Katherine Lei

Katherine Lei of JPMorgan Chase & Co. asked for specifics on the BOCOM-related threshold deduction and how much more impairment would be needed to impact CET1. She also asked about the accounting treatment of restructuring costs and for details on the tokenized deposit service.

Answer

Group CEO Georges Elhedery explained the tokenized deposit service is for HSBC clients and their whitelisted counterparties, subject to KYC checks, and reiterated that there is ample room for further BOCOM impairment before any CET1 impact. Group CFO Pam Kaur confirmed there are €14 billion of threshold deductions against a $13 billion market value for the BOCOM stake, providing a significant buffer. She also clarified that restructuring costs are a notable item but not a material one affecting the dividend.

Katherine Lei of JPMorgan Chase & Co. asked for specifics on the BOCOM-related CET1 threshold deduction and the amount of future impairment that would impact capital. She also questioned the accounting treatment of restructuring costs and the technical capabilities of the tokenized deposit service, including its availability to clients' clients and use on public chains.

Answer

Group CFO Pam Kaur clarified there is €14 billion of threshold deductions and the BOCOM stake's market value is $13 billion, meaning an impairment to market value would have no material CET1 impact. She confirmed restructuring costs are notable but not 'materially notable' for dividend purposes. Group CEO Georges Elhedery explained the tokenized deposit service is for HSBC clients and their whitelisted counterparties who pass KYC, and it does not operate on public chains.

Katherine Lei asked if the downside tariff scenario incorporated potential positive impacts from Chinese government stimulus. She also inquired about the assumptions behind the 'muted' loan growth guidance and if there was guidance on deposit or asset growth.

Answer

Georges Elhedery, an executive, expressed confidence in China's long-term outlook but confirmed the downside scenario did not include potential positive stimulus measures. Manveen Kaur, an executive, reiterated that muted loan growth reflects client uncertainty delaying CapEx decisions. She emphasized that the key driver for NII guidance is the strong and growing deposit franchise, not loan growth.

Katherine Lai asked for the reason behind the weakness in Transaction Banking non-interest income, the potential impact of relaxed LTV ratios on Hong Kong mortgage growth, and how the bank will meet its 5% cost growth target given the 8% rise in Q1.

Answer

Georges Elhedery, Group CFO, explained the transaction banking weakness was due to a tough comparison with a record Q1 2023 for foreign exchange, with current levels normalized. He also affirmed confidence in the 5% cost target, attributing the Q1 increase to timing of pay accruals, acquisition base effects, and one-off levies. Noel Quinn, Group CEO, noted that while Hong Kong's property market changes are positive, it's too early to call a trend.