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

6.
7.
8.
9.
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
4.

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
2.
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

1.

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
2.
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
2.
3. Changes in equity consolidated in ‘Other’
4.
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
4.

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