HSBC Holdings Plc Q3 FY2024 earnings call

Reorganization Announcement - Announced a new structure with four businesses: Hong Kong and the UK, Corporate & Institutional Banking, and International Wealth and Premier Banking. Reduced geographic regions from five to two. Net cost savings expected with short payback on upfront costs, details to be shared in full year results. - Pam Kaur to take over as Group CFO from Jan 1, 2025. Jon Bingham's support acknowledged. ### External Environment - Welcomed clarity from UK government on Prudential rules and positive policy measures in China and Hong Kong, expected to support economic growth. ### Distributions and Buyback - Announced $4.8 billion distributions, including a third interim dividend and $3 billion share buyback. Repurchased 9% of share count since last year. ### Argentina Sale - Expected to complete sale of HSBC Argentina in Q4, recycling $5.1 billion of reserve losses. ### Legacy French Home Loan Portfolio - Actively marketing $8 billion portfolio, to be reclassified next year with estimated $1 billion pretax loss.

Profit before tax was $8.5 billion, up $0.9 billion or 11% on a constant currency basis compared to 3Q 2023. Revenue was $17 billion, up $1.1 billion on 3Q 2023. Banking NII was $10.6 billion, down $0.3 billion on the second quarter on a reported FX basis, but the 2024 banking NII guidance remains unchanged at around $43 billion. Fee and other income saw wholesale transaction banking up 7%, driven by global foreign exchange growth, and wealth up 32% year-on-year, its third consecutive quarter of double-digit growth. ECL charge in 3Q was $1 billion or 40 basis points of average loans.

Profit - Mid-teens return on tangible equity, excluding notable items, for 2024 and 2025. ### Banking NII - Guidance unchanged at around $43 billion in 2024, around $42 billion excluding Argentina. ### ECL - Expected to be within 30 to 40 basis points medium-term planning range. ### Cost Growth - Targeted around 5% cost growth for 2024 on a target basis.

Argentina - Hyperinflation accounting makes forecasting banking NII from quarter-to-quarter difficult. ### Market Volatility - Impact on fee businesses and net interest income. ### Regulatory - Potential impact of Basel 3.1 rules, though immaterial expected. ### Hong Kong CRE - Cash flow pressures from rates, but collateral remains good for Hong Kong CRE portfolio.

Q: On the re-organs strategy, where does Mexico fit?

A: Mexico has a good market position, with wholesale business strongly connected globally, and retail business part of International Wealth and Personal Banking.

Q: On wealth business disconnect with net new invested assets?

A: Wealth growth driven by various segments, deposits feeding into wealth share of wallets, with strong customer growth and net new invested assets in Asia.

Q: On the degree of ambition around restructuring and net interest income?

A: Reorganization aims for simpler, agile bank with cost savings, and on NII, banking NII guidance considered with factors like rates, structural hedge, reinvestment, volume growth, and time deposit migration.

Q: On transaction banking outlook?

A: Wholesale transaction banking up 7%, driven by client activity, with continued investment in Global Trade Solutions and Global Payment Solutions for growth.

Q: On ECL charges and 40 bps guidance?

A: 3Q ECL charge includes normal charges, with UK and Hong Kong components, confident of being within 30-40 bps medium-term range.

Q: On wealth management income post China policy?

A: Wealth business has underlying growth trend, with additional activity from China policy measures continuing and normalizing.

Q: On structural hedge and investments?

A: Structural hedge increased, with focus on cost discipline and strategic investments in core pillars like home markets, corporate institutional banking, and wealth for growth opportunities.

Q: On net interest margin and legacy securities?

A: Net interest margin affected by legacy securities and Argentina, with banking NII clean run rate stable; legacy securities actions taken to be accretive, no immediate plans for further redemptions.

Q: On Stage 3 loans in Hong Kong and US election risks?

A: Most Stage 3 loan increase in Hong Kong CRE due to cash flow pressures, but collateral good; US election outcomes to be seen, with focus on serving customers and complying with regulations, reorganization not related to splitting Asia business.