Amit Goel

Amit Goel asked about the year-on-year trajectory of the 17%+ RoTE target, specifically whether it implies continuous improvement or reinvestment at an acceptable level, and noted the LTIP boundary changes. He also sought more detail on the $0.4 billion 'additional benefit' from Hang Seng Bank that isn't treated as an accounting synergy and the specific spending within the restructuring charge, particularly regarding staff.

Answer

Group CFO Georges Elhedery noted that LTIP is a remuneration committee consideration reflecting ambitious performance. Group Chief Risk and Compliance Officer Pam Kaur stated the target is 17%+ each year, without specifying a trajectory, but emphasizing diligent investment. She clarified that the $0.4 billion 'upside' reflects benefits dependent on markets and customer behavior, not strictly accounting synergies. Pam Kaur explained that the restructuring cost primarily covers technology investment and organizational alignment, with no planned severance, but rather role evolution, training, and reskilling. Group CFO Georges Elhedery reiterated that HSBC is a net investor in people and technology in Hong Kong.

Amit Goel asked if the mid-teens profitability target could be achieved within the plausible tariff downside scenario without additional cost actions. He also questioned why the downside ECL scenario for China and Hong Kong appeared less severe than at year-end.

Answer

Georges Elhedery, an executive, confirmed the bank is confident it can achieve its mid-teens return targets within the plausible downside scenario without needing further cost actions beyond those already announced. Manveen Kaur, an executive, explained that the starting point for Hong Kong and China CRE is better, leading to a lesser impact in the current model, and noted there has been little adverse development from that sector in the quarter.

Amit Goel asked for the rationale behind keeping the parent bank's CET1 ratio above its target range during periods of U.S. dollar weakness and questioned the strategic synergies of the U.S. Wealth business.

Answer

CFO Todd Tuckner explained that a weaker dollar inflates the leverage ratio denominator, making the leverage ratio more constraining and thus requiring a higher CET1 ratio to maintain prudent buffers. Group CEO Sergio Ermotti emphasized the U.S. Wealth business is a core strategic asset, citing its contribution to global diversification, synergies with the IB and CIO, and a clear path to higher profitability.

Amit Goel asked about the pace and rationale for reducing the group's equity double leverage ratio toward pre-acquisition levels. He also inquired about volume expectations in the Personal & Corporate Banking business, considering recent exchange rate movements.

Answer

Todd Tuckner, Group Chief Financial Officer, explained that lowering the equity double leverage ratio is a prudent measure that provides greater operational flexibility. For the P&C business, he projected a flattish outlook for lending volumes and a stable outlook for deposits, noting that interest rate movements would be the most significant driver of NII.

Amit Goel of Mediobanca inquired about the long-term plan to raise the U.S. wealth business's PBT margin from the targeted 15% to peer levels of 25-30%. He also asked if the 2027 target for mid-teens margin was a delay from a previous 2026 expectation.

Answer

CFO Todd Tuckner stated the goal is to narrow the gap with peers, not necessarily match them, to improve overall group profitability. He clarified the mid-teens margin target for the mid-term is consistent with prior commentary and that investments in banking capabilities are factored into the margin outlook, not expected to "fall out" later.

Amit Goel inquired about the bank's capacity to replace funding from sweep deposit outflows, the strategy for improving Wealth Management Americas profitability, and the potential to shift parent company exposures to mitigate capital requirements.

Answer

Executive Todd Tuckner clarified that the guided $50 million PBT impact from sweep repricing is net of various offsetting initiatives. He reaffirmed the commitment to achieving a mid-teens profit margin in WMA. Regarding the parent company, he stated it was "way too early to speculate" on specific actions to address potential future capital rules.

Amit Goel asked about the outlook for the Barclays UK product margin into 2026, questioning if a positive contribution is expected. He also inquired about the Investment Bank's cost management and investment strategy, particularly if strong revenues continue.

Answer

Group Finance Director Anna Cross noted it was too early to give specific 2026 product margin guidance, citing offsetting factors like mortgage growth mix and the maturation of promotional card balances. Group Chief Executive C.S. Venkatakrishnan stated the Investment Bank is operating according to the plan laid out, which involved realizing benefits from prior technology investments in Markets while making targeted investments in Banking segments like tech and healthcare.

Amit Goel from Mediobanca questioned why the 2025 RoTE guidance of ~11% was not upgraded despite a strong Q1 and higher NII guidance. He also sought clarity on the structural hedge benefit beyond 2026, particularly the assumed roll-off yield.

Answer

Executive Angela Cross stated that while Q1 was strong, it is only the first quarter, so the bank is reiterating its guidance. Regarding the hedge, she confirmed the benefit will continue beyond 2026 as the hedge notional is now expected to be stable, and guided that the average hedge yield in 2027 would be below the 3.5% planning assumption.

Amit Goel of Mediobanca asked for clarification on the accounting for FX risk management derivatives in central items and inquired about the potential impact of UK regulatory reforms on the bank's business outlook, particularly in mortgages.

Answer

CFO Katie Murray explained the central items noise was due to treasury activities taking advantage of FX volatility, which creates a negative NII entry offset by a positive non-interest income gain. CEO Paul Thwaite commented that the bank is supportive of recent reforms, noting they have already implemented changes to help first-time buyers and see the reforms as a net positive, though impacting a specific segment of the market.

Amit Goel from Mediobanca asked for a reconciliation of Q1 costs to the full-year guidance, suggesting potential for a cost beat. He also inquired about how a softening of ring-fencing rules could impact capital deployment and yields.

Answer

CFO Katie Murray reiterated the full-year cost guidance of £8.1 billion (including integration costs), cautioning that Q1 is not a run rate due to the lumpy nature of costs and upcoming expenses like wage awards. Executive Paul Thwaite explained that ring-fencing reform could allow for more efficient deployment of capital and liquidity across the group, ultimately benefiting customers, while maintaining strict capital discipline.

Amit Goel of Mediobanca questioned the non-banking NII headwind, asking if the previously expected uptick was still anticipated. He also sought clarity on the sustainability of strong commercial deposit growth, probing whether it was sticky or a temporary result of market uncertainty.

Answer

Executive Director & CFO William Chalmers stated that the non-banking NII trend is not linear and is developing as expected, with H2 likely to see an accelerated pace. Regarding commercial deposits, he noted that while some flows were from wealth managers parking cash, there was also strong, stable growth in core SME business current accounts. Group Chief Executive Charlie Nunn added that growing SME market share is a key strategic focus.

Amit Goel inquired about the Q1 severance charge, asking how much more is expected for the year and if this level is recurring. He also asked for any change in sentiment on the motor finance Supreme Court case and the potential opportunities from ring-fencing reform.

Answer

Executive William Leon Chalmers explained the severance charge was deliberately front-loaded to accelerate cost efficiencies, with the full-year charge around £280 million. On the Supreme Court case, he stated it's inappropriate to comment before the judgment. Regarding ring-fencing, he argued that a cost-benefit review is appropriate given the stronger prudential regime now in place.

Amit Goel inquired about any observed changes in customer behavior following the Bank of England's recent rate cut. He also asked for insights from the bank's recent discussions with the government (specifically Rachel Reeves) and their receptiveness to pro-growth proposals.

Answer

Executive William Leon Chalmers stated that the main effect of the rate cut was a rational market response and a reinforcement of the bank's expectation for slowing deposit churn, which supports the NIM outlook. Regarding government discussions, he expressed hope that the upcoming budget would provide clarity and be pro-growth, stating the bank is ready to support initiatives in housing, infrastructure, and energy transition, but offered no specific insights from meetings.

Amit Goel of Barclays asked for a reconciliation of the 93 basis point full-year gross margin guidance with the higher exit rate of ~96 bps seen in May/June. He also requested an update on the subsidiary Kairos, in light of recent press reports.

Answer

CFO Evie Kostakis explained that the full-year gross margin guidance of 93-94 bps is somewhat conservative, as it does not assume a significant pickup in the highly variable client activity-driven income. CEO Philipp Rickenbacher stated there was nothing new to report on Kairos and that the company does not comment on press speculation.

Amit Goel asked a follow-up question on interest rate sensitivity, inquiring whether the impact of falling rates in the future would be a simple reversal of the current sensitivity or if other factors would lead to a more stable contribution.

Answer

CFO Evie Kostakis responded that it is hard to predict and that the firm will continue to provide updates on its interest rate sensitivity. CEO Philipp Rickenbacher added that the elasticity of rate moves is not necessarily linear in both directions, making the question speculative.

Amit Goel of Barclays asked for color on the drivers behind improved client activity in July, given the market environment had not significantly improved. He also inquired whether the client deleveraging trend seen earlier in the year had started to reverse.

Answer

CEO Philipp Rickenbacher explained that the pickup in activity is a typical pattern following periods of extreme market movements, such as the 9% MSCI drop in June. He noted that after such events, investors often pause before re-engaging to seek new opportunities, leading to a step-by-step return to the market.