Hsbc Holdings (LON:HSBA) Breakfast with HSBC.

Richard O’Connor, the Head of Global IR hosted a breakfast meeting yesterday (11/12/19) at Edison, supported by his equity investor focused colleague. Richard is an ex bank analyst and until three years ago, the main IR person at RBS.

HSBC operates in 65 countries/ territories and over 50% of the clients are connected to the global HSBC banking network with 90% of global GDP is covered by this footprint. At the interim's , the RoTE was 11.2%, RoE 10.4% and PBT $12.5bn. The NAV was $8.35 a share. The geographic split of adjusted PBT was 79% Asia, 2% Europe, 6% North America with the Middle East at 7%. Commercial banking is Asian focused with 1.5m customers in 53 countries. Retail banking and wealth management has 38m customers.

Described as an interim update, the meeting had the function of scene setting many themes ahead of the full year numbers due on the 18/2 and expect big restructuring charges. FY numbers will clearly have a focus on the problem areas of the bank, the proposed solutions and new financial targets for 2020 and 2021 given. The CEO is an interim one ( ex Head of commercial banking) as the CEO proper left in the 1H and a full time CEO should be announced in the 1H 2020 with both internal and external candidates being considered.

Problems exist in many parts of HSBC, nothing new here due to the size of the bank. The non ring fenced bank has $190bn of RWA exist and produces a 1% return. There is too much capital in Europe and with insufficient returns. A similar situation exists with the US bank division, with $90bn of RWA and a similar 1% return from $19bn of capital, though down from $30bn. A new team is now running America, right sizing the $5bn of revenues and $4bn of costs. In Europe, the b/s is $700bn and the cost/income ratio 90%. France was highlighted along with the American retail brand Marine Midland ( NY based) as needing to be right sized. CCF, the French owned bank is loss making and negociation begun with the unions begun. There is no connection with CCF and the PLC we were told so this bank sounds a gonner. HSBC has no presence in the West Coast of America yet wants…

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