Joseph Dickerson

Joseph Dickerson asked about the underlying metabolic rate of cost growth for 2026, particularly concerning investments in areas like AI, and inquired about the specific HIBOR rate assumption used in the Banking NII guidance of greater than $45 billion.

Answer

Group CFO Georges Elhedery explained that investment capacity comes from within the cost base, additional costs (half for payroll inflation, half for investments), and the reallocation of $1.8 billion. He emphasized commitment to cost discipline. Group Chief Risk and Compliance Officer Pam Kaur noted that earlier-than-planned simplification saves provide incremental benefits for 2026, and confirmed that the end-January forward rate curve was used for Banking NII guidance, with HIBOR volatility impacts considered.

Joseph Dickerson of Jefferies followed up on Hong Kong CRE, asking what specifically drove the timing of the impairment charge in Q2 rather than earlier and what the bank considers an appropriate coverage level for the portfolio.

Answer

Group CEO Georges Elhedery reiterated the bank's comfort with its Hong Kong CRE position. Group CFO Pam Kaur explained that the charge was partly driven by a periodic model update. She noted that the bank considers distressed valuations, and the continued oversupply in the office sector combined with low transaction liquidity informed the timing and size of the charge.

Joseph Dickerson of Jefferies followed up on Hong Kong CRE, asking what specifically drove the timing of the ECL charge in Q2 rather than earlier, given the market dynamics were already known. He also sought to understand how to gauge the appropriate credit coverage level for this portfolio.

Answer

Group CFO Pam Kaur explained that the timing was driven by periodic model changes and ongoing valuation assessments, which now incorporate a probability of distressed valuations that can lag on performing books. She noted that the oversupply in the office sector and low market transaction liquidity are key challenges influencing the timing and calibration of these charges.

Joseph Dickerson inquired about the purpose of the 'plausible downside scenario' analysis, asking if it was meant to counter the perception of HSBC as solely a trade bank. He also asked about opportunities arising from the current environment and April trends for new-to-bank customers in Hong Kong.

Answer

Georges Elhedery, an executive, explained that the bank's broad trade finance expertise helps clients reconfigure supply chains, creating opportunities to deepen relationships and gain market share. He confirmed the strong trend of new-to-bank customer acquisition in Hong Kong continued in April. Manveen Kaur, an executive, detailed that the downside scenario modeled significant tariff hikes and a global GDP slowdown, resulting in a potential $0.5 billion incremental ECL charge.

Joseph Dickerson asked about the trend in time deposit migration in Hong Kong, questioning if the recent stabilization was better than expected, and inquired if the $3 billion share buyback was due to a calendar effect or an increased run rate.

Answer

Georges Elhedery, Group Chief Financial Officer, explained that while some deposits were reclassified, the stable quarter-on-quarter trend in Hong Kong was in line with expectations for slower migration in 2024. He confirmed the $3 billion buyback reflects a calendar effect, maintaining the recent $1 billion per month run rate, with future buybacks to be decided quarterly.

Joseph Dickerson of Jefferies asked about the key drivers behind the strong performance in the consumer finance business and its outlook for the remainder of the year.

Answer

Executive Jerome Grivet highlighted three key drivers for the consumer finance business: a strategic shift towards rapidly growing mobility financing (car loans), improving margins from lower refinancing costs, and a stabilization and slight improvement in the cost of risk. This combination is driving both commercial and financial performance.

Joseph Dickerson asked about the UK business, questioning if the deposit mix shift away from current accounts has stabilized, and about the US Consumer Bank's credit loss trajectory and whether late fee impacts were included in guidance.

Answer

Angela Cross, Group Finance Director, confirmed that underlying deposit trends in the UK are stabilizing, with Q1 impacted by normal seasonality. For the US, she explained that higher write-offs were anticipated and reserved for, with the full-year impairment charge expected to be lower than in 2023. She affirmed the late fee headwind is factored into the bank's RoTE projections.

Asked about the expected payback period for the Q4 restructuring charge, the sustainability of the high Consumer, Cards & Payments (CC&P) margin, and the RoTE outlook for 2024.

Answer

Payback details for the restructuring will be provided in February, as they vary by action type. The CC&P margin was boosted by a one-off item and is expected to normalize lower in Q4, closer to the Q2 level. The 2024 RoTE guidance will be provided at the full-year results.