HSBC Holdings plc (LON: HSBA) 2019 INTERIM RESULTS – HIGHLIGHTS
• Strong revenue momentum in 1H19 in Retail Banking and Wealth Management, as we won new customers and increased lending, and in Commercial Banking, with growth in all major products and all regions. Global Banking and Markets revenue lower.
• Continuing growth in Asia, although outlook is less certain. Reported revenue in Asia up 7% compared with 1H18. Reported lending in Asia up $23bn or 5% compared with the end of 2018.
• Investments of $2.2bn in 1H19, up 17% compared with 1H18, on near- and medium-term initiatives to grow the business and enhance digital capabilities.
• Improved customer satisfaction in scale markets in RBWM and CMB.
Group Chief Executive
• On 5 August 2019, John Flint stepped down as Group Chief Executive and as a Director of HSBC Holdings. Noel Quinn was appointed as interim Group Chief Executive and as a Director of HSBC Holdings.
Financial performance (vs 1H18)
• Reported profit after tax up 18.1% to $9.9bn.
• Reported profit before tax up 15.8% to $12.4bn, including an $828m dilution gain recognised on the completion of the merger of our associate The Saudi British Bank (‘SABB’) with Alawwal bank in Saudi Arabia. It also included a provision of $615m in respect of the mis-selling of payment protection insurance (‘PPI’), and $248m of severance costs arising from cost efficiency measures across our global businesses and functions. Adjusted profit before tax up 6.8% to $12.5bn.
• Reported revenue up 7.6%. Adjusted revenue up 8.0%, with strong performances in RBWM and CMB. Adjusted revenue down 3% in GB&M, which suffered from lower market activity due to ongoing economic uncertainty, and spread compression.
• Reported operating expenses down 2.3%. Adjusted operating expenses up 3.5%, with significant work undertaken in 1H19 to reduce 2020 run-rate. Positive adjusted jaws of 4.5%, supported by favourable market impacts in insurance manufacturing, the non-recurrence of a 1H18 adverse swap mark-to-market loss in Corporate Centre and disposal gains in Latin America.
• Earnings per share of $0.42. Return on average tangible equity (annualised) (‘RoTE’) up 150 basis points (‘bps’) to 11.2%, including c.120bps favourable impact of the SABB dilution gain.
• Common equity tier 1 (‘CET1’) ratio up 30bps from 31 December 2018 to 14.3%.
• We intend to initiate a share buy-back of up to $1bn, which we expect to commence shortly.
Progress on 2020 financial targets
• The outlook has changed. Interest rates in the US dollar bloc are now expected to fall rather than rise, and geopolitical issues could impact a significant number of our major markets. In the near term, the nature and impact of the UK’s departure from the European Union remain highly uncertain. Given the prevailing outlook for interest rates and revenue headwinds in GB&M and RBWM, we do not expect to achieve our 6% RoTE target in the US by 2020.
• We are managing operating expenses and investment spending in line with the increased risks to revenue.
• We expect some recovery from first-half market conditions in GB&M in the second half of 2019 and into next year, and continue to target a RoTE above 11% in 2020, but we will not take short-term decisions that could jeopardise the long-term health of the business.