HSBC Holdings PLC 2026 Q2 Earnings Call

Welcome all to today's call. I'm joined by Pam, who will take you through the second quarter performance in detail in a moment. I'll cover three items. One, our second quarter highlights and the first-half performance. Two, the progress we're making on strategy execution. Three, our targets for 2026, 2027, and 2028. Let's turn straight to performance. My comments here will exclude notable items, and the comparisons will be year-on-year on a constant currency basis. Momentum accelerated into the second quarter. We grew revenues by 7% to $19 billion. We generated profit before tax of $10.3 billion, up 13% year-on-year, and we delivered an annualized return on tangible equity for the quarter of 19.5%. We grew our deposit franchise by $46 billion and grew our loans by $20 billion. Next, the half-year performance highlights.

We grew both group revenues and group profits before tax by 6% with an annualized return on tangible equity of 19.1%. Year-on-year, we grew our deposit franchise by $129 billion, or 8%, including held-for-sale balances. Our deposit base stands at $1.8 trillion. We grew loans $55 billion, or 6% year-on-year on the same basis. We see improved demand in Hong Kong and consistent strong growth in the U.K. We grew fee and other income and Wholesale Transaction Banking by 4%. As the world's trade bank, this shows the central role we are playing and the growing market share we are taking as our customers adapt to new patterns of trade. In wealth, we grew fee and other income by 18%, delivering particularly good growth in our market-leading Asia franchise.

We are distributing to our shareholders with another $0.10 quarterly interim dividend per share, $0.20 for the first half. We are restarting share buybacks with the up to $1 billion we announced today, three quarters after pausing them following the announcement of the Hang Seng Bank privatization. We continue to progress at pace and with discipline with our strategy execution. Each of our four businesses is growing. Each generated an annualized return on tangible equity in excess of 17%, and each is building on a strong foundation for future growth. Our four leading and highly connected businesses bring scale benefits to our unique growth proposition. We continue to focus on three clear strategic priorities. We are moving at pace with each. One, be simple and agile. Two, drive customer centricity. Three, deliver focused, sustainable growth. First, to strategic priority number one.

To unlock HSBC's full potential, we have been re-engineering to become simple and agile. To do this, we have focused on five areas. First, organizational structure. That's done. We are now focused on embedding greater business collaboration. Second, leadership. That's also done. We are now focused on embedding a common enterprise leadership culture to drive a bank-wide high-performance culture. Third, organizational simplification saves. We are today revising upwards our total target savings to $2 billion. We originally set out to deliver $1.5 billion of annualized saves. We have now exceeded this target, reaching $1.7 billion of actioned saves. We have achieved this with associated restructuring costs of $1.4 billion, lower than originally expected.

We are now planning to use the full $1.8 billion of restructuring cost as per our initial commitment to increase total organizational simplification saves to $2 billion to be actioned before the end of the year. The additional saves will provide capacity to support further business growth. Fourth, cost reallocation from non-strategic or low-returning businesses. We have now announced 15 business or market exits since 2025, most recently the sale of our Singapore insurance business, the exit of our Australia retail business, and the sale of our retail banking business in Egypt. These disposals provide investment capacity to drive franchise growth in our areas of strategic focus. This is where we have a leadership position and can deliver better returns. Clearly, completion of announced disposals and related actions remains subject to relevant regulatory and other approvals.

In 2026, we plan to have reallocated $0.3 billion of this $1.5 billion. Fifth, streamlining and upgrading our operating model. This is where we are simplifying the bank at scale. It will be a multi-year journey comprised of two sets of initiative. The first one, demise of non-strategic infrastructure, and the second one, process re-engineering. In the first half, we demised another 20% of the total non-strategic application reduction plan we set to deliver between 2025 and 2028. We have now demised a total of circa 50% of the apps we plan to demise by 2028. On process re-engineering, we continue to work on around 50 processes and procedures to achieve substantial simplification. This is where we are putting our AI to work to simplify, strengthen, and accelerate the bank, empower our colleagues, and personalize our service to customers.

We are investing in the talent, training, and technology to deliver it. Now to strategic priorities number two and three. I will talk to these through the lens of our four connected franchises. For each of these franchises, you will clearly see, one, our leadership position in those areas of strategic focus, two, the growth delivered in the half year, and three, the strong client recognition. Our Hong Kong home market is a dynamic economy, a top three global financial center, and a thriving trade gateway. It is the super connector between the Chinese mainland and the world and has just become the world's leading cross-border wealth hub. Our deposit base is almost twice the size of the second largest peer. The privatization of Hang Seng Bank represents a unique opportunity in the growing market. It enables us to scale capabilities and drive growth across both banks.

We can already see the benefits, both financial and operational. For instance, Hang Seng Bank nearly doubled its new customer acquisition quarter-on-quarter to around 60,000 customers after adopting HSBC's digital onboarding capabilities. In the first half, we grew our wealth balances in Hong Kong by 10% year-on-year, reaching USD 0.5 trillion. We continue to attract high volumes of new-to-bank customers, 640,000 personal banking customers, and 24,000 business banking customers. We continue investing to strengthen our market share. Next, the U.K. Taking our full footprint in the U.K., we are the U.K.'s leading international bank. We delivered strong lending growth of USD 10 billion in commercial banking, an increase of 10%, and USD 10 billion in mortgages, an increase of 5%. We continued to grow deposits, and we grew our customer base year-on-year with active premier customers up 7%.

New-to-bank customers and business banking were up 48%. The U.K. is a key contributor to our global loan growth, and we are pleased to be supporting the U.K.'s growth as the U.K.'s leading international bank. Next, our wealth franchise. We are Asia's number one wealth manager with USD 1.1 trillion of wealth balances. This deeply rooted full-service franchise is performing strongly. Revenue generated globally from wealth relationships account for around a quarter of our group revenues. In the first half, we generated global net new money of USD 64 billion. In Asia, we generated net new money of USD 57 billion, representing 32% growth year-on-year. We saw continued momentum in wealth fee and other income growth for the half year, increasing 18% to USD 5.5 billion.

Our unique position in wealth management across the client continuum from premier affluent to private banking, combined with an acceleration of our investments, will help us capture an even bigger share of the structural growth opportunity. Next, our Corporate and Institutional Banking franchise. We generate 85% of our client revenue from multi-jurisdictional clients, and within this, cross-border client revenue has increased 15% year-on-year. We are a leading globally connected Wholesale Transaction Banking. 65% of cross-border client revenue, or client revenue booked outside the client's home market is from clients headquartered in the U.K., Europe, and the Americas. This proportion is stable year-on-year and shows the importance of these regions to our overall network and the resilience of these flows. Chinese mainland clients contribute 10% of this multi-jurisdictional client revenue, with 75% of those revenues booked cross-border.

As more Chinese businesses go global, we expect the structural secular trend to continue over the medium term and become a key growth driver for CIB. Clients increased their deposits with us by 16% year-on-year. This growth is broadly geographically spread, demonstrating the value of this franchise, which is built on deep client trust in our balance sheet, the power of our network, and our capabilities and expertise. We grew Wholesale Transaction Banking fee and other income by 4%, with trade up 7%, reflecting resilient client trade flows. CIB is performing well, and its first half annualized ROTE was over 18%. Finally, let's turn to our targets. Our first half performance demonstrates continued progress against our targets.

It gives us the confidence to reiterate each of them, including growing our revenues year-on-year, rising to 5% by 2028, and delivering 17% or better return on tangible equity for each of the three years. We are creating a simple, agile, growing bank built to generate high returns, a bank capable of achieving more. We are executing our strategy with discipline, precision, and pace. We are investing for growth, and we are confident we can navigate uncertainty from a position of strength. We have begun this next phase with a clear strategy, performing businesses, focused investment, and an international network that remains difficult to replicate. We are creating the capacity to continue investing for growth, including in talent, technology, and AI. HSBC is becoming the bank we set out to build, and we are now putting more of its strength to work.

By doing so, we will unlock more of HSBC's full potential. Let me now hand over to Pam.