Q1 2025 HSBC Holdings PLC Earnings Call

April 29, 2025

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Welcome, ladies and gentlemen to the analyst and Investor weapon on the first quarter results for HSBC Holdings plc.

Speaker Change: Your information this webinar is being recorded.

George Hill: Now handover to George Hill.

Speaker Change: Great see you.

Speaker Change: Okay.

Speaker Change: Welcome all to today's call I'm joined here in London by Pat.

Speaker Change: Okay.

Speaker Change: Before Paul takes you through the numbers I would like to begin with some opening remarks.

Speaker Change: Overall, it was a strong quarter marked by three key drivers.

Speaker Change: Momentum in our earnings.

Speaker Change: Disciplined execution and.

Speaker Change: And confidence in our ability to deliver our targets.

Speaker Change: First.

Speaker Change: We have strong momentum in our business.

Speaker Change: We had a strong first quarter with profit before tax up 11% and an annualized return on tangible equity of 18, 4% both excluding notable items.

Speaker Change: We had our fifth consecutive quarter of double digit growth in wealth.

Speaker Change: And attracted net new invested assets of $22 billion as well as another 300000, you two bank customers in Hong Kong, continuing the trend from last year.

Operator: The analyst and investor webinar on the Q1 results for HSBC Holdings plc will begin in five minutes. Following the presentation, there will be the opportunity to ask questions. For analysts and investors joining via the Zoom link provided, please use the Raise Hand function in Zoom to register your interest in asking a question. You may raise your hand now or at any other time during the webinar. Please ensure your camera is also turned on. If you're invited to ask a question, please accept the prompt to unmute your line. Please note that it will not be possible to ask a question if you are joining via the webcast link on the HSBC website. The analyst and investor webinar on the Q1 results for HSBC Holdings plc will begin in two minutes. Following the presentation, there will be the opportunity to ask questions.

Speaker Change: We also had a strong performance in transaction banking in particular in effects.

Speaker Change: And then all the equities and debt trading businesses.

Speaker Change: They're fitting from higher client activity on the back of higher volatility.

Speaker Change: Second.

Speaker Change: We remain focused on executing our strategy with discipline and are on track to deliver the cost actions, we set out in February.

We are progressing at pace to deliver on the simplification related cost saves as well as the strategic Austria locations.

Speaker Change: We also continue to take a disciplined approach toward investments and capital allocation to drive growth across our four businesses.

Speaker Change: We will provide you with a full update on this at the half year results in July.

Speaker Change: Third.

Speaker Change: The external macroeconomic environment is less favorable and more uncertain than it was in February.

Speaker Change: The uncertainty around trade policy, dampens business confidence and constrained investment.

Speaker Change: However.

Speaker Change: We remain confident in our ability to deliver our targets.

Speaker Change: Oh balance sheets are strong this is reflected in the deposit surpluses, we hold in every major currency in each of our four businesses in every geography in which we operate.

Speaker Change: This is why our clients place their trust in us during times of predictability and even more so during times of unpredictability.

Speaker Change: This provides us with a steady recurring income stream and underpin the lion's share of phone banking NII.

Speaker Change: Growing our structural hedge has reduced the sensitivity of these revenues to interest rate cuts.

Speaker Change: Our balance sheet is also underpinned by strong capital position and a high quality credit portfolio.

Speaker Change: We also have resilient recurring fee income from stable floor based activities and transaction banking and then what.

Speaker Change: With a much smaller contribution from investment banking event driven business.

Speaker Change: I encourage you to keep the diversity and quality of our earnings in mind, when considering how changes in trade policy will affect our business.

Speaker Change: Our wholesale transaction banking business covers much broader activities than those related to cross border trade.

Speaker Change: And within our trade finance business, we have diverse products and cover all major global and intra regional quality doors.

Speaker Change: To assist the impact of higher tariffs could have on our business.

Speaker Change: Scenarios that contemplate significant but plausible increases in tariffs by the world's largest trading blocks.

Speaker Change: Resulting in a notable slowdown in global trade.

Speaker Change: As well as a slowdown in global GDP growth.

Speaker Change: And the closer build downside tariff scenario.

Operator: For analysts and investors joining via the Zoom link provided, please use the Raise Hand function in Zoom to register your interest in asking a question. You may raise your hand now or at any other time during the webinar. Please ensure your camera is also turned on. If you're invited to ask a question, please accept the prompt to unmute your line. Please note that it will not be possible to ask a question if you are joining via the webcast link on the HSBC website. Welcome, ladies and gentlemen, to the Analyst and Investor Webinar on the Q1 results for HSBC Holdings PLC. For your information, this webinar is being recorded. I will now hand over to Georges Elhedery, Group CEO.

Speaker Change: We estimate that there would be a low single digit percentage impact on the group's revenues.

Speaker Change: Separately.

Speaker Change: Our consensus downside scenario models.

Slowdown in global trade and GDP growth as a result of an increase in tariffs.

Speaker Change: The impact of this scenario.

Speaker Change: It would be incremental issuance of $1 $5 billion.

Speaker Change: On this basis, we remain confident in delivering a mid teens return on tangible equity for 2025 20 to 26 and 2027 and are reaffirming all of the guidance that we gave in February.

Speaker Change: We recognize though that the broader impacts of the current conditions are more difficult to quantify and we will continue to monitor these as we formulate our ongoing okay.

Speaker Change: Importantly.

Speaker Change: In the current environment customers look for the strength.

Speaker Change: The ability and expertise of a trusted partner.

Speaker Change: We are extremely well positioned to support all of our customers wherever they are.

Speaker Change: However, they needs evolve and whatever the market conditions.

Speaker Change: Yeah.

Speaker Change: Finally.

Speaker Change: We've only announced and up to three months.

Speaker Change: Share buyback.

Speaker Change: And at 10 cents per share interim dividend.

Speaker Change: Selecting our continued focus on capital return to our investors.

Bob: With that let me hand over to Bob.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Thank you Joan.

Thank you everyone for joining.

Speaker Change: The momentum in our business has enabled us to deliver a strong first quarter performance.

Speaker Change: Headlined by an annualized return on tangible equity of 18, 4%.

Speaker Change: Principal items.

Speaker Change: Very good underlying profit and revenue performance.

Speaker Change: Credit remains stable and we maintained a disciplined approach to cost management.

Speaker Change: We are pleased to announce.

First interim dividend of 10 cents per share and a share buyback of up to $3 billion.

Speaker Change: The buyback see completed over the last 12 months.

Speaker Change: How about that.

Speaker Change: Closer to what target range of 14 to 14, 5% C T y.

Georges Elhedery: Welcome all to today's call. I'm joined here in London by Pam. Before Pam takes you through the numbers, I would like to begin with some opening remarks. Overall, it was a strong quarter marked by three key drivers. One, momentum in our earnings, discipline in our execution, and confidence in our ability to deliver our targets. First, we have strong momentum in our business. We had a strong Q1, with profit before tax up 11% and an annualized return on tangible equity of 18.4%, both excluding notable items. We had our fifth consecutive quarter of double-digit growth in wealth and attracted net new invested assets of $22 billion, as well as another 300,000 new-to-bank customers in Hong Kong, continuing the trend from last year.

Speaker Change: We will continue to return surplus capital to shareholders with buybacks remaining off preferred method.

Speaker Change: As always does.

Speaker Change: Cision on any share buyback will be made on a quarterly basis.

Speaker Change: It will depend on.

Speaker Change: Panic capital generation and the capital needs of the business.

Speaker Change: I'm talking the revenue story, excluding notable items revenue of $17 $7 billion was up $1.1 billion.

Speaker Change: The first quarter of last year, driven by fee and other income.

Speaker Change: It also included a 0.3 billion dollar increase in debt and equity markets driven by higher volatility.

Speaker Change: The favorable impact of zero point $2 billion in the quarter from the disposal of Argentina, which we completed at the end of last year.

Georges Elhedery: We also had a strong performance in transaction banking, in particular in FX, and in our equities and debt trading businesses, benefiting from higher client activity on the back of higher volatility. Second, we remain focused on executing our strategy with discipline and are on track to deliver the cost actions we set out in February. We are progressing at pace to deliver on the simplification-related cost saves, as well as the strategic cost reallocations. We also continue to take a disciplined approach to our investments and capital allocation to drive growth across our four businesses. We will provide you with a full update on this at the half year results in July. Third, the external macroeconomic environment is less favorable and more uncertain than it was in February, as the uncertainty around trade policy dampens business confidence and constrains investment.

Speaker Change: On banking NII.

Speaker Change: Excluding the impact of Argentina, and other notable items the banking NII run rate remained broadly stable for the on the fourth quarter.

The impact of interest rate cuts and two fewer days in the quarter were offset by the repricing of liabilities and structured hedge assets.

Speaker Change: Changes in asset mix.

Speaker Change: We continue to expect banking NII of around $42 billion in 2025.

Speaker Change: As previously stated this is not an underpin it remains our expectation at the present time.

Speaker Change: Based on the current market rates outlook and our own projections.

Speaker Change: Moving to fee and other income.

Georges Elhedery: However, we remain confident in our ability to deliver our targets. Our balance sheet is strong. This is reflected in the deposit surpluses we hold in every major currency in each of our four businesses in every geography in which we operate. This is why our clients place their trust in us during times of predictability and even more so during times of unpredictability. These provide us with a steady recurring income stream and underpin the lion's share of our banking NII. Growing our structural hedge has reduced the sensitivity of these revenues to interest rate cuts. Our balance sheet is also underpinned by a strong capital position and a high-quality credit portfolio. We also have resilient recurring fee income from stable flow-based activities in transaction banking and in wealth, with a much smaller contribution from investment banking event-driven business.

Speaker Change: Transaction banking was up 13% on last year's first quarter.

Speaker Change: This was driven by a strong FX performance.

Speaker Change: Elevated volatility drove substantial volumes of client hedging it to me.

Speaker Change: Excluding the impact of disposals.

Speaker Change: Payment solutions was up 3% ear on yeah.

And global trade solutions was up 6%.

Speaker Change: In wealth the strong momentum from the fourth quarter continued as we delivered our fifth consecutive quarter of double digit year on year growth.

Speaker Change: High client activity levels in Asia, primarily Hong Kong, but the key driver and there was broad based growth.

Speaker Change: We are pleased that the investments we are making in our wealth products distribution channels and customer journeys is translating into results.

Georges Elhedery: I encourage you to keep the diversity and quality of our earnings in mind when considering how changes in trade policy will affect our business. Our wholesale transaction banking business covers much broader activities than those related to cross-border trade. Within our trade finance business, we have diverse products and cover all major global and intra-regional corridors. To assess the impact higher tariffs could have on our business, we modeled scenarios that contemplate significant but plausible increases in tariffs by the world's largest trading blocks, resulting in a notable slowdown in global trade, as well as a slowdown in global GDP growth. In a plausible downside tariff scenario, we estimate that there would be a low single-digit percentage impact on the group's revenues.

Our record new business CSM.

Speaker Change: 301000, new to bank customers in Hong Kong.

Speaker Change: And $22 billion of net new invested assets.

Speaker Change: $16 billion of which was in Asia.

Speaker Change: The see some balance which is the store of future value was up again this quarter.

Speaker Change: As you know the C. S imbalance is subject to market fluctuations.

Speaker Change: And sensitivities to key indices are in the earning release.

Speaker Change: On credit off first quarter, ECL charge or zero point $9 billion.

Speaker Change: Equivalent to an annualized charge off 37 basis points as a percentage of loans and advances.

Speaker Change: This included $150 million provision to reflect heightened economic uncertainty.

Speaker Change: Excluding this the first quarter charge was broadly the same as in the first quarter of 'twenty 'twenty four.

Georges Elhedery: Separately, our consensus downside scenario models a slowdown in global trade and GDP growth as a result of an increase in tariffs. The impact of this scenario would be incremental ECLs of $0.5 billion. On this basis, we remain confident in delivering a mid-teens return on tangible equity for 2025, 2026, and 2027, and are reaffirming all of the guidance that we gave in February. We recognize though, that the broader impacts of the current conditions are more difficult to quantify, and we will continue to monitor these as we formulate our ongoing outlook. Importantly, in the current environment, customers look for the strength, stability, and expertise of a trusted partner. We are extremely well-positioned to support all of our customers wherever they are, however their needs evolve, and whatever the market conditions.

Speaker Change: The credit risk metrics that we track remain stable and we continue to monitor them closely.

Speaker Change: Thinking about the potential impact of <unk>.

Speaker Change: On credit performance.

Speaker Change: He says we'll be sensitive to macroeconomic performance the outlook for which remains uncertain.

Speaker Change: We consider a variety of scenarios as part of our E. C L calculation.

Speaker Change: One of these.

Speaker Change: Consensus downside scenario in which an increase in tariffs result in a global economic slowdown in this scenario there would be an incremental ECL charge of around zero point $5 billion.

Speaker Change: On costs, we are taking a disciplined approach to cost management.

Speaker Change: And are on target to achieve.

Speaker Change: Our target of around 3% cost growth in 2025 compared to 2024 on a target basis.

Speaker Change: We are also on track to deliver zero point $3 billion of simplification savings into the P&L in 2025.

Georges Elhedery: Finally, we're also pleased to announce an up to $3 billion share buyback and a $0.10 per share interim dividend, reflecting our continued focus on capital return to our investors. With that, let me hand over to Pam.

Speaker Change: Okay.

Speaker Change: On loans and deposits loan balances for broadly stable quarter on quarter.

Speaker Change: As growth in corporate and institutional banking was offset by the reclassification of our retained French home loan portfolio.

Pam Kaur: Thank you, George. Thank you, everyone, for joining. The momentum in our business has enabled us to deliver a strong Q1 performance, headlined by an annualized return on tangible equity of 18.4% ex items. Very good underlying profit and revenue performances. Credit remains stable, and we maintained a disciplined approach to cost management. We are pleased to announce a first interim dividend of $0.10 per share and a share buyback of up to $3 billion. The buybacks we completed over the last 12 months have helped us closer to our target range of 14 to 14.5% CET1. We will continue to return surplus capital to shareholders with buybacks remaining our preferred method. As always, a decision on any share buyback will be made on a quarterly basis. It will depend on organic capital generation and the capital needs of the business.

Speaker Change: Deposits were also broadly stable quarter on quarter.

Speaker Change: The partial reversal of some of the seasonal inflows we saw in Q4.

Speaker Change: Ear on yeah deposits were up 6% with growth in all entities and businesses.

Speaker Change: Our CET one ratio was 14, 7%.

Speaker Change: The reclassification of our retained France home loan portfolio led to a 1.3 billion dollar pre tax loss in the quarter, we recognized in fair value through other comprehensive income this had a capital impact for around.

Speaker Change: 0.2 percentage points of the Dupont.

Speaker Change: Looking ahead, we expect to buy back we announced today to have an impact of around 0.4 percentage points in the second quarter.

Speaker Change: Yeah.

Speaker Change: You will have seen that Bocom has announced that it has approved a share issuance of up to 120 billion remninbi.

Pam Kaur: Unpacking the revenue story, excluding notable items, revenue of $17.7 billion was up $1.1 billion in Q1 of last year, driven by fee and other income. It also included a $0.3 billion increase in debt and equity markets, driven by higher volatility, and a favorable impact of $0.2 billion in the quarter from the disposal of Argentina, which we completed at the end of last year. On banking NII, excluding the impact of Argentina and other notable items, the banking NII run rate remained broadly stable on Q4. The impact of interest rate cuts and two fewer days in the quarter were offset by the repricing of liabilities and structural hedge assets, and some rule changes in asset mix. We continue to expect banking NII of around $42 billion in 2025.

Speaker Change: Upon completion.

Speaker Change: Expect to recognize an accounting impact dilution loss of between one 2 billion and $1 $6 billion on our stake.

Speaker Change: This will be treated as a material notable item and will have no material impact on C. T. One and no impact on the dividend.

Speaker Change: Let me end by summarizing first.

Speaker Change: We have momentum in our earnings.

Speaker Change: We had a strong first quarter performance with an annualized return on tangible equity of 18, 4% excluding notable items.

Speaker Change: We have also continued to perform well in the quarter to date.

Speaker Change: Second we have discipline in our execution.

Speaker Change: We are on track to deliver the cost actions, we set out in February.

Speaker Change: Todd.

Speaker Change: Although the external environment is more uncertain.

Speaker Change: We're confident in our ability to deliver.

Speaker Change: And we are reaffirming our existing targets and guidance.

This includes a mid teens return on tangible equity in 'twenty 'twenty five 'twenty 'twenty six 'twenty 'twenty seven.

Pam Kaur: As previously stated, this is not an underpin. It remains our expectation at the present time based on the current market rates outlook and our own projections. Moving to fee and other income. Wholesale transaction banking was up 13% on last year's Q1. This was driven by a strong FX performance as elevated volatility drove substantial volumes of client hedging activity. Excluding the impact of disposals, Global Payments Solutions was up 3% year-on-year, and Global Trade Solutions was up 6%. In Wealth, the strong momentum from Q4 continued as we delivered our fifth consecutive quarter of double-digit year-on-year growth. High client activity levels in Asia, primarily Hong Kong, were the key driver, and there was broad-based growth. We are pleased that the investment we are making in our wealth products, distribution channels, and customer journeys is translating into results.

Louise: Louise can we go to Q&A. Please.

Speaker Change: You pen.

Speaker Change: As a reminder, if you'd like to ask a question today. Please use the raise hand function and C. Pace also ensure you'll camera is turned on if you're invited to ask a question. Please accept the prompt to meet your line and if you find your question has been answered you may relieve yourself from the queue Butler and Johan in sea.

Speaker Change: Our first question today comes from Benjamin Toms RBC. Please accept the Bronx to meet your line.

Benjamin Toms: Good morning, and thank you for taking my questions, especially you mentioned in the release that you're doing the strategic review of Volta. Our full year results were relatively early in the strategic refresh process. Although the joke phase that you're also strategically reviewing our results you talked about $1 5 billion of gross costs that cost saves.

Benjamin Toms: People into that process have you seen any potential to be able to achieve cost saves in excess of that target.

Benjamin Toms: Secondly, one of the features of your Q1 results show the strength of fees and other income can you provide some color on how sustainable that print is and how much is driven by the old method volatility.

Benjamin Toms:

Speaker Change: Very much Ben.

Benjamin Toms: So we've announced.

Pam Kaur: A record new business CSM, 301,000 new to bank customers in Hong Kong, and $22 billion of net new invested assets, $16 billion of which was in Asia. The CSM balance, which is a store of future value, was up again this quarter. As you know, the CSM balance is subject to market fluctuations, and sensitivities to key indices are in the earnings release. On credit, our Q1 ECL charge of $0.9 billion, equivalent to an annualized charge of 37 basis points as a percentage of loans and advances. This included a $150 million provision to reflect heightened economic uncertainty. Excluding this, the Q1 charge was broadly the same as in Q1 2024. The credit risk metrics that we track remain stable, and we continue to monitor them closely.

Benjamin Toms: In February of $1.5 billion of cost saves from the organization simplification, which we expect to take to the bottom line.

Benjamin Toms: Spam shared earlier, we are on track to deliver those and we're moving at pace, we separately announced 1.5.

Benjamin Toms: <unk>.

Benjamin Toms: From strategic reallocation of costs from activities that are low low non strategic or lower returning into our core strategy where areas opposed competitive strength.

Benjamin Toms: We continue to progress at pace on those and you know we've made a number of announcements, which which we've shared including the investment banking in Europe, and the U S including.

Benjamin Toms: The French insurance private.

Benjamin Toms: Private bank in Germany, et cetera, and we're progressing with those at pace and again.

Benjamin Toms: Both items, we continue the execution with discipline and pace and we're not fazed remain unfazed would be you'd.

Benjamin Toms: The external environment for the execution of course. This is our primary focus though is just focusing on delivering those.

Benjamin Toms: That's sort of kind of cost efficiencies as a method of gay usually identify cost efficiencies. We will of course be taking them as a method of being you, but our primary focus is to deliver on those commitments.

Pam Kaur: Thinking about the potential impact of tariffs on credit performance, ECLs will be sensitive to macroeconomic performance, the outlook for which remains uncertain. We consider a variety of scenarios as part of our ECL calculation. One of these is the consensus downside scenario, in which an increase in tariffs results in a global economic slowdown. In this scenario, there would be an incremental ECL charge of around $0.5 billion. On costs, we are taking a disciplined approach to cost management and are on target to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. We are also on track to deliver $0.3 billion of simplification savings into the P&L in 2025.

Benjamin Toms: With regards fees and other income look we've talked to the plausible downside scenario, which may put some but it's an adverse scenario.

Benjamin Toms: But it is a plausible scenario and it will slow down sports with all the business.

Benjamin Toms: Been trade flows, but also the <unk>.

Benjamin Toms: Implications it has on other aspects of.

Benjamin Toms: Our business, including the volumes in general.

Benjamin Toms: But.

Benjamin Toms: Outside I would say this adverse scenario, we continue to see strength.

Benjamin Toms: In the wealth business five quarters, the double digit growth, which we expect to continue in the medium term at least for the medium term and we continue to invest in this space and we continue investing in a number of areas as we called out in February.

Benjamin Toms: We we believe in the growth potential that we can exhibit in these areas.

Benjamin Toms: You bet.

Benjamin Toms: Just to add I mean for the quarter.

Benjamin Toms: Good for fall and that's been high level of client activity, which has benefited.

Benjamin Toms: In fact that equities markets in wealth.

Pam Kaur: On loans and deposits, loan balances were broadly stable quarter-over-quarter as growth in corporate and institutional banking was offset by the reclassification of our retained French home loan portfolio. Deposits were also broadly stable quarter-over-quarter, with a partial reversal of some of the seasonal inflows we saw in Q4. Year-over-year, deposits were up 6% with growth in all entities and businesses. Our CET1 ratio was 14.7%. The reclassification of our retained French home loan portfolio led to a $1.3 billion pre-tax loss in the quarter, recognized in Fair Value through Other Comprehensive Income. This had a capital impact of around 0.2 percentage points of CET1. Looking ahead, we expect the buyback we announced today to have an impact of around 0.4 percentage points in Q2.

Benjamin Toms: So I want to remind that one benefit was also the Argentina headwind that we had of zero point $2 billion in Q1 of 24, which obviously didn't repeat in this quarter, but because of the sale, but the key franchise factors all well, it's a structural growth.

Benjamin Toms: And those dynamics will persist.

Benjamin Toms: Driven by our brand there driven by the range of products, we have to offer them.

Speaker Change: The improvements you've made in terms of technology and that investment is going to pay and as George said, we stay confident in terms of double digit growth in the medium term on wholesale transaction banking.

Speaker Change: An area of competitive advantage, we will continue to grow that but it's going to be hard to predict quarter to quarter, especially in the current environment.

Speaker Change: Volatility has definitely benefited us in this quarter. So it may not repeat at the very high levels that we've seen in this quarter, but we are still continuing to see underlying growth as we have.

That's true in Q2.

Speaker Change: Thank you very much. Our next question today comes from Joseph Dickerson Jefferies. Please accept the prompt to meet your line.

Joseph Dickerson: Hi, Thank you for taking my question Congrats on a strong set of numbers and some clarity on your thinking on the on the path forward.

Pam Kaur: You will have seen that BOCOM has announced that it has approved a share issuance of up to CNY 120 billion renminbi. Upon completion, we expect to recognize an accounting impact dilution loss of between $1.2 billion and $1.6 billion on our stake. This will be treated as a material notable item and will have no material impact on CET1 and no impact on the dividend. Let me end by summarizing. First, we have momentum in our earnings. We had a strong Q1 performance with an annualized return on tangible equity of 18.4%, excluding notable items. We have also continued to perform well in the quarter to date. Second, we have discipline in our execution. We are on track to deliver the cost actions we set out in February.

Joseph Dickerson: Can I just ask on the possible downside scenarios for the low single digit impact on our revenue I guess.

Joseph Dickerson: But what was the point of of.

Joseph Dickerson: Undertaking that exercise was it to basically show that the perception of the bank because of global trade Bank.

Joseph Dickerson: And then in some ways may be exaggerated about how youre not basically youre not overly reliant on any particular corridor is.

Joseph Dickerson: And I guess, what kind of elements went into that scenario in terms of magnitude of of drawdown on trade and then secondly, just on that could you opine on any opportunities that you're seeing or that you foresee as a result of what's happening not that.

Joseph Dickerson: What's happening is necessarily starting at the moment, but just any any opportunities that you're going to see based on any any initial discussion list and then I would presume that the you had very strong new to bank customers in Hong Kong I presume.

Joseph Dickerson: Can make any comment on April trends, there I would presume that that would have continued.

Joseph Dickerson: From our last quarter.

Pam Kaur: Third, although the external environment is more uncertain, we are confident in our ability to deliver, and we are reaffirming our existing targets and guidance. This includes a mid-teens Return on Tangible Equity in 2025, 2026, and 2027. Louise, can we go to Q&A, please?

Joseph Dickerson: And what we're picking up on the ground in Hong Kong is accurate.

Speaker Change: Thank you very much Joseph.

Speaker Change: I'll take your question about the positioning of our trade business and Oh Bang because whether it's the opportunities.

Speaker Change: I'll ask Tom to take you through the elements of this analysis.

Speaker Change:

Tom: So we are the world's trade bank, we have been ranked the number one trade bank for eight consecutive years.

Tom: With our trade that covers a variety of products.

Operator: Thank you, Pam. As a reminder, if you would like to ask a question today, please use the Raise Hand function in Zoom. Please also ensure your camera is turned on. If you're invited to ask a question, please accept the prompt to unmute your line. If you find your question has been answered, you may remove yourself from the queue by lowering your hand in Zoom. Our first question today comes from Benjamin Toms at RBC. Please accept the prompt to unmute your line.

Tom: As well as.

Tom: We cover them.

Tom: All the large Korea doors of trade, including intra region in Korea doors, which have been growing quite fast.

Tom: Over the last few years.

Tom: The exercise that you've conducted and you know has is meant to basically evaluate the impact of plausible downside scenarios on our overall activities, obviously, including trade.

Tom: But just to add on trade number one we have more than 5000 trade specialists and 50 more than 50 markets. We're in a unique position to be able to support our customers with our expertise in trade.

Benjamin Toms: Morning, both, and thank you for taking my questions. Firstly, you mentioned in the release that you've launched a strategic review of Malta. In the full year results, we are relatively early in the strategic refresh process. Are there other geographies that you're also strategically reviewing? In the full year results, you talked about $1.5 billion of gross cost saves. Now you're deeper into that process, have you seen any potential to be able to achieve cost saves in excess of that target? Secondly, one of the features of your Q3 results was the strength in fees and other income. Can you provide some color on how sustainable that print is and how much is driven by the ongoing volatility? Thank you.

Tom: The business environment shifts the business outlook shifts there trading pattern shifts and they you know our customers need to reconfigure some of their supply chains.

Tom: And.

Tom: We expect to be able to deepen our relationships with existing clients, but also thanks to all of our strengths stability and expertise to attract more clients and to continue building market share in the trade business. Among other of the you know kind of robust.

Tom: Business proposition and service proposition, we have put all the customers.

Speaker Change: Yeah. Thanks, Joseph for the question. So firstly broadly in terms of context, setting every quarter, we do a range of scenario analysis.

Georges Elhedery: Thank you very much, Ben. So we've announced in February $1.5 billion of cost savings from the organization and simplification, which we expect to take to the bottom line. As Pam shared earlier, we are on track to deliver those and we're moving at pace. We separately announced $1.5 billion from strategic reallocation of costs from activities that are low non-strategic or low returning into our core strategy, where areas of our competitive strength. We continue to progress at pace on those. You know, we've made a number of announcements, which, you know, we've shared, you know, including the investment banking in Europe and the US, including you know, the French insurance, the private bank in Germany, et cetera.

Tom: This quarter, we looked at the significant but plausible downside scenario, resulting from increase in tonnage.

Tom: We homed in on one scenario after looking at a range of possible outcomes, which we as you know are uncertain and remain very wide.

Tom: So the specific scenario, which we honed into was based on significant increase in Paris.

Tom: As well as retaliatory tonnage. We also took a holistic approach that can say that different businesses different geographies as well as customer segments.

And this scenario resulted in significant decline in trade and significant.

Tom: Global GDP growth.

Tom: They looked at both in terms of revenue through lower balances, but also on flow based income. In addition, just like we took a reserve of $150 million in this quarter from a downside scenario.

Georges Elhedery: We're progressing with those at pace. Again, on both items, we continue the execution with discipline and pace and, we remain unfazed with the, you know, external environment for the execution of those. This is our primary focus now, is just focusing on delivering those. You know, a matter of kind of cost efficiencies as a matter of BAU. If we identify cost efficiencies, we will of course be taking them as a matter of BAU, but our primary focus is to deliver on those commitments. With regards, fees and other income, look, we've talked to the plausible downside scenario, which may put some.

Tom: <unk> father looked at the downside scenario on 100% probability basis and came up with the number which is the 0.5 billion provision best estimate in terms of the.

Tom: The tariffs.

Tom: And then with regards your new to bank customers in Hong Kong, We were pleased to announce that we acquired 300000 new to bank customers.

Georges Elhedery: That it's an adverse scenario, but it is a plausible scenario, and it will slow down parts of our business, you know, trade flows, but also the implication it has on other aspects of our business, including the volumes in general. But outside, I would say this adverse scenario, we continue to see strength in the wealth business, five quarters double-digit growth, which we expect to continue in the medium term, at least for the medium term. We continue to invest in this space, and we continue investing in a number of areas as we called out in February, because we, you know, we believe in the growth potential that we can exhibit in these areas. Thank you, Ben.

Tom: In Q1. This is after we acquired 800000 mutual bank customers in the full year 2024, and we continue to see that trend ongoing. Thank you very much Joseph.

Tom: Yeah.

Speaker Change: Thank you Barry. So next question today comes from Kung Hang My hat, China Securities. Please accept the privilege to meet your line.

Tom Palmer: Yeah, Josh Hi, Tom This is Tom Palmer, China, sometimes just thank you for taking my question.

Speaker Change: I have two questions harsh things also some hot ops on the possible downside.

Speaker Change: Scenario, if we compare the you know you have to sort out and attached small trade off on ECL.

Speaker Change: And we got a set of assumptions for those tests.

Speaker Change: No no in your annual report.

Pam Kaur: Ben, just to add, I mean, for the quarter, there's been good performance and there's been high level of client activity which has benefited FX, debt, equities, markets, and wealth. Also, I want to just remind that one benefit was also the Argentina headwind that we had of $0.2 billion in Q1 of 2024, which obviously didn't repeat in this quarter because of the sale. But the key franchise factors are wealth, it's a structural growth and those dynamics will persist. They are driven by our brand, they're driven by the range of products we have to offer, the improvements we've made in terms of technology and that investment is going to pay. As Georges said, we stay confident in terms of double-digit growth in the medium term. On wholesale transaction banking, it remains an area of competitive advantage.

Speaker Change: Those two tests are the assumptions for the train test that's how it all worse.

Speaker Change: I mean, that's the downside scenario, that's what all of us.

Speaker Change: And then it does.

Speaker Change: I'm just used.

Speaker Change: And also is that low single digit revenue impact just awesome long here.

Speaker Change: Paul.

Speaker Change: Revenue layoffs, yeah. That's the first question second question is could you. Please give us some color on that that is a trend.

Speaker Change: Thank you.

Tom Palmer: Thank you very much campaign I'm going to ask Tom to address both your questions comparing.

Tom Palmer: Thanks couldn't plan, so we're not going to get into the detail, but the underpinning depending of the scenario where that ecl's orange. Indeed on revenue has the same starting point and we are comfortable based on the work we have done to reaffirm our guidance on ROE T. I just want to be cab that the scenario does not incur.

Pam Kaur: We will continue to grow there, but it's going to be hard to predict quarter to quarter, especially in the current environment. Volatility has definitely benefited us in this quarter, so it may not repeat at the very high levels that we've seen in this quarter, but we are still continuing to see underlying growth as we have progressed through in Q2.

Pam Kaur: We will continue to grow there, but it's going to be hard to predict quarter-to-quarter, especially in the current environment. Volatility has definitely benefited us in this quarter, so it may not repeat at the very high levels that we've seen in this quarter, but we are still continuing to see underlying growth as we have progressed through in Q2.

Tom Palmer: Glued the secondary impact of any change in policy rates in terms of the the revenue related scenario.

Tom Palmer: Secondly, none of the DS. These two scenarios have what you call an extreme downside to scenario with like a double digit contraction of GDP like you saw in the Covid patients. So just to give you. Some guardrails. So in terms of Hong Kong clearly this was a relatively quiet quarter. We did have a one specific.

Operator: Thank you. Thank you very much, Pam. Our next question today comes from Joseph Dickerson at Jefferies. Please accept the prompt to unmute your line.

Joseph Dickerson: Hi. Thank you for taking my question. Congrats on the strong set of numbers and some clarity on your thinking on the path forward. Can I just ask on the plausible downside scenarios for the low single-digit impact on revenue, I guess, what was the point of undertaking that exercise? Was it to basically show that the perception of the bank as a global trade bank, in some ways may be exaggerated about how you're not overly reliant on any particular corridors. I guess what kind of elements went into that scenario in terms of magnitude of drawdown on trade?

Tom Palmer: Name a wedge in the performing book there was a.

Tom Palmer: Credit downgrade otherwise, there's really nothing more significant we continue to look at our book in detail and there may be a few names up or down on the credit curve with very modest impact on <unk>, but no significant impact on sales.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question today comes from them on let's call. It all case. Please accept the prompt told me, Illinois.

Speaker Change: Hey, George Hey, Pam Thanks.

Speaker Change: Thanks, very much for that.

Speaker Change: Various updates and sensitivities that you get enough of them.

Joseph Dickerson: Then secondly, just on that, could you opine on any opportunities that you're seeing, or that you foresee, as a result of what's happening? Not that what's happening is necessarily certain at the moment, but just any opportunities that you can see based on any initial discussions. I would presume that you know, you had very strong new to bank customers in Hong Kong, I presume. Can you make any comment on April trends there? I would have presumed that that would have continued from last quarter, if what we're picking up on the ground in Hong Kong is accurate. Thanks.

Speaker Change: Two questions just around customer.

Speaker Change: Customer behavior so.

Speaker Change: Wondered if you'd observed any material shift in.

Speaker Change: The way that your customers are transacting with U C.

Speaker Change: Any forward indicators around sentiment.

Speaker Change: Any signs of Derisking and deleveraging any shifting.

Speaker Change: Particularly your kind of corporate customers that might be on the receiving end of trade tariffs.

Speaker Change: Any insights there would.

Speaker Change: It would be really helpful.

Speaker Change: And then the second is.

Speaker Change: Definitely get the message around continuing to execute.

Georges Elhedery: Thank you very much, Joseph. I'll take your question about the positioning of our trade business and our bank as well as the opportunities. I'll ask Pam to take you through the elements of this analysis. We are the world's trade bank. We have been ranked the number one trade bank for eight consecutive years. Our trade covers variety of products as well as we cover you know all the large corridors of trade, including intra-regional corridors, which have been growing quite fast over the last few years. The exercise that we've conducted is meant to basically evaluate the impact of plausible downside scenarios on our overall activities, obviously including trade.

Speaker Change: On the existing strategy.

Speaker Change:

Speaker Change: Yes, just to kind of.

Speaker Change: For like 10 points to the one around capital returns I mean, it's obviously, great that you've announced the $3 billion buyback.

Speaker Change: You're talking about a more subdued outlook for lending and by extension all Wi So presumably you yep.

Speaker Change: I'll be quite capital generative. This year. So it seems like youre committed to distributions. Despite the uncertainty right. So uncertain backdrop, but the pace of distributions that you kind of executing on it it feels like you're you're committed to that is that the right rates should we be.

Speaker Change: Confident around things like the buyback sustainable from here.

Speaker Change: Just the related.

Speaker Change: If that question that surround it.

Speaker Change: Talk about divesting.

Georges Elhedery: Just to add on trade, number one, we have more than 5,000 trade specialists in more than 50 markets. We're in a unique position to be able to support our customers with our expertise in trade. As the business environment shifts, the business outlook shifts, their trading pattern shifts, and you know, our customers need to reconfigure some of their supply chains. You know, we expect to be able to deepen our relationships with existing clients, but also thanks to our strength, stability, and expertise, to attract more clients and to continue building market share in the trade business among other of the, you know, kind of robust business proposition and service proposition we have for our customers. Pam?

Speaker Change: Hi, Mike.

Speaker Change: <unk> billion dollars.

Speaker Change: In terms of the redeploy.

Speaker Change: Because I think you talked about.

Speaker Change: Yeah, so some potential revenue opportunities from the redeployment of cost savings if it doesn't come back are you minded to delay any of this redeploy basically given the volatile backdrop. Thank you.

Speaker Change: Very good. Thank you very much I'm going to take your first question about customer behavior, and I'll ask them to address both our capital return strategy as well as the cost redeployment from these.

Speaker Change: Relocations. So in terms of customer behavior, I think nothing that will join the surprise your corporate customers essentially are in the wait and see mode. So some of the capex or large investments on hold certainly some of the shipments from China, specifically to the U S have slowed down.

Pam Kaur: Yeah. Thanks, Joseph, for the question. Firstly, broadly in terms of context-setting, every quarter we do a range of scenario analysis. This quarter, we looked at the significant but plausible downside scenario resulting from an increase in tariffs. We homed in on one scenario after looking at a range of possible outcomes, which, as we know, are uncertain and remain very wide. The specific scenario which we homed in on was based on a significant increase in tariffs as well as retaliatory tariffs. We also took a holistic approach. We considered different businesses, different geographies, as well as customer segments. This scenario resulted in significant decline in trade and significant slowdown in global GDP growth. The impact of this, we looked at both in terms of revenue through lower balances, but also on flow-based income.

Speaker Change: But we've seen no panic, so theres been no significant drawdowns theres deposit behavior has it remained normal so.

Speaker Change: Nothing really to call out.

Speaker Change: Beyond the wait and see in terms of personal banking and Winced customers' activity actually this has been quite strong, but remember we have a diversified product offering. So we've seen customers you know.

Speaker Change: Rebalance.

Speaker Change: Investments between base offerings, and it'll be a greatest geographic equity exposure or other assets such as mutual funds are structured products.

Speaker Change: And you know when when customers want to take risk off the approach, we see the money flow into our deposit base. So we kind of capture the customer assets either in invested assets are in deposits.

Speaker Change: When we look at our N N I E for the first two months of the year. It remained positive strong.

Speaker Change: So we remain positive on the outlook of the growth in this business remember also we're investing in this business are we capturing the underlying growth in the market, but we're also capturing marketshare.

Pam Kaur: In addition, just like we took a reserve of $150 million in this quarter from a downside scenario, we further looked at the downside scenario on a 100 percent probability basis and came up with a number which is the $0.5 billion provision best estimate in terms of the tariffs.

Speaker Change: And the way we are investing in this business.

Speaker Change: Thanks, and I'm, sorry, just one point to add on that.

Speaker Change: Wealth customer behaviors, our strengths, where he lives in a very broad product proposition. So as we see the mix shift between.

Georges Elhedery: Ben, with regard to your new-to-bank customers in Hong Kong, we were pleased to announce that we acquired 300,000 new-to-bank customers in Q1. This is after we acquired 800,000 new-to-bank customers in the full year 2024, and we continue to see that trend ongoing. Thank you very much, Joseph.

Speaker Change: One you know U S equities, all our Asian equities are indeed into shocked them fixed income products. We are there to support our customers as well as a in terms of insurance on more protection and savings related product. So given that gives us confidence that this.

Speaker Change: Double digit growth continues and we are seeing the same trend and even through April and the same trend also no panic, no drawdowns and deposit behavior normal through April. So that's just the sad that so coming down to a distribution. So just as a starting point.

Operator: Thank you both. Our next question today comes from Kunpeng Ma at China Securities. Please accept the prompt to unmute your line.

Kunpeng Ma: Hi, Georges. Hi, Pam. This is Kunpeng of China Securities. Thank you for taking my question. I have two questions. The first is also some follow-ups on the plausible downside trade scenario. If we compare the, you know, you have two scenario tests, one for trade, one for ECL. We got your set of assumptions for those ECL tests from your annual report. So if we compare those two tests, are the assumptions for the trade test better or worse than the, I mean, the downside scenario, better or worse than those set of assumptions used in the ECL test? And also, is the low single digit revenue impact just for some one year revenue or for every year's revenue thereafter? Yeah, that's the first question.

Speaker Change: We have a policy on ordinary dividends I'm, assuming your question is much more on share buybacks, but let me see overall on the process we follow.

Speaker Change: Every quarter.

Speaker Change: We look at where we are in terms of our CET, one and you know our CET one operating range is between 14 to 14, 5%. They also look at our capital generation less the capital needs of capital deployment that we want to do.

Speaker Change: And what's very important is routinely but we look at a range of scenarios in terms of the macroeconomic environment and then based on that we look at the content on share buybacks and clearly if we have excess capital share buybacks continues to be our preferred method to her.

Kunpeng Ma: The second question is, could you please give us some color on the latest trend on Hong Kong CRE? Thank you.

Speaker Change: <unk> capital we have.

Georges Elhedery: Thank you very much, Kunpeng. I'm going to ask Pam to address both your questions, Kunpeng.

Speaker Change: <unk> not changed our view on capital redeployment.

Pam Kaur: Thanks, Kunpeng. We're not going to get into the detail, but the underpinning of the scenarios, whether it's ECLs or indeed on revenue, has the same starting point. We are comfortable based on the work we have done to reaffirm our guidance on RoTE. I just want to be clear that the scenario does not include the secondary impact of any change in policy rates in terms of the revenue-related scenario. Secondly, none of these two scenarios have what you call an extreme downside to scenario with like a double-digit contraction of GDP like we saw in the COVID period. Just to give you some guardrails. In terms of Hong Kong CRE, this was a relatively quiet quarter. We did have one specific name, which in the performing book there was a credit downgrade.

Speaker Change: But as I've said, we look at opportunities, we look at the generator capability quarter on quarter and that's how we make the decision on the quantum of share buybacks.

Speaker Change: And on the redeployment of the island.

Speaker Change: Coffee absolutely so far we have not made any change to the timeline of what we said we would do that redeployment is going to be through the Midtown Theatre ads. So between 25 26 and 27.

Speaker Change: In terms of the macroeconomic uncertainty you're very mindful in this current environment.

Speaker Change: That there may be some delays, but overall it doesn't shift the trajectory or indeed, the transactions that we have both announced and are working on they are progressing as we expected.

Speaker Change: Perfect. Thank you very much I'm on.

Pam Kaur: Otherwise, there's really nothing more significant. We continue to look at our book in detail, and there may be a few names up or down on the credit curve with very modest impact on RWAs, but no significant impact on ECLs.

Speaker Change: Thank you. Our next question today comes from Jason Napier UBS. Please accept the prompt you to meet your line.

Jason Napier: Good morning can you hear me okay.

Speaker Change: Yeah.

Georges Elhedery: Thank you, Kunpeng.

Speaker Change: We can hear you Jason.

Operator: Thank you both. Our next question today comes from Aman Rakkar at Barclays. Please accept the prompt to unmute your line.

Speaker Change: Perfect. Thank you.

Speaker Change: Two questions face to face.

Speaker Change: Yours Intraspecies, a signatory to the letter.

Aman Rakkar: Hey, Georges. Hey, Pam. Thanks very much for the various updates and sensitivities that you've given us. I had two questions just around customer behavior. I just wondered if you'd observed any material shift in the way that your customers are transacting with you. If you've seen any forward indicators around sentiment, any signs of de-risking or de-leveraging, any shift in particularly your kind of corporate customers that might be on the receiving end of trade tariffs. Any insights there would be really helpful. The second is, you know, definitely get the message around continuing to execute on the existing strategy. I guess just two kind of related points to that. One around capital returns. I mean, it's obviously great that you've announced a $3 billion buyback.

Speaker Change: The distinction of the UK regulators should ring fencing is something that you think.

Speaker Change: That's the right.

Speaker Change: But we've got a lot of investor demand for a sense from you as to.

Speaker Change: The motivation for that what is it that you would say in terms of Opex funding costs and restructuring charges that go with that so when you made that motivation watch.

Speaker Change: So that's behind us.

Speaker Change: Secondly, as very strong performance in costs in Q1.

Speaker Change: But guidance held constant for the.

Speaker Change: The year ahead, I guess that implies.

You see some slippage in efficiency ratios in the quarters to come notwithstanding.

Speaker Change: Having actions that are underway can you talk a little bit about some of the moving parts just bought.

Speaker Change: Dakota volatility.

Speaker Change: We should be thinking about any upcoming quarters as far as cost inflation.

Speaker Change: Yeah, Thanks very much.

Jason Napier: Thank you Jason.

Tom Palmer: Let me address your first question on ring fencing, and Tom will take your second question on the on the cost.

Aman Rakkar: You're talking about a more subdued outlook for lending and by extension RWAs. Presumably you might be quite capital generative this year. You know, it seems like you're committed to distributions despite the uncertainty, right? It's an uncertain backdrop, but the pace of distributions that you're kind of executing on, it feels like you're committed to that. Is that the right read? Should we be confident around things like the buyback sustainability from here? Just the related part of that question then is around, you talk about divestiture on track, the $1.5 billion. In terms of the redeploy, 'cause I think you talked about, some potential revenue opportunities from the redeploy or cost savings if it doesn't come through.

Speaker Change: So our view on the ring fencing is that.

Speaker Change: We've taken major I mean, there's been major enhancement to the Prudential regulations for banks in the U K in particular, the broader use of capital of a you know a lot of.

Speaker Change: Loss absorbing chefoo, emlen liquidity recovery and distribution et cetera. All these measures have basically put the bank in a much better safer prudential's space, but have made ring fencing effectively rounding.

Speaker Change: The second thing to say is that the UK is the only major economy.

Speaker Change: Uh huh.

Speaker Change: Sensing so it's quite unique to the U K.

Speaker Change: So as you know is an outcome it's increased the cost to operate as a bank, it's created capital inefficiencies it trapped liquidity.

Aman Rakkar: Are you minded to delay any of this redeploy, basically, given the volatile backdrop? Thank you.

Georges Elhedery: Very good. Thank you very much, Aman. I'm going to take your first question about customer behavior, and I'll ask them to address both our capital return strategy as well as the cost redeployment from the reallocations. In terms of customer behavior, I think nothing that would really surprise you. Corporate customers essentially are in a wait and see mode, so some of the CapEx or large investments are on hold. Certainly, some of the shipments from China, specifically to the US, have slowed down, but we've seen no panic. There's been no significant drawdowns. There's, you know, deposit behavior has remained normal. Nothing really to call out beyond the wait and see. In terms of personal banking and wealth customers activity, actually, this has been quite strong.

Speaker Change: Hum it effectively exposed our customers, including businesses and Smes two higher cost. It did somewhat also stifle competition that the bar to be able to compete in the U K for banks is has become stiffer and you know more difficult.

Speaker Change: So therefore, we believe that removing ring fencing or at least scaling back.

On some of the ring fencing considerations wouldn't improve the outcome for customers and ultimately therefore will support growth in the U K.

Speaker Change: No just to reiterate we are very supportive of the government's growth agenda.

Speaker Change: And we will play a role in the U K for that.

Speaker Change: And as regards to the financial impact of the removal or the scaling down of the ring.

Georges Elhedery: Remember, we have a diversified product offering, so we've seen customers, you know, rebalance their investments between various offerings and, you know, be it various geographic equity exposure or other assets such as mutual funds or structured products. When customers wanna take a risk-off approach, we see the money flow into our deposit base, so we kind of capture the customer assets, you know, either in invested assets or in deposits. But when we look at our NNIA for the first three months of the year, it remained positive, strong. We remain positive on the outlook of the growth in this business.

Speaker Change: Ring fencing look we haven't we haven't done the.

Speaker Change: Full analysis, but we believe this will be positive for both capital cost and ability to compete and support the growth of the UK Colombian old customers.

Speaker Change: Yeah. Thanks, Jason So firstly, the manage cost to a full year number and quarter on quarter, you can see some volatility.

Speaker Change: But just to clarify are fully are 2025 guidance.

Speaker Change: Lost 3% is on a base of $31.9 billion, which is a full year 'twenty four restated to the average FX for Q1 25, So just unbundling that the 3% the dependencies on the 4% inflation investment spend and the benefit.

Georges Elhedery: Remember also we're investing in this business, so we're capturing the underlying growth in the market, but we're also capturing market share, in the way we're investing in this business. Sam?

Pam Kaur: Thanks, Aman. Just one point to add on the wealth customer behaviors. Our strength really lies in our very broad product proposition. As we see the mix shift between one, you know, US equities or Asian equities, or indeed into short-term fixed income products, we are there to support our customers as well as in terms of insurance on more protection and savings related products. Given that gives us confidence that this double-digit growth continues. We've seen the same trend even through April, and the same trend also, no panic, no drawdowns, and deposits behavior normal through April. That's just to say that. Coming down to our distribution. Just as a starting point, we have our policy on ordinary dividends.

Speaker Change: Net of zero point $3 billion, so the 1% from the P&L saves from the simplification as we guided on the Q4 and the actions that are going to rise that 300 million of the had been already probably taken through the P&L will come through in subsequent months.

Speaker Change: Thank you Jason.

Speaker Change: Thank you guys. Our next question today comes from Kian.

Speaker Change: Hussain from J P. Morgan please accept the approach to mute your line.

Yes, Hi, George and Pam Thanks for taking my questions.

Speaker Change: Great results, but clearly the focus is on the on the new tariff worlds and I wanted to try to understand first of all your target and guidance around interest rates in particular, but also GDP assumptions.

Speaker Change: Mentioned mid April, but clearly not happened in April so I just trying to understand.

Pam Kaur: I'm assuming your question is much more on share buybacks, but let me see overall on the process we follow. Every quarter, we look at where we are in terms of our CET1. You know our CET1 operating range is between 14 to 14.5%. We also look at our capital generation, less the capital needs or capital deployment that we want to do. What's very important is we look at a range of scenarios in terms of the macroeconomic environment, and then based on that, we look at the quantum on share buybacks. Clearly, if we have excess capital, share buybacks continues to be our preferred method to return capital.

Speaker Change: What date.

Speaker Change: What we should use as a guidance in terms of interest rate assumptions, if you could give maybe GDP assumptions.

Speaker Change: And secondly, coming to your sensitivities.

Speaker Change: Our analysis around.

Speaker Change: Tariffs impact if you could discuss again interest rate assumptions in particular in GDP, but also their assumptions about.

Speaker Change: China as a trading.

Speaker Change: The counterparty in terms of your revenues.

Speaker Change: Kearney Dorsey talk about because clearly BD into new world. The corridor seem to be impacted just about so are you assuming corridor can grow or do you assume current address would also be negatively impacted in a new tariff rules and lost in that context can you just talk about cost flexibility, yes, you didn't discuss that.

Pam Kaur: We have not changed our view on capital redeployment, but as I've said, we look at opportunities, we look at the generative capability quarter-over-quarter, and that's how we make the decision on the quantum of share buybacks.

Speaker Change: Thank you Kim and I'm going to make some broad comments on the view of core doors and overall in our business.

Georges Elhedery: on the redeployment of

Georges Elhedery: On the redeployment of-

Pam Kaur: Yeah. On the redeployment of costs, yeah, absolutely. So far, we have not made any change to the timeline of what we said we would do. That redeployment is going to be through the midterm period, so between 2025, 2026, and 2027. Clearly, in terms of the macroeconomic uncertainty, we are very mindful in this current environment that there may be some delays, but overall it doesn't shift the trajectory or indeed the transactions that we have both announced and are working on. They are progressing as we expected.

Speaker Change: And I will ask them too.

Speaker Change: It gives you additional information on the tariff scenarios as well as in the cost implications okay.

A couple of things.

Speaker Change: The first one is you know as we did say.

Speaker Change: The lion's share of our bank and I always driven by our deposit franchise. This deposit franchises a hallmark.

Speaker Change: Balance sheet.

Speaker Change: And you know we own 50 as loan to deposit ratio and three or four for businesses in the in the U K with an H, which is the lowest therefore, we have deposit surpluses in every currency every geography every business line.

Georges Elhedery: Perfect. Thank you very much, Aman.

Speaker Change: This franchise is very robust and there's a driver of our very important.

Operator: Thank you both. Our next question today comes from Jason Napier at UBS. Please accept the prompt to unmute your line.

Speaker Change: And the lion's share for banking NII very important revenue stream.

Speaker Change: The second when you look at our fee income when.

Aman Rakkar: Morning. Can you hear me okay?

Jason Napier: Morning. Can you hear me okay?

Speaker Change: So far has continued to grow at double digit returns and we do expect it to continue to grow at double digit returns in the medium term given the underlying market opportunities and market growth as well as our own investment to continue gaining market share.

Georges Elhedery: We can hear you, Jason.

Aman Rakkar: Oh, perfect. Thank you. Questions please. The first, Georges Elhedery, HSBC is a signatory to a letter suggesting to the UK regulators that ring-fencing is something that should go. I think that's the right view. But we've got a lot of investor demand for a sense from you as to the motivation for that. What is it that you'd say in terms of OpEx, funding costs, and what restructuring charges may go with that? When you made that motivation, what was the maths behind it? Secondly, very strong performance in costs in Q1, but guidance held constant for

Jason Napier: Oh, perfect. Thank you. Questions please. The first, Georges Elhedery, HSBC is a signatory to a letter suggesting to the UK regulators that ring-fencing is something that should go. I think that's the right view. But we've got a lot of investor demand for a sense from you as to the motivation for that. What is it that you'd say in terms of OpEx, funding costs, and what restructuring charges may go with that? When you made that motivation, what was the maths behind it? Secondly, very strong performance in costs in Q1, but guidance held constant for

Speaker Change: So transaction banking is the one that really we really are diving into remember first transaction bank is a wide set of products that cover various areas outside trade and remember a lot of our businesses, let's say with multinational customers operating in Asia or in China.

Speaker Change: A lot of their business is in China for China or into Asia for Asia, where they produce and manufacture locally and distribute locally with limited impact on Fedex, albeit some may be affected by those.

Jason Napier: For the year ahead, I guess that implies potentially some slippage in efficiency ratios in the quarters to come, notwithstanding the cost-saving actions that are underway. Could you talk a little bit about sort of the moving parts, just quarter-to-quarter volatility? Is there anything we should be thinking about in the upcoming quarters as far as cost inflation is concerned?

Speaker Change: But even within trade we have seen growth of trade corridor is intra Asia or within Asia Middle East.

Speaker Change: At a very fast pace.

Speaker Change: And in a number of these quality doors have become structurally resilient and on the growth trajectory no some of the China plus one.

Georges Elhedery: Yeah.

Jason Napier: Thanks very much.

Georges Elhedery: Thank you, Jason Napier. Let me address your first question on ring-fencing and Pam Kaur will take your second question on the cost. Our view on ring-fencing is that, I mean, there's been major enhancement to the Prudential regulations for banks in the UK, in particular the broader regimes of capital, you know, loss absorbency through MREL, liquidity, recovery and resolution, et cetera. All these measures have basically put banks in a much better, safer Prudential space that have made ring-fencing effectively redundant. The second thing to say is that the UK is the only major economy that has applied ring-fencing, so it's quite unique to the UK. As a, you know, as an outcome, it's increased the cost to operate as a bank. It created capital inefficiencies. It trapped liquidity.

Georges Elhedery: Thank you, Jason. Let me address your first question on ring-fencing and Pam will take your second question on the cost. Our view on ring-fencing is that, I mean, there's been major enhancement to the Prudential regulations for banks in the UK, in particular the broader regimes of capital, you know, loss absorbency through MREL, liquidity, recovery and resolution, et cetera. All these measures have basically put banks in a much better, safer Prudential space that have made ring-fencing effectively redundant. The second thing to say is that the UK is the only major economy that has applied ring-fencing, so it's quite unique to the UK. As a, you know, as an outcome, it's increased the cost to operate as a bank. It created capital inefficiencies. It trapped liquidity.

Speaker Change: Trade patterns that are spin men to ultimately distribute or you know exports to the U S.

Speaker Change: Will it be affected and so far that this intra Asia trade flows for that ultimate purpose, but there is a much bigger intra Asia intra Asia and Middle East trade flows that are two way.

Speaker Change: And that's all related to domestic manufacturing for the purposes of domestic consumption, which we continue to see a structurally growing.

Speaker Change: Our scenarios have really looked at differentiation between the areas of structural growth in the areas that would be why is widely impacted by tariffs, which which Tom can talk to.

Speaker Change: Thank you Ken so firstly just to reiterate the $40 billion bank and I continues to be our best estimate for full year 2025.

Speaker Change: We've looked at a range of reasonable upside downside assumptions.

Speaker Change: Assumptions, including rates.

Georges Elhedery: It effectively exposed our customers, including businesses and SMEs, to higher costs. It did somewhat also stifle competition. The bar to be able to compete in the UK for banks has become stiffer and, you know, more difficult. Therefore, we believe that removing ring-fencing or at least scaling back on some of the ring-fencing considerations will improve the outcome for customers and ultimately, therefore, will support growth in the UK. Now, just to reiterate, we are very supportive of the government's growth agenda, and we will play our role in the UK for that.

Speaker Change: But we're not immune to all scenarios. Despite the stress work that they've done.

Speaker Change: Our Q1 run rate of 10.6 billion puts us in a good trajectory given that range of scenarios, we've looked at all plausible upsides and downsides.

Speaker Change: Now as always therefore, a key drivers the rates that we have included a based on the mid April comps.

Speaker Change: The structural hedge.

Speaker Change: It'll be a tailwind to this headwind of race, we have 75 billion maturities in the remainder of the I'm down to point at San deal at the moment, so there'll be an upside to that the other two elements are harder to forecast, particularly in terms of balance sheet growth as we've said before and the loan.

Georges Elhedery: As regards the financial impact of the removal or the scaling down of ring-fencing, look, we haven't done the, you know, full analysis, but we believe this will be positive for both capital, cost, and ability to compete and support the growth of the UK economy and our customers. Pam.

Speaker Change: Stay muted, having said that loans and advances were slightly up in the first quarter of this year, primarily because Hong Kong loans and advances was stable compared to Q4 last year, but they had contracted.

Speaker Change: Now the deposit migration trend from Hong Kong has stayed stable over last year into this year at 39% and that is continuing even through April. So if I look at in the round in terms of deposit behaviors of our customers both from a corporate side and as well as from a retail side they stay quiet.

Pam Kaur: Yeah. Thanks, Jason. Firstly, we managed cost to a full-year number. Quarter-on-quarter you can see some volatility. Just to clarify, our full-year 2025 guidance of +3% is on a base of $31.9 billion, which is the full-year 2024 restated to the average FX for Q1 2025. Just unbundling that, the 3%, the dependencies on the 4% inflation investment spend and the benefit of $0.3 billion, the 1% from the P&L saves from the simplification as we guided on the Q4, and the actions that are going to re-realize that $300 million a year have been already broadly taken through the P&L will come through in subsequent months.

Speaker Change: So on tariffs just in terms of the the broad piece, what we have.

Speaker Change: Looked at from a tariff perspective as well.

Speaker Change: In terms of seeing the various scenarios.

Speaker Change: In terms of delivering the mid teens Roe team.

Speaker Change: I mean, firstly, we looked at our income stream beyond banking and I, which is wholesale transaction banking and it has many more products beyond trade finance.

Speaker Change: It also is in diverse products within trade finance and their diverse global and intra regional Colorado's now maybe you've looked at the downside scenario, we've looked at higher tell us they have looked at the impact on GDP have you ever looked more broadly on policy rates inflation, the big picture, but again to say we have not.

Georges Elhedery: Thank you, Jason.

Operator: Thank you both. Our next question today comes from Kian Abouhossein from JP Morgan. Please accept the prompt to unmute your line.

Speaker Change: At G D P through the stress level off a downside scenario that we've called out in our release, which is like a double digit contraction of GDP as we saw in the Covid period. So if you look at all of that will come to a low single digit percentage impact on revenues.

Kian Abouhossein: Yes. Hi, Georges Elhedery and Pam Kaur. Thanks for taking my questions. Great results, but clearly the focus is on the new tariff world. I wanna try to understand, first of all, your target and guidance around interest rates in particular, but also GDP assumptions. You mentioned mid-April, but clearly a lot happened in April, so just trying to understand what date, or what week we should use as a guidance in terms of interest rate assumption, if you could give maybe GDP assumptions. Secondly, coming to your sensitivities, or your analysis around, tariff impact, if you could discuss again interest rate assumptions in particular in GDP, but also the assumptions about China as a trading counterparty in terms of your revenues versus the corridors you talk about.

Kian Abouhossein: Yes. Hi, George and Pam. Thanks for taking my questions. Great results, but clearly the focus is on the new tariff world. I wanna try to understand, first of all, your target and guidance around interest rates in particular, but also GDP assumptions. You mentioned mid-April, but clearly a lot happened in April, so just trying to understand what date, or what week we should use as a guidance in terms of interest rate assumption, if you could give maybe GDP assumptions. Secondly, coming to your sensitivities, or your analysis around, tariff impact, if you could discuss again interest rate assumptions in particular in GDP, but also the assumptions about China as a trading counterparty in terms of your revenues versus the corridors you talk about.

Speaker Change: Yeah.

And within that and whether the incremental 500 million E. Seattle, we stay very confident for a mid teens royalty for the next three years now the broader impacts are going to be hard to quantify these are your second part or the impact, but we'll continue to monitor them through our various scenarios and reviewed them quarter on quarter.

Speaker Change: On costs, our cost trajectory is on.

Speaker Change: On track and given this theres no shift on that.

Speaker Change: And we will still continue.

George Hill: Through our envelope to be able to invest in the areas, which we have been as George has said because we can see the direct benefit coming very quickly in those areas even in the current environment and continuing through April and that's primarily on the website.

Speaker Change: Hey.

Kim: Kim Thank you very much.

Kian Abouhossein: Because clearly really in the new world, the corridors seem to be impacted as well. Are you assuming corridors can grow, or do you assume corridors would also be negatively impacted in a new tariff world? Lastly, in that context, can you just talk about cost flexibility as you didn't discuss that?

Speaker Change: Thank you Mike. Our next question today comes from Amit goal at Mediobanca. Please accept from to meet your line.

Speaker Change: Hi, Thank you.

And so essentially follow up actually to to Kansas question that so thank you and I'm trying to say essentially the plausible tariff downside scenario is pretty similar place I'd say, the ECL downside, one rather than the downside to tie a case.

Georges Elhedery: Thank you, Kian. Kian, I'm going to make some broad comments on the view of corridors and overall our business, and I'll ask Pam to, you know, give you additional information on the tariff scenarios as well as in the cost implications. Okay? A couple of things to know. The first one is, you know, as we did say, the lion's share of our banking NII is driven by our deposit franchise. This deposit franchise is a hallmark, you know, of our balance sheet. And, you know, we run 50s loan to deposit ratio in three of our four businesses. In the UK we run 80s, which is the lowest, therefore, we have deposit surpluses in every currency, every geography, every business line.

Speaker Change: Again, just coming back in terms of the broader profitability mid teens.

Speaker Change: And then kind of a.

Speaker Change: Target and so essentially you're saying that if it were to say that possible downside scenario you still believe you can achieve that mid teens profitability level.

Speaker Change: And that's before factoring in any further kind of cost actions or would that be with any kind of rejigging or additional cost actions.

Speaker Change: Action taken by the group to mitigate some of that impact.

Georges Elhedery: This franchise is very robust and is a driver of a very important, you know, lion's share for banking NII, very important revenue stream. The second, when you look at our fee income, wealth so far has, you know, continued to grow at double-digit returns, and we do expect it to continue to grow at double-digit returns in the medium term, given the underlying market opportunities, market growth, and our own investment to continue gaining market share. Transaction banking is the one we really are diving into. Remember first, transaction banking is a wide set of products that cover various areas outside trade.

Speaker Change: And then secondly, and I just want to check him when I look at the downside 180 shell scenario.

Speaker Change: Now versus that so yeah. It seems like the the the China and Hong Kong draw down is not quite as severe.

Speaker Change: And actually the U S is maybe a little bit of 30 bps. Most of their sales you'll say just kind of curious why that downside scenario is not quite as.

Speaker Change: Negative, perhaps as you assess the full year stage.

Speaker Change: Thank you.

Amit Goal: Okay. Thank you Amit.

Amit Goal: I mean on your phone so I'm going to ask Pam to comment on your second question, but on your first question look we're not going to give more details than what we shared with I think your analogy to say that it's a downside one like scenario in the sense that it is adverse but plausible is correct and within that center.

Georges Elhedery: Remember, a lot of our businesses, let's say with multinational customers operating in Asia or in China, a lot of their business is in China for China or in Asia for Asia, where they produce and manufacture locally and distribute locally with limited impact on tariffs, albeit some may be impacted by tariffs. Even within trade, we have seen growth of trade corridors intra-Asia or within Asia, Middle East at a very fast pace. A number of these corridors have become structurally resilient and on a growth trajectory. Now, some of the China plus one trade patterns that are still meant to ultimately distribute or, you know, export to the US will be affected for insofar that there's intra-Asia trade flows for that ultimate purpose.

Amit Goal: Without additional cost actions than the one that we have set out to do and are on track for doing and obviously committed to do we are confident we can achieve our targets and in particular always targets of mid teen returns for 'twenty five 'twenty six 'twenty seven.

Speaker Change: Thanks, So just in terms of the scenario just to confirm they're not identical scenarios, but in terms of severity and plausibility you're right in that in the ballpark because you sell scenario stress is a lot of things on interest rates inflation et cetera from a range of factors and this one on.

Georges Elhedery: There is a much bigger intra-Asia and Middle East trade flows that are two-way and that are related to domestic manufacturing for the purposes of domestic consumption, which we continue to see as structurally growing. Our scenarios have really looked at differentiation between the areas of structural growth and the areas that will be widely impacted by tariffs, which Pam can talk to.

Amit Goal: You know, it's quite specific on the on the revenue line.

Amit Goal: And to clarify on E C. Alex we had to build a reserve for this quarter change the weightings of the downside one from 15% to 30% and when they look at the 500 million.

Amit Goal: Potential impact that is if you change that downside one scenario weighting to 100%. So just to say that's a 500 additional to the 159 times of Hong Kong, China create absolutely in terms of.

Pam Kaur: Thank you, Kian. Firstly, just to reiterate, the $42 billion banking NII continues to be our best estimate for full year 2025. Now, we've looked at a range of reasonable upside, downside assumptions, including rates, but we are not immune to all scenarios despite the stress work that we have done. Our Q1 run rate of $10.6 billion puts us on a good trajectory given that range of scenarios we've looked at, all plausible upsides and downsides. Now, as always, there are four key drivers. The rates that we have included are based on the mid-April curves. The structural hedge will be a tailwind to this headwind of rates. We have $75 billion maturities in the remainder of the year, and they are on 2.8% yield at the moment, so there'll be an upside to that.

Amit Goal: Both from an individual customer level as well on the forward economic guidance given the starting point there is a lesser impact on overall, there's been very little noise from a Hong Kong Korea, and China create although then isolated names in this quarter.

Amit Goal: There can be credit downgrades over a period of time, we saw few now but the impact from an arguably a perspective is very modest if you look from a U S perspective also there was a specific name and then when we look at the credit downgrades. So that's also in the quarter I Wouldnt really build any trend from this.

Amit Goal: Quarter into our full year.

Amit Goal: And all of these factors bottom line are part of the scenario analysis, which we do on upside and downsides before we would reaffirm our Ot guidance.

Pam Kaur: The other two elements are harder to forecast, particularly in terms of balance sheet growth, as we've said before, and the loans stay muted. Having said that, loans and advances were slightly up in the Q1 of this year, primarily because Hong Kong loans and advances were stable compared to Q4 last year, where they had contracted. Now, the deposit migration trend from Hong Kong has stayed stable over last year into this year at 39%, and that is continuing even through April. If I look at in the round in terms of deposit behaviors of our customers, both from a corporate side and as well as from a retail side, we stay quite comfortable.

Amit Goal: And target.

Speaker Change: Okay. Thank you Amit.

Speaker Change: Thank you Mike. Our next question today comes from Samsung from Goldman Sachs. Please accept the problem. She told me all the time.

Speaker Change: Thank you for taking my question, Georgia Fine Good morning, I'm, sorry on banking NII a couple if I may. Please first is Q on Q backend I held a freedom flags, whereas interest rates would have added a headwind of whereas there Mike alkylation 170 million.

Speaker Change: So can you please double click.

Pam Kaur: On tariffs, just in terms of the broad piece, what we have looked at from a tariff perspective is in terms of seeing the various scenarios in terms of delivering the mid-teens RoTE. I mean, firstly, we looked at our income stream beyond banking and IA, which is wholesale transaction banking, and it has many more products beyond trade finance. It also is in diverse products within trade finance and their diverse global and intra-regional corridors. Now, when we have looked at the downside scenario, we've looked at higher tariffs, we have looked at impact on GDP, and we have looked more broadly on policy rates, inflation, the big picture.

On how much was the benefit from the.

Speaker Change: Deposit price ruling not that high and then improved asset mix and the hedge.

Speaker Change: Stuck on that that's one and second in the.

Speaker Change: 42 billion again on banking and a further 2 billion around 42 billion guidance.

Speaker Change: How much are we assuming for average interest earning assets growth because that has if I see your deposit growth has been consistent but that somehow on a Y O Y basis dollar showing up as 4% growth, but then Q on Q Theres no growth and previously on YY always somebody could not show any growth and then what is the.

Speaker Change: Is 41.5 outcome around 42 does that take the bulks.

Pam Kaur: Again to say we have not looked at GDP to the stress level of a downside two scenario that we have called out in our release, which is like a double-digit contraction of GDP as we saw in the COVID period. If you look at all that, we come to a low single-digit percentage impact on revenues. Within that, and within the incremental $500 million ECLs, we stay very confident for our mid-teens RoTE for the next three years. Now, the broader impacts are going to be hard to quantify. These are your second- and third-order impacts, but we continue to monitor them through our various scenarios and review them quarter-on-quarter. On costs, our cost trajectory is on track, and given this, there's no shift on that.

Speaker Change: And help us meet our target. Thank you.

Speaker Change: I am going to ask Tom to address both of your questions and thank you and I think you're going to trade. So firstly banking NII was flat on a quarter on quarter on a constant currency basis, excluding notable items in Argentina, but we don't split out the dollar impact of every moving part, but let me just on.

Speaker Change: <unk>.

Speaker Change: So the headwinds were two fewer days in the quarter as well as lower interest rates, but.

Speaker Change: But the tailwind was reinvestment of maturing hedge assets at high yields.

Speaker Change: A bit of a change in the mix of our market treasury assets as well as the benefit of the positive posture was particularly in the U K, which come through with a delay of 90 days. So the interest rate cuts. We saw in August came in through for a full quarter in this quarter and then we saw a bit of a tail of the.

Pam Kaur: We will still continue through our envelope to be able to invest in the areas which we have been, as George has said, because we can see the direct benefit coming very quickly in those areas, even in the current environment and continuing through April, and that's primarily on the wealth side.

Speaker Change: November cuts as well so that's how you know what is the.

Speaker Change: The impact them.

Georges Elhedery: Perfect. Kian Abouhossein, thank you very much.

Georges Elhedery: Perfect. Kian, thank you very much.

Speaker Change: And in terms of your you know other question of course, we look at various upside and downsides in that 42 billion and I just wanted to reiterate that 42 billion.

Operator: Thank you both. Our next question today comes from Amit Goel at Mediobanca. Please accept the prompt to unmute your line.

Speaker Change: He's not and underpin it is just around 42 billion.

Amit Goel: Hi. Thank you. Potentially follow up, actually to Kian's question. Thank you, and I understand. Essentially the plausible tariff downside scenario is pretty similar or closer to the ECL downside one rather than the downside two type case. Again, just coming back in terms of the broader profitability mid-teens kind of target. Essentially you're saying that if we were to see that plausible downside scenario, you still believe you can achieve that mid-teens profitability level, and that's before factoring in any further kind of cost actions?

Speaker Change: Our current best estimate based upon what we see in terms of deposit beta is based upon what we see in terms of actual deposit flows coming through updated not just for the quarter, but also considering the trends you've seen through April.

Speaker Change: Great.

Speaker Change: Very much corporate.

Speaker Change: Yeah.

Speaker Change: Thank you Bye. So next question today comes from Andrew Coombs Citigroup. Please accept the problem. She told me all night.

Speaker Change: Yeah.

Andrew Coombs: Good morning, if I can have a couple on the organizational simplification and then also just one clarification on well.

Amit Goel: Would that be with any kind of rejigging, or additional cost action taken by the group to mitigate some of that impact? Secondly, I just want to check, when I look at the downside ECL scenario now versus a full year, it seems like the China and Hong Kong drawdown is not quite as severe. Actually the US is maybe a little bit 30 basis points more severe. I was also just kind of curious why that downside scenario is not quite as negative perhaps as what you assessed at the full year stage. Thank you.

Speaker Change: On the organizational simplification.

Speaker Change: Previously guided to $1 8 billion of restructuring costs and he said the majority of that is expected to be booked in 2025.

Speaker Change: I think you need to $141 million in Q1.

Speaker Change: Presumably we should expect a big step up in the restructuring charges from Q2.

Speaker Change: The rest of this year.

Speaker Change: And then the second question got attached to this is it.

Speaker Change: You said that the actions you've taken to date.

Speaker Change: Ready translate to $300 million of annualized savings.

Speaker Change: I appreciate it in Q1 due contract later, but nonetheless, you're still guiding to 300 million.

Speaker Change: For the full year 'twenty.

Georges Elhedery: Okay. Thank you, Amit. Amit, on your first, so I'm going to ask Pam to comment on your second question, but on your first question, look, we're not going to give more details than what we shared. I think your analogy to say that it's a downside one like scenario in the sense that it is adverse but plausible is correct. Within that scenario, without additional cost actions than the one that we have set out to do and are on track for doing, and obviously committed to do, we are confident we can achieve our targets and in particular our targets of mid-teen returns for 25, 26, and 27. Pam.

Speaker Change: When you've already achieved 300 million annualized and presumably moved.

Speaker Change: Yeah with the additional restructuring can.

Speaker Change: Can you just clarify that on why more savings and not flaring and full year 'twenty five 'twenty six.

Speaker Change: And then.

Speaker Change: Oh Wow clarification can you maybe segment split.

Speaker Change: Is it possible to get the split of the Asian invested asset and 60 billion Asian.

Speaker Change: <unk> invested assets as core tenant base attributable to Hong Kong.

Speaker Change: Thank you.

Speaker Change: Okay.

Pam Kaur: Thanks. Just in terms of the scenarios, just to confirm, they are not identical scenarios, but in terms of severity and plausibility, you're right in the ballpark because ECL scenario stresses a lot of things on interest rates, inflation, etc., from a range of factors. This one on tariffs is quite specific on the revenue line. To clarify on ECLs, we had to build our reserve for this quarter, change the weightings of the downside one from 15% to 30%. When we look at the $500 million potential impact, that is if you change that downside one scenario weighting to 100%. Just to say that's a $500 additional to the $150. Now in terms of Hong Kong and China CRE, absolutely.

Speaker Change: Thank you Andrew Andrew.

Speaker Change: Andrew I'm going to ask them to address.

Speaker Change: Sure Yeah. The first two questions with regard to the organization. Some communication just saying that we will give him as I as I said earlier, we will give a more photo update at the interim results.

Speaker Change: And then on your final question.

Speaker Change: Let us take it forward and see what we can communicate $16 billion of net invested assets in Asia with the majority in Hong Kong, but we will we will take it forward to see what additional granularity.

Speaker Change: We would likely to share.

Okay.

Speaker Change: Zandy. So firstly in terms of the actions taken in the P&L being coming through for the yeah.

Speaker Change: The actions taken typically is when you have.

Pam Kaur: In terms of both from an individual customer level as well on the forward economic guidance, given the starting point, there is a lesser impact, and overall there has been very little noise from a Hong Kong CRE and a China CRE other than isolated names in this quarter. There can be credit downgrades over a period of time. We saw a few now, but the impact from an RWA perspective is very modest. If you look from a US perspective, also there was a specific name, and then when we look at the credit downgrades, so that's also in the quarter. I wouldn't really build any trend from this quarter into a full year. All these factors, bottom line, are part of the scenario analysis which we do on upside and downside before we reaffirm our RoTE guidance.

Speaker Change: Colleagues pulled through at risk and decisions made communicated.

Speaker Change: Yeah, there's always a time lag typically between that and colleagues, leaving our platform typically it tends to be about a quarter 90 days. So when you say an action. That's been taken you know a saving is going to come through but there is going to be a time lag between that decision and the savings feeding into the P&L. So when we said the majority.

Speaker Change: The actions have already been taken the annualized savings that we've calculated it is for the full year. So it's not as though these actions are already banked in and Theres going to be further so that's sort of the main piece not on restructuring costs, you're absolutely right that there is going to be the majority of.

Speaker Change: The restructuring cost taken in 2025, rather than 2026, and I would expect most of that to come through Q2, Q3, and then some Q4 and then tapering down as we go into 2026.

Georges Elhedery: Perfect.

Pam Kaur: Target.

Georges Elhedery: Okay. Thank you, Amit.

Operator: Thank you both. Our next question today comes from Gurpreet Singh Sahi from Goldman Sachs. Please accept the prompt to unmute your line.

Speaker Change: Good.

Speaker Change: Thank you Andy.

Gurpreet Singh Sahi: Thank you for taking my question, George and Pam. Good morning. Really on banking NII, a couple, if I may, please. First is quarter-over-quarter. Banking NII held up pretty much flat, whereas interest rates would have added a headwind of, as per my calculation, $170 million. Can you please double-click and tell us on how much was the benefit from the deposit pass-through being not that high, and then improved asset mix, and then the hedge, structural hedge? That's one. Second, in the $42 billion, again, on banking NII, around $42 billion guidance, how much are we assuming for average interest earning assets growth? Because that has, if I see, deposit growth has been consistent, but that somehow on a year-over-year basis is now showing up as 4% growth.

Speaker Change: Thank you very much. Our next question today comes from Ed Firth <unk> K B W. Please accept the prompt you to mute your line.

Speaker Change: Hey, good morning, everybody. Thanks, very much for the for taking the questions.

Speaker Change: Yeah.

Speaker Change: I just had a couple the first one I noticed that your cost guidance is based on an average exchange rate in Q1.

Speaker Change: But the U S. Dollar I think is what off about 6% since then.

Speaker Change: I assume that if we were actually to do that at today's exchange rate. Your cost number will be somewhat higher than that and I'm. Just trying to say is your revenue guidance is also based on these exchange rates. So you should expect it to be like both web we should both gear up both revenue and costs.

So the weaker dollar in terms of all in terms of our expectations. That's the first point and then I guess it partly related to that Oh, we actually in the plausible downside scenario now I mean, if I'm looking at it you know trade.

Gurpreet Singh Sahi: Quarter-over-quarter, there is no growth. Previously, year-over-year, we also could not show any growth. What is the outlook? Is 41.5 outturn around 42? Does that tick the box and help us meet the target? Thank you.

Speaker Change: Trade flows China to the U S sedan, what 45% booking something like that I mean that feels to me like a pretty downside scenario. So should we assume that as we go through Q2 and Q3, we are actually in that scenario. Now is that is that effectively what were we are assuming nothing changes in I guess.

Georges Elhedery: I am going to ask Pam to address both your questions on banking NII.

Speaker Change: Nobody has any idea what will happen in terms of the changes, but assuming we stay where we are today.

Pam Kaur: Thank you, Gurpreet. Firstly, banking NII was flat on a quarter-on-quarter constant currency basis, excluding notable items in Argentina. Now we don't split out the, you know, dollar impact of every moving part, but let me just unbundle. The headwinds were two fewer days in the quarter as well as lower interest rates. The tailwinds was reinvestment of maturing hedge assets at high yields, a bit of change in the mix of our market treasury assets, as well as the benefit of deposit pass-throughs, particularly in the UK, which come through with a delay of 90 days. The interest rate cuts which we saw in August came in through for a full quarter in this quarter. Then we saw a bit of a tail of the November cuts as well.

Speaker Change: And then I guess my second question was just about Bocom.

Speaker Change: Just can't really understand the accounting because you still running with evaluation, that's what 10 billion above the market value.

Speaker Change: But you didn't subscribe.

Speaker Change: The new shares with the capital raise which I assume you would have done if you had thought it really wasn't that much more so should we be expecting you to actually correct that now down to what would be like a market price.

Speaker Change: Rather than just the one six should we be revisiting how you do the sort of equal value in Houston, you something like that.

Speaker Change: Okay. So much well thank you very much.

Speaker Change: Let me think Youll plausible downside scenario and I'll ask them to address your cost of the cost question as well as the Bocom accounting question.

Pam Kaur: That's how you know is the impact then. In terms of your you know other question, of course, we look at various upside and downsides, you know, in that $42 billion. I just want to reiterate that $42 billion is not an underpin. It is just around $42 billion, our current best estimate based upon what we see in terms of deposit betas, based upon what we see in terms of actual deposit flows coming through, updated not just for the quarter, but also considering the trend we've seen through April.

Speaker Change: The adverse plausible downside scenario the scenario that is further adverse from where we are today.

Speaker Change: With significantly higher global tariffs on major trading blocks.

Speaker Change: On the on an aggregate basis, and we've looked at their impact across Avi show trade business, but more importantly across overall our volumes in the you know the economic.

Speaker Change: Outlook for our businesses.

Speaker Change: Yeah.

Speaker Change: We do recognize that there is uncertainty and it's very difficult to understand how much downside or upside. There is in you know the future outlook for this but we believe this plausible downside scenario is is not the expected scenario and it is a lower probability.

Georges Elhedery: Great. Thank you very much, Gurpreet.

Operator: Thank you both. Our next question today comes from Andrew Coombs at Citigroup. Please accept the prompt to unmute your line.

Speaker Change: Downside than they expected scenario.

Andrew Coombs: Good morning. If I could have a couple on the organizational simplification, and then also just one clarification on Wealth. On the organizational simplification, you previously guided to $1.8 billion of restructuring costs, and you said the majority of that is expected to be booked in 2025. I think you only took $141 million in Q1, so presumably we should expect a big step-up in the restructuring charges from Q2 onwards for the rest of this year. And then the second question kind of attached to this is, you said that the actions you've taken to date will already translate into $300 million of annualized savings.

Speaker Change: Yeah.

Speaker Change: Yeah. Thank you add so agree the downside scenario is not something that we are now because of the downside scenario kayleigh has broader impact in terms of GDP and other areas, which then gives the significant impact that we talked about it just to to make that cap and you're absolutely right.

Speaker Change: The target cost base of $31 9 billion mm equivalent of a full year 'twenty forecast what was rebased on first quarter's average exchange rates.

Speaker Change: All things being equal U S depreciation would put an upward pressure on an absolute costs, but in the same way it'll put an upward pressure I accept some benefit on the revenues and we will do that on the same principle quarter on quarter as we progress now FX rates have been volatile we will continue to update you a quarter on quarter sometimes of Bocom.

Andrew Coombs: I appreciate in Q1 you've had very little of that, but nonetheless, you're still guiding to $300 million for the full year 2025 when you've already achieved $300 million annualized, and there's presumably more to come over the remaining year with the additional restructuring. Can you just clarify a bit there on why more of their savings are not flowing into full year 2025 compared to 2026? And then on Wealth for clarification, given the new segmental split, is it possible to get the split of the Asian invested assets and the $16 billion Asian net new invested assets this quarter that's attributable to Hong Kong? Thank you.

Speaker Change: Just instead of simple times, you know at this point of time.

Speaker Change: We continue to say that spoke is.

Speaker Change: <unk> is an associate.

Speaker Change: We have done the assessment as we do every year in terms of further impairment.

Speaker Change: And there has been no impact.

Speaker Change: Impact for this quarter the dilution impact in the P&L, we will.

Speaker Change: Haven't accounting impact on the completion of the share issuance and that's a lot to be taken but I just want to reiterate all set and done.

Speaker Change: There is an insignificant impact from this dilution on a C. T. One because it's immaterial notable item that has no impact on dividends or distributions.

Georges Elhedery: Okay. Thank you, Andrew. Andrew, I'm going to ask Pam to address your, the first two questions with regard to the organization simplification. Just saying that, as I said earlier, we will give a, you know, more thorough update at the interim results. On your final question, let us take it forward and see what we can communicate. $16 billion of net new invested assets in Asia, with the, you know, majority in Hong Kong, but we will take it forward to see what additional granularity we're likely to share. Pam?

Speaker Change: Thanks.

Ed: Sorry, Ed you're on mute sorry.

Speaker Change: Sorry.

Speaker Change: Please go ahead, yes.

Speaker Change: Yes.

Speaker Change: Yes, sorry about that.

Speaker Change: I just I don't understand the logic of why you didn't subscribe for dish for more capital E. In the sense that the if it is worth that much more.

Speaker Change: It would seem to me that that it was an opportunity to put more capital in them.

Speaker Change: And to value the up again to get the upside in due course.

Speaker Change: So.

Pam Kaur: Okay. Thanks, Andy. Firstly, in terms of the actions taken and the P&L being coming through for the year. The actions taken typically is when you have colleagues put through at risk and decisions made, communicated. There is always a time lag typically between that and colleagues leaving the platform. Typically, it tends to be about a quarter, 90 days. When you say an action has been taken, you know a saving is going to come through, but there is going to be a time lag between that decision and the savings feeding into the P&L. When we said the majority of the actions have already been taken, the annualized savings that we calculated, it's for the full year. It's not as though these actions are already banked in and there's going to be further. That's sort of the main piece.

Speaker Change: The.

Speaker Change: There was a you know the share issuance will subscribe by government or government related entities in China, we were happy with our holding as it is.

Speaker Change: Therefore, we were you know were happy with the outcome.

Speaker Change: And with regards to the actual accounting value, probably you know kind of point you to the Investor Relations team, which can take you through some.

Speaker Change: Some of the specificity of this.

Speaker Change: Equity accounting principles, which.

Speaker Change: But you are quite unique in the way, we treat the associate accounting vocal.

Speaker Change: But I just wanted to reemphasize, we're happy with our holding and vocal we're happy with our strategic relationship with Bocom and the fact that they give us exposure to the domestic economy in China be it retail SME outlook, which is not something our organic businesses involved in and very <unk>.

Speaker Change: Potently, what Tom said.

Speaker Change: The valuation and I would love is deducted from CET, one which means.

Pam Kaur: Now on restructuring costs, you're absolutely right that there is going to be the majority of the restructuring costs taken in 2025 rather than 2026. I would expect most of that to come through Q2, Q3, and then some Q4, and then tapering down as we go into 2026.

Speaker Change: These impairments do not have a.

Speaker Change: Very minimal second order impact with a CET one ratio and therefore.

Speaker Change: To do that or distribution capability.

Happy to talk offline go through with you on the equity accounting treatment and the rest of the detail.

Speaker Change: Yeah.

Georges Elhedery: Very good. Thank you, Andy.

Speaker Change: Thank you very much thanks, so much.

Speaker Change: Thank you Bye. Your next question today comes from Catherine Night at J P. Morgan. Please accept from just tell me your line.

Operator: Thank you very much. Our next question today comes from Ed Firth at KBW. Please accept the prompt to unmute your line.

Catherine Night: Hey, Thank you I have two questions. The first one I still want to ask about the tariff scenario because I think for analysts and investors can you just put up a well I think it's partly a.

Ed Firth: Yeah. Good morning, everybody. Thanks very much for taking the questions. Yeah, I just had a couple. The first one, I noticed that your cost guidance is based on an average exchange rate in Q1. But the US dollar, I think, is what? Off about 6% since then. I assume that if we were actually to do that at today's exchange rate, your cost number will be somewhat higher than that. I'm just trying to check, is your revenue guidance also based on those exchange rates? Is it effectively like we should both gear up both revenue and costs for the weaker dollar in terms of our expectations? That's the first point.

Catherine Night: It is widely expected that the Chinese government will have more stimulus policy because of the tariff. So in your downside scenario analysis have you incorporated some of the positive impact.

Catherine Night: From the stimulus policies, which could potentially benefiting.

Catherine Night: China market. So I think this is number one a limit to ask do you want to ask about the loan growth because now the guidance you said that will be immune to a lumpy moms in 2025, so what sorts of terrorists or scenarios that we are like when we're getting the type of guidance, what sort of tariff environment. So we're incorporating and also.

Ed Firth: I guess, you know, partly related to that, are we actually in the plausible downside scenario now? I mean, if I'm looking at, you know, trade flows from China to the US are down, what 45% booking or something like that. I mean, that feels to me like a pretty downside scenario. Should we assume that as we go through Q2 and Q3, we are actually in that scenario now? Is that effectively where we are, assuming nothing changes, and I guess nobody has any idea what will happen in terms of the changes, but assuming we stay where we are today. I guess my second question was just about BoCom. I just can't really understand the accounting because you're still running with a valuation that's what? $10 billion above the market value.

Catherine Night: That.

Catherine Night: Is there any guidance say for example, like deposit growth and also thinking if at all it just generating ethics rules like how should we look at this whole thing.

Catherine Night: Thank you.

Catherine Night: Thank you Catherine.

Catherine Night: And I'm going to make some comments on your first question and I'll ask them to take it forward as well as the loan growth question, which gives you an overload.

Catherine Night: So firstly, we recognize indeed, the then you know there there's a lot of potential for.

Catherine Night: China.

Catherine Night: You too take policy measures and other measures to stimulate the economy and we'd be very encouraged by that.

Ed Firth: You didn't subscribe for new shares with the cap rate, which I sort of assume you would have done if you had thought it really was worth that much more. Should we be expecting you to actually correct that now down to what would be like a market price, rather than just the 1.6? Should we be revisiting how you do the sort of, I think you call it value in use, don't you? Something like that.

Catherine Night: We are confident about the outlook for China, we're optimistic that these measures.

Catherine Night: They are taken them they will be taken will have a positive impact on the economy. We believe the foundation the strength of the Chinese economy, and we're very encouraged to see the pick up in retail sales and therefore, the pickup in domestic consumption also.

Georges Elhedery: Okay.

Ed Firth: Thanks so much.

Georges Elhedery: Well, thank you very much, Ed. Let me take your plausible downside scenario, and I'll ask Pam to address your cost question as well as the BOCOM accounting question. The adverse plausible downside scenario is a scenario that is further adverse from where we are today, with significantly higher global tariffs on major trading blocks. On an aggregate basis, and we've looked at their impact across obviously our trade business, but more importantly across overall our volumes and the, you know, the economic outlook, you know, of our businesses on the whole. We do recognize that there is uncertainty, and it's very difficult to understand how much downside or upside there is in, you know, the future outlook for this.

Catherine Night: So on the whole.

Catherine Night: The main scenario is that we are confident in the medium to long term outlook in China. This being said and the plausible adverse downside scenario, we have not taken into account some of these potential positive impacts, which which maybe or not likely to come.

Catherine Night: But.

Catherine Night: Yeah. Thanks, Catherine so absolutely being expressed downside scenario plausible, but savannah, we typically take the downside we don't take the outside of the mitigating actions.

Catherine Night: Or are any other policy measures, it's purely town centre retaliatory tariffs in a plausible range.

Catherine Night: So and all said and done just wanted to reaffirm it was all calculated as part of.

Catherine Night: The the target royalty guidance that we're giving.

Georges Elhedery: We believe this plausible downside scenario is not the expected scenario, as in it is a lower probability downside than the expected scenario. Pam?

Catherine Night: On loan growth the.

Catherine Night: Question is in some ways similar to where we were at the end of Q.

Catherine Night: Q4, because my macroeconomic uncertainty delays decision, making so we're not seeing any of those capex decisions being brought forward or delay they were delayed they will continue to be delayed.

Pam Kaur: Yeah. Thank you, Ed. Agree the downside scenario is not something where we are now because the downside scenario clearly has broader impact in terms of GDP and other areas which then gives the significant impacts that we talked about, just to make that clear. You're absolutely right. The target cost base of $31.9 billion equivalent to full year 2024 costs was rebased on Q1's average exchange rates. All things being equal, USD depreciation would put an upward pressure on an absolute cost. But in the same way, it'll put an upward pressure, i.e., have some benefit on the revenues, and we will do that on the same principle quarter on quarter as we progress. Now, FX rates have been volatile. We'll continue to update you quarter on quarter.

Catherine Night: Delayed hopefully at some stage you know with some certainty remains there will be loan growth. We're also monitoring very closely to see if there is any increase in drawdowns just like we had observed in Q2 of 2020 at this point of time, there's no increase in drawdowns.

Catherine Night: So overall from a loan growth perspective, I would say, it's still muted you know and in terms of what we are seeing them. The only thing I would say is that if there is.

Catherine Night: You know sort of continued.

Catherine Night: Tariff on southern do you will see them, maybe a little bit pick up from a opex perspective on working capital. Because then you have to pay you know import duties upfront and there's some delays in some of the moneys coming and so on so that's kind of will have an impact but from a materiality perspective.

Pam Kaur: In terms of BOCOM, just in sort of simple terms, you know, at this point of time, you know, we continue to say that BOCOM is an associate. We have done the assessment as we do every year in terms of further impairment, and there has been no impact for this quarter. The dilution impact into P&L, we will have an accounting impact on the completion of the share issuance, and that's where that will be taken. I just want to reiterate all said and done, there is an insignificant impact from this dilution on our CET1. Because it's a material notable item, there is no impact on dividend or distribution.

Catherine Night: The real driver for a banking NII guidance of 42 billion Israeli deposits for which we have a very strong franchise, the having a privileged position to be a trusted partner for our customers and we expect that to grow of course there'll be a little seasonal.

Catherine Night: Fluctuations quarter on quarter, but overall that trend has continued.

Catherine Night: Thank you very much Kathryn.

Catherine Night: Thank you Bye all final question today comes from Jackie <unk> from C. L. I C C pace, except from what you're telling me no line.

Speaker Change: Thanks for taking my question.

Georges Elhedery: Sorry, Ed, you're on mute.

Speaker Change: My question is also about terrorists could you. Please give an example.

Georges Elhedery: Sorry, Ed, you're on mute.

Pam Kaur: Sorry.

Georges Elhedery: Oh, sorry.

Pam Kaur: Yes, Ed. Sorry.

Speaker Change: How are our major clients react to terrorism policy in April are they facing a sharp decline in business demand or are they actively seeking the solutions to reduce the PPE back of terrorists or just to cut their business.

Georges Elhedery: Please go ahead.

Pam Kaur: Sorry. You were saying something. Yes.

Ed Firth: Yeah, sorry about that. No, I just don't understand the logic, why you didn't subscribe for this for more capital in the sense that if it is worth that much more, it would seem to me that it was an opportunity to put more capital in and again, to get the upside in due course.

Speaker Change: And how HSBC help them.

Speaker Change: Navigate to the challenge from terrorists and beyond the risks have we seen any new business opportunities for HSBC in this context. Thank you.

Georges Elhedery: Ed, there was, you know, the share issuance was subscribed by government or government-related entities in China. We were happy with our holding as it is. Therefore, we, you know, we're happy with the outcome. With regards to the actual accounting value, I'd probably, you know, kind of point you to the investor relations team, which can take you through, you know, some of the specificities of this equity accounting principles, which are quite unique in the way we treat the, you know, the associate accounting of BOCOM. But I just wanna, you know, reemphasize, we're happy with our holding in BOCOM.

Thank you very much in for Chris.

Speaker Change: Questions.

Speaker Change: So.

Speaker Change: Yes, indeed customer I mean look first the customers aren't taking any decisions independent customers essentially all wait and see mode.

Speaker Change: Number.

Speaker Change: Fix or large investments or slow down and certainly trade between them between the.

Speaker Change: China and the U S. We've seen a major slowdown but.

Speaker Change: On the whole customers are looking at their business models. They are looking at their supply chains. They are looking at ways to create more resilience in their business and we are definitely here to help them as I said earlier, we are our customers' trusted banking partner They trust the strength.

Georges Elhedery: We're happy with our strategic relationship with BOCOM and the fact that they give us exposure to the domestic economy in China, be it retail, SME, and outlook, which is not something our organic business is involved in. Very importantly, what Pam said, the valuation in our NAV is deducted from CET1, which means.

Speaker Change: Our financial strength, the strength of our balance sheet to those proposition They trust.

Speaker Change: The stability of our commitments to support them through their needs.

Ed Firth: Yeah.

Georges Elhedery: These impairments do not have, you know, or have a very minimal second order impact on our CET1 ratio and therefore do not impact our distribution capability.

Speaker Change: And through all of them.

Speaker Change: Yeah, predictable and unpredictable times and.

Speaker Change: And very importantly, they trust and expertise we have more than five.

Pam Kaur: Ed, very happy to offline go through with you on the equity accounting treatment and the rest in detail, if you so wish.

Speaker Change: And trade experts in more than 50 jurisdictions.

Speaker Change: Working with clients to help them think through what this means for their business model and know how they can.

Georges Elhedery: Thank you very much, Ed.

Ed Firth: Thanks very much.

Operator: Thank you both. Our next question today comes from Katherine Lei at JP Morgan. Please accept the prompt to unmute your line.

Speaker Change: You know, how they can help them adapt and adjust and create resilience.

Katherine Lei: Hey. Thank you. I have two questions. The first one I still want to ask about the tariff scenario, because I think, for analysts, at least our investors in this part of the world, I think it's partly, it's widely expected that the Chinese government will have more stimulus policy, because of the tariff. In your downside scenario analysis, have you incorporated some of the positive impact, from the stimulus policies which could potentially be benefiting, the Hong Kong China market? I think this is number one. Number two, I still want to ask about the loan growth, because now the guidance is that there will be muted, loan demand in 2025.

Speaker Change: So therefore in an environment like this one we expect to deepen relationships with our clients, we expect to acquire new clients and to consolidate our position as a leading trade bank.

Speaker Change: And you know we you know.

Speaker Change: We expect to make a hopefully a difference for our customers and navigating these uncertainties.

Speaker Change:

Speaker Change: Thank you very much.

Speaker Change: When I think.

Speaker Change: Sure.

Speaker Change: All the questions. So I wanted to take this opportunity to thank.

Speaker Change: Thank all of you for you for your questions. So look in closing we had a strong quarter marked by momentum in our earnings disciplined in our execution.

Katherine Lei: When we're giving this type of guidance, what sort of tariff environments are we incorporating? Also, is there any guidance on, say for example, like deposit growth and also banking asset or interest generating asset growth? Like how should we look at this whole thing? Thank you.

Speaker Change: Confidence in our ability to deliver our targets.

Neil and the team are available for any follow up questions with Investor Relations experts. Meanwhile, Panama I look forward to speaking with you again soon and enjoy the rest of the day. Thank you. Thank.

Georges Elhedery: Thank you, Katherine. Katherine, I'm going to make some comments on your first question, and I'll ask Pam then to take it forward as well as the loan growth question, which gives you an overview. Firstly, we recognize, indeed, you know, there's a lot of potential for China to take policy measures and other measures to stimulate the economy, and we'd be very encouraged by that. We're confident about the outlook for China. We're optimistic that these measures, as they, you know, are taken and they will be taken, will have a positive impact on the economy. We believe in the foundational strength of the Chinese economy, and we're very encouraged to see the pickup in retail sales and therefore the pickup in domestic consumption also.

Speaker Change: Thank you very much ladies and gentlemen for joining today's webinar you may now disconnect your line.

Speaker Change: [music].

Georges Elhedery: On the whole, you know, our main scenario is that we are confident in the medium- to long-term outlook in China. This being said, in a plausible adverse downside scenario, we have not taken into account some of these potential positive impacts which may be or not likely to come.

Pam Kaur: Yeah. Thanks, Catherine. Absolutely, being a stressed downside scenario, plausible but severe, we typically take the downside. We don't take the upside of, you know, the mitigating actions or any other policy measures. It's purely tariffs and retaliatory tariffs in a plausible range. You know, all said and done, just want to reaffirm it was all calculated as part of the target ROTI guidance that we are giving. On loan growth, the situation is in some ways similar to where we were at the end of Q4 because macroeconomic uncertainty delays decision-making. We are not seeing any of those CapEx decisions being brought forward or delayed. They were delayed. They will continue to be delayed. Hopefully at some stage, you know, when some certainty remains, there will be loan growth.

Pam Kaur: We are also monitoring very closely to see if there is any increase in drawdowns, just like we had observed in Q2 of 2020. At this point of time, there's no increase in drawdowns. Overall from a loan growth perspective, I would say still muted, you know, in terms of what we are seeing. The only thing I would say is that if there is, you know, sort of continued tariff uncertainty, you will see maybe a little bit pick up from an OpEx perspective on working capital, because when you have to pay, you know, import duties up front and there's some delays and some of the money's coming and so on, so that will have an impact.

Pam Kaur: From a materiality perspective, the real driver for our banking NII guidance of $42 billion is our deposits for which we have a very strong franchise. We are in a privileged position to be a trusted partner for our customers, and we expect that to grow. Of course, there'll be a bit of seasonal fluctuations quarter-over-quarter, but overall that trend has continued.

Georges Elhedery: Thank you very much, Catherine.

Operator: Thank you both. Our final question today comes from Jiahui Yan from CICC. Please accept the prompt to unmute your line.

Jiahui Yan: Thanks for taking my question. My question is also about tariffs. Could you please give an example of how our major clients react to tariff policy in April? Are they facing a sharp decline in business demand, or are they actively seeking the solutions to reduce the effect of tariffs or just cut their business? How HSBC help them navigate through the challenge from tariffs? Beyond the risks, have we seen any new business opportunities for HSBC in this context? Thank you.

Georges Elhedery: Thank you very much, Yan, for your questions. Yes, indeed, I mean, look, first, the customers aren't taking any decisions in panic. Customers essentially are wait and see mode. Number of CapEx or large investments slowed down, and certainly trade between, you know, China and the US, we've seen a major slowdown. On the whole, customers are looking at their business models. They are looking at their supply chains. They're looking at ways to create more resilience in their business, and we're definitely here to help them. As I said earlier, we are our customers' trusted banking partner. They trust the strength of our, you know, our financial strength, the strength of our balance sheet, and our proposition.

Georges Elhedery: They trust the stability of our commitments to support them through their needs, and through all, you know, predictable and unpredictable times. Very importantly, they trust our expertise. We have more than 5,000 trade experts in more than 50 jurisdictions, working with clients to help them think through what this means for their business model and now how they can, you know, how they can help them adapt, adjust, and create resilience. Therefore, in an environment like this one, we expect to deepen relationships with clients. We expect to acquire new clients and to consolidate our position as a leading trade bank. You know, we expect to make, you know, hopefully a difference for our customers in navigating these uncertainties. Thank you very much, Yan. I think.

Jiahui Yan: Thank you very much.

Georges Elhedery: We have addressed all the questions. I wanna take this opportunity to thank all of you for your questions. Look, in closing, we had a strong quarter marked by momentum in our earnings, discipline in our execution, and confidence in our ability to deliver our targets. Neil and the team are available for any follow-up questions with our investor relations experts. Meanwhile, Pam and I look forward to speaking with you again soon. Enjoy the rest of the day. Thank you.

Operator: Thank you very much, ladies and gentlemen, for joining today's webinar. You may now disconnect your line.

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