HSBC HOLDINGS(US:HSBC)2021-10-25 10:51Financial Data and Key Metrics Changes - The company reported pre-tax profits of $5.4 billion, up 76% from the previous year's third quarter, with an annualized return on tangible equity of 9.1% for the year to date [9] - Adjusted revenues were down 1% year-on-year but up 1% excluding certain volatile items, indicating a return to more consistent top-line growth across most business lines [9][10] - Expected credit losses (ECL) were a net release of $659 million, marking the third consecutive quarter of net releases, with total net releases for the year to date amounting to approximately $1.4 billion [9][10] Business Line Data and Key Metrics Changes - In Wealth and Personal Banking, revenues were down 3% year-on-year, but excluding insurance market impacts, revenues grew by 7% due to higher fee income in Asset Management and Private Banking [14] - Commercial Banking revenues increased by 4%, driven by higher fee income across all products and growth in trade lending and deposit balances [14] - Global Banking and Markets saw revenues decrease by 3% due to slower customer activity in fixed income markets, although equities benefited from higher client activity and volatility in Asia [15] Market Data and Key Metrics Changes - In Asia, revenues were up 7% quarter-on-quarter and 5% year-on-year, indicating strong underlying revenue trends [13] - In the UK, ringfenced bank revenues increased by 2% quarter-on-quarter and 6% year-on-year, with fee income up 25% compared to the third quarter of the previous year [13] - Trade balances grew approximately 18% to 20% year-on-year, reflecting strong demand for trade finance amid global economic uncertainty [50] Company Strategy and Development Direction - The company announced a $2 billion share buyback, reflecting a commitment to return capital to shareholders as revenue normalizes [5][11] - The acquisition of AXA Singapore was highlighted as a strategic move to enhance product and distribution capabilities in a key market [5] - The company is focused on sustainable finance initiatives, including partnerships aimed at accelerating the low carbon transition [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about turning the corner on revenue growth, with expectations of interest rate rises contributing positively to net interest income [8][16] - The outlook for 2022 includes sustained revenue growth driven by loan growth and improved net interest margins, despite inflationary pressures on costs [19][22] - Management remains cautious about potential second-order risks from the Chinese real estate market but is confident in the overall exposure [46][51] Other Important Information - The company expects adjusted costs for 2021 and 2022 to remain stable at around $32 billion, influenced by inflationary pressures and ongoing investments [19] - The core Tier 1 ratio improved to 15.9%, with a target to normalize it to 14% to 14.5% by the end of 2022 [20][22] - The company has helped issue $170 billion in green bonds year-to-date, reinforcing its commitment to sustainability [13] Q&A Session Summary Question: Buyback metrics and future buybacks - Management indicated that the $2 billion buyback reflects a stronger capital position than anticipated, driven by higher profitability and lower ECLs [30] Question: Cost outlook and M&A impact - The increase in costs includes approximately $300 million related to M&A, with inflationary pressures and higher compensation being significant factors [32] Question: Revenue outlook and net interest margin - Management noted that while interest rate rises are expected to boost revenue, the core business is already experiencing strong growth [64] Question: Trade performance and global trade outlook - Management highlighted strong growth in trade finance, driven by increased demand amid global economic uncertainty [50] Question: China real estate exposure - Management reassured that direct exposure to troubled developers is limited, and they are closely monitoring potential second-order risks [46][51]