TIDMHSBA
RNS Number : 6045Y
HSBC Holdings PLC
05 May 2023
5 May 2023
HSBC HOLDINGS PLC - AGM STATEMENTS
At the Annual General Meeting of HSBC Holdings plc, held at The
Eastside Rooms, Birmingham, UK today, the following statements were
issued by Group Chairman, Mark Tucker and Group Chief Executive,
Noel Quinn.
Group Chairman's Statement:
Before I ask Noel Quinn, our Group Chief Executive, to comment
let me first provide a few reflections on some key areas.
First, I would like to comment briefly on the external
environment.
So far this year we have seen continued economic volatility and
difficulties faced by some banks largely caused by higher interest
rates.
Central Banks' rate increases going forward are likely to
moderate in order to maintain financial markets stability.
A consequence of this is that inflation is likely to prove more
stubborn, reinforced by 'net looser' monetary policy impacting
global growth.
However, at the same time China's re-opening has provided a
renewed vigour to both global demand and supply.
The Chinese economy has recovered faster than expected with a
4.5% year-on-year increase in GDP in the first quarter. Our
economists now estimate the country's economy will grow by 6.3% in
2023.
In recent weeks, I have seen first-hand the strong economic
recoveries underway in both Hong Kong and China.
And with energy prices on their way down, notably across Europe,
one of the major growth 'headwinds' seems to be easing.
Major Western economies have shown great resilience and appear
to have avoided recession although growth will be slow.
Other encouraging signs are coming from the Middle East, where
activity is expanding at a robust pace.
However there remain significant headwinds.
Most obviously, inflation is still high and there are serious
pressures on the cost of living.
Even though headline inflation rates are falling in most
countries, they are still persistently high in markets like the UK
with 'core' inflation rates still elevated.
History tells us that fighting inflation is not easy
particularly in an environment of heightened geopolitical and
financial stability risks.
But we also know from history that price stability is a
necessary condition for lasting prosperity.
And this is why I remain confident that inflation will, over
time, be tempered.
On the global banking sector specifically.
After the recent collapses of three US banks and the takeover of
Credit Suisse, the share prices of all banks have been
suppressed.
I do not believe the issues experienced by these banks represent
a systemic risk but the market has yet to settle.
The banking sector as a whole is well capitalised, profitable
and has good liquidity.
Specifically, HSBC has a strong balance sheet, good liquidity,
good profitability and good diversity of earnings.
I have full confidence in our ability to navigate ongoing
uncertainty and in many respects, this combined with the nature of
the global economic recovery reaffirms the importance of HSBC as a
global bank.
Let me now talk briefly about how our strategy is delivering
improving performance.
We set out our strategy three years ago because it was clear to
the Board that HSBC was underperforming.
There were fundamental issues that needed to be addressed
including uneven performance and inefficient use of capital.
As you have seen from our recent results over the last few
years, our strategy is delivering much stronger financial
performance.
Last year, adjusted profits were up 17%.
Our reported return on tangible equity was 9.9%, or 11.6% on an
adjusted basis.
And there was good, broad-based profit generation.
This is the biggest change to your Bank compared with three
years ago.
In 2019 our profits were concentrated in the UK and Hong Kong
and our businesses in the US and Europe were loss-making.
Today, the UK and Hong Kong are still performing very well and
we continue to invest in them.
But we now have profitable businesses in Continental Europe and
the US which together contributed more than US$3bn of adjusted
profit.
In addition the total amount of adjusted profit contributed by
Asia excluding Hong Kong and China was more than US$4bn in 2022
which was an increase of 23% compared to 2019.
Outside Asia, the Middle East generated US$1.8bn of adjusted
profit last year.
We also posted strong first quarter results on Tuesday this
week.
Noel will go into the details but they underline the good
momentum that we have built across our business and that our
strategy is delivering improving performance and dividends.
We are committed to ensuring that this upwards trajectory for
our profitability and your dividends continues.
Moving on - to the positive impact that our strategy and
performance are having on your dividends.
We completely understand the importance of dividends to all our
shareholders and are committed to ensuring that you benefit from
our improved performance.
In 2022, the dividend was 32 cents per share which was an
increase of 28%.
Earlier this week, we announced our first quarterly dividend
since 2019 of 10 cents per share.
As I said last year, our plan - if delivered - would lead to
higher dividends for 2023 and 2024.
Again, Noel will talk more about this but we expect to have
substantial distribution capacity in the years ahead.
On top of this we will consider a special dividend of 21 cents
per share to be paid in the first half of 2024 subject to the
completion of the sale of our banking operations in Canada and
necessary approvals.
However, we are not complacent and our focus remains on
executing our strategy so we can deliver the returns that we all
want to see, which is very good news for you, our loyal
shareholders.
Finally, let me turn to the business before us today at our
AGM.
Full details of all the resolutions being tabled before you are
contained in the Notice of Meeting but let me say a brief word on
some of the resolutions.
Resolutions 3(A) to 3(L) concern the election and re-election of
Directors.
Over the past year, two new independent non-executive Directors
have joined the Board along with our new Group Chief Financial
Officer.
Geraldine Buckingham joined on 1 May 2022. Geraldine is a highly
regarded and widely experienced executive within the global
financial services industry and she brings significant Asia
leadership experience to the Board.
Kalpana Morparia joined on 1 March 2023. Kalpana has deep
banking expertise and experience of the Asia region, particularly
in India and Southeast Asia, which will be a great asset to the
Board.
Georges Elhedery assumed the role of Executive Director and
Group Chief Financial Officer on 1 January 2023.
Georges is an exceptional leader with strong experience of
leading a global business and a major geographic region, a track
record of driving growth while maintaining tight cost discipline
and a strong focus on execution.
Georges replaced Ewen Stevenson who stepped down from the Board
on 31 December 2022. I would like to thank Ewen for all he has done
for the Bank. His leadership, financial expertise and operational
rigour were invaluable to HSBC, and we send him our very best
wishes for the future.
On 14 February 2023, we announced that Jack Tai would retire
from the Board at the conclusion of this year's AGM.
Let me pay tribute to Jack - who has made a significant and
lasting contribution to the success of HSBC during his time on the
Board, particularly in the strengthening of risk and conduct
governance and oversight through a significant period of
change.
We wish him the very best with his future endeavours and thank
him for all that he has done for HSBC.
These changes mean that subject to the election and re-election
of Directors today, your Board will comprise myself as
non-executive Chairman, two executive Directors and nine
independent non-executive Directors.
Three resolutions have been tabled by shareholders - resolutions
16, 17 and 18.
Resolution 16 was requisitioned by shareholders on behalf of the
Midland Clawback Campaign and is essentially another approach to an
issue that the Board has carefully considered and which has
previously been overwhelmingly rejected by shareholders at
AGMs.
We fully understand that this is a very important issue to those
members of the Midland Clawback Campaign but our position has
consistently been, and remains, that removal of the State Deduction
feature would constitute a retrospective change that would benefit
a particular group of members and would be unfair to other HSBC
Pension Scheme members.
We recommend that you vote against this resolution.
Resolutions 17 and 18 are new and were tabled by a group of
shareholders represented by Mr Lui Yu Kin.
They propose strategy and structural reviews for your Bank and
to restrict your Board's ability to set the dividend.
We have considered these carefully and fully, and I would like
to address them directly.
First, the strategy and structural review resolution.
Last year, and with the benefit of expert advice from third
parties, the Board considered a wide range of alternative
structural options for your Bank, in some depth.
We concluded that the alternative structural options would
materially destroy value for shareholders, including putting your
dividends at risk.
This remains our unanimous view today.
HSBC was founded to be a global bank serving East and West and
the many points in-between.
Connecting the world's biggest trade and investment blocs for
our customers remains what we do best today.
We are the world's leading trade finance bank, top three in
foreign exchange and a world-leading payments company.
Being global is how we generate a significant portion of our
revenues and is central to our whole strategy.
A restructuring or spin-off would mean that we lose this revenue
as our bank would no longer have the connectivity which our
customers value.
It would create a period of uncertainty when our clients,
employees, and shareholders would all be negatively impacted and
distracted.
And there would also be significant costs over a number of years
as well as material execution risks.
So it would not be in shareholders' interests to split the
Bank.
Turning now to the resolution on dividend policy.
It is not prudent financial management for banks or companies in
general to have a fixed dividend.
The Board needs to take into account financial performance, the
market context and the Bank's resilience and capital and reserve
levels as well as the need to invest in our future and meet all our
legal and regulatory requirements.
We are already delivering attractive returns through our
dividend pay-out ratio approach.
And as I have said, our current strategy is working.
It is improving our performance and increasing your
dividends.
You should not put this at risk.
That is why the Board is unanimous in recommending that you vote
against resolutions 17 and 18.
We respect the views and opinions of our shareholders. But we
would only ever pursue suggestions if they offered material net
benefits for all our shareholders.
It is our unanimous view that these resolutions do not do
that.
The Board has a clear responsibility to protect and grow
shareholder value.
And the best way to do that is to continue with our current
strategy.
So, let me end by repeating our advice to you.
We strongly encourage you to vote against Resolutions 16, 17 and
18.
I hope we can count on your continued support.
I will end my comments by reiterating that your Bank is
performing well.
Our strategy is working.
It is delivering improving performance and dividends.
And we are focussed on how we can create even more value for
you, our loyal shareholders, over the years to come.
Thank you for your continued support.
It means a great deal to us.
Group Chief Executive's Statement:
I'd also like to welcome all fellow shareholders joining
virtually and those with us here in Birmingham.
This is a city that is hugely important to HSBC's history.
It's also where my own association with HSBC began more than 36
years ago, less than a mile from where we are now.
I would like to begin by reflecting on the last three and a half
years, which is important context to today's meeting.
In so doing I have to acknowledge that you've been disappointed
by the financial performance of your bank in the past.
One of your main criticisms was that parts of the business have
underperformed and pulled down the good performances we had in Hong
Kong and the UK.
Over the last three years, we have worked hard to address this
issue.
Mark highlighted the good broad-based profit generation that we
now have.
Our profits in Hong Kong and the UK are no longer being dragged
down by underperformance elsewhere.
The Group is performing well as a whole - both geographically
and across our different business lines.
Our very strong international proposition has been critical to
this achievement.
We have grown our international revenue in each of the past
three years.
And we are building strong wealth businesses in mainland China,
India and Singapore, to go alongside the market-leading business we
have in Hong Kong.
We've accelerated this process through a series of acquisitions,
by recruiting wealth planners for our wealth business in mainland
China, and by increasing our shareholdings in joint ventures.
All of this work has been supported by strong cost discipline,
with the savings made reinvested in technology to improve customer
experience.
And we've built a strong platform for improved growth and
returns, with new opportunities for value creation.
We saw the benefit of these moves in our 2022 performance.
Adjusted revenue was up 18% and adjusted profits were up
17%.
The dividend was 32 cents per share.
And as Mark said, we achieved a reported return on average
tangible equity of 9.9% - or 11.6% on an adjusted basis.
We also announced a strong set of Q1 results on Tuesday.
We had a strong profit performance, with reported PBT of
US$12.9bn, including US$3.6bn of notable items which was again
spread across all of our major geographies.
All three global businesses performed well.
And cost discipline remained tight.
In the first quarter - excluding the gain on SVB UK and the
part-reversal of the impairment on the potential sale of our French
retail bank - we delivered an annualised return on tangible equity
of 19.3%.
Clearly this was just the first quarter so our focus will be on
continuing to deliver good performance over the rest of the
year.
Another important change over the past few years has been to our
dividend policy.
In the past, the dividend was 51 cents per share every year,
irrespective of how much profit we made.
In some years, we were distributing 70, 80, or even 90% of our
profits in dividends - which meant we could not invest enough in
our business to modernise it and grow it.
We've now committed to a 50% dividend payout ratio for 2023 and
2024.
So, the dividend will get back to around pre-Covid levels if we
deliver on our plans - and we will do so on a much more sustainable
basis and with substantial capacity still to invest in growth,
whilst paying good dividends.
At our Q1 results, we resumed quarterly dividends, with an
interim dividend of 10 cents per share, which is the same level as
the last time we paid a first quarterly dividend before Covid.
As well as dividends, we can use the money we generate to invest
for growth - or for share buybacks, which remain another important
way of returning capital to shareholders.
Earlier this week at our Q1 results, we announced that good,
continued capital generation enabled us to announce a share buyback
of up to US$2bn.
The planned sale of our banking operations in Canada also gives
us an opportunity to reward you for your patience and the trust you
have had in HSBC.
We intend to consider the payment of a special dividend of 21
cents per share in the first half of 2024 as the first priority use
of the proceeds from that transaction, once it closes.
And once we close the Canada transaction, we will decide how
much of the remaining proceeds - after the special dividend - we
retain within the business, and how much we will return to
shareholders via buybacks.
But I want to emphasise that the special dividend and any
additional buybacks relating to Canada would be over and above our
normal plans for dividends and buybacks.
So, our strategy is working.
And I am confident about future performance, for two main
reasons.
First, as I said, we've built a good platform for growth.
We have a strong balance sheet, broad-based profit generation,
growing and more diverse revenue, and a tight grip on costs which
is enabling us to invest in technology.
And our wealth strategy is continuing to gain traction.
In the first quarter of 2023, we attracted net new invested
assets of US$22bn - bringing the total for the last 12 months to
US$93bn .
You have my commitment that we will continue to drive strong
performance for the rest of the year, while maintaining cost
discipline and investing in growth.
The second reason I'm confident is the diversity and
connectivity of our geographic footprint, where we have access to
markets that are exhibiting good growth, good international
connectivity and return potential.
Like Mark, I've seen first-hand the strong economic recoveries
underway in Hong Kong and mainland China.
I've also visited the Middle East recently, where I saw a strong
economy that is well placed to continue to grow.
And the UK economy is also showing good resilience, and our HSBC
UK business is performing well.
Investing in growth is critical, and we saw an opportunity to do
that by acquiring SVB UK.
For 158 years, HSBC has banked the entrepreneurs who created
today's industrial base.
With the SVB UK acquisition, we have access to more of the
entrepreneurs in the technology and life sciences sectors who will
create the businesses of tomorrow.
We believe they're a natural fit for HSBC, and that we're
uniquely placed to take them global.
Another area that will offer increasingly significant
opportunities is the transition to net zero.
We know that over US$110tn of financing will be required in
HSBC's markets over the next three decades.
We want to be at the forefront of this.
We also know that we are in the sectors and regions that are
critical and challenging to transform in order to reach net zero in
time.
We continue to set 2030 targets across sectors of our portfolio
aligned to a 1.5 degree pathway.
We have now set targets for eight sectors for on balance sheet
financed emissions.
And we will include off balance sheet emissions as soon as an
industry standard is approved.
An important recent milestone was our updated energy policy,
which commits us to no longer provide new finance or advisory
services for the specific purpose of projects pertaining to new oil
& gas fields and related infrastructure, as well as the most
carbon-intensive oil assets.
I'm pleased that we have made good progress towards our
sustainable financing and investment target to up to US$1tn by
2030.
Between 2020 and 2022, we provided around US$210bn.
Later this year, we will publish our first bank-wide climate
transition plan, which will provide further information about the
changes underway at the bank, and how we intend to meet our
goals.
With our strategy delivering improving performance and
dividends, and our belief that it will continue to do so, it is
imperative that we do not put this at risk.
With respect to Resolutions 16, 17 and 18, we've considered them
fully, but we strongly recommend to all shareholders that they vote
against them.
Let me build on Mark's comments on Resolutions 17 and 18.
On Resolution 17, we considered alternative structural options
last year, and we did so thoroughly and rigorously with the benefit
of external advice and challenge.
Our analysis clearly demonstrated that such options would
destroy value and put your dividends at risk.
That conclusion has not changed.
On Resolution 18, I do not believe that fixing the dividend at
an absolute level is financially sensible, prudent or workable,
particularly for a bank such as HSBC which is systemically
important for the UK, Hong Kong and the global financial system
A dividend payout ratio is a much more balanced approach that
aligns dividends to the level of profit generated. This model is
widely used across the financial services industry and other
industries for good reason.
Our first quarter results reinforce our recommendations and
demonstrate that our current strategy is the fastest and safest way
to improve returns.
Therefore, I reiterate, I strongly recommend shareholders vote
against Resolutions 16, 17 and 18.
I am pleased you are seeing the benefits of our strategy through
increasing returns and dividends.
You deserve them.
But I also want you to know that I want to continue to drive the
performance of your Bank and deliver strong returns.
That is my priority.
We are on the right path.
Thank you for your continued support.
Media enquiries to:
Gillian James +44 (0) 20 7992 0516 gillian.james@hsbcib.com
Investor enquiries to:
Richard O'Connor +44 (0)20 7991 6590 investorrelations@hsbc.com
Note to editors:
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered
in London. HSBC serves customers worldwide from offices in 62
countries and territories. With assets of US$2,990bn at 31 March
2023, HSBC is one of the world's largest banking and financial
services organisations.
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