Paul Fenner-Leitao

Paul Fenner-Leitao (Societe Generale S.A.) asked about internal discussions regarding emerging risks not yet widely recognized, specifically if Artificial Intelligence (AI) is viewed as a major future risk. He also inquired about the decision not to rebrand Hang Seng Bank post-privatization, the expected stabilization and potential peak of Stage 3 loans, and the preferred currency for Tier 2 issuance, particularly if Euro offers cost advantages.

Answer

Group Treasurer Faisal Yousaf stated that HSBC actively monitors scenarios, geopolitics, and regulatory policies, embracing AI for its opportunities while being aware of its structural shifts and risks for clients. Regarding Hang Seng, Mr. Yousaf explained the privatization brings two iconic brands together to maximize potential in Hong Kong, focusing on revenue synergies by leveraging the best of both brands. Global Head of Investor Relations Alastair Ryan added that it's an unusual strategy to run two full-service banks, emphasizing revenue opportunities over typical cost-cutting. On Stage 3 loans, Mr. Yousaf noted a tick-up to 2.5% but pointed to the cost of risk guidance (around 40 basis points), indicating conservative positioning despite pain points in commercial real estate, with no material increase expected. For Tier 2 issuance, he stated there are no set plans for currency, and options will be evaluated based on spread and demand.

Paul Fenner-Leitao from Societe Generale asked about potential risks HSBC is discussing internally that are not yet public, particularly regarding AI, the rationale behind not rebranding Hang Seng Bank post-privatization, the expected stabilization and potential size of Stage 3 loans, and the currency strategy for Tier 2 issuance, specifically if EUR is more cost-effective.

Answer

Faisal Yousaf, Group Treasurer, acknowledged HSBC's focus on scenario analysis and risk monitoring, stating they are positive about AI's opportunities and structural shifts while remaining aware of its risks. Regarding Hang Seng, Mr. Yousaf highlighted the successful privatization and the strategy to run two iconic brands to maximize potential in Hong Kong. Alastair Ryan, Global Head of Investor Relations, added that the intention is to run two full-service banks, focusing on revenue synergies rather than typical in-market cost cutting, and retaining Hang Seng's distinct brand and customer base. Mr. Yousaf noted that Stage 3 loans have ticked up but pointed to the 40 basis points cost of risk guidance, indicating conservative positioning with no material changes expected. For Tier 2 issuance, Mr. Yousaf stated there are no set plans for currency, and they will evaluate options based on spread and demand.

Paul Fenner-Leitão from Société Générale asked about Barclays' Tier 2 issuance intentions given tight spreads and upcoming calls, the tangible benefits of a potential credit ratings upgrade, and a quantification of the RWA benefit from SRTs, including the maximum expected capital benefit.

Answer

Group Treasurer Dan Fairclough confirmed expectations for some Tier 2 issuance due to upcoming maturities but indicated limited AT1 activity. He expressed optimism about a ratings upgrade, believing it's overdue given the improved credit profile, and noted active dialogue with rating agencies. Regarding SRTs, he stated the RWA amount is not disclosed but mentioned GBP 54 billion in total notional, reiterating that the Colonnade program is at scale with no major changes expected in SRT volume.

Paul Fenner-Leitão from Société Générale asked about Barclays' capital issuance plans, specifically regarding Tier 2 given tight spreads and upcoming calls. He also questioned the tangible benefits of achieving a single-A senior credit rating and the proximity to such an upgrade, and sought clarification on the RWA benefit from SRTs.

Answer

Dan Fairclough, Group Treasurer, indicated that while Tier 2 issuance is expected due to upcoming maturities, it would be limited. He also noted that AT1 activity would be small given no calls in 2026. Regarding ratings, he expressed optimism that an upgrade, which he believes is overdue given the improved credit profile, would lead to tighter spreads. He confirmed active dialogue with rating agencies, aligning the bank's strategy with their focus areas. For SRTs, he reiterated that the RWA benefit is not disclosed, but the total notional is GBP 54 billion, with the Colonnade program at scale and no major changes in SRT volume expected.

Paul Fenner-Leitao from Societe Generale asked for clarification on a 2034 call date, future AT1 issuance plans, the mechanics behind the U.S. consumer bank's high cost of risk versus its NPLs, and what early warning signs of negative consumer behavior Barclays is monitoring.

Answer

Daniel Fairclough, Treasurer, clarified the 2034 call date relates to a legacy preference share, not new supply, and stated that AT1 issuance would be broadly balanced with calls for the year. Anna Cross, Group Finance Director, explained the U.S. cost of risk is elevated due to IFRS 9's forward-looking provisions, which assume a higher unemployment rate than currently observed. She added that Barclays monitors spending patterns and payment rates for consumer stress, both of which remain stable and reassuring.

Paul Fenner-Leitao from Societe Generale asked for clarification on a 2034 call date, future AT1 issuance plans, the mechanics behind the U.S. consumer bank's high cost of risk versus its NPLs, and what early warning signs of negative consumer behavior Barclays is monitoring.

Answer

Daniel Fairclough, Group Treasurer, clarified the 2034 call date relates to a legacy preference share, not new supply, and confirmed Barclays expects to be a broadly balanced AT1 issuer. Anna Cross, Group Finance Director, explained the U.S. cost of risk is elevated due to the procyclical nature of IFRS 9 and forward-looking economic models, not just current delinquencies. She added that they monitor spending patterns and payment rates for consumer stress, neither of which are currently showing negative trends.