q111/random_k2/random_1.md

HSBC Strategy Update: Return to Growth and Value Creation Investor presentation, June 2018

HSBC Strategy Update Important notice and forward-looking statements

Important notice

The information, statements and opinions set out in this presentation and subsequent discussion do not constitute a public offer for the purposes of any applicable law or an offer to sell or solicitation of any offer to purchase any securities or other financial instruments or any advice or recommendation in respect of such securities or other financial instruments.

The information contained in this presentation and subsequent discussion, which does not purport to be comprehensive nor render any form of financial or other advice, has been provided by HSBC Holdings plc and its consolidated subsidiary undertakings (the “Group”) and has not been independently verified by any person. No responsibility, liability or obligation (whether in tort, contract or otherwise) is accepted by the Group or any member of the Group or any of their affiliates or any of its or their officers, employees, agents or advisers (each an “Identified Person”) as to or in relation to this presentation and any subsequent discussions (including the accuracy, completeness or sufficiency thereof) or any other written or oral information made available or any errors contained therein or omissions therefrom, and any such liability is expressly disclaimed.

No representations or warranties, express or implied, are given by any Identified Person as to, and no reliance should be placed on the accuracy or completeness of any information contained in this presentation, any other written or oral information provided in connection therewith or any data which such information generates. No Identified Person undertakes, or is under any obligation, to provide the recipient with access to any additional information, to update, revise or supplement this presentation or any additional information or to remedy any inaccuracies in or omissions from this presentation.

Forward-looking statements

This presentation and subsequent discussion may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking statements with respect to the financial condition, results of operations, capital position, strategy and business of the Group (together, “forward-looking statements”), including the strategic priorities and 2020 financial, investment and capital targets described herein. Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant assumptions and subjective judgements which may or may not prove to be correct and there can be no assurance that any of the matters set out in forward-looking statements are attainable, will actually occur or will be realized or are complete or accurate. Forward-looking statements are statements about the future and are inherently uncertain and generally based on stated or implied assumptions. Certain of the assumptions and judgements upon which forward-looking statements contained herein are based are discussed under “Targeted Outcomes: Basis of Preparation”, available separately from this presentation at www.hsbc.com. The assumptions may prove to be incorrect and involve known and unknown risks, uncertainties, contingencies and other important factors, many of which are outside the control of the Group. Actual achievements, results, performance or other future events or conditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks, uncertainties and other factors (including without limitation those which are referable to general market conditions or regulatory changes). Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at the date the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to update, revise or supplement them if circumstances or management’s beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. No representations or warranties, expressed or implied, are given by or on behalf of the Group as to the achievement or reasonableness of any projections, estimates, forecasts, targets, prospects or returns contained herein. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report and Accounts for the fiscal year ended 31 December 2017 filed with the Securities and Exchange Commission (“SEC”) on Form 20-F on 20 February 2018 (the “2017 20-F”) and in our 1Q 2018 Earnings Release furnished to the SEC on Form 6-K on 4 May 2018 (the “1Q 2018 Earnings Release”).

This presentation contains non-GAAP financial information. The primary non-GAAP financial measure we use is ‘adjusted performance’ which is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the underlying trends in the business. Reconciliations between non-GAAP financial measurements and the most directly comparable measures under GAAP are provided in the 2017 20-F, the Reconciliations of Non- GAAP Financial Measures document and the 1Q 2018 Earnings Release which are available at www.hsbc.com.

Information in this presentation was prepared as at 10 June 2018.

2

HSBC Strategy Update Summary of the strategy

Leading international bank with platform for growth and signature balance sheet strength

 World’s leading international bank and No 1 global transaction bank  Unparalleled access to high growth markets and coverage of trade corridors between

them

 Recognised for signature balance sheet strength – foundation for future growth and a

stable dividend

Next phase of our strategy is to return the Group to growth, improve returns, and enhance customer and employee experience

 After a period of restructuring, supported by normalising interest rates and synchronised

economic growth, it is time for HSBC to get back into growth mode

 Accelerate growth in areas of strength with higher capital efficiency, in particular in Asia

and from our international network

 Leverage our size and strength to embrace new technologies over a period of disruptive

technological change. Investing USD15-17bn until 2020 primarily in growth and technology while delivering positive adjusted jaws

 Complete the turnaround in the US  Simplify the organisation and invest in capabilities for the future

As a result of these strategic priorities, the Group targets a RoTE of >11% by 2020 while delivering positive adjusted jaws on an annual basis and sustaining our dividend

3

HSBC Strategy Update Strategic priorities to deliver growth, improve returns, and enhance customer and employee experience

Strategic priorities

Financial targets

1

2

3

4

5

6

7

Accelerate growth from our Asian franchise  Build on strength in Hong Kong  Invest in PRD, ASEAN, and Wealth in Asia (incl.

Insurance and Asset Management)

Be the leading bank to support drivers of global investment: China-led Belt and Road Initiative and the transition to a low carbon economy Complete establishment of UK ring-fenced bank, increase mortgage market share, grow 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 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

8

Simplify the organisation and invest in future skills

Deliver growth from areas of strength

Turnaround of low-return businesses

Build a bank for the future that puts the customer at the centre

Empower our people

RoTE1

 >11% by 2020

Costs

 Positive jaws

(adjusted, on an annual basis)

Capital and dividend

 Sustain dividends through long-term earnings capacity of the businesses  Share buy-backs

subject to regulatory approval

1. Return on tangible equity (‘RoTE’) is calculated as reported profit attributable to ordinary shareholders less changes in goodwill and present value of in-force long term insurance business divided by average tangible shareholders’

equity. A targeted reported RoTE of 11% in 2020 is broadly equivalent to a reported return on equity (‘RoE’) of 10%; assumes a Group CET1 ratio greater than 14%

4

HSBC Strategy Update Agenda

1

2

3

Leading international bank with platform for growth and signature balance sheet strength

Next phase of strategy: Return to growth and value creation

Profitable growth to deliver RoTE > 11% by 2020

5

Leading international bank with platform for growth and signature balance sheet strength Leading international bank with a platform for growth and signature balance sheet strength

Who we are

Strategic differentiators

c.38m customers served by 229k colleagues1

67 markets Covering >90% of global GDP, trade and capital flows

#1 global transaction bank2

#1 International bank in Asia3

USD182bn Total capital4

Top 3 FTSE dividend payer5

1

2

3

Leading international bank  >50% of Group client revenue connected to the network  No 1 global transaction bank, gaining market share  Recognised by customers as leading international bank

Unparalleled access to high growth markets  Access to high growth developing markets in Asia,

Middle East and Latin America

 Investment aligned to high growth markets to deliver

shareholder value

Signature balance sheet strength  Strong capital, funding and liquidity position with

diversified business model

 Conservative approach to credit risk and liquidity

management

 Low earnings volatility  Strong capital position and intrinsic capital generation  Foundation for sustained dividend; strong capacity for

distribution to shareholders

1. Full-time equivalent as at 31 Dec 2017

2. Based on 2017 Transaction Banking product total revenue (including Payments, Cash Management, Trade Finance, FX and Securities Services) compared with US and European peers. Source: HSBC Research

3. Based on 2017 total revenue in Asia among major international and regional banks in Asia. Peers include

Standard Chartered, DBS, Citi, UOB, OCBC, Maybank and CIMB. Source: Company accounts

4. As at 31 Dec 2017
5. Total USD payout (2015-2017)

6

Leading international bank with platform for growth and signature balance sheet strength

1

Leading international bank with high return transaction banking

Leading transaction banking franchises1

FY2017, revenue, USDbn

Recognised as leading international bank

% of large corporates choosing HSBC as their lead international bank2

Leading market positions

HSBC

US Bank

US Bank

US Bank

European Bank

European Bank

European Bank

European Bank

European Bank

15.2

26%

22%

21%

#1 bank for Trade Finance3

#1 bank for FX for corporates4

Asia

US

Europe

RoTE Transaction Banking, %

20%

HSBC Transaction Banking

Transaction Banking Industry1

Banking Industry overall7

#1 bank for Liquidity and account management3

#2 bank for Emerging Markets Fixed Income6

#1 For Assets Under Custody in Asia Pacific5

53% of client revenue connected to international network

1. Revenue from GTRF, GLCM, FX and Securities Services, compared with peer equivalents.

Source: Company financial data; HSBC adjusted revenue

2. Greenwich Associates – Large Corporate Banking

3. Oliver Wyman

4. Greenwich Survey; G10 + EM countries

5. EY, based on data provided by HSBC and Tricumen

6. EM Macro; McKinsey/ Coalition

7. McKinsey

7

9%20%Leading international bank with platform for growth and signature balance sheet strength Unparalleled access to high growth markets

2

Emerging markets remain drivers of global growth

HSBC has access to high growth markets

World Nominal GDP growth, 2017-20301

Asia, Market shares2

+5.8%

Asia

Middle East

Africa

Latin America

N. America

Europe

2017

2030E

World Trade Growth, 2017-20301

+6.1%

Asia

Middle East

Africa

Latin America

N. America

Europe

CAGR

7.4%

7.4%

6.5%

6.0%

4.3%

4.6%

CAGR

7.1%

7.8%

8.0%

5.7%

4.4%

5.4%

29% Hong Kong

12% PRD4

(Share in Guangdong among foreign banks)

5% Singapore

3% Malaysia

Middle East, Market shares2

8% Saudi Arabia7

4% United Arab

Emirates

Latin America, Market shares2

8% Mexico

 Largest among international and

regional banks3

 50% of Group adjusted revenues and

75% of Group adjusted profits in 2017

 Strong foundation in China / PRD to

support future expansion

 #1 DCM in Asia5 (6% market share)  #1 in offshore RMB bond underwriting

with 28% market share6

 Leading international bank in the Middle

East8

 Ranked #1 in cash management and trade

finance9

 Well positioned for Saudi Vision 2030 and

Belt and Road Initiative10

 #1 DCM in Middle East5

 Top 5 bank in Mexico11  Wholesale network across LATAM region  An intra-regional strategy focused on

leveraging cross-border flows, including with NAFTA

2017

2030E

1. Global Insights Jan18; World trade based on imports plus exports
2. Customer deposits, based on local regulators’ data
3. Excludes Asia-Pacific based banks where majority of revenue generated in its domestic market and excludes

Japanese banks

4. CBRC/PBOC
5. Dealogic, based on 2017 full year fees

109 QFI applications approved by CMA Engagement in Saudi Arabia primarily through investment in Saudi British Bank (SABB); held as an Associate of HSBC By assets in 2017 from MENA regional bank financials Euromoney Trade Finance Survey 2018 and Euromoney Cash Management Survey 2017

10. Best International Bank for BRI in 2017 Asiamoney New Silk Road Finance Awards
11. National Commission of Banking and Securities (Mexico)

8

Leading international bank with platform for growth and signature balance sheet strength

2

Access to domestic growth in eight markets; network to connect trade and capital flows

Aspiration

Characteristics

Markets

Markets at scale

“HSBC is considered one of the leading domestic banks”

Markets as leading international bank

“HSBC is the leading international bank in the country”

 Top 5 bank, at least 3-5%

market share

 At least USD1bn revenue  Universal bank  Full participation across customer segments

 Hong Kong  UK  Mexico  PRD  Singapore

 Malaysia  UAE  Saudi Arabia1

 Leading international bank  At least USD0.5bn revenue  Wholesale bank or Universal bank with very focused retail offering (where strategic)

 Australia  Canada  China  France

 Germany  India  Indonesia  US

Markets to connect the network

“HSBC is in the country to connect foreign and local customers to our network”

 Targeted offering for

international customers

 Wholesale-focused  Branch or rep office where

possible

 Network markets to

connect trade and capital flows (e.g. Japan, Spain, Brazil)

 Supporting subsidiaries of

global customers

% of adj. revenue

FY17

c.60%

c.25%

c.15%

1. Engagement in Saudi Arabia primarily through investment in Saudi British Bank (SABB); held as an Associate of HSBC

9

Leading international bank with platform for growth and signature balance sheet strength

3

Signature balance sheet strength

Strong balance sheet, FY2017, USD (unless otherwise stated)

Low-risk model with stable earnings, 2017

Customer accounts

Balance Sheet

Loans & advances to customers

Total equity

1.4tn

1.0tn

198bn

Total regulatory capital

182bn

Capital

Leverage ratio

Total capital ratio

5.6%

20.9%

Advances to deposits ratio

71%

Funding and liquidity

Liquidity coverage ratio

142%

10 year PBT volatility2

LICs / loans and advances3

Advances to deposits ratio

Leverage ratio

Total capital ratio

Liquid asset buffer

500bn

CET1 ratio

Peer group average1

2.6x

HSBC

1.0x

5.5%4

Source: HSBC and peers’ public filings, Bloomberg, Factset

1. Average calculated based on 2017 published figures by the following peers: Barclays, BNP, Citi, DBS, Deutsche Bank, ICBC, Itau, JP Morgan, Santander, Standard Chartered, BoAML; ICBC not included in CET1 ratio
2. Calculated as range of reported PBT divided by average reported PBT from 2008 to 2017
3. Represents gross loans and advances to customers Leverage ratio not disclosed by ICBC and Itau

10

0.9%0.2%13.0%14.5%82%71%5.6%17.1%20.9%HSBC Strategy Update Agenda

1

2

3

Leading international bank with platform for growth and signature balance sheet strength

Next phase of strategy: Return to growth and value creation

Profitable growth to deliver RoTE > 11% by 2020

11

Strategic priorities Completing period of transformation; platform for growth

Transformation since 2011

Next phase of strategy: Return to growth and value creation

 Divested or exited 110 businesses and geographies, reducing Group footprint from 87 countries to 67

 Reduced Risk Weighted Assets by

USD349bn or 29%1

 Globalised the organisation around 4 Global Businesses, supported by Global Functions

 Introduced robust financial crime risk management capabilities

 Invested USD7bn “Costs to Achieve”

to realise cost efficiencies of USD6.1bn p.a. from our global platform and built digital capabilities

 Shifted business to Asia and

faster-growing markets with Asia representing c.50% of Group revenue and c.75% of Group profits2

 Strengthened network to support

global trade and capital flows

 Demonstrated ability to execute

Deliver growth from areas of strength

Growth

Turnaround of low-return businesses

Turnaround

Build a bank for the future that puts the customer at the centre

Customer

1

2

3

4

5

6

7

Accelerate growth from our Asian franchise, and Insurance and Asset Management in Asia Be the leading bank to support drivers of global investment: China-led Belt and Road Initiative and the transition to a low carbon economy

Complete establishment of UK ring-fenced bank, increase mortgage market share, grow 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 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

Empower our people

8

Simplify the organisation and invest in future skills

Our People

1. Period 2015-17
2. Adjusted basis

12

Strategic priorities

1-3

Targeting revenue opportunities in high growth areas with returns well above cost of equity

Revenue (reported), USDbn, 2011-2020

Targeting revenue opportunities in high growth areas with returns well above cost of equity

CAGR -8%

72.3

mid single digit growth, p.a.

+7%

51.4

48.0

2011

2016

2017

2020 Target

1. ROE including PVIF

Market Growth

Size represents targeted revenue growth, 2017-2020; equal to c.USD1bn

Low carbon economy/ Sustainable Finance

Asia Wealth

Asset Management (Asia)

Belt and Road

Insurance (Asia)1

ASEAN

PRD

UK Ring-fenced Bank

Hong Kong

Transaction Banking/ International network

5.8% (World Nominal GDP Growth)

Cost of Equity

RoTE

13

Strategic priorities

1

Accelerate revenue growth in Asia

3bn

1bn

0.2bn

Franchise in Asia (reported, ex BoCom)

Opportunities and areas of investment

Targeted revenue growth by 2020

USD

PBT, 2017 USDbn

11.4

7.5

A

Build on strength in Hong Kong

 Capture growth in targeted segments  Enhance customer experience  Capitalise on China outbound investments

Revenue, 2017 USDbn

Hong Kong (RBWM and CMB)

Hong Kong (GB&M, GPB and Corporate Centre)

ASEAN

China

India

Australia

Other Asia

4.7

3.1

PRD

0.2

2.4

2.4

0.9

0.9

2.1

1.2

0.5

0.9

0.4

0.8

B

Develop a leading business in the Pearl River Delta  Serve emerging middle class  Facilitate industrial up-grade and cross-border connectivity  Expand new business capabilities by further developing

technology in PRD

C

Build leading Wealth Management business

 Capture growth in financial wealth in Asia  Build leading wealth business, particular focus on Greater

China and ASEAN

 Grow insurance to address the protection gap  Enhance Asset Management to serve retail / institutional

clients

D

Expand our business in ASEAN

 Continue to build regional product and coverage expertise

to capture opportunities from Singapore’s role as a regional hub for treasury and wealth

 Support intra-ASEAN business corridor flow  Capture infrastructure opportunity (including BRI)  Targeted digital investments to enhance position

14

Strategic priorities

1A

Build on strength in Hong Kong

HSBC’s market share has been steady over the years…

Opportunities and areas of investment

Total banking assets in Hong Kong1, USDtn

HSBC market share, %

USD0.9tn

USD2.9tn

10%

CAGR 2005-17

24%

2005

10%

Asset growth

25%

20172

Leading market share across major products2

…with leading positions across major products3

Customer accounts

Loans and advances to customers

DCM

#1

#1

#1

Mortgages

37%

#1

Credit cards

40%

Trade finance

#1

Capture growth in targeted segments

Enhance customer experience

Capitalise on China outbound investments

 Grow millennials client base to build customer generation for the future  Enhance proposition for Non Resident

Chinese customers

 Invest in insurance for sustainable

market share growth

 Develop digital payment ecosystem  Build new capabilities in Business

Banking

 Explore partnerships to launch

innovative solutions

 Capture new growth opportunities with

China, in particular: – Belt and Road Initiative – International activities of Chinese

corporates and financial institutions – Greater Bay Area / Pearl River Delta – Sustainable Finance/ Hong Kong as

Green Financial Centre – RMB Internationalisation

1. HKMA, Annual Report 2017
3. HKMA announcements, Bloomberg, mReferaln 2017 and HSBC internal data; HSBC including Hang Seng. Mortgages - new sales count, legal mortgages; Loans – loans for use in Hong Kong; DCM - G3 currency bonds, Asia

25% asset market share; 29% deposit market share

15

excluding Japan

Strategic priorities

1B

Develop a leading business in the Pearl River Delta (PRD)

HSBC’s business in PRD has grown steadily

Opportunities and areas of investment

USDbn

Revenue

0.18

2014

0.22

2017

USD1bn

c.0.5

2020 target

Medium- term target

Loans & advances to customers

20bn

4.1

6.2

10bn

2014

2017

2020 target

Medium- term target

 First JV securities company: majority-owned by a foreign bank

in China, opened for business in December 2017

 Headcount: >700 FTE increase in 2017; more than doubled

since project launched in June 2015

 Credit cards: Launched first HSBC sole-branded credit cards in December 2016; total cards in force number: c.280k in PRD as of April 2018

 Grow and enhance distribution network / access to customers  Broaden product offerings and accelerate quality asset growth  Capture cross-border wealth flows, e.g. opportunities from remittances, Shenzhen-Hong Kong Stock Connect

 Enhance corporate coverage to

capture growth from international supply chains and industrial upgrading

 Broaden client base and drive for

deposit-heavy product mix

Emerging Middle Class

Industrial up- grade / cross- border connectivity

 Fully leverage capital market

capabilities of new Securities Joint Venture HSBC Qianhai Securities  Expand Global Markets capabilities arising from policy liberalisation

New business capabilities

16

Strategic priorities

1C

Asia expected to be the largest creator of wealth

Rising wealth in Asia

Private financial wealth1, USDtn

2016-21E CAGR

223

Middle class in Asia2

of people, bn

2.5x

152

E. Europe

L. America

MENA

N. America

34%

W. Europe

25%

Japan

10%

Asia ex Japan

21%

166

33%

24%

9%

23%

33%

5.6%

Average household annual income3

2015

2030E

USD‘000

2.3x

22%

3.5%

7%

1.7%

28%

9.9%

2017

2030E

HNWI financial wealth4

USDtrn

2.0x

2014

2016

2021E

1. BCG Global Wealth 2017
2. Global Economy and Development: The Unprecedented Expansion of the Global Middle Class, 2017
3. Euromonitor, disposable income by household
4. Capgemini: Asia Pacific Wealth Report, 2017

2017

2025E

17

3.51.432.614.542.120.8Strategic priorities

1C

HSBC is well-positioned to build a leading wealth business in Asia

USD1bn

0.4bn

0.1bn

Wealth in Asia already a USD5.1bn business for HSBC today

Revenue (reported) in USDbn, Asia, 2017

Opportunities and areas of investment

Targeted revenue growth by 2020

USD

Wealth in Asia

Private Bank

RBWM Wealth

Insurance1

Asset Management1 0.3

Includes manufacturing revenue only

Wealth management (across Private Bank and RBWM)

 Hong Kong: Increase share in UHNW segment across Greater

China

 Singapore: Accelerate client coverage / RM growth across all segments including ASEAN new-to-bank / referred clients, and Chinese offshore wealth

0.7

 China: Primary focus on Jade build-out underpinned by

investment in RM and product platform

 Product: Leverage transactional banking, digital, discretionary

portfolio management and lombard lending

Insurance

 Develop product range to address the needs of new wealth

customers, and strengthen front line

 Deepen existing insurance specialist coverage, and open up new

distribution channels

 Exploring opportunities in mainland China

Asset management

 Leverage coverage of GB&M / CMB clients  Increase share of wallet and net new money growth via RBWM /

GPB customers

 Growth in Alternatives and Sustainable Investing  Exploring opportunities in mainland China

18

2.41.85.1Strategic priorities

2

UK presents an opportunity for growth after successful completion of ring-fencing

USD1bn

0.4bn

0.1bn

Targeted revenue growth by 2020

USD

Ring-Fenced Bank setup close to completion

Opportunities and areas of investment

 HSBC is positioned for

sustainable growth; 14% deposit market share1 and a 7% mortgage market share2

 UK ring-fencing remains on track ahead of the July 2018 legal separation - six months ahead of the regulatory deadline:

– On the 21 May 2018, the High Court approved the UK Ring- Fenced Transfer Scheme

– More than 95% of technical

and IT related transfers have already been successfully completed

Retail banking

 Target mortgage growth (high single digit) by

embedding controlled intermediary channel expansion3

 Enhancing the multi-brand strategy to drive growth

and acquire new customers

 Leverage our unique global access to support

commercial customers’ trade and overseas banking needs

Corporate banking

 Improve penetration of mid market segment through additional on-boarding capacity and renewed focus on ‘fast growth cities or sectors’

 Improve CRM and data analytics to drive better value segmentation of clients (in particular Business Banking)

Digital and customer satisfaction

 Target a consistent top 3 position in the UK for

customer satisfaction, via journey improvements, digital investment and simplification

 Capitalise on AI, Data analytics and Open Banking to develop immersive customer experiences (e.g., Connected Money app)

 Grow collaboration opportunities across business lines

and brands

1. Source: CACI Retail Finance Benchmark, 2017
2. Source: Council of Mortgage Lenders (CML), 2017
3. No change in risk appetite

19

Strategic priorities

3

Proven ability to grow the business and gain market share; invest for growth from our international network

USD1bn

0.4bn

0.1bn

Investments are delivering

Opportunities and areas of investment

Targeted revenue growth by 2020

Global Trade and Receivables Finance

Trade Finance rank1

Hong Kong market share2

2015

2017

#1

#1



10.8%

13.8%

Global Liquidity and Cash Management

Average GLCM balances

c$470bn

c$530bn

Hong Kong market share3

22.8%

26.3%

FX corporates rank4

FX institutional rank4

#1

#7



#1

#3

Assets under custody

$6.2trn

$7.7trn

FX

Securities Services

Digitise and grow Trade Finance

 Transform technology and business model, enabling simpler, safer and faster experiences for clients, and seamless communication with trade ecosystems

 Capitalise on growth outlook for structured trade by

investing in our channel and product capabilities

 Extend No 1 position in both traditional and structured

trade

Strengthen global leadership position in GLCM

 Drive sustained deposit and transaction growth by

leveraging API and cloud to transform payments, liquidity and data propositions

 Create new products and revenue streams - new

propositions powered by machine learning, offsetting competitive pressures in traditional fees

FX business growth

 Grow the business through the continued development

of ‘FX as a service’ engagement model

 Utilise technology to deliver efficiencies and digitise

the customer experience

Grow Securities Services business

Market share5

5.4%

5.8%

 Evolve business by enhancing and develop products

Asia rank6

#1

#1

1. Oliver Wyman
2. Hong Kong Monetary Authority
3. Oliver Wyman
4. Greenwich Survey

and services; invest in digital future



 Grow core business with Group clients, focus on

asset managers and asset owners

5. Based on AUC of Top 9 providers (BM, SS, JPM, Citi, BP2S, SG, NT, RBC, HSBC) making

up c.82% of the market

6. Assets Under Custody (AUC), EY, based on data provided by HSBC and Tricumen

20

Strategic priorities

4

The US is the single biggest exporter of revenue to the Group and an important part of HSBC’s proposition as leading international bank

US biggest exporter of client revenue to the Group Cross-border GB&M and CMB client revenue1, 2017, USDbn

Outbound client revenue: client revenue booked outside of the country where client is managed

Client revenue from US-managed companies booked outside US

2

1

0

US

UK

China

France

% of Group client outbound revenue

Hong Kong

24%

13%

9%

6%

6%

Significant for HSBC’s global franchise

USD represents 68% of payments volume for HSBC2

HSBC top 5 cross-border USD clearer3

c.19% of HSBC custody assets denominated in USD

Other

32%

51%

68%

USD

JP Morgan

Citigroup

Bank of America

HSBC

BoNY Mellon

c.19%

Overall

Hong Kong

Germany

UK

1. Client revenue is sourced from HSBC internal client MI. Client revenue excludes Business Banking and differs from reported revenue
3. Clearing House Interbank Payments System (CHIPS)

Internal HSBC data and SWIFT

21

16%16%29%9.2%10.4%16.2%17.1%9.4%Strategic priorities

4

Significant progress to date; targeted organic growth to bring scale to US platform

The US has made progress over the past several years…

…and our medium-term strategy is built on continued organic growth

Adjusted PBT1, USDm

RoTE2

6%2

1,201

974

CML

US Principal

464

494

737

920

556

387

2014

2015

2016

2017

0.9%2,3

2017

PBT growth

Future capital actions

2020

Capital reductions completed & Tax reform

 Completed run-off of the CML legacy portfolio; reduced receivables from USD24bn at end-2014 to USD0bn at end 2017

 Improved RBWM PBT, revenue and deposits; migration

of >1mn customers to new core banking platform; launched CMB returns improvement and infrastructure rebuild

 Achieved non-objection to US capital plan as part of CCAR in 2016 and 2017; first return of capital to the Group (USD5.4bn) since 2006

 International client revenue4 booked in the US up

c.10% YoY; US client revenue booked outside of the US (outbound) is up c.15% YoY

 Improved profitability driven by global business organic growth in:

– CMB: Targeting greater share in corporates, particularly

international mid market companies and subsidiaries, through increased coverage and sector focus; supported by selected cash management and lending product expansion

– RBWM: Targeted growth within international segment and higher-

return products and business banking

– GBM: Sector coverage and greater share of foreign multi-national

clients in the US

 Further efficiency gains to help fund reinvestments; invest in

innovation leveraging Group technology solutions

 Return to regular dividend payments to Group

1. US geographic basis
2. HSBC North America Holdings (‘HNAH’) legal entity basis. Reported RoTE for 2017 was -4.3% and included a 5.2% adverse impact from the one time write down of deferred tax assets due to US Tax Reform
3. Principal Business RoTE for 2017 excluding the one time write down of deferred tax assets due to US Tax Reform, CML and deferred tax assets disallowed for capital purposes would be 2.2%
4. Revenue from international clients is derived from an allocation of Adjusted revenue based on internal management information. International clients are businesses and individuals with an international presence; YoY growth refers

22

to 2017

Strategic priorities

5

HSBC has a strong track record in delivering RWA reductions while growing revenue; plans to further improve capital efficiencies

RWA mix by Global Business

Group RWAs, USDbn

-29%

1,220

c.1-2% p.a.

Initiatives

 Embed RoTE in

Global Businesses and operating entities

 Link incentives to value creation

RoTE implementation

871

GB&M

34%

CMB

35%

RBWM GPB Corp Centre

14% 2% 15%

c.30%

To support mid- single digit revenue growth

c.35%

Distribution

15-20%

2020 target

c.7%

RWA optimisation

 Develop distribution

channel and increase distribution for wholesale lending

 Free up capital/ balance sheet capacity and deploy to higher return business/clients

 Operating entity RWA

optimisation  Improve global booking model

2014

5.0%

Rev as % of RWA1

2017

RWA saves

Business growth

5.9%

1. Calculated using reported revenue and reported average RWAs. The increase between 2014 and 2017 includes the RWA impact of the 2016 change in the regulatory treatment of our investment in BoCom

23

Strategic priorities

6

Maintain strong cost discipline, deliver positive jaws and create capacity for increased investment

Create investment capacity and deliver overall positive adjusted jaws on a full year basis

Adjusted basis, USDbn

Mid single digit growth, p.a.

Low to mid single digit growth, p.a.

Investments of USD15-17bn (2018-2020)

 Ability to invest is a prerequisite for the Group’s long-term

competitiveness

 Investments aligned to strategic priorities

 Managed through a strong approval and prioritisation framework to deliver payback in the near to medium term

 Ability to respond to changes in economic environment and

31.1

c.4

4.5-5

5.5-6

6-6.5

revenue development

 No CTA2 in strategic plan; all investments to be made from

within the cost base of the Group

Revenue

Total operating expenses

Investments

Costs (ex investments)

Strong cost discipline and control to create investment capacity

 Implement strong cost discipline and control

– Continue to benchmark our costs with the market

– Absorb inflation through productivity gains

– Maintain focus on improving business productivity

 Maintain positive (adjusted) jaws on an annual basis each

year 2018-2020

2017

2018

2019

2020

Jaws1

positive

positive

positive

positive

1. Adjusted, on an annual basis
2. Costs to Achieve

24

Strategic priorities

7

Investing in growth and technology; managed through robust investment framework

Investment categories

Description

Investment criteria

Examples of specific initiatives

Share of investment

Near term investments in core business

 Investments to grow, improve customer service and defend competitive position of established businesses in short term

 Positive Return on Investment in financial year1

 Investments across Global Businesses to

grow and improve customer service across core businesses (e.g. hiring Wealth RMs in Hong Kong)

 Positive Return on Investment over 2-5 years1

 Transaction Banking platform

transformation (e.g. build new payment and liquidity platform)

c.2/3

 Investments to grow revenue or increase returns in the medium term (e.g., selected business turnaround, product enhancements)

 Investments in new

opportunities

 Improve operational

efficiency in order to lower cost base

 Positive Return on Investment broadly in financial year1

 Deliver robust solution design

with additional franchise benefits

 Turnaround of existing businesses

(e.g. US)

 Investing in expanding our businesses

(e.g. PRD)

 Productivity programmes

(e.g. process re-design, cloud migration, use of robotics and machine learning initiatives in operations)

 Core infrastructure replacement or

modernisation (e.g. US)

c.1/3

 Implement required

 Deliver in cost

 Implement regulatory programmes

regulatory programmes and invest in cyber security

effective manner with additional franchise benefits

(e.g. IFRS 9)

 Strengthen capabilities to manage

financial crime risk

 Increase cyber security measures

Total cumulative investment over 2018-2020

USD15-17bn

Medium term investment in core business and new opportunities

Investment in productivity programmes and core infrastructure

Regulatory and mandatory investments, including service sustainability

Leverage technology to enhance customer centricity and customer service, expand the reach of HSBC and safeguard our customers

1. P&L basis

25

Strategic priorities

8

Simplify the organisation and invest in future skills

Reducing organisational complexity  Simplifying the organisation

Simplifying processes  Improving end-to-end

processes, e.g.

• Client onboarding from 65 days

 Strengthen accountability, decision-

to 10 (Private Banking)

making

 Clarify roles within the organisation’s

matrix

• Lending: Reduce time to money from up to 2 months to 1 day for SME and mid market clients

• Delivering more digital features faster; 67 features delivered in 1H18 v. 22 in 1H17

 Building capabilities for continuous

improvement

Streamlining governance

 Reducing number of

committees needed to manage the business, e.g. Holdings Board committees reduced from 7 to 5

 Improving the efficiency and effectiveness of governance

 Embed throughout the organisation

and for all legal entities

A leadership encouraging the right behaviours  A connected leadership



cadre committed to reinforcing our new ways of working

 Balanced scorecards to incentivise

the right performance and behaviours from the leadership and across the organisation

Investing in training and development  Establishing HSBC Universities in UK, China, Mexico, UAE, and online

 Areas of focus:

Leadership

Technical capability

• Digital & Future Skills

Building a platform for future talent  Established HSBC

Digital Solutions to attract and develop technology talent  Implementing agile ways of

working across large parts of technology and business teams  Access to digital training and

resources allowing talent to shape and develop their own career paths

 Build a diverse workforce

26

Strategic priorities Deliverables for strategic priorities by 2020; continue to provide regular progress updates

Strategic priorities

Targeted outcome by 2020

1

2

3

4

5

6

7

Accelerate growth from our Asian franchise  Build on strength in Hong Kong  Invest in PRD, ASEAN, and Wealth in Asia (incl. Insurance and

 High single digit revenue growth p.a. from Asian

franchise

 Market share gains in 8 scale markets

Asset Management)

Be the leading bank to support drivers of global investment: China-led Belt and Road Initiative and the transition to a low carbon economy

 No 1 international bank for BRI  USD100bn in sustainable financing & investment1

Complete establishment of UK ring-fenced bank, grow mortgage market share, grow commercial customer base, and improve customer service Gain market share and deliver growth from our international network

 Market share gains

 Mid to high single digit revenue growth p.a. from

international network

 Market share gains in Transaction Banking

Turn around our US business

 US RoTE >6%

Improve capital efficiency; redeploy capital into higher return businesses

Create 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

 Increase in asset productivity

 Positive adjusted jaws, on an annual basis,

each financial year

 Improve customer satisfaction in 8 scale markets2

8

Simplify the organisation and invest in future skills

 Improved employee engagement  ESG rating: ‘Outperformer’3

1. Commitment by 2025; on track to deliver 2025 target (see HSBC ESG Update November 2017)
2. Top 3 or improvement by 2 ranks; measured by customer recommendation for RBWM and customer satisfaction for CMB amongst relevant competitors
3. Based on Sustainalytics

27

HSBC Strategy Update Agenda

1

2

3

Leading international bank with platform for growth and signature balance sheet strength

Next phase of strategy: Return to growth and value creation

Profitable growth to deliver RoTE > 11% by 2020

28

Profitable growth to deliver RoTE > 11% by 2020 Path to achieve >11% RoTE by 2020

Reported RoTE walk1

%

8.7

6.8

2017 Reported

Sig items

2017 ex- sig items

Interest rate rises2

UK growth

Accelerate growth in Asia, BRI, Sustainable Finance

Growth from the inter- national network

US turn- around3

Investments

Other4

ROE Reported

5.9%

Interest rate rises separated from other performance improvements

1. Bars in chart are illustrative and not to scale
3. Changes in equity consolidated in ‘Other’
5. Subject to regulatory approval

Include LICs/ECL normalisation, profits and equity from rest of the Group, DTA write-off in US in 2017 and significant items

Revenue growth supported by increasing capital and cost efficiency

 Investing USD15-17bn primarily in growth and technology

11

 Delivering positive

adjusted jaws

 Increasing capital

efficiency, limited RWA growth to 1-2% and increasing asset productivity

 Sustaining dividend,

supported by share buy- backs5

 With >14% CET1 ratio

2020 Reported (target)

10%

29

Profitable growth to deliver RoTE > 11% by 2020 Strong capital base to support future growth and shareholder distribution

Group capital ratio above 14% over period of strategic plan1

Strong capital base to support growth and returns to shareholders

Local CET1 ratio at legal entity level2

12-13%

Surplus equity3

c.USD5bn at 31DEC17

Support asset growth in strategic priorities Capital required to support growth in Global Businesses

Maintain strong balance sheet CET1 ratio greater than 14% Meet Basel III Reform requirements globally

Higher RWAs under local rules driven by greater use of standardised approaches and local calculation differences4

Includes risk diversification benefits and other structural items

Increasing capital requirement under stress testing

Deliver 11% RoTE on a higher capital base

Potential impact from Basel III reform and other regulatory changes

14%

Sustain dividends, continue equity buy-backs Share buy-backs as and when appropriate, subject to regulatory approval

e r u t c u r t s p u o r G y b n e v i r D

s r o t c a f

l a n r e t x e

m o r f s k s i R

Higher risk weights under local rules

Diversification benefit / other

Stress testing

Anticipated regulatory changes

Group consolidated CET1 ratio

1. Bars in chart are illustrative and not to scale
2. This represents a weighted average of legal entity CET1 ratios on a local basis
3. Surplus equity is equity held in excess of HSBC risk appetite in major operating entities that cannot be released immediately given local restrictions. Released over time or used to support growth

Including the application of national discretions, including RWA floors, and the extent of Basel III adoption by local regulators

30

HSBC Strategy Update Conclusion

 HSBC is the leading international bank with unparalleled access to the highest

growth markets

 After a period of restructuring, supported by normalising interest rates and

synchronised economic growth, it is time for HSBC to get back into growth mode

• Accelerate growth in areas of strength with higher capital efficiency, in particular

in Asia and from our international network

• Leverage our size and strength to embrace new technologies over a period of disruptive technological change. Investing USD15-17bn until 2020 primarily in growth and technology while delivering positive adjusted jaws

• Complete the turnaround in the US

• Simplify the organisation and invest in capabilities for the future

 The Group will return to value creation, targeting a RoTE of >11% by 2020 while

delivering positive adjusted jaws

 Our signature balance sheet strength supports future growth and is the foundation for

sustained dividends

31

32