Raul Sinha

Raul Sinha inquired about the drivers behind the growth in Risk-Weighted Assets (RWAs), particularly the increase from asset quality trends in Asia, and its outlook. He also asked Noel Quinn for his thoughts on the group's future strategic priorities following its major transformation.

Answer

Georges Elhedery, Group CFO, detailed that the RWA growth was driven by lending, market risk normalization, and asset quality downgrades due to rate pressures, but noted no major ECL impact. Noel Quinn, Group Chief Executive, stated the future focus is on maintaining momentum, executing the strategy around HSBC's international core, and coupling sustainable returns with growth in wealth and transaction banking.

Asked about the underlying Net Interest Margin (NIM) trajectory, particularly in the UK, and how factors like deposit costs and HIBOR movements will affect the group's overall margin outlook in the absence of further rate changes.

Answer

The executive advised focusing on Banking NII. The UK NIM is considered broadly stable despite a Q3 dip. Headwinds from deposit migration are offset by tailwinds from higher HIBOR in Hong Kong and the reinvestment of maturing hedges. Overall margin pressure is easing, with volume growth expected to provide support in 2024.

Raul Sinha of JPMorgan Chase & Co. questioned the sustainability of Q1 deposit trends, asking if there were non-repeatable factors and whether the deposit margin could face pressure in Q2. He also asked about the development of credit risk in the corporate book amid rising insolvencies and the expected timing for unwinding post-model adjustments (PMAs).

Answer

CFO Katie Murray noted that while Q1 deposit behavior was in line with expectations, the market could become more competitive, and upcoming rate cuts would impact margins. On credit, she stated the PMA unwind will be a multi-quarter event and reiterated the full-year impairment guidance of below 20 basis points. Executive Paul Thwaite added that underlying corporate asset quality remains encouraging, with insolvency data being noisy and primarily affecting smaller businesses with no credit exposure.