HSBC Holdings plc, Q2 2010 Earnings Call, Aug 02, 2010 - SEHK:5

SEHK:5

** Summary of Executives' Speeches**

Douglas Flint

• Reported Results:
  • Lower revenues.
  • Significantly reduced loan impairment charges.
  • Turnaround in the fair value of own debt credit spread movement, resulting in a gain.
  • High expense growth against inflation.
• Underlying Results:
  • Profit before tax was 30% ahead of the prior period, driven by lower impairment charges.
  • Revenue declines were partially offset by growth in Commercial Banking and European Personal Financial Services.
  • Lower pension curtailment and settlement gains, along with bonus tax impact, contributed to cost growth.
• Credit Quality:
  • Loan impairment charges were lower in all regions, with the largest decline in the United States.
  • Credit quality improved in Personal Financial Services and Commercial Banking.
• Capital:
  • Steady progression in core tier 1 and tier 1 capital ratios.
  • Successful retail capital securities issue increased innovative tier 1 capital.
• Outlook:
  • Uncertainty in the West, but bullish on emerging markets, especially Asia.
  • HSBC's capital strength positions it well for regulatory changes.

Michael Geoghegan

• First Half Results:
  • Soundly-managed universal banking model proved effective.
  • Diversification benefited HSBC through the economic cycle.
  • Strong returns in key markets like Asia and Europe.
  • Return on equity in Asian bank was 23%, and in the U.K., it was 14%.
• Regional Focus:
  • Emphasized the importance of Asia, with increasing diversification of profits.
  • Growth in customer lending and wealth management products in Asia.
  • Progress in Europe, with reduced loan impairments and growth in international trade revenues.
• Customer Groups:
  • Personal Financial Services (PFS) returned to profit, driven by improvements in the U.S.
  • Commercial Banking saw strong growth in customer numbers, especially in emerging markets.
• Strategy:
  • Focused on building sustainable revenue streams in target markets.
  • Investments in high-quality customers, particularly in the Premier segment.
  • Expansion in insurance and international trade.
  • Commitment to service and efficiency improvements.
• Outlook:
  • Emerging markets, led by Asia, will continue to drive global recovery.
  • Regulatory changes are stepping up, and HSBC's capital strength positions it well.
  • Belief in the need for large, diversified banks to support a wide range of customer needs.

Peter Wong

• Hong Kong Performance:
  • Loan growth across all customer groups: PFS (6%), CMB (42%), and Global Banking and Markets (10%).
  • Focus on cross-selling to improve revenue and net interest margin.
  • Competitive pricing pressure, especially with Chinese banks entering the market.
  • Strategy to offer more products to customers to strengthen relationships.
• Commercial Banking:
  • Strong trade flows between Hong Kong and China.
  • Ambition to be the leading bank in renminbi trade settlement and bond issuance.
  • Growth in lending driven by quality loan growth and investment in China.

Stuart Gulliver

• Global Banking and Markets (GBM):
  • Strong revenue delivery, second only to the first half of last year.
  • Investment and buildout contributed to the performance.
  • Revenue growth was partly due to non-qualifying hedges and other one-off items.
• Cost and Revenue:
  • Cost-income ratio ahead of target due to one-offs and investments.
  • Focus on cost efficiency and commonality of systems across the group.
  • Long-term strategy to improve customer service and cost efficiency.
• Outlook:

  • Continued investment in Asia and emerging markets.

  • Focus on risk-adjusted revenues and disciplined approach to lending.

  • Opportunities in equity issuance and capital markets in Asia.