia
Italy
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Fundamental operating strategy
Customer-driven — stay close to our customers
International teamwork
Strong capital and financial position
Conservative, sound risk management
Disciplined expense control
Ethical behaviour, observing the letter and the spirit
of rules and regulations
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Managing the Group
Making the matrix work
Leverage Group skills
Technology
Strategic management of costs
Developing human capital
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Managing the Group - making the matrix work
Asia-Pacific
Middle East
UK / Eurozone
North America / NAFTA
South America
Collective management binds the matrix together
Corporate, Investment Banking & Markets
Private Banking
PFS
CMB
PFS
CMB
PFS
CMB
PFS
CMB
PFS
CMB
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Leveraging the Group skills: two key examplesMexico
Internationality of Group key to ensuring success of acquisition• Influx of Group talent• Tightened controls (compliance and internal audit)• Installed new systems (treasury, branches, trade services
and credit card)Leverage Mexico’s ATM capabilities – location selection, direct sales channel, charity donations.
Rolling out the consumer finance modelSophisticated analytics MexicoScaleable systems BrazilMarketing skills Asia
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Technology
Our customers are using technology in a transforming way:• 1.5 billion visits to HSBC websites in 2005, +48% on 2004• 25 million registered internet customers, +27% on 2004• High penetration in Commercial Banking with 950k
registered internet banking customers, around 40% of customer base
• 271 million online transactions, +37% on 2004• 66% growth in online sales worldwide in 2005
Constant drive to common architecture• HSBC Universal Banking (“HUB”)• Credit card system (WHIRL)• Bank on the internet - hsbc.com / HSBCnet
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Strategic management of costs
Global resourcing• 11 locations in 5 countries currently
• 21,600 FTE (including IT development) at the end
of 2005
Process re-engineering and automation
Professional procurement
Strategic property management
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Developing human capital
Core values underpin corporate culture• Putting the team’s interests ahead of individuals• Individual accountability, aversion to committees
and bureaucracy• Speed of decision making• Integrity• Reputation is paramount
Talent Management
Diversity and international experience
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Developing the platform for further growth
Greater China
Other developing markets
Mature markets
Corporate, Investment Banking and Markets
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Developing the platform for growth in Greater China
Hong Kong - financial services centre for Pearl River Delta region
Network in Mainland China
Strategic stakes• Bank of Communications (19.9%)
• Ping An (19.9%)
• Industrial Bank of China (15.98%)
• Bank of Shanghai (8%)
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… and in other important marketsIn Mexico:• Lowest cost deposit base in Mexico• 1.1 million credit cards in circulation - up 80% in 2005
In Brazil:• PFS / Losango customer base over 20 million• 2.2 million credit cards in circulation – up 22% in 2005
PFS in Rest of Asia Pacific:• 6.6 million customers – up 1.2 million or 22% in 2005• 43% expansion in sales force to 17,400 across the region
In the Middle East:• Widest foreign banking presence – onshore platform in 14 countries• 24% growth in Commercial Banking RMs
In Turkey:• Marketing helped to increase customer numbers to 2.2 million• Plan to double branch network over the next 3 years
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Mature markets- there are clear growth opportunities
In the UK:• Current account market share 17%• Mortgage market share (stock) 4%
In Hong Kong:• Increased PFS customer base in target segments• PFS cross-sell ratio improved from 3.36 to 3.53• SME sales outlets re-branded ‘SME Centres’ to strengthen brand
identity In the United States:• Expanding the retail footprint – 27 new branches in 2005• Launched US-wide ‘On-line Savings’ proposition through HSBC
Direct USA – balances > US$1bn at the end of 2005In France:• Re-branded to ‘HSBC’ in Nov. 2005• Launch of 20 Premier centres in 2006• Target 15% market share of Corporate and Mid-Market by 2008
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Growth in: Income Costs
-3.3%
-4.4%
9.5%
10.6%
22.3%
12.6%
-10% 0% 10% 20% 30%
3.1%
15.6%
-9.8%
7.8%
27.9%
16.9%
-20% -10% 0% 10% 20% 30%
Growth in revenues and control of costs in mature markets
Note: Constant currency and excluding acquisitionsUSA PFS excludes the USA consumer finance business
PFS CMB
UK
Hong Kong
USA
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Change 2004 – 2005
* Excludes Day 1 profits as described in Note 17 in Annual Report & Accounts, 2005
35%
17%
17%
27%
0%
213%
42%
7%
-48%
0%
Foreign Exchange
Credit and Rates
Structured Derivatives*
Equities
Money Market andBalance Sheet
Global Investment Banking
Corporate Institutional Banking & Global Transaction Banking
Private Equity
% Change in Revenues 2004-2005
Full year revenues
US$11,457m
36%
9%
25%
30%Global Markets
Corporate & Institutional Banking andGlobal Transaction Banking Global Investment Banking
Other CIBM
(1,138)
75
276
1
68
145
496
441
Amount $m
Other 590
Extending the range of services in Corporate, Investment Banking & Markets
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OutlookHSBC’s unique international footprint provides the platform for profitable growth.
The Group’s scale and breadth provides competitive advantage.
Strong opportunities for organic growth in Asia, Turkey, Mexico, Brazil and the Middle East.
Opportunities to strengthen our position in established franchises in the US, UK, Hong Kong and France.
Growing momentum in Corporate, Investment Banking and Markets.
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