Q2 2025 HSBC Holdings PLC Earnings Call

July 30, 2025

Webinar is being recorded I will now hand over to Jos on 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.

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.

Georges Elhedery: 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. In our UK home market business, our loan book grew by $6 million over the quarter on a constant currency basis. 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 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.

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.

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 the 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.

Customers are looking for a trusted financial partner.

Georges Elhedery: In this complex environment, customers are looking for a trusted financial partner. Our differentiated strengths are clear. 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 long-standing experience of facilitating financial flows globally and our international network, especially across the world's fastest growing trade and investment routes.

Our differentiated strengths are clear.

First one.

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

Despite highboy 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 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.

Georges Elhedery: We delivered 5% growth in wholesale transaction banking fee and other income in Q2. 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 flows. 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.

Our trade fees and other income grew by 4%.

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 sides 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.

Georges Elhedery: Cost efficiency is one of the benefits. 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.

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

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. 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 four 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 one new state-of-the-art wealth center with two more opening in the coming months. 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 plan 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 four-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 whilst 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, way across our network. They're 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 payment tracking solution, which now provides a global view of payment status improving our client experience.

In IW P. B, 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 all 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're 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're 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 ads 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 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're investing for growth and we are delivering growth.

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

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.

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

Let me now hand over to Pat.

Thank you George Thank you everyone for joining us.

Pam Kaur: Thank you, George. 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. Of the $2.8 billion, $2.1 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.

Full year I said, we would focus on three things discipline.

And 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.

Larry in the way, we enhanced operating leverage and support our customers.

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

We've 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.

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.

Pam Kaur: 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, ROTE, 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 the Q2 ECL 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 2024 on a target basis.

Yeah.

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% supported by our $1 seven trillion deposit base.

Slide 22 sets these things out.

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.

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

This was driven by fee and other income.

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 as to the significantly higher than the Greek ratio highlighting the conservatism in our house.

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

Our approach.

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.

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 likely to be on 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%.

Pam Kaur: 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. Our four businesses performed strongly with revenue growing in each.

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

Yeah.

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 two G for call of maturity over the period.

We have now reduced our share count by 13% since the first quarter of 'twenty to 'twenty three.

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 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 over time.

Yeah.

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 cost 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.

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 royalty or better.

Pam Kaur: Each one is making mid-teens RoTE 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.

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, we will 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 question. Please.

And our U K business.

Please ensure you on mute. Your line you May also submit your question why are the Q&A function.

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

Okay.

Thanks, guys just while people are looking to to signal for a question and we've had some submitted questions from Lee Street from Citi is unfortunately, unable to dial in so Lee asks five questions on label 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%.

Okay. Thank you Greg Sorry did you say he asked five questions did asphalt question, Jeff Wow, Okay.

The 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 currently have 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.

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

Pam Kaur: For the last 12 months, net new invested assets was $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 Q1, reflecting lower interest rates, partly offset by the repricing of the structural hedge.

In dollars.

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

Great.

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.

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.

We obviously think about investor expectations are peer comparisons.

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

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.

It's one of those things that we keep on the under review and discuss them periodically within the organization and then obviously it will be something we would discuss with them like debentures as well.

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

Pam Kaur: Our structural hedge, now $578 billion, has reduced the sensitivity of our revenues to interest rate cuts. Regarding HIBOR, as a reminder, under the Linked Exchange Rate System, the Hong Kong dollar is maintained within a trading band via the HKMS commitment to buy or sell Hong Kong dollars when the exchange rate hits either the strong side or weak side of the band. During 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 Q3. We remain confident in the prospects for our business and in the outlook for Hong Kong.

Thanks for asking let 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.

Hong Kong dollar is maintained within a trading band.

Okay. Thank you.

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

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 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 kind of credit environment was conducive to doing those trade certainly so.

Which added liquidity to the market and led to a notable drop in hibor 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 about 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 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 go on to tier two in terms of tier two we communicated a range of $2 billion to $3 billion and so far we're in the middle of that was done two and a half.

Pam Kaur: 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. 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.

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 there's maybe a little room, there, but we'll see and then on a T. One.

We we all completes we communicated three to 4 billion and we printed $4 1 billion.

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.

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. Our all time was all time.

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.

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 that he 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 you know I don't I don'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.

Pam Kaur: Securities Services was 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. 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.

Yeah.

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 are on mute myself.

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

Yes, we can hear you. Thanks, all right yes.

So maybe just obviously.

Another question on <unk>.

In wealth.

Issuance more so 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.

Non.

Currencies.

This represents.

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 to go with them of course.

Okay I'll take that one first and then come back to you. So yeah I did say around two sets.

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

So far and if I look back to 2024 as well.

$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.

Pam Kaur: 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. 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.

Will be a natural source for us to go to a lot of our other breweries are in U S dollars. 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 violence element of our second quarter performance was transactional there are many positive drivers of our business.

I think I will.

In terms of the issuance of it probably be somewhere in the range of two sets of three quarters in terms of what we do in dollars.

But also very conscious of the franchise in.

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

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

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.

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 issue is in dollars. It was obviously supported and seem to be.

A part of this quarter Hong Kong ECL reflects commercial real estate model updates and adjustments.

Well balance so I appreciate that.

I guess.

Second question is a bit more of a strategic strategy question. So.

The balance reflects what is still a weak commercial real estate market office rents are still declining somewhat office and retail values are softening.

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.

The boat.

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.

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

Pam Kaur: 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, we are taking a disciplined approach to cost management and are 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.

We are now guiding to a group ECL charge of around 40 basis points for the full year 'twenty 25. This new guidance includes our updated outlook on Hong Kong commercial real estate.

Stands out there is something thats, just a bit of an irritant rather than anything meaningfully positive.

I just wanted to walk through that if you have 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 he supposed to say welcome to the relationship with bank of communications become it's been a long standing one for HSBC.

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.

We've had this relationship for around 20 years, and it's a representative I think about deep and long.

We are also on track to live to deliver zero point $4 billion of simplification savings into the P&L in 2025.

<unk> to mainland China from a strategic perspective.

The nature of that relationship hasn't changed at all and we really view that market in that environment as providing excellent medium and long term growth opportunities for HSBC.

This is an improvement compared to our previous expectation of zero point $3 billion.

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

Really where we're happy with the relationship no plans to change whatsoever and.

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

In 2025, we expect to have taken actions.

Pam Kaur: 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 7 exits since Q1. As we exit non-strategic activities, we will be accelerating investment into our 4 businesses. 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 held for sale, notably relating to our custody business in Germany in Q2.

The result in saves of $1 billion in 2020 seven the full $1.5 billion of cost saves will be independently.

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.

However, our strategic.

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

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.

Put a press note on what.

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

What was the reasoning behind not.

Maintaining your.

Sure sure and vessels you, let it dilute their.

George set out earlier the progress we are already making.

Total race.

Yeah. It was it was the case that when Broadcom announced that they were doing the capital issuance. It was a private capital issuance.

Yeah.

On loans and deposits.

The loan book was broadly stable with growth in the U K.

We went and talked to sponsors by our our shareholding therefore diluted from 19, 3% to 16%. The injection was done by China's Ministry of Finance. So it was a private private issue and got it that's helpful.

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.

I don'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.

Pam Kaur: When 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. 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 expectation.

Thank you can you guys hear me okay.

Yes, we can hi, good.

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, there is still the Sterling five spot 844.

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 last at capital value for us at the end of 'twenty, one and became eligible for calling at that point in time, and we chose to coal.

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

In summary.

Our second quarter results show disciplined performance and delivery.

The holdings issuance, which was a dollar of issuance.

In Q3 Q4 of last year.

Surplus and the way we are applying strong cost control.

But we're not in a position at the time to call. The other instrument, which is stunningly issue in five years.

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.

For we did look at that instrument at the time and there are various factors we take into account when kind of making a decision. There for example, the economics all are important for US we look at the funding benefit those those securities provide to us.

Ahead of our previous expectation.

We are also progressing at pace with our exit of non strategic activities and are redeploying into priority growth areas.

And it is a balance I think it's fair to say that 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.

Pam Kaur: We are also progressing at pace with our exit of non-strategic activities and are redeploying into priority growth areas. Performance in our earnings. Each of our four businesses is growing revenue, and each one is making mid-teens RoTE or better. Delivery. These Q2 results show the way in which we are supporting our customers. Our 5% revenue growth and 17.7% RoTE show we are delivering against the targets we set out to you. Louise, can we go to Q&A, please?

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

Core investors that have had.

<unk> 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.

Okay.

Thanks, so much I appreciate it.

Thank you thanks a lot.

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

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

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.

Thank you Pat if you would like to ask a question today. Please use the raise hand function and team placed also ensure you'll camera is tied if you're invited to ask a question. Please accept the prompt you to mute. Your line. If you find your question has been answered you may release yourself from the queue by lowering your hand insane.

Dealt a lot 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 one round continued organic growth.

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

And 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%. 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 FY 2026? Thank you.

42 billion.

Books and pieces of other of other companies.

You can always say provide some useful guidance on one month hibor sensitivity.

And then 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 et cetera.

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 high ball to return to normalized levels.

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

And while they move.

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 Barry 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.

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 these got anything on on question two.

The 42 billion guidance includes market expectations of Hibor.

Pam Kaur: Thank you, Benjamin. The $42 billion guidance includes market expectations of HIBA implied above 2% in Q3. We've already said that HIBA at a 1% impacts us by $100 million per month. If you look overall, our HIBA 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 HIBA impacted us for around six to seven weeks. We have given more detail of it in the appendix. A couple of things have moved around.

So on the first question in terms of the UK.

Implied 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% in fact satisfy 100 million per month.

<unk> position in the UK at the moment.

The UK economy continued to show resilience through the fence.

So if we look overall a high vol a.

Thank you Brian.

All right.

Concerts environment.

Expectations as well as the impact of the 100 million. All of these are included when you look at our overall our confidence in the B N I guidance for the year.

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

Fine.

And probably another two cuts are expected by the market and H T. Greg for us there.

They'd be in our guidance is not just based on the forward curves.

The main message I would say, they're encouraging isn't that correct.

We know in Q2, very low hydro impacted us for around six to seven weeks, we have given more detail off and in the appendix.

Okay.

And that's becoming more and more supportive.

But a couple of things have moved around the time deposits are not full points lower and you look at those factors and as they look for the rest of the there will be some upside and downside. Obviously also in terms of the timing of when a high bush shifts happen as well as the.

Real wages are really hungry.

And expectations of rate cuts are bringing.

Pam Kaur: The time deposits are now four points lower. 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 hybrid shifts happen as well as the dollar depreciation, how long it continues. In Q2, it was a tailwind for us.

We can see it.

Getting to lift the stay.

The conference.

<unk>.

And in terms of in terms of.

Okay.

Yeah.

Continuing to look at organic growth.

Dollar depreciation how long it continues in Q2, it was a tailwind for us.

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

In terms of CLS.

We've revamped our xiaomi proposition.

Georges Elhedery: Um.

So 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 visit to the upper end. So we're not giving any guidance beyond 2025 at this stage.

Enhancing coverage and increasing proximity to our customers.

Pam Kaur: In terms of ECLs. 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're 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 we.

When we look at that.

You know the bar for us in terms of inorganic growth.

Ben Thank you very much for the question.

At reasonably high we need to be confident.

Thank you guys. Our next question today comes from Ken at the Shane of J P. Morgan. Please accept the prompt to mute your line.

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

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.

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

Our burden of integrating within an organization and can be costly and distracting. So you know there are various factors that we think when when deciding about weather.

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, 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. You discussed PDs, which have 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 environment. Thank you.

Give 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 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.

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

We were pleased to see the announcements are made in mansion house around.

Around revisiting the ring fencing regime.

That is.

That is something we absolutely welcome.

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

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

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.

Very much wanting to support within the U K in the.

Georges Elhedery: 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's 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 you know, we're encouraged to see that more agreements are being, you know, are being concluded and this giving us a more, ideally more certainty as we look in the future.

The ring fencing is I think 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.

Quite different now and has significantly improved from.

So on tariffs.

First the tariff has never been there.

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

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

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 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.

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

You are being concluded and this giving us a.

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 our trade fees and other income has grown by 4%.

Georges Elhedery: The important things to call out, one, as you did see from our Q2 results, our trade fees and other cam- income has grown by 4%. The reason is multiple. First, 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 Middle East corridors.

Kind of.

Great 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 Corey 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>.

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

Traditional trade.

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.

Georges Elhedery: Second 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 services trade sector than what has been the growth exhibited in the goods trade sector. That's another area of strength for HSBC. Third, even in trade and so far that the US is involved and, you know, 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 their duty, the duties they're, you know, due to pay for tariffs in a way that, you know, allowed us to continue growing our business and gaining share.

Services straight sector I know, we have capabilities, there and we're able to capture a much faster growth in services trade sector. Then 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.

Your bread and butter.

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

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

Okay. Thank you.

Hi, Robert scratch. So thanks for the question. Thanks for the question.

So on <unk> in terms of the total loan book, you're talking about $90 billion out of the total just under a trillion dollars of the loan book in the first half was <unk> I think it reflects a number of things.

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

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.

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

Georges Elhedery: You put all of this together, you put the expertise we have with more than 5,000 trade specialists across our more than 50 markets where we operate, and 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, and this is what we envisage, you know, for the, you know, expertise we have and the strength we have in our trade business. With regards 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.

More than 50 markets, where we operate.

And particularly within security services. These are kind of 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.

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

It is this is the period, where we can differentiate continue gaining market share deepening customer relationships acquiring more customers.

Not <unk> the various different strata, but.

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

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.

Our coal business for us.

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

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%.

No problem ill answer the questions.

Just to step in and 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 firstly 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.

So firstly in terms of thoughts scenario as you know we continue to update them.

Pam Kaur: Yeah. Thank you, George. Firstly, in terms of our scenarios, you know, 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. 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 are holding well.

What will be the key drivers any other regions or sectors, where you see some asset quality deterioration due to the current macro uncertainty.

And the 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.

And then separately Paul Fenner from Gen. Also asks how do we interpret Hong Kong.

<unk> risk, we've got $5 billion 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 than whether you are 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.

What's the worst case scenario here.

The base case, a glide path of impairments.

Okay. Thank you 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.

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.

Pam Kaur: We are seeing no early warning signs or triggers of, you know, either lower deposits or additional drawdowns. Coming on to the ECLs in terms of the model update. The model update 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 two as we have already disclosed. On the other hand, in the UK, it was a release. Models when the calibration happens, some markets goes up, some down. Just wanted to share that with you overall. The vast majority of the model changes was actually due to PD migration, you can imagine how it varies from market to market.

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

We've updated our guidance to Oh.

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

Looking at trailing 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 clients so far.

The the the allowance number going to stage two as we have already disclosed but on the other hand in the U K. There was a release. Some model then the calibration happens some market goes up some down so just wanted to share that with you overall.

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.

And the vast majority of the model changes was actually due to P. D migration and then you can imagine how it varies from market to market.

Having an <unk> equivalent rating maybe.

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.

Okay.

Thank you very much Jim.

Thank you. Our next question today comes from.

Georges Elhedery: Thank you very much, Kieran.

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

China Securities.

Tell me all night.

We as 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 160 years, and and so it's something we were well priced too to look at and assess them the.

Okay.

Good morning, George Good morning, Pat.

I have two questions on impairments.

Kunpeng Ma: Good morning, George. Good morning, Pam. I have two questions on impairments. The first one is related to the BoCom impairment, especially that one with the, you know, with the VIU test. You know, it seems that you conduct VIU tests every quarter, you don't charge impairments every quarter. You know, it seems that, you know, the impairment charge always come together with other bad news, you know. When you first charged the VIU impairment in Q4 2023, you got, you know, French disposal loss, you got, you know, a slight miss on the cost control, so you charged the first time. In this quarter you got, you know, the BoCom dilution impairment.

First of all in Israel that attitude coming Paramount, especially those that one but the with the <unk> test.

The Hong Kong CRE.

It seems that you you conduct via unit tests every quarter.

CRE market can be split into segments.

But you don't charge impairment every quarter.

If I try and do that a little bit.

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

The vessel market, if I stopped that.

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

The first charge the impairment.

In there but.

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

Because of the policy support.

That's been given and rental incomes are.

It remains strong.

The office and retail we can still but we can see pop.

And in this quarter you got to you know the Bocom dilution impairment.

I always I you know I also cover Chinese banks don't their fundamentals are weak.

In office and retail.

Kunpeng Ma: You know, I always, you know, I also cover Chinese banks, so, you know, their fundamentals are weak. You know, there were no sudden drops in fundamentals in Q2. It seems that, you know, that VIU impairment charge always come 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? Yeah, that's the 1st question. The 2nd question is that, you know, can you share us some views on, you know, on a little bit longer term on the Hong Kong CRE outlook? You know, you increased the credit cost assumption going forward due to the Hong Kong CRE pressure.

Yeah.

Still challenged and still struggling a little however.

There are no sudden drops in fundamentals in the second quarter. So it seems that you know that can take that.

However, there is government government support in terms of.

We are you impairment charge all this come together was let's say with other packages so can't produce share us a little bit.

Addressing the oversupply and restricting land sales.

Oh.

Some more color on the factors triggering that kind of.

If we look at our commercial.

Real estate book.

<unk> impairment charge, yeah, 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.

My second question is that in.

Can you share some views.

A little bit longer term.

Hunter CRE altered it.

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

You increased it.

Credit costs.

Going forward due to the HOKA CRE pressure is there any chance that the hunter CRE pressure further increase you feel assumption going forward, yeah that hazardous to questions. Thank you.

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

Kunpeng Ma: Is there any chance that the Hong Kong CRE pressure will further increase your ECL assumptions going forward? Yeah, I have those two questions. Thank you.

Of the deck that shows you. What this shows you the numbers that I'm talking to at the moment.

Comparing thank you very much.

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

But that substandard and credit impaired component.

Georges Elhedery: Pang, thank you very much. I'm going to take your 2nd question first and give you some outlook on the Hong Kong CRE. Pang can then give you additional details on ECL and address your first question about BoCom. I'll make 1 comment on BoCom.

Hum.

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.

Banking can then give you additional details on ECL and can address sure. Your first question about Bocom I'll make one comment on Vulcan.

So with Hong Kong Shirley Firstly pumping as you May expect we know this market very well we've been in Hong Kong 460 years embolden the sector.

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

Kunpeng Ma: Okay.

Georges Elhedery: With Hong Kong CRE, firstly Pam as you may expect, we know this market very well. We've been in Hong Kong for 160 years involved in this 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. This has stabilized, and we're encouraged by that. It stabilized mostly because of policy support measures that have been taken, as well as because of robust rental market more recently. 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.

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

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

I will now.

I think we're very comfortable with.

Specifically.

Where we are what we've provisioned.

As regards our residential development this has stabilized.

Our mission here is really to support our customers and.

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

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

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

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

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

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

Buoyant capital markets as well in H, one and 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.

Georges Elhedery: Now, we are encouraged by some additional government action taken to restrict land sales and office CRE, 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. 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%.

CRT and.

I think we said before as well that it's at.

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.

A strong and trusted financial hub.

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

None of the exposure we have in Hong Kong theory, we basically called out less than 5% of it around $1.5 billion of debt 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 up 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.

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.

Where the loan to valuation of the collateral is about 70% now against this $1.5 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 to the extent that might be $1.

Georges Elhedery: Now, against this $1.5 billion, we have a half a billion dollar 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're looking at. Across the wider spectrum on Hong Kong CRE, what I can say is our mission obviously to continue support our customers as they work through some of the short-term, you know, 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. On, The comment I wanna make on BoCom is purely coincidental.

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

We've we're largely complete in terms of our 81, maybe there's a bit of room on senior how it kind of NCA, it's a it will.

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

Challenges theyre 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 really stayed.

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

That's that's really in a position at this point.

Large and therefore remain constructive and optimistic about the medium to long term.

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. When you might remember the New York Law Tier two securities that we exchanged on back in 2022.

Hum.

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

Georges Elhedery: There is no correlation whatsoever between an accounting process related to the VIU process versus any other information. Remember, the BoCom impairments have no CET1 impact. They have no CET1 ratio impact. They have therefore also no distribution impact in terms of dividend or share buyback. I really encourage you to look at it as a pure accounting but no actual economic impact to the bank. Pam.

<unk> 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.

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.

As I've said previously.

But no actual economic impact to the bank.

We do look at <unk>.

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

Thank you I'll take.

I'll take the question on Hong Kong Korea, first and then on Bocom. 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, which had nearly 95% rated <unk>.

Pam Kaur: Thank you. I'll take the question on Hong Kong CRE first and then on BoCom. 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're right, it's $600 million, is largely to the secured side of the portfolio. The ECL stage two allowance increase is entirely due to models. Out of that, you know, the charge we've taken of $400 million, the quarter, $100 million is due to the modeling charges.

Hum.

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

Did a we did a liability management exercise in 'twenty two is as your question Stacy <unk>.

And that received that allowed us to.

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

Juice 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.

Side of the portfolio.

And the E C O M stage, two allowance increase is entirely due to model so all of that.

Mike on the face of it sound a little lower than <unk>.

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

The the charge, we've taken a 400 million the quarter of 100 million is due to the modeling charges.

As 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.

Pam Kaur: As Georges 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, and 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 tree book as we look at it now. On BoCom, and as Georges said, of course, we don't link impairment timing to anything else. It's a retained quarterly accounting process. Again, we use our models.

Exercise.

But there were also some holders of securities.

We hope to collect stay at 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.

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 the economics are right and whether there are.

There's genuine interest.

And in that site.

That's a that's probably will.

I think.

No more questions Greg.

No more questions. Okay. So then perhaps will wrap up for that.

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

Just leaves me to say look thank you everyone for joining thank you for the questions as well really appreciate that.

So on Bocom and as George said of course, we don't link impairment 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.

It was useful if you have any further questions. Please do you pick up with Greg and the IR team will be happy to help thank you.

Pam Kaur: 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. 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 look at it and make changes accordingly.

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 motto 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 Ma, thank you very much.

Thank you. Our next question today comes from I'm on record at Barclays. Please accept the prompt you to meet your line.

Pam Kaur: Thank you.

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

Good morning, George.

I have a couple of questions. Please.

Aman Rakkar: Morning, Georges. Good morning, Pam. I had a couple of questions, please, on one on net interest income and one on costs. Two-part question on NII. At face value, your banking NII guide, that's 42 for the year. Given that you're annualizing at 43 at H1 does actually imply a pretty marked step off in net interest income in H2. I want to query whether you really mean that or not. You know, 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. I don't know. Is there any amount of conservatism in that 42? Is there just too much uncertainty around HIBOR or...

One on the net interest income.

On costs.

So a two part question on Illinois, So just a fight for Shaw banking.

Hi, good morning, Thanks, Yeah.

You kind of annualize you've got 43, H, one thought should I imply a pretty market step off in that.

Trust income relates to I kind of just want to query whether you find me at all.

Yeah.

Oh yeah.

Yeah.

What it implies.

It implies a run rate for net interest income to retract that people carry over into 'twenty.

Is there now a lot of conservatism or not or is that just too much onshore.

Hi, Paul.

Kind of second part of my first question. If I May is just can you help me understand.

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 are running. You're pushing the organization right now to realize the cost savings because, you know, 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. Georges, I'm really interested in your reflections on how...

All right.

And I wish I can change from it.

Oh God.

Oh, sorry.

The second question.

Is there a cost financed.

Uh huh.

Just interested in that.

How are you all right.

Are you pushing the organization right now to realize the cost savings.

Outside of it.

Thank you all.

A bit of a contra costa to backstop that you cannot.

And I'm hopeful that you can realize additional cost saves I have Tom chime, Georgia aren't interested in your reflections on how.

You want it.

Much capacity it sounds like what you're trying to do.

Aman Rakkar: You know, 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 cost next year. I don't think consensus has got that, but, you know, 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.

It just all in 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.

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

Okay.

I'm on 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 Oh 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.

Georges Elhedery: Okay. Aman, thank you very much for the questions. I'll deal with your cost question first, since you've, you know, you've called this one out clearly to me. I'll give some comments on banking NII, but Pam can elaborate better on, you know, 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, you know, commitments we have. It's the fact that we are on track on, you know, on all the cost items, be it our underlying cost or the cost save. That one doesn't change.

So.

First cost discipline and grade in the firm quarter after quarter year after year.

It's it's commit 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.

In terms of the cost takeout.

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

Georges Elhedery: In terms of the cost takeout, the cost takeout that's taking place now that we're calling out is 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, and we just revised upward to 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 seven exits since the Q1 results.

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 takeout, which is exiting of non strategic activities, we announced seven exits since the Q1 result.

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.

Georges Elhedery: These in total will add up to about $1.5 billion of cost takeout. About a third has already been announced, a third has been worked on. We intend, once these cost saves are achieved, to reinvest this into our core revenues 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 and cost. As, 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, and these improvements will continue helping us manage our costs. I'm not going to comment on 2026. We have not guided to it, just given the amount of saves we expect to achieve from the simplification, 2026.

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

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 our operating leverage and cost.

As you know efficiency and productivity drives including through Gen. AI automation and other modernization of OTA 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 weeks.

Not guide to it but just given the amount of saves we expect to achieve from the simplification Tracy 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 and known 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, and that's a very important lever in the growth potential we can achieve in banking NII in terms of volume growth. Pam?

That's a 5% growth in our deposit base and our deposits drove the lion 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.

Thank you so on and just.

Pam Kaur: Thank you. Aman, just quick comment on cost. 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, and that will be something which will be a priority for us. That's something we can control. We have shown you a good track record in the first few quarters, and 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.

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 and 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.

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 math.

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

And this quarter in 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 Hibor also is important we are assuming that there will be a sharp normalization.

Pam Kaur: This quarter, you know, we had obviously the headwind from a 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, you know, $100 million at a 1% HIBOR. What we will have as a benefit still coming the rest of the year is the structural hedge, which is a tailwind. We've got a reinvestment of $55 billion in the second half at 2.8%.

All fiber within this quarter to around the 2% Mark obviously any delay even this delay as of July a month costs, you know a 100 million at a 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.

A 55 billion in the second half of two 8%, if you reinvest and if theres an improvement of 2%.

Pam Kaur: We 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 4 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. We also saw some balance sheet growth happening because part of the weakness of the HIBOR was because of the strong South Bond connecting flows into Hong Kong. That immediately gave us the benefit into our deposit line. We have been also active in markets treasury.

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 move.

Hum.

Move up or down nine terms of leave us to offset the the hydro pressures are the high the Hong Kong time deposits were repriced. We also 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 the benefit.

Two our deposit line, we have been also active in markets Treasury and the benefit of that goes into fee and other income. So all in all there are number of areas, which we can for leave us to be very confident on or around 42 billion.

Pam Kaur: 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, and if we outperform, we outperform.

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

Conservative realistic kind of feed outperform the outperform.

Okay and then 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 category on Etsy ICC. Please accept prompt to meet your line.

Operator: Thank you both. Our next question today comes from Kendra Yan at CICC. Please accept 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 Q1 and Q2, primarily driven by the wealth management effects and the capital markets related business. I wonder how you see the sustainability of this momentum going forward. The second question is about the stable coin because there are several countries and areas have introduced the stable coin related regulations. How does HSBC view the cryptocurrency, this area? Have you have some initiations in this area or we will maintain a cautious approach on this area? That's my two questions. Thanks.

I've seen that HSBC deliberated quite strong non interest income in both quarter, one and wanted to.

Primary driven by the wealth management, FX and the capital markets related business. So I wonder how you see the sustainability of this momentum going forward and the second question is about the stable coin because they're several countries and their rents have introduced.

Stable quite related regulations.

This HSBC field the crypto currency this area.

Have you.

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

Thank you very much kendra letting.

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

Georges Elhedery: Thank you very much, Kendra. Let me start with the stablecoin question, then I'll give you some of my kind of comments on non-NII, you know, wealth effects, et cetera. You know, Pam can elaborate further on that part of the question. Okay, digitized means of payment. We have launched tokenized deposit services for our wholesale customers. 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, between...

Comments on on non NII, you know wealth effects et cetera, and Tom 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.

It will be live in September in the U K and in the Eurozone.

And then early in 'twenty six it will be live in the 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 kind of counter parties on.

Georges Elhedery: with their suppliers or, you know, 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, and we continue investing in it. It's programmable, and it, you know, it basically leverages the, you know, 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 stable coin. Very encouraged about Hong Kong indeed issuing regulation there. Obviously, the US with the GENIUS Act is publishing regulation there. 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 stable coin and their compliance with these regulation.

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 you know the blockchain technology. So we're very pleased with this development.

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

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

Publishing regulation there.

So what we will 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.

Georges Elhedery: 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, kind of, you know, algorithmic or other non, you know, non-pegged cryptocurrencies, as an asset class, we still do not have risk appetite to be involved in that space. Okay. Now, with regards our non-NII, there are a few comments I wanna 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. Let me talk about first, transaction banking. We have a leadership position.

Or customers involved with these issuers.

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

Kind of.

Algorithmic with other non U.

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 with regards 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, but let me talk about.

First.

Transaction banking, we have a leadership position we're at a top two player in global transaction banking and payments and FX and trade with them their 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.

Georges Elhedery: We're a top two player in global transaction banking, in payments and FX and trade. We're the trade bank for seven or eight 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 a 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 wanna talk to is wealth. Six consecutive quarters of double-digit growth.

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.

That's the 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 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: Our target there is to grow in the medium term at double-digit rates, but 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 number of, you know, 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.

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.

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

Georges Elhedery: 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. Pat.

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. We have been focusing on growing our fee and other income. As George has said, it's been a focus area, and we've seen strong performance. Albeit in the last 2 quarters, there has been the tailwind of market conditions, and 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%. Our very strong position in FX is a baseline that will always be a growth engine. Investment distribution was up 24%. Private banking was up 12%. And there are also other NNIA revenues, which are like our net new invested assets, which are up $75 billion over the last 4 quarters. Not really helped just by tailwinds.

And it's hard to predict when they sort of transactional tailwind and then.

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 inlets and distribution was up 24% private banking was up 12%.

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 balance is at record levels and that'll just drips into the P&L over time. So that's also like an annuity now there's just one or two.

Pam Kaur: Also the insurance CSM balance is at record levels, and that'll just drip into the P&L over time. That's also like an NNIA. 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 Argentina hyperinflation, which was the $200 million impact in Q2 2024, obviously was not a repeat in Q2 2025. With Argentina gone and that sort of is not going to be again, coming into the comparison. The other was a $100 million related to markets treasury activity, and that will be volatile. It will change from quarter to quarter. Overall, very comfortable with the core of the growth with some, you know, moves from quarter to quarter.

Items, which I would call 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 of 'twenty. Four obviously was not a repeat in Q2 of 25, but with Argentina have gone and does that sort of is not good.

Going to be and again coming into the comparison and the other was 100 million are related to market as 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 call.

Uh huh.

Kendra. Thank you very much for your questions.

Thank you guys. Our next question today comes from Joseph Dickerson at Jefferies. Please accept from to meet your line.

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

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

Yeah.

Oh Hi, Thank you for taking my question is just a simple follow up on the Hong Kong, CRE, which I know you've done a pretty good job of 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? Because the 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? Because clearly, I think you also had about 20 bits of credit risk migration in last year's CET1 from this size. I'm just trying to walk through the moving parts to dimension any further charges. Thanks.

All of this a 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 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.

The science or I'm, just trying to walk through the moving parts to dimension the any further charges. Thanks.

Thank you Joe for the question I'm going to make a couple comments, but I'll 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 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, and we've captured the outlook for 2025 in our revised ECL target. Pam, you may wanna elaborate on that one.

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

The outlook for 2025, and our revised ECL target.

Tom you may want to elaborate on that yeah. Thanks to a really good question.

Pam Kaur: Yeah. Thanks. Firstly, part of the charge you said is the model change, and the model changes happen periodically, and that comes with that 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 distressed valuations. Already we have started considering distressed valuations as part of our ECL charge for the year-end by giving some probability for this distressed valuation. This lag on a performing book, because the book is still performing on the valuations as it comes as part of our credit process.

So firstly part of the charge, we set as a model change in the model changes happen.

Very honestly and that comes with that is the only 100 million. The key thing that we look at every quarter and we looked at the last year and 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 distress valuation 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.

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.

Pam Kaur: C is we do a read across to the book. Generally, the LTVs have remained strong. Just to say the LTVs which have gone, you know, 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 is it continues with the oversupply in the office space. 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 refurbed or otherwise?

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 isn't 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 the ore 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 off from the kind of property the use of property and the overall liquidity.

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 of from the kind of property, the use of property, and the overall liquidity in the market in terms of actual transactions has been relatively low.

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

Makes sense. Thank you.

Thank you. Thank you Joe.

Joseph Dickerson: Makes sense. Thank you.

Our next question today comes from Blackberry six Psi from Goldman Sachs. Please accept the prompt to meet your line.

Pam Kaur: Thank you both.

Operator: Thank you both.

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 like above normal FX growth? At 7%, would you call it above normal? Just thinking of what were our clients' feedback? Were they churning portfolios more, hedging, et cetera, during the quarter on FX? Because I see it's Q on Q also, it's down. On loan growth is the second part. We see some pickup in the UK book, but then in Hong Kong, China region, with the lowered interest rates, are we seeing client demand come back in for loan growth?

Effects, you called out a 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 worked with their clients feedback where there Jerry.

<unk> portfolio is more of a hedging et cetera during the quarter on FX and then because I see it skew and she also edged down and then on loan growth in the second part are we see some pickup 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 loan growth and how do we see the outlook there. Thank you.

Gurpreet Singh Sahi: How do we see the outlook there? Thank you.

Thank you for your two questions I'll take the first question and make a comment on loan growth in pen can explain a little bit there.

Georges Elhedery: Gurpreet, thank you for your two questions. I'll take the first question and make a comment on loan growth and 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. 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 this space. Therefore, we do have a leadership market share in this space and capture client activity.

The outlook in the various segments of the world.

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.

Therefore, we are we do have a leadership market share in this space and capture client activity, it's difficult to forecast what kind of volatility we may see going forward and foreign exchange.

Georges Elhedery: It's difficult to forecast what kind of volatility we may see going forward in foreign exchange, but we will continue being one of the main counterparties to support our customers' hedging activities. The loan growth, I was actually particularly encouraged with the UK commercial banking corporate loan growth. It's early to call it a trend, three and a half billion dollar growth, but it is definitely a green shoot in the space where, you know, it has been subdued for many quarters now. We, you know, we have seen the UK credit book remain very resilient through the last few years, but we haven't seen it grown. Hopefully, you know, with more clarity about the UK and the tariffs related to the UK, we can see more investments taking through.

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

So in 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 billion 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.

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.

Georges Elhedery: The additional comment I would like to make about the UK specifically, 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, then more recently with India, which is a historic trade deal where, you know, we have a very vibrant business corridor going on between the UK and India. We're frankly very, very excited about supporting our customers along this corridor, kind of realize the benefits in their businesses.

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

You know, where 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 for the question. 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 on 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, we are very engaged with our customers and 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 AsiaEx 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, whether it's in the infrastructure space and so on.

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 in terms of making their decisions.

In the UK 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.

We're focused and that's held US well we are doing the same engagement level on that.

Pam Kaur: We were well-focused, and that held us well. We are doing the same engagement level on our customers across the globe. From a, you know, 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, you know, early engagement where people are looking at how they, you know, shift and change some of their business models and so on. What I do wanna say is that overall, where we have a good benefit still coming through from an NII line is our deposit base, which is, as I've called out, up sort of $83 billion year-on-year.

Now 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.

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 sort of 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.

Pam Kaur: That stays a very strong component as part of our NII business. I would say from a FX perspective, the other thing to bear in mind is we're seeing strong flows into Hong Kong through the depressed TIBO. That is another factor to balance overall in our outlook.

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.

Very good. Thank you very much for your question.

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

Thank you 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 just for a.

Katherine Lei: Hi, good morning. I have three questions. The first two is for Pam. I think it's just for housekeeping for our model updates. The first is that I would want to ask about what's the threshold deduction, like the outstanding of... Like, what is the, like, 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 a impact on your CET1 ratios and share buyback and EPS and so forth? This is number one. Number two is related to the $0.6 billion of restructuring related costs.

A housekeeping for Armada abate.

I want to ask about what the French open back in like the outstanding AR, but what is the whether the outstanding class a threshold deduction related to the phone call. If there is further impairment on bulk up that.

That's where the impairment on Bocom won with a man b in order for that.

Hammond to have an impact on your food you buy rate shows and share buyback.

So Paul.

Number one and number two.

Uh Huh, it's related to the thermal plants, that's the land and structuring related cost like what portion of that Oh in the notable mchugh real notable items I E. A while I mean is that what portion of that zero point Lillian had no impact.

Katherine Lei: Like, what portion of it is in the material notable items? What I mean is that what portion of the $0.6 billion has no impact on DPS, and what portion of it may have an impact on DPS? The last question is for Georges. I think it's still on the Tokenised Deposit part. May I know, like, for this Tokenised 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 Tokenised Deposit to transact crypto assets? Say, for example, if they want to trade Bitcoin or other crypto assets, can they use this Tokenised Deposits to facilitate that? Thank you.

<unk> had no impact on EPS and what portion of it may have an impact on book yet and then the last question George I think you undertook a nice deposit park. So may I know like Oh, there's took a nice deposit or is it only for HSBC clients are also available for clients clients Oh.

On public Chang I E does it mean that Oh client basically use this took nice to pass them to transact crypto asset.

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

Click to pay.

Say that again.

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 ask you a third question. I'll ask Pam to address the, you know, 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 kind of checks. The, the, you know, the capabilities will be extended, but will be extended to who, you know, 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.

So today this is available to hsbc's clients.

And any white listed clients clients or clients Counterparties.

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 will 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 stay because issuers are able to K why she the why the client base some of them are but obviously the regulations is going.

Georges Elhedery: 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, but obviously the regulations is going to dictate for those who will be effectively whitelisted, what these requirements are. We will evaluate, you know, accordingly, you know, over the next few weeks and months as this is develops. Your first question is related to BoCom, and your second question is related to the restructuring related costs and whether they would be treated as notable or materially notable.

To dictate four four for those who will be effectively wiped listed what these requirements are and we will evaluate.

Accordingly over the next few weeks and months.

As it develops.

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

Restructuring related costs, and whether they would be treated as notable or material. Notable pamela address both but 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 CET, one or CET, one ratio or distribution capability.

Georges Elhedery: 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 distribution capabilities. Pam can talk to that.

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

Pam Kaur: Yeah. Thank you, Katherine. We have $14 billion of threshold reductions, 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 Georges 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, but they're not a material notable item for the dividend.

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.

Thank you base that ends 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 Georges for closing remarks.

Well, thank you, everyone and 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 and 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.

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