Full Year 2020 HSBC Holdings PLC Earnings Call

[music].

Okay.

Good morning to everybody and London, and good afternoon, so everybody and Hong Kong.

We have two objectives today.

And the policy to take you through our Q4 and full year results for 'twenty and 'twenty.

And the second is to update you on progress against the change agenda, we shared with you last February.

And the additional actions we have taken to deliver returns above the cost of capital.

I'll start with a few reflections on the year just gone.

You and will then take you through our full year and fourth quarter results.

And then myself, Peter Wong Nuno myself, and John Hinshaw will share details of our future plan.

You have and will lend returns and cover the financial implications of that plan.

Let me start with 'twenty and 'twenty.

First and most importantly, our people provided amazing support to our customers.

And the communities we serve throughout the world.

We provided more than $52 billion of wholesale lending support through government schemes and moratoria.

More than $26 billion of additional relief for personal customers and.

And more than 1.9 trillion dollars of loan debt and equity support for our wholesale customers.

However, the numbers doesn't do justice to the efforts and energies that went into delivering them.

My colleagues acted with great purpose on a global scale.

They broke down silos, they innovated and they delivered repeatedly in the toughest of circumstances.

They are a customer centric and the truly sense of its.

And our customer schools in the U K Hong Kong the U S. The middle East and Mexico Bad day sides.

Second the economic impacts of COVID-19, he saw profitability.

But we still delivered $12 $1 billion of adjusted pre tax profits.

And $8 $8 billion of reported profit before tax.

We also finished the year with a strong capital base of 15, 9%.

And increased our liquidity by around $170 billion.

This proves two things.

This is an incredibly strong and resilient business.

Particularly in Asia, which delivered $13 billion of adjusted profit before tax.

But also opportunity exists even in a difficult year.

We increased mortgage lending and the U K and Hong Kong, we grew our share of trade and Asia. Despite the falling volumes, we grew all wealth balances and all target markets.

And we made $1 billion of P B and C in our India business.

Which will be hugely important in the years to come.

Third.

It was an incredibly important to us to resume dividend payments.

And we have declared a dividend of <unk> 15 cents per share.

We are also resetting our dividend policy in the future to strike a balance between providing good income.

And supporting future growth.

And future, we're aiming to deliver sustainable cash dividends.

While transitioning towards a payout ratio of 40% to 55%.

From 'twenty to 'twenty two.

We're no longer going to offer a scrip dividends.

And we will consider share buybacks beyond the near term when no imager opportunity for capital redeployment exists.

This is a measured policy.

And that gives us the flexibility to invest and grow the business and future.

Clearly 2020 fundamentally challenged many businesses.

So we also embarked on a major exercise to refresh our core purpose as an organization.

We consulted widely on this over a number of months speaking to thousands of colleagues and customers looking deeply into our history, but also assessing the world of the future.

And we kept coming back to the same things.

H S. P. C has always focused on helping customers pursue the opportunities of random.

Whether it's individuals families businesses.

Our renewed purpose.

Okay and off the world of opportunity both captures the same and sets I challenge.

Opportunity never stand still.

It changes and evolves with the world around us.

It is our job to keep adapting with it.

And to find and capture opportunities with the same spirit of entrepreneur realism, and innovation that I feel represents HSBC.

And it's very best.

We also saw in 'twenty and 'twenty the power of an organization that can respond positively and that pace. So radical change on a global scale.

Hence you will see a new behavior within our value statements.

We get it done.

It's deliberately expressed and uncomplicated language.

We can talk about what we want to achieve for ever.

But execution is everything.

Last February I promised we deliver all plans with pace and conviction.

Which is exactly what we've done.

We've taken more than $1 billion of costs out of the business.

I would expect to exceed our full 5 billion cost savings target ahead of schedule.

And despite the pools and a redundancy program following the COVID-19 outbreak.

We've reduced our FTE and contractor head count by around 11000.

And achieving those headcounts and cost savings.

We created a combined wholesale banking and back office function, serving both commercial banking and global banking.

We merged wealth and personal banking.

We reduced our senior management population by 17%.

We appointed new people to just under 50% of the top 200 senior positions.

We reduced our U S branch footprint by more than 30%.

And of course, our U S adjusted cost base by 8%.

We reduced ftes and our European and non ring fence bank by 6%.

And we achieved $52 billion of gross odds and <unk> savings in 2020.

Taken us more than halfway towards our three year gross risk weighted asset reduction target and just the single year.

However, given the impact of low interest rates on Covid.

We no longer expect to reach our targeted level of returns by 2022.

That said, we recognize the fundamental shifts in our environment in 2020 and react to them quickly.

The plans, we are aligned and today will build on this work.

And enable us to target a return on tangible equity at or above 10% over the medium term.

And that's with the assumption that base interest rates remain at today's ultra low levels.

You and we'll now take you through our results.

Thanks, and all and good morning or afternoon all.

From a quick words on the full year 2000, and 'twenty results.

The combined impact of Covid, 19, and ultra low interest rates significantly impacted our reported profit before tax.

Down in third and 4% from the prior year to $8.8 billion.

On the positive side.

Asian business held up well.

Our $13 billion of adjusted pre tax profits.

Russ included the second year running off a billion dollars of pre.

Pre tax profits from India and franchise.

And further market share gains and I tried franchise and the region.

We did a good job of controlling operating costs down 1.1 value and over 3% well ahead of what we had promised.

And I wait achieve a year ago.

And we achieved exceptional guy and our deposit franchise up 100, and southern Detouring and variant and a year or some 12%.

And we strengthened our cole capital base with a core tier one ratio up 120 basis points to 15, 9%.

As we move into 'twenty and 'twenty one.

What's the interest rate environment, that's mice and negatively impacting our returns outlook.

And it's why we're shifting our revenue next awards and noninterest income.

Accelerating our capital allocation or people and investment towards Asia.

And investing in our multi year technology plan to significantly improve productivity.

Turning to slide eight.

And the fourth quarter. It was a solid set of results with reported pretax profits of $1 $4 billion and.

Adjusted revenues were down 14% on last year's fourth quarter.

Mainly driven by the progressive impact of ultra low interest rates.

Expected credit losses were 44 basis points or $1.2 billion and the quarter.

This compares to 26 basis points. So, we're just under $700 million and the fourth quarter of last year.

Total ACL for the full year were $8 $8 billion at the lower and the five targeted eight to 13 billion full year range.

While operating costs were up Q4, and king for by 1% ex the bank Levy and this was mainly driven by a decision to increase the variable pay and coal occur Ole and the quarter, which was down 17% year on year.

And tangible net asset value per share increased by 20 strengths and the quarter to $7 75.

As you model 2021 please.

Please note that the weakening of the U S dollar towards the end of 2020.

We will materially impact both costs and revenues.

If you adjusted the 2020 results to average January exchange rates.

It would have added $1 $6 billion to our revenues and <unk>.

One $1 billion Chihuahua operating costs.

Turning to slide nine.

And looking at fourth quarter adjusted revenues across the three global businesses.

And wealth and personal banking.

Revenues were down 18% on a year ago.

Retail banking revenues falling by just under $1 billion.

This was due largely to the impact of falling interest rates on deposit margins.

Wealth management revenues were down $91 million due to a combination of lower insurance sales and the impact of lower interest rates on private banking deposits.

Commercial banking revenues were 15% lower.

G mainly to the impact of lower margins on global liquidity and cash management.

And global banking and markets revenues were down 7% and that's despite another good quarter for global markets, which saw revenues up 13% even from even as we can't value at risk broadly stable.

On slide 10, net interest income was $6 $6 billion, that's up 3% against the third quarter. The net interest margin was 122 basis points.

Up 10 basis points on the third quarter, reflecting improved liability margins, particularly in the U S and Europe.

As we look forward.

While we expect a soft start.

For non interest income.

For net interest income due to the lower short term high barrier Reits and fewer days this quarter, we expect NIM stabilization and lending volume guidance to progressively support net interest income over the remainder of the year.

On the next slide to core trains to discuss firstly on fee income, we saw greater stability and the fourth quarter, notably and commercial banking and global banking and markets with a small reduction in fees and wealth and personal banking, reflecting lower insurance sale.

<unk> and unsecured lending volumes.

And secondly on other noninterest income it was down $800 million. This reflected a combination of lower interest and on securities held in the trading book.

A reduction and the value of new business written and insurance.

And lower credit and funding valuation adjustments and global banking and markets.

For 2021, we expect customer activity and fee income to recover.

As economic activity recovers and.

And we've seen a good start to the year and Hong Kong.

But with the impact of new COVID-19 variance this recovery may be slower than wafers for solar or a few months ago and areas such as consumer credit.

We also expect global markets to have trading activity and lower than we experienced last year.

On the next slide Ecl's, where $1.2 billion from 44 basis points of gross lines and the quarter.

Relative to the third quarter. This mainly reflects higher stage three charges and the fact that the third quarter benefited from additional releases.

The stage, one and two year P&L charge for 2020 was around $4 5 billion.

And clothing around $300 million incurred and the fourth quarter.

We now have stage, one and stage two provision and balances of $7 $9 billion.

That's up $3.9 billion and 2020.

While we remain cautious on the outlook for credit and 2021, we.

We expect the 2021 ECL charge to be lower than 2020.

And we have no update at this point to the guidance. We gave you at the third quarter.

Effectively a range of approximately 40 to 60 basis points this year.

By 2020 city, we expect ACL Stuart Metairie and reduced from the 81 basis point charge in 2020.

Towards or even below the lower and the fire 30 to 40 basis point normalized range.

Turning to slide 13.

Fourth quarter, adjusted operating operating costs ex the bank Levy.

We're $719 million higher than the third quarter.

This was driven by targeted technology investment and marketing spend.

Together with a decision to increase the variable pay April.

For the year as a whole operating costs were down $1.1 billion or 3%.

This included a number of offsetting items the variable pay pool was down by more than $500 million.

COVID-19 impacted cost items like travel and entertainment and marketing were down by around $600 million.

And our combined cost programs, either 2019 and 2020.

Delivered and in year savings of $1 $4 billion.

Offsetting this were various items, including technology increased technology investment up $377 million or 7% on 2019.

But 2021, we expect the bank levy to fall to around $300 million, that's some $500 million lower than 2020.

For operating costs ex the bank Levy, we're seeking to keep them broadly flat after adjusting for the impact of dollar weakness.

With significant cost savings from our ongoing restructuring program offset by a combination of CIT and costs, increasing from COVID-19 loans together with planned higher investment and growth spend.

On slide 14, and the first year of a three year program, we achieved $52 billion of Grace risk weighted assets saves.

We're more than halfway towards our 100 billion dollar guidance reduction target of low returning risk weighted assets. This included a $10 billion reduction and the fourth quarter.

We expect to make around a further $30 billion of <unk> and 2021.

On slide 15.

Core tier one ratio at the end of the fourth quarter was 15, 9%, that's up 30 basis points and the quarter.

This was driven by a combination of RW rate reductions on a constant currency basis profit generation FX translation differences and 21 basis points of software intangible benefit.

On the latter we expect software intangibles to be reversed out of our core tier one over the next 12 to 18 months.

Excluding FX movements.

Risk weighted assets fell by $20 billion and the fourth quarter, primarily as a result of reduced lending balances.

The play and 'twenty and 'twenty interim Devin and the 15 cents resulted in a reduction of 40 basis points to our core tier one ratio at the end of 2020.

And with that back to Noel.

Thanks Shannon.

So last February we announced a series of actions to make HSBC fit for the future.

And we remain committed to delivering them.

But there were three fundamental shifts in 2020, we must reflect in our plans for the future.

First the interest rate environment changed dramatically.

We lost around $5 $3 billion of net interest income.

And more than two percentage points of royalty.

And we don't expect rates to rebound anytime soon.

We reacted to this in two ways.

And accelerating our shift towards non interest income.

Including and fee income.

And cutting our cost further and faster to compensate for loss of revenue.

Second the shift to digital was accelerated by the impact of Lockdown.

As the pandemic took hold and our customers' digital engagement increased dramatically.

We were already investing heavily and digital and technology.

But we responded by rapidly accelerates and the Digitization of our business.

Third COVID-19 has made everyone aware of how fragile the global economy is two and external events.

And as a consequence and.

<unk> mental issues I've taken on and renewed importance.

Thankfully we were already working on the next phase of our successful journey with respect to sustainability.

And we announced and ambitious new climate plan in October of last year.

The low carbon transition is the most transformative trend of our time.

And he presents and unmissable commercial opportunity for a bank of our size geography and profile.

So these three trends.

And the decisive action, we took to meet them form the basis.

For much of what you're going to hear over the next 30 minutes.

We have a plan that we think can deliver at least 10% return on tangible equity over the medium term.

It will transfer material amounts of capital from low return markets to higher return markets.

And that capital will be deployed into businesses in Asia, where we already have a strong track record of growth and profitability.

And we will also invest in technology to transform our costs.

The supply and capable of delivering returns above the cost of capital.

And supporting both sustainable dividends and future growth.

It is built on the four pillars you see here on slide 19.

And I'll take you through each one and term.

Slide 20, and looks at the first pillar of our plan.

Driving growth by focusing on our strengths.

We're going to stop trying to be everything to everyone.

We want to do the things that capitalize on the advantages we have and.

And to do them brilliantly.

In wealth and personal banking and we will continue to invest in our scale markets in the U K and Hong Kong.

But the new story here is Asia wealth.

Nino will talk about this in more detail.

Well, we're going to invest more than $3 $5 billion and wealth in Asia and the next five years.

To achieve three things.

We want to serve high net worth and ultra high net worth clients and Hong Kong mainland China, Singapore.

And southeast Asia.

Globally.

We want to build out our insurance and asset management capabilities across Asia.

With organic and inorganic options certainly on the table.

And we want to do more with clients, who already banked with us, bringing wealth opportunities to our customers and commercial banking and global banking and markets.

And commercial banking, we will continue to be unashamedly and uniquely global.

We want to lead the world and cross border trade.

And in serving mid market corporates globally.

There are many things that a change and with respect to our strategy and our execution.

But this one will remain unchanged.

We'll invest around $2 billion to drive customer acquisition.

And become digital leader and our scale markets.

And to support the three critical product platforms.

Global liquidity and cash management glue.

Global trade and receivables finance and foreign exchange.

Global banking and markets will retain the capacity to serve clients globally.

But we will invest in the markets that sets us apart.

Whilst also moving the heart of the business to Asia.

Including leadership.

We will use our global network to connect and our global banking and market clients so opportunities in Asia The U K.

And the middle East.

Where we can add the greatest value.

We will spend around $800 million in GB and EM in Asia.

Build better digital market platforms to support our wealth strategy.

To build better market access and execution capabilities for our wholesale clients.

And to expand our investment banking coverage across Asia.

Peter will talk about this and a few minutes.

Slide 21 shows where our U S and Europe business European businesses fits in.

Michael Roberts and the U S team did a great job in 2020 repositioning the business.

Closing branches and driving down costs and reducing capital.

For the next stage, we will focus the vast majority of our resources into our international corporate and institutional franchise in the U S.

We will continue to connect our U S wholesale clients into our international network.

Driving revenue growth in other regions.

We'll also defend our strength in U S dollar clearing.

Trade and foreign exchange.

And continue to reposition U S markets and security services to provide access.

In a way that uses less capital.

And U S retail.

And I'll focus will be on building and international wealth platform.

That connects WPB clients across our global network.

U S wealth opportunities.

And we continue to explore organic and inorganic options for our U S retail banking franchise.

For Europe. The story is similar Nuno and the team laid solid foundations in 2020, removing arguably ways and reducing ftes by 6%.

Our strategy remains focused on connect and inbound and outbound international wholesale customers into our network.

And our wealth business focused on our global book and sensors in mainland Europe.

We will keep investing and our transaction banking franchises to better connect issuers and investors into Europe and.

In Europe to Asia.

And continue to reduce or exit subscale retail banking and SME portfolios.

We are continuing with the strategic review of our retail banking operations and friends.

And are in negotiations in relation to a potential sale.

Although no decision has yet been taken.

If any sale is implemented given the underlying performance of the French retail business.

And the loss on sale is expected.

Slide 22 looked at the second pillar of our plan.

And this is incredibly important.

We see our digital agenda is presenting opportunities for both revenue growth and cost efficiency.

In the last year, we spent around $5 $5 billion on digital and technology.

The impact of this is coming through our.

Digital engagement and ratings.

And our revenue and.

Our cost base and in our ability to operate a global business and the middle of Covid.

We wouldn't have achieved what we have already done without historical investment.

John will go into more detail about the future investment program.

But I want to take a minute or two to talk about how we'll pay for it.

We think we need to grow and investment by between 7% and 10% on a compound annual basis between 2019 and 2022.

To pay for that we need to reduce the cost of Rooney and HSBC by 4% to 5% over the same period.

We intend to save a $1 billion more on costs and we said last February on a constant currency basis.

We'll make our cost programs work harder to deliver between five and $5 $5 billion of savings.

And we will spend around $7 billion to achieve those savings.

With at least half of that falling in 2021.

We also intend to keep our headline costs broadly stable from 2022 onwards and I.

Pivotal and us to reinvest further savings into the business.

Slide 23 is about energizing HSBC for growth.

So the culture, the composition and the future skills, we need.

This is about creating a dynamic inclusive and entrepreneurial organization.

We've already infuse the top of the firm with new people and new skills.

More than three quarters of my senior leadership team have been imposed from around a year or less.

And of the layer below just under half of the top 200, so called from their current roles in 2020.

We've also reduced senior management numbers by 17%.

Removing layers and increasing accountability.

I am passionate about creation and inclusive organization that unlocks opportunity for rule and.

And fosters the diversity of thought and experience that every business needs.

The diversity of our top team is improving but we want to go further both in terms of agenda and.

And if necessary.

We also made good progress include improving employee advocacy.

But there are gaps amongst some employee groups that we must bridge.

We also need to build skills and capabilities in areas that are different to what we've needed historically.

Particularly in digital analytics and sustainability.

We can bring some of those in from my side as we have zone over the last 12 months.

But we also need to train from Exane.

Which we're doing through the newly expanded HSBC University for.

And for which I was the executive sponsor before I became group CEO.

Slide 24 looks at one of our biggest opportunities and one of our biggest drivers of change.

The transition to net zero.

We're already a global leader in sustainability, and we want to stay there as the market expands exponentially.

In 2002, and see we were the biggest underwriter of green, social and sustainability and sustainability linked bonds for the second year running.

Doubling the volume we under wrote in 2019.

We've already set out some uniquely ambitious plans for a bank of our scale and footprint.

To reduce emissions and our operations and supply chain to net zero by 2030.

And to align our portfolio of finance the emissions to net zero by 2050 or sooner.

In May we intend to find a resolution to our AGM requesting investor approval for a clear.

Science based routes to our net zero aligned portfolio.

It will commit the bank and then financing of coal fired power.

They will align our finance the emissions to net zero.

And it will commit us.

To evidence in it through very specific milestones and reported.

Let me be clear that we intend and plan to work with all our clients in every sector to map and finance their low carbon transition.

We are aligning every part of our business behind that aim.

Both to achieve net zero ambition and to capture the commercial opportunity.

So taking all of this and aggregate.

What's is tomorrow's HSBC look like.

We're effectively undertake and three pivots.

To Asia to wealth and to fee income.

We'll also continue to grow our global capability in wholesale banking and.

And further leverage our unique capability to service mid market corporates globally.

These are our highest return highest growth opportunities.

We expect to move around eight percentage points of group tangible equity to Asia over the medium to long term and.

And were linking this to compensation for the first time.

It will explicitly be path of mine and you and scorecards.

We also expect to move around 10 percentage points of tangible equity so wealth and personal banking over the same period.

With a broadly equivalent reduction in global banking and markets.

The focus of the investment and wealth combined with our investment and technology aims to deliver compound annual revenue growth and the mid single digits from 2022.

And that should accelerate the growth of fee income and insurance income from 29% to around 35% of group revenue over the medium to long term.

This is an ambitious plan, but a deliverable plan.

And we're going to move with pace and determination and belief and our ability to get it done.

I'll now hand over to patients talk about our Asia opportunity Luna to talk about our pivot to wealth.

And John to talk about the technology that underpins everything we want to achieve.

Thank you no.

I wanted to start by saying I'm very excited about Asia growth and.

And HSBC is uniquely positioned to capitalize on the opportunities.

Economically Asia is outperforming the rest of the world.

It contributed 71% of global growth and 2019 and is expected to account for almost half of global GDP and <unk>.

2025.

The key story and Asia is rapid wealth creation.

By 2032 thirds of the world's middle class will be and Asia.

Up from just over 50% today driving strong growth in consumer spending.

And this will promote trade.

Pwc forecast the trade flows and Asia will grow 25% faster than the rest of the world over the next five years.

Well HSBC the opportunities lie not just and helping sustainable growth.

Supporting trade and managing the well within the region, but also and using our unique global footprint to connect the rest of the world to Asia and vice versa.

We are already a leader in Asia.

We operate in 19 markets across the region, covering 98% of Asia and GDP.

But the majority of our markets our history goes back 140 to 150 years.

Therefore, we know the customers the cultures, we know the regulators and we know the business flows.

And when it comes to global connectivity.

Our international competitors lack our footprint and deep connection to Asia.

And our Asian competitors lack our international network.

Within Asia, Hong Kong mainland, China, Southeast Asia, and India will drive our growth. These.

These markets will benefit from and expected doubling of assets under management and Asia is 30 trillion dollars over the next five years.

To expand our businesses, we will continue to strengthen our position and Hong Kong.

Our market, leading digital products in particular.

And leverage our strengths to capitalize on the opportunities and the greater Bay area and <unk>.

And with a population of $73 million and GDP of one seven trillion and U S dollars.

We will hire more than 3000 wealth managers and China.

And we expect the middle class population could double from the current $300 million to $600 million by 2028.

And in Singapore, and our wealth and personal banking business.

We will increase resources to build and the momentum created by last year double digit AUM growth across premier and Jade.

And established regional wealth management hub for RCN and South Asia.

Our global banking and markets and consumer and current and.

And commercial banking businesses, we will capitalize on the more than 4200 multinational corporations that have regional headquarters in Singapore.

We already bank. Some 750 of these and we will build on this progress by scaling up our coverage teams and product capabilities, including cash and liquidity risk management to increase our market share in this space.

And India, we will build on our long standing national and international relationships and accelerate the growth momentum we have already established.

<unk> banking revenue grew by over 20% per annum and the last two years and.

And we also aim to leverage our unrivaled network to win a large a larger share of the $18 million Nonresident Indians and wealth management business across the world.

So how are we going to do this.

We will invest an additional six daily and in the region over the next five years with half of it and South and Southeast Asia.

The investment is mainly in new talent for our wealth management and wholesale banking businesses.

And improving our technology externally.

Externally Lula and <unk>.

Hence our digital capabilities across all markets.

And to deliver a tailored and to end customer experience, enabling our 14 million clients, who use our network to move or invest capital globally and seamlessly.

Internally, we will invest in areas, including data and analytics our.

Initial intelligence and machine learning and anticipate the needs of our customers more effectively.

And capture a greater share of wallet across retail commercial and global banking.

And we will continue to maximize the revenue generating potential of our global footprint and product range.

Already 55% of our global revenue is driven by cross border businesses.

And the last 12 months, we have won awards for best Global Trade Finance Bank.

Best Digital bank and best regional.

Private bank among many others.

We will continue to invest the capital relies on the huge and growing opportunities in Asia as wealth market.

And work and work towards becoming Asia, leading international wholesale bank.

Overall, these actions will increase market share and boost our revenue streams, which will generate double digit PBT growth and Asia over the medium to long term allow.

Allowing the region to continue to deliver significant contributions to HSBC group dividend.

This is really an exciting time to be in Asia, and really and exciting time to be an HSBC and.

And with that I'll hand over to immuno. Thank you.

Thank you Peter.

Last year, we created wealth and personal banking and we brought together our mass affluent and asset management insurance and private banking businesses in.

And to one integrated business and.

Allowing for a significant acceleration of our wealth strategy.

Last year.

Business and generated close to $8 billion in highly accretive wealth revenues with more than 50% being fee revenue.

Our wealth expansion is well underway.

We've made the necessary structural changes the plans are well defined we have bold, but achievable ambitions and we are in full execution mode, particularly in Asia.

But also and our global wealth hubs and.

And that's what I would like to talk about today.

We believe that wealth management is one of the most compelling opportunities for growth in financial services today.

The affluent and high net worth population expansion.

Low rates for longer and the capital light profile of this business makes it very attractive.

And while the opportunity is global.

Asia is no doubt.

And the fastest growing region for <unk>.

<unk> assets.

In this context.

Sbcs perfectly placed to capture this opportunity.

We have a compelling starting point with 4 million customers and one six trillion.

Of wealth balances, making us a leading international wealth manager.

The lion's share is in Asia and.

And accounting for more than 65% of our wealth revenues.

We are the second largest wealth manager in Asia <unk>.

Leveraging the strength of our brand, which is built on a 155 year heritage of serving customers and the full capabilities of Universal Bank.

And last year, we grew our global world balances by more than $160 billion of double digit growth.

Second and.

The wealth opportunity becomes truly global or international network gives us the ability to deliver transactional banking and.

And wealth management services in the most relevant markets to our international oriented affluent and high net worth customers.

We have a strong presence in the world's top eight cross border well pumps and.

And third.

We have unique access to our prospect customers through our leading CMV and GBM businesses and their extensive client base in 2020.

And 60% of net new money from asset management private banking came from our wholesale relationships.

So over the next three to five years, we will invest more than $3 $5 billion to leverage disadvantages and accelerate development of our wealth business, particularly in Asia.

Our investments will be focused on two areas.

Firstly, developing new products technology and platforms.

To deliver a leading client experience.

We will built digitally enabled financial planning platforms across the client continuum.

And scale up our insurance health and wellness platforms.

We will integrate our wealth management capabilities with a mobile first approach and create a single core banking platform for private banking across Asia and EMEA.

We will differentiate our asset management business.

And with a focus on high value higher margin products.

And we will deliver high conviction product and areas like alternatives ESG and equities.

We'll deliver bespoke wealth products for our <unk> and private banking customers in partnership with global banking and markets.

And we will grow and deepen and ultra high network clients.

Through a dedicated client coverage model, focusing on Asia, and the middle East and non products, which make best use of the group's capabilities.

In parallel.

Two thirds of our investments will aim to significantly expand our distribution capabilities.

This effort will focus on hiring more than 5000 customer facing world planners.

We equipped with remote video capabilities.

Particularly from our flagship clinical expansion in mainland, China and high net worth coverage and Singapore.

On significantly growing our private banking and rich on mainland China to 10 cities and.

And more than doubling our customer base in mainland China and Singapore.

And finally in expanding our asset management footprint in emerging Asia, particularly India and Malaysia.

These investments will enable us to grow our AUM and Asia.

Covid and the markets.

And grow revenues by more than 10% CAGR significantly and crews and increasing the contribution of wealth from our total WPZ revenues.

We have strong credentials to deliver on this ambition.

Our leadership position and Hong Kong is well known.

And having delivered strong growth over the last five years and concentrating our number one world market share.

Our U K integrated digital wealth capabilities are now very credible.

With recent rollouts of flex invest well plus and benefit plus.

Today more than 60% of our customers equity trading in Hong Kong is now done and mobile.

We will be leveraging these capabilities to differentiate our wealth proposition and the rest of Asia.

In mainland China, we are the largest foreign bank.

And despite the chance of the pandemic, we have launched clinical in four cities and obtain the first ever foreign Fintech license in mainland China.

Our hiring plans are well underway.

In six months, we have approximately 200 world planners and.

And we will scale up to 3000 and by 2025.

And by the way we are also exceeding our financial targets.

Our rollout of a leading advice led private banking.

And in mainland China will also benefit from our private banking Hong Kong, which was recently voted number one.

For the sixth consecutive year.

And in asset management, we will aim to take a majority stake in <unk> interest.

Falling changes and regulation and we will execute to become a top 10 international asset management in mainland China.

And finally.

Our global footprint is unique.

And particularly important in the wealth space as our clients' needs increasingly are global.

With Matilda expansion and many wealth corridors.

We will invest in our booking centers and Singapore, Switzerland, The U K channel Islands, and the U S. S key wealth hubs.

In India, we will target to be the number one foreign bank for and arrives.

And having a ready and leading market share among the overseas Chinese diaspora.

And as agents well expense.

Expense cross border, we are well.

Positioned to grow with it.

I have great confidence and the prospects of our wealth business.

And the combination of our unique competitive position our integrated business structure.

And our investment and people and platforms will deliver solid growth.

With our global donation position WPZ is well placed and organize to accelerates our wealth growth and deliver at pace.

And I look forward to updating you on.

On our progress.

I will now hand over to John.

Thanks, Neil and I want to expand upon what you've heard today and describe how technology will be a differentiator for the group or.

And our focus is to shift away from costs across the bank debt aren't adding value to customers and to make investments that drive revenue growth and a better customer experience.

But first let me explain digital business services and <unk>.

And do it as host and the past, which stood for HSBC operations services and technology.

It's my view that this was a fragmented approach to our task at hand, which is digitizing our business and to and.

Thus we are digital.

And we're focused on improving our business results and where our services based organization digital business services.

The first slide slide explains our approach and probably wont be surprised that we spent more on technology, especially given increased customer demand due to COVID-19.

But more importantly than the amount we're spending is that we're developing technology and a fundamentally different way.

Our approach to building technology platforms and shifted from building bespoke local solutions to leveraging our scale, we will build once and deploy globally.

We're also laser focused on reducing the bank's cost by digitizing end to end processes and eliminating manual work.

To do this we're resolving the boundaries between the front middle and back offices. So work is process with a limited or ideally no manual touch points.

And 2020 for example.

We processed seven 6 billion payments as a bank.

And they were worth 563 trillion dollars.

And we increased our no touch rate on those transactions to 96%.

But we can do even better.

Our aim is to get above 99% low touch right and the next several years.

And to get those last few percentage points, we're going to need to digitize the most complex payment processes.

Reducing the number of people involved and manual work means that can be redeployed into revenue generating roles and savings can be reinvested back into technology, creating a virtuous circle of digitization that unlocks customer growth.

We're also doubling down on our partnerships with big Tech firms like Google and Apple Amazon, Microsoft and Alibaba as well as many small fintech firms across the Globe. For example, we believe HSBC is one of Google clouds largest and most engaged financial services clients.

And we're working with them on intelligence led financial crime detection, which will ultimately help protect our revenues.

The next slide contains three examples of how we're using our scale to improve the customer experience and drive revenue growth.

We've invested over $1 billion of last few years, and our mobile ex platform, which is now a bank and your pocket and as standardized as our core digital platform across all key markets.

But one of the most interesting things about this new platform is the way, it's driving personalized interactions with.

We marketed and extensively and Hong Kong last year and saw record credit card spending as customers like the improved experience.

We've also received App store ratings and many markets that are $4, seven or higher which is up significantly from prior ratings.

And we now have 3 million, Hong Kong digital customers, which represent 40% of the population.

And over 95% of all retail transactions and Hong Kong are done digitally.

Our global money account platform is a great example of how we're taking something developed in one country and this case and the U S and deploying it elsewhere.

The internationally and mobile population requires access to funds and different countries and currencies I'm personally a great example of that having just recently moved from the U S to the UK.

And our product does just that it enables instant global transfers with our multi currency card using real time FX rates.

Built on a common platform, it's now being rolled out worldwide.

They went live and the U S and August with planned launches this year and the UK for ex Pats and the middle East and Singapore and shortly the rest of the world will follow.

And then finally kinetic which is a cloud based mobile app for our corporate customers that we rolled out and the U K.

And we're using the insights gained so far to see how we can apply the capabilities and Asia and other parts of the world.

Finally, let's get into more details on the opportunities to drive operational efficiencies.

Clearly COVID-19 has transformed the way we've all worked over the past year and we now have an opportunity to create a lower sustained cost base and both corporate real estate.

And reduced business travel.

We've analyzed our worldwide real estate footprint and anticipate a reduction and the order of 40% over the next several years, while also ensuring our remaining real estate has a lower environmental footprint on the journey to having our operations at net zero by 2030.

And there also opportunities to further reduce our workforce performing non customer facing functions.

Overall, our workforce numbers are down 11000 and year on year. Despite the fact that we pause redundancies last year, while we assess the impact of the pandemic on our customers and our people.

But over the next few years through Digitization, and we expect the finance function to be reduced by about a third.

And we will change the nature of the work the finance teams perform.

We will do this by migrating our analytics and reporting capability to and agile cloud platform.

Our technology head count will be optimized to focus on agile development and we will reskill, our colleagues with the technology skills needed for the future.

There's also an opportunity to materially shrink the number of manual processes, which will result, and less need for the vast operations function and a bank today, which currently spans 74000 resources.

Many of these resources will be re skilled for higher value customer engaged opportunities, including data and analytic skills that are in high demand.

Our commitment throughout HSBC is to attract and retain the best and brightest and most diverse colleagues for our journey ahead.

Few if any other organizations and the world can offer the same breadth of opportunities that HSBC does to applying cutting edge technology to solve real life problems and improve People's lives.

We're doubling down on creating a diverse and inclusive workforce I have an entirely new senior management team that has have promoted from within and have recruited externally and has pre quarter female executives.

And we will continue to do more to improve gender balance and diversity across the broader team.

Thanks for listening, let me hand back over to you and now.

Thanks, John.

On slide 40.

Our refresh plan seeks to build returns to at or above the cost of capital.

And to do so and in an environment, where right broadly stay at.

Today's levels, providing leverage to the upside of higher rights retailer and in the coming years.

In order to do this this broadly three buckets of retailer and upside.

Firstly things that we just expect to happen irrespective of management and intervention.

And the risk bucket I would put two things.

The normalization of ECL charges that I talked about earlier.

And the lowering of the bank Levy from this year onwards.

Together, they should add around 300 basis points of writing over the next few years.

And secondly are the actions, we talked about across revenues cost and capital.

Together, we think these plans can drive an incremental 400 basis points of return on tangible equity over the coming years.

On revenues, a few things that contribute to us.

Firstly, the achievement of our <unk>.

Better mix of higher returning lending relationships.

This was a core part of what we announced in February last year.

And the shifting of capital from certain lower recurring western and clients to the east.

And we made very good progress on the shift out of the west and 2020.

With material growth from risk weighted asset reductions and our U S and non room fence bank franchises.

But COVID-19 did slightly the reallocation of capital to the east relative to what we expect it to day last year.

However, as Peter has just set out we continue to be massive balls on the high growth and return potential across our Asian franchises.

And as a medium term, we've and ambition to have Asia represent around 50% of our tangible equity that's up from 14% today with.

And with much of the remaining 50% of our capital led to Asia.

And secondly on revenues as our planned growth in noninterest income.

You have heard from pizza and Nuno are raised aspirations in this respect.

We see significant growth opportunities and both Asia wealth and Asia wholesale and we're committing further material capital people technology and investment resources to underpin and us.

On operating costs, you've heard today and increased ambition from us.

We've raised our 2022 cost reduction target by a further $1 billion.

But more importantly, we've got growing confidence and our multi year cost opportunity beyond us.

And and aspiration to keep costs broadly flat, while continuing to achieve healthy revenue guidance and yours.

John just talked about thus using technology to transform the hull of our organization.

Our front office distribution costs through increased digital delivery and.

And higher relationship manager productivity.

Lower commercial real state costs, as we return to work and a very different way.

And using technology to transform the operations and functional support model delivering much better customer and control outcomes at a dramatically lower cost.

And on capital, we've got a whole bunch of initiatives underway stripping back the capital allocation to our U S and non ring fence bank franchises, including trapped capital currently sitting in the U S.

And proving the optimization of capital across various subsidiaries elsewhere.

And investing and our stress testing capabilities to drive and the aggregate level of stress across the group.

That's why we're now guiding to a 14 day 14, and a half per se and core tier one ratio.

Rather than the previous 14% to 15%.

And the last building block for our return on tangible equity is and improve rating environment to be clear, we're not baking that into our base plans.

We want to have a business that can generate cost of equity returns.

Assuming this rate environment.

But I would note that a 100 basis point parallel shift upwards and Reits would improve our returns by around 300 basis points within two years.

And so on slide 41, and technical and to conclude before handing back and now.

We're resetting our operating operating cost target for $2022 1 billion lower than previously guided and.

And post 2022, and and passion to keep costs broadly stable, while achieving material revenue growth.

Our gross and risk weighted asset target by the end of 'twenty two remains unchanged.

At least $100 billion, but with over 50 billion and achieved in 2020 and a further 30 billion and targeted in 2021 we've.

We have high confidence and delivery.

Our core tier one ratio of 14% or more with confidence and being able to manage to a 14% to 14 and and a half percent range over the medium term.

And new dividend policy, all cash going forward with nice script alternative and.

And have dividend of 15 cents per 2020.

And then transitioning in 2021 towards a payout ratio of 40% to 55% from 2000 and 'twenty two onwards.

This allows for a powerful combination of both sustainable growth and.

And sustainable dividends.

Where we have excess capital in any given year, we will look to buybacks to augment dividends.

<unk> died model buy backs into your 2021 numbers.

And our return on tangible equity of at least 10% over the medium term.

And that can be delivered and the current rate environment with material leveraged upside if rates improve.

And <unk> and that can be delivered with a set of actions that set firm layers and self help measures within this management team's control.

And with that thanks and over to now to conclude.

And thank you and so to wrap up.

We will significantly increase the group's capital and resource allocation to faster growing and high return markets.

And we will capitalize on the opportunity offered by our network and our franchise to drive growth from fee generating products and wealth and platform businesses and wholesale banking.

We will leverage technology to transform our cost position.

All four insignificantly higher operating leverage and freeing up resources from investment.

And we expect all this to deliver returns above the cost of capital, while driving revenue growth principally from Asia.

Through our new dividend policy, we aim to deliver both sustainable dividends and sustainable growth.

And as a final comment.

In 2020, we executed against our promises.

And in 2021, we will do the same.

We will get it done.

With that we'd be happy to take your questions.

Thanks, Paul and <unk>.

Good morning, and good afternoon everybody.

We got through a combination of questions mainly audio question from telephone lines.

From written questions from the video webcast will start off the four fire from the order lion's share over to share on the operator please.

Thank you if you'd like to ask a question today. Please press star one on your telephone keypad.

So that the mute function on your telephone is switched off.

And your question has been answered you may remove yourself from the queue by pressing star and to please limit yourselves to two questions and Lee.

Once again to ask a question. Please press star one and show that.

The mute function on your telephone is switched off.

Your first question today comes from the line of Martin Light GAAP from Goldman Sachs. Please go ahead. Your line is open.

Yes, good morning and.

Thank you very much for the presentation.

The first question.

Just on the capital and Im just trying to understand.

And the moving parts in terms of capital progression from here because on one hand.

And the strong capital plan.

And this quarter was $15 nine.

And.

Yeah, the guidance in terms of capital headwinds so positive free.

And software and tangibles.

And just around.

Just to emphasize Basel III from around 10 to 15 billion excess capital spot versus your 14.

And to $14 five target range and John.

And trying to square that up with mid single digits.

Net growth ambitions.

And your investment spend which is over five year periods and I understand.

And.

The dividend payout guidance capture in 2021.

John.

So a significant hedge.

Headroom here in terms of capital.

Quickly.

Eagle faster growth, but it is predominantly or inorganically always Dennis and I'm.

Im missing in terms of the potential headwinds.

And the second question and I was just wondering.

On rate sensitivity and thank you for the disclosure on slide 69.

And shifting yield curve.

Yeah.

And could you help us quantify the impact.

Okay.

From purely a rising from the Steepening of the new credit facility.

Over the last couple of weeks months and U S. Sid.

And Sterling.

It's still fairly limited inventories from dish.

Steepening of the yield curve kidney and limited purchase and particular income from it.

Or is that in a more meaningful impact from me. Thank you.

Okay.

Well I'll start off and the first question Martin on.

Yes, maybe to deal with a three risk weighted assets I mean, if he.

And we obviously finished the year at just over 850 billion of risk weighted assets.

Yes, we are.

And telegraphing and expectation of volume growth and sort of mid single digits over the next few years I think for this year, it's probably going to be backend weighted.

As.

Various economies recover from Covid.

Yeah, Yeah, we have around $10 billion of regulatory pressures this year.

And.

And total about $40 billion to $50 billion. If you go through 'twenty, two and 23, including the impact of Basel.

We've got a non <unk> rundown program, that's still about $50 billion to go that largely offsets that $30 billion this year and call. It another 20 next year.

And then on top of that.

Which has.

<unk> has surprised us, but yeah, we've had.

Meaningful.

Credit rating migration during 2020, there's about $30 billion of credit migration.

We're anticipating that to be less and 'twenty 'twenty, one it could be materially less depending on how economies recover.

And then a decent amount of that reverse out in 'twenty two onwards.

So when you put all that together, we are anticipating risk weighted asset growth on.

Distributions we.

We do expect to be about the 40% to 55% payout ratio in 2021.

And then migrating within that payout ratio thereafter, as I've said no buybacks this year, but.

It's certainly something that we used in the past as you know.

We do see them as a legitimate means of capital management.

And if we have excess capital and 'twenty, two and beyond and certainly something we'll consider.

And on right.

<unk> sensitivity.

And.

Yes, the shaping of the yield curve and the U S dollar and provide some support but not material support we're far more sensitive to the nearer and of the curve.

Net attrition from the audio line please.

Thank you.

Thank you. Your next question comes from the line of agencies from Credit Suisse. Please go ahead. Your line is Nathan.

Alright. Thank you very much for taking my questions I have two questions one follow up on capital and one on net interest income.

On capital just to just to understand you very helpfully outlined the risk weighted assets.

And your capital targets.

And part of that share.

Mark capital.

Mark for potential opportunities and could you maybe outline how much youre thinking and.

Over what period of time, and then on net interest income.

You've had and NIM contribution of five basis points from from the liabilities can you give us any insight how much of that sort.

And the recurring and how much more you could do from from either changing liability mix or reprice and going forward and then on loan volumes.

Sort of showing a decline quarter on quarter basis from.

From the development, despite a weaker U S dollar.

You expect and mid single digit going forward.

Sort of where do you expect this could come from thank you very much.

Yeah, So on capital we're not.

Yeah, allocating or precisely allocating any amount and say.

Inorganic.

Within that dividend policy of 40% to 55% payout ratio, we are giving ourselves and flexibility to do bolt on acquisitions.

And I use the word bolt on quite carefully and expect us going out and doing.

Material M&A anytime soon but if we see things that we can bolt on that accelerate our strategy and some of the areas we talked about today.

We will certainly consider it.

Yeah.

Yes, net interest income them generally.

<unk>.

Yes, I think Q4, there was the repayment of.

And.

IPO and Hong Kong, which I think had a material impact on.

And lending volumes together with.

And at traditional cramming down.

Corporate borrowings towards year end, so I wouldn't read too much into tier four of last year.

<unk>.

Our net interest income for this year, yes, we do expect on the positive sides and asset growth as I said are biased to the second half.

I think news flow out of the UK yesterday was very positive.

Vaccination programs now styler and Hong Kong.

You'll have your own forecast for China, but we see significant growth opportunity I think and Asia coming out of Covid.

And continue to see a significant opportunity here and the U K and mortgages for example, where we've been consistently running at about a 10% market share during the year last year.

And by the liability side and the asset side, we see some repricing opportunity.

John.

Dollar weakness should add about $800 million or so too.

Non interest income this year and offsetting that obviously when you look at our where all forward interest tables were going to have some headwinds from.

The lower interest rates from last year.

And we've currently got a very weak high ball say.

And and you know that we're very very sensitive to one and three month LIBOR. So.

Hey, John and I would also add and loan volumes and I think what we saw towards the end of last year.

And Asia was a lot of customers wholesale customers.

Positioning themselves with facilities available to fund future growth, but not yet drawing down on those facilities.

I think they're ready with their balance sheets to take advantage of an upturn.

And they are waiting to see that to income as we start to see the world come out of the Covid crisis, hopefully on the back of the vaccination program.

And certainly a lot of.

Activity towards the end of last year and getting ready for the upturn.

Thank you.

It's very helpful. Thank you very much.

And another question from the audience. Please.

Thank you. Your next question comes from Tom <unk>.

From UBS. Please go ahead your line is open.

Yes, good morning, everybody.

A couple please first one on the Tam and guidance for 2022.

The bottom and or below the 30 day.

And to 40 basis point range.

And if you're factoring in anything significant in terms of the leases from the stage one and two.

And with the weather.

So the 2022 number is going to be.

So that's through the cycle right.

And then the second question please.

So the distributions you mentioned and obviously.

Share buybacks, a possibility, but in the medium the.

The medium term you define and straight to full yes.

Just wondering whether you're actively rolling out buybacks. This.

And this year and next year all weather.

Reading too much and et cetera.

Monology.

And I'm assuming that.

And above the maximum dividend payout it'll be the 14% to 14 and half percent target range.

Equity tier one and that sort of calibrate Shaw maximum distribution potential. Thank you.

Yeah.

Thanks, Tom for taking me out from the use of the two medium so I'll be more careful going forward.

Rural GAAP buybacks in 2021.

I wasn't intending to also put a block on us participating and buybacks in 2022.

And payment guidance.

And we've talked in the past about.

Our normalized range of 30 to 40 basis points.

Three the cycle, we were obviously.

And more than double the top end of that in 2020.

Included in net was a very significant buildup of stage, one and stage two.

If you back that out we were running and probably the low forty's law in 2020.

Yeah.

Yes.

And as we think about 'twenty two there may well be some reserve releases and that guidance, but I do think if.

Yes, and the world is recovering out of Covid, we should be able to operate at or below 30 basis points for 'twenty two onwards for a few years until the cycle turns again.

Okay. Thank you and.

And just on the <unk>.

Have a question.

Thanks for the clarification on the on the 2022.

The total distributions and I know youre leasing risk outcome acquisitions, you've said.

55% maximum payout.

And I'm, just thinking if the loans any acquisition opportunities and so.

Would you pay that debt to distribute everything else within the whole thing for the full day in and then I'll.

So and the important thing is the first call on any excess capital will be to try and use it to drive growth, but profitable growth and are strategically important markets and a focused way.

And then if we call if we don't see opportunity for growth and we do reserve.

The option of buybacks, but I think it is too early to make that call at this point in time so.

I think we'll clearly look to use the capital and profitable growth and the focused areas and resorts of buybacks. If we don't have a realistic opportunity for profitable deployment.

And I was I remember, Tom and what I was talking about and one of the previous questions is.

Yes, there will not be there will still be some decent amount of.

And <unk> inflation, and both 'twenty, two and 'twenty three.

Coming from regulatory change.

The important change we've made with this dividend policy is to provide an opportunity to both generate strong return and.

And strong growth for the bank and.

That's what we're trying to position with the dividend policy going forward.

Okay. Thank you very much one.

And more audio question. Please and then we'll take a callable over it and questions.

Thank you. Your next question comes from the line of among the call from Barclays. Please go ahead. Your line is open.

Good morning, John.

Thanks for the questions.

Just a couple of fees.

And I was just curious.

Quickly on the cost targets that you've given in 2022 does it.

<unk> anything to French retail and.

And the North American retail business that is currently under review or should we be looking to kind of.

John just those targets incrementally for anything that may or may not get announced that's not included within our cost targets any actions on those two areas would be incremental.

Okay. So would there be a loss of revenue as well so you need to take both of those into account.

Okay.

And then on costs.

Cost management more broadly then.

How are we thinking about the cost and managing that cost base. I mean are you looking to.

Jos.

And as well as given the absolute cost target and if the revenue volume. It doesn't come through are you looking to manage it on a dual risk basis should we be looking at cost income ratio.

How are you thinking about cost per ex the revenue come through but I'll give you a to performing status and then I'll ask you into today and some more detail there.

And we're targeting and absolute cost number in the medium term.

And on a constant currency basis that is now $30 billion.

When we talk to a year ago, we talked about $31 billion and 2022, we're now talking 30 on a constant currency basis and the medium tier.

And so that is also having taken into account a willingness to invest so that $30 billion.

And is post.

Net investment.

And clearly, we're investing and the business because we see growth opportunities.

And we believe it's right for the bank to investing those growth opportunities.

And I clearly that's a dynamic we'd have to key.

On the watch as to how much growth is starting to return into the economy.

And how much growth, we should be investing in.

But that target absolute number we've given you is only assumption of growth and ultimately on the assumption of investing in growth and in total and ran about 6 billion and over the next.

Five years in Asia.

<unk> and juul had anymore.

And then act.

I think we've done a pretty good job on costs over the last couple of years remember in 2018, we grew our cost base by about five 5% and that year last year, we shrank by 3%.

Yes, that's a eight and a half percentage point delta and the cost run rate.

And as Noel said and I think it really yeah, we're not targeting either yours or at what we're targeting is to get returns up materially and and know what to do that we need to control costs well.

And John talked about earlier.

Growing confidence and generally about a very material productivity uplift that we can get from the investment and technology.

And that gets you on a very virtuous circle.

Productivity you drive them more.

Affordability you have to invest.

And also I think over the last couple of years, what you've also seen us we've been flexible if we seen great.

<unk> come down and revenue projections come down we've addressed and we've adjusted our cost trajectory.

Yeah, We think we have got a decent amount of growth ahead of us and we think the cost plans that we set out a realistic for that cost for that revenue trajectory, but if things change we will change our cost plan and use.

And when you look at the slides youll notice that although the number in absolute terms remains the same from 2022 onwards.

Net.

30 billion and on a constant currency basis, 31 oil and FX adjusted basis, the nature of that cost changes, so youll see and a higher proportion of that cost base going into investment and technology plus the red part of that voucher and Youre seeing the Btu run cost the operating cost become a smaller percentage of that total cost base.

And that to me is where we then start to get the payback in terms of return on capital because with with decline more of our investment and to take in.

That costs.

Investing in the good costs that can drive revenue and and drive enhanced customer experience and that's.

The balanced and accurate we're trying to achieve.

Got it great. Thank you very much couple of questions were worthy and cash from Citigroup.

First one is on the wealth business, the wealth business and Hong Kong. So we've always been very strong why do you think your wealth business in Asia, Excluding Hong Kong has been less strong and what.

And what should we do incrementally with Altice and it's a great question and to be honest I don't think we've invested enough and it outside of Hong Kong and outside of China and in the past and that's why.

Over the next three to five years, we get we're embarking upon no material and investment programs and 50% of which will be deployed outside of Hong Kong and China.

So that's an important aspect of why we think we can succeed.

The other thing and I'll say on success.

And is.

We're investing on our platform there is already very very successfully and Hong Kong. So we're taking the learnings from there and taken them elsewhere and we've taken the clients that we fostered and Asia, and our commercial banking and global banking business and we.

Work and width.

And we're taking those clients into our wealth business. So we're investing on and already successful platform just to give you some statistics from 2020.

60%, so the private banking net new money for.

So that came into the private bank last year came from our wholesale banking relationships commercial banking and global banking and.

And 75% so the net new money from our asset management business last year came from those same very low same sources commercial banking and global banking now.

And all across Asia, including South and Southeast Asia, We have a very successful commercial and global banking business.

Which we're also investing in and.

And we see that as a source of growth for our wealth business as we put resources on the ground and as we enhance our product capability and wealth and asset management and insurance.

So that's why I think we can drive growth and a faster rate and we have done historically.

And the second question is more of a tactical question.

And then from Ronit from Citi, given your strong capital position while unit quarter.

Quarterly dividends this year at least year.

And <unk> and Joel I'll kick off debt.

And I think a couple of reasons I mean, firstly on ISI, just caution I mean, and I would note that we are coming out of a one and 100 year recessionary event and we're not out of it yet so.

We're pretty pleased with how we manage our capital resources.

Last year, but we do see value and having strong capital ratios and environment as we recover out of Covid.

And secondly, also just from a regulatory perspective.

You would all know the annual cyclical scenario didn't get run by the bank of England at the back end of last year, we're sort of and the middle of running that stress test at the moment.

And yes, I think the news coming out of the UK I've been out with pretty positive around Covid, and we're not expecting any surprises out of that but.

I think it will take yes, we'll pay one interim dividend this year and the middle of the year. If we can and then we'll revisit the approach to quarterly versus semiannual dividends next year.

Okay, operator back to the airlines for our tier three questions. Please.

Thank you and your next question from the phone line comes from Edward Firth from <unk>. Please go ahead. Your line is Nathan.

Hey, good morning, everybody, thanks very much.

And I just got a quick question really on the target.

John I'll comment and stuck with.

And you used but you said that if we're going to redo our forecast for the current exchange rate, which should add about $1 billion of costs.

For 2021.

Does the same day for revenue and.

And obviously about consensus, but obviously the revenue you mentioned was about $1 6 billion higher.

I'm wondering if you've had and that the currency exchange ratio should we be.

Thinking about that when we're looking at a forecast of Taiwan as well.

Yeah, well when we looked at consensus.

It was obviously, a hot for us and whether or not a weakening dollar and being picked up we thought it probably hadn't and most people's forecast that we published a few weeks ago.

As I said, if you would use average January exchange rates from last year Rev.

Revenues would have been one 6 billion.

Higher and costs would have been $1 $1 billion or so.

Yeah, as you work and numbers I think he definitely half day.

Think about the impact of the weak dollar.

And it also impacts why we're sticking with a 31 billion cost target for 2000 and too.

Which we think is $1 billion hotter than what it was previously.

And amongst that $1 $6 billion of revenue uplift, it's roughly half and half across non interest income and net interest income.

Alright, okay. Thanks very much.

Another question from new Oriental and place.

Thank you. Your next question comes from Manus Costello from Autonomous. Please go ahead. Your line is open.

Hi, John I wanted to ask a couple of questions on the commercial bank fees.

And if I look.

And then you delivered 1% royalty.

And if I normalize for provisions, maybe you can get that up to seven or 8% base. The biggest consumer volume delays and the group divisional Lee and it will be the biggest consumer of tangible equity.

And what's constraining the commercial bank in terms of it.

And how are you planning to focus on that specifically and then also.

Typically on the commercial bank are you still planning to recycle the audibly ways out of GBM and to U S commercial.

And if so why would it not be better to think about a restructuring and about U S commercial business and maybe adding that to your capital return plan.

Thank you.

Firstly, the commercial bank and rotary and 2020 was impacted by two things Firstly, the first line provisions, which you've drawn attention to and you would need to normalize for that.

And and <unk>.

And secondly, the impacts of lower interest rates on what is a very liquid balance sheets and commercial banking.

So it's had a.

Material impacts on the revenue and commercial banking and 2020 now we're looking to reposition.

And that aspect of the revenue decline by a greater focus on fee income a greater focus on repricing some of the asset book.

And driving greater collaboration with some of the GB and AMC income product range, which we've had a very successful.

<unk>.

That record is doing.

Particularly in 2020 cross selling more capital market opportunities to CMV clients more try generated fee income products to CMV clients.

And more M&A activity as well, we were particularly successful.

And the U K and in Asia, but it's still early days on that transition into a low interest rate environment and.

And reboot and other sources of revenue and fee income from commercial banking.

With respect to the commercial bank and the U S actually pre COVID-19 that was generating good returns.

Within the U S and when you add in the cross border referrals to other parts of the world.

Current return from our commercial banking clients and the U S was strong so I don't think strategically.

That is an under performing business the way, we have an underperforming business in retail banking and the U S and it's one that we think and continue to generate good returns going forward as the economy economies normalize after COVID-19.

Yeah Madison.

One other thing.

Yeah as you model it too I think customer activity was pretty muted and a number of areas. So you'll see and some of the fee income lines.

They were pretty depressed last year and again, we would expect those to recover as activity recovers.

Got it okay. Thank you very much guys.

One more from the order lines and we've got a couple of our written since and Hong Kong.

Yes.

Thank you and your next question comes from Raul Sinha from Jpmorgan. Please go ahead. Your line is open.

Good morning, everyone. Thanks, so much for taking my questions.

And so part of feedstock.

The tangible equity allocation slide again.

And just trying to understand this two percentage point shift per year.

But you are talking about to get to book, 50% Asia over time and long term.

One of the constraints.

Foster than that.

Do you think thats, the sort of addressable market.

And obviously your franchise in Asia, obviously, very strong food that book.

And so you can go within the addressable market and major or.

Are there other constraints.

Okay.

We currently do you think golf right, now which might be rating and maybe some conservatism in there and also does that assume the U S.

Sure.

And from which we sort of target.

Mix of the businesses.

And a second one if that's okay.

Let me just clarify a couple of tomo and so on the reallocation of tangible equity what we talked about was a reallocation of around about 800 basis points essentially from west to east.

We also said there was a reallocation of tangible equity by business line as well and that's about it.

Uh huh.

SaaS and basis points, or 10 percentage point shift out of global banking and markets utilizing that equity into other business lines, such as wealth and commercial banking.

And those two things obviously overlap to a degree.

And is coming from the west principally out of global banking markets in the U S and Continental Europe, which are low return markets for us.

Relative to the return opportunity in Asia.

So we're in the process of as we said running day.

Parts of our book.

And the U S and Europe.

And reinvesting the LOE saved at every ways into Asia, and that's going to be doing in AR.

And orderly manner a column b.

And we've made good progress on that 50% our gross our <unk> savings and the first year of law alone. So I think you should view it as we put in pulling the <unk> out of a lower lower retail and business global banking and markets and lower return and geographies Europe, and the U S and redeploying into Asia, and wealth and commercial banking.

And in global banking and Asia.

Alright, thank you.

And the second one I guess.

And Im wondering if you.

And once again I'll start with this one I was just wondering as you think.

And then.

And non stabilized it was only down two basis.

And the last quarter.

Well I mean as you know.

H back NIM is very short dated and both the asset and liabilities side.

Yeah, and buy sides effectively repriced by around a one or three month basis.

And it's highly dependent on the path of near term high ball, which continues to be very volatile. So.

I would be hesitant to.

Say that we've reached the bottom I mean, certainly so far this year high both me and very very weak.

Yeah, I think we're more optimistic that there is some upside during the year.

And I'm not going to predict the path of high book and say that yes.

Yeah. There is no further weakness in NIM as a result and H Brett.

Got it and but if I look at slide 45, when you reported your high bar assumptions laid out.

43 basis points and pipe or from 12 basis points and Larry.

Yeah.

But at night is also have been 13 basis points, so far and Q1 per se.

Alright.

And I was just wondering whether other factors apart from high blood might be mark.

But it sounds like cardboard and are high but we're still we've repriced most of our liabilities at this point theres, probably some modest but the biggest driver of that NIM will be the trajectory of high level. This year.

Thanks very much.

Got a couple of written questions, which we'll readout Roger city, the Cheddar equity reallocation is organic and.

Couple of questions.

One of them, which and for Manulife in Hong Kong, how do we measure the success of your digital investments in terms of.

Revenues cost or risk management, and what are the sort of metrics. We should measure the success of your digital investments. Please.

And then it's a great question and I think we need to do more on disclosure on the return we're getting on those digital and investments I mean, we measure that internally we have every project tracks.

Understand and the digital penetration rates the automation is taking place.

I think we should share more of that information with you as we go forward John is there anything you'd like to add.

And what we have a technology strategy that spans the bank that is aligned with every single business objective both on the revenue side and the cost side and the risk management side I think your question once and asked about all three.

And there was a very extensive process and an ongoing process to tick and tie all of those so when you hear Peter talk about growth and Asia. There is technology that underpins that when you hear talk about.

The wealth program, that's all connected to the technology objectives when you're here.

And our cost targets there are specific technology objectives to take those costs out and we are investing a lot and operational resilience as well from a risk management perspective. So as total says we've got all that internally happy to share that as appropriate and more detail.

Yes.

And sort of look at what we're doing and finance for and as an example.

Yeah, It really depends on the project and the metrics.

And we're putting all of our reporting.

Onto the cloud and creating a single data set and as part of that over the next three years.

Yeah, we've we've done and liquidity reporting over the last year or so we're just starting on the risk weighted assets and one of the markets at the moment.

We're processing 18 times more data eight times faster, so a 150 times improvement.

We've taken out a whole bunch of manual intervention, so the control environment materially improved.

And we think when we finish that project, we'll be able to take costs down and finance by third.

But the main benefits of guy and to be much much better.

Much better reporting and a much better control environment together with the significant uplift in productivity. So we're tracking all of the above on that project. Let me give you a couple of facts just quickly and they're losing a sort of things we should probably share more regularly with you.

90% of our personal banking transactions.

Globally, our own digital platform.

And 128 billion logins to our personal banking mobile apps and 2020.

We had over $10 5 million chat conversations with our total banking customers last year online.

And we had.

Nearly 120000 downloads of the HSBC net corporate Treasury and mobile App.

Which we recently developed and upgraded.

In 2020.

And that represented around about 150% improvement year on year on its utilization rates now.

They're the sort of things that we're tracking on how digital.

Total investment is transforming the way we do business book.

And we'll come back to you and share more information on future updates.

Yeah, I think you have anything to add to that and the other side of it is always say, yes, a very meaningful shift that obviously got accelerated last year and.

A reduction and traditional banking.

And our cash.

Cash transactions across the Atms and branches were down 25% last year.

Contact center volumes and what we describe as can day traditional contact center conversations were down 11%. So one thing Covid has done I think is dramatically shift.

Away from <unk>.

Some of the old economy stuff towards digital.

Second question from me.

Written questions before we got from <unk> from Citigroup, and Hong Kong and.

Could you just sorry, it's a bit better oversee the opportunity and the pinnacle and wealth inverse.

And particularly in the greater Bay area, how are we talking about hundreds of millions dollars billings of $1 can you give us a bit of quantification net lease.

New nodes you want to pick up some of your thoughts and so it's still early days on clinical but you want to share some of the early results and and what you see sure sorry, and mainland China as we know we we launched the pinnacle wealth venture.

We started with the first four and Fintech license in mainland China by the way.

In the first six months as we hired 200 dwelled planners.

They are very well equipped and trains.

They are performing above expectations at this moment, both in terms of value of new business and tickets because size.

We expect to scale up by 3000, and by 2025 and cover 10 cities and.

And by the way this year, we expect to scale up debt number by another 600, we believe we can do it and.

And what I would like to call your attention and this is not just an insurer and strategy. This is a world strategy, Okay and Thats. The way, we are actually growing in southeast Asia and mainland China.

And non mark to market non branch based strategy.

It says digital enabled strategy with personal wealth planners.

Is there anything and you can share with us on what you see as the opportunity for wealth and China for HSBC, particularly and the greater Bay area.

Yes.

On February.

In February the there is an Mou signed between PD Oc.

And the BRC.

Uh huh.

Between them and also with Hong Kong and Macau.

Hi.

The Mou is about is about neutral investment between the greater Bay area and Hong Kong.

And that will have substantial potential for us.

The clinical project that we're doing right now is actually also getting ready for that.

And when.

And the investment and when the mutual investment.

And is.

It's pushed between the two is push between greater Bay area and Hong Kong, We are the leading bank and Hong Kong with the quality products and we are also the leading foreign bank in China and.

So the pinnacle will work very well with the with the with the strategy because we'll be selling well.

Wealth planning.

And in the Greater Bay area.

Okay, and we've got time for one or two more from the audio lines.

Sorry, Rob back to you operator please.

Thank you and your next question from the phone lines comes from Guy stemming from Exane BNP Paribas. Please go ahead your line of day.

Hi, good morning. Thanks.

Thanks for taking the questions. The first one was just on and on and building on some of your previous comments.

First of all being on interest, earning assets. If we take Q4 position adjusted FX and reflects some language. So as you suggested at least this year would it be fair to assume.

And yes, it should be up quite meaningfully versus the Q4 position at least in dollar terms, perhaps mid single digits.

And then on the <unk>.

And Tim Oxley proven and keep all but you pointed to some headwinds from from hydro et cetera.

And if one was to achieve mid single digit reduction and NIM from here given not interest, earning asset finance guys.

And to point to three 4% uplifts to consensus and benign 'twenty 'twenty, one and just trying to get a sense of whether that sounds.

Reasonable and what im being a bit optimistic given where high boys and Mr. Backend nature of the loan growth this year and.

And then just a quick follow up and all the guys. Thank you very much.

Escalation and the $40 billion to $50 billion regulatory headwinds I'm, just wondering whether you might be able to break that down at all between and Paul.

TB other Basel, III and potent and all the regulatory changes.

And.

Is there anything sort of beyond 'twenty, three we should be factoring and I will say that the outperformed that and switches.

And if things sort of residual real networks, and you would expect to be much less and magnitude. Thank you.

Yeah, so on <unk>.

Output floors.

Yes that will have an impact on us and the car.

Current modeling and about 20 and $27 28.

Bob.

It is a longtime Hawaii and yes.

We would expect to have them work on how would we mitigate some of that impact.

So I think I've, given you already and puts out to 'twenty three I'm not trying to comment on the individual breakdown of all of that and towards sub component and parts, but on.

Net interest income.

Yes relative to consensus I guess, just two things out and I one of us.

I think consensus as it was modeled.

Or as we disclosed included the impact of dollar weakness, which we think would have added about $800 million.

So I don't know where that wasn't your numbers and.

And I.

We are more optimistic as you would expect us to be but probably more optimistic than consensus which had quite low loan growth last year.

But some of the other headwinds I think would act as a partial <unk> to some of that.

Yeah.

Okay. Thank you.

And for one more question from me order loans, please and nimble will wrap up.

Thank you. Your final question from the old your lines comes from Fahad <unk> from Redburn. Please go ahead. Your line is Nathan.

Hi, and thanks for taking my questions and thanks for all the detail I just two quick ones I guess tangentially on net.

The first one is your rate sensitivity and a 12 month basis go up it looks like it pretty.

Pretty much all and the U K and go ahead from the stand what's pretty equivalent debt.

And why you don't think Youre U S rate.

And would have come up as well and Amazon.

And so of course and my second question was just non U.

And so if you go from to connect with the scope of that.

Net repricing with tier one of the pillars.

Revenue growth normally when we see and excess liquidity.

And the opposite in the sense that actually competition.

<unk> molecule.

Just to understand like what do you see on the ground.

Underlying asset margin competition given.

Very high liquidity across the board all your payments, both global and local thank you.

We are seeing some early songs of absolute repricing, taking place, particularly in Asia.

I don't want to over promise on the consumer a lot, but we are seeing some early signs regarding the second half of last year.

So.

We do believe that is a viable option pool.

Mitigating some of the overall <unk>.

And as on NIM from lower interest rates.

And you and think and the UK again and the mortgage market.

Actually we've seen.

Better spreads and actually our share of new business has gone up and.

So yeah.

Yeah, I mean, we're not.

It's not on the Com, we are actually seeing improved asset side margins and a number of parts of the business at the moment.

Yeah on the interest rate sensitivity and the U K I think it was mainly driven by higher.

Short term assets and liabilities.

<unk>, particularly on the liability side, which has gone up materially.

If you look at the.

The liquidity and the U K, it's very very stronger per month.

Thank you.

How do you reconcile I guess looking ahead.

<unk> total revenue.

And obviously in Asia.

Favorable absolute reports and what do you think is different this time for us to kind of think I can recall and can hold and flow.

And with that much liquidity around.

Okay.

And I went through the TFC and life after the GSE and we saw Rossi repricing and taking place there as well.

And I think Peter you will track record and Asia dealing with low interest rates environment Post GSE do you just want to share some of your thoughts about how you handle that in the past.

Yeah.

We remember back and after the Lehman crisis. The interest rate scenario was extremely low. However, we were able to between 2010 to 12 2019. Our total income went up on a compounded basis by 6%. If we look at 2006 day into 2019, it would be it would be nine per.

And so.

We are accustomed to dealing with low interest rate environment, and we're able to reprice our asset.

Our asset portfolio and also changed the mix of our deposit portfolio.

Okay. Thank gino to start off thank you well. Thank you very much for your questions and for taking the time to be with us.

I want to remind you of some of the key messages, we shared with you earlier in the morning.

First we have executed all promises and 2020 and second we will do the same again in 2021.

We are pleased that we've been able to reactivate dividends.

And we've tried to position the new dividend policy.

We are able to support both good yields and good growth.

And for that growth, we're willing to invest and the businesses, we're confident in our opportunity and our ability to drive growth even in a low interest rate environment, and we're willing to invest to make it helpful.

And that investment program is material and it's different from what we've done in the past.

We look forward to discussing our plans with you on our progress over the coming weeks and months Richard and the team are available to you. If you have any further questions, but in the meantime stay safe and have a good day or good evening wherever you all thank you very much.

Yeah.

Okay.

[music].