The FINANCIAL — HSBC Holdings plc is holding an update for investors and analysts. The theme of the update is “Return to Growth and Value Creation”.
HSBC is one of the leading international banks with access to the world’s largest and fastest growing markets. Its international network covers over 90% of global GDP, trade and capital flows.
HSBC targets a return on tangible equity (‘RoTE’) of greater than 11% by 2020, while investing USD15-17bn, subject to achieving positive adjusted jaws each financial year. HSBC intends to sustain dividends at current levels and undertake, as appropriate, share buybacks to neutralise any share issuance as a result of scrip dividends, subject to regulatory approval. This will be supported by the following eight strategic priorities:
According to HSBC, accelerate growth from our Asian franchise: build on our strength in Hong Kong, and invest in the Pearl River Delta (‘PRD’), the Association of Southeast Asian Nations (‘ASEAN’), and Wealth in Asia (including Insurance and Asset Management); we also aim to be the leading bank to support the biggest drivers of global investment: the China-led Belt and Road Initiative and the transition to a low carbon economy;
Complete the establishment of the UK ring-fenced bank, increase mortgage market share, grow our commercial customer base, and improve customer service;
Gain market share and deliver growth from our international network;
Turn around our US business;
Improve capital efficiency; redeploy capital into higher-return businesses;
Create the capacity for increasing investments in growth and technology through efficiency gains;
Enhance customer centricity and customer service through investments in technology: invest in digital capabilities to deliver improved customer service; expand the reach of HSBC, including partnerships; safeguard our customers and deliver industry-leading financial crime standards; and
Simplify the organisation and invest in future skills.
Throughout the period from 2018 to 2020, our plan assumes our CET1 ratio will be above 14%. Our CET1 ratio has been above this level for the last five quarters.
The presentation materials also include the following targeted financial outcomes in respect of the period from 2018 to 2020:
Targeted financial outcomes
A RoTE greater than 11% by 2020
Positive adjusted jaws each financial year
Sustain dividends at current levels and undertake, as appropriate, share buybacks to neutralise any share issuance as a result of scrip dividends
According to HSBC, to achieve these financial targets in the period from 2018 to 2020, they aim to deliver mid-single digit growth in revenue, low to mid-single digit growth in operating expenses, and c.1-2% annual growth in RWAs. We expect this to result in an improvement in reported revenues as a % of reported average RWAs from c.5.9% in 2017 to c.7% by 2020.