Our growth and transformation strategy is delivering good revenue momentum, tight cost control and improving returns.

For the period ended 30 June 2022

Highlights

• We’re increasing our returns target to at least 12% RoTE from 2023 onwards
• We expect a dividend payout ratio of around 50% for 2023 and 2024
• We intend to restart quarterly dividends from 2023 and aim for pre-Covid levels
• Adjusted operating costs were stable in 2Q22, compared with 2Q21, despite inflationary pressure and continued investment
• We took a net charge of $448m for expected credit losses in 2Q22; the quality of our loan book remains good and there are not yet any early signs of portfolio stress
• Our Common Equity Tier 1 capital ratio was 13.6% at 30 June 2022; we aim to manage back to within our 14% to 14.5% target range during 1H23

Reflections on our results (duration 2:40) Group Chief Executive Noel Quinn: “We’ve seen the positive impact of our strategy”

We’re delivering on our strategy by transforming our portfolio to focus on our strengths in areas where we have a competitive advantage, including international connectivity.

We’re accelerating growth by shifting capital into areas with the highest returns; simplifying processes and structures to improve efficiency and autonomy; and maintaining our reputation of resilience with a strong balance sheet and liquidity profile.

And we’re deploying the latest technology to digitise our operating model and enhance customer experience:

Wealth and Personal Banking’s 2Q22 adjusted revenue was up 5% vs 2Q21, benefitting from global interest rate rises and balance sheet growth.

Commercial Banking delivered a 19% rise in adjusted revenue in 2Q22 vs 2Q21, including double-digit growth in Global Liquidity and Cash Management and Trade.

Global Banking & Markets’ 2Q22 adjusted revenue was up 15% vs 2Q21, primarily in Markets & Securities Services. Our Global FX business delivered $1.1bn in revenue, up 66% vs 2Q21.

WPB has expanded its personal wealth planning service in mainland China, and digital international account opening has been launched in the US, Canada and Hong Kong and for our Expat proposition.

In CMB, HSBCnet mobile downloads increased by 7% compared with 2Q21, and we’ve been named Global Best Bank for Trade Finance in the Euromoney Awards for Excellence.

This year, GBM achieved a No.1 ranking in EMEA IPOs, according to Bloomberg Manager Rankings, and we achieved a top 5 rank in global Green, Social, Sustainable and Sustainability-linked (GSSS) bonds, according to Dealogic.

The revenue outlook remains positive. Based on the current market consensus for global central bank rates and our continued mid-single-digit percentage lending growth expectations for 2022, we would expect net interest income of at least $31bn for 2022 and at least $37bn for 2023 (based on average June rates of foreign exchange).

We continue to expect our ECL charges to normalise towards 30 basis points of average loans in 2022, recognising the possible risk of further deterioration in the consensus economic outlook.

We remain confident in our ability to deliver 2022 adjusted operating expenses in line with 2021, despite inflationary pressure. We now aim to deliver 2023 adjusted cost growth of around 2%, compared with 2022, and intend to maintain strict cost discipline thereafter.

With profit generation and continued RWA actions, we aim to manage back to within our 14% to 14.5% CET1 target range during the first half of 2023. The forecast loss on the disposal of our French retail operations is expected to impact our CET1 ratio by approximately 30 basis points in the second half of 2022.

The impact of our growth and transformation programmes over the last 2 years has given us the confidence to update our returns guidance. Subject to the current path implied by the market for global policy rates, we are now targeting a RoTE of at least 12% from 2023 onwards, noting continued macroeconomic uncertainty.

Given the current returns trajectory, we expect a dividend payout ratio of around 50% for 2023 and 2024. We also intend to revert to paying quarterly dividends in 2023, although we expect the quarterly dividend for the first three quarters to initially be reinstated at a lower level than the historical quarterly dividend of $0.10 per share paid up to the end of 2019.

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