Q2 2025 HSBC Holdings PLC Earnings Call

July 30, 2025

Seven hours being recorded I will now hand over to George and the dairy group C. R.

Operator: PLC. For your information, this webinar is being recorded. I will now hand over to Georges Elhedery, Group CEO.

Welcome all to today's call I'm joined by pounds.

Georges Elhedery: Welcome all to today's call. I'm joined by Pam. Before Pam takes you through the Q2 numbers, I will cover three items: our first-half performance, the external environment, and the progress we're making against the targets we set out. Turning to our performance, the momentum we saw in Q1 continued into Q2. Our half-year performance was strong. Excluding notable items, revenue in the first half grew 6% to $35.4 billion. Profit before tax was 5% higher at $18.9 billion. On the same basis, annualized return on tangible equity was 18.2%, up 1.2% year-on-year. Our four businesses sustained momentum in their earnings. In our Hong Kong home market business, we attracted 100,000 new-to-bank customers every month this year on average, reflecting strong customer growth and solid deposit inflows.

Before Pam takes you through the second quarter numbers I will cover three items.

Our first half performance.

The external environment and the progress, we're making against the targets we set out.

Turning to our performance the momentum we saw in the first quarter continued into the second quarter.

<unk> performance was strong.

Excluding notable items revenue in the first half grew 6% to $35 $4 billion.

Profit before tax was 5% higher at $18 $9 billion.

On the same basis annualized return on tangible equity was 18, 2%.

One 2% year on year.

All four businesses sustained momentum in their earnings.

In our Hong Kong home market business, we attracted.

100000, new to bank customers every month this year on average.

Reflecting strong customer growth and solid deposit inflows.

In our U K home market business, our loan book grew by $6 billion over the quarter on a constant currency basis.

Georges Elhedery: In our UK home market business, our loan book grew by $6 billion over the quarter on a constant currency basis. We were particularly encouraged by signs of recovery in lending growth and commercial banking, with loans growing by $3.5 billion on the same basis. We grew fees and other income in both wealth and wholesale transaction banking. For Q2, we announced a $0.10 dividend per share alongside a share buyback of up to $3 billion. This brings total shareholder distributions in respect of the half-year to $9.5 billion. Turning to the external environment, we enter this period of uncertainty from a position of strength. In this complex environment, customers are looking for a trusted financial partner. Our differentiated strengths are clear.

We were particularly encouraged by signs of recovery in lending growth in commercial banking with loans growing by $3 $5 billion on the same basis.

We grew fees and other income in both wealth and wholesale transaction banking.

For the second quarter, we announced 10 cents dividend per share alongside the share buyback of up to $3 billion. This brings total shareholder distributions in respect of the half year to $9 $5 billion.

Turning to the external environment, we entered this period of uncertainty from a position of strength.

In this complex environment.

Summaries are looking for a trusted financial partner.

Our differentiated strengths are clear.

First.

Oh, the hallmark financial strength.

Georges Elhedery: First, our hallmark financial strength, underpinned by a strong balance sheet and high-quality credit portfolio, has helped us deepen our customer relationships and grow deposits by $83 billion from the same period last year. This is after adding back balances held for sale. Our $1.7 trillion deposit base drives the lion's share of our Banking NII. Despite HIBOR headwinds, other tailwinds have allowed us to reiterate our full-year Banking NII guidance of around $42 billion. In Hong Kong commercial real estate, while some short-term challenges remain, we are confident in the overall credit quality of the book. Second, our longstanding experience of facilitating financial flows globally and our international network, especially across the world's fastest-growing trade and investment routes. We delivered 5% growth in wholesale transaction banking, fee, and other income in Q2.

And depend by a strong balance sheet and high quality credit portfolio has helped us deepen our customer relationships and grow deposits by $83 billion from the same period last year.

This is after adding back balances held for sale.

Our one seven trillion dollar deposit base drives the lion's share of our banking NII.

Despite high boy headwinds.

Other tailed wins have allowed us to reiterate our full year banking NII guidance of around $42 billion.

In Hong Kong commercial real estate, while some short term challenges remain we are confident in the overall credit quality of the book.

Second our.

Our long standing experience facilitating financial flows globally.

And our international network, especially across the world's fastest growing trade and investment routes.

We delivered 5% growth in wholesale transaction banking fee and other income in the second quarter.

Our trade fees and other income grew by 4%.

Georges Elhedery: Our trade, fees, and other income grew by 4%, reflecting our leading position across fast-growing intra-regional trade corridors, as well as our continued investments in services trade sector. We have 5,000 trade specialists in more than 50 markets operating on both sides of trade floors. They bring significant expertise and real-time insight to our customers. Third, we are seeing continued momentum in our wealth business. We are ideally placed to capture the increasing number of affluent and high-net-worth customers in the fastest-growing wealth markets in Asia and the Middle East, where we are investing at scale. Turning next to the progress we are making against our organizational simplification targets. As set out in February, this initiative is meant to make the group simple and more agile. Cost efficiency is one of the benefits.

Reflecting our leading position across the fast growing intra regional trade corridors as well as our continued investments in services trade sector.

We have 5000 trade specialists and more than 50 markets.

Operating on both side of trade flows they.

They bring significant expertise and real time insight all customers.

And third we are seeing continued momentum in our wealth business.

We are ideally placed to capture the increasing number of affluent and high net worth customers in the fastest growing wealth market in Asia, and the middle East, where we are investing at scale.

Turning next to the progress we are making against our organizational simplification targets.

As set out in February.

This initiative is meant to make the group simple and more agile.

Cost efficiency is one of the benefits.

We are on track to deliver the circa one $5 billion of simplification saves by the end of 2026.

Georges Elhedery: We are on track to deliver the circa $1.5 billion of simplification saves by the end of 2026. To remind you, these are primarily through the deduplication of roles and will have no meaningful impact on revenue. The saves will be taken straight to the bottom line, $0.4 billion of which will be in the P&L in 2025, revised upwards from $0.3 billion. The full $1.5 billion will be fully realized in 2027. Pam will go into more details. Turning to the progress we're making in our exit of non-strategic activities. We are progressing at pace. We have rigorously reviewed our portfolio against our strategic priorities.

To remind you. These are primarily through the de duplication of roles and will have no meaningful impact on revenue.

The saves will be taken straight to the bottom line.

Point $4 billion of which will be in the P&L in 2025 revised upwards from north point $3 billion.

And the full $1 $5 billion will be fully realized in 2027.

Pam will go into more details.

Turning to the progress, we're making in our exit of non strategic activities.

We are progressing at pace.

We have rigorously reviewed our portfolio against our strategic priorities.

Since the first quarter results, we have announced the sale of our business in Uruguay U K life insurance subsidiary German custody business and German Fund administration business.

Georges Elhedery: Since the Q1 results, we have announced the sale of our business in Uruguay, UK Life Insurance subsidiary, German custody business, and German fund administration business, our stake in Grupo Galicia, and our French portfolio of home and other loans retained following the disposal of our retail operations in France. While Asia is at the heart of our growth strategy, we want to provide clarity on our footprint in Asia. Earlier this year, we commenced a targeted strategic review of our retail business in four markets in Asia. Three of these reviews, Australia, Indonesia, and Sri Lanka, are ongoing, and no decisions have been made yet. The fourth, in Bangladesh, has completed, and we will start to wind down the retail business there in the second half of this year.

Our stake in group of Galicia.

And our French portfolio of home and other loans retain following the disposal of Poe retail operations in France.

While Asia is at the heart of our growth strategy, we wanted to provide clarity on our footprint in Asia.

Earlier this year, we commenced a targeted strategic review of our detailed business in four markets in Asia.

Three of these reviews.

Australia, Indonesia, and Sri Lanka.

Our ongoing and no decisions have been made yet.

The fourth in Bangladesh has completed and we will start to wind down the retail business. There in the second half of this year to be clear, our CIB business, our corporate and institutional banking business is unaffected by these reviews in all four markets remain critical to our international network for Ci.

Georges Elhedery: To be clear, our CIB business, our corporate institution banking business, is unaffected by these reviews, and all 4 markets remain critical to our international network for CIB customers. Costs released from the exits of our non-strategic activities will be invested in our priority growth areas. These are areas where we have clear competitive advantage and can generate accretive returns. Let's turn to them now. We are investing with intent. In our home markets, we said we would expand the number of wealth centers and enhance our wealth capabilities. In Hong Kong, which is set to become the world's leading cross-border wealth hub, we have opened 1 new state-of-the-art wealth center, with 2 more opening in the coming month. In the UK, we have opened our first wealth center in London and reduced the threshold for wealth investments. We have also relaunched our premier wealth brand targeting mass affluent customers.

B customers.

Costs released from the exit of our non strategic activities.

Will be invested in our priority growth areas.

These are the areas, where we have clear competitive advantage and can generate accretive returns.

Let's turn to them now.

Okay.

We are investing with intent.

Our home markets.

We said, we would expand the number of wealth centers and enhance our wealth capabilities.

In Hong Kong, which is set to become the world's leading cross border wealth hub.

We have opened one new state of the Art World Center with two more opening in the coming months.

In the U K, we have opened our first wealth center in London, and reduce the threshold for wealth investments.

We have also relaunched our premier wealth plan targeting mass affluent customers.

In the U K also our improved coverage model for SME banking is bringing our relationship managers closer to customers.

Georges Elhedery: In the UK also, our improved coverage model for SME banking is bringing our relationship managers closer to customers. This is reflected in our Trustpilot score, which has improved to a 4-star ranking. In CIB, we launched HSBC TradePay for import duties, a targeted financing solution for our US customers, which simplifies the payment of import duties while helping them optimize working capital. We have also launched HSBC Tokenised Deposit Services in Hong Kong and Singapore, with the UK and Luxembourg expected to launch in September, and the US, UAE, and other markets in 2026. These next-generation programmable cross-border payments move money in real time, always on, and way across our network. They are a step towards our ambition of delivering global instant cross-border payments. We have also enhanced our payment tracking solution, which now provides a global view of payment status, improving our client experience.

This is reflected in our trust pilot score, which has improved to a four star ranking.

In CIB, we launched HSBC trade pay for import duties at targeted financing solution for our U S customers, which simplifies the payment of import duties, whilst helping them optimize working capital.

We have also launched HSBC token is deposit services in Hong Kong, and Singapore with the U K and Luxemburg expected to launch in September.

And the U S. You in other markets in 2026.

These next generation programmable cross border payments move money in real time always on.

Way across our network.

There is a step towards our ambition of delivering global instant cross border payments.

We have also enhanced our repayment tracking solution, which now provides a global view of payment status improving our client experience.

In IW P. D. We have opened 13 dedicated wealth centers, including in mainland, China, Singapore and Malaysia.

Georges Elhedery: In IWPB, we have opened 13 dedicated wealth centers, including in mainland China, Singapore, and Malaysia. We have also refreshed our premier banking proposition, which will launch in the UAE, India, Malaysia, and the US in the second half of this year. In the UAE, which is home to more than 200 nationalities, we have simplified our onboarding process for certain customers to open a bank account before they relocate into the UAE. Each of these will drive customer acquisition, deepen wealth penetration, grow our share of mandates, and enable us to capture greater share of corridor flows. Finally, we are modernizing the bank through AI, GenAI, and automation. We are improving our technology productivity with coding assistance. Today, more than 20,000 engineers are 15% more efficient in coding because of our new tools.

We have also refreshed our premier banking proposition, which will launch in the UAE, India, Malaysia, and the U S. In the second half of this year.

In the UAE, which is home to more than 200 nationalities, we have simplified our onboarding process for certain customers to open a bank account before they relocate into the U a E.

Each of these will drive customer acquisition deepened wealth penetration.

Our share of mandates and enable us to capture greater share of corridor flows.

Finally, we are modernizing the bank through AI journey, AI and automation.

We are improving our technology productivity with coding assistance today more than 20000 engineers are 15% more efficient in coding because of our new tools.

Jenny is being used across five CIB markets to bring process efficiency to our credit analysis write ups.

Georges Elhedery: GenAI is being used across five CIB markets to bring process efficiency to our credit analysis write-ups. We are also focused on improving customer service through AI-supported mobile apps and strengthened contact center capabilities. The key message is: we have continued ramping up investments in these areas. Further momentum will build as our exits complete, releasing investment capacity to redeploy into our priority growth areas in line with our disciplined cost and capital allocation framework. In summary, we enter this uncertain macroeconomic environment from a position of distinctive strength, underpinned by our hallmark financial strength, our global connectivity, and our expertise. We remain well-positioned to support our customers as their trusted financial partner. We have strong momentum in our business and are well-positioned for growth. We are investing for growth, and we are delivering growth. We are executing our strategy with discipline and at pace.

We're also focused on improving customer service through AI supported mobile apps and strengthened contact center capabilities.

Key messages, we have continued ramping up investments in these areas.

Further momentum will build as our exits compete releasing investment capacity to redeploy into our priority growth areas in line with our disciplined cost and capital allocation framework.

In summary, we enter this uncertain macroeconomic environment from a position of distinctive strip.

Underpinned by our Hallmark financial strength.

Our global connectivity.

And our expertise.

It market.

We remain well positioned to support our customers as their trusted financial partner.

Stage three balances with two 4% of customer loans remaining stable in the first half.

We have strong momentum in our business and are well positioned for growth, we're investing for growth and we are delivering growth.

Onto the final item today that is our balance sheet.

And we are executing our strategy with discipline and at pace.

Turning first to capital.

Our CET one ratio of 14, 6% remains above our target operating range of 14% to 14.5%.

The positive progress, we're making gives us confidence in our ability to deliver our targets.

Georges Elhedery: The positive progress we're making gives us confidence in our ability to deliver our targets. We reaffirm our mid-teens' return on tangible equity guidance, excluding notable items, for each of 2025, 2026, and 2027. Let me now hand over to Pam. Thank you. Thank you, Georges. Thank you, everyone, for joining. At full year, I said we would focus on three things: discipline in the way we prioritize and maintain strong cost control while ensuring investment rigor for growth, performance in the way we gear our financial strategy towards achieving our mid-teens' returns target, delivery in the way we enhance operating leverage and support our customers. The Q2 numbers show discipline, performance, and delivery across the bank. Let's turn to the details. First, the income statement. I'll be excluding notable items of $2.8 billion this quarter from my performance commentary.

We reaffirm our mid teens return on tangible equity guidance, excluding notable items for each of 2025 26 and 27.

And you should expect us to bring it down into the range over time.

Note that the aforementioned impairment and dilution loss taken following the capital raise by Bocom has no material impact on the HSBC group CET one ratio.

Let me now hand over to Pat.

Hum.

Pam Kaur: Thank you, Georges. Thank you, everyone, for joining. At full year, I said we would focus on three things: discipline in the way we prioritize and maintain strong cost control while ensuring investment rigor for growth, performance in the way we gear our financial strategy towards achieving our mid-teens' returns target, delivery in the way we enhance operating leverage and support our customers. The Q2 numbers show discipline, performance, and delivery across the bank. Let's turn to the details. First, the income statement. I'll be excluding notable items of $2.8 billion this quarter from my performance commentary.

Thank you George Thank you everyone for joining.

It is offset by threshold deductions.

At full year I said, we would focus on three things.

At the midpoint of our target operating range, we will have around 300 basis points of headroom above our MTA hurdle requirements.

The plan in the way, we prioritize and maintain strong cost control, while ensuring investment rigor for growth.

Performance in the way, we get our financial strategy towards achieving a mid teens returns target delivery in the way, we enhanced operating leverage and support our customers.

HSBC continues to be strongly capital generative with profits delivering one eight percentage points of CET one in the first half.

Dividend payout ratio policy remains 50% of earnings excluding material notable items and related impacts.

The second quarter numbers show discipline performance and delivery across the bank.

We have announced a total of 20 cents per share dividend for the first half.

Let's turn to the details.

First the income statement.

Alongside our first quarter results, we announced a $3 billion buyback, which completed last week and today, we have confirmed up to a further 3 billion to commence in the coming days.

I'll be excluding notable items of $2.8 billion this quarter from my performance commentary.

Of the $258 billion.

This brings our total shareholder distributions in respect to the first half of the year to $9 $5 billion.

Georges Elhedery: Of the $2.8 billion, $2.1 billion are related to Bank of Communications. $1.1 billion of this results from its share issuance, which diluted our interest to 16%. It is booked in other operating income as flagged in Q1. The balance of $1 billion impairment is booked in associates. A separate $0.7 billion relates to restructuring and other charges, which are in the cost line. Slide 22 sets these figures out. Annualized return on tangible equity, ROTI, was 17.7% in Q2. Revenue grew 5% year-on-year to $17.7 billion. This was driven by fee and other income. Profit before tax was $9.2 billion, stable year-on-year. We have revised our full year ECL guidance to around 40 basis points from 30 to 40 basis points. The increase in Q2 ECL partly relates to Hong Kong commercial real estate, which I will discuss further.

Pam Kaur: Of the $2.8 billion, $2.1 billion are related to Bank of Communications. $1.1 billion of this results from its share issuance, which diluted our interest to 16%. It is booked in other operating income as flagged in Q1. The balance of $1 billion impairment is booked in associates. A separate $0.7 billion relates to restructuring and other charges, which are in the cost line. Slide 22 sets these figures out. Annualized return on tangible equity, ROTI, was 17.7% in Q2. Revenue grew 5% year-on-year to $17.7 billion. This was driven by fee and other income. Profit before tax was $9.2 billion, stable year-on-year. We have revised our full year ECL guidance to around 40 basis points from 30 to 40 basis points. The increase in Q2 ECL partly relates to Hong Kong commercial real estate, which I will discuss further.

To find one are related to bank of communications.

$1.1 billion of this results from its share issuance, which diluted I interest to 16%.

And wherever I showed was 32, 6% broadly flat in the first half of the year and 4.8 percentage points above our requirement, which is equivalent to around $43 billion.

It is booked in other operating income as flagged in the first quarter.

The balance of $1 billion impairment is booked in associates.

Moving on to liquidity.

A separate zero point $7 billion relates to restructuring and other charges, which are in the cost line.

The group retains a large and well diversified deposit base with strong levels of liquidity.

We maintain a conservative loan to deposit ratio of 57%.

Slide 22 sets these things out.

Posted by our $1 seven trillion deposit base.

Annualized return on tangible equity Roti was 17, 7% in the second quarter.

Across our two home markets, our deposits continue to skewed significantly more towards current and savings accounts than we see across the broader market.

Revenue grew 5% ear on year to $17 $7 billion.

This was driven by fee and other income.

We hold no 0.8 trillion dollars in high quality liquid assets and the group LCR was 140%.

Profit before tax was $9.2 billion stable year on year.

The group, primarily manages liquidity at each individual legal entity and has a conservative approach to calculating a group LCR.

We have revised our full year ECL guidance to around 40 basis points from 30 to 40 basis points.

You'll notice that our major subsidiaries all operate with LCR stood the significantly higher than the group ratio highlighting the conservatism in our approach.

The increase in the second quarter E. Seattle, partly relates to Hong Kong commercial real estate, which I will discuss further.

We remain on track to achieve our target of around 3% cost growth in 2025 compared to 'twenty 'twenty fall on a target basis.

Okay.

Finally.

Georges Elhedery: We remain on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Looking at capital and distributions, our CET1 capital ratio was 14.6%. We have announced a second interim dividend of $0.10 per share alongside a new share buyback of up to $3 billion. We have now reduced our share count by 13% since Q1 2023. As always, a decision on future share buybacks will be made on a quarterly basis and depends on organic capital generation and the capital needs of the business. The 50% dividend payout is at the top of our capital use hierarchy. We look to grow the business, where we see significant opportunities over time. We absorb other capital demands that emerge. The buyback is the flexible, residual means of capital distribution. Let's now turn to our business segment performance.

Pam Kaur: We remain on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Looking at capital and distributions, our CET1 capital ratio was 14.6%. We have announced a second interim dividend of $0.10 per share alongside a new share buyback of up to $3 billion. We have now reduced our share count by 13% since Q1 2023. As always, a decision on future share buybacks will be made on a quarterly basis and depends on organic capital generation and the capital needs of the business. The 50% dividend payout is at the top of our capital use hierarchy. We look to grow the business, where we see significant opportunities over time. We absorb other capital demands that emerge. The buyback is the flexible, residual means of capital distribution. Let's now turn to our business segment performance.

Onto issuance.

We chose to accelerate our issuance plan in the first half given the balance of risks and opportunities presented to us in the market.

We have now largely completed our funding plan for 2025 with the focus is likely to be our non G. III currencies in Holdco senior in the second half of the year.

Looking at capital and distributions our CET one capital ratio was 14, 6%.

We have announced a second interim dividend of 10 cents per share alongside our new share buyback of up to $3 billion.

Okay.

Given the acceleration of our plan, we expect to be a significantly net negative issuer in the second half with nearly $9 billion of senior Holdco and Te to Ta for call maturity over the period.

We have now reduced our share count by 13% since the first quarter of 2023.

As always a decision on future share buybacks will be made on a quarterly basis and depends on organic capital generation and the capital needs of the business.

Two thirds of our Holdco senior issuance has been in U S dollars. So far this year and we are particularly pleased with the reception we continue to receive an Asia Pacific currencies.

We will continue to look for opportunities to diversify the currency of our issuance to fit with our footprint and found the franchise.

The 50% dividend payout is that the top off our capital use hierarchy.

And we look to grow the business, where we see significant opportunities overtime.

Okay.

In summary.

We then absorb other capital demands that image the buyback is the flexible residual means of capital distribution.

Our first half results demonstrate the financial strength of our business.

We are on track to deliver against the targets, we have set for costs and simplification saves and we are progressing at pace with our exit of non strategic activities.

Let's now turn to our business segment performance.

Our full business says performed strongly with revenue growing in each.

And deploying to growth areas.

Georges Elhedery: Our four businesses performed strongly, with revenue growing in each. Each one is making mid-teens ROTI or better. In Hong Kong, we attracted a further 300,000 new-to-bank customers in Q2, representing 600,000 for the first half. We also grew deposits by 9% over the last 12 months on a constant currency basis. In our UK business, our loan book grew by 4% year-on-year on the same basis, with mortgages and commercial lending standing out. Since we relaunched our UK premier proposition earlier this year, we have seen our average weekly customer acquisition more than double. In IWPB, fee and other income grew 21% year-on-year. Across our wealth businesses, fee and other income grew in Q2 by 22%. Across these wealth businesses, we attracted net new invested assets of $22 billion in the quarter, with $11 billion booked in Asia.

Pam Kaur: Our four businesses performed strongly, with revenue growing in each. Each one is making mid-teens ROTI or better. In Hong Kong, we attracted a further 300,000 new-to-bank customers in Q2, representing 600,000 for the first half. We also grew deposits by 9% over the last 12 months on a constant currency basis. In our UK business, our loan book grew by 4% year-on-year on the same basis, with mortgages and commercial lending standing out. Since we relaunched our UK premier proposition earlier this year, we have seen our average weekly customer acquisition more than double. In IWPB, fee and other income grew 21% year-on-year. Across our wealth businesses, fee and other income grew in Q2 by 22%. Across these wealth businesses, we attracted net new invested assets of $22 billion in the quarter, with $11 billion booked in Asia.

We navigate the uncertain macroeconomic environment from a position of strength and we are well positioned to support our customers.

Each one is making mid teens roti or better.

In Hong Kong, we attracted a further 300000 new to bank customers in the second quarter.

On that note, let's open this call up for Q&A.

Faiza.

Representing 600000 for the first half we also grew deposits by 9% over the last 12 months on a constant currency basis.

Thanks, guys.

Now be taking questions or resume please use the raise hand function to indicate that you would like to ask a question I will then announce to you and you will be able to ask your questions. Please ensure you're on mute your line.

And our U K business.

Our loan book grew by 4% year on year on the same basis with mortgages and commercial lending standing out.

All to submit your question why are the Q&A function.

Yeah.

Thanks, guys just while people are looking to to signal for a question and we've had some submitted questions from from Lee Street from Citi is unfortunately, unable to dial in so Lee asks five questions Lee I'm on I'm going to take the first two but we'll see if we've got time to get to the other ones. So.

Since we relaunched our UK premier proposition earlier this year, we have seen.

Our average weekly customer acquisition more than doubled.

And I W. P b.

So first starting with the first one so under what scenario might you revisit your 14 to 14, 5% CET one target range.

And other income grew 21% ear on the App.

Across our wealth businesses fee and other income grew in the second quarter by 22%.

Thank you Greg Sorry did you say he asked five questions get asked a lot questions, Yes, Wow, Okay. So festival.

Across these wealth businesses, we attracted net new invested assets of $22 billion in the quarter with $11 billion booked in Asia.

Taking a step back say, 40% to 49, 5% is our target price you manage for CET, one as I said in my prepared script.

We're currently at 14, 6% now that target range of 14 to 14 and a half per cent has been Nashville, a little while there are a number of factors that we consider when when setting such ranges I guess in no particular order I called out we think about our operating entities as well as the <unk>.

For the last 12 months net new invested assets was $75 million.

Georges Elhedery: For the last 12 months, net new invested assets were $75 billion. In wholesale transaction banking, we grew fee and other income by 5% on a constant currency basis year-on-year, given market volatility. Moving to the group revenue story. Revenue grew 5% year-on-year to $17.7 billion. This was driven by fee and other income, which I'll discuss further in a moment. On Banking NII, Banking NII remained broadly stable on the Q1, reflecting lower interest rates partly offset by the repricing of the structural hedge. Our structural hedge, now $578 billion, has reduced the sensitivity of our revenues to interest rate cuts. Regarding HIBOR.

Pam Kaur: For the last 12 months, net new invested assets were $75 billion. In wholesale transaction banking, we grew fee and other income by 5% on a constant currency basis year-on-year, given market volatility. Moving to the group revenue story. Revenue grew 5% year-on-year to $17.7 billion. This was driven by fee and other income, which I'll discuss further in a moment. On Banking NII, Banking NII remained broadly stable on the Q1, reflecting lower interest rates partly offset by the repricing of the structural hedge. Our structural hedge, now $578 billion, has reduced the sensitivity of our revenues to interest rate cuts. Regarding HIBOR.

In wholesale transaction banking, we grew fee and other income by 5% on a constant currency basis year on year given market volatility.

So that is one of the factors certainly in our minds, we look very carefully at how our positions might perform under stress as well as on the <unk> and really our target operating range is is calibrated to accommodate all scenarios, we will obviously think about investor.

Moving to the group revenue story.

Revenue grew 5% year on year to 17, five $7 billion. This was driven by fee and other income, which I'll discuss further in a moment.

Expectations are peer comparisons.

On banking NII banking NII remained broadly stable on the first quarter you.

The rating agencies as well as another is another factor that comes into mind. So at this point, we don't have any intention to change the 14% to 14.5%.

Reflecting lower interest rates, partly offset by the repricing of the structural hedge oster.

But it's one of those things that we keep on the under review and discuss them.

Our structural hedge now $578 billion has reduced the sensitivity of our revenues two interest rate cuts.

Periodically.

Within the organization and then obviously it will be something we would discuss with the regulators as well.

Thanks, Lee second question is given current spread levels is it fair to assume a significant amount with 2026 pre financing for the remainder of this year.

Regarding high vol.

As a reminder, under the linked exchange rate system.

Georges Elhedery: As a reminder, under the Linked Exchange Rate System, the Hong Kong dollar is maintained within a trading band via the HKMA commitment to buy or sell Hong Kong dollars when the exchange rate hits either the strong side or weak side of the band. During the Q2, we saw market-driven interventions after the Hong Kong dollar appreciated to the strong side, which added liquidity to the market and led to a notable drop in HIBOR rates. Forward market indicators suggest that the one-month HIBOR is expected to rise gradually back above 2% during the Q3. We remain confident in the prospects for our business and in the outlook for Hong Kong. Slide 24 in the appendix sets out more detail around Hong Kong dollar sensitivity. We still expect Banking NII of around $42 billion in 2025.

Pam Kaur: As a reminder, under the Linked Exchange Rate System, the Hong Kong dollar is maintained within a trading band via the HKMA commitment to buy or sell Hong Kong dollars when the exchange rate hits either the strong side or weak side of the band. During the Q2, we saw market-driven interventions after the Hong Kong dollar appreciated to the strong side, which added liquidity to the market and led to a notable drop in HIBOR rates. Forward market indicators suggest that the one-month HIBOR is expected to rise gradually back above 2% during the Q3. We remain confident in the prospects for our business and in the outlook for Hong Kong. Slide 24 in the appendix sets out more detail around Hong Kong dollar sensitivity. We still expect Banking NII of around $42 billion in 2025.

<unk> dollar is maintained within a trading band.

Okay. Thank you.

Let me start by taking a little bit of a step back so are we.

The H T M S commitment to buy or sell Hong Kong dollars when the exchange rate hit either the strong side all week side of the band.

We we laid out in February our funding plan for 2025, and I'm pleased to say, we've made significant progress against that we frontloaded it largely because as I said in my notes.

During the second quarter, we saw market driven interventions after the Hong Kong dollar appreciated to the strong side.

We are we were cognizant of the uncertainty in the market environment and the credit credit environment was conducive to doing those trade Charlie so.

Which added liquidity to the market and led to a notable drop in high build rates.

We are if I go one by one if we look at senior Holdco we've.

Market indicators suggest that the one month hibor is expected to rise gradually back above 2% during the third quarter.

We communicated a range of 16 to 18 billion in terms of our appetite for the year, we've done 17, and a half so we've got a little bit more than that to to do something and if we do and I think our focus will be on non G. III currencies really for the senior whole Cai.

We remain confident in the prospects for our business and the outlook for Hong Kong.

Slide 24 in the appendix sets out more detail around Hong Kong dollar sensitivity.

Then if I'm down to tier two in terms of tier two we communicated range of $2 billion to $3 billion and so far we are in the middle of that was done two and a half.

We still expect banking NII of around $42 billion in 2025 within this low or high vol is a headwind of a weaker dollar is a tailwind there are many other moving parts.

So this may be a little room, there, but we'll see and then on a T. One we all completes we communicated three to 4 billion and we printed $4 1 billion.

Georges Elhedery: Within this, lower HIBOR is a headwind, a weaker dollar is a tailwind. There are many other moving parts. Moving to fee and other income. As I mentioned, wholesale transaction banking grew 5% year-on-year. This reflects how closely we have been working with our customers to adapt to a changing operating environment. We are pleased this translated into strong revenue. Growth was driven by a strong FX performance, up 7%, capturing elevated client activity due to market volatility and geopolitical events. Global Trade Solutions increased 4%, driven by guarantees as we supported customers to build out infrastructure and expand production facilities. Security services were up 3% due to higher asset balances as a result of improved valuations and new customer mandates, particularly in Asia and the Middle East. Global Payment Solutions increased 1%, including higher volumes in cross-border and real-time payments.

Pam Kaur: Within this, lower HIBOR is a headwind, a weaker dollar is a tailwind. There are many other moving parts. Moving to fee and other income. As I mentioned, wholesale transaction banking grew 5% year-on-year. This reflects how closely we have been working with our customers to adapt to a changing operating environment. We are pleased this translated into strong revenue. Growth was driven by a strong FX performance, up 7%, capturing elevated client activity due to market volatility and geopolitical events. Global Trade Solutions increased 4%, driven by guarantees as we supported customers to build out infrastructure and expand production facilities. Security services were up 3% due to higher asset balances as a result of improved valuations and new customer mandates, particularly in Asia and the Middle East. Global Payment Solutions increased 1%, including higher volumes in cross-border and real-time payments.

Now the idea of accelerating.

Moving to fee and other income as.

As I mentioned wholesale transaction banking grew 5% ear on the App.

The plan either over this year has been really about.

Kind of recognizing the uncertainty and a favorable credit environment not because we wanted to do more particularly within our within the second half of the year. All time was all time.

This reflects how closely we had been working with our customers to adapt to a changing operating environment. We are pleased this translated into strong revenue.

Growth was driven by a strong FX performance up 7%, capturing elevated client activity due to market volatility and geopolitical events.

The intention then is is really will be a net negative issuer in the second half of the year and.

In terms of pre financing to lease real question I would say the you would we would not rule that out but I think the way it was fined if I heard you correctly.

Always trade solutions increased 4% driven by guarantees as he supported customers to build out infrastructure and expand production facilities.

Greg was would we do a significant amount.

I didn't I didn't expect that and I think.

Security services was up 3% due to higher asset balances as a result of improved valuations new customer mandates, particularly in Asia and the middle East.

We will look at any opportunities if the markets might probably later towards the later half of the year, if we're going to do something.

The next question is from Rob Thomas of T Rowe price.

Your line is now open please on mute yourself and ask your question I'm assuming of a muted myself.

Global payment solutions increased 1%, including higher volumes in cross border and real time payments.

Yes, we can hear you sound so correct yes.

So maybe just obviously.

In wealth.

Another question on <unk>.

Issuance more to just clarifying the point you made you've been focusing on <unk>.

See in other income increased 22% year on year with growth across all products.

Georges Elhedery: In wealth, fee and other income increased 22% year-on-year, with growth across all products. This represents our 6th consecutive quarter of double-digit fee growth, as the strong momentum from Q1 continued in Q2. We also benefited from higher customer activity levels in Asia, particularly in Hong Kong, where the stronger stock market drove greater customer activity. The investments we are making in our wealth business are translating into results: $22 billion of net new invested assets, $11 billion of which were in Asia. $13.5 billion CSM balance, a new record. Wealth invested assets are now $1.4 trillion, up 12% year-on-year. Our $75 billion of net new invested assets over the last 12 months show that while an element of our Q2 performance was transactional, there are many positive drivers of our business.

Pam Kaur: In wealth, fee and other income increased 22% year-on-year, with growth across all products. This represents our 6th consecutive quarter of double-digit fee growth, as the strong momentum from Q1 continued in Q2. We also benefited from higher customer activity levels in Asia, particularly in Hong Kong, where the stronger stock market drove greater customer activity. The investments we are making in our wealth business are translating into results: $22 billion of net new invested assets, $11 billion of which were in Asia. $13.5 billion CSM balance, a new record. Wealth invested assets are now $1.4 trillion, up 12% year-on-year. Our $75 billion of net new invested assets over the last 12 months show that while an element of our Q2 performance was transactional, there are many positive drivers of our business.

<unk> see.

Currencies.

This represents.

<unk> been pleased to see the support.

Our sixth consecutive quarter of double digit fee growth as the strong momentum from the first quarter continued in the second quarter.

How should we think about that in terms of like a go forward.

The split of your issuance you said two thirds was in dollars this year.

Is that something that we should expect is a normal cadence or are you thinking or seeing some potential to sort of diversify further away.

We also benefited from higher customer activity levels in Asia, particularly in Hong Kong, where the stronger stock market drove greater customer activity.

From the U S market with into other countries I've got a second question, but are still with them first.

Okay I'll take that one first and then come back to you. So yeah I did say around two sets. This year, so far and if I look back to 2024 as well.

The investments we are making in our wealth business are translating into results.

$22 billion of net new invested assets $11 billion of which were in Asia.

<unk> done a round about the same I think two thirds of our MRO was in U S dollars.

So do you find $5 billion C S imbalance.

On a go forward basis, we are I think I've said it a few times now that it's our intention to.

New record.

What invested assets are now 1.4 trillion dollars up 12% year on year.

Diversify our currency mix and I I think generally U S dollars I mean, it's the biggest liquidity pool in the world.

Will be a natural source for us to go to a lot of our other breweries are in US Dollar is another our functional currency is U S dollars and I think that would stay well to be honest.

Our $75 billion of net new invested assets over the last 12 months show that violent element of our second quarter performance was transactional there are many positive drivers of our business.

I think Ivo.

In terms of the insurance they would probably be somewhere in the range of two <unk> to three quarters in terms of what we do in dollars.

Okay.

On credit our second quarter ECL charge was $1.1 billion. This includes some corporate impairments in the U K and U S.

But also very conscious of the franchise and I'm.

Very very happy with what we've been able to do in <unk>.

Georges Elhedery: On credit, our Q2 ECL charge was $1.1 billion. This includes some corporate impairments in the UK and US, Mexico retail, and an ECL charge for Hong Kong commercial real estate. A part of this quarter's Hong Kong ECL reflects commercial real estate model updates and adjustments. The balance reflects what is still a weak commercial real estate market. Office rents are still declining somewhat. Office and retail values are softening. Slide 25 in the appendix provides more detail on the portfolio. Challenges are concentrated in the secured portfolio, particularly with retail and office property collateral. Credit migration in the first half was predominantly in this book. We are now guiding to a group ECL charge of around 40 basis points for the full year 2025. This new guidance includes our updated outlook on Hong Kong commercial real estate. On costs.

Pam Kaur: On credit, our Q2 ECL charge was $1.1 billion. This includes some corporate impairments in the UK and US, Mexico retail, and an ECL charge for Hong Kong commercial real estate. A part of this quarter's Hong Kong ECL reflects commercial real estate model updates and adjustments. The balance reflects what is still a weak commercial real estate market. Office rents are still declining somewhat. Office and retail values are softening. Slide 25 in the appendix provides more detail on the portfolio. Challenges are concentrated in the secured portfolio, particularly with retail and office property collateral. Credit migration in the first half was predominantly in this book. We are now guiding to a group ECL charge of around 40 basis points for the full year 2025. This new guidance includes our updated outlook on Hong Kong commercial real estate. On costs.

Asia Pacific currencies, and I think that will be another another area, we tap into so that's that's the way we're thinking about it at the moment okay.

Mexico retail and an ECL charge for Hong Kong commercial real estate.

Okay. Yeah, that's helpful and certainly I think the cadence of your issues in dollars. It was obviously supported and seem to be.

A part of this quarter's Hong Kong ECL reflects commercial real estate model updates and adjustments. The balance reflects what is still a weak commercial real estate market office rents are still declining somewhat office and.

Well balance so I appreciate that.

I guess the second question is a bit more of a strategic strategy question. So.

I'm not sure.

This is the right call to do it but I thought I'd put it out there.

And maybe Greg you could come back to me later, but.

Retail values are softening.

The the bulk.

Slide 25 in the appendix provides more detail on the portfolio.

Investment can you remind me what the strategic rationale behind this investment as I know it was sort of like it's a long long term investment, but I'm just trying to understand.

Challenges are concentrated in the secured portfolio, particularly with retail and office property collateral.

In the context of the kind of the restructuring and sort of simplification of the business that's been going on over the last few years and just sort of stands out there is something just just a bit of an irritant rather than I think meaningfully positive.

Credit migration in the first half was predominantly in this book.

We are now guiding to a group ECL charge of around 40 basis points for the full year 'twenty 'twenty five this new guidance includes our updated outlook on Hong Kong commercial real estate.

I just wonder if you had any thoughts on that or any direction.

Thank you.

I'll give you I'll give you some of my comments and then if if Greg wants to add Oh, you're supposed to say welcome to the <unk>.

On costs we.

We are taking a disciplined approach to cost management and are on track to achieve our target of around 3% cost growth in 2025 compared to 'twenty 'twenty fall on a target basis.

<unk> shipped with bank of communications become it's been a long standing one for HSBC.

Georges Elhedery: We are taking a disciplined approach to cost management and are on track 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 $0.4 billion of simplification savings into the P&L in 2025. This is an improvement compared to our previous expectation of $0.3 billion. Overall, in the first half, we have taken actions that deliver $0.7 billion of future cost saves. In 2025, we expect to have taken actions that will result in saves of $1 billion. In 2027, the full $1.5 billion of cost saves will be in the P&L. As George highlighted, we are also making positive progress in our reallocation efforts. We have announced seven exits since the Q1. As we exit non-strategic activities, we will be accelerating investment into our four businesses.

Pam Kaur: We are taking a disciplined approach to cost management and are on track 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 $0.4 billion of simplification savings into the P&L in 2025. This is an improvement compared to our previous expectation of $0.3 billion. Overall, in the first half, we have taken actions that deliver $0.7 billion of future cost saves. In 2025, we expect to have taken actions that will result in saves of $1 billion. In 2027, the full $1.5 billion of cost saves will be in the P&L. As George highlighted, we are also making positive progress in our reallocation efforts. We have announced seven exits since the Q1. As we exit non-strategic activities, we will be accelerating investment into our four businesses.

We've had this relationship for around 20 years, and it's representative of I think about deep and long commitment to mainland China from a strategic perspective.

We are also on track to live to deliver zero point $4 billion of simplification savings into the P&L. In 2025. This is an improvement compared to our previous expectation of zero point $3 billion.

Faiz: Reflecting conditions in the Hong Kong commercial real estate market, Stage 3 balances were 2.4% of customer loans, remaining stable in the first half. On to the final item today, that is our balance sheet. Turning first to capital, our CT1 ratio of 14.6% remains above our target operating range of 14% to 14.5%. You should expect us to bring it down into the range over time. Note that the aforementioned impairment and dilution loss taken following the capital raised by BOCOM has no material impact on the HSBC Group CT1 ratio, as it is offset by threshold deductions. At the midpoint of our target operating range, we will have around 300 basis points of headroom above our MDA hurdle requirements. HSBC continues to be strongly capital-generative, with profits delivering 1.8 percentage points of CT1 in the first half.

Nitrile that relationship hasn't changed at all and Ah, we really view that market in that environment as providing excellent medium and long term growth opportunities for <unk>.

<unk>.

Overall in the first half we have taken actions that deliver zero point $7 billion of future cost saves.

So really where we're happy with the relationship no plans to change our whatsoever and.

The count because of the kind of impairments that we have reported this quarter have been mechanical in nature.

In 2025, we expect to have taken actions.

That will result in saves of $1 billion in 'twenty 'twenty seven the full $1 $5 billion of cost saves will be independent.

We undertake K, what's known as a V or U calculation of value in use calculation and that is just as at the formal mechanism. We used to account for a holding but it doesn't change.

As George highlighted we are also making positive progress in our reallocation efforts, we have announced seven exits.

However, our strategic.

Our strategic relationship with both of them.

Okay.

So maybe just a follow up then what was C and I may have missed this you may have.

Since the first quarter.

Put a press note on what was the reasoning behind not.

As the exit non strategic activities, we will be accelerating investment into our full businesses.

Maintaining your.

Sure sure and vessel you, let it dilute with there.

George set out earlier, the progress we're already making.

Little race.

Yeah. It was it was the case that when Broadcom announced that they were doing the capital I shouldn't say it was a private capital insurance. So we went and talked to sponsors by our our shareholding therefore diluted from 19, 3% to 16%.

Georges Elhedery: George set out earlier the progress we are already making. On loans and deposits. The loan book was broadly stable, with growth in the UK. Deposits, a structural source of strength for us, were up 5% or $83 billion over the last 12 months, adjusting for the balances we have reclassified to help for sale, notably relating to our custody business in Germany in Q2. Combined with the $75 billion of net new invested assets over the same period, these show potential drivers of future income. Turning to capital. Our CET1 ratio was 14.6%. Overall, we have delivered a good capital number this quarter, even with the capital consumption. We have accrued $0.39 of dividends per share in the first half against the $0.20 per share announced year to date.

Pam Kaur: George set out earlier the progress we are already making. On loans and deposits. The loan book was broadly stable, with growth in the UK. Deposits, a structural source of strength for us, were up 5% or $83 billion over the last 12 months, adjusting for the balances we have reclassified to help for sale, notably relating to our custody business in Germany in Q2. Combined with the $75 billion of net new invested assets over the same period, these show potential drivers of future income. Turning to capital. Our CET1 ratio was 14.6%. Overall, we have delivered a good capital number this quarter, even with the capital consumption. We have accrued $0.39 of dividends per share in the first half against the $0.20 per share announced year to date.

On loans and deposits.

Loan book was broadly stable with growth in the U K.

Faiz: Our dividend payout ratio policy remains 50% of earnings, excluding material notable items and related impacts. We have announced a total of $0.20 per share dividend for the first half. Alongside our first quarter results, we announced a $3 billion buyback, which completed last week. Today, we have confirmed up to a further $3 billion to commence in the coming days. This brings our total shareholder distributions in respect to the first half of the year to $9.5 billion. Our MRR ratio was 32.6%, broadly flat in the first half of the year, and 4.8 percentage points above our requirement, which is equivalent to around $43 billion. Moving on to liquidity, the group retained a large and well-diversified deposit base, with strong levels of liquidity. We maintain a conservative loan-to-deposit ratio of 57%, supported by our $1.7 trillion deposit base.

Deposits.

Structural source of strength for us were up 5% or $83 billion over the last 12 months adjusting for the balances we have reclassified to held for sale, notably relating to our custody business in Germany in the second quarter.

The injection was done by China's Ministry of Finance. So it was a private private issues got it.

Helpful.

I didn't know that thanks very much.

The next question comes from <unk> <unk> from UBS.

When combined with the $75 billion of net new invested assets over the same period. These show potential drivers of future income.

Your line is now open please on mute yourself and ask your question.

Thank you can you guys hear me okay.

Yes, we can hi, good afternoon, and congrats on the results I just had a quick one actually about legacy capital. Obviously, there isn't really that much left anymore, but it was about this time last year that you called the dollar ton spot 176 and of course, they are still the sterling five spot at four four.

Turning to capital.

Our CET one ratio was 14, 6%.

Overall, we have delivered a good capital number this quarter, even with the capital consumption.

Any thoughts on sort of your plans for for this going forward.

We have accrued 39 cents of dividends per share in the first half against the 20 cents per share announced year to date.

Yeah, absolutely so.

Thank you for the question. So just by way of context for others that are perhaps not as familiar with this yes. As you say we are we have two instruments that's.

We expect the 3 billion dollar buyback the announced today to have an impact of around 0.4 percentage points.

Georges Elhedery: We expect the $3 billion buyback we announced today to have an impact of around 0.4 percentage points. In summary, our Q2 results show discipline, performance, and delivery. Discipline in the way we are applying strong cost control. We are on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Our simplification saves are ahead of our previous expectations. We are also progressing at pace with our exit of non-strategic activities and our redeploying into priority growth areas. Performance in our earnings. Each of our 4 businesses is growing revenue, and each one is making mid-teens ROTI or better. Delivery. These Q2 results show the way in which we are supporting our customers. Our 5% revenue growth and 17.7% ROTI show we are delivering against the targets we set out to you.

Pam Kaur: We expect the $3 billion buyback we announced today to have an impact of around 0.4 percentage points. In summary, our Q2 results show discipline, performance, and delivery. Discipline in the way we are applying strong cost control. We are on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Our simplification saves are ahead of our previous expectations. We are also progressing at pace with our exit of non-strategic activities and our redeploying into priority growth areas. Performance in our earnings. Each of our 4 businesses is growing revenue, and each one is making mid-teens ROTI or better. Delivery. These Q2 results show the way in which we are supporting our customers. Our 5% revenue growth and 17.7% ROTI show we are delivering against the targets we set out to you.

Lost that capital value for us at the end of 'twenty, one and became eligible for calling at that point in time, and we chose to cool the holdings issuance, which was a dollar issuance.

Faiz: Across our two home markets, our deposits continue to skew significantly more towards current and savings accounts than we see across the broader market. We hold $0.8 trillion in high-quality liquid assets, and the group LCR was 140%. The group primarily manages liquidity at each individual legal entity and has a conservative approach to calculating a group LCR. You will notice that our major subsidiaries all operate with LCRs that are significantly higher than the group ratio, highlighting the conservatism in our approach. Finally, on to issuance, we chose to accelerate our issuance plan in the first half, given the balance of risks and opportunities presented to us in the market. We have now largely completed our funding plan for 2025, with a focus likely to be on non-G3 currencies in Holdco senior in the second half of the year.

In summary.

Our second quarter results show discipline performance and delivery.

In Q3 Q4 of last year.

Discipline in the way, we are applying strong cost control.

We're not in a position at the time to call. The other instrument, which is a stunning issue.

We are on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis.

Eight four.

We did look at that instrument at the time and there are various factors we take into account when making our decision. There for example, the economics are important for US we look at the funding benefit those those securities provide to us and it is a balance I think it's fair to say that.

Our simplification saves.

Head of our previous expectation.

We are also progressing.

With our exit of non strategic activities.

And the reason we didn't call it at the time as the economics, just really didn't make sense for us but at the same time, we are very conscious that we've got a number of our.

And are redeploying into priority growth areas.

Performance in our earnings each of our full businesses is growing revenue and each one is making mid teens Roe T or better.

Core investors that have have holdings in the security.

So it is something we will continue to review as we move forward, but nothing really to report at the moment in terms of timescale.

Delivery.

These second quarter results show the way in which we are supporting our customers.

Yeah.

Thanks, so much I appreciate it.

Thanks, a lot.

A 5% revenue growth and 17.7% Roti show, we are delivering against the targets we set out to you Louis.

Next question is from Rob Smalley of or I shouldn't.

Faiz: Given the acceleration of our plan, we expect to be a significantly net negative issuer in the second half, with nearly $9 billion of senior Holdco and Tier 2 due for call or maturity over the period. Two-thirds of our Holdco senior issuance has been in U.S. dollars so far this year, and we are particularly pleased with the reception we continue to receive in Asia-Pacific currencies. We will continue to look for opportunities to diversify the currency of our issuance to fit with our footprint and franchise. In summary, our first-half results demonstrate the financial strength of our business. We are on track to deliver against the targets we have set for costs and simplification saves, and we are progressing at pace with our exit of non-strategic activities and deploying to growth areas.

Your line is now open please on mute yourself and ask your question.

Luis can we go to Q&A. Please.

Alright, thanks for taking my questions.

Georges Elhedery: Louise, can we go to Q&A, please? Thank you, Pam. 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. Morning, both. Thank you for taking my questions. The first one's on your Banking NII guidance of $42 billion. You've also provided some useful guidance on one-month HIBOR sensitivity at 1%.

Pam Kaur: Louise, can we go to Q&A, please?

Keep him if he would like to ask a question today. Please use the raise hand function in the same place also ensure your camera as times, if you're invited to ask a question. Please accept the prompt you to meet your line. If you find your question has been answered you may relieve yourself from the queue Butlering Yohan insane.

With Bill Com and Hong Kong CRE in the other call I wanted to ask about two things one on the U K.

Operator: Thank you, Pam. 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.

It looks like revenues on a constant dollar basis or.

Pretty stable whats the plan going forward there.

Our first question today comes from Benjamin Toms RBC. Please accept the prompt to mute your line.

One around continued organic growth.

Potential benefits from a loosening of the ring fence.

Good morning, Thank you for taking my questions. The first one is on your banking NII guidance.

And then inorganic growth as we continue to see competitors pick up.

Benjamin Toms: Morning, both. Thank you for taking my questions. The first one's on your Banking NII guidance of $42 billion. You've also provided some useful guidance on one-month HIBOR sensitivity at 1%.

<unk> 42 billion.

Books and pieces of other.

You've always said provide some useful guidance on one month hibor sensitivity a 1% can you just give some more color on the assumptions that you've made within your banking NII guidance in relation to the time it would take heibel to return to normalized levels.

Other companies.

And then secondly on a different topic since I've asked a number of others could you talk about your exposure to non depository.

Georges Elhedery: Can you just give some more color on the assumption that you've made within your Banking NII guidance in relation to the time it will take HIBOR to return to normalized levels? Secondly, on cost of risk, the guidance range is 30 to 40 basis points, and you've been at the top end of that range now for a couple of years. Is it a sensible assumption, really, to think that you'll remain in the top half of this range for at least FY26? Thank you. Benjamin, thank you very much for your question. I'm going to ask Pam to address both your Banking NII and your ECL guidance. Thank you, Benjamin. The $42 billion guidance includes market expectations of HIBOR implied above 2% in Q3. We've already said that HIBOR at a 1% impacts us by $100 million per month.

Benjamin Toms: Can you just give some more color on the assumption that you've made within your Banking NII guidance in relation to the time it will take HIBOR to return to normalized levels? Secondly, on cost of risk, the guidance range is 30 to 40 basis points, and you've been at the top end of that range now for a couple of years. Is it a sensible assumption, really, to think that you'll remain in the top half of this range for at least FY26? Thank you.

Institutions, specifically alternative asset managers, bdcs et cetera.

And then secondly on cost of risk guidance range of 30 to 40 basis points and you being at the top end of that range now for a couple of years is that a sensible assumption ready to think that you'll remain in the top half of this range or at least FY 'twenty six thank you.

Faiz: We navigate the uncertain macroeconomic environment from a position of strength, and we are well-positioned to support our customers. On that note, let's open this call up for Q&A. Faizan.

And while they.

Move into Asia.

What's your plan around that co.

Coexistence gaming new clients et cetera. Thank you.

Benjamin Thank you very much for your question I'm going to ask Bob to address both your banking NII in your ECL guidance.

Okay. Thank you I'll get to hear from me, so I am kind of tight probably your first question on the UK and then.

Greg: Thanks, Faiz. We will now be taking questions over Zoom. Please use the raise hand function to indicate that you would like to ask a question. I will then announce you, and you will be able to ask your question. Please ensure you unmute your line. You may also submit your question via the Q&A function.

Georges Elhedery: Benjamin, thank you very much for your question. I'm going to ask Pam to address both your Banking NII and your ECL guidance.

Thank you Benjamin.

I will ask Craig what he's got anything on on question two.

Pam Kaur: Thank you, Benjamin. The $42 billion guidance includes market expectations of HIBOR implied above 2% in Q3. We've already said that HIBOR at a 1% impacts us by $100 million per month.

The 42 billion guidance includes market expectations of Hibor.

So on the first question in terms of the UK.

Fly at about 2% in third quarter.

Where we are very pleased with the the revenue and the.

So if you already said that high bar at 1% impacts us by 100 million per month.

Greg: Thanks, Faizan. Just while people are looking to signal for a question, we've had some submitted questions from Lee Street from Citigroup, who's unfortunately unable to dial in. Lee asks five questions. Liam, I'm only going to take the first two, but we'll see if we've got time to get to the other ones. Faiz, starting with the first one. Under what scenario might you revisit your 14% to 14.5% CT1 target range?

The position in the UK at the moment in the.

The UK economy has continued to show resilience through the first half of 2025, despite the Gao.

So if you look overall a high vol a.

Georges Elhedery: If you look overall, our HIBOR expectations, as well as the impact of the $100 million, all these are included when we look at our overall confidence in the BNI guidance for the year. The BNI guidance is not just based on the forward curves. As we know in Q2, a very low HIBOR impacted us for around 6 to 7 weeks. We have given more detail of it in the appendix. A couple of things have moved around. The time deposits are now 4 points lower, and you look at those factors, and as you look for the rest of the year, there will be some upside and downside, obviously also in terms of the timing of when the HIBOR shifts happen, as well as the dollar depreciation, how long it continues. In Q2, it was a tailwind for us. In terms of ECLs.

Pam Kaur: If you look overall, our HIBOR expectations, as well as the impact of the $100 million, all these are included when we look at our overall confidence in the BNI guidance for the year. The BNI guidance is not just based on the forward curves. As we know in Q2, a very low HIBOR impacted us for around 6 to 7 weeks. We have given more detail of it in the appendix. A couple of things have moved around. The time deposits are now 4 points lower, and you look at those factors, and as you look for the rest of the year, there will be some upside and downside, obviously also in terms of the timing of when the HIBOR shifts happen, as well as the dollar depreciation, how long it continues. In Q2, it was a tailwind for us. In terms of ECLs.

Expectations as well as the impact of the $100 million. All these are included when we look at our overall our confidence in the P&I guidance for the year.

Such an environment.

We had two rate cuts in May and June taking the base rate.

Four to five and probably another two cuts are expected by the market in H T.

They'd be in our guidance is not just based on the forward curves as we know in Q2, a very low hydro impacted us for around six to seven weeks, we have given more detail off line in the appendix, but a couple of things have moved around the time deposits are now full points lower and you look at those facts.

Growth for us there.

Faiz: Okay. Thank you, Greg. Sorry, did you say he asked five questions?

<unk> remains measured but I would say there are encouraging signs in the macro economy, and and that's becoming more.

Greg: He did ask five questions, yeah.

Faiz: Wow. Okay. First of all, perhaps taking a step back, 14% to 14.5% is our target operating range for CT1, as I said in my prepared script. We are currently at 14.6%. That target range of 14% to 14.5% has been there for a little while. There are a number of factors that we consider when setting such ranges. In no particular order, I would call out we think about our operating entities as well as the group. That is one of the factors, certainly in our mind. We look very carefully at how our positions might perform under stress, as well as under BAU. Our target operating range is calibrated to accommodate all scenarios. We obviously think about investor expectations, peer comparisons. The rating agencies as well is another factor that comes into mind. At this point, we do not have any intention to change the 14% to 14.5%.

More supportive real wages are really recovering and expectations of rate cuts are bringing.

From what we can see are beginning to lift consumer and business confidence.

And as you look for the rest of the there will be some upside and downside honestly answer in terms of the timing of when a high bush shifts happen as well as the dollar depreciation and how long. It continues in Q2, it was a tailwind for us.

In terms of in terms of our own strategy for for that market.

We are continuing to look at organic growth.

And growing our market share, particularly in the SME segment.

Yeah.

Revamped ostomy proposition.

In terms of Ecl's. So from an ECL perspective, you only give you. The 25 number it's fair to say that we have always in the last few years stayed between the 30 to 40 basis points, sometimes a bit to the upper end. So we're not giving any guidance beyond 2025 at this stage.

Enhancing coverage and increasing proximity to our customers.

Georges Elhedery: From an ECL perspective, we only give you the 25 number. It's fair to say that we have always, in the last few years, stayed between the 30 to 40 basis points, sometimes a bit to the upper end. We are not giving any guidance beyond 2025 at this stage. Ben, thank you very much for the question. Thank you, both. Our next question today comes from Kian Abouhossein at J.P. Morgan. Please accept the prompt to unmute your line. Yes, thank you very much for taking my questions. Two questions. The first one is related to tariffs. You gave a guidance of 5% impact on revenues, and just wanted to see how we should think about that going forward, as you don't see anything in the numbers today. The second question is related to stage one and stage two movements. Clearly, your stage two has deteriorated.

Pam Kaur: From an ECL perspective, we only give you the 25 number. It's fair to say that we have always, in the last few years, stayed between the 30 to 40 basis points, sometimes a bit to the upper end. We are not giving any guidance beyond 2025 at this stage.

The in terms of inorganic growth I mean, obviously, we see what's happening in the in the marketplace and are we.

When we look at that.

You know the bar for us in terms of inorganic growth is set reasonably high we need to be confident.

Ben Thank you very much for the question.

Georges Elhedery: Ben, thank you very much for the question.

Thank you guys. Our next question today comes from Ken at the Shane of J P. Morgan.

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

It will add to the franchise and is consistent with our strategy, but also we recognize that any inorganic growth is.

Except the prompt to meet your line.

Yeah. Thank you very much for taking my questions two questions. The first one is related to tariffs you.

Faiz: But it is one of those things that we keep under review and discuss periodically within the organization. Obviously, it would be something we would discuss with our regulators as well.

Kian Abouhossein: Yes, thank you very much for taking my questions. Two questions. The first one is related to tariffs. You gave a guidance of 5% impact on revenues, and just wanted to see how we should think about that going forward, as you don't see anything in the numbers today. The second question is related to stage one and stage two movements. Clearly, your stage two has deteriorated.

Further integrating within an organization and can be costly and distracting. So you know there are various factors that we think when when deciding about whether they're.

You gave a guidance of 5% impact on revenues and just wanted to see.

How we should think about that going forward as you don't see anything in the numbers today.

Greg: Thanks, Faiz. Lee's second question is, given current spread levels, is it fair to assume a significant amount of 2026 pre-financing for the remainder of this year?

The inorganic opportunities that we want to say to say.

And the second question is related to.

And then I believe you told you asked about ring fencing as well.

I'd comment very briefly on that but we were we were pleased to see the announcements are made and mansion house arounds around.

Stage, one and stage two movement clearly your stage two has deteriorated you discussed Pds, which has been adjusted and is just trying to understand a little bit more detail around your movement in particular in the corporate and commercial bank in terms of.

Faiz: Okay. Thank you. Well, look, let me start by taking a little bit of a step back. We laid out in February our funding plan for 2025. Very pleased to say we have made significant progress against that. We front-loaded it largely because, as I said in my notes, we were cognizant of the uncertainty in the market environment, and the credit environment was conducive to doing those trades early. We are, if I go one by one, if we look at senior Holdco, we have communicated a range of $16 billion to $18 billion in terms of our appetite for the year. We have done $17.5 billion. So we have got a little bit more room there to do something. If we do, I think our focus will be on non-G3 currencies, really, and for the senior Holdco.

Georges Elhedery: You discussed PDs, which has been adjusted. I'm just trying to understand a little bit more detail around your movements, in particular in the corporate and commercial bank, in terms of potential realized losses, but also model adjustments versus environments. Thank you. Kian, thank you very much for the question. I'm going to make some comments on your tariff question, and we'll ask Pam to talk to the scenarios. I'll ask Pam to address your stage one and stage two questions. On tariffs, first, tariff has never been a new feature of global trade. It has always been there. Although we've seen recently a more significant shift in the US tariff policy, that's created more uncertainty. At the same time, now, as we're encouraged to see that more agreements are being concluded, and this giving us, ideally, more certainty as we look in the future.

Kian Abouhossein: You discussed PDs, which has been adjusted. I'm just trying to understand a little bit more detail around your movements, in particular in the corporate and commercial bank, in terms of potential realized losses, but also model adjustments versus environments.

Around revisiting the ring fencing regime.

That is.

And that is something we absolutely welcome.

Potential realized losses, but also model adjustments, whereas this environment. Thank you.

The government has called in that for the industry to offer solutions to improve gross that's something we're very.

Ken. Thank you very much for the question I'm going to make some comments on your tariff question and we'll ask them to talk to these scenarios.

Georges Elhedery: Thank you. Kian, thank you very much for the question. I'm going to make some comments on your tariff question, and we'll ask Pam to talk to the scenarios. I'll ask Pam to address your stage one and stage two questions. On tariffs, first, tariff has never been a new feature of global trade. It has always been there. Although we've seen recently a more significant shift in the US tariff policy, that's created more uncertainty. At the same time, now, as we're encouraged to see that more agreements are being concluded, and this giving us, ideally, more certainty as we look in the future.

Very much wanting to support within the U K and the ring fencing.

Thank you well know was established after the financial crisis, and we think that the environments.

And I'll ask them to address your stage, one and stage two questions.

So on tariffs.

Quite different now and has significantly improved from those.

First the tariff has never been in.

A new feature of global trade has always been there although.

So those he is directly after the crisis I mean, one one example, I gave is that the.

Although we've seen recently a more significant shift in the U S tariff policy.

The independent Independent Commission for banking had discussed previously a loss absorbency rate of between 17 and 20%.

That's created more uncertainty, but at the same time, though as you know we're encouraged to see that more agreements are being.

Faiz: Then if I go into Tier 2, in terms of Tier 2, we communicated a range of $2 billion to $3 billion. So far, we are in the middle of that. We have done $2.5 billion. So there is maybe a little room there, but we will see. Then on 81, we are complete. We communicated $3 billion to $4 billion, and we have printed $4.1 billion. The idea of accelerating the plan over this year has been really about kind of recognizing the uncertainty and a favorable credit environment, not because we wanted to do more, particularly within the second half of the year. Our plan was our plan. The intention then is really we will be a net negative issuer in the second half of the year. In terms of pre-financing, to Lee's real question, I would say that we would not rule that out.

We sit today at over 30% in terms of RW eyes.

You know are being concluded and this giving us.

So the ring fencing regime, I think it's the right opportunity to revisit that and look at it again with a view to.

More ideally more certainty as we look into the future, but the important things to call out. One is you did see from our Q2 results.

Georges Elhedery: The important things to call out. 1, as you did see from our Q2 results, our trade fees and other income have grown by 4%. The reason is multiple. 1st, we are positioned across some of the fastest-growing trade corridors on the planet, specifically the ones within Asia or between Asia and the Middle East and various parts of the world, where trade continues to grow significantly higher trends than some of the more traditional trade corridors. We have a leadership position across these intra-Asia, Asia-Middle East corridors. 2nd one is we kept investing at pace in our services trade sector. Now we have capabilities there, and we're able to capture a much faster growth in the services trade sector than what has been the growth exhibited in the goods trade sector. That's another area of strength for HSBC.

Kind of.

Trade fees and other income has grown by 4%.

First is growth opportunities.

And making sure that the U K does not.

And the reason is multiple.

First we are positioned across some of the fastest growing trade Cory doors on the planet specifically the ones with in Asia between Asia, and the Middle East in various parts of the World where trade continues to grow significantly higher trends.

I find this offers an outlier in terms of other jurisdictions. So that's that's probably what I'd say on the UK point, perhaps Greg.

Before we go over to Greg if I could just follow up quickly on the inorganic side.

And then some of the more.

<unk>.

Traditional trade.

When we've seen these opportunities come up over the last 18 to 24 months have you looked and.

Trade corridors, and where we have a leadership position across these intra Asia Asia Middle East corridors.

These just didn't make sense for you either economically or from an integration basis or.

Second one is we kept investing at pace in our.

Service history sector, and though we have capabilities, there and we're able to capture a much faster growth in services trade sector been with has been the growth exhibited in the good straight sector and that's another area of strength for HSBC.

Have you not been evaluating these things as they come up because <unk> been focused on.

Faiz: But I think the way it was framed, if I heard you correctly, Greg, was would we do a significant amount? I do not expect that. I think, you know, we will look at any opportunities if the market is right, probably later towards the later half of the year if we are going to do something.

Your bread and butter.

Yeah look we have looked at them.

Any opportunity that comes up we would we would look at them, but it really didn't make sense for some time.

And third even in the trade and so far that the U S is embolden you know imports into the U S. Some of the unique propositions. We've we've put forward such as trade Bay.

Georges Elhedery: Third, even in trade insofar that the US is involved and imports into the US, some of the unique propositions we've put forward, such as TradePay, has given unique support to US importers in helping them manage their working capital facilities and helping them meet the duties they're due to pay for tariffs in a way that allowed us to continue growing our business and gaining share. You put all of this together. You put the expertise we have with more than 5,000 trade specialists across more than 50 markets where we operate. You can see the resilience of our business to uncertainty. Actually, it is a period where we can differentiate, continue gaining market share, deepening customer relationships, acquiring more customers. This is what we envisage for the expertise we have and the strength we have in our trade business.

Okay. Thank you.

Hi, Rob it's Greg So yes, thanks for the question and thanks for the question. So on <unk> in terms of the total loan book, you're talking about $90 billion also.

Greg: The next question is from Rob Thomas of Dero Price. Rob, your line is now open. Please unmute yourself and ask your question.

Given unique support to U S importers in helping them manage their working capital facilities and helping them meet their duty the duties. There you do to pay on tariffs.

Greg: Great. I am assuming I have unmuted myself.

The total just under a trillion dollars of the loan book in the first half was two <unk>.

Greg: Yes, we can hear you. Thanks, Rob.

Greg: Great.

Greg: Yes.

Greg: Maybe just obviously another question on issuance, more to just clarifying a point you made. You have been focusing on non-G currencies, and you have been pleased to see the support there. How should we think about that in terms of like a go-forward split of your issuance? You said two-thirds was in dollars this year. Is that something that we should expect as a normal cadence, or are you thinking or seeing some potential to sort of diversify further away from the U.S. market into other currencies? I have got a second question, but let us just go with that one first.

It reflects a number of things.

In a way that you know that allowed us to continue growing our business and gaining share.

It is an area of focus for us in the CIB business I think we do see some growth opportunities there.

You put all of this together you put the expertise we have with more than 5000 trade specialists across over 50.

But it also reflects as well the <unk>.

Well rated business that we are in the transaction services business that we have we.

More than 50 markets, where we operate.

And particularly within the security services. These are core client relationships that we have and it's I think it's quite difficult from the disclosure that we have for me to disaggregate within that <unk>, the various different strata, but.

And you can see the resilience of our business to uncertainty actually.

It is in a period, where we can differentiate continue gaining market share deepening customer relationships acquiring more customers and this is this is what we envisage a uniform for for the expertise we have and the strength we have in our trade business.

We're very comfortable with the exposure and it is a.

I think the.

Our core business for us.

Great. Thank you thanks for the detail on all my questions.

Faiz: Okay. I will take that one first and then come back to you. So, I did say around two-thirds this year so far. If I look back to 2024 as well, we have done around about the same. I think two-thirds of our MRR was in U.S. dollars. On a go-forward basis, I think I have said a few times now that it is our intention to diversify our currency mix. I think generally, U.S. dollars will, I mean, it is the biggest liquidity pool in the world. It will be a natural source for us to go to. A lot of our RWAs are in U.S. dollars, and our functional currency is U.S. dollars. I think that would stay, Rob, to be honest.

Now with regard scenarios I would like Tom to take you through it but remember some of these scenarios are including extreme market movements, such as interest rates at 1%.

Now probably will answer the questions.

Georges Elhedery: Now, with regard to scenarios, I would like Pam to take you through it. Remember, some of these scenarios are including extreme market movements, such as interest rates at 1%, which have a material impact beyond what is the pure trade impact in our business, Pam. Yeah, thank you, George. Firstly, in terms of our scenarios, we continue to update them on a quarterly basis. I just want to reiterate, we are still comfortable that the impact on revenue that we highlighted in Q1 of a low single digit from tariffs is still the same. When you look at scenarios more broadly and you look at the lower interest rates, then whether you're a trade bank or not, it would affect us like any other bank if interest rates go well below 2% in the 1% territory.

Just to step in so we've got a couple of submitted questions I'll read them out and full of both relatively similar but just for transparency, so, especially from an <unk> a pique.

Which have a material impact beyond what is the pure trade impact in our business.

Yeah. Thank you George.

Asks when do you expect provisions in Hong Kong real estate to peak and what will be the key drivers any other regions or sectors, where you see some asset quality deterioration due to the current macro uncertainty.

So firstly in terms of thoughts scenario as you know we continue to update on a quarterly basis I just want to reiterate we are still comfortable that the impact on revenue that we highlighted in the first quarter of low single digit from terrorists is still the same.

Pam Kaur: Yeah, thank you, George. Firstly, in terms of our scenarios, we continue to update them on a quarterly basis. I just want to reiterate, we are still comfortable that the impact on revenue that we highlighted in Q1 of a low single digit from tariffs is still the same. When you look at scenarios more broadly and you look at the lower interest rates, then whether you're a trade bank or not, it would affect us like any other bank if interest rates go well below 2% in the 1% territory.

And separately Paul Fenner from Jan also asks how do we interpret Hong Kong.

<unk> risk, we've got 5 billion are in pads, but only $1 5 billion is greater than 70%.

When you look at scenarios more broadly and you look at the lower interest rates and whether you're a trade bank or not it would affect us like any other bank if interest rates go well below 2% in the 1% territory. So that's the kind of broader piece in terms of the downside scenarios I also want to share with you that when we look.

LTV, what's the LTV on the balance.

Faiz: I think overall, in terms of the issuance, it will probably be somewhere in the range of two-thirds to three-quarters in terms of what we do in dollars. We are also very conscious of the franchise and very happy with what we have been able to do in Asia-Pacific currencies. I think that will be another area we tap into. So, that is the way we are thinking about it at the moment.

What's the worst case scenario here.

The base case, a glide path of impairments.

Georges Elhedery: That's the kind of broader piece in terms of the downside scenarios. I also want to share with you that when we look at our customers and our portfolios, so far, the customers who are impacted by tariffs, from a credit perspective, they're holding well. We are seeing no early warning signs or triggers of either lower deposits or additional drawdowns. Now, coming onto the ECLs in terms of the model update. The model update was looking at really PDs and looking at them in a more calibrated way across our portfolio. In Hong Kong, it increased the allowance number going to stage 2, as we have already disclosed. On the other hand, in the UK, there was a release. Model, then the calibration happens. Some markets go up, some down. Just wanted to share that with you overall.

Pam Kaur: That's the kind of broader piece in terms of the downside scenarios. I also want to share with you that when we look at our customers and our portfolios, so far, the customers who are impacted by tariffs, from a credit perspective, they're holding well. We are seeing no early warning signs or triggers of either lower deposits or additional drawdowns. Now, coming onto the ECLs in terms of the model update. The model update was looking at really PDs and looking at them in a more calibrated way across our portfolio. In Hong Kong, it increased the allowance number going to stage 2, as we have already disclosed. On the other hand, in the UK, there was a release. Model, then the calibration happens. Some markets go up, some down. Just wanted to share that with you overall.

Okay. Thank you, so I'll try and tackle all of that.

At our customers in our portfolio so far the customers who are impacted by tariffs from a credit perspective, they're holding world. We are seeing no early warning signs.

Let me start by just.

<unk>.

Refreshing, where we are in terms of all Ivo ECL charge for the half year, so without charge at the moment stands at $1 9 billion, which represents a cost of risk of 40 basis points.

Greg: Okay. That is helpful. Certainly, I think the cadence of your issuance in dollars was obviously supported and seemed to be well balanced. I appreciate that. I guess the second question is a bit more of a strategic strategy question. I am not sure this is the right call to do it, but I thought I would put it out there. It is just, and maybe Greg, you could come back to me later. The BOCOM investment, can you remind me what the strategic rationale behind this investment is?

Signs are triggers all feel either lower deposits or additional drawdowns now coming onto the he sells in terms of the the model update so the model update was.

We've updated our guidance to.

Around 40 basis points cost of risk for 2025, and that's reflecting the risks that we see in the book.

Looking at really P DS and looking at them in a more calibrated way across our portfolio and in Hong Kong.

It increased.

I would say that the loan book as a whole is strong and the tariffs have been well managed by our con so far.

The the the allowance number going to stay.

Stage, two as we have already disclosed but on the other hand in the U K. It was released some model then the calibration happens some market goes up some down so just wanted to share that with you overall and the vast majority of the model changes was actually due to P. D.

In retail approximately 90% of our exposures are fully secured and have had really strong collateral and in wholesale we have a diversified book with around 60% of borrowers.

Greg: I know it was sort of like it is a long-term investment, but I am just trying to understand in the context of all the kind of the restructuring and sort of simplification of the business that has been going on over the last few years, it just sort of stands out there as something that is just a bit of an irritant rather than anything meaningfully positive. I just wondered if you had any thoughts on that or any direction.

Georges Elhedery: The vast majority of the model changes was actually due to PD migration. You can imagine how it varies from market to market. Thank you very much, Kian. Thank you. Our next question today comes from Pam Kumar at China Securities. Please accept the prompt to unmute your line. Good morning. Good, George. Good morning, Pam. I have 2 questions on impairments. The 1st one is related to the FOCUM impairment, especially that one with the VIU test. It seems that you conduct VIU tests every quarter, but you don't charge impairments every quarter. It seems that the impairment charge always comes together with other bad news. When you 1st charge the VIU impairment in Q4 2023, you got french disposal loss. You got a slight miss on the cost control. You charge the 1st time.

Pam Kaur: The vast majority of the model changes was actually due to PD migration. You can imagine how it varies from market to market.

Having an <unk> equivalent rating made.

Migration and then you can imagine how it varies from market to market.

Maybe where the.

Whereas the tension has come has been in the Hong Kong commercial real estate sector, and we've been looking at that and focused on that in some detail.

Thank you very much Jim.

Georges Elhedery: Thank you very much, Kian.

Thank you. Our next question today comes from.

Pam Kaur: Thank you. Our next question today comes from Pam Kumar at China Securities. Please accept the prompt to unmute your line.

China Securities.

Prompt tell me all night.

Faiz: Thank you. Look, I will give you some of my comments, and then if Greg wants to add, he is obviously welcome to. The relationship with Bank of Communications, BOCOM, has been a long-standing one for HSBC. We have had this relationship for around 20 years, and it is representative, I think, of our deep and long commitment to mainland China from a strategic perspective. The nature of that relationship has not changed at all, and we really view that market and that environment as providing excellent medium and long-term growth opportunities for HSBC. We are happy with the relationship. No plans to change whatsoever, and the kind of impairments that we have reported this quarter have been mechanical in nature. We undertake what is known as a VRU calculation, a value and use calculation, and that is just the formal mechanism we use to account for our holding.

We as.

Okay.

Do you expect and I think as George said during the call. At this morning. This is a market we know very well we've been we've been in Hong Kong for a 160 years and and so it's something we will price to look at and assess them the.

Kunpeng Ma: Good morning. Good, George. Good morning, Pam. I have 2 questions on impairments. The 1st one is related to the FOCUM impairment, especially that one with the VIU test. It seems that you conduct VIU tests every quarter, but you don't charge impairments every quarter. It seems that the impairment charge always comes together with other bad news. When `you 1st charge the VIU impairment in Q4 2023, you got french disposal loss. You got a slight miss on the cost control. You charge the 1st time.

Morning, George Good morning, Pat and I have two questions on impairments.

The first one Israel mid entry to the upcoming Paramount, especially those that one with the weather.

With the Ria you touched it.

The Hong Kong CRE.

It seems that you you conduct via you test every quarter.

CRE market can be split into segments.

You don't charge impairments every quarter.

If I try and do that a little bit the the resin market if I stopped there.

It seems that you know the the impairment charge always come together with other bad news.

<unk> has really stabilized and there are encouraging signs.

When you first charge thing parents that are via your impairments in the fourth quarter of 'twenty three you've got French disposal loss. Your thoughts you know a slight miss on the cost control. So you charge the first time.

In there.

Because of the policy support.

That's been given and rental incomes are.

It remains strong there.

If we then look at office and retail we can still we can see parts.

This quarter, you got the Bocom dilution impairment.

Georges Elhedery: In this Q2, you got the FOCUM dilution impairment. I also cover Chinese banks. Their fundamentals are weak. There were no sudden drops in fundamentals in Q2. It seems that VIU impairment charge always comes together with other bad news. Can you please share us a little bit some more color on the factors triggering that kind of VIU impairment charge? That's the first question. The second question is, can you share us some views on a little bit longer term on the Hong Kong CRE outlook? You increased the credit cost assumption going forward due to the Hong Kong CRE pressure. Is there any chance that the Hong Kong CRE pressure will further increase your ECL assumptions going forward? I have those two questions. Thank you. Kunpeng Ma, thank you very much.

Kunpeng Ma: In this Q2, you got the FOCUM dilution impairment. I also cover Chinese banks. Their fundamentals are weak. There were no sudden drops in fundamentals in Q2. It seems that VIU impairment charge always comes together with other bad news. Can you please share us a little bit some more color on the factors triggering that kind of VIU impairment charge? That's the first question. The second question is, can you share us some views on a little bit longer term on the Hong Kong CRE outlook? You increased the credit cost assumption going forward due to the Hong Kong CRE pressure. Is there any chance that the Hong Kong CRE pressure will further increase your ECL assumptions going forward? I have those two questions. Thank you.

I always I you know I also cover Chinese banks don't do you know their fundamentals are weak, but you know there are those southern trough seen fundamentals in the second quarter. So it seems that you know in fact that we are you impairment charge.

With some retail.

It's still.

Still challenged and still struggling a little.

However, there is government government support in terms of.

Addressing the oversupply and restricting land sales.

This come together with let's say with other back us so can't produce share us some more color on the factors triggering that kind of.

So if.

Faiz: It does not change whatsoever our strategic relationship with BOCOM.

If we look at our commercial real estate book.

Okay.

Impairment charge, that's the first question.

<unk> reduced by about $2 billion to $31 9 billion at the end of each one now all of that.

Greg: Okay. What was the, and I may have missed this, you may have put in press notes on it, what was the reasoning behind not maintaining your share investment? You let it dilute with their capital raise?

My second question is that.

Can you share some views on that.

A little bit longer term.

The Hunter CRE alternate.

We most focused on is the portion that's in substandard and credit impaired and there's a slight hum.

You increased the.

Credit cost assumptions going forward due to the Hawk RCRA pressure is there any chance that the hunk RCI pressure southern increase you feel assumptions going forward yeah, perhaps just two questions. Thank you.

At the end within our pack that starts to lay this out and it's quite quite clear in the appendix.

Faiz: It was the case that when BOCOM announced that they were doing a capital issuance, it was a private capital issuance. We were not entitled to participate. Our shareholding therefore diluted from 19.03% to 16%. The injection was done by China's Ministry of Finance. It was a private issuance.

Of the deck that shows you what it shows you the numbers that I'm talking to at the moment.

<unk>. Thank you very much.

I'm going to take your second question first and then give you some outlook on the Hong Kong surety.

But that substandard and credit impaired component.

Georges Elhedery: Kunpeng Ma, thank you very much.

Georges Elhedery: I'm going to take your second question first and give you some outlook on the Hong Kong CRE. Pam can then give you additional details on ECL and can address your first question about FOCUM. I'll make one comment on FOCUM. With Hong Kong CRE, firstly, Kunpeng, as you may expect, we know this market very well. We've been in Hong Kong for 160 years involved in the sector, and we're comfortable with the position in this market. That's very important to call out. Specifically, as regards residential development, this has stabilized, and we're encouraged by that. It's stabilized mostly because of policy support measures that have been taken, as well as because of robust rental market more recently.

Banking can then give you additional details on ESPN and can address sure. Your first question about Broadcom I'll make one comment on both of them.

After that we look at the pet that has an LTV above 70% and that's around 1 billion and a half one $5 billion.

Greg: Got it. That's helpful. I didn't know that. Thanks very much.

So with Hong Kong theory, Firstly Comping as you May expect we know this market very well we've been in Hong Kong 460 years involved in the sector.

And of that that's the bet that we've.

We've taken an ECL charge for in Q2 of <unk> 5 billion.

Greg: The next question comes from Kian Abouhossein from UBS. Kian, your line is now open. Please unmute yourself and ask your question.

And we're comfortable with our position in this market, that's a very important to call out.

I will now.

I think we're very comfortable with.

Kian Abouhossein: Thank you. Can you guys hear me okay?

Specifically.

Where we are what we've provisioned.

Faiz: Yes, we can. Hi, Ivan.

As regards our residential development this has stabilized.

Kian Abouhossein: Perfect. Good afternoon and congrats on the results. I just had a quick one, actually, about legacy capital. Obviously, there isn't really that much left anymore, but it was about this time last year that you called the $10.176. And of course, there's still the sterling 5.844. Any thoughts on sort of your plans for this going forward?

And here is really to support our customers and.

Stabilized this has stabilized and we are encouraged by the destabilized, mostly because of policy support measures that have been taken as.

And we believe these these challenges that I've talked about are really in the short term and that there's a lot of signs of positivity.

As well as because of our robust rental market more recently.

Positivity for the medium and long term Hong Kong, Hong Kong's incredibly resilient there were a number of new growth areas that we've seen a significant surge in IPO listings.

But when you look wider in the surety space, specifically around the office space in Hong Kong.

Georges Elhedery: When we look wider in the CRE space, specifically around the office CRE space in Hong Kong, we're still struggling because of some oversupply in this space. Now, we are encouraged by some additional government action taken to restrict land sales and office CRE. This should work its way into the medium term by restricting supply and supporting, if you want, the recovery of pricing in this space. There will be some short-term pressure. Now, of the exposure we have on Hong Kong CRE, we basically called out less than 5% of it, around $1.5 billion of that exposure, where we continue to look with focus and attention. That $1.5 billion is to the weak lenders that are either substandard or credit impaired, where the loan-to-valuation of the collateral is above 70%. Now, against this $1.5 billion, we have a half-a-billion-dollar VCL.

We're still struggling because of some oversupply in this space.

Faiz: Yeah, absolutely. Thank you for the question. Just by way of context for others that are perhaps not as familiar with this, yes, as you say, we had two instruments that lost their capital value for us at the end of 2021 and became eligible for calling at that point in time. We chose to call the holdings issuance, which was a dollar issuance in Q3, Q4 of last year, but were not in the position at the time to call the other instrument, which is the sterling issuance of 5844. We did look at that instrument at the time, and there are various factors we take into account when making our decision there. For example, the economics are important for us. We look at the funding benefit that those securities provide to us. It is a balance.

Buoyant capital markets as well in H, one and the Hong Kong is very much building stronger links across Asia and the middle East.

Now we are encouraged by some additional government action taken to restrict land sales in office.

CRT and this should work its way into the medium term by restricting supply and supporting if you want the recovery of pricing in this space, but there will be some short term pressure.

I think we said before as well that it's it's a strong and trusted financial hub.

And over the next decade is well positioned to become a.

No.

The exposure, we have in Hong Kong CRD, we basically called out less than 5% of it around $1.5 billion of that exposure, where we continue to look with our focus and attention that $1.5 billion as to the.

Probably the world's leading cross border wealth hub, so a lot of signs for to look at Hong Kong and saying that this is.

This tension is going to be so short term.

Yeah.

Thanks, <unk>, so I think.

Last question, because we don't have any more submitted unless I don't want to put their hand up and the dying hours, but one final question from Paul Fenner right.

Weaker lenders that are either substandard or credit impaired.

The loan to valuation of the collateral is about 70% now against this one $5 billion, we have a half a billion dollars ECL. So it gives you a quantum of what is a worst case scenario in this space can be and that is the segment. We look at across the wireless spectrum in Hong Kong theory, what I can say.

John So he also asks can you give us an idea of the currency mix.

And from that you might look out for the remainder of the year and so the extent that might be.

Okay, sorry, Thank you Paul as a as I said previously we.

Faiz: I think it's fair to say that the reason we didn't call it at the time is the economics just really didn't make sense for us. At the same time, we're very conscious that we've got a number of our core investors that have holdings in this security. It is something we'll continue to review as we move forward, but nothing really to report at the moment in terms of timescale for you.

Georges Elhedery: It gives you a quantum of what a worst-case scenario in this space can be. That is the segment we're looking at. Across the wider spectrum on Hong Kong CRE, what I can say is our mission is obviously to continue to support our customers as they work through some of the short-term challenges they're going through, but that in the medium to long term, we remain confident in the supply-demand dynamic in Hong Kong and the appeal of the Hong Kong real estate at large, and therefore remain constructive and optimistic about the medium to long term. The comment I want to make on FOCUM is purely coincidental. There is no correlation whatsoever between an accounting process related to the VIU process versus any other information. Remember, the FOCUM impairments have no CET1 impact. They have no CET1 ratio impact.

We've we're largely complete in terms of our 81, maybe there is a bit of room on senior Holdco and THC It will.

So we're our mission obviously to continue to support our customers as they work through some of the short term challenges.

Challenges, they're going through but that in the medium to long term, we remain confident in the supply demand dynamic in Hong Kong and the appeal of the Hong Kong Realestate at large and therefore remain constructive and optimistic about the medium to long term.

I'm the senior side, probably a non G three currencies, where we would look.

That's that's really the position that split.

Kian Abouhossein: Thanks so much. I appreciate it.

Greg did you want to add anything no no I was just going to say, we've actually had that leaves just reminded me that we did have one further question from him that we've not covered which is on the tier two securities and you might remember the New York Law Tier two securities that we exchanged on back in 2022.

Faiz: Thank you, Ivan. Thanks a lot.

On.

The comment I want to make on Bocom is purely coincidental. There is no correlation whatsoever between an accounting process related to our to.

Greg: Next question is from Rob Smalley of Horizon. Rob, your line is now open. Please unmute yourself and ask your question.

To the VR you process versus any other information, but remember the whole the bocom impairments have more CET one impact they have more CET one ratio impact. They have therefore also no distribution impact in terms of dividend or share buyback. So I really encourage you to look at it as a pure accounting.

Rob: Hi. Thanks for taking my questions. You've dealt a lot with BOCOM and Hong Kong CRE in the other call. I want to ask about two things. One, on the U.K., it looks like revenues on a constant dollar basis were pretty stable. What's the plan going forward there? One, around continued organic growth and potential benefits from loosening of the ring fence. Then inorganic growth as we continue to see competitors pick up books and pieces of other companies. Secondly, on a different topic, since I've asked a number of others, could you talk about your exposure to non-depository financial institutions, specifically alternative asset managers, BDCs, etc.? While they move into Asia, what's your plan around that coexistence, gaining new clients, etc.? Thank you.

Lee asks now several years past is it now time to address these again given the loss of capital treatment earlier in the year.

Okay, Yes, I mean, this is part of our legacy stack them as we've said.

Georges Elhedery: They have, therefore, also no distribution impact in terms of dividend or share buyback. I really encourage you to look at it as pure accounting but no actual economic impact to the bank. Pam? Thank you. I'll take the question on Hong Kong CRE first and then on FOCUM. In Hong Kong CRE, our book is down $1 billion to $32 billion, and it's mainly because of repayments done at the unsecured end of the book, where the exposure is mainly to very strong, diverse conglomerates, which are nearly 95% rated strong or good and have had very little impairment. That's 42% of our limits. The increase that we have seen in the impaired book, you write it's $600 million. It's largely to the secured side of the portfolio. The ECL stage two allowance increase is entirely due to model.

As I've said previously.

But no actual economic impact to the bank.

We do look.

To look at our legacy stack and have dialogue with our regulators on this and any actions we take.

Thank you I'll take the question on Hong Kong, three first and then on Baucom. So in Hong Kong. Our book is down $1 billion to $32 billion, and it's mainly because of repayments done or the unsecured and of the book Grant exposures, mainly two very strong diverse conglomerates Mitchell.

Pam Kaur: Thank you. I'll take the question on Hong Kong CRE first and then on FOCUM. In Hong Kong CRE, our book is down $1 billion to $32 billion, and it's mainly because of repayments done at the unsecured end of the book, where the exposure is mainly to very strong, diverse conglomerates, which are nearly 95% rated strong or good and have had very little impairment. That's 42% of our limits. The increase that we have seen in the impaired book, you write it's $600 million. It's largely to the secured side of the portfolio. The ECL stage two allowance increase is entirely due to model.

Hum.

Using the language that the regulators have have used really needs to be appropriate and proportionate.

We did a liability management exercise in 'twenty two is as your question safely.

95% rated strong or good and they've had very little impairment, that's 42% of our limits. So the increase that we've seen in the impaired book and you're right. It's a 600 million is largely to the secured.

And that received that allowed us to.

Reduce these tier two instruments to around $4 3 billion from.

Six seven I think if my memory serves me correctly so.

That was about a 35% take up.

Of the portfolio and the ECL.

Mike on the face of it sound a little lower than them.

Stage two allowance increase is entirely due to model. So all of that you know the the charge we've taken a 400 million in the quarter of 100 million is due to the modeling charges.

One would normally expect but in doing that what we realized was that well first of all we are very pleased that number of our KOL bondholders took part in that.

Georges Elhedery: Out of that, the charge we've taken of $400 million the quarter, $100 million is due to the modeling charges. As George has said, the area we are most focused on is the substandard and the credit-impaired side of the book, where the exposure is $1.4 billion. There is already an existing ECL charge of $500 million. You can see further down what it means from an outlook perspective. Overall, when we have refreshed our ECL guidance, we obviously stress it with upside, downside, and some fairly stringent requirements. We continuously monitor our book. We think that overall guidance that we have given in terms of around 40 basis points captures the entirety of the risk in the Hong Kong CRE book as we look at it now. On FOCUM, and as George said, of course, we don't link impairment timing to anything else.

Pam Kaur: Out of that, the charge we've taken of $400 million the quarter, $100 million is due to the modeling charges. As George has said, the area we are most focused on is the substandard and the credit-impaired side of the book, where the exposure is $1.4 billion. There is already an existing ECL charge of $500 million. You can see further down what it means from an outlook perspective. Overall, when we have refreshed our ECL guidance, we obviously stress it with upside, downside, and some fairly stringent requirements. We continuously monitor our book. We think that overall guidance that we have given in terms of around 40 basis points captures the entirety of the risk in the Hong Kong CRE book as we look at it now. On FOCUM, and as George said, of course, we don't link impairment timing to anything else.

George has said the area. We're most focused on is the substandard and the credit impaired side of the book, where the exposure is $1 4 billion. There is already an existing ECL charge of 500 million. So you can see further down what it means from from an outlook perspective overall.

Faiz: Thank you, Rob. Good to hear from you. I am going to take probably your first question on the UK, and then I will ask Greg whether he has got anything on question two. On the first question in terms of the UK, look, we are very pleased with the revenue and the position in the UK at the moment. The UK economy has continued to show resilience through the first half of 2025, despite the global uncertain environment. We have had two rate cuts in May and June, taking the base rate to 4.25%, and probably another two cuts are expected by the market in H2. Growth for us there remains measured, but I would say there are encouraging signs in the macroeconomy, and that is becoming more supportive.

Exercise.

But there were also some holders of securities really hold to collect state that keeping the positions and holding them for whatever reason and so.

So what we do when we look at those again, we'd need to assess whether the.

Overall, when we have refreshed our ECL guidance, we obviously stress it with upside downside and some some fairly stringent requirements and we continuously monitor our book and we think that overall guidance that we've given in terms of around 40 basis points capture.

The economics are right and whether there are.

There's genuine interest.

And in that site.

That's a portfolio.

I think.

Any no more questions Greg.

The entirety of the risk in the Hong Kong Cree book as we look at it now.

No more questions. Okay. So then perhaps will wrap up for that I am just leaves me to say look. Thank you everyone for joining thank you for the questions as well really appreciate is I hope. It was useful if you have any further questions. Please do pick up with Greg and the IR team will be happy to help.

So on Bocom and as John said of course, we don't link and Pam and timing to anything else is a routine quarterly accounting process again, we use our models. It's a value in use model. It is very sensitive to input factors. So even a small shift in basis points can make it move up or down.

Georges Elhedery: It's a routine quarterly accounting process. Again, we use our models. It's a value-in-use model. It is very sensitive to input factors. Even a small shift in basis points can make it move up or down. When we make an impairment, it's because the fair value from the model is below the carrying value. We have already given you details on the model sensitivity to the various inputs in our annual report. Nothing has changed in that process. Just to reiterate, we don't expect any impact on CET1 from any further impairments. We also have no impact of this on our distribution or dividend policy. The model will do what the model does. Every quarter, we'll look at it and make changes accordingly. Kunpeng, thank you very much. Thank you, Barry. Our next question today comes from Aman Rakhar at Barclays.

Pam Kaur: It's a routine quarterly accounting process. Again, we use our models. It's a value-in-use model. It is very sensitive to input factors. Even a small shift in basis points can make it move up or down. When we make an impairment, it's because the fair value from the model is below the carrying value. We have already given you details on the model sensitivity to the various inputs in our annual report. Nothing has changed in that process. Just to reiterate, we don't expect any impact on CET1 from any further impairments. We also have no impact of this on our distribution or dividend policy. The model will do what the model does. Every quarter, we'll look at it and make changes accordingly.

Okay.

Faiz: Real wages are really recovering, and expectations of rate cuts are bringing, from what we can see, are beginning to lift consumer and business confidence. In terms of our own strategy for that market, we are continuing to look at organic growth and growing our market share, particularly in the SME segment. We have revamped our SME proposition, enhancing coverage, and increasing proximity to our customers. In terms of inorganic growth, obviously, we see what is happening in the marketplace. When we look at that, the bar for us in terms of inorganic growth is set reasonably high. We need to be confident that it will add to the franchise and is consistent with our strategy. We also recognize that any inorganic growth has a burden of integrating within an organization and can be costly and distracting.

And when we make an impairment is because the family from the model is below the carrying value. We have already given you details on the modeled sensitivity to the various inputs and in our annual report and nothing has changed in that process just to reiterate.

We don't expect any impact on C. T. One from from any further impairments. There also have no impact of this on our distribution or dividend policy and the model will do what the model does every quarter, we look at it and make changes accordingly.

Thank you very much.

Georges Elhedery: Kunpeng, thank you very much.

Thank you Mike. Our next question today comes from I'm on record at Barclays. Please accept the prompt told me all night.

Operator: Thank you, Barry. Our next question today comes from Aman Rakhar at Barclays.

Georges Elhedery: Please accept the prompt to unmute your line. Good morning, George. Good morning, Pam. I had a couple of questions, please, one on net interest income and one on costs. Sorry, two-part question on NII. Just at face value, your banking NII guide at SECA $42 for the year, given that you're kind of annualizing at $43, at H1, does actually imply a pretty market step-off in net interest income in H2. I kind of just want to query whether you've really meant that or not. There's obviously lots of moving parts at play here. It implies a run rate for net interest income in H2, which I guess people will carry over into 2026. Yeah, I don't know. Is there an element of conservatism in that $42? Is there just too much uncertainty around HIBOR?

Aman Rakkar: Please accept the prompt to unmute your line. Good morning, George. Good morning, Pam. I had a couple of questions, please, one on net interest income and one on costs. Sorry, two-part question on NII. Just at face value, your banking NII guide at SECA $42 for the year, given that you're kind of annualizing at $43, at H1, does actually imply a pretty market step-off in net interest income in H2. I kind of just want to query whether you've really meant that or not. There's obviously lots of moving parts at play here. It implies a run rate for net interest income in H2, which I guess people will carry over into 2026. Yeah, I don't know. Is there an element of conservatism in that $42? Is there just too much uncertainty around HIBOR?

Good morning, George.

I have a couple of questions. Please.

One on net interest income.

On costs.

So a two part question on Illinois, So justified Shaw banking.

Faiz: There are various factors that we think when deciding about whether there are inorganic opportunities that we want to pursue. I believe you asked about ring fencing as well. I would comment very briefly on that, but we were pleased to see the announcements made in Mansion House around revisiting the ring fencing regime. That is something we absolutely welcome. The government has called in that for the industry to offer solutions to improve growth. That is something we are very much wanting to support within the UK. The ring fencing, as I think you well know, was established after the financial crisis. We think that the environment is quite different now and has significantly improved from those years directly after the crisis. One example I would give is that the Independent Commission for Banking had discussed previously a loss of absorbency rate of between 17% and 20%.

Yeah.

You kind of annualize you've got 43 <unk>.

One does that imply a pretty market step off.

Interest income relates to I kind of just want to query whether you frame at all.

Uh huh.

Oh, sorry.

Yeah.

What it implies.

Run rate for net interest income to be checked as people carry our French Spanish.

Is that conservatism or not or is that just too much ashok turnaround time.

The kind of second part of my first question if I may.

Can you help me understand that.

Georges Elhedery: The kind of second part of that first question, if I may, is just, can you help me understand the levers that you're pulling and able to continue pulling from here to offset this HIBOR decline? I'm specifically thinking about deposit pass-throughs. The second question is around costs, please. I'm just interested in how hard you're pushing the organization right now to realize the cost savings because outside in, I think you're kind of leading a bit of a quiet revolution across the firm to the extent that you can. I'm hopeful that you can realize additional cost saves over time. George, I'm really interested in your reflections on how are you running at max capacity now in terms of what you're trying to do? Just a modeling point, to me, next year, I think it should be flattish costs next year.

Aman Rakkar: The kind of second part of that first question, if I may, is just, can you help me understand the levers that you're pulling and able to continue pulling from here to offset this HIBOR decline? I'm specifically thinking about deposit pass-throughs. The second question is around costs, please. I'm just interested in how hard you're pushing the organization right now to realize the cost savings because outside in, I think you're kind of leading a bit of a quiet revolution across the firm to the extent that you can. I'm hopeful that you can realize additional cost saves over time. George, I'm really interested in your reflections on how are you running at max capacity now in terms of what you're trying to do? Just a modeling point, to me, next year, I think it should be flattish costs next year.

You're pulling.

And then once I continue buying from an offset in Hong Kong.

Just trying to.

Think about horsepower flourish.

The second question.

Is there a cost financed.

Sure.

Interesting.

How are you all right.

Pushing him cause I should write offs and realized cost savings.

Sorry, Dan.

Thank you al you called a leading up to.

Victor you cannot.

Faiz: We sit today at over 30% in terms of RWAs. The ring fencing regime, I think, is the right opportunity to revisit that and look at it again with a view to growth opportunities and making sure that the UK does not find itself as an outlier in terms of other jurisdictions. That is probably what I would say on your UK point. Perhaps Greg.

And I'm hopeful that you can realize additional cost saves I have Tom chime, Georgia already interested in your reflections on how.

You got it.

Max capacity.

You talked about.

Just all I can point to many next year.

It should be flattish cost action alright got that.

A three and a half inflation rate on costs.

Georges Elhedery: I don't think consensus has got that. A 3.5% inflation rate on costs and the $1.1 billion of gross saves tells me it should be flat next year. If you can comment on that as well, that'd be great. Thank you so much. Okay. Aman, thank you very much for the questions. I'll deal with your cost question first since you've called this one out clearly to me. I'll give some comments on Banking NII, but Pam can elaborate better on the movers and shakers of our Banking NII. First, cost discipline ingrained in the firm quarter after quarter, year after year. It's a commitment we have to this discipline. It's our confidence in our ability to meet the commitments we have. It's the fact that we are on track on all the cost items, be it our underlying cost or the cost saves.

Aman Rakkar: I don't think consensus has got that. A 3.5% inflation rate on costs and the $1.1 billion of gross saves tells me it should be flat next year. If you can comment on that as well, that'd be great. Thank you so much.

The Hong Kong market and of course that actually tells me should be flat actually that she can comment on that that'd be great. Thank you so much.

Rob: Before we go over to Greg, if I could just follow up quickly on the inorganic side. When we have seen these opportunities come up over the last 18 to 24 months, have you looked and these just did not make sense for you, either economically or from an integration basis, or have you not been evaluating these things as they come up because you have been focused on your bread and butter?

Yes.

And then thank you very much for the questions. Let me I'll deal with your cost question first since you have the you know you've called this one.

Georges Elhedery: Okay. Aman, thank you very much for the questions. I'll deal with your cost question first since you've called this one out clearly to me. I'll give some comments on Banking NII, but Pam can elaborate better on the movers and shakers of our Banking NII. First, cost discipline ingrained in the firm quarter after quarter, year after year. It's a commitment we have to this discipline. It's our confidence in our ability to meet the commitments we have. It's the fact that we are on track on all the cost items, be it our underlying cost or the cost saves.

Clearly to me and then I'll give some comments back your NII, but Tom can give you can elaborate better on you know on the movers and shakers of old banking NII.

So for.

First cost discipline ingrained in the firm quarter after quarter year after year.

It's its commitment it's a commitment we have to this discipline, it's our confidence in our ability to meet the commitments we have and it's the fact that we are on track on all the cost items be it our underlying cost or the cost saves so that one doesn't change.

Faiz: Yeah, look, we have looked at them. Any opportunity that comes up, we would look at, but it really didn't make sense for us at the time.

Rob: Okay. Thank you.

Greg: Hi, Rob. It's Greg. Thanks for the question. So on MBFIs, in terms of the total loan book, you are talking about 90 billion out of the total, just under a trillion dollars of the loan book at the first half was to MBFIs. I think it reflects a number of things. I think it is an area of focus for us in the CIB business. I think we do see some growth opportunities there. But it also reflects the well-rated business that we are and the transaction services business that we have. Particularly within security services, these are core client relationships that we have. I think it's quite difficult from the disclosure that we have for me to disaggregate within that MBFI the various different strata. But I think we are very comfortable with the exposure, and it is a core business for us.

In terms of the cost takeout.

Georges Elhedery: That one doesn't change. In terms of the cost takeout, the cost takeout that's taking place now that we're calling out is a cost takeout related to organization simplification. Remember, it is intention to simplify the organization, make us simple and agile. There is obviously an ancillary benefit, which is a cost reduction from deduplication of roles with limited impact on our revenue generation capabilities. That one is moving at pace. We just revised upwards the saves we can achieve this year towards the target of $1.5 billion, which we will take to the bottom line and we expect to achieve by the full year 2026. There is another cost takeout, which is exiting of non-strategic activities. We announced 7 exits since the Q1 results. These, in total, will add up to about $1.5 billion of cost takeout. About a third has already been announced.

The cost takeout, that's taking place now that we're calling out as opposed to cater to a cost take out related to organization simplification remember.

It is intention to simplify the organization make a simple and agile.

But there is obviously, an ancillary benefit which is a cost reduction from de duplication of roles with limited impact on our revenue generation capabilities.

That one is moving at pace.

We just revised upward to the saves we can achieve this year towards the target of $1.5 million, which we will take to the bottom line and we expect to achieve by the full year 2026.

There is another cost take out which is exiting of non strategic activities, we announced seven exits since the Q1 results.

This in total will add up to about $1.5 billion of cost take out about a third has already been announced fifth third has been worked on.

Rob: Great. Thank you. Thanks for the detail on all my questions.

Greg: No problem. Thank you, Rob. Thanks for the questions. Just to step in, we have got a couple of submitted questions. I will read them out in full. They are both relatively similar, just for transparency. Firstly, from Anne Carys at Pictae, asks, "When do you expect provisions in Hong Kong real estate to peak, and what will be the key drivers? Any other regions or sectors where you see some asset quality deterioration due to the current macro uncertainty?" Separately, Paul Fenner from SOC Gen also asks, "How do we interpret Hong Kong CRI risk? We have got 5 billion of impaired, but only 1.5 billion is greater than 70%. What is the LTV on the balance? What is the worst-case scenario here? What is the base case or glide path of impairments?

And we intend once these cost saves are achieved to reinvest this into our core revenues growth areas strategic.

Georges Elhedery: A third has been worked on. We intend, once these cost saves are achieved, to reinvest this into our core revenue growth areas, strategic areas where we have competitive advantage, and can generate accretive returns. This is not the only levers we have on cost. We continue working at our operating leverage on cost. As you know, efficiency and productivity drives, including through GenAI, automation, and other modernization of our capabilities, will continue as a matter of regular course of business. These improvements will continue helping us manage our costs. I'm not going to comment on 2026. We have not guided to it, but just given the amount of saves we expect to achieve from the simplification 2026.

Areas, where we have competitive advantage and can generate accretive returns.

But this is not the only lever as we have on costs, we continue working with one operating leverage and cost.

As you know efficiency and productivity drives including through Gen. AI automation and other modernization of old capabilities will continue as a matter of a regular course of business and these improvements will continue helping us manage all costs I'm not going to comment on 2026.

Not guide to it but just given the amount of saves we expect to achieve from the simplification places.

Faiz: Okay. Thank you. I will try and tackle all of those. Let me start by just refreshing where we are in terms of our overall ECL charge for the half year. That charge at the moment stands at $1.9 billion, which represents a cost of risk of 40 basis points. We have updated our guidance to around 40 basis points cost of risk for 2025. That is reflecting the risks that we see in the book. I would say that the loan book as a whole is strong, and the tariffs have been well managed by our clients so far. In retail, approximately 90% of our exposures are fully secured and have really strong collateral. In wholesale, we have a diversified book with around 60% of borrowers having an IG equivalent rating. Really, where the tension has come has been in the Hong Kong commercial real estate sector.

On banking NII, the one comment I'd like to make is that we continue growing our deposit base and continue being extremely liquid to support growth in loan as and when our customers towards investing again, we called out $83 billion growth in our deposits over the last 12 months.

Georges Elhedery: Look, on Banking NII, the one comment I'd like to make is that we continue growing our deposit base and continue being extremely liquid to support growth in loan as and when our customer starts investing again. We called out $83 billion growth in our deposits over the last 12 months. That's a 5% growth in our deposit base. Our deposits drive the lion's share of our Banking NII. That's a very important lever in the growth potential we can achieve in Banking NII in terms of volume growth. Pam? Thank you. Aman, just a quick comment on costs. The cost discipline will very much continue, not just into 2026 but further on as well. We also said earlier we will continue to invest in ways of increasing our productivity. That will be something which will be a priority for us.

That's a 5% growth in our deposit base and our.

Deposits drove the lion's share of our banking NII and that's a very important lever and the growth potential we can achieve in banking NII in terms of in terms of volume growth.

Okay. Thank you so I mean just.

Pam Kaur: Thank you. Aman, just a quick comment on costs. The cost discipline will very much continue, not just into 2026 but further on as well. We also said earlier we will continue to invest in ways of increasing our productivity. That will be something which will be a priority for us.

Quick comment on cost cost discipline will very much continue not just into 'twenty six but further on as well and we also said earlier, we will continue to invest in ways of increasing our productivity.

And that will be something which will be a priority for us.

And that's something we can control and we have shown you a good track record in the first few quarters and we continue to.

Georges Elhedery: That's something we can control. We have shown you a good track record in the first few quarters. We continue to focus on that. Now, coming down to Banking NII, you're right, around $42 billion. You may deem it to be conservative if you just do the simple arithmetic in terms of what the run rate takes us to. This quarter, we had obviously the headwind from HIBOR, but it was offset to some extent by a weaker US dollar. The timing of how long the US dollar depreciation continues and on HIBOR also is important. We are assuming that there will be a sharp normalization of HIBOR within this quarter to around the 2% mark. Obviously, any delay, even this delay of July month, costs $100 million at a 1% HIBOR.

Pam Kaur: That's something we can control. We have shown you a good track record in the first few quarters. We continue to focus on that. Now, coming down to Banking NII, you're right, around $42 billion. You may deem it to be conservative if you just do the simple arithmetic in terms of what the run rate takes us to. This quarter, we had obviously the headwind from HIBOR, but it was offset to some extent by a weaker US dollar. The timing of how long the US dollar depreciation continues and on HIBOR also is important. We are assuming that there will be a sharp normalization of HIBOR within this quarter to around the 2% mark. Obviously, any delay, even this delay of July month, costs $100 million at a 1% HIBOR.

Focus on that now coming down to banking and I, you're right around 42 billion you may deem it to be conservative if you just do the simple.

Faiz: We have been looking at that and focused on that in some detail. As you expect, and I think as Georges Elhedery said during the call this morning, this is a market we know very well. We have been in Hong Kong for 160 years. So it is something we are well placed to look at and assess. The Hong Kong CRE market can be split into segments. If I try and do that a little bit, the resi market, if I start there, has really stabilized. There are encouraging signs in there because of the policy support that has been given. Rental incomes remain strong there. If we then look at office and retail, we can see parts in office and retail that are still challenged and still struggling a little. However, there is government support in terms of addressing the oversupply and restricting land sales.

Metric in terms of what the run rate takes it takes us to.

And this quarter and as you know we had obviously the headwind from a high bar, but it was offset to some extent by a weaker U S. Dollar. So the timing of how long the U S. Dollar depreciation continues and on highway are also is important we are assuming that there will be a sharp normalization.

Our fiber within this quarter to around the 2% Mark honestly any delay even distillate as of July a month costs, you know a 100 million at 1% High vol. What we will have as a benefit still coming in the rest of the AR is the structural hedge which is a tailwind you've got to.

Georges Elhedery: What we will have as a benefit still coming the rest of the year is the structural hedge, which is a tailwind. If you've got a reinvestment of $55 billion in the second half at 2.8%, you have to reinvest. If there's an improvement of 2% on that in terms of the reinvestment rates as they stand, that obviously is a tailwind. Now, the balance sheet growth has been a real positive. It's mainly driven by deposits. Our Hong Kong time deposit migration in a lower interest rate was sort of four points into Q2. Obviously, this can move up or down. Now, in terms of levers to offset the HIBOR pressures, the Hong Kong time deposits were repriced.

Pam Kaur: What we will have as a benefit still coming the rest of the year is the structural hedge, which is a tailwind. If you've got a reinvestment of $55 billion in the second half at 2.8%, you have to reinvest. If there's an improvement of 2% on that in terms of the reinvestment rates as they stand, that obviously is a tailwind. Now, the balance sheet growth has been a real positive. It's mainly driven by deposits. Our Hong Kong time deposit migration in a lower interest rate was sort of four points into Q2. Obviously, this can move up or down. Now, in terms of levers to offset the HIBOR pressures, the Hong Kong time deposits were repriced.

I spent a 55 billion in the second half of 2.8% if you reinvest and if there is an improvement of 2% on.

On that in terms of the reinvestment rates as they stand. So that obviously is a tailwind now the balance sheet growth has been a real positive and it's mainly driven by deposits our Hong Kong time deposit migration in a lower interest rate what sort of full points into Q2, but obviously this can.

Faiz: Overall, if we look at our commercial real estate book, it has reduced by about a billion to $31.9 billion at the end of H1. Now, of that, the bit we are most focused on is the portion that is in substandard and credit impaired. There is a slide within our pack that starts to lay this out, and it is quite clear in the appendix of the deck that shows you the numbers that I am talking to at the moment. But that substandard and credit impaired component of that, we look at the bit that has an LTV above 70%. That is around a billion and a half, $1.5 billion. Of that, that is the bit that we have taken an ECL charge for in Q2 of $0.5 billion. Overall, look, I think we are very comfortable with where we are, what we have provisioned.

Move up or down nine terms of leavers to offset the the hydro pressures are the heart the Hong Kong time deposits were repriced the auto Saar saw some balance sheet growth happening because part of the weakness of the high bar is because of the strong solid bond connect inflows into Hong Kong and that immediately gave us a benefit.

Georges Elhedery: We also saw some balance sheet growth happening because part of the weakness of the HIBOR was because of the strong Southbound Bond Connect inflows into Hong Kong. That immediately gave us the benefit into our deposit line. We have been also active in markets treasury. The benefit of that goes into fee and other income. All in all, there are a number of areas which we can pull levers to be very confident on our around $42 billion guidance for banking NII. As always, we will be conservative, realistic. If we outperform, we outperform. Okay. Aman, thank you very much for your question. Thank you both. Our next question today comes from Kendra Yan at CICC. Please accept the prompt to unmute your line. Thanks for taking my questions. I have two questions. The first is about the non-interest income.

Pam Kaur: We also saw some balance sheet growth happening because part of the weakness of the HIBOR was because of the strong Southbound Bond Connect inflows into Hong Kong. That immediately gave us the benefit into our deposit line. We have been also active in markets treasury. The benefit of that goes into fee and other income. All in all, there are a number of areas which we can pull levers to be very confident on our around $42 billion guidance for banking NII. As always, we will be conservative, realistic. If we outperform, we outperform.

Two our deposit line, we have been also active in markets Treasury and the benefit.

Benefit of that goes into fee and other income. So all in all there are number of areas, which we can pull leave us to be very confident on or around 42 billion.

Guidance for banking NII, but as always we will be.

Conservative realistic kind of feet outperform the outperform.

Okay. Thank you very much for your question.

Georges Elhedery: Okay. Aman, thank you very much for your question.

Thank you guys. Our next question today comes from Cadbury Yana C. O S. T C. Please accept prompt to meet your line.

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

Thanks for taking my questions I have two questions. The first is about the non interest income.

Kendra Yan: Thanks for taking my questions. I have two questions. The first is about the non-interest income.

I've seen that HSBC delivered quite strong non interest income in both quarter, one and quanta too.

Faiz: Our mission here is really to support our customers. We believe these challenges that I have talked about are really in the short term. There is a lot of signs of positivity for the medium and long term. Hong Kong is incredibly resilient. There are a number of new growth areas there. We have seen a significant surge in IPO listings, buoyant capital markets as well in H1. Hong Kong is very much building stronger links across ASEAN and the Middle East. I think we have said before as well that it is a strong and trusted financial hub. Over the next decade, it is well positioned to become probably the world's leading cross-border wealth hub. A lot of signs to look at Hong Kong and think that this tension is going to be short term.

Georges Elhedery: I've seen that HSBC delivered quite strong non-interest income in both Q1 and Q2, primarily driven by the wealth management, FX, and the capital markets-related business. I wonder how you see the sustainability of this momentum going forward. The second question is about the stablecoin because there are several countries and areas that have introduced stablecoin-related regulations. How does HSBC view the cryptocurrency this area? Have you had some initiations in this area, or we will maintain a cautious approach on this area? That's my 2 questions. Thanks. Thank you very much, Jiahui Yan. Let me start with the stablecoin question. Then I'll give you some of my kind of comments on non-NII, wealth FX, etc. Pam Kaur can elaborate further on that part of the question. Okay. Digitized means of payment. We have launched tokenized deposit services for our wholesale customers.

Kendra Yan: I've seen that HSBC delivered quite strong non-interest income in both Q1 and Q2, primarily driven by the wealth management, FX, and the capital markets-related business. I wonder how you see the sustainability of this momentum going forward. The second question is about the stablecoin because there are several countries and areas that have introduced stablecoin-related regulations. How does HSBC view the cryptocurrency this area? Have you had some initiations in this area, or we will maintain a cautious approach on this area? That's my 2 questions. Thanks.

Primary driven by the wealth management, FX and the capital markets related business. So I wonder how you see the sustained.

Sustainability of this momentum going forward and the second question is about the stable coin because there are several countries and their rents have introduced a stable quite related regulations.

There's actually a b C D. The crypto currency this area.

Have you.

Yeah like the you have some initiations in this theory or we will maintain a cautious approach on this area. That's my two questions. Thanks.

Thank you very much kendra letting.

Georges Elhedery: Thank you very much, Jiahui Yan. Let me start with the stablecoin question. Then I'll give you some of my kind of comments on non-NII, wealth FX, etc. Pam Kaur can elaborate further on that part of the question. Okay. Digitized means of payment. We have launched tokenized deposit services for our wholesale customers.

Let me start with the stable corn question and then I'll give you some of my.

Comments on on non NII, when Fairfax et cetera in the Perm.

Greg: Thanks, Faiz. I think last question, because we do not have any more submitted unless anyone wants to put their hand up in the dying hours. One final question from Paul Fenner at SOC Gen. He also asks, "Can you give us an idea of the currency mix in funding you might look at for the remainder of the year? And to the extent that might be dollars?

Can elaborate further on that part of the question.

Okay. So digitized means of payment we have launched token is deposit services for our wholesale customers. It's live in Hong Kong, Singapore. It will be live in September in the U K and in the Euro zone.

Georges Elhedery: It's live in Hong Kong, Singapore. It will be live in September in the UK and in the Eurozone. Early in 2026, it will be live in a number of other countries, including the US, the UAE, and other. This will allow our wholesale customers and is already allowing our wholesale customers to do cross-border transactions with their suppliers or the other kind of counterparties on a real-time basis and on an always-on, as in 24/7 basis. That service is live and is developing. We continue investing in it. It's programmable. It basically leverages the blockchain technology. We're very pleased with this development. Now, beyond what we already offer in terms of tokenized deposits, we're watching very closely the regulatory developments around stablecoin. I'm very encouraged about Hong Kong, indeed issuing regulation there. Obviously, the US, with the Genius Bill, is publishing regulation there.

Faiz: Okay. Thank you, Paul. As I said previously, we're largely complete in terms of our 81. Maybe there's a bit of room on senior Holdco and Tier 2. On the senior side, probably a non-G3 currencies is where we would look. That's really the position at this point. Greg, did you want to add anything?

And then early in 'twenty six it will be live in a number of other countries, including the U S. The UAE and other.

This will allow our wholesale customers and is already allowing our wholesale customers to do cross border transactions.

Between with with their suppliers or you know the other kinds of Counterparties on.

On a real time basis and on an always on is in 24 seven basis.

So that service is live and is developing and we continue investing in it it's programmable and it you know it basically leverages the blockchain technology. So we're very pleased with this development.

Greg: I was just going to say, we've actually had Lee's just reminded me that we did have one further question from him that we've not covered, which is on the Tier 2 securities. You might remember the New York Law Tier 2 securities that we exchanged back in 2022.

No beyond what we already offer in terms of token those deposits were watching very closely the regulatory developments around stable coin.

Faiz: Oh, yes.

Greg: Now several years have passed. Is it now time to address these again, given the loss of capital treatment earlier in the year?

Very encourage about Hong Kong, indeed, issuing regulation there obviously the U S with the genius Bill is publishing regulation there.

Faiz: Yes. I mean, this is part of our legacy stack. As we have said, as I have said previously, we do look at, continue to look at our legacy stack and have dialogue with our regulators on this. Any actions we take, using the language that the regulators have used, really needs to be appropriate and proportionate. We did a liability management exercise in 2022, as your question states, Lee. That allowed us to reduce these Tier 2 instruments to around 4.3 billion from around 6.7 billion, I think, if my memory serves me correctly. That was about a 35% take-up, which might, on the face of it, sound a little lower than one would normally expect. In doing that, what we realized was that, first of all, we were very pleased that a number of our core bondholders took part in that exercise.

What we would monitor one is that the regulation addresses all of our regulatory related concerns such as financial crime Prudential and other risks. We will also monitor the issuers of stable coin and their compliance with these regulations and then subject to those we will evaluate all potential banking services, we can do with them.

Georges Elhedery: What we will monitor, one, is that the regulation addresses all our regulatory-related concerns, such as financial crime, prudential, and other risks. We will also monitor the issuers of stablecoin and their compliance with these regulations. Subject to those, we will evaluate all potential banking services we can do with them or customers involved with these issuers so that we expect to move at pace. With regard to other crypto, at this stage, we have no appetite to involve in other kinds of algorithmic or other non-pegged cryptocurrencies. As an asset class, we still do not have risk appetite to be involved in that space. Okay. Now, with regards to our non-NII, the few comments I want to make, and I'll hand over to Pam, is it's a very important area for us. It's a very important investment area for us.

Or customers involved with these issuers.

So that we expect to move with pace with regards other crypto at this stage, we have no appetite to involved in other.

Kind of.

Algorithmic or other non.

Non pegged crypto currencies.

And as you know as an asset class, we still do not have risk appetite to be involved in that space now.

Now with regard to our non NII. The few comments I wanted to make and I'll hand over to Pat is it's a very important area for us it's a very important investment area for us.

Let me talk about.

Faiz: There were also some holders of securities that are really hold to collect. They are keeping the positions and holding for whatever reason. What we do when we look at those again, we need to assess whether the economics are right and whether there is genuine interest in that. That is probably all. I think no more questions, Greg?

First.

Georges Elhedery: Let me talk about, first, transaction banking. We have a leadership position. We're a top 2 player in global transaction banking, in payments, FX, and trade, with the trade bank for 7 or 8 consecutive years, the largest trade bank. It's an area of unique strength, unique expertise. It's an area of continued investment, both in digital capabilities and customer servicing. We continue to see this area as resiliently growing and, as demonstrated, 5% growth in Q2, of which 4% growth within trade itself. That resilient underlying growth is due to the fact that we continue deepening customer relationships, gaining market share, and acquiring new customers through all our expertise and our investment. The second one I want to talk to is wealth, 6 consecutive quarters of double-digit growth. Our target there is to grow in the medium term at double-digit rates.

Transaction banking, we have a leadership position, we had a top two player in global transaction banking and payments and FX and trade with them the trade bank for seven or eight consecutive years, the largest rate bank. It's an area of unique strengths unique expertise. It's an area of continued investment both in.

Digital capabilities and customer servicing and we continue to see this area as a resiliency growing and as demonstrated 5% growth in Q2 of which 4% growth within trade itself.

Greg: No, no more questions.

Faiz: Okay. Then perhaps we'll wrap up for the day. Just leaves me to say, look, thank you, everyone, for joining. Thank you for the questions as well. Really appreciate those. I hope it was useful. If you have any further questions, please do pick up with Greg and the IR team. We'll be happy to help. Thank you.

But the resilient underlying growth is due to the fact that we continue deepening customer relationships gaining market share and acquire new customers through all our expertise and our investment second one I want to talk to US went six consecutive quarters of double digit growth.

Our target there is to grow in the medium term at double digit rates, but that could be volatile from quarter to quarter right based on market conditions, but this is also an area of active investment with intent.

Georges Elhedery: That could be volatile from a quarter to quarter, right, based on market conditions. This is also an area of active investment with intent. Our footprint, our brand, our heritage in Asia and the Middle East in particular, give us unique strength to be able to accelerate this growth and continue gaining market share and benefiting from the underlying growth in the market. We've demonstrated a number of initiatives that we've already rolled out, be it in wealth centers, relationship managers, or technology capabilities, digital capabilities we've been rolling out to our customers. Last but not least, capital markets and advisory, our debt and equity trading, all of whom have benefited also from our focused investment and our capabilities to be more meaningful and relevant for our customers and deliver growth as we did also in Q2. Pam? Thank you, George. Thank you, Kendra.

Our footprint.

Brand or heritage in Asia, and the Middle East in particular give us unique strength to be able to accelerate this growth and continue gaining market share and benefiting from the underlying growth in the market.

And we've demonstrated a number of.

The initiatives that we've already rolled out be it in wealth centers relationship managers or technology capabilities digital capabilities, we've been rolling out to our customers and last but not least capital markets and advisory our debt and equity trading all of whom have benefited also from our focused investment in <unk>.

Capabilities to be more meaningful and relevant for our customers and deliver growth as we did also in the in Q2.

Uh huh.

Thank you George Thank you Kendra, so we have been focusing on growing our fee and other income as George has said, it's been a focus area and we have seen strong performance now, albeit in the last two quarters. There has been a tailwind of market conditions and.

Pam Kaur: Thank you, George. Thank you, Kendra.

Georges Elhedery: We have been focusing on growing our fee and other income. As George has said, it's been a focused area. We've seen strong performance. Now, albeit in the last 2 quarters, there has been the tailwind of market conditions. It's hard to predict when these sort of transactional tailwinds will fade away. Nevertheless, if you look at the various parts that build up to this fee and other income, FX was up 7%, a very strong position in FX. There's a baseline that will always be a growth engine. Investment distribution was up 24%. Private banking was up 12%. There are also other NUT revenues, which are like our net new invested assets, which are up $75 billion over the last 4 quarters, so not really helped adjust by tailwinds. Also, the insurance CSM balance is at record levels.

Pam Kaur: We have been focusing on growing our fee and other income. As George has said, it's been a focused area. We've seen strong performance. Now, albeit in the last 2 quarters, there has been the tailwind of market conditions. It's hard to predict when these sort of transactional tailwinds will fade away. Nevertheless, if you look at the various parts that build up to this fee and other income, FX was up 7%, a very strong position in FX. There's a baseline that will always be a growth engine. Investment distribution was up 24%. Private banking was up 12%. There are also other NUT revenues, which are like our net new invested assets, which are up $75 billion over the last 4 quarters, so not really helped adjust by tailwinds. Also, the insurance CSM balance is at record levels.

It's hard to predict when they sort of transactional tailwind will fade away.

Nevertheless, if you look at the various parts that build up to this fee and other income FX was up 7% a very strong position in FX, there's a baseline that will always be a growth engine.

That's been distribution was up 24% private banking was up 12% and and there are also other annuity revenues, which are like a net new invested assets are up 75 billion over the last four quarters, so not really helping despite tailwind and also the insurance CSM balances at record levels and that'll do.

Just drips into the P&L over time. So that's also like an annuity now there's just one or two items, which I would call them, one offs or specifically volatile beyond the sort of transactional tailwind one is the hot Argentina, hyperinflation, which was the 200 million impact in Q2 up 24, obviously was not a repeat in.

Georges Elhedery: That'll just drip into the P&L over time. That's also like an NUT. Now, there's just one or two items which I would call one-offs or specifically volatile beyond the sort of transactional tailwinds. One is the Argentina hyperinflation, which was the $200 million impact in Q2 2024. Obviously, it was not a repeat in Q2 2025, but with Argentina gone, and that sort of is not going to be, again, coming into the comparison. The other was the $100 million related to markets treasury activity. That will be volatile. It'll change from quarter to quarter. Overall, very comfortable with the core of the growth with some moves from quarter to quarter. Kendra, thank you very much for your questions. Thank you both. Our next question today comes from Joseph Dickerson at Jefferies. Please accept the prompt to unmute your line. Hi.

Pam Kaur: That'll just drip into the P&L over time. That's also like an NUT. Now, there's just one or two items which I would call one-offs or specifically volatile beyond the sort of transactional tailwinds. One is the Argentina hyperinflation, which was the $200 million impact in Q2 2024. Obviously, it was not a repeat in Q2 2025, but with Argentina gone, and that sort of is not going to be, again, coming into the comparison. The other was the $100 million related to markets treasury activity. That will be volatile. It'll change from quarter to quarter. Overall, very comfortable with the core of the growth with some moves from quarter to quarter.

Q2 of 25, but with Argentina have gone and does that sort of is not going to be and again coming into the comparison and the other was 100 million are related to markets treasury activity and that will be volatile doesn't change from quarter to quarter. So overall very comfortable with the core.

Of the growth with some you know moves from quarter to quarter.

Kendra. Thank you very much for your questions.

Georges Elhedery: Kendra, thank you very much for your questions.

Thank you Barry So our next question today comes from Joseph Dickerson of Jefferies. Please accept the approach to meet you all night.

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

Yeah.

Hi, Thank you for taking my question is just a simple follow up on the Hong Kong, CRE, which I think have done a pretty good job of thumb addressing I guess, what what drove the timing.

Joseph Dickerson: Hi. Thank you for taking my question. This is just a simple follow-up on the Hong Kong CRE, which I think you've done a pretty good job of addressing. I guess, what drove the timing of this charge? Some of the dynamics that you point out in the interim report, you could have easily argued were there in Q4. I guess, what drove the timing of today versus Q4? Is there any way to gauge what you think the appropriate coverage level is? Clearly, I think you also had about 20 bits of credit risk migration in last year's CET1 from this. I guess I'm just trying to walk through the moving parts to dimension any further charges. Thanks.

Georges Elhedery: Thank you for taking my question. This is just a simple follow-up on the Hong Kong CRE, which I think you've done a pretty good job of addressing. I guess, what drove the timing of this charge? Some of the dynamics that you point out in the interim report, you could have easily argued were there in Q4. I guess, what drove the timing of today versus Q4? Is there any way to gauge what you think the appropriate coverage level is? Clearly, I think you also had about 20 bits of credit risk migration in last year's CET1 from this. I guess I'm just trying to walk through the moving parts to dimension any further charges. Thanks. Thank you, Joe, for the question. I'm going to make a couple of comments but ask Pam to address your question.

Of this charge because the.

Some of the dynamics that you point out in the interim report you could've easily argue bar there in Q4, so I guess what drove the timing of today versus.

Versus Q4, and then is there any way to gauge what you think the appropriate coverage level is because clearly I think you also had about 20 bps of credit risk migration in last year's CET one.

From the sites, where I'm just trying to walk through the moving parts to dimension any further charges. Thanks.

Thank you Joe for the question I'm going to make a couple comments, but ask Pam to address your question.

Georges Elhedery: Thank you, Joe, for the question. I'm going to make a couple of comments but ask Pam to address your question.

The the first one is is to reiterate the fact that we are comfortable with our position in Hong Kong theory, We've explained the area of specific focus and we've captured.

Georges Elhedery: The first one is to reiterate the fact that we are comfortable with our position in Hong Kong CRE. We've explained the area of specific focus. We've captured the outlook for 2025 in our revised ECL target. Pam, you may want to elaborate on that one? Yeah. Thanks, Joe. Really good question. Firstly, part of the charge, we said, is a model change. The model changes happen periodically. That comes with that's only $100 million. The key thing that we look at every quarter, and we looked at the last year-end as well, is we look at, obviously, valuations. Now, valuations is an ongoing process. You see the valuations in terms of orderly valuations. The valuations also get impacted even on the performing book when you see some distress valuations.

The outlook for 2025, and our revised ECL target.

Tom you may want to elaborate on that one yeah. Thanks to a really good question. So firstly part of the charge, we set as a model change in the model changes happen.

Pam Kaur: Yeah. Thanks, Joe. Really good question. Firstly, part of the charge, we said, is a mo del change. The model changes happen periodically. That comes with that's only $100 million. The key thing that we look at every quarter, and we looked at the last year-end as well, is we look at, obviously, valuations. Now, valuations is an ongoing process. You see the valuations in terms of orderly valuations. The valuations also get impacted even on the performing book when you see some distress valuations.

Periodically and that comes with that is the only 100 million. The key thing that we look at every quarter and we looked at last yearend as well as we look at obviously valuations now valuations is an ongoing process, you'll see the valuations in terms of orderly valuations, but the valuations also get impacted even on the performing book.

When you see some distressed valuations and already we had started considering distressed valuations as part of our ECL charge for the yearend by giving some probability for those distressed valuation and this lag on our performing book because the book is still performing on the valuations as it comes as part.

Georges Elhedery: Already, we had started considering distress valuations as part of our ECL charge for the year-end by giving some probability for those distress valuations. This lag on a performing book because the book is still performing on the valuations as it comes as part of our credit processes. We do a read across to the book. Now, generally, the LTVs have remained strong. Just to say, the LTVs which have gone higher than 70% is still a very small portion of the book. While we have focused on this, we are, as in every quarter, looking at the rest of the book. The real challenge continues with the oversupply in the office space. Now, it's not across everywhere the same. It depends upon the location of the office space. It depends upon the quality of the building. Has it been new, refurbished, or otherwise?

Pam Kaur: Already, we had started considering distress valuations as part of our ECL charge for the year-end by giving some probability for those distress valuations. This lag on a performing book because the book is still performing on the valuations as it comes as part of our credit processes. We do a read across to the book. Now, generally, the LTVs have remained strong. Just to say, the LTVs which have gone higher than 70% is still a very small portion of the book. While we have focused on this, we are, as in every quarter, looking at the rest of the book. The real challenge continues with the oversupply in the office space. Now, it's not across everywhere the same. It depends upon the location of the office space. It depends upon the quality of the building. Has it been new, refurbished, or otherwise?

Of our credit process.

We do a read across to the book now generally the LTV is ltvs have remained strong so just to say the ltvs, which have gone.

You know higher than 70% is still a very small portion of the book and while we are focused on this we are as in every quarter looking at the rest of the book the real challenge is it continues with the oversupply in the office space now it's not across everywhere the same it depends upon.

The location of the office space it depends upon the quality of the building has it been new refurb door or otherwise. So that's the piece that we also then bear in mind when we look at the valuation shift to say is there any greater calibration or divergence or from the kind of property the use of property and the overall.

Georges Elhedery: That's the piece that we also then bear in mind when we look at the valuation shift to say, is there any greater calibration or divergence from the kind of property, the use of property? The overall liquidity in the market in terms of actual transactions has been relatively low. Makes sense. Thank you. Thank you both. Thank you, Joe. Our next question today comes from Gurpreet Singh Sahi from Goldman Sachs. Please accept the prompt to unmute your line. Thank you for taking my question. I have two, please. First is on FX. Good to see strong growth all across non-banking NII. On FX, you called out good growth. I wonder, we've seen some unusual currency volatility in the quarter. Did that not lead us to generate above-normal FX growth? And at 7%, do you call it above-normal?

Pam Kaur: That's the piece that we also then bear in mind when we look at the valuation shift to say, is there any greater calibration or divergence from the kind of property, the use of property? The overall liquidity in the market in terms of actual transactions has been relatively low.

Entity in the market in terms of actual transactions has been relatively low.

Makes sense. Thank you.

Joseph Dickerson: Makes sense. Thank you. Thank you both.

Thank you. Thank you Joe.

Our next question today comes from Godfrey things Die from Goldman Sachs. Please accept the prompt to meet your line.

Georges Elhedery: Thank you, Joe.

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

Thank you for taking my question I have two please first is on FX, what to see strong growth all across non banking NII, but.

Gurpreet Singh Sahi: Thank you for taking my question. I have two, please. First is on FX. Good to see strong growth all across non-banking NII. On FX, you called out good growth. I wonder, we've seen some unusual currency volatility in the quarter. Did that not lead us to generate above-normal FX growth? And at 7%, do you call it above-normal?

Effects, you called out good growth, but I wonder if you've seen some unusual currency volatility in the quarter.

Did that not lead us to generate like above normal FX growth in that 7% what do you call. It above normal so what we're just thinking out what where their clients' feedback where they're joining portfolio is more of a hedging et cetera. During the quarter on FX and then because I see it skew in here also.

Georges Elhedery: Just thinking out, what were our clients' feedback? Were they churning portfolios more, hedging, etc., during the quarter on FX? I see it's Q and Q also. It's down. On loan growth is the second part. We see some pickup in the UK book. In Hong Kong, China region, with the lowered interest rates, are we seeing client demand come back in for loan growth? How do we see the outlook there? Thank you. Gurpreet, thank you for your two questions. I'll take the first question and make a comment on loan growth. Pam can explain a little bit the outlook in the various segments of the world. Yes, FX has benefited from increased customer activity due to higher volatility. This is something that is difficult to forecast.

It's down and then on loan growth as a second part are we see some pick up in the U K book, but then in Hong Kong, China region with the lower interest rates are we seeing client demand come back in for a loan growth and how do we see the OCA. Okay. Thank you.

Thank you for your two questions I'll take the first question and make a comment on loan growth and in turn can explain a little bit the outlook in the various segments of the world.

Georges Elhedery: Gurpreet, thank you for your two questions. I'll take the first question and make a comment on loan growth. Pam can explain a little bit the outlook in the various segments of the world. Yes, FX has benefited from increased customer activity due to higher volatility. This is something that is difficult to forecast.

So yes, so FX has benefited from increased customer activity due to higher volatility.

This is something that is difficult to forecast.

But what is important to note is that it remains one of our core capabilities in transaction banking and we remain one of the top players I would say top two global players in the space.

Georges Elhedery: What is important to note is that it remains one of our core capabilities in transaction banking. We remain one of the top players, I would say top two global players in the space. Therefore, we do have a leadership market share in the space and capture client activity. It's difficult to forecast what kind of volatility we may see going forward in foreign exchange. We will continue being one of the main counterparties to support our customers' hedging activities. In loan growth, I was actually particularly encouraged with the UK commercial banking corporate loan growth. It's early to call it a trend, $3.5 billion growth. It is definitely a green shoot in the space where it has been subdued for many quarters now. We have seen the UK credit book remain very resilient through the last few years.

And therefore, we are we do have a leadership market share in this space and capture client activity. It is difficult to forecast what kind of volatility we may see going forward and foreign exchange.

But we will continue being one of the main counterparties to support our customers' hedging activities.

So the loan growth was actually particularly encouraged with the UK commercial banking corporate.

Loan growth, it's early to call it a trend three and a half million dollar growth, but it is definitely a green shoot in the space where.

In a way it has been subdued for the many quarters, though.

So we are you know we have we have seen the U K credit book remained very resilient through the last few years, but we haven't seen the grown in hopefully.

You know with more clarity about the U K and the tariffs related to the U K, we can see more investments taking through.

Georges Elhedery: We haven't seen it grown. Hopefully, with more clarity about the UK and the tariffs related to the UK, we can see more investments taking through. The additional comment I would like to make about the UK specifically, and then hand over to Pam, is that we're very encouraged by the UK having also moved at pace in their trade negotiations, with trade agreements now concluded with the US, with the EU since Brexit, and then more recently with India, which is a historic trade deal where we have a very vibrant business corridor going on between the UK and India. We're, frankly, very excited about supporting our customers along this corridor, kind of realize the benefits in their businesses. Thank you, Gurpreet, for the question. Just to make a comment on FX, of course, there's a transactional nature to FX.

The additional comment I would like to make about the UK, specifically and then hand over to Perm is that we're very encouraged by the U K, having also moved at pace and their trade negotiations with trade agreements now.

Concluded with the U S with the EU since Brexit and then more recently with India, which is a historic trade deal where you.

You know we have a very vibrant business corridor going on between the U K and India and will frankly, very very excited about supporting our customers.

Along this.

Corridor kind of realize the benefits in their businesses.

Thank you Godfrey for the question and so just to make a comment on FX of course, there's a transactional nature to FX, but we are very engaged with our customers and we have been capturing flows well and at the back of that we are accelerating our investment in this business to grow medium term. So that's.

Pam Kaur: Thank you, Gurpreet, for the question. Just to make a comment on FX, of course, there's a transactional nature to FX.

Georges Elhedery: We are very engaged with our customers. We have been capturing flows well. At the back of that, we are accelerating our investment in this business to grow medium term so that we can be best positioned to support our customers. From a loan growth perspective, in Q1, we saw growth in Asia ex-Hong Kong, China. That's been stable. It's sort of moving along. Obviously, Q2, given some of the tariffs news, people were slower in terms of making their decisions. In the UK, our growth was good. Also, our focus was very much across sectors which were growing, so whether it's in the infrastructure space and so on. We were very focused. That held us well. We are doing the same engagement level on our customers across the globe.

Pam Kaur: We are very engaged with our customers. We have been capturing flows well. At the back of that, we are accelerating our investment in this business to grow medium term so that we can be best positioned to support our customers. From a loan growth perspective, in Q1, we saw growth in Asia ex-Hong Kong, China. That's been stable. It's sort of moving along. Obviously, Q2, given some of the tariffs news, people were slower in terms of making their decisions. In the UK, our growth was good. Also, our focus was very much across sectors which were growing, so whether it's in the infrastructure space and so on. We were very focused. That held us well. We are doing the same engagement level on our customers across the globe.

He can best be best positioned to support our customers from a loan growth perspective. So in Q1, we saw growth in Asia ex Hong Kong China.

And that's been stable, but it's it's sort of moving along and obviously Q2 given.

Some of the tariffs newspeople were slower.

Slower in terms of making their decisions.

In the U K our growth is good but also our focus was very much across sectors, which are growing so whether it's in the infrastructure space and so on so we were very.

Well focus and that held us well, they're doing the same engagement level on that.

Our customers across the globe and from.

Growth perspective at the back of the interest rates coming down the other factor, which is very important and we've called it out before as macro uncertainty. So when this macro uncertainty continues the capex decisions are delayed however from a working capital we see some you know early engagement.

Georges Elhedery: From a growth perspective, at the back of the interest rates coming down, the other factor which is very important, and we've called it out before, is macro uncertainty. When this macro uncertainty continues, the CapEx decisions are delayed. However, from a working capital, we see some early engagement where people are looking at how they shift and change some of their business models and so on. What I do want to say is that overall, where we have good benefits still coming through from an NII line is our deposit base, which is, as I've called out, up sort of $83 billion year-over-year. That stays a very strong component as part of our NII business. I would say, from an FX perspective, the other thing to bear in mind is we're seeing strong flows into Hong Kong through the depressed HIBOR.

Pam Kaur: From a growth perspective, at the back of the interest rates coming down, the other factor which is very important, and we've called it out before, is macro uncertainty. When this macro uncertainty continues, the CapEx decisions are delayed. However, from a working capital, we see some early engagement where people are looking at how they shift and change some of their business models and so on. What I do want to say is that overall, where we have good benefits still coming through from an NII line is our deposit base, which is, as I've called out, up sort of $83 billion year-over-year. That stays a very strong component as part of our NII business. I would say, from an FX perspective, the other thing to bear in mind is we're seeing strong flows into Hong Kong through the depressed HIBOR.

Where people are looking at how they shift and change some of their business models and so on what I do want to say is that overall.

Where we have them.

Good benefit still coming through from an NII line is our deposit base, which is as I've called out up to the 83 billion year on year. So that stays a very strong component as part of our NII business and I would say from a FX perspective, the other thing to bear in mind is.

We're seeing strong flows into Hong Kong and through the depressed tie both of that.

Is another factor to balance overall in our outlook.

Georges Elhedery: That is another factor to balance overall in our outlook. Very good. Gurpreet, thank you very much for your question. Thank you both. Our last question today comes from Katherine Lei at J.P. Morgan. Please accept the prompt to unmute your line. Hi. Good morning. I have 3 questions. The first two is for Pam. I think it's just for housekeeping for our model update. The first is that I would want to ask about what's the threshold deduction, like the outstanding of what is the outstanding parts of the threshold deduction related to the BOCOM? If there is further impairment on BOCOM, let me ask this. If there's further impairment on BOCOM, what would the amount be in order for that future impairment to have an impact on your CET1 ratios and share buyback and EPS and so forth? This is number 1.

Pam Kaur: That is another factor to balance overall in our outlook.

Very good. Thank you very much for your question.

Georges Elhedery: Very good. Gurpreet, thank you very much for your question.

Thank you guys. Our last question today comes from Catherine.

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

J P. Morgan please accept the prompt you to mute your line.

Oh, Hi, good morning, I have three questions. The first two Penn I think so.

Katherine Lei: Hi. Good morning. I have 3 questions. The first two is for Pam. I think it's just for housekeeping for our model update. The first is that I would want to ask about what's the threshold deduction, like the outstanding of what is the outstanding parts of the threshold deduction related to the BOCOM? If there is further impairment on BOCOM, let me ask this. If there's further impairment on BOCOM, what would the amount be in order for that future impairment to have an impact on your CET1 ratios and share buyback and EPS and so forth? This is number 1.

Housekeeping for Armada abate.

I want to ask about what the fracture I feel like the outstanding but what is the whether the outstanding class a threshold deduction related to the Bocom. If there is further impairment on bulk Atlanta Athens, if that's part of it.

Impairment on Bocom Wow, what a man b in order for that.

Hammond to have an impact on your combined ratio and share buyback and so Paul.

That's number one.

So is related to the thermal plant.

Georges Elhedery: Number 2 is related to the $0.6 billion of restructuring-related costs. What portion of it is in the material notable items? I.e., what I mean is that what portion of the $0.6 billion has no impact on DPS? What portion of it may have an impact on DPS? The last question is for George. I think he's still on the tokenized deposit part. May I know, for this tokenized deposit, is it only for HSBC clients or also available for HSBC's clients? Clients? Is that on public chains? I.e., does it mean that can clients basically use this tokenized deposit to transact crypto assets? Say, for example, if they want to trade Bitcoin or other crypto assets, can they use these tokenized deposits to facilitate that? Thank you. Thank you, Katherine. Let me then ask your third question.

Katherine Lei: Number 2 is related to the $0.6 billion of restructuring-related costs. What portion of it is in the material notable items? I.e., what I mean is that what portion of the $0.6 billion has no impact on DPS? What portion of it may have an impact on DPS? The last question is for George. I think he's still on the tokenized deposit part. May I know, for this tokenized deposit, is it only for HSBC clients or also available for HSBC's clients? Clients? Is that on public chains? I.e., does it mean that can clients basically use this tokenized deposit to transact crypto assets? Say, for example, if they want to trade Bitcoin or other crypto assets, can they use these tokenized deposits to facilitate that? Thank you.

And suffering where labor costs like what portion of that Oh in the notable.

Acutely all notable items I E. A what I mean is that what portion of that zero point, that's totally and have no impact no.

No impact on EPS and what portion of it may have the impact on EPS.

And then the last question George I think you undertook a nicer parts apart. So may I know like Oh, that's took a nice deposit or is it only for HSBC clients are also available for cloud.

Clients clients are on public change I E does it mean that Oh client basically use this took a nice deposit to transact a crypto asset.

I'm wondering if they wanted to play E com or other personnel as it can be used to smoke nice report.

Click to pay.

Thank you.

Yeah.

Thank you Catherine So let me then ask your third question and I'll ask them to address the first two.

Georges Elhedery: Thank you, Katherine. Let me then answer your third question.

Georges Elhedery: I'll ask Pam to address the first two. Today, this is available to HSBC's clients and any whitelisted clients' clients or clients' counterparties. Ultimately, they need to go through the HSBC standards for Know Your Client, financial crime checks, among other kinds of checks. The capabilities will be extended but will be expanded in a way where we remain very comfortable with the KYC considerations to be able to onboard them as clients or future clients. We are looking, obviously, on stablecoin developments. We believe it is still early to understand how some of these stablecoin issuers are able to KYC the wider client base. Some of them are. Obviously, regulations are going to dictate for those who will be effectively whitelisted what these requirements are. We will evaluate accordingly over the next few weeks and months as this develops.

So today this is available to hsbc's clients.

And any whitelisted clue.

Clients clients or clients come to forties.

But ultimately they need to go through the HSBC standards for more your client financial crime checks.

Among among other kind of checks.

So the.

The you know the capabilities would be extended but will be expanded to who you know in a in a way where we remain very comfortable with the.

K Y she considerations to be able to onboard them as clients or future clients.

We are looking obviously on stable coin developments. We believe it is a it is still early to understand how some of these stable coin issuers are able to ky. She the why the client base some of them are but obviously the regulations is going.

Dictate four for those who will be effectively white listed what these requirements are and we will evaluate.

Accordingly over the next few weeks and months.

As it develops.

Your your your your first question is related to book home and your second question is related to the.

Georges Elhedery: Your first question is related to BOCOM. Your second question is related to the restructuring-related costs and whether they will be treated as notable or material notable. Pam will address both. Let me say one thing about BOCOM is we have ample room for any potential future impairments, whether they happen or not, before this even comes near affecting CET1 or CET1 ratio or our distribution capabilities. Pam can talk through that. Yeah. Thank you, Katherine. We have $14 billion of threshold deductions. This is slide 33 of the deck. On slide 28, we give you more details on BOCOM, including the market value in the footnote, which is the $13 billion. As George says, even if there was an impairment to market value, it'll have no material impact on CET1. In terms of restructuring costs, they are a notable item.

Restructuring related costs and whether they would be treated as notable or material. Notable Pam will address both but let me say one thing about broadcom is we have ample room for any potential future impairments, whether they happen or not before this even comes near affecting CET, one or CET, one ratio or distribution capability.

Duncan can talk towards yeah. Thank you Catherine So we have 14 billion of.

Threshold deductions.

Slide 33 of the deck and on slide 28 to give you more details in bocom, including the market value in the footnotes, which is a 13 billion. So the judge says even if there was an impairment to market values will have no material impact in CET one.

And in terms of restructuring costs.

They are a notable item.

But they're not in the terrible notable item for the dividend.

Georges Elhedery: They're not a material notable item for the dividend. Thank you both. That ends today's Q&A. Now I will hand back to George for closing remarks. Well, thank you, everyone. I really want to take this opportunity to thank you for your questions. Alistair and the investor relations teams are available for any follow-up questions. Meanwhile, Pam and I look forward to speaking with you again soon. Please enjoy the rest of the day. Thank you very much. Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect your line.

Georges Elhedery: They're not a material notable item for the dividend.

Thank you, Mike and today's Q&A and now I will hand back to George for closing remarks.

Operator: Thank you both. That ends today's Q&A. Now I will hand back to George for closing remarks.

Well. Thank you everyone I really want to take this opportunity to thank you for your questions.

Georges Elhedery: Well, thank you, everyone. I really want to take this opportunity to thank you for your questions. Alistair and the investor relations teams are available for any follow-up questions. Meanwhile, Pam and I look forward to speaking with you again soon. Please enjoy the rest of the day. Thank you very much.

Alastair in the Investor Relations teams are available for any follow up questions. Meanwhile, Perm and I look forward to speaking with you again soon these enjoy the rest of the day. Thank you very much.

Thank you, ladies and gentlemen for joining today's webinar you may now disconnect your line.

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

[music].

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