HSBC Holdings plc Sponsored ADR Aktie

Okay. Good morning, everybody. I'm delighted to be joined on stage now by Georges Elhedery, CEO of HSBC. Georges was appointed as CEO nearly 2 years ago, having previously spent 18 months as Chief Financial Officer. He spent over 20 years at HSBC in a wide range of leadership roles in a variety of markets. And immediately prior to joining HSBC, Georges, in fact, worked at The Goldman Sachs. So George, well, I think it's your first time at the conference, if you like I can say, welcome back.

Thank you so much for making the trip here. Super grateful for you being here. This session is due to last 30 minutes, 35 minutes. That includes a bit of time towards the end for some audience Q&A. And then this session is also being webcast. So thank you for everybody joining us remotely on the line.

Georges, perhaps we begin reasonably high level on the macro backdrop. You operate across a very wide range of geographies. How would you characterize the current macro backdrop in aggregate? And when you speak to clients, how are they balancing those near-term uncertainties you can see with the longer-term structural opportunities that clearly exist in many of your markets?

Thank you, Chris. And again, thank you for having me here. There are a couple of features in the macro backdrop that has definitely become very, very prevalent. There are 2 I would call out, and they actually play to our strength. The first one is there are structural growth opportunities in big parts of the world, and that's particularly true in parts of -- big parts of Asia. You have a growing consumer market. You have a growing labor market. You have a growing talent or kind of sophisticating talent. You have good fiscal and economic policies, good pro-business policies, strong FDIs and into these markets for everything from manufacturing to extraction and what have you with technology, et cetera.

So structural growth is inherent in these markets and is here for a long time ahead. There is -- the other macro feature, which we've been talking about now for a few years, certainly since COVID is that we're seeing globalization reconfigure more into neural networks where multiple jurisdictions and economies connect through supply chains, investment. And if you want less of the big large corridors between very few -- or very few economies.

That also plays to our strength because when you're present in 18 markets in Asia, 10 markets in the Middle East and many other around the world, more than 55 around the world, when you have neural networks of connectivities in all these markets interconnected in different ways, then the presence in all these markets becomes a value add. So these are the 2 big macro trends we're observing.

On your question about uncertainty, everyone we're talking to now and including our own views is that uncertainty now has to be baked as a feature, not as a black swan or as episodic. It has to be baked as a feature in the way you plan for your business. And if you bake uncertainty as a feature and you want your business to capture the structural growth opportunities and kind of in a sustainable, durable manner, then the most important investment you have to do is build resilience, building resilience so you can have a sustainable business despite uncertainties that you expect to come.

So building resilience is one of the biggest themes we're working on. It's -- resilience can be resilience in infrastructure, resilience in logistics, resilience in power generation, resilience in data storage, et cetera, et cetera, et cetera. Now it so happens it also plays to our strength because we have -- we are a big infrastructure financing house among other, and we can help our clients in their kind of projections how to build resilience for the business.

And a key element of the sort of HSBC narrative over the last 12 to 18 months has clearly been one of efficiency. And you've described HSBC as becoming simpler, leaner, higher return, more agile. What's the single most important change investors should recognize in HSBC today versus perhaps how the business operated 2 to 3 years ago?

So Chris, the single most important change as we portray it and investors can judge for themselves, but as we portray it is that everything now we choose to do or we decide to do, we aim to be the best at doing, which means either we're the best at doing and we double down investing in it or we ought to be the best at doing and we double down investing in it or this is not where we're at our best and not necessarily an area of strategic importance because customers aren't expecting us to deliver and we're disposing of it.

I think the clarity of strategy and the clarity of purpose allows us to -- well, allows us basically to choose to be the best at everything we decided to do. Everything kind of falls from that, how we become simple and agile, how we streamline our business, how we focus our strategy, how we kind of build client relationships, et cetera, is basically based on being the best at doing what we choose to do.

I mean you make it sound very straightforward, but you're simplifying, you're reallocating costs, you're investing for growth all at the same time. So what are some of the hardest trade-offs you face when you're balancing all those decisions?

Of course, it's -- these are usually always difficult decisions to make, decisions where we take cost out to the bottom line by simplifying or deduplicating or creating efficiencies, decisions to take cost out by exiting activities that are nonstrategic, nonreturning or where we don't have the right to win or the right to compete and we don't -- you should not waste effort doing so are all difficult decisions. But I think the most difficult decision going forward, most of these decisions have been taking for the last 2 years, but the most difficult decision to go forward is that we have created a much bigger capacity to invest. We created space in our cost base by taking these decisions to give us capacity to invest.

So the decisions going forward is kind of how to allocate our investment, but more importantly, how to allocate our investment in a way that is the highest returning possible. So you can decide you want to invest in an area and you can evaluate a quantum of investment and the set of benefits against that investment. And that's all good. But we have also more investment capacity.

But if you choose to decide to invest additionally in that area by the law of diminishing returns, the risk is that we get lower bang for our buck, and we won't get the -- so we need to find the efficient frontier where you're investing as much as you can to get the maximum benefit without starting to dilute investment because you end up hiring the wrong people, people with not the right talent for the right jobs or you end up not being able to build the technology at scale and throwing money after something where you can't resource it appropriately or speed up the development.

So just putting more money at an opportunity doesn't give you higher benefits for it. So it's finding that efficient frontier where you invest for the biggest value of that investment and then accept that probably the next round of investment is next year, not right away for that opportunity.

And my final sort of question on the topic of efficiency is really around the issue of resilience. You're effectively reprogramming the operating model of HSBC, while at the same time, plumbing in new sort of frontier technologies, you have the ambition to become the world's most trusted bank or to be the world's most trusted bank. How do you balance the fragilities that those changes can bring about and perhaps particularly when it comes to cyber and the sort of incredibly fast-evolving picture when it comes to zero-day vulnerabilities?

So Chris, actually, those changes are building strength. Let me try to unpack this. When we say -- when we have a strategic priority of being simple and agile, and we shared one slide in our year-end results, which illustrate that. Some of the decisions, of course, about exiting activities, exiting businesses, deduplicating, but also a big block of work that's still ongoing, which is reengineering our processes and procedures and the help of GenAI is accelerating that reengineering at scale where we call out demising nonstrategic technology applications, demising legacy products that are not on the shelf, but still out there, demising all sorts of other things like URLs or legacy cost centers or small and legal entities that are not needed anymore, et cetera, et cetera.

So this reengineering and this demise as part of becoming simple and agile as a primary mission, also as a kind of secondary positive impact make us safer because it's easier to protect when you have a smaller exposure, you have fewer applications to worry about, et cetera, makes us easier to protect. So anything that's vulnerability identification, patching, network segregation, layering, et cetera, you will have to do on a smaller estate and a strategic estate as opposed to having nonstrategic bloated estate that you have to try to protect.

So first, being -- the journey to be simple and agile is a journey to make us also more resilient. That's number one. Second, cyber is a very big investment -- cyber protection is a very big investment program. It has always been and will always be a very big investment program for us. And cyber protection ranges are wide range of issues, in particular, protection against social engineering, where we have a lot of capabilities being built and tested and protection against vulnerabilities.

Clearly, most recently with Mythos and 5.5 Cyber, additional capabilities to find patch vulnerabilities have been made available to us included. But that's not the only thing. We've -- again, we've been working very actively at network segregation at multiple layer estate. We've been working at tertiary vault capabilities to recover quickly. We have a continuous Blue Team, Red Team trying to attack us and identify areas of vulnerability.

So -- we work with our suppliers, again, in what they are doing to make them foolproof or cyber protected so that we benefit from that. That journey is on. And this is an area of continuous investment and never, never cut corners on investment to protect our estates from cyber risk. And that's -- between these 2 kind of big initiatives, we aim to be among the most safe from a cyber point of view, safest banks on the planet, helping us to be the most trusted bank on the planet.

Now let's move over to Hong Kong. In recent years, there's been a big focus on the cyclical elements within the Hong Kong business, namely Hong Kong [ SAR ]. And obviously, very happy to get an update on the cyclical side of the Hong Kong business right now. But I wanted really to hear your thoughts on the structural element of the Hong Kong story. You talked about Hong Kong being a super connector, both Mainland companies using Hong Kong as a launch pad to go global and also as a cross-border wealth hub. So how do you see the growth dynamics in Hong Kong business at this point, both from a cyclical and a structural perspective?

Okay. So from a cyclical perspective, there was a big burden from the COVID days into the impact on the commercial real estate. Let me give you some data points, recent data points. Residential real estate, up 16% over the last 12 months, plus 16%. Office real estate, we've seen now vacancies in Central and Hong Kong below 10%, level not seen for many, many years. Hong Kong GDP has grown more than 5% in the first quarter.

So without making direct assumptions on where we are in the cycle, it is much more encouraging the -- what we're looking forward versus what we've seen. There are some challenges, residual challenges in some of the weaker real estate in the office space or some of the weaker sides of retail, but we're seeing recovery in a number of other areas. So we're actually short-term constructive, medium, long-term positive. I mean, medium, long term, the dynamic of the Hong Kong real estate market, the dynamic of Hong Kong economy, the supply/demand is -- we're optimistic. We're comfortable about. We're confident in, right?

Now case in point, in October last year, we announced the intent to take Hang Seng Bank private. And in January, we've disbursed USD 14 billion to buy the 37% minority. Now we own Hang Seng Bank in full. And we're working through the synergies. The synergies alone and the capital efficiencies alone make this acquisition -- well, make this privatization more attractive than using our shares for a share buyback. But if you add the structural -- sorry, if you add the cyclical improvements, among other in the cost of risk and commercial real estate environment and the structural growth opportunities, that's kind of double potential upside over and above accretion to share buyback.

Now the structural opportunities of Hong Kong are evident. Let's call 2 that are really, really highlight and important for our business. Hong Kong is a super connector to the Mainland. Hong Kong has always been a connector to the Mainland, whereby international investments into the Mainland would channel or funnel through Hong Kong. That flow continues. It's changed in profile. So now the international flow into the Mainland isn't really about accessing cheap labor and manufacturing capabilities. It's more about accessing high-end technologies and innovation and trying to scale it out internationally. But the flow continues.

It's a different form of flow looking after different opportunities. But the real flow that we've observed for the last decade, and we believe will define the next decade is the China outbound where Chinese -- core Mainland Chinese corporate businesses are going out to the world. Initially, they've been producing for the world, Made in China kind of exported to the world. That model is seen for all sorts of reasons, many are familiar with. That sort of model is trying to see its limit. So what's happening is not anymore the Made in China produced for the world, is the Made by China produced in the world.

So these corporates now are going out to establish manufacturing hubs, move technology, create employment in the economies where they're building and be able to access the local markets with this dynamic. That possibly is one of the biggest cross-border trends, if not the biggest cross-border trends we will see over the next decade. And Hong Kong is the launch pad. And by the way, we in Hong Kong are the bank of choice to help these customers do that because when they come to Hong Kong, and we are very big in Hong Kong, we can take them to the world. This is not the last stop for us or one stop and then that's the last stop. We really give them the whole access to the world at the highest international standards of finance. So that's one trend.

The other trend is Hong Kong as a cross-border wealth hub. For the last 2 years, I've been saying Hong Kong will become the world's largest cross-border wealth hub before the end of the decade. It turns out I was wrong because it happened 2 weeks ago already. Hong Kong today already is the largest cross-border wealth hub overtaken Switzerland. And given the growth trajectory, that gap can only keep kind of expanding. It is a cross-border wealth hub for the world, for Asia and very much also for the Mainland that have chosen Hong Kong as their international platform for wealth management.

The level of sophistication of the capabilities, the level of attractivity of the jurisdiction, of the legal framework, of the regulatory framework, et cetera, is such that -- and of course, the level of wealth creation, as I mentioned earlier, in Asia in general is such that this trend is also a decade, if not secular trend. And these structural opportunities for Hong Kong, frankly, we have a very important role to play, but we happen to also have a very leading role to play in, given our sheer size and presence and scale in Hong Kong.

And then perhaps a slightly more nuanced or a different story in the U.K., 1 of your 2 home markets. How would you describe the role of the U.K. within the HSBC group, aside from the retail operation that you operate in the U.K.?

Very good. So the U.K. is our second home market. Of course, the retail operations is a very important operation for us. And when you look at the retail and the kind of SME commercial operation in the U.K., it's a business that generates more than 20% return on tangible equity. It's a business last year that -- year-on-year, that's grown its loan book by 7% so clearly strong business. And we have a very strong market position in the top 3, top 4. But the U.K. for us, if you add our wholesale activities, for those familiar, we have the ring-fenced bank and the non-ring-fenced bank, if you add the whole footprint of HSBC in the U.K.

And HSBC in the U.K. is -- generates revenues of $19 billion per annum, has $570 billion in deposits, is by far the largest international bank in the U.K. Well, it's a U.K. bank home market, but the largest international bank in the U.K. is by far the bank of choice for U.K. corporates and businesses looking for international opportunities and the largest bank for international corporates all the way from the U.S. to Asia to the Middle East to the rest of Europe, looking for opportunities in the U.K.

It's a very open economy, a testament to all the free trade deals that have been signed all the way from the U.S. to India, to the GCC to the deal with Europe, and the kind of the open economy, the free trade economy. So being by far, the largest international bank in the U.K. and a bank that generates $19 billion revenue in the U.K., which puts us in the top 3 with #1 and #2 being domestic, pure domestic banks in the U.K. means that the U.K. is extremely important for HSBC. But it also means that HSBC is extremely important for the U.K. economy.

Very clear. And then in the CIB, you've talked about this narrative of Asia buys Asia. Can you talk us through what does that mean, especially in the context of, I think, the 50 or so markets that you cover globally within the CIB, Asia buys Asia?

Yes. And then within Asia, you have to lead the greater Asia, so Asia and West Asia or Asia and the Middle East and sort of wider Asia. So our assessment is that the trade flows that have been taking place in Asia are able to add 1.8% to the Asian GDP. But importantly, Asia in 2025 has been subjected to some of the most adverse tariff environments with the largest trading partner, which is the U.S. and trade from Asia into the U.S. have really dropped steeply more than 20%. Yet Asian shipments in 2025 hit a historical record. So that is demonstration that whatever is not going to the U.S. has found ways to circulate within Asia.

So Asia has become also a manufacturer for Asia. Asia has become an FDI investor in Asia. And that neural network flow between the various Asian economies have meant that they are able to continue growing strongly and equally have meant that HSBC's presence across all these economies has become an even bigger competitive advantage because we're deeply rooted in many of these markets. I mean we have 161 years of history in Hong Kong and Shanghai, but we have more than 150 years of history in practically every Asian economy, and that includes the Vietnams and Indonesians and Malaysias and India and what have you in the Middle East. So that trend is definitely one that we are able to capture and strategic growth.

But remember, CIB is not only about Asia buys Asia. Corporate Institutional Banking is a global business. It's a global network business. More than 85% of our customers are multi-jurisdictional customers. They operate in more than one market. So inherently what a network business is about. And frankly, of the 15% that are domestic only many of them are government sector, et cetera, which we operate with, but they're inherently domestic. But for those 85 cross-jurisdictional customers, more than 65% of the revenue is generated by customers whose head office is in the West, that is Europe, U.K. or the Americas.

And more than half the revenue generated by these Western corporates is the revenue we book in Asia. And that's a substantial part of how we drive our corporate institution banking revenue and profitability and returns is being able to take 6 of our top 10 customers by revenue in Mainland China are U.S.-based, U.S. head office. It gives you a perception of how important the global corridors are beyond the -- just the Asia buys Asia. And we have a business that is present in more than 50 markets that is liquid in all the currencies where we -- in all the currencies that we operate in, in all the geographies where we operate with a fantastic deposit franchise. So we remain the bank of choice for these corporates across Asia doing business with us.

You talked a little bit about the fantastic deposit franchise, which is echoed obviously in the other business in wealth. So wealth is 1/4 of group revenues now, around 2/3 of that business is in Asia, our business is grounded in Asia. Can you talk a little bit about how the global HSBC network helps support growth in the business? I guess, in particular, 8 booking centers, you've got the cross-sell from CIB. So how does that network connectivity feed into the wealth side of the business as well?

Yes. So wealth is already a substantial portion of what we do. So 25%, you called it out because 25% of our revenue is wealth revenue. If you look at wealth balances at $1.6 trillion, that puts us in the largest globally. But more importantly, of the $1.6 trillion wealth balances, we have more than $1 trillion wealth balances in Asia, which makes us the largest wealth manager in Asia. So therefore, our position there is that of strength. Number two, we have fantastic structural growth in wealth of Asia, which we -- it's a wave we all can write, but we clearly have a strong -- we're starting from a strong position to write.

More importantly also, we have an affluent proposition, which we call Premier in many of the Asian markets, including the Mainland China, including India and a number of other markets, including the UAE, et cetera, which allow us to onboard wealth right from its early days. So we don't have to wait on a decades-long basis for people to become fairly wealthy to be eligible to our proposition because we capture them already at the Premier level, which is when they start building wealth from USD 100,000 and above. And of course, as they go up the journey and if their wealth exceeds the $1 million or $2 million, then they can become eligible to our private bank, but the acquisition there is -- the acquisition cost is nil because we already have acquired them through our Premier.

And we are the only international bank offering Premier in many, many of these markets. So it's a real differentiation being an international bank accessing this affluent, and that's a great funnel for acquisition for us going on. Second, corporate institutional banking, we have very, very deep and trusted relationships. But historically, we have not converted these relationships into personal wealth and private bank wealth. Today, the combination of our 2 businesses and the fact that we cross-seminated resources and we have the cultural and the incentives alignment to do that mean that we also have a relatively cheap acquisition corridor to convert from CIB customer base to our wealth proposition.

So we really have scale in the way we can acquire that none of our peers in Asia can benefit from. We've built product capabilities. Product capabilities, some of our international peers can build faster because they can scale it globally. But we basically did a catch up to be able to be on par or relatively on par with our product capabilities, at least in the area where we are dominant, which is Asia. So all of that plays to our Asia wealth proposition growth.

Now one of the features that the high net worth have been asking for, true for Asia, but true globally, is the diversification of their booking centers. They realize that it's important now to diversify from a risk point of view, their booking centers, but also diversify from a product capabilities point of view, booking centers from a legal, jurisdictional, tax point of view, inheritance and all. And therefore, you're seeing more and more of the higher net worth looking for multiple booking sites for their wealth.

So one additional differentiation for us compared to many of the pure Asian players or pure single market players is that we have more than 8 booking centers. We can book wealth in Hong Kong, in Singapore, in the UAE. We can book cross-border wealth in Switzerland, in the Channel Islands in the U.K., in the U.S., in Luxembourg. So our cross-border booking centers are diversified and cater for the need of using multiple [indiscernible]. So this is one additional competitive advantage for us for those who are pure Asian or pure single market that don't have this additional capability. And I think all of those play to our strength in being able to capture a bigger share of this growth in wealth in Asia.

That's very clear. I think we have about 5 minutes left. So at this point, I just -- if anyone in the audience would like to ask a question, I give you the opportunity. Otherwise, I have one more. We have one right at the back. If you could just wait for a microphone because we're being webcast. If somebody can bring you a microphone, that would be helpful. If you can put your hand up again because I think they're trying to find you.

I appreciate your comment on Hong Kong commercial real estate and residential real estate. Do you have any comment on -- for commercial real estate and residential real estate for Mainland China?

So on a kind of macro basis, commercial real estate in China is recovering in certain areas such as Tier 1 cities and quality developments or quality residential areas. And remember, in China was essentially a residential commercial real estate challenge, not rest. But residential is picking up in China and some of the Tier 1 cities. It remains subdued in a number of other cities. We believe some of the most recent measures and recall measures now taken around the Hukou, which is the kind of local residency permits and -- for domestic immigrants, rural or urban immigrants will support further this residential real estate because there will be -- a chunk of it will be used for social housing.

So we will support further some of these residential estate in Tier 2 cities. So broadly speaking, we feel it hit the bottom, but some of it has recovered, some of it will take a little bit longer, a multiyear process. That's the macro perspective.

On an HSBC perspective, I think where we stand today is we have no residual concern. We've taken some impairments over the last 2 years in this space. And whatever we left with are the ones we are comfortable with. And usually, they're mostly nonresidential. They're mostly occupied. They're mostly actually strong borrowers and current. And the ones that have been a bit more difficult have already been addressed either through write-downs or through restructurings. And when we look at our current book, we feel this is now vastly, vastly, vastly behind us. Thank you.

Okay. One last one for me before we wrap up. We've described HSBC as a global liquidity engine that's built on the deposit franchise, the wealth flows, the connectivity as well the global activity. As you look forward, what do you see as the most enduring advantages of that model? And how does that give you confidence when you think about the medium-term targets that you've laid out?

I think we have to approach it with 2 lenses. The first one is we're a bank built on the relationships on deep-rooted customer franchise on trust. For many, many, many decades and for many of our customers, more than -- well, more than 160 years, they were with us right at the start of our journey.

So being true to our heritage, to our values, being true to our customer relationships being -- demonstrating the resilience, the strength -- the financial strength, the hallmark financial strength of our balance sheet as a token of safety for them being able to demonstrate and put all our expertise for their good use, showing consistency, effectively true to our DNA through to our heritage, has served us extremely well, continues to serve us extremely well with these deep-rooted, highly trusted customer relationships. So I think the first element is to say it's true to our heritage and always striving to be the most trusted bank for our customer, for our relationship, for our clients, for our kind of deep, deep, deep rooted franchise.

And then the second aspect is that we also want and are moving at the pace of our clients as they face off to the future, the opportunities of the future, the challenges of the future. So we need to be a bank that is agile, that moves at pace, that innovates and that delivers so that while connected to our DNA, we need to be projecting our customers safely into the future at pace. And therefore, our investments in the future of digital finance, tokenization of assets, the future of AI and how AI is going to be utilized and all other innovation-related aspects, I don't know, sustainability-related financing capabilities, et cetera, need to be at the forefront of what we do.

So our customers feel we're taking them into the future with all the innovative capabilities of the future and doing so with the level of safety, comfort and trust they have with HSBC. I'm proud to say we've already demonstrated a number of these. For instance, the U.K. government have chosen HSBC and our digital platform for their first ever digital bond as a kind of blockchain issued bond, DIGIT [ gold ]. We've done -- we use that platform for many other issuances, including sovereign issuance such as the Hong Kong SAR, a number of corporates. We are a bank that now launched 24/7 frictionless payment through tokenized deposits across multiple jurisdictions, giving our clients access to this capability on and on and on. So that's us taking our clients into the future at pace but safely with the trust they should expect from a service and engagement in partnership with HSBC.

Very clear. Great note on which to end. Georges, thank you so much for taking the time. Thank you for spending time at the conference.

Thank you Chris. Thank you very much.

Good morning, everyone. Thank you very much, Peter, for this introduction and for hosting us today, and welcome, everyone, to One QRC, One Queen Road Central to the bank that's known as the Hong Kong Bank. We -- all of you have seen this iconic building. We celebrated 40 years, was it 2 months ago. We had Lloyd Foster, Norman Foster with us for the celebration. It was one of the highlights of his career, probably one of the starters of his career. Actually, what you've also seen in the video, some of you know, 161 years ago in exactly that same spot, we set up the Hong Kong and Shanghai Banking Corporation. In March in Hong Kong, a few weeks later in Shanghai, within 10 years in most of Asia. Within a year, we were already in Osaka and Kobe. We were within a few years in, well, Vietnam, Malaysia, Thailand or [indiscernible] China or Malayia or the [indiscernible], et cetera, et cetera.

But I think what's important when you look at that history is that, number one, we were set up by our customers. We were set up by those merchants, those entrepreneurs, those shipping companies who needed a bank that served their needs. They needed a bank that has their trust and they needed a bank that was focused on delivering what they needed and what their ambitions are. They need a bank that is relationship driven. They also needed a bank that allowed them to grow and grow with them. And this is why we ended up setting shop in so many geographies across Asia and the rest of the world. Of course, London a year after we opened Hong Kong. But in France, we opened in Lyon because that was the capital of France, not in Paris. And in the U.S., 10 years on, we opened in San Francisco because that was the port city. They needed a trade bank. And they also wanted a bank that called Hong Kong home because they collectively called Hong Kong home, however much their business was international and trading related.

And finally, many international banks have heard about this need and felt that they want to sail and come to Hong Kong and set up shop. They need a bank to set up quickly before any of these internationals come and try to build something. The first ship was due in a week coming from India with bankers. So they had 5 days to build the bank. And in 5 days, all the articles of association and the licenses were there. That was a bank that was agile, delivering to our customers fast for our customers. If you look at our ambition today and our 3 priorities. Our ambition is to be the -- one more slide, -- to be the most trusted bank globally, putting customers at the heart of everything we do. Our 3 strategic priorities is to be simple and agile, and that's in order to be responsive to a fast-changing world to be able to adapt and to be able to help our customers adapt and move at their speed.

Second priority, driving customer centricity. We are a relationship-driven bank. This is how we were built. This is our DNA. We're not a product-push bank. We're a bank that delivers to customers' needs, customers' goals and the evolving needs and the future needs and goals. Number three, we deliver focused, sustainable growth, focused on where we're best at serving our customers and sustainable because they are growing year after year after year, and we want to grow with them year after year after year. They need to count on us today. They need to know that we are here for them in 10 years' time, 20 years' time and longer. Never had our ambition and our 3 strategic priorities been so aligned to our DNA, but equally never had our ambition and 3 strategic priorities been so well positioning us for the world of the future, for the uncertainties that we're facing for the innovation that is coming. These are our basic DNA that are helping us position very well for the future.

So we set up 4 businesses. The first thing we did about 20 months ago is, well, set on the course to be simple and agile. I have to say sometimes in our history, we didn't live up to the DNA, and we became somewhat complex, and we're reversing that journey very fast. So we set 5 strategic missions to be simple and agile so that we can be responsive to a developing market and moving at the pace and the speed that our customers need us to move at. First thing we did is we reorganized our structure to align it to our strategy. And I'm pleased to say we have called Hong Kong a home market. We also have U.K. as a home market. These are 2 home market businesses we have a leading position.

We also have 2 network businesses, corporate and institutional banking, supporting our wholesale customers, global aspirations, the World's Trade Bank, but also wealth and Premier Banking, supporting our customers manage their personal finances, trusting us with their hard-earned savings, trusting us as the custodian of their savings and the manager of their savings. Second, after we set up the structure with these 4 businesses, we set up a leadership structure to be able to deal with it by deduplicating certain areas where we were too over matrixed. So now at the group operating committee that is dropped from 18 to 12 members, 60% of the revenue has single line of accountability at my group operating committee and therefore, fully empowered line of accountability. Importantly, 15% of our managing directors, we were able to reduce. That's about 300 MDs without impacting the business. These were roles that were duplicated due to the previous setup. That's done.

Number three, we promised you $1.5 billion of simplification saves to be taken to the bottom line. That's about 8% of the payroll cost. We have already decisioned -- we promised you that by the end of '26, a 2-year journey. By the half year results, we will have delivered it 6 months ahead of time in 18 months. We already, as of today, have actioned $1.4 billion of the $1.5 billion savings that we committed. Last year, in our P&L, we managed to get $600 million of those saves. That equated to about 4,400 full-time employees. By the half year, we will update you about the closing of this program of $1.5 billion full saves annualized. And the impact in terms of how much reduction of employees. I have to say this is non-impacting of revenue. These are simplification that's driving through the organization from the setup in the business setup and the leadership setup. And that will be driven through. And at the half year, the ahead will turn into done on this slide.

Okay. Number four, $1.8 billion of cost reallocation. This is where we decided to review our participation choices and to review those areas that are not strategic, where we don't matter for our customers to do them and then we shed them. And then we focus, we reinvest those costs taken out. We reinvest them in those activities where we matter for our customers, where we drive growth, where we drive returns and where we have competitive advantages. We've already decisioned 12 exits, $0.8 billion worth of those costs, associated revenue about EUR 1 billion. And we have under active execution, including some of the 3 strategic reviews that we called out, $0.5 billion. I'm expecting on that first chunk of EUR 1.5 billion by the end of the year to be vastly delivered, broadly substantially delivered. Now mind that the cost saves will only happen after the exit is complete.

So the decisions, the signing of some of these M&As will take us 12 months before the actual saves come and that we can redeploy it. You have to assume that redeployment will deliver higher revenue and higher returns than the revenue that's taken out because we're reinvesting it in those areas of higher growth potential and higher returns. And there's a $0.3 billion additional coming from the privatization of Hang Seng, which we discussed at length at previous results. These are the reported basis cost takeout. Our ambition is to deliver more than that in terms of cost takeout, more like EUR 0.5 billion. But from an M&A reporting standards, EUR $0.3 billion was the number that is auditable, and we're expecting to deliver those by the end of '28, okay? And that will be substantially moving forward.

The final point, number five is really where you're going to hear me talk about for the next few years because that's going to be a multiyear journey. This is really an upgrading of our operating model. This is HSBC reengineering itself, rewiring itself to be simpler, to be agile and to be able to deliver fast. Two big work streams under this category. The first one is a demise work stream. We're killing nonstrategic or legacy applications called out here, and we're tracking this. But we're also killing legacy products and all the processes and procedures linked to legacy products. We're killing spreadsheets, EUCs that are not needed. We're killing URLs, we're killing cost centers, and we're streamlining by taking down all of those. We'll be talking about that in the coming quarters.

The second work stream under this is we are simplifying policies process procedure, automating and embedding controls in an automated way. We have more than 50 of those process procedures that are in the process of being simplified. Now how we're going to go about that? That's probably one of the challenges we're going to face. Well, if I was here in 2020 talking about this, I will be telling you that we're going to put dozens and dozens of Six Sigma process engineers giving them a process, giving them weeks and weeks to be able to review it and redesign it, reengineer it and then another weeks and weeks and weeks to develop a new one. Fortunately, I'm doing this in 2026, 2025 started, and we have generative AI. And generative AI is going to be a material accelerator of these initiatives. So I'm going to take a minute to talk -- 2 minutes, talk about generative AI. So we set the vision and we set 3 goals. I'm going to read the vision.

Vision is to empower our colleagues to use AI in order to create personalized experience for each customer or client to deliver it safely in real time and at scale, while we keep human judgment, human decision-making and human accountability at the core. So let me unpack. First, empower our colleagues. Our -- we have 200,000 colleagues. we all know generative AI will destroy certain jobs and will create new jobs. But my initial mission is I need 200,000 colleagues with us on this journey. However, many will be left at the end of the journey isn't the problem. The problem is how can we make sure that those 20 200,000 colleagues have been given all the capabilities, the training, the tools to make themselves future-ready, be more productive versions of themselves.

Importantly, how can they be on the journey with us, not fighting us, not disentfranchised, not anxious, overwhelmed and resisting the change. That's our first mission. Everyone will be given training capabilities, productivity tools, specialized tools, coding assistance so that they can become a better, more productive, higher-performing version of themselves. It's on them to use these tools and be future ready. It's on us to make sure that they're all given these opportunities to come along the journey with us.

Number two, simplify -- goal number two, simplify and scale how we operate. This is what I was just mentioning earlier, the more than 50 work streams that we're simplifying. We appointed already a Chief AI Officer. He already delivered end-to-end, the KYC onboarding process for corporate institutional banking with material productivity saves and time save. And now we've given him oversight across the bank, all our value streams, businesses and functions, technology and operations to help us redesign, collectively redesign with the help of AI, with the help of external partners, all these processes, more than 50 of those mission, achieve real time or near real time. It's a moonshot. But imagine we're onboarding in real time, credit card application approval in real time, wholesale revolving credit facility approval in real time, capital allocation in real time. That's the moonshot. So we're bringing time down materially, but the idea is if you're fully automated, your customer life cycle should come to nill.

Third, we want to personalize experience for customers at scale. And this is where it's not anymore about productivity or cost gains. It's going to be about acquisition of more customers and more revenue. So there is a customer -- there's a revenue element, there's a new customer element in this third goal, which is the personalization of experience. We are putting these tools in the hand of all our frontline colleagues today. They will be using them, be it relationship managers, wealth advisers, contact center operators, salespeople, et cetera. But in the future, if these tools have proven their worth and we train them well and then we control them well, we can put them in the hand of our customers. There are a number of initiatives that we called out. You can see the next slide will show 2 initiatives in terms of simplification, the KYC one as well as the financial crime risk monitoring.

Just to give you an idea, KYC, we achieved 55% productivity, 50% reduction in client onboarding time. Of course, the moonshot is 100% reduction, but that's a fantastic journey so far. Financial crime risk monitoring, we are 4x better at detecting financial crime. We're twice faster in the investigation, and we have 70% fewer false positives. You can see the benefits. They're already live. We're using them. They're already delivering the productivity gains that we see. On the right side of the slide, you will see how we're hyper-personalizing customer experiences. I won't go through those details, but that's the contact center example and the wealth AI example where we're personalizing the experience. Okay. Now I'm moving on to the third strategic priority, which is focused sustainable growth. As you can see in our 4 businesses, Hong Kong business, U.K. business, International Wealth and Premier Banking as well as Corporate and Institutional Banking. We have multiple growth drivers. We have a good track record of growth. You can see '24 to '25. You can see our deliveries in '26.

And importantly, you can see that our return on tangible equity for the first quarter in '26 is above 17% for each of those businesses. In '25, it was above mid-teens for each of those businesses. Let me unpack one by one. Let's start with the Hong Kong business. So Hong Kong, we're the Hong Kong bank. But Hong Kong, as you heard from Peter, is a super connector to the Mainland. It's a super connector for the Mainland companies who want to go international, they come to Hong Kong as a launch pad to go international. But it's also set to become the largest cross-border wealth hub before the end of this decade, superseding Switzerland. A lot of it is coming from China or from Asia in general or international. That is the opportunity. So we doubled down on it. We took Hang Seng private. And we thought with the 2 banks and the 2 brands of HSBC and Hang Seng, we should be able to get maximum opportunity from these underlying growth -- structural growth drivers. If you look at our position in Hong Kong, with a deposit base of $619 billion, we're practically twice the second largest peer.

We're coming from a position of material substantial leadership. But we are investing fast and hard because that opportunity is massive. We onboarded 1.2 million new personal banking customers in Hong Kong 2025 alone. We onboarded 800,000 in '24. We could onboard 1 million customers per annum for the next 20 years if you assume, among other that the China -- Mainland Chinese middle class looking for international investment aspirations for their savings, is going to choose Hong Kong as their financial center. We need to be geared up for that. Between Hang Seng Bank and HSBC, we have 10 million customers. About 15%, 20% are nonresident. Still, that leaves us with more customers than there are people, including toddlers in Hong Kong. That's because many of them are customers of both brands. They love the 2 propositions, differentiated, but they like both. We're building and strengthening our market share. We're acquiring new customers at pace, and we're building wealth capabilities here to support the growth of Hong Kong and to support this launch pad to -- from China to the world. Second business to call out, Asia wealth opportunity. Our wealth business is essentially driven by Asia. It's 2/3 of our wealth business.

Wealth in Asia is set to grow 7% CAGR for the next 5 years, one of the fastest-growing wealth opportunities on the planet. Our brands, our heritage, our position in all these Asian markets, as Peter was saying, more than 150 years for most of these markets. our deep connections with these markets, our capability to onboard from the new emerging affluent all the way to the affluent, all the way to the high net worth following their personal journeys, our capability to onboard from our corporate institutional banking, the founders, the entrepreneurs, the C-suite coming over and helping them with their wealth are all channels where we can be a leader for growing this business. Not only do we want their deposits, but we also want to convert them to invest with us. We still have 65% of our premier customers who still don't have wealth products with us. You can imagine how seamless it should be for us building product capabilities and converting these deposit customers to become also investment customers with us.

And we have multiple booking centers. One of the biggest wealth drivers today is how our customers can use a diversified booking center structure for their wealth management globally. We have 8 booking centers globally that we can offer them. That is a unique position. Now Wealth already is 25% of group revenues between fees and NII from deposits. Wealth is already 25% of the $70-plus billion of group revenue. And in Asia, in wealth balance terms, we're already the leader with more than $1 trillion of wealth balances. And we're a leader with some margin to the next one, the Swiss, and we keep investing to grow even faster. Third business, CIB. I want to call out 2 features driving growth in CIB. The first one is Asia buys Asia. We coined this term. Asia buys Asia basically is reflective of how much more trade and investment flows are taking place within Asia. how much this is driving GDP growth in Asia expected to be another 1.8% additional GDP growth due to this intra-Asia flow, Asia, Middle East.

As Peter said, we have presence in 18 markets in Asia, plus 10 markets in the Middle East. That's 28 markets for our 50-odd markets globally. And we're a leader in practically all these markets in trade. We're #1. Market share in Hong Kong, more than 30% in trade. But what's important is shipments in 2025 in Asia hit a record high. So one can argue there is a trade and tariff war going on. Asia buys Asia is growing relentlessly strongly, and we are extremely well connected to this opportunity. Now if you look at our business, wholesale transaction banking, which captures trade payments in Asia. we're more than twice larger in revenue terms than our second best competitor. We're more than 2.5x larger than the average of our next 3 competitors. That's our leadership position. And we're investing. We're investing in deposit growth.

We're investing in the network capabilities. And very importantly, we're investing in innovation. And you'll hear from Manish later on how we're investing in tokenized deposits, real-time payments, stable coins, and you'll hear also how we're investing in our various platforms for blockchain-related activities. So those investments, we will be, therefore, with all the rollout of what we're doing, the leader in driving innovation in payments or in general in wholesale in Asia. The second thing I want to call out about CIB is the global flows because we have a global network, not just an Asia network. I think this is very important. 85% of CIB customers are multi-jurisdictional customers. Half the revenue -- more than half the revenue they book, they book outside their home market. This is us at our best as a network bank. 65% of those customers are customers whose home market is in the Americas, in Europe or in the U.K. Our presence in the Americas and Europe and the U.K. is critical to bank these customers in their home market at their head office so that we can capture their flow. And if you look at their flow, 50% of that flow comes back to Asia. Asia is a big beneficiary, not just from within Asia, but from this Western American, European, U.K. business that is coming to Asia.

If you look at the Americas, that's mostly the U.S. really, it is one of the largest contributors to revenue in Asia, but also everywhere. And that's a very important feature to call out. And of course, there is the Asia -- intra-Asia flow, and you can see the Chinese Mainland Hong Kong flow, which is demonstrating how the Chinese Mainland customers are using Hong Kong as a launch pad for their international aspirations. Okay. The last business I want to call out, you'll only hear about this from me, the U.K. because we're in Asia and we're doing Asia seminar. But in November, David Lindberg, our U.K. CEO, will talk to you in a little bit more detail about that. But there are a few things I want to call out about the U.K. business. The first one is if you combine our ring-fenced bank and nonring-fenced business in the U.K., we're talking a business that generates in the U.K. alone $19 billion of revenue. We're talking in the U.K. alone a business that's driving $570 billion of deposits. And we're talking basically a top 3 bank in the U.K. But when you consider the #1 and #2 banks in the U.K. are domestic-only bank, we are the leading international bank in the U.K. flat. And by being the leading international bank in the U.K., the U.K. is extremely important for us.

And you can see the flows from the Americas and Europe to the U.K. as well as the flows from the U.K. all the way into Asia. But we are extremely important to the U.K. as a bank. We are the bank that is making the U.K. a global hub as well. So with that, we have a full day. I'm not going to go through the agenda. You have it. You will hear from all my colleague or a very large number of my senior leadership team here. I'm extremely proud of every single one of them and what they've achieved as individual leaders as well as teams, and I'll leave you to hear from them. That's your day 1 agenda. That is the day 2 agenda where we take you through some more of our businesses. And then I'm going to close on just a few items, my final remarks. The first one is we are becoming simple and agile as we've always meant to be, building a bank for the future and leading in innovation. Strategic priority #1.

We're a customer-centric bank with a high-quality customer franchise, unrivaled customer franchise. And each of our businesses is built on trust, is growing its revenues, is growing its deposits and is delivering above 17% returns. And we're a bank that is delivering focused, sustainable growth from a position of undisputed leadership being the #1 bank in Hong Kong by miles, the #1 wealth manager in Asia by certain distance and the #1 transaction bank in Asia as well by a certain distance. And we're doubling down our investments to be able to capture the structural growth opportunities and continue taking market share. But importantly, and finishing on that note, we are built on strong foundations. The world is uncertain. The world is evolving fast, but our positioning is extremely supportive of us helping our customers navigate these uncertainties. We have a very strong balance sheet. We have a hallmark financial strength, liquid, highly capitalized prudent risk management

We have a brand trust and a heritage that's unrivaled. We have a power of a global network that is not only broad but more importantly, deeply rooted and culturally deeply aligned to all our customers and decision-makers and policymakers in all those markets where we operate. And we have one of the most attractive cultures with people highly skilled with deep product expertise.

And on that note, I'm going to ask Pam to come and take you through additional information. Thank you very much,.

Good morning, and a very warm welcome. Thank you for joining us today. I've had the pleasure of meeting most of you, so I'm going to spare you the introduction. I think you know me well enough by now, the gray hair tells, so it's a good recognition. We have been looking forward to this seminar for some time. It is really an opportunity for us to step back from the earnings cycle and talk in depth about the bank we are building. George has spoken about where we have come from, where we are today and where we are going next.

I'm going to talk to you about the strong foundations we are building from. First, the discipline and focus we are applying, and that really matters. Second, how we are driving growth because growth is the next stage of our journey, and we are going to absolutely double down on it. Third, the choices that we are making in order to create that growth, which is bang on strategy and gives us that operating leverage as we move forward. Now let's start first, why we are confident in delivering our targets. Now I believe that results speak for themselves. Our financials show a consistent improvement. Revenue has grown 5% and earnings per share 11% on a 2-year CAGR basis, excluding notables. RoTE is 1.2% higher to the best level that we have achieved in the last 2 decades. This is unlocking true shareholder value no matter where you are, and it provides us with a platform to raise our ambition, and it gives us the confidence to continue to build from the strong foundation.

Let's just turn to the targets we set in February. I'm going to offer you some context on the targets you are familiar with. When developing them in line with our conservative nature, we want to give you targets that we intend to achieve under a range of scenarios. So there are a range of plausible scenarios we consider when we set our targets. But behind that, we are ambitious. Now what does that mean? It really means that our goals are pushing us to improve, to think differently, as George called out, and raise our performance further. I'm often asked, you just look at your targets and then do you stop? And I said, do you think I'm going to stop there? The targets are there for us to run the bank to deliver on those targets, but we don't stop there. They are the baseline from which we continue to build.

Now let's look at the foundations underpinning our targets. As George said, banking begins with trust, and that's our hallmark strength. Customers place their money with institutions. They see us safe, stable and who will protect their money. And that is even more important when the world around us, the macro environment is uncertain and volatile. That trust truly matters to us. Deposits for us are more than just funding. They reflect the confidence our customers have in us, and they reflect the strength and growth potential of our franchise. Now we hold a surplus of deposits in each of our major currencies, in each of our 4 businesses and in each of our major operating entities. We are very pleased with that, but we work hard to earn our customers' trust. We do not take it for granted. Now this trust gives us the resilience through cycles and a strong foundation for growth.

Now in the first quarter results, we gave you some additional deposit disclosures because we wanted you to see the quality, diversification and strength of our $1.8 trillion deposit base. We also shared with you how $1.2 trillion of our deposits are instant access, relationship balances. They are global and they fund each of our 4 businesses. Now turning to how our deposits are driving earnings. Most of our banking NII is deposit driven. Our loan-to-deposit ratio is 55%. We have a strong track record of growing deposits as the 4% CAGR on the slide shows. Our deposit relationships then give us a deeper engagement over time with all our customers, and they lead to wealth and investment products, payments and cash management, trade and foreign exchange. Simply put, the value of our relationship with our customers can and does extend well beyond the deposit itself.

That is just the starting point. It gives us high-quality recurring revenues that support high-quality fee and other income revenues. and our global network and deep franchise drives connectivity across our businesses and markets through our global footprint. Now what this does is it strengthens both the resilience as well as the sustainability of growing earnings for the bank. Now let's look at these instant access deposits specifically. A defining strength of our deposit base is that 70% comes from instant access. This is across our retail, wealth, commercial and wholesale transaction banking businesses. These are balances connected to our customers' everyday activities, true relationship balances.

For retail customers, it reflects us having a primary banking relationship with each and every customer. For commercial customers, it reflects operating accounts, transaction banking and cash management flows of our customers. Our relationship-led deposits are driven by the role we play in our customers' financial lives and not just simply pricing. As the slide shows, our instant access deposits fund 124% of our loan book. For peer banks, it is below 100% -- and what does it really mean? Simply, it makes us less reliant on market funding than any peer. It gives us flexibility. So when we see attractive lending opportunities, which are on target, on strategy within our risk appetite, we can and we do move quickly. It also means we generate our strong return on tangible equity with lower balance sheet leverage than many of our peers, and that is a key strength for us.

Our deposits provide the foundation for our growth. And when we think about growth and where it comes from, of course, we think about Asia because it's at the heart of who we are. Let's turn to it now. Asia, as you saw in the video, and Peter mentioned and George, it has been our heartland for more than 160 years. It is driving 60% of global growth and 40% of global GDP. So we are prime positioned to take advantage of those evolving trends. Asia is at the center of new trade, capital and wealth flows. We are a leader in Asia, and it is a leading contributor to the group, its performance as well as growth trajectory. Across the region, our international network and customer franchise gives us real competitive strength. You can see this in our 7% customer deposit and 5% revenue CAGRs in what has been a challenging falling rate environment. That is why our success in Asia is key to delivering our targets, and it is built on the strength of our customer relationships and the trust they have in us in every market.

At this seminar, we'll talk about the opportunity we see and where we are making investments to grow. Let's look first at our most recent growth investment, Hang Seng Bank. We now own 2 iconic banks here in Hong Kong. Like HSBC, Hang Seng Bank is a bank built on the trust of its customers. It has history and heritage, deep customer relationships and is the leading local community bank here in Hong Kong, and that truly matters. We see significant opportunity to build on the strengths of Hang Seng Bank, particularly in wealth, SME and MME banking, where customer relationships run deep and banking needs are rapidly evolving, and we are there to serve our customers. We also see the opportunity to simplify how we operate together to co-build capabilities align technology and infrastructure more effectively, upgrade systems and invest for the future.

I'll not talk more about this slide. You've heard us, our ambition does not stop at just the numbers there. They are the blank boxes there, and that really call out that once impairments normalize as we are seeing through the stabilization of the Hong Kong commercial real estate and growth comes in, we see an even further upward trajectory than the numbers that have been called out at the year-end results. Now Luanne and Maggie will talk in depth about both of our franchises, and I'm sure they're going to be far more eloquent because they live here all the time, irrespective of how I travel and get to know the place. So I'm sure you'll be very keen to hear from them later this morning. Now I'm going to move next to wealth.

As we've said before, we are a customer relationship bank. We are building the bank around these customer relationships and wealth is no different. Our relationships reach across retail, wealth and corporate banking. When we think about wealth, our starting point is our relationships that have spanned decades, even generations, particularly in Asia, which is our Heartland. That is why we have built a full suite of products so that we can serve our customers through all life stages. and that is our key strength. Now this gives us multiple opportunities to support our customers with their wealth and business needs. Now particularly in Asia, where we're seeing rising wealth and entrepreneurship driving long-term structural growth, we are there on the ground to take those opportunities and to continue to build on the strength of our customer relationships.

Now just to help you see the significance of our wealth franchise, we are providing new disclosures today. Wealth generates 1/4 of our group revenue and 2/3 of that 25% comes from here in Asia. What the disclosures also show is that the major contributor to banking NII is wealth deposits. These wealth deposits generate 20% of our group banking NII. And again, 2/3 of that comes from Asia. And it is our intention to continue to seize the wealth opportunity in front of us. We are well positioned with how we have prioritized these markets, how we are investing in wealth and the heritage and the history we come from.

Now let me briefly conclude before we move to the management presentations, which I know you have all been eagerly waiting for. Trust sits at the center of our business. It supports lower funding costs, drives resilient earnings and is the foundation, a very solid foundation indeed for future growth. We have an integrated network business with strength in our capabilities across payments, trade, FX and security services. And that really helps us navigate our customers in what has been a more and more volatile uncertain world. Now this is an important part of our growth story, and we will discuss further with some of my colleagues this afternoon. Our network is truly unique. It has scale, it has breadth and the depth of our customer base. And that gives us a very broad base of opportunities to continue to grow. Now you can see after all that, why we are truly excited about the next phase of our journey, which is going to be a journey of growth.

As a starting point, we are the #1 bank in Hong Kong, and we intend to drive further growth. We are the #1 wealth manager in Asia, and we intend to capture the structural growth opportunity ahead of us. We are the #1 wholesale transaction bank across the region, and we will grow with the trade, capital and investment flows shaping Asia's future. We are investing in innovation to position us to remain at the forefront of new forms of finance, particularly in digital assets and currencies. That is how we are building a modern bank, a bank built for the future.

I'll now invite David and Rosha to take it from here.

Thank you, Pam. Good morning, everybody, and welcome to One QRC. My name is Surendra Rosha, and I'm joined today by my Co-CEO, David Liao. David and I have the privilege of managing HSBC's business in Asia and the Middle East. Together, we are members of the Group Operating Committee. We are Executive Directors on the Board of the Hong Kong and Shanghai Banking Corporation. David also sits on the Board of Hang Seng Bank and Chairs HSBC China, and I'm a Non-Executive Director of the Board of Saudi Awwal Bank.

Thank you, Rosha. Good to see you all. Today, we're going to elaborate on the group strategy that George has laid out and detail the management actions we are taking to capture the new opportunities to drive growth. We are building a growing and high-returning HSBC in Asia. To drive momentum, Rosha and I are focusing on banking the growing wealth in the region, deploying the unique global network to gain cross-border banking share, leveraging the 2 distinctive brands of HSBC and Hang Seng simplifying our organization structure, accelerating decision-making and last but not least, upgrading our processes and system to better serve the customers.

As Peter mentioned just now, China is the growth engine for Asia and beyond. We are sitting at the financial catchment of the world's largest trading economy. China generated $20 trillion in GDP last year, a major global contributor of innovation with half of the world's IP filings coming from China last year. It's home to 1.4 billion consumers with much upside on growth, and it is the world's second largest equity and bond market. China is a net capital exporter, generating 10% of world's outbound direct investment flow with Hong Kong adding another 5%. Our CIB business is well positioned to support Chinese institutions and corporates as they expand internationally.

China is fueling the growth of wealth in the region. We added 1.3 new-to-bank customers in Hong Kong in 2025. And all of this, we are only scratching the surface. There are over 70 million Mainland Chinese with offshore wealth needs. Turning to next page. On the back of the world's second largest economy, Hong Kong's fundamental is very strong. GDP was up nearly 6% in the first quarter. Housing market activities are picking up, and it is the world's leading IPO market. The government is developing an all-encompassing financial market, stepping up in fixed income, currencies and commodities as well as in digital assets.

The foundations are compelling as ever, a $2.5 trillion liquidity pool backed by a robust regulatory regime, an attractive regional headquarter and treasury center with over 10,000 multinationals with regional headquarters here. As wealth and investment flow in from around the world, we see a runway for growth across asset classes and currencies and much more room for development as an offshore renminbi center. The opportunity is substantial, but our Asia franchise is more than just Hong Kong and China. Rosha?

Thanks, David. So you heard this morning about how through its history, HSBC has been anchored in Asia and the contribution Asia makes to the group. But what's very important for us is the future. As the region is growing and the way it is growing is changing, it plays to our strengths. Trade is rebalancing and our global network supports customers as they rewire not just their supply chains, but they look to open up new markets for their products. New technology is delivering real-time payments and finance. Regional capital is moving outward and diversifying. And Asian wealth is becoming more mobile, moving across borders coming into Hong Kong, coming into Singapore and investing globally. In short, for us, Asia is the growth engine.

Hong Kong amplifies that growth and HSBC is the connector. We are the leading international bank in Asia today. This is not a single market story. This is about a deep franchise. We are diversified, connected and resilient, present in 18 markets that represent 90% of the GDP of the region. We bank 79% of the global Fortune 500 here. In Hong Kong, as you've heard, we are the #1 bank, but also in Singapore, our growth is supported by strong wealth and treasury activity. India's PBT is up nearly 50% since we last met. The -- it is the largest contributor to CIB outside our home markets. In the Chinese Mainland, we banked around 80% of the MSCI China Tech 100. And in all our other markets, we have an average of 100 years of history, deep relationships, and we continue to deepen that penetration. Last year, David and I took over responsibility for our Middle East business, enabling us to capture the growing connectivity between these 2 regions.

Next, I'll go into 3 actions that David and I are focused on as we look to deliver sustainable growth in the region. Firstly, Hong Kong. You heard from Hong Kong -- you heard from David, sorry, about the strong fundamentals of our Hong Kong business. The scale of our franchise is impressive. In the geography of Hong Kong, across our 3 businesses of the Hong Kong pillar, IWPB and CIB, we earned $13 billion in profit before tax. nearly 50% market share in credit card balances and mutual fund sales in the city, around 1/3 in trade and 1/4 in deposits. But collectively, the management team here is not complacent. Our leadership must be defended, renewed and expanded. David, Maggie and Luanne will go into more detail on this later this morning. Secondly, you heard about the scale of our wealth franchise in Asia. This has underpinned double-digit growth, wealth CAGR for the last 2 years. But there are 2 things I'd like to call out that differentiates our franchise from others. We bank customers across the continuum, 3.8 million premier accounts across Hong Kong and IWPB in the region, 35,000 private banking relationships, and we can upgrade seamlessly across this continuum as people's wealth grows.

Secondly, our ability to cross-sell and refer across businesses. We refer entrepreneurs from our commercial banking business in Hong Kong, from our CIB business in the region to the Private Bank and capture wealth broadly across all our businesses, including in CIB, where we manufacture wealth products and provide custody for wealth assets. You will hear more from Barry and the IWPB team on this later tomorrow. The third thing we are focused on is our distinctive global network. 60% of the cross-border revenues booked in Asia are contributed by customers from outside the region. Our network is uniquely positioned to capture 4 broad trends. China outbound.

Chinese corporates are seeking new markets. We know that. Mainland corporates, WeBank increased their offshore presence by 40% year-on-year, adding over $1 billion in revenues. Today, we have over 120 Mandalin-speaking relationship managers and salespeople across 28 markets, and that number continues to grow. Secondly, Asian asset managers and institutions are diversifying. There has been -- this has been a particular a particular growth focus for us in our institutional client business. Revenue from Asia-based FIs grew by double digits over the first quarter of this year. Thirdly, the corporate champions of the future are being created and incubated in Asia right now, which is why we launched innovation banking in the Chinese Mainland, in Hong Kong, in India, in Singapore to serve Southeast Asia and in Australia.

And lastly, as we think about new infrastructure being built and energy resilience being built across the region, our balance sheet positions us very well to support our customers. We will hear more about this from our CIB team later this afternoon. As we build HSBC into the bank of the future, this foundation and Asia is core to that journey, but the foundation for this build is technology. You heard about our focus on AI from George, and you will see some of the use cases that are being put to work in delivering hyper-personalized service to our customers later this evening at the ICC Wealth Center.

Secondly, we are partnering and investing in fintechs across the region so that we can accelerate development and co-deliver solutions ranging from platforms to customer service and fraud prevention. And thirdly, in terms of digitization, we talked about blockchain, stablecoin, tokenized deposits, and a lot of these products are today live with us in Hong Kong and across the region.

I will now hand over to David to go into more detail about the Hong Kong business.

Thank you, Rosha. Hong Kong, as you can see, is our home market and a substantial contributor to the group. We have 2 iconic brands here that cover retail and wealth as well as commercial banking. HSBC is the largest bank in Hong Kong, and Hang Seng is the largest local bank. The 2 combined serve almost the entire population and almost 0.5 million business banking customers. Under the simplified organizational structure, Rosha and I are directly responsible for the Hong Kong business.

We are focusing on 3 initiatives: First, deliver the revenue and cost upside of Hang Seng privatization that Pam spoke of. Secondly, investing in wealth, people and capabilities. Finally, capturing the cross-border activities from the Chinese Mainland. I will go into each of them in detail. Growing the 2 iconic brands. At the full year results, George and Pam communicated the $900 million revenue and cost upside we expect from the $13.7 billion Hang Seng privatization. Fundamentally, this is about serving our loyal customer better by leveraging the strength of the entire group. This means leverage the best-in-class wealth capabilities that we have across the group, enhancing our business banking propositions through digitization.

This month, for example, Hang Seng already launched remote account opening for Mainland customers using a capability developed by HSBC Hong Kong. We are also connecting Hang Seng to HSBC's global network and products. In simplification, we're positioning the 2 brands to be able to co-build capabilities with a modernized technology foundations. In wealth, both brands are starting from a position of strength as reflected in strong customer growth at the top of the spectrum. HSBC Hong Kong has been accelerating growth of its customer base, creating a pipeline for future upgrades, while Hang Seng has a very high wealth penetration and is executing a focused strategy to increase market share.

Maggie and Luanne will shortly detail their plans to drive further wealth growth -- wealth revenue growth. Expanding the customer base. We are growing at pace, but there is just much more upside. Hong Kong is reshaping into a new era of upsized cross-border consumption, investment and trade hub. We have seen an intense influx of new nonresident customers, corporates and individuals and rapid growth in Mainland-linked businesses. On the retail side, we opened 2.1 million accounts over the last 3 years, sizable, but a fraction of the addressable market. On the corporate side, we acquired over 60,000 Mainland business customers in 3 years, and the pace is accelerating. We will continue to invest to capture further customer growth through seamless onboarding, digitization and leveraging our connectivity. Now I'll hand over to Rosha to conclude.

Thank you, David. So to conclude, we have scale and momentum in Asia, underpinned by 3 #1: #1 in Hong Kong; 1 in Asia wealth and #1 in Asia CIB anchored by wholesale transaction banking. We are investing in technology, and we are investing in our people to better serve our deepest, most trusted customer relationships. But also importantly, we are building new relationships with new customers in the region. Our global and complementary businesses is our calling card, enabling us to capture the growth opportunities in the region across our home markets of Hong Kong, wealth and CIB.

I will now pass over to Maggie Ng, CEO of Hong Kong. After Maggie's presentation, we will be moving to Hang Seng to hear from Luanne Lim, our CEO for Hang Seng Bank. There is time later for Q&A with all of us. Thank you.

Welcome to the analyst and investor presentation for HSBC Holdings plc First Quarter 2026 Earnings. This webinar is being recorded. I will now hand over to Pam Kaur, Group Chief Financial Officer.

Welcome, everyone. Thank you for joining. We have had another quarter of positive performance, which reflects further progress towards creating a simple, more agile, growing HSBC. Annualized return on tangible equity, excluding notable items, was 18.7%. We are confident in achieving the targets we set out to you at the full year. We are updating 2 pieces of guidance today, banking NII to around $46 billion and our expected ECL charge to around 45 basis points. I'll talk to the drivers of both shortly.

In the quarter, we continued to make disciplined progress in simplifying the group to unlock HSBC's growth potential. We actioned a further $0.2 billion of simplification saves and remain well on course to deliver the $1.5 billion target. We completed the privatization of Hang Seng Bank, the sale of U.K. Life Insurance, Sri Lanka Retail Banking and South Africa. And as you will have seen, we have agreed the sale of our retail banking business in Indonesia. We expect to realize an up to $0.4 billion gain on completion anticipated in the first half of 2027. Our CIB business in Indonesia is unaffected.

On outlook, the economic landscape remains complex and uncertainty will persist. Our thoughts are with all those affected by current events in the Middle East. We are fully engaged in supporting our colleagues, customers and partners across the region. We are well positioned to work with our customers and manage the uncertainties in the global environment from a position of financial strength.

Let's turn first to the income statement, where I will focus on year-on-year comparisons unless I indicate otherwise. Profit before tax, excluding notable items, was $10.1 billion. Notable items this quarter include a loss of $0.3 billion on moving Malta to held for sale, a loss of $0.2 billion on the sale of U.K. Life Insurance and $0.1 billion of restructuring costs related to our simplification program. Revenue, excluding notable items, grew 4% year-on-year to $19.1 billion. This was driven by banking NII and strong growth in wealth fee and other income.

Annualized RoTE was 18.7%, 0.3% higher than last year. It benefited from the removal of Hang Seng Bank minorities. Looking at capital and distributions. Our CET1 capital ratio is 14%, down 90 basis points on the quarter as expected following the privatization of Hang Seng Bank. Reflecting our strong organic capital generation, we are already back to our operating range of 14% to 14.5%. The dividend for the quarter is $0.10. We continue to target a dividend payout ratio for 2026 of 50% of earnings per ordinary share, excluding material notable items and related impacts.

Let's now turn to our business segment performance. Each of our 4 businesses grew revenues and each also delivered annualized RoTE in excess of 17%, excluding notable items. This broad-based performance shows our strategy is working. I would just mention the $0.2 billion gain from a one-off property asset disposal in the Corporate Center, which is not a notable item.

Moving now to banking NII. Banking NII increased $0.3 billion year-on-year to $11.3 billion. It fell by $0.5 billion quarter-on-quarter. $0.3 billion of this quarterly decline is day count. We also noted at the fourth quarter, $0.1 billion in gains that we did not expect to repeat. In addition, this quarter, HIBOR was lower in March, and we also recognized a $0.1 billion adverse one-off. We are now upgrading our full year banking NII guidance to around $46 billion. This reflects an improved interest rate outlook. I would highlight that interest rate curves have been volatile and can, of course, change further in either direction.

Turning now to wholesale transaction banking. Recent economic, market and tariff situations have validated the strength of our franchise, both over the last 12 months and in this quarter. We grew fee and other income 2% year-on-year. Customers continue to turn to us to help them navigate volatility and uncertainty. Our balance sheet and franchise strength are particularly valuable in times like this. In the quarter, Securities Services grew fee and other income 11%, reflecting new mandates and higher transaction volumes.

Trade grew 8%, driven by continued growth in volumes. Payments grew 3%, driven by growth in volumes across most regions. Foreign exchange fell by 1% compared to a strong first quarter last year. We continue to see growth in volumes and strong client engagement. Turning now to wealth. We grew fee and other income by 15% to $2.7 billion. I remind you that the first quarter of last year was a high base. Growth was driven by all 4 income lines, and we added 287,000 new-to-bank customers in Hong Kong.

It is worth remembering there is typically favorable seasonality to the first quarter when compared with the fourth quarter. Having said that, we are pleased that the investments we are making in our wealth products, distribution channels and customer experience are translating into real results. Private Banking grew 8% and Asset Management, 3%. Investment distribution performed very well, up 21%, reflecting particularly strength in our customer franchise in Hong Kong. Insurance growth of 19% from a strong base was also pleasing, again, with Hong Kong, the standout.

Our insurance CSM balance was $15.2 billion, up 19% versus the prior year. First quarter wealth balances were $1.6 trillion, up 12% or $170 billion year-on-year. Net new money in the first quarter was a strong $39 billion, of which $34 billion came from Asia. This is a broad-based and robust franchise. Our investments and focus are paying off. I will note that we saw a slowdown in flows in the early days of the conflict, but activity recovered in April across our wealth franchise in Asia.

Turning now to credit. Our first quarter ECL charge was $1.3 billion, equivalent to an annualized charge of 52 basis points as a percentage of loans and advances. Given the ongoing uncertainty in the outlook, we are updating our full year 2026 credit guidance to around 45 basis points. This quarter includes a $0.3 billion charge related to the Middle East conflict. This is precautionary and related to the impact of the conflict everywhere, not just in the Middle East. We also include $0.4 billion for fraud-related secondary securitization exposure with a financial sponsor in the U.K.

I will emphasize that we regard the Stage 3 charge this quarter as idiosyncratic and not representative of the risks in the wider portfolio. We have completed a full review of the highest risk areas in our portfolio and have not identified any comparable fraud concerns. We have updated our risk appetite and are incorporating lessons in our due diligence processes. This remains an area in which we are comfortable, but it is not a significant growth driver in our plan.

In Hong Kong commercial real estate, we had some small recoveries in the quarter. And overall, it remains broadly stable. You will see our usual detailed breakdown on Slide 21. On Slides 15 and 16, we have also set out our private market exposure. We have made these expansive definitions to give you a full picture of our full-service business in private markets.

Let's now turn to costs. We continue to take a disciplined approach to cost management. We are on track to achieve our target of 1% cost growth in 2026 compared to 2025 on a target basis. Cost growth this quarter is 3% year-on-year. This included 1% driven by higher variable pay accrual based on business performance. If you exclude the variable pay accrual, target basis cost growth was around 2% year-on-year. We manage costs on a full year basis. So looking at a quarter in isolation is not meaningful. We remind you that our simplification actions provide a cumulative year-on-year benefit through 2026. For the avoidance of doubt, our 2025 target cost baseline is $34 billion when updated for FX.

Now let's turn to customer deposits and loans. Our deposit momentum continues with $99 billion of deposit growth, including held-for-sale balances over the last 12 months. CIB deposits increased $10 billion quarter-on-quarter in what is usually a soft quarter. Hong Kong was a particular driver. This corporate inflow offset a slower retail flow in our Hong Kong pillar. You will see deposit seasonality on Slide 20. Excluding the movement of Malta to held for sale, IWPB deposit growth was $4 billion. You will see on Slides 18 and 19 that we have set out additional deposit disclosure. This shows you the deposit base split between fixed term and instant access accounts. The 70% instant access proportion should help you see the strength and breadth of our deposit base across our businesses.

Turning to loans. Growth picked up in the quarter. CIB mainly reflects continued momentum in GTS, higher term lending in Hong Kong and drawdowns on committed lines by high-quality borrowers in the Middle East. We are pleased to be there for our customers when they need us most. Hong Kong returned to volume growth this quarter after a period of decline. We are pleased to see borrowing appetite return as the economy grows and as residential property prices recover. Our $13.7 billion investment in Hang Seng Bank is a signal of our confidence in the opportunity in Hong Kong.

We are investing across both iconic banks, and we see significant growth runway for both ahead. In the U.K., we delivered another quarter of good growth. This was both mortgages and our commercial lending book. We see good momentum in our domestic portfolio. Low levels of household and corporate debt in the U.K. provide a platform for the continued growth of our franchise.

Now turning to capital. Our CET1 capital ratio was 14%, down 90 basis points in the quarter. This follows the 110 basis point impact of the Hang Seng Bank privatization and Malta disposal loss. We also saw a 12 basis points impact from the fair value through other comprehensive income bond portfolio, as government yields rose following events in the Middle East. These were offset by ongoing strong organic capital generation. We are pleased to have remained within our CET1 operating range since the announcement of the Hang Seng Bank privatization. A decision on future share buybacks will be taken quarterly, subject to our normal buyback considerations.

Let's turn to targets and guidance. First, targets. We reiterate the targets we set out to you at the full year. Revenue rising to 5% year-on-year growth by 2028, excluding notable items. Return on tangible equity of 17% or better, excluding notable items each year. Dividends, 50% of earnings per share, excluding material notable items and related impacts. Finally, to guidance. Today, we are updating our banking NII to around $46 billion, given the higher rate outlook and our ECL charge to 45 basis points given macroeconomic and market uncertainty.

In addition, to inform management planning, we have assessed a range of top-down stress scenarios. We have set these out for you on Slide 17. I'm happy to discuss these further in Q&A. All other guidance set out on this slide remains unchanged. To conclude, the intent with which we are executing our strategy is reflected in the growth and momentum in our first quarter. It shows discipline, performance and delivery. Discipline in the way we are applying strong cost control and investing to deliver focused sustainable growth.

We are on track to achieve our target of around 1% cost growth in 2026 compared to 2025 on a target basis. And we are reallocating costs from nonstrategic or low-returning businesses towards growth opportunities, while upgrading our operating model. This includes investing in artificial intelligence to empower our colleagues, simplify how we operate and enhance the customer experience by personalizing service at scale.

Performance in our earnings. Each of our 4 businesses grew revenues and each also delivered annualized RoTE in excess of 17%, excluding notable items and delivery. Our first quarter results show we are creating a simple, more agile, growing HSBC built on the strong foundations of a robust balance sheet and hallmark financial strength. This is why during periods of greater uncertainties, our customers turn to us as a source of financial strength, and we remain confident in delivering against our targets.

With that, I'm happy to take your questions.

[Operator Instructions] Our first question today comes from Guy Stebbings at BNP Paribas.

The first one was on wealth. Clearly, another very good performance, particularly on investment distribution, insurance. Can you talk about what you're seeing in terms of flows in the competitive landscape in Hong Kong right now? I'm sort of mindful it's been a very good story and the benchmark comparisons is getting tougher in terms of growth rates. But equally, there's sort of no evidence of let up in momentum and can see another really good performance for new business CSM, which is well above what you're actually booking through the P&L right now.

And then the second question was on private markets. Thanks for Slide 15 and 16. Interested in any changes you're making in your approach to this segment. You've called out the $400 million hit in Q1, and you've not identified anything comparable in the book. One of your peers has signaled sort of partially stepping away from some exposures in this segment, as they've assessed sort of levels of financial controls. I know you said this wasn't a big growth driver of the plan, but are you changing how you're thinking about this segment in any way?

Thank you, Guy. If I take your questions in turn. On the first question on wealth, we are really pleased with the growing CSM balance and as well as on investment distribution. First quarter is always a very strong quarter for us, but I'm pleased to say that even after some slowdown in the month of March, we again see momentum coming through in April. We have a very vast range of products that we offer to our customers. So we've seen some shift in the products. So people moving from bonds and mutual funds into structured products and equities and all that obviously contributes very well to our fee income in wealth.

We have an iconic brand in Hong Kong. And yes, competition is fierce. But as you can see, we are also growing new customers despite putting the fee in January, and these new customers over time also become customers from a wealth perspective, but more in the near term for the insurance business. So those are all very positive signs for us. From a private credit perspective, our overall exposure on private credit has stayed the same, as I called out at the year-end of $6 billion on the chart. And then this is both drawn and undrawn and the private credit and related exposure stays within 2% of our balance sheet. So that, again, from our perspective, is a comfortable position in terms of the concentration.

Following the, what I would call, experience that we've seen in the fraud perspective, I've always said that in this ecosystem, no one is immune to second order sort of exposures, which is where we have had from financial sponsors. Clearly, as a learning, what we are working on is looking at very specifically some of the additional due diligence processes we may carry even where we are relying on the due diligence of financial sponsors. In terms of concentrations, we are also looking at any specific concentrations on individual counterparties in this space, but remain comfortable overall.

And as I've said, we will not have this and it has never been a significant driver of private credit. So same as before, continue to be even more diligent where we are relying on financial sponsors related secondary exposures and their due diligence.

Our next question today comes from Amit Goel at Mediobanca.

So 2 other questions from me. So one was just on the cost growth. So it seemed like the cost growth was a bit higher this quarter, even ex the VP than the overall target for the year. So just in terms of why you think the costs will be a bit more contained or at least the cost growth will be a bit more contained and the drivers there? And then also the second question is just on the Middle East scenario. So I appreciate the extra slide. Just curious on those stress scenarios. So what would we need to see or what would we have to see -- to be seeing some of that scenario play through and to have further impact on your ECL guidance?

Thank you, Amit. So I'll take the cost question first. So as we have said, our simplification actions will be completed by the middle of the year. And those simplification actions will give us cumulatively more savings in the second half of the year. And if we factor those in and phase out in line with our forecast and financial resource planning, we are very comfortable that we will be within our cost guidance of around 1% growth on a target basis. It is a timing of when you have the gross increase, which we said last year would be 3% and then the timing of when the 2% savings come so that you come to the net 1% cost growth.

Now from a Middle East scenario, firstly, to be clear that our ECL guidance and indeed, when we reaffirm our targets, we look at all plausible downside scenarios, and we are, by nature, quite conservative in how we approach these matters. We have, in the fullness of an integrated top-down stress scenario called out a bookend stress scenario, which requires all 5 things to happen. So just to give you some perspective, in this kind of a scenario, you would expect stock markets to be down 35%. So it's pretty severe.

You would also expect oil price at 145 basis points and market disruption as well as significant GDP slowdown across markets globally. So that is the context of this scenario. But as I said earlier, in terms of the right weightage of probability from an ECL perspective, that has already been factored in the 45 basis points guidance. And this scenario gets driven by not just an ECL number, but also an impact on the revenue line, and it assumes that the wealth business, which has continued to do really well even through the month of April will have a significant impact in this kind of a scenario as well as deposits, which typically in a stress position always become an inflow for large deposits. But because of the extreme market disruption, very high inflation that the deposits will come down because customers will need to get money in order to survive through a very stressful economic scenario.

The next question today comes from Aman Rakkar at Barclays.

I just wanted to ask one quick follow-up on the Middle East scenario. Is there any chance -- I think just back of the envelope, it's a kind of $2 billion to $3 billion hit to PBT in terms of the mid- to high single-digit percentage on '26. Is there any chance you could just kind of round out the disclosure on that in terms of what the breakdown in that scenario is between revenues and impairments? I'm assuming it's literally revenues and ECLs and if you could just quantify that for us, that would be really helpful.

The second question was just on banking NII, please. So first of all, I think you're calling out $100 million negative impact in the quarter. Just kind of adding that back in, I guess, to the underlying run rate, it looks like your Q1 banking NII is annualizing a shade above the $46 billion that you are guiding for your full year. So I'm interested in the sequential drivers of net interest income, please, from here, as you see them presumably rates not that much of a headwind and you've got some balance sheet momentum. So trying to work out what the negative is from here to offset that, please?

Thank you, Aman, for your 2 questions. So taking the first one. Firstly, to say, yes, the impact absolutely is equal between sort of revenues and ECLs broadly in this scenario and your numbers were right. I also want to say this is what I would call an unmitigated impact. In other words, it's prior to management actions. We are very comfortable that even in stress scenarios, we have a range of management actions we would be taking. And therefore, we are very confident in reiterating our RoTE targets for '26, '27 and '28.

Now on banking NII guidance, as always, as you would expect, we tend to be quite conservative. We consider in the guidance all possible downside scenarios as well, at least the plausible ones. So in terms of the mathematical calculation, as you've done ex the one-off and looking at the day count, et cetera, it, of course, takes you above the $46 billion. Our guidance is around $46 billion, not just $46 billion. So that's the first point to call out. And the things that we have considered in terms of a possible plausible headwind would be, of course, there's an uncertainty on the interest rates.

Also, we have seen the experience. There were a few weeks of impact of a lower HIBOR in the month of March, but I'm very pleased to note that the HIBOR has again come to the range that we are most pleased with, which is around 2.5% and obviously, there is the continuing tailwind of our structural hedge reinvestment. We've given you disclosures on that. And the deposit flow overall continues to be very strong, but we are happy to say around $46 billion with our usual conservatism.

Our next question today comes from Andrew Coombs at Citi.

A couple of follow-ups from me, please. Just firstly, coming back on the private credit exposures on Slide 16. I think the exposure on which you booked the charge today falls within the $3 billion securitization financing bucket that you list on that slide. Can you just give us an idea, please, of how much of the exposure that you've taken a charge on today accounts for of that $3 billion total, please?

And then secondly, coming back to wealth, it's difficult to quibble on 15% year-on-year growth, but that revenue growth does look slightly weaker than your peers. So can you just give us an idea of where you think the differences are? Is it business mix, which means you have lower transaction income benefit year-on-year? Anything you can comment on relative performance?

Thank you. So just in terms of the exposure, we have substantially provided for that exposure. And that exposure, when you can see mathematically, is not an insignificant part of the $3 billion that you've called it quite rightly, it really comes from that particular bucket. Coming back to your point on our revenue. So in terms of the revenue, I'll just bring to attention that the CSM balances have been growing, but the way they actually hit the P&L, it is really over a period of time. And therefore, what you capture in the P&L is 1/10 and that then flows through over the following years. So that is how I would look at it in terms of the fee income growth. If you ex that or adjust for that, we are very much in line or indeed ahead of peers in certain pockets.

The next question today comes from Katherine Lei at JPMorgan.

Pam, I would like to ask about the fraud cases. Like can we have more color about the fraud cases such as like what is our total exposure? Because the key concern is that is this $0.4 billion one-off or we were going to see more like step-up in impairment charges because of this particular case? I think this is the number one question.

Number two question is like I look at the risk weighting, right? It seems like a downside scenario, now we aside, 45% versus like before the war, like, say, 4Q '25 is roughly about 15%. Can we get more color of like, say, in this scenario, would that be -- let's put it this way, under what situations do you think we will continue to see continue rise in this 45% of downside scenario?

Thank you, Katherine. So firstly, this fraud is an idiosyncratic fraud. We have gone back and reviewed all our highest risk exposures across our portfolio and specifically looked at the private credit exposures as called out on the slide, and we see no comparable fraud risks in this matter. And of course, we continue to review our risk appetite, tightened due diligence and so on. So therefore, we feel quite comfortable that this is a one-off fraud indeed, and it comes to us through a secondary exposure that we have through a financial sponsor and where there was reliance on the financial sponsor due diligence. So that's the first case.

And second one, in terms of the downside scenarios, the 45% downside scenario is built also from a 30% Middle East-related specific scenario that we created, which was a fifth scenario. So we do not expect that 45% downside scenario to shift much. And I can just give you as a comparison as we went through periods of COVID, Russia, Ukraine, that's sort of a leaning on the downside scenario. It's pretty much at the top end of the downside scenarios. And then once the situation gets more normalized, we bring the scenarios back to what our normalized scenarios that you have called out.

I also want to stress to you that the IFRS 9 downside scenarios factor in, what we think at this point of time, the full extent of the forward-looking guidance, as we would obviously calculate based upon what we're seeing on the ground as well as assumptions as well as the probabilities given to all the scenarios. And this is quite distinct and different from the bookend Middle East conflict stress scenario on Slide 18, which has a much holistic view and a range of things happening, including, as I called out, from very severe stock market disruptions as well as oil price distinction. So I just want to make a clear distinction between what you account for, what you have in your outlook versus what you keep as part of a planning exercise in terms of the range of scenarios that you should always be aware of as a good management practice.

Our next question today comes from Chris Hallam at Goldman Sachs.

Two for me. So the first, again, on wealth. So $5 billion of that $39 billion of net new money was deposits. So it feels as though sort of 90% of the flows were invested, whereas if I think about the stock of your wealth balances, it's closer to 60%. So how should we think about that? Is that a structural trend you're seeing? Are clients becoming more invested? And if so, what does that mean for fee margins and for returns going forward? And maybe just within the $39 billion, without the conflict in Iran, would that number have been higher or lower?

And then second, on capital, like you said, well managed through the guidance range throughout the HSB privatization process. Obviously, this quarter, a couple of one-offs within the quarter, but the underlying business performance appears to be encouraging. So given all of that, can you comment on when you expect to restart share buybacks?

Thank you, Chris. So firstly, in terms of invested assets, we are very pleased with the growth in invested assets. But I just want to remind you, typically, Q1 is strong for investments. So there is some seasonality of money moving from deposits into investment assets into -- in Q1. We've also been very strong in terms of the new mandates we've got from private banking. So overall, wealth is a very robust story to call out, and it's very broad-based, not just dependent on one lever.

In terms of the conflict, there was a bit of risk-off wait and watch in the second half of March. However, as April has come through, we continue to see high volume of transactional activity. And as I said earlier, our customers, they continue to readjust their portfolios and our strength lies in the broad range of products we have on offer. And we have really invested in this business. So going forward, from a fee income perspective, I do believe there is a huge tailwind for us in terms of how we build on this year-on-year.

So coming back to capital now. Firstly, I'm really pleased that even with this very large core investment we have done in Hong Kong, which is a critical market for us where we are hugely confident about the future growth prospects, we have still remained throughout the entire period within our CET1 operating range, and that truly reflects the very strong capital generation capabilities of our business across all 4 businesses. So that is indeed very encouraging.

Now in terms of share buybacks, you're right that even with all the one-offs we've had in the first quarter, we are in a good position, and I expect Q2 to be equally highly capital generative for us. But of course, a share buyback decision is done on a quarterly basis. Starting point is always capital generation, which looks strong. We have to also look at loan growth, then we have to look at our 50% dividend payout ratio, which is an important target for us and the residual is always in terms of share buybacks and distributions, notwithstanding any inorganic opportunities for which we have an extremely high hurdle rate. So we will look at it again starting from Q2.

The next question today comes from Kunpeng Ma at China Securities.

I got 2 questions for you. And the first one is about Hang Seng. I'm glad to hear the momentum in deposit and wealth management in the first quarter and the pickup in the momentum from April. But how -- what proportion of such momentum could be attributed to the synergies out of the Hang Seng deal? And also some color on future synergies, future synergy effects of the Hang Seng deal would be much more helpful for us. Yes.

The second question is on HSBC's global footprint. Yes, this is out of the proposed disposal of the Indonesian retail business. I think the Indonesian market is quite important. It's not the kind of some marginal or less important market. So I want to know the HSBC's views on your global franchise. I mean, which markets are important to you or which markets and which business are less important? Yes.

Thank you, Kunpeng. So firstly, we have made a very good start on the Hang Seng privatization, but the synergies at the moment have been very little, if any, because it's just the start of the process. We have already started investing in Hong Kong, both in the red brand and the green brand in terms of technology, in terms of simplifying customer journeys and training and skilling of our colleagues. So we do expect progressively the growth from the synergies to come through starting from the second half of this year, but mainly through 2027, '28. So that's a very strong tailwind, again, to support our targets as we progress.

And so far, everything is very much on plan and with a lot of engagement with colleagues on the ground, which is, I think, really important, both in terms of maintaining the momentum, the sentiment as well as reinforcing our strong optimism in Hong Kong, as you've already seen in the results as well as in the stabilization of the Hong Kong commercial real estate market.

Now coming to our global footprint from an Indonesia perspective, we think Indonesia is a critical market for us from a CIB perspective. It is an important network market and the economy is significant from an Asian perspective. However, our retail business of the size and the scale it was and the scope it had was not within the strategy of our wealth business. It was a valuable business, remains a valuable business, as you've seen from the financials for the transaction that has been announced. But from our perspective, from a wealth perspective, it did not meet the high hurdle rate criteria we had. We have other markets where we are investing in a far more focused manner.

Our next question today will come from Alastair Warr at Autonomous.

Just a couple of follow-ups on the credit costs and on the insurance that we touched on just a moment ago. If you've got 52 basis points booked in for the first quarter on credit costs, it looks like, therefore, to get to your 45 over the rest of the year, you'd be looking at a little bit above 40 for the remaining quarters of the year? You were at 40 for the full year before. So is that just implicitly building in maybe a little bit more drag from the Middle East? Or is there anything else going on anywhere else for us to be thinking about?

And just a second point, you touched on the CSM there and how it can make a difference to how you're booking your speed of growth of income at the wealth line. HSBC has been really strong on some big ticket quite short payment period and products that some of your big name peers in Hong Kong are not necessarily so keen on. So can I just confirm, you talked about 10 there -- that your release rate in years is about 10 years and that this shorter payment period thing doesn't turn up in a shorter release rate as well.

Thank you, Alastair. So firstly, on the credit costs. You're right, this quarter's credit cost of 52 basis points has 2 significant numbers in it. One is obviously the idiosyncratic one-off fraud-related. If you take that off, we are pretty much in line with where we would be in Q1 of 2025. Our books overall ex these 2 items have performed really well. The second being obviously the Middle East reserve. So if you take the Middle East reserve build of $300 million and the fraud number, then the actual credit cost would be lower than what it was in Q1 2025 at around $600 million. What we are looking -- $600 million, sorry.

As we look at going forward into the next few quarters, we are always a bit conservative, and we do have a little bit of scope built in, both in terms of what happens on Stage 3s of the fraud-related item, obviously, that's a one-off, but the ex-fraud-related Stage 3 buildup increases because of a prolonged conflict in the Middle East. Also Q1 has been very benign on Hong Kong commercial real estate. We are very pleased that we are seeing the beginning of a stabilization, but we are not calling it the end of the cycle. So therefore, we keep that sort of a buffer for the rest of the year.

So in terms of the CSM balances very specifically, there is no change in the accounting policy. Obviously, it's based upon IFRS 17 principles, hence, the drip feed over the 9- to 10-year period that we will see. And the key thing there is as long as with the new customers that we are onboarding, with the growth in the CSM balance, the growth in the CSM balance exceeds the P&L flow from the CSM balance because the trajectory is very positive in the growth of that business in Hong Kong. It is an iconic brand for us. So therefore, the demand for the product from a distribution perspective remains extremely strong.

Thank you, Pam. We will take our last question today from Joseph Dickerson at Jefferies.

I just wanted to ask in terms of the numbers you've given the guidance upgrade on the banking NII, is that taking into account the -- effectively marking the market for the current yield curve in the U.K. I note some footnotes around you were using rates, as I think mid-April. Does that take account of the yield curve in the U.K.? And then presumably, there's some outer year tailwind into that. And given you've got some outer year revenue growth assumptions, I'd be keen to know how that -- how any maturities at higher rates might influence the outer year revenue growth rate.

Thank you, Joe. So from a banking NII perspective, yes, we looked at the yield curves as -- at the middle of April across the currencies. So that's correct. In terms of the revenue growth projections that we gave for the outer years, they were based upon the yield curves as when we set our targets. So if the yield curves continue to be higher or grow, then everything else being equal, that will be a tailwind for revenue in future years. The banking NII guidance, as you know, we always only give for the current year.

Thank you very much. That ends today's Q&A. So I'll now hand back to you, Pam, for any closing remarks.

So thank you all for your questions. As you've seen from our results, we are very pleased with our return on tangible equity of 18.7%. We have never printed a number of this size for nearly 20 years now. And that gives us a very good start in terms of where our targets are and how firmly we stand behind them for the next 3 years. Of course, there are macro uncertainties in the current environment, and we have given disclosures, which are very fulsome, both on private credit as well on extreme downside stress scenarios, bookends. So hopefully, in that context, I have answered all your questions. And obviously, if you have any more detailed questions, please reach out to the IR team. Thank you very much again for your patience and interaction.

Thank you, everyone, for joining today. You may now disconnect.

Good afternoon, everybody. I hope everybody had a good lunch. And I'd like to welcome you to this session with Pam Kaur, who is the Group CFO of HSBC. Thank you very much for joining us, Pam.

Thank you, Nick, for the opportunity.

We're going to start off with the usual polling question. So I shall read that out to you now. So the question is, what is the most important area for HSBC management to deliver on to achieve the better than 17% RoTE target. The first is managing banking net interest income against the backdrop of rate volatility. The second option is delivering operational efficiencies. The third option is delivering growth in their wealth business. And the fourth option is managing capital efficiency. If you could please use the buzzer to answer the question and see what the result. Well, split. So it's operational efficiencies, banking NII, but actually pretty evenly balanced, I think.

So maybe we just start with the obvious question. Obviously, it's a very dynamic situation out there, and it's difficult to predict. But what are your initial thoughts on the impact of the Middle East conflict on HSBC's operations?

Thank you, Nick. This question is top of mind for us, particularly in terms of the safety and security of our colleagues. And beyond that, it is being there to support our customers. We have been in this region for 130 years, and we absolutely believe in the business, the region and its potential continuing going forward. As we sit here today, I would like to call out just the size and shape of what we have on the ground. Our biggest exposures in the region are directly through our HSBC Middle East Bank and they're mainly in Dubai. And just in terms of context, that business contributes $1 billion to our PBT. Next is the Saudi Awwal 31% share, and that contributes $700 million to our PBT. So overall, in the round, the region contributes around 5% to the PBT.

In terms of loans and advances, it's about 2%. More broadly, what we are monitoring on the ground is a range of risks, whether it's to do with cyber, whether it's to do with operational continuity, fraud and so on. As I look back and see how does this impact us from our own business perspective, we are very comfortable with the targets that we have given for this year in terms of 17% RoTE and a continued trajectory of growth accelerating to 5% between '27 and '28 as well as the 50% dividend payout ratio. Of course, depending on the duration of this conflict continuing, and that is the key factor with which we do the risk assessment. So does this continue just for the next few weeks? Till sometime in April? Or does it go well into most of Q2?

And in those context, we really would like to raise a few points of reference because that does have an impact on ECL guidance because of IFRS 9. At this point, we are not shifting that ECL guidance because the assumption is it's more shorter end. So we are looking at a range of downside scenarios, some very specific for this conflict and some just the existing downside scenarios with impacts on inflation, GDP, not just in the Middle East, but more broadly across the globe. And typically, what happens in these circumstances is you change the probability weighting from the base case to downside 1, downside 2 as well as to any specific scenarios that you may have created for this conflict or this stress.

In terms of a parallel I can draw is when Russia-Ukraine happened, Q1 2022, we had similar shifts in weightage of our scenarios, similar pressures on oil price. And there was a reserve build during the quarter, and we would expect the same to be this year. The reserve build at that time, and that's not necessarily to be exactly the same here, was a couple of hundred million dollars. It was $250 million to be precise then.

And then as we go through the cycle in the next 2 quarters, if there is more stability, you absolutely get the releases to those reserves. So that's the one area which is really important. Very much close to that is you also look at what's happening from an RWA perspective because there will be a downward pressure on CRRs. Having said that, at this point, we are not seeing any significant either drawdowns. We're seeing a bit more deposit flows coming in into our accounts, and we have seen no specific individual customer-related credit issues related to the Middle East scenario. But in terms of the RWA downgrades and the headwind you get, in some ways, unfortunately, the tailwind is loan growth because of the sentiment is even slower, and therefore, you won't get RWA growth there. But in terms of our targets, it's still fine because we had not really factored that much loan growth in the first place.

In terms of wealth, what we are looking at is really being there for our customers as they look into opportunities to consider opening new accounts, whether it's in Channel Islands or Singapore or Hong Kong. And our customers are very much there, but they obviously want to have some ability that if they do choose to move, they have accounts, and we are very much ready to help and support them. If I think in terms of the CIB business, there will be some impact in terms of not just lending, the general customer activity. But of course, the volatility is up, there will be some benefits coming from that as well.

So overall, in the round, fairly comfortable on the revenue trajectory. Some headwinds driven by IFRS 9 modeling temporarily from an ECL perspective. And in the same token, we look at what we can do. So from a cost perspective, if things go bad, we have a plans to say, are there any areas which we can reprioritize because of what's happening in the world and indeed need to because there may be areas you want to invest more because your customers are reaching out in those geographies. And there may be some areas where in terms of your multiyear plans, you may indeed choose to shift the timing of when you invest. But we don't want to do anything and don't need to do anything, which in any shape or form takes us away from our strategic priorities, which we will continue to focus on.

And I guess the other sort of news that's grabbing headlines at the moment is private credit. You've mentioned less than 2% of loan book, I think, in your disclosure. Can you give us sort of any more detail or any more comfort around these exposures? Should we expect any impact from MFS or any of the other names that are in the headlines?

Okay. So firstly, private credit is a very inconsistent definition on how different people are describing private credit. If I take a more conservative view on private credit compared to what has been described elsewhere, our overall exposure in private credit is within 2% of our loan book. So that's $20 billion below. Within that, if I look at specifically that specific area where we have secondary exposure, where we have more reliance on due diligence done by third-party organizations, that is a minority of this number, which would mean it's a single-digit billion number.

Now we are very mindful of fraud risk, and we have a large book. I'm not going to comment on any single name. But that fraud risk is something which we are monitoring. We are looking at our portfolios, doing read across, so on and so forth. But we have not changed our overall ECL guidance, and that is the most important factor to consider at this point of time. And we remain very comfortable that given the size of our book and the diversity of our book, as and when these losses crystallize given that contains space, we have the loss absorption capacity, but not commenting on any particular name.

Okay. So let's move probably to a little bit more medium term from the immediate sort of concerns. Obviously, 2025, I think you defined it as performing and transforming in terms of what you achieve. Now you're sort of focusing growth on your strongest areas and reallocating $1.8 billion in costs to strategic growth opportunities, investing in Asia, for example, Hang Seng. Over the next 3 to 5 years, what are the most reliable structural growth advantages you have? And what do you think you need to do to prove it to investors that they are structural growth opportunities?

So firstly, from our perspective, since we reorganized the bank into the 4 businesses, we are really pleased that each of those 4 business is growing. Each of these 4 business has a mid-teens or better RoTE because that's really important, not just in terms of the financial numbers you deliver, but of the confidence and the culture you drive in the organization because no one is subsidizing another business. Everyone is strong enough to stand on their own 2 feet and indeed be able to get the investments that they need, which we are doing through multiyear programs.

So I'm very comfortable that as a starting point and our results from last year as well as the continued performance we have seen until the end of February this year prove that. Whether it's in terms of the resilience and the growth of the banking NII, pretty much driven by a very strong deposit franchise as well as the growth in the fee income from a wealth perspective, not just in Hong Kong, but across other markets, Singapore, Middle East, India, China, Taiwan, so I can name a few as well as the very large corporate institutional bank and it's very strong underpinning in a top 3 position in FX, payments as well as trade.

And just as in good times and in difficult times, we've been there to support our customers, as you're seeing even today in the Middle East, the engagements you get and the long-term relationships you actually solidify because you've been there when times have been good and bad, that's the underpinning of the franchise, and there is a track record behind that to deliver it. If I look then in terms of what's yet to be proven, but again, we have, I think, realistic, albeit a bit ambitious, planned because we believe in this market, which is Hong Kong.

In terms of the Hang Seng Bank, we are well on track and starting the process of implementing on what we have promised to deliver, which is $900 million of benefits with the restructuring cross the $600 million and then going beyond that, as we go deeper into opportunities in Hong Kong as well as in a more stabilized pre-impairment kind of level, which is great always. But even with the ECLs normalizing over time, we think the opportunity is tremendous. But that, of course, is yet to be proven because we still have to get the numbers delivered, and that will follow through from '26, '27 into '28. But we will not stop there. We will continue on that growth trajectory from '28 onwards. Underpinning that, we have some real key drivers, which are product driven as much as we are a relationship brand bank, but in our ability to be able to serve our wealth customers, the wealth products or the retail franchise of Hang Seng Bank as well as wholesale products, transaction banking, capital markets, the wholesale client base as well as their ability to participate in our very strong cross-border business.

On top of all of this, having privatization, and yes, it is a privatization and no other word applies because it is truly leaning into the Hong Kong growth story with 2 strong brands. We have a good ability to have greater operational efficiencies, and that's with regard to manufacturing capabilities in insurance as well as in asset management. We will also have some technology harmonization. Our mantra is we want to do more with the same. So we will be upskilling colleagues and helping them to be able to serve their customer base with a broader product franchise across both the brands. So it's not a severance story. It's much more of doing more with the same number of people we have as well as deploying AI and so on. But the other factor is we'll also have greater ability to have capital efficiency and portfolio efficiency because once you're all privatized in terms of how you upstream, downstream capital and deploy your capital as well as better manage the balance of your portfolios across both brands.

Okay. That's good. And just, I mean, slightly on Hong Kong. I mean, obviously, we had very, very strong deposit growth in '25. We had very soft loan growth generally. It seemed that things were changing a little bit towards the end of the year. I mean, Hong Kong, certainly on the ground feels like it's much healthier. U.K. performance, I think, in Q4 was strong. obviously, there's a few things changing. But is your sense that these -- there are these little pockets of growth?

We always welcome pockets of growth because that's a core role for a bank in any community, in any country that they served, particularly in their home markets. So we have the risk appetite available, and we will be there to support our customers. Now obviously, with the current situation, if there is a downer on the overall sentiment, loan growth gets muted. But even before the current situation, we had very, I would say, conservative estimates on loan growth for this year, hardly any.

I'm hopeful in Hong Kong, which has been pretty normal. If I look at the IPO activity, the economic activity over the last few weeks, nothing has really changed in Hong Kong. And if commercial real estate continues to stabilize, then the very small Hong Kong growth will continue in gross terms. But also in net terms, you won't have any large big sort of deleveraging of commercial real estate that has happened in the last 2 years where large developers who have strong cash flow positions are resilient and have been deleveraging. So that, I think, could be a little bit of a tailwind.

From a U.K. perspective, the growth has been for us more than GDP, but in very specific areas. There's been growth in mortgages to $6 billion. There's been also growth in terms of infrastructure, renewables, innovation, so some of the new sectors. And those areas and pockets -- partly it was because we were catching up on market share and didn't want to be left behind, but partly because we had very specifically invested in those areas, and therefore, the growth has come through. Before the last few weeks, we did see very good momentum in terms of credit appetite, particularly coming from mid-market as well.

Now the backdrop to it is the underlying credit levels in the U.K., both for retail and wholesale customers are pretty low. So I expect that to continue to some degree, even though the overall sentiment is a bit sort of wait and watch. And hopefully, if this current situation stabilizes, particularly over the next few quarters or a month or so, then it's a very different situation because as I mentioned earlier, sentiment as well as our own assessment gets driven by how long a stress actually stays in the system because after then, there has to be a period of normalization, supply chains opening, so on and so forth.

Okay. And then just talking a little bit about costs. I mean, obviously, 17% RoTE, a lot of that depends on costs. I think that was what a lot of people thought in answer to that question. So when you're budgeting, how do you measure the appropriate level of BAU cost savings from simplification? How much of that gets recycled into investment? How much of it drops down into the bottom line and improves returns? And just linked to that, will BAU -- is BAU inflation going to become an issue again at some stage?

Really good question again, Nick. So firstly, what we are managing the bank to is 17% or better RoTE. So we're not stopping at 17%. What is important from a cost perspective is one of the key drivers in cost, obviously, from inflation is also staff-related inflation. So the inflation related cost increase was 3.6% in '24, 3.2% in '25. This year, the assumption prior to the Middle East situation again was 3% and the reason the number comes to 1% net is because we have simplification savings of $700 million going into this year. So very comfortable with that sort of 1% headline, and that's what we are tracking to.

In terms of -- just to note there, quarter-on-quarter may be different because when the savings come in and run the bank continues, just to give you a bit of a view on that. But so far, nothing changes. The real shift where we are doing in terms of our investment is really trying to drive operating leverage whether it's by focusing on scale businesses or indeed focusing on the benefits we can get through AI, whether it's on better productivity around the revenue line or just the cost benefit. And by doing that, the purpose is that within the overall cost envelope because we think we have a very heavy sort of healthy revenue and cost ratios. So our main driver is that we want to be able to shift the run-the-bank cost to more change the bank.

So in other words, when your efficiencies, it is easier to deliver and manage your day-to-day costs, but you always have greater room for investing and change the bank opportunities. And that's really the value of being a big scale large organization because when we do these shifts from run the bank to change the bank for investments, it's not in hundreds of millions, it gets into billions. And I think that's a big benefit for an organization of our size, scale and diversity.

I think overall, yes, inflation is a key driver. The view at the moment is around, I said, the 3% number. But the way it actually lands on the ground is it varies from market to market. It also varies in terms of skill sets, demand and supply. So keeping all those things in the round, the 3% is not just a straight line, but that's kind of the average sort of look at in these markets.

Okay. Great. I'm conscious that we're -- I've asked a few questions. So I'm going to throw it open to the audience and see if anybody has anything that they would like to ask. No. Well, maybe I will go on with one more. Maybe if we can just talk a little bit about capital. So I think at the results meeting, it was made very clear what the capital policy is, obviously, balance sheet growth payout or business growth payout and then buybacks acquisitions with very, very clear sort of targets around what the hurdles are for acquisitions versus buybacks. So I guess my question would be, Hang Seng it's a business you knew, and it's in your core market. But how easy is it to hit those hurdles in terms of acquisitions?

You mean our 4 criteria.

4 criteria, yes.

So firstly, I want to remind you, in every results announcement, I've used 3 words: discipline, performance and delivery. So the underpinning of discipline is that when you have those 4 criteria, you absolutely deliver on those 4 criteria considerations before you make any decision. And you're right, Hang Seng was truly a one-off, and we are very pleased we could do that transaction the right time at the price which was accretive from an EPS perspective. So that is our #1 criteria. But it also gave us meaningful scale, not small scale. It was also in a market which is a home market for us.

And last but not least, I know mergers and acquisitions become a fashion of day very often. But when you have such strong opportunities and ability for organic growth, you don't want M&A activity to become a distraction factor for you. So we will not do things which distract us away from our organic growth because that is an absolute goal that we have that we will drive towards. Obviously, if there is a great opportunity not perhaps similar to Hang Seng because I do believe that's sort of once-in-a-generation kind opportunity for us. We will consider them, but use the very strong disciplined approach and rule that we have applied. We don't want to get off track, lose focus because as I keep saying, especially in a world which will have headwinds, scale matters. It gives you the ability to weather the storm, to have loss absorption capacity and yes straight through to delivering on your organic growth and your strategic objectives. And small-scale acquisitions don't give you that, obviously.

So let's -- so as you've touched on it, let's talk about Hang Seng in a bit more detail. I think you've spoken around some of the sort of the things that you hope to do there. But can we just get into some specifics and talk like where are the biggest revenue opportunities for you out of Hang Seng? Where are the cost savings? What areas will they come in?

So the revenue opportunities, as I briefly mentioned, really comes from the basic fact that you have growth in a market, you have a very strong customer proposition. Hang Seng has a community bank customer proposition. HSBC has both local, domestic and international in the Red brand. But what we do have from a Red brand perspective is some very strong product proposition. So the ability to serve those products to customers who come to us through the Green brand, whether it's the new customers like close to 1 million we got in on the retail in the Red brand and 250,000 in the Green brand, we should be able to have the same cross-sell for wealth products and fee income generation. So that's one thing.

If I look in terms of how you enable it, you do some technology harmonization, you improve your customer journeys, but you also maintain the very strong branch network and service capabilities of the Green brand because that is so important for the Green Bank's role as a community bank. So you can accelerate customer journeys and product offerings in terms of improvements for the Green brand. You also have some abilities to look at from a wholesale bank perspective in terms of the suite of products you offer, whether it's your wholesale transaction banking products or beyond DCM products and so on and your advisory products for your wholesale customers as well as enabling those customers to have the same degree of cross-border connectivity and flows of products and offerings as we do in the red brand.

When I look at from a cost perspective, firstly, it's going to be easier to do that growth based upon investment you do in one place. So that's where the restructuring cost is. It's not, as I said, people related so much, it's the investment you're doing in technology. You do it in one place, you don't duplicate -- that's the technology harmonization. So that gives you some cost synergies. But also in terms of manufacturing capabilities, you don't need to necessarily do it in 2 places. So therefore, that gives you the synergy.

So from my perspective, it is the ability to leverage both operational efficiency, people capabilities as well as learnings from both sides. There are some pockets where Hang Seng Bank has done some really good initiatives, including some AI deployment, which they have done from a finance function perspective, which I am learning from for HSBC Group overall. And that's all to do with understanding better customer profitability, understanding the real drivers and you do a cross-sell in terms of the differential on profitability across different customer relationships and customer segments.

So I guess that brings us quite nicely on to technology then. And I guess there's -- I mean, we can tackle this in 2 different ways. Maybe if we can start off and we can talk about AI, and we can talk about how HSBC is deploying AI. And where do you see the biggest sort of near-term opportunities for you from AI deployment?

It's a really good question. So for us, the first starting point of an AI is to increase the productivity of your colleagues. And for that, we have deployed a productivity suite with more than 80% take-up in terms of people who regularly use it. And that is all about opening the minds of our colleagues to new ways of doing business because that will have an impact not just today, but your ability to embrace change as we see a changing landscape over the next few years.

And as I've said, given our scale, we should be able to deploy not just at pace, but in a significant manner. But beyond that, we consider that both in terms of revenue and cost, AI is beneficial. Most people will talk only of cost synergies. For revenue, it's like -- and we do actually track it to say, if for growth in revenue, you needed x number of additional headcount in a pre-AI world, in a post-AI world as deployment gets deeper, what would that number be? And hopefully, it's going to be significantly smaller. And if that's the case, you straight away get improvement in jaws and operating leverage.

From a cost synergy perspective, again, we want to be quite targeted. We don't want to take an approach to say, let's deploy AI anywhere and everywhere. And hopefully, the vast majority of use cases stick and what doesn't so be it. We want to pick up areas where it's going to be meaningful enough to make a difference. And that is, again, looking at those processes, those volume-driven activities, those activities which at the moment, require very basic binary decision-making, a lot of which that gets through offshore activities as we all have grown.

We're looking at those more. We are also looking at technology and technology coders in terms of deployment of AI in that space. But in terms of processes, very specifically speaking, it's not just contact centers, it's KYC onboarding, it's small ticket credit lending. It's also looking at transaction monitoring. So there's a range of activities where with the deployment of AI, not only can you do it, what I would say, in a more cost-efficient way, but it can also be faster. It helps you to do at-scale client onboarding, for example, in a safe risk-managed way. What is very important to all of this is, and that makes a big deciding factor on who we choose to partner with.

And we have no specific view whether it's buy or build. But in terms of the partnerships we choose, we want to make sure not those people who just give big headline numbers on benchmarks and savings, but those who give us the optionality in terms of deployment for us, which is safe. And by that, I mean safe and well controlled, whether it's from a cyber fraud risk perspective or indeed from a data protection perspective because those are sacrosanct. And I think if anybody takes a misstep, those are the areas no matter what country you are in, what jurisdiction is managing you, you not only get into issues from a regulatory perspective, but you start losing the trust of your customers.

I'm going to check one more time to see if there are any questions out there from the audience.

We've just seen some rate curves around the world move pretty violently in the last couple of weeks. I'm wondering directionally if any of this has any bearing for HSBC.

Can you be a little bit more specific, please, sorry?

I think a lot of the belly of the swap curves around the world are starting to -- you believe hikes or not, but I know you reinvested as well. So great impact.

Okay. Great. No, thank you. And I'm sorry, you didn't pick up banking NII that is kind of right up there in the questions in my comments. So the way we look at that is that clearly, from a rate curve perspective, both the timing of the interest rate cuts and these shifts will be a benefit from a sterling and a U.S. dollar perspective for us. So that is a tailwind. And so far, given the fact in Hong Kong, the IPO activity is still at a heightened level. And although HIBOR is at the lower end of the 2% to 3% range, we still see quite comfortable. And on top of that, if I look at from a deposit perspective, in times like this, customers always want to go for what they consider to be the safest, securest biggest banks. So the deposit inflows have also started and started getting built up. So banking NII is in a good space.

Are there any more questions out there? One right at the back over there.

What are the opportunity or the threats you see from the current war in Iran from your -- for your wealth management business?

So your question is what are the opportunities we see from our wealth?

Yes.

Okay. And so from an opportunity perspective, clearly, we are well present and the best embedded bank in some of the largest middle class growing economies, whether it's China's, India's and also Hong Kong, Singapore, et cetera. So demographically, as well as growth of the middle class goes absolutely in our favor. And that's why you see the large volume of new client activity and client numbers that have been building up, 1 million in the Red brand and 250,000 in the Green, as I mentioned. Now these numbers can vary a little bit, and they're not all wealth customers day 1, but that's the starting point of the growth into the wealth journey over a vintage of a couple of years. So I think that is quite powerful from a wealth opportunity.

The threat on that is, of course, you're always mindful of the customer journeys, in particular, some of the new providers may be offering. So you need to be absolutely top of the game in terms of the technology, online banking as well as applications and product offerings you have. So that's what we are investing in. And we learn actually as we move from one geography to another to be able to leverage and build it across the board. This is what we have been doing already.

The other big advantage for us is then when the world is in a difficult position and clients want to be more mobile in terms of opening accounts, not just in one location, but more broadly across the geography, the internationally mobile clients, we can do that right from U.K., Europe, Middle East, Indian subcontinent, Asia. So that is a big advantage for us and a few colleagues have that. And the last but not least is we have an embedded commercial bank, not just large corporate banking in all these countries where we are present, which basically means the employees and the owners of these banks for their banking needs, they are our natural client base. We don't need to put so many RMs on the road to actually get that business.

And then as they grow and their businesses grow, our wealth client base grows. And we have seen that happen with businesses we have supported over the years and as they have become millionaires and billionaires, our wealth business has grown. And last but not least, we play the full spectrum on the wealth business right from assets under management of $100,000 going to $2 million, $2 million to $10 million and beyond. So we have that broad range. And the competitors we face in different buckets are different. And of course, it's more competitive at the top end, but we have that continuum. And I think that's what gives us the growth trajectory as opposed to a pure-play wealth manager in one country.

Are there any more questions there? So I'm going to come up with one more on the tech side. So can you talk a little bit about sort of digital assets? I mean there's news or there's talk in the press about Hong Kong launching its stable coins in the next week or so, I guess, 23rd, I think, is what the South China Morning Post was talking about. So anything you're doing in terms of the stablecoin space or the direct sort of crypto asset space? And then maybe a bit more broadly talk about what you're doing on tokenized deposits.

So on tokenized deposits, we are very comfortable. We've been spreading tokenized deposits across various of our geographies. So that will continue from a tokenized deposit perspective starting from Asia onwards coming west. But again, for all these initiatives, we want to first stay very much aligned to our strategy. So we are big in the payments business. We believe in digital being very viable in terms of the transmitter of value. So we will use those digital channels as well as those products.

In terms of stable coins, there are a couple of things. If the stablecoins being launched are in a market or a geography, which is strategically important to us, obviously, Hong Kong, but also if the regulatory environment there is mature and strong enough to give us that safeguard, which will be critical as time goes by to be able to mitigate financial crime risk, provide the right degree of transparency of the money flows, then of course, we will participate. So that's the way we look at this. We are not into the sort of crypto space in terms of proprietary risk for our own purposes. Obviously, in terms of product offerings for our customers, depending on the sophistication and the size of the customers, we have a broader upside.

And are you seeing -- I mean, are you seeing -- what are the best use cases for tokenized deposits? Because I know that's where more of your focus is.

I think the best use cases -- and of course, we are following through this very closely is to say where we have that ability for our customers to engage with us real time in terms of managing their expectations 24/7. I think that's a very strong point that tokenized deposits and digital more broadly has. It's in line with customer expectations shifting more in terms of having more real-time products, but also giving the customer the ability to be fungible and ability to engage with us at all times everywhere.

All right. I think we've got time for one last question. So I shall offer it out to the audience one more time. And if not, thank you very much. Any closing remarks you'd like to make?

Yes. I would like to -- we've got a few minutes, if I can make a few closing remarks, if I may. So firstly, I would like to close by saying we follow up and manage on our risks very closely. We learn from the history of what we've been through, through various years, especially recently, whether it's COVID, whether it's Russia, Ukraine. That gives us the confidence as well as with our strong capital, very strong liquidity position to be able to be there to support our customers in line with our ethos of being a relationship bank, and that will not change.

And therefore, our commitment to our strategic choices where we are is something which will stay firm as we go through even the current crisis period. At the backdrop of this, we always work through different choices we can make in terms of timing of investments, in terms of prioritizing them, in terms of costs, and we will manage that through the cycle. We have sufficient leaders given our diverse businesses, our size, scale, our geographic footprint to be able to very comfortably despite the conservatism and how we call issues to have loss absorption capacity if there are individual issues that we need to tackle through the cycle as well as to be able to deliver to the targets that we have set out. And that is the underpinning for what I'm sharing with you.

I also believe for the sustainability of our franchise and our growth journey, it's really important that the people leadership journey we are on, the cultural change that we are driving in the organization of speedier decisions, simpler organization, greater accountability enables us both in normal times, but particularly in the times we faced in the last few weeks to be better positioned to service our customers. And that is really the underpinning of our franchise. We never sit on our laurels and the inherent advantages we have for the trust that we have taken hundreds of years, 160s to be precise to build in terms of our customer loyalty, but we want to continue to be and will be competitive for the customer journeys we offer because the landscape around us in terms of competition as well as the demographics changing of our client base requires us to do so, and we are very well positioned to do so because when we shift from run the bank to change the bank, we can do it meaningfully at scale on strategy where it matters, where it will deliver once you have the right discipline underpinning it all.

Thank you very much. Thank you for your time.

Hello, everyone, and thank you for joining our full year 2025 Fixed Income Investor Call. I'm Fais Yousaf, Group Treasurer, and I'm joined today in Hong Kong by Alastair Ryan, Global Head of Investor Relations; and from London, by Greg Case, Head of Debt Investor Relations.

My remarks today will cover 3 areas. First, I'll provide a summary of group performance and progress against strategic initiatives. Second, I'll discuss the strength of our balance sheet, including capital, funding and liquidity. And finally, I'll highlight a few forward-looking topics relevant to debt investors, including an update of group targets and guidance and, of course, issuance plans.

As I speak, we'll show some selected slides from our 2025 fixed income investor presentation. The full presentation is available on our Investor Relations website. And once I finish, we'll move straight into Q&A.

Starting with the full year. Our results were strong and continue to demonstrate the power of our diversified and capital-generative business. I will refer to our results, excluding notable items and comparisons are on a constant currency basis, details for which are set out in the appendix of the presentation.

Group revenue for 2025 was $71 billion, representing a 5% year-on-year growth. This included $44.1 billion from banking NII. Profit before tax was $36.6 billion. This is 7% up on last year and represents a record high for HSBC. The group generated a return on tangible equity of 17.2%, achieving our mid-teens or better target. Importantly, each of our 4 global businesses returned a mid-teens or better RoTE.

I refer you to the main investor presentation for full business highlights, but a few standouts include: fee and other income from wholesale transaction banking, which grew 4% year-on-year within our CIB business. And also in IWPB, wealth fee and other income rose 22% with growth across all subsegments. Our robust performance allowed us to declare ordinary dividends for the year of $0.75 per share, an increase of 14% on the prior year.

Turning next to progress we're making on strategic execution. As our CEO and CFO set out in detail on the analyst call earlier today, we've made significant progress this year in creating a simple, more agile, customer-centric bank, which is well positioned to deliver sustainable growth. Given that I'm speaking to you from Hong Kong, let me briefly begin with an update on the privatization of Hang Seng Bank.

First of all, we were pleased to complete the transaction ahead of schedule, further strengthening our position in our Hong Kong home market. Hong Kong is not only a dynamic financial center, but also a super connector, a trade and capital gateway between the Mainland and the rest of the world. This transaction brings together global reach and local depth, allowing us to drive growth across both banks for all customers and investors.

We've already identified initial synergies from the transaction, and we see further revenue and cost upside to come. Moreover, we believe growth and asset quality improvement will bring additional value. Beyond the privatization, we've continued to simplify the group and sharpen our focus on core markets and businesses. In 2025, we announced 11 business exits and 4 of these have been completed to date.

These actions reduce organizational complexity, improve capital efficiency and support a more stable earnings profile. In addition, we have taken actions to realize approximately $1.2 billion of annualized simplification savings in 2025, which is ahead of our original time line. Of this, $0.6 billion were realized in P&L this year. The delivery of this plan and our ongoing discipline has allowed us to guide for 1% cost growth in 2026 on a target basis.

Next, moving on to the second area, the strength of our balance sheet, asset quality, funding, capital and liquidity. The power of our franchise and our deep customer relationships drove 5% growth in deposits during the year. This includes held-for-sale balances and this equivalent to $78 billion increase. Growth was broad-based, but notably strong in Hong Kong, where we see ongoing capital and wealth inflows.

Across our 2 home markets, our deposits continue to skew significantly more towards current and savings accounts than we see across the broader market. Our loan book grew by 2% as increases in 3 of our 4 businesses, the U.K., CIB and IWPB were partially offset by ongoing customer repayments and muted demand in Hong Kong.

Our cost of risk for the year was around 39 basis points, aligned with our guidance of around 40. As we look out into 2026, our expectation is for around 40 basis points again. Stage 3 balances were 2.5% of customer loans, up marginally on the 2.4% level last year. The overall grading of our loan book continued to improve with 77% rated strong or good, up 1 percentage point on last year.

Turning to capital. Our CET1 ratio was 14.9%. This is at an elevated level due to our strong organic capital generation and retained capital in the fourth quarter to support the Hang Seng prioritization. This transaction completed on the 26th of January with a $13.7 billion purchase price. The removal of the $3.8 billion minority capital inefficiency takes us to around $10 billion of common equity Tier 1 consumption. This lowered our CET1 ratio by 110 basis points in January this year post the balance sheet date. A slide in the appendix sets out the capital impacts in more detail.

We expect to remain capital generative, and we'll continue to manage our CET1 ratio in the operating range of 14% to 14.5%. The midpoint of this range gives over 300 basis points of headroom above our MDA hurdle requirements. Our MREL ratio was 32.9%, which is 4.5 percentage points above our requirement, equivalent to around $40 billion of available capital.

Now touching a little on regulation. The implementation of Basel 3.1 in the U.K. will take place on the 1st of January 2027. We have well established programs in place to support this change, and the reform is expected to be modestly beneficial. We do not expect this to alter our capital target operating range or our issuance plans, and our focus at this stage is on model alignment, data preparation and ensuring a smooth transition.

Also in the U.K., the Financial Policy Committee published their review of bank capital requirements in December last year. We believe the review of the framework and the intended alignment with other jurisdictions is a positive step. This review is a welcome catalyst to improve the framework to support growth and competitiveness and should proceed with ambition and pace. We are committed to continue our engagement with the Bank of England and U.K. government on this topic.

Moving on to liquidity. The group's large and well-diversified deposit base provides strong levels of liquidity. The total HQLA on hand is now $0.9 trillion, covering around half at total $1.8 trillion customer deposit base. Our group LCR is 137%, but this is a conservative methodology, which excludes $160 billion of HQLA. Our underlying entity LCRs are extremely healthy with the lowest at 148% and the rest generally considerably higher.

Our loan-to-deposit ratio continued to reduce and is now at 55%, representing a $0.8 trillion customer surplus. Our structural hedge is $593 billion, which increased by $64 billion in 2025. The average life remains at 3.1 years. During the year, we expect to redeploy $110 billion of structural hedge assets, currently yielding 2.7%. The structural hedge remains a tailwind for banking NII. And whilst increases in the hedge are behind us -- sorry, large increases in the hedge are behind us, we continue to look for opportunities to add to the hedge as always, dependent on market conditions.

Now on to the third and final part, the forward-looking dimension. That is targets, guidance, issuance plan, but also growth and innovation. Our franchise strength that I outlined earlier, together with the strong execution of our strategic plans has meant that today, we announced improved targets and guidance.

Revenue growth is expected to be rising towards 5% by 2028, excluding notable items. We are targeting a return on tangible equity at 17% or better each year to 2028, also excluding notable items. And for 2026, our guidance for banking NII is at least $45 billion, reflecting expectations of deposit growth and the contribution of the structural hedge.

Alongside these financial targets and guidance, we continue to invest and develop for the future, particularly in our digital asset capabilities and use of artificial intelligence. This will support new revenue opportunities, promote market innovation and drive internal operational efficiency.

In digital assets, our activity remains client-driven and focused on custody, tokenization and market infrastructure. We are delivering innovative solutions across bonds, gold and tokenized deposits for both institutional and retail clients across geographies. We are pleased that our HSBC Orion digital bond platform recently secured the U.K. government's Digital Gilt mandate, while our HSBC Gold tokens in Hong Kong, now with a gold gifting feature demonstrate our commitment to practical innovation.

We remain closely engaged with emerging developments, including the Hong Kong stablecoin and in the U.K., the GB tokenized deposits' live pilot, ensuring we continue to lead responsibly as the digital asset landscape evolves. These activities incur limited balance sheet usage and are all conducted with an established risk appetite framework. In artificial intelligence, our investments are directed at empowering colleagues, delivering end-to-end process reengineering and enhancing our customer experience.

Finally, on to issuance. We are pleased with the engagement and support from our investors across multiple currencies in 2025. For '26, we expect to issue approximately $20 billion of Holdco Senior, $1 billion of Tier 2, and $4 billion of AT1. We will once again have minimal needs for OpCo funding this year given our strong funding position.

Across all asset classes, we will continue to look for opportunities to diversify the currency of our issuance to fit with our footprint and franchise. As with recent years, this will include significant issuance in U.S. dollar, but we will also continue to look for opportunities in sterling, euro, Singapore dollars, Australian dollars and others.

We also continued our focus on legacy securities management in 2025 with the tender of some of our New York law instruments that no longer have value as regulatory capital or MREL. Where appropriate and proportionate to do so and where the economics make sense, we will manage this step further over time.

In summary, with the strong performance in 2025, we're moving at pace to continue to deliver a simpler, more agile and growing HSBC. We are on track to deliver against our simplification savings target. We continue to progress with our exit of nonstrategic activities, and we are confident in our ability to continue execution with discipline and precision.

On that note, let's open this call up for Q&A. Faizan?

[Operator Instructions] While we wait for the questions to line up, we can start with a presubmitted question. Greg?

Thanks, Faizan. Yes. So we've had a pre-submitted question in Fais. So the question is, could you give us an update on your plans around currency of the various different splits of issuance, you've outlined in the issuance plan, please?

Okay. Thanks, Greg. So really, it's very similar to what I've said in the past on these calls. Generally, you'll see much of our issuance issued through the U.S. dollar markets given that's the largest liquidity pool. In '25, we did about 68% of our MREL issuance in dollars. Although as I said in my prepared remarks, we did have some other currencies as well.

What I'd say is that generally, this year, you probably expect -- should probably expect us to do between 2/3 and 3/4 of our senior holdco in U.S. dollars. For AT1, we do have a preference for U.S. dollars given that's our functional currency. And where we do other currencies, it would be, frankly, where we could downstream it to legal entities that have a functional currency in that alternative currency. So yes, look, largely U.S. dollars, but we are open to looking at euro, Aussie, Sing, sterling, yen and maybe a few other currencies as well.

Our first question on Zoom comes from Lee Street of Citi.

I have 3, please. Firstly, you mentioned the FPC review as a positive step. I guess, in a bit more detail, what mean practically do you actually expect to change as a consequence of the review? Secondly, you mentioned tokenized deposits. Just when do you expect to have that as a broad offering for your client base? Is that this year's business, next year's, timing on that would be helpful.

And a technical one on bonds. You obviously continue to include par call windows, refinancing windows within your subordinated instruments. Obviously, other banks are now ceasing to include those. What are your thoughts around that, please? That would be my 3 questions.

Thanks, Lee. Good to hear from you. So I'll probably take your questions in order. So I guess, first of all, on the FPC review, I think perhaps I'll start by providing a little bit of context for people that are perhaps not familiar with this. So at the back end of 2025 -- December 2025, the FPC Financial Policy Committee in the U.K. published their initial findings of the capital review.

We welcomed that -- those findings. And we think this is an important process. And as I said in my prepared remarks, it's one we want to move forward at pace and with ambition because for us, it provides a real and genuine opportunity to make, I guess, thoughtful amendments to the framework. What the FPC have said, and I think you will know this, Lee, but just for everyone else's benefit, is they've said that they would like firms and other interested parties to submit written feedback by the beginning of April. And they've highlighted 4 core areas. From memory, that's, first of all, usability of buffers. The second was leverage ratio and the leverage ratio framework. The third was looking at the interaction within the capital regime of different aspects and different requirements. And the fourth was really indexation of thresholds, proportionality, complexity, et cetera.

So those are the 4 core areas that have been highlighted for feedback. I guess to your question, it's a little bit early to predict what will come out of that review process. But I'd certainly say there are a few things that will be positive for us from our perspective and that we would like to see happen. So the leverage ratio is one of those things. We think there, there are several angles that could be considered. And as I think many of us will know, this is something that the U.S. have looked at in terms of changes to the eSLR framework. So that's one thing.

Second thing, buffers and usability of buffers. Obviously, the FPC announced a change in their benchmark guidance moving that to between 13% and 14%, which in itself is positive. But buffer usability is really the catalyst that helps firms from our perspective, use that and change ratios.

Perhaps the third thing I'd call out on this one is ring-fencing. We think that this is an area that should also be looked at and would provide meaningful opportunity for -- there is meaningful opportunity for adaptation there. The ring-fencing regime was obviously developed a few years ago and the whole framework is in terms of capital and the Basel rules have evolved since that was first established. So that's what probably I'd call out on the FPC review.

I think the second question was on tokenized deposits. And what I would say in that regard is that we have spent a lot of time ourselves developing our capability for tokenized deposits. I would say we're a leader in that space and certainly within the technology aspect of that. And as I mentioned in the prepared remarks, we have spent some time developing our HSBC Orion platform, and we were very pleased for that to be selected for the U.K. -- to have the U.K. Gilt mandate as part of the pilot. We're also actively engaged in the GBTD pilot exercise among U.K. banks.

But I think your point was probably very specifically about kind of expanding our tokenized deposit offering to clients. And what we've done in that regard is, we started in Hong Kong, and we have onboarded clients in Hong Kong on our tokenized deposit offering. And since that initial launch, we have expanded to other jurisdictions, including the U.K., Singapore and Luxembourg. And that's not the extent of our ambition. We want to go beyond that. So it's clearly an area of focus. So that's probably what I would call out in terms of tokenized deposits.

And then if I caught correctly, your final question was on the 6-month par call window. Look, as you've probably seen, we issued a call notice a few weeks ago, which was actually the first AT1 that came up for us with that 6-month par call window within it. And we chose to call that really at the start of the window. We -- the way we think about this, I would say, is that we continue to see benefits in having securities issued with this call window as it gives flexibility when we're in stressed markets to ensure we can call or to maximize the probability of calling it.

But we're not in itself trying to derive value from the call window. And generally, we would look to exercise early on. What we do here is that we do not leave the refinancing of our AT1s right to the last minute. We will look multiyears ahead certainly months ahead, and we will ensure that there's no refinancing risk. So keeping an AT1 through the call window, we're effectively incurring a carry cost. So it's quite often to our disadvantage to do that. But the 6-month call window for us does create the opportunity, as I say, in a stressed market to maximize our opportunity to call.

It's one of the things, we don't think there's a clear market consensus that's formed here. And I know that some parties have chosen to remove that. Others retain it as well. We'll keep track of that evolvement or how that evolves over time. And at the moment, there's no cost for us in the primaries to having that call window in. If a cost were to arise, then we would maybe reconsider as well. Hopefully, that addresses your questions, and I haven't missed anything.

Next question comes from Dan David of Autonomous.

Hopefully you can hear me. Congrats on the [indiscernible] I've got 3 questions. The first one is on the CET1. So thanks for providing some guidance on the pro forma impact of Hang Seng. Just interested in the -- how long it will take to come back into your CET1 range and what actions you're taking. If you could just refresh us on that, that would be great.

Second one is on MREL. The requirement has gone up. quite a bit 60 basis points, which equates to about $5 billion, which is quite large. Could you give us some detail on what's driven the increase in the requirement? And do you expect this to -- the, I guess, half yearly volatility to continue?

And then the third one is a bit broader on, I guess, Hong Kong CRE and the ECL charges. So I think the ECL charges look pretty small in Q4 on Slide 16. But I think on the call earlier, you said there were some macro-related upgrades, which offset the underlying charges. Could you maybe provide some guidance on or break out the pieces that are moving there, the kind of the underlying from the macro-related upgrades? And maybe give us some background on what drives the timing of that macro reflection or change in your view to kind of push through into the models?

Thanks, Dan. That's very clear. What I propose to do is split that up actually. So perhaps I'll take question one on CET1, perhaps I'll ask Greg whether he can make some comments on the MREL requirements. And I'll ask Alastair to take question 3 on Hong Kong CRE. So I guess on CET1, yes, look, we closed the year at 14.9%. So that's our group CET1 ratio. And we -- that was a 40 basis points increase on the quarter. That's above our target operating level, which, just to remind everyone, is 14% to 14.5%.

But we built that capital up in expectation of the Hang Seng privatization going through. And as you will have seen, Dan and as you kind of quoted in your question, that's now gone through -- and that effectively recognizes 110 basis points drop in the CET1. So that takes us just marginally below our target operating level. It's my expectation that we will recover back into the operating range fairly quickly. And I don't -- as we've said a few times, we are -- and continue to be incredibly capital generative.

So I'm not going to give you a time line for that, but I don't think you should expect us to take too long to get back into the range. In terms of share buybacks, what we said at the beginning when we announced the transaction which was around October 9, was that we were suspending share buybacks for up to 3 quarters. Now we're not changing our guidance or messaging on that point. Generally, share buybacks are something we consider each quarter as we go. And they are one of the tools that we have at our disposal in terms of capital deployment.

Clearly, we look at other things as well. We will look at inorganic growth -- sorry, organic growth opportunities and inorganic growth opportunities and then share buybacks probably comes a little bit after that. So no clear guidance that I can give you today on when we will resume share buybacks. But there's nothing that we see at the moment that would change that would require us to change what we said previously. So that's CET1. Perhaps as Alastair is sitting next to me here in Hong Kong, perhaps I'll ask him to do the Hong Kong CRE, and then I'll come over to Greg for MREL.

Yes. thanks, Fais. So Slide 36 in the fixed income deck, you can see that there's actually very modest deterioration in the book in the second half of the year in Hong Kong CRE. The major feature of the percentage move was actually the best borrowers repaying. So the top of the stack, the strongest loans went down because borrowers deleveraging. So that was a theme across the market.

We'd like to be lending more in Hong Kong in general, but the demand isn't there. There was one Stage 3 loan of materiality in the fourth quarter. There have been one in the third quarter. I mean we -- parts of the market here is still stressed in particular parts of the office market and particular pockets of retail, but we haven't seen the broad-based deterioration that people were worried about, I think, for some of the banks.

In terms of the revised economic assumptions, we run that regularly. We update that in our quarterly reports. The key features in Hong Kong in the recent past have been things like better retail sales, stronger tourism arrivals, increased property transactions, better GDP growth, and rising prices in certainly residential property. So a number of positive signs in the market. It just happened that those numbers -- the single name and the revisions were broadly comparable in the quarter.

I guess back in Fais's slides on Slide 33, there's some disclosure on Hang Seng Bank, where I think the market was asking more questions. The first half had a number of significant moves into Stage 3 at Hang Seng. That hadn't happened in the second half of the previous year, and it didn't follow through in the second half of this year. So I'd say we felt the second half on the book was very much as we'd expected. We are calling out in the group's 40 basis points guidance for this year, there remain risks of further moves into Stage 3 or deterioration in other ways, certainly in pockets of the Hong Kong market. But overall, the market conditions have been improving of late, which is the driver of revisions to economic assumptions.

Thanks Alastair. All right, Greg, over to you.

Thanks, Fais. So on the MREL, I think firstly, it's just important to note, of course, that our buffer above our minimum remains very significant at around $40 billion or around 4 percentage points of RWAs. But yes, as you can imagine, given we are, I think, quite unique in the way that our MREL requirements are made up in that you take the component parts of all of our group, so all the various different resolution entities and add that together, there are some complexities in there.

And primarily, the one that I think is driving the increase that you saw in the second half was that some of the entities that make up the whole are leverage constrained rather than RWA constrained. So there has been some growth in leverage assets, and that has driven that increase, albeit still, as I say, leaving us with a decent buffer.

[Operator Instructions]

Thanks, faizan. So I've had a submitted question in from Ivan Zubo from UBS, who asks around an update on our legacy position and specifically on the 5844s alongside just if you give us an overview of where you are on legacy.

Okay. Thanks, Greg. So I guess let me start with the 5844. So these are legacy make-whole calls that we issued -- Tier 1 instruments that we issued out of our European entity. We had another series as well, which was 10-handle series issued out of our holding company that we decided to exercise a make-whole call on, I would say, in 2024 actually now. We, at the time, looked at the 5844s and concluded that it was not optimal economically to call those at the time.

We continue to monitor that, I would say, and look at it on a regular basis. But we have no intention at this point to call them. And so there's no update I can give in terms of timing of that. So look, I'm aware that this is of interest to our investor base, and it is something that we look at regularly. So that's on the 5844s.

More broadly on the legacy stack, we -- I'm pretty pleased with the progress we made in terms of reducing it. That stack was over $14 billion back in 2022. And over the intervening years, we've cut it by approximately half. You will know that we undertook a liability management exercise for some of our New York law instruments in 2025, where we took 4 of the 5 series that were there and offered the tender and premium on the tender for exercising that. This is something we'll continue to look at. We'll continue to look at opportunities to reduce the legacy stack. But really for us, it needs to be proportionate and reasonable in terms of cost, complexity and other things. So that's where we are at the moment.

Our next question comes from Paul Fenner of SocGen.

Can you hear me?

Yes, we can now.

Sorry, I'm not on Zoom. Zoom is a pain for me, by the way, because of all the firewalls. I've got all very quick questions. The first is HSBC is known as seeing risks way before anyone else does. And in that context, I just wanted to know what it is that you guys talk about internally that no one else is yet talking about? I mean I noticed that George was questioned about AI and talked about AI as if it's still the great opportunity. But is that a major risk coming down the pike in 2 years' time that we're not really thinking about? I'd love to know -- get some color around that.

Second, Hang Seng, it strikes me as a perfect in-market merger integration, significant cost cutting. Why -- I know it was discussed this morning, but just love to get a sense of why it is that you are not, one, rebranding, is it because there are very, very different customers and there's sort of brand loyalty? A little bit of color on that.

Third, you mentioned this in relation to Daniel's question. But at the group level on Slide 17, you've got a nice little chart with what's been going on in Stage 3 loans over the last 4 years. Obviously, the trend has not been your friend. You've got $25 billion of Stage 3 loans. You may not think of it this way. But do you have -- I mean, do you see that stabilizing now? I mean how big a number do you think Stage 3 can get? I know that what you're saying around cost of risk, but I'm thinking specifically around that number would be helpful.

And then the very last question, you did talk about the currency of supply. I may have missed what you said about Tier 2. In euros, Tier 2 remains cheaper to issue into even on a cross-currency basis, I think. And given that it's a it's about $1 billion that you are saying and not $1.5 billion, that suggests more of a size of a euro. Am I overthinking it? Is euro made more sense in Tier 2? Those are my 4 questions.

Okay. Thank you, Paul. So noted on Zoom, but thank you for making the effort to call in, first of all. That's really appreciated. So I'm going to -- I'll perhaps start with one, which is the risks question. I'll touch on the Hang Seng, but I'll also bring in Alastair to give you a bit of color on that. Then I'll pick up 3 and 4. So we'll probably go that way, if that's good.

So well, look, thank you for your comments on HSBC seeing risks before anyone else does. Look, I think we spend a lot of time looking at scenarios that can play out. We have a vast network of banks across the world. And so I think it's incumbent on us to be close to the market, be close to risks that can occur and to test them out. We have great teams that look at stress testing, look at scenario analysis, geopolitics and the like.

We're also very tapped into policies, regulatory policies, governments, et cetera. So we don't -- we're not complacent about that at all. It's something we continue and we always monitor, but it's something we have to monitor, I would say.

Now on AI, look, we are positive about AI. There's huge opportunity in that arena, as George rightly said earlier on in the day. But this is going to, we believe, lead to structural shifts as well. And one needs to be aware of that. So it will lead to kind of changes for some of our client base, and we stay and remain very close to those client bases in terms of talking to them about the impacts of AI positive and negative and helping those clients kind of transform and evolve what they do.

But ultimately, this is happening regardless, the kind of momentum is there around AI. And I think we need to be conscious of it, aware of it and kind of embrace it where we can and be aware of the risks as well. I know that's pretty high level, but that's probably how I'd comment on your first question.

On Hang Seng, I mean, just to share kind of my own take on that. Look, we are incredibly pleased to have done this privatization and completed it ahead of time. When we announced it in October, we had a time line that was longer than January 26. So it's great to have completed it. First, it brings 2 iconic brands together and allows us to really fulfill our potential in Hong Kong and exploit the opportunities within the Hong Kong market. That's a market that we're incredibly positive on.

We think these 2 brands together will -- is best placed to do that. We've called out some synergies, which were described earlier on. And those synergies will allow us to take the best of both brands. So for HSBC, that is taking some of the great things that are done in Hang Seng and adopting those. But also for Hang Seng, we really believe that the vast product suite that we have within the red brand within HSBC, the technology that we have as well the customer base, the international customer base are all things that can benefit the green brand, i.e., Hang Seng. So that's the way we see it. Alastair, would you like to comment on the rebranding and the other question?

No. Thanks, Fais. Absolutely. So all I'd add, Paul, is we recognize it's a relatively unusual thing that we're doing. It is our intention to run 2 banks with a full market service. So the synergies will naturally be around the revenue opportunities that Fais was talking about. We have identified significant cost opportunities, but they are not as big as a typical in-market deal because this is not a typical in-market deal. You'll retain your sort code, your bank account with Hang Seng, no change.

I'd also just mention a number of the back offices were already working together because clearly, we had a controlling stake in Hang Seng for the previous 60 years. So it is a different structure to what I think you'll have seen from just about any other setup. That's why there's emphasis on the revenues. And just back to the beginning of what Fais said that this is an opportunity, we think, to increase the economic exposure of the group to a market that is a great banking market and what we think has a lot of growth in the future.

Okay. Thank you, Alastair. So moving on then. So the Stage 3 loans, though they have ticked up a little bit, as you say, Paul, up to 2.5%. Really, what I'd point you to is our cost of risk guidance. And I know you comment on that in the question, but cost of risk guidance is around 40 basis points for this year. We see this as a cycle actually. And the range we often quote is 30 to 40 basis points. And so we're quoting at the moment at the top end of that.

There is still -- there are still pain points, particularly in commercial real estate. Pam talked on the call earlier about Hong Kong commercial real estate and kind of the 3 areas that we look at within that, so residential, office and retail. And there are different points in terms of the evolution. There are still pain points, but there's still -- there's optimism and others, and that might be a source of Stage 3 in the future. But actually, we're quite conservatively placed at the moment. And there's nothing that I would call out in terms of something that we're looking at on the horizon that would move that number materially.

So that's on Stage 3. And then finally, I think your last question was on MREL -- sorry, was on Tier 2. I didn't say anything previously on Tier 2. There are no set plans really in terms of Tier 2 for currency at the moment. We'll look at the options and really, it's in line with my prior comments for senior, we'll see what there is, and we'll look at -- we'll be quite deliberate about that in terms of spread and demand for it in terms of our entities. So nothing I can add to it.

This brings us to the end of our Q&A session as we have no further questions lined up. I will now hand it back to Fais for his closing remarks.

Okay. Thank you, Faizan. So right, thank you. Look, thank you, everyone, for joining today. It's -- just reiterate, it's a pleasure to be sat here in Hong Kong, especially having completed our privatization. I spent some time with Hang Seng colleagues earlier today, and we are working, as you would expect, closely together. I would like to say [Foreign Language] to colleagues across Asia who are celebrating Lunar New Year. And I wish everyone else a great day and talk to you soon. Thank you.

Welcome to the HSBC Holdings plc Investor and Analyst Presentation for the 2025 annual results. We will begin in 2 minutes. [Operator Instructions] Please note that it will not be possible to ask a question if you are joining via the webcast link on the HSBC website.

Ladies and gentlemen, welcome to HSBC Holdings plc's 2025 annual results webinar for investors and analysts. For your information, today's webinar is being recorded.

At this time, I will hand the call over to Georges Elhedery, Group CEO.

Welcome, everyone. Thank you for joining us. As we celebrate the year of the horse, [Foreign Language].

Our 2025 full year performance was strong. It was a year in which we performed, transformed, invested for growth. I will discuss our strong strategic progress today. First, the strong momentum in our 2025 performance. Second, the execution of our 3 strategic priorities where we are progressing at pace and with discipline. And third, the new growth and return targets we are setting out today for 2026, '27 and '28.

So first, the full year earnings. My comments will exclude notable items and the comparisons will be year-on-year on a constant currency basis. In 2025, there were $6.7 billion of notable items. You are already aware of these from prior quarters. They are set out on appendix Slide 36.

So first, we delivered strong earnings. Group revenues grew 5%. Profit before tax rose 7%, reaching a record $36.6 billion. Return on tangible equity was 17.2%. And we delivered 3% cost growth on a target basis in 2025, in line with our cost target.

Second, we delivered strong growth. Our deposit balances grew 5% with deposit growth in each of our 4 businesses. Our deposit base is a core strength. It contributes the lion's share of our banking NII.

We also grew fee and outcome. In Transaction Banking, it grew by 4%. Elevated market activity demonstrating the power of our deep international network, which gives access to 86% of world trade flows, alongside our product and service expertise.

In Wealth, it grew by 24%, reflecting our leadership position in the world's fastest-growing wealth markets and continued investment in our products and proposition. And we are investing for strategic long-term growth. We completed the $13.7 billion privatization of Hang Seng Bank. This brings together to 255 years of history and heritage, combining global reach and local depth. It reflects our confidence and conviction in Hong Kong's future growth.

And third, we delivered strong returns to our shareholders. We announced a full year ordinary dividend per share of $0.75, up 14% on 2024.

Let's turn straight to the progress we are making on strategy execution. In October 2024, I set out a clear agenda to unlock HSBC's full potential. To do so, we now run the bank on 4 core complementary businesses, 2 home market businesses, U.K. and Hong Kong, and 2 international network businesses, Corporate and Institutional Banking and International Wealth and Premier Banking. Each business is growing. Each is generating above mid-teens return on tangible equity and each is building on a strong foundation for future growth. We are focused on 3 clear priorities, and we are moving at pace with each one, be simple and agile; two, drive customer centricity and three, deliver focused sustainable growth.

Now let's look at each priority in turn and our progress. First, simple and agile. The first step in unlocking HSBC's full potential is reengineering to reduce complexity and cost. Structure and strategy are now aligned. Accountability is sharpened and roles deduplicated.

In 2025, we reduced net managing director positions by circa 15%. We are taking $1.5 billion of annualized simplification saves straight to the bottom line with immaterial revenue impact. We expect to have taken action to deliver these saves by the first half of 2026, 6 months ahead of plan.

We are also making positive progress with the reallocation of circa $1.5 billion from nonstrategic or low-returning businesses. The medium-term intent being to reallocate these costs to areas of competitive strength and generate accretive returns. In 2025, we announced 11 business or market exits. Completed and announced exits account for $0.7 billion in annualized cost savings with around $1 billion of associated revenue $0.6 billion remains an active execution, including those under strategic review.

Then following the privatization of Hang Seng Bank, we are increasing reallocation costs to $1.8 billion, reflecting an additional $0.3 billion of reported basis cost synergies across HSBC and Hang Seng Bank. We will direct this $0.3 billion to growth opportunities in Hong Kong.

We are also streamlining and upgrading our operating model by simplifying the bank at scale and retiring nonstrategic applications. And we are reengineering whilst focusing on resilience and risk management.

Next, priority number two, drive customer centricity. Our 4 businesses are built on customer trust. Our investments to improve customer proposition and experience are yielding results. Net Promoter Scores have improved or remained top ranked in our home markets. In Hong Kong, we added 1.1 million new to bank customers. Taking the total number of customers to more than 7 million.

Our U.K. business lending -- our U.K. business banking lending grew 13% year-on-year, excluding COVID loan runoff. In CIB, corporate surveys have positioned us as a market leader in trade, in payments and in foreign exchange. In IWPB, we attracted net new invested assets of $80 billion.

Next, priority #3, investing to deliver focused, sustainable growth. Our Hong Kong home market is a dynamic economy, a top 3 global financial center and a thriving trade gateway. It is the super connector between Mainland China and the world. And it is set to become the world's leading cross-border wealth hub by 2029.

The privatization of Hang Seng Bank enables us to scale capabilities and drive growth across both banks for all customers. We have the ambition, and we have comprehensive plans to deliver $0.9 billion of benefits through reported synergies and unlock of opportunities by 2028. It is an investment for growth. And if we move beyond Hong Kong and look at HSBC's other core strength, we are in Asia, Middle East powerhouse. Asia and the Middle East are increasingly central to global trade and capital flows. Global trade is being rewarded. Asia's growth is increasingly powered by intra-Asia demand. Asia is buying Asia.

The Middle East is scaling as a global capital trade and investment hub. Its integration with Asia is accelerating. The Asia-Middle East corridor is becoming a defining access of global growth.

Wealth creation across Asia and the Middle East is also structurally strong. That is why we are investing to consolidate our powerhouse position and capture these growth opportunities.

We are also investing to connect the world, scaling our capabilities, building new capabilities and supporting customers secure commercial advantage from real-time services. Our customers are making real-time 24/7 payments across 35 markets. They're also using frictionless tokenized deposits and payments in 4 markets, including the U.K. with more to follow.

And we are pioneering the future of finance. Last month, the U.K. Treasury selected HSBC's distributed ledger technology as its preferred platform for its U.K. Digital Gilt pilot.

Next, our people and technology. We see innovation and culture that's core to our competitiveness, and we are investing in both. We are scaling AI adoption first, to empower our colleagues second for end-to-end process engineering and third, to enhance customer experience. Our customer relationships are built on trust. AI strengthens how we act on that trust, personalizing service at scale. The strong culture turns a clear strategy into results, and we are investing to nurture a high-performance culture. All our senior leaders and the broader managing director cohort have attended our new group-wide leadership training.

Finally, let's turn to our new targets for 2026, '27 and '28. 2025 has been a year in which we have performed, transformed and invested for growth. This gives us the confidence to set out new growth targets. We will target revenues growing year-on-year every year, rising to 5% in 2028, excluding notable items. We will target return on tangible equity of 17% or better in each year from 2026 to 2028, excluding notable items and a dividend payout ratio of 50% for each year, excluding material notable items.

To conclude, we are creating a simple, agile, growing bank built to generate high returns. We are executing our strategy with discipline and precision. We are delivering growth, we are investing for growth and we are confident we can navigate uncertainty from a position of strength. That is why we are confident in setting these new targets and in our ability to continue delivering for our shareholders.

Let me now hand over to Pam. Thank you.

Thank you, Georges. Thank you, everyone, for joining. We have had another strong quarter, which reflects the positive progress we are making towards creating a simple, more agile growing HSBC. We are investing for growth. Throughout this presentation, I will exclude notable items and focus on the fourth quarter numbers compared to the same period last year on a constant currency basis.

Let's turn straight to the highlights. In the fourth quarter, revenues grew 6% and to $17.7 billion. This was driven by broad-based growth in banking NII and fee and other income. Profit before tax was $8.6 billion, up 17%. Our customer deposit balances stand at $1.8 trillion, an increase of $78 billion when we include held-for-sale balances.

Full year return on tangible equity was 17.2%, achieving our mid-teens or better target. In 2025, we maintained tight cost discipline, managing target basis cost growth to 3%, in line with our cost growth target.

Turning to capital and distributions. Our CET1 capital ratio was 14.9%, up 40 basis points in the quarter, reflecting our organic capitalization and expectation not to initiate any further buybacks for up to 3 quarters following October's announcement of our intention to privatize Hang Seng Bank. As Georges said, this strong performance allows us to announce ordinary dividends for the year of $0.75 per share, an increase of $0.04 on the prior year.

Turning to our business segment performance. We grew full year revenue by 5% to $71 billion. Each of our 4 businesses grew revenues. Each grew deposits, deepening customer relationships. Each returned a mid-teens or better return on tangible equity, excluding notable items. We are pleased to be making such positive progress firm-wide.

Moving next to our privatization of Hang Seng Bank. On 9th October, we announced our intention to privatize Hang Seng Bank. We are pleased to have completed on 26th January, sooner than our initial expectation of the first half of 2026.

This slide explains the financial rationale. Let's walk through it, starting with a $13.7 billion purchase price. The removal of the $3.8 billion minority capital inefficiency takes you to the $9.9 billion of common equity Tier 1 consumption. The removal of the capital inefficiency is around 1/4 of the purchase price. The $9.9 billion CET1 consumption is equivalent to buying back 4% of group shares at the point of announcement.

Next, we show the $0.8 billion minority interest in the P&L and the $0.5 billion of pretax synergies from the privatization. Together, the minority interest and the synergies contribute more than 4% to our profit, beating the buyback threshold.

On top of this, we see potential, further revenue and cost upside of $0.4 billion enabled by the privatization. Then on the right of the slide, we see good growth in Hong Kong in the years ahead. Having 2 fully owned banks positions us well to capture this growth. As we said in October, we are acquiring a business with structurally high pre-impairment margins. And while we are not calling the credit cycle, we believe it is a cycle.

Let's now turn to banking NII. Our full year banking NII was $44.1 billion. In the fourth quarter, banking NII of $11.7 billion grew $0.7 billion. $0.4 billion of this growth was in Hong Kong, including the recovery of HIBOR during the quarter.

Banking NII in the fourth quarter included a positive benefit of around $100 million for items that we do not expect to repeat. We expect full year 2026 banking NII of at least $45 billion with the impact of expected lower rates more than offset by deposit growth and the tailwind from our structural hedge.

Next, to wholesale transaction banking. This year has really validated the strength of our franchise in a range of economic market and tariff situations. We have deepened customer relationships, and our global network has helped our customers navigate volatility and uncertainty. In the quarter, security services grew fee and other income 6%, reflecting higher market valuations and new mandates.

Payments grew 3%, driven by new mandates and payment volumes. In particular, international payments. Foreign exchange increased by 1%, reflecting strong client flows and higher levels of volatility. This was a good performance given the strong prior year comparison.

Trade was down 5% in the quarter, but it was stable over the full year. I would note the first half was particularly strong, given advanced ordering as we supported clients to navigate a fast-changing landscape. We continue to see growth in volumes, and strong client engagement.

Let's now turn to Wealth, including the new disclosures we are setting out today. We are very pleased with the 20% year-on-year fee and other income growth to $2.1 billion. And we are very encouraged that this was driven by all 4 income areas, which shows the sharpening of our strategy is working. Asset Management grew 14% and Private Banking grew 8%. Investment Distribution also performed well, up 14%, reflecting strength in our customer franchise in Hong Kong. Our Insurance CSM balance was $14.6 billion, up 21% versus the prior year.

We continue to attract net new invested assets with $7 billion in the fourth quarter. Today, we are giving you new disclosures, which you will see through on this slide. These better show the strength of our relationship with our customers, including both their deposits and invested assets. We are focused on capturing the full wealth opportunity, and we will now report Wealth balances and net new money. I appreciate that the Wealth balance figure is similar to the invested assets. But I would highlight two changes to note. You will see these set out on Appendix Slides 31, 32 and 33. We have added $608 billion of Premier and Private Bank deposits to the invested assets. That is offset by taking out $580 billion of asset management, third-party distribution assets. This is a good business, but it does not reflect our wealth customers. Adjusting our disclosure in this way also means our Wealth business is more easily comparable to the broader peer group. These new disclosures will replace the existing ones from the first quarter of 2026.

We saw net new money in the quarter of $26 billion, of which $19 billion was in Asia. And Wealth is not just a Hong Kong story. It runs across our Asia and Middle East franchise with double-digit invested asset growth in Singapore, Mainland China, India and the UAE.

Next to credit. Our ECL charge this quarter was $0.9 billion. There was no material impact from Hong Kong commercial real estate in the quarter.

On Slide 29, you will see we have updated the commercial real estate disclosures. Movements in the fourth quarter were in line with our expectations. of a full year 2026 ECL guidance is around 40 basis points. This is at the higher end of our typical range, reflecting the economic outlook and remaining pressures in parts of retail and office commercial real estate in Hong Kong.

Let's now turn to costs. We delivered 3% target basis cost growth in the full year, hitting our cost goals while making the space to invest in the bank was a key theme of 2025. It will be again in 2026. We have taken actions to realize $1.2 billion of annualized simplification savings with immaterial revenue impact. This is ahead of our original time line of $1 billion by the year-end 2025. On a realized basis, we have taken $0.6 billion of the simplication saves into the full year 2025 P&L. Together with ongoing discipline, this allows us to guide for 1% cost growth on a target basis for 2026 while reinvesting in the business.

Next, to customer deposits and loans. We had another strong quarter with deposit growth of $50 billion. We saw good growth in each of our 4 businesses. Loans increased by $5 billion. The U.K. was again the standout with another quarter of growth in mortgages and commercial lending.

Our U.K. business is well positioned to support growth in the U.K. economy. We are particularly pleased with the momentum in our commercial loan book where we see significant potential, particularly in infrastructure, innovation, social housing and mid-market direct lending.

Now turning to capital. Our CET1 ratio is up strongly to 14.9%, primarily reflecting good organic capital generation. Although after the balance sheet date, I draw your attention to the impact of the Hang Seng Bank privatization which is 110 basis points in addition to the 10 basis points already incurred in the fourth quarter. We have set this out in the appendix Slide 27.

As a reminder, we said when announcing the offer on 9th October that we expected to suspend buybacks for up to the next 3 quarters. That is, of course, dependent on underlying capital generation. With strong profitability and current modest loan growth we remain highly capital generative. A decision on future share buybacks will be taken quarterly, subject to a non-buyback considerations.

Let's next turn to the full year defaults. Excluding notable items, and at constant currency, revenues grew 5% to $71 billion. Profit before tax was $36.6 billion, up 7% year-on-year to a record high. Return on tangible equity was 17.2%, achieving our mid-teens or better target. Our strong performance allows us to announce ordinary dividends for the year of $0.75 per share or $12.9 billion.

Let's briefly return to the new targets Georges set out earlier before I close on guidance. We made clear and positive progress in 2025. That is why we are now raising our ambition to target 17% return on tangible equity or better, excluding notable items in each year from 2026 to 2028. We will also target year-on-year revenue growth in each year over the period, rising to 5% in 2028 compared to 2027, excluding notable items. And as you would expect, we maintain our discipline of a 50% dividend payout ratio, excluding material notable items and related impacts.

Finally, to guidance. This slide gives you our guidance mainly for 2026. We saw revenue momentum continue in January, including in Wealth. On the slide, you see banking NII of at least $45 billion. Our revenue ambitions for our Wealth business are contained within our revenue target. We have, therefore, removed grow fee and other income at a double-digit percentage CAGR from our guidance.

We see an ECL charge of around 40 basis points, broadly stable on 2025. We expect to constrain cost growth to 1% on a target basis. This benefits from our organizational simplification and allows us to continue to invest in the business. There is no change to our CET1 target range of 14% to 14.5%.

In 2026, we will deliver the $1.5 billion of savings from the reorganization. We are well on track with the $1.5 billion of reallocation costs which will be redirected towards priority growth areas. We are now adding the expected $0.3 billion of Hang Seng Bank cost synergies to the original $1.5 billion of reallocation costs, taking this to circa $1.8 billion.

On Hang Seng Bank specifically, we see $0.5 billion of revenue and cost synergies to be achieved by year-end 2028 as well as an additional $0.4 billion of potential further upside enabled by the privatization. To achieve this $0.9 billion, we will incur a restructuring charge of $0.6 billion from the Hang Seng privatization which will be a material notable item.

To close, as I said to you last year, I am fully focused on discipline, performance and delivery. Discipline means prioritizing with precision, maintaining strong cost control and ensuring investment rigor for growth. Performance means gearing our financial strategy towards achieving our new returns target. Delivery means ensuring we remain agile and resilient, enhance operating leverage and are always well positioned to support our customers. This is exactly how we will continue to run the bank.

With that, we are happy to take your questions. Alastair?

Thank you, Georges. We'll take any questions from the room here in Hong Kong first. If I can ask you to introduce you to your company, and there's been the hard part, constrain yourself to two questions each, please. That goes for people on Zoom as well as people in the room. Anyone would like to ask a first question here? Yes, we'll take a question from Nick.

It's Nick Lord from Morgan Stanley. I'll put it in one question in two parts, if that's okay. I'm just interested in your revenue target by 2028 of achieving 5% revenue growth. And I just wonder if you could talk about some of the components of how you would get there. Presumably, Wealth is part of that. And so maybe you could talk about the Wealth trajectory and how sustainable that is. Presumably, at some stage, we're going to see sort of a kick in of sort of the development of markets in Asia, and that market's business can grow more. So I wonder if you could talk a little bit about how you want to grow that markets business in Asia.

Thank you, Nick, for the question. I'm going to share some high-level comments as we are looking at the growth opportunities, and Pam can take you through the various components. The first thing is we have delivered growth in 2025. And we have delivered growth, as we mentioned, across all our businesses and all our key metrics, including deposits, loans, including fee income and Transaction Banking and Wealth and this is reflected in our revenues growing at 5%, 2025.

The second item to call out is if you look at our footprint. We're actually basically aligned to the strong structural growth opportunities. Hong Kong, we've called it out, and we are basically consolidating our leadership position to capture these growth opportunities with the privatization of Hang Seng among other. Asia and Middle East, structural growth opportunities in Wealth, but also Asia and Middle East hitting record volumes and shipments for trade, Asia is buying Asia and we are -- our footprint allows us to capture these growth opportunities.

The U.K., we've seen the strongest loan growth in 2025, and we have indicators to believe that there is a possibility for this trend to carry on. This is the strongest loan growth we've seen in the U.K. for many years, but it's also the strongest store growth we've seen across all our businesses that we have seen in the U.K.

And then the last thing I would put, we are investing for all these growth opportunities. We're putting now investment from within our cost base. We're putting investment from the additional costs we are taking in 2026. And we will be putting even further investments from the reallocation of the $1.8 billion as we free up these costs back into those core areas where we can grow. And this is what's giving us this confidence to give you the growth targets of revenue growing year-on-year every year rising to 5% in 2028. Pam?

Thanks, Georges. So firstly, in 2026, we expect broad-based growth in revenue across all our businesses, but just unbundling a little. In banking NII, as we have said, we expect a low single-digit growth fundamentally driven through deposits. Yes, there are pockets of growth in loans, but so far, we've just seen in the U.K. market.

Overall, we expect that growth in Wealth and Transaction Banking and our fee-generating businesses will continue to be very positive. As we go beyond '26, we do expect balance sheet growth should again in Asia and other markets, not just in the U.K. Of course, we are seeing growth in the U.S. already, but we are not a big player in the U.S. market, domestic growth. And we are continuing to invest in our fee businesses and our investment plans are multiyear plans. So it's not just for growth for 1 year. It's a very strong building block for growth through the period we have called out and beyond. Particularly in markets like Hong Kong, in the U.K. and other key markets for us in Asia and the Middle East.

Thank you, Nick. Thank you. Any further questions in Hong Kong. We'll go straight to Zoom. The first question on the Zoom then, please, is with Joe Dickerson at Jefferies. Actually I've announced yourself, Joe.

Good set of results, guys. Just a quick question on the costs. If you look at the 2026 number that you've given the kind of 1% growth. I know you've got your recycling how do you think about when you peel that back and what's the metabolic rate of growth in costs, particularly coming from investments because you clearly have some global peers who have accelerated their investments around AI. So I was just curious how you think about that. And then secondly, a nitpicky question, but what rate of HIBOR have you assumed in the banking NII guide of greater than $45 billion?

Okay. Thank you very much, Joe, for your questions. On let me make some high-level considerations how we look at costs, and I'll ask Pam to comment then on cost and then on hypo rates. And I shared a bit earlier, but I want to emphasize, first, within our workspace, there's a proportion set aside for investments for change the bank, investments, digital capabilities, additional people, hires, relationship managers, wealth advisory, et cetera, of course, generative AI efficiencies. That's within our cost base.

Second, the fact that we're adding costs adjusted for these savings, half of that additional cost will go towards payroll inflation, but the other half will go towards additional investments.

And then third, the recycling of those $1.8 billion, which is commensurate to about 5%, 6% of our cost base will go back into those areas of investment for growth. So we believe we have ample capacity to invest and deliver the growth that we are setting ourselves, setting targets to deliver against.

Then the next thing I would say about cost is that it's important, Joe, to -- we are committed to cost discipline, we are confident in our ability to deliver cost discipline. And as you've seen for our 2025 results, we have met our cost target. So I think that's an important guide also as you look at our cost guidance for 2026. Pam?

Thank you, Georges. So firstly, I would note that we are ahead on our simplification saves because the plan and the actions we have taken have come through sooner than what we had originally outlined. This gives us incremental saves of $700 million in full year '26. So that has been a consideration in the overall 1% cost growth envelope.

And as Georges said, as we have divestments happening, we are continuously redeploying those -- reallocating those costs to our priority growth areas. What's really important for us is that our investment rigor is focused on our strategic priorities. That's what we've done in 2025. That's what we will do going forward. And these are committed plans, which are multiyear plans. They don't go back and forth every year. So that's all part of the overall cost envelope guidance we have given for this year. And again, we're only giving guidance for this year only, but we expect to maintain a cost rigor on a continuous basis.

In terms of assumptions, we have used the end January forward rate curve for our banking NII guidance for all major currencies. So in terms of HIBOR just to note a couple of points. Our HIBOR volatility that we saw in Q2 and Q3 when HIBOR is at 1% has an impact of about $100 million on banking NII. The moment HIBOR sort of stabilizes as it did in Q4 and indeed this year, although it has fluctuated a little bit around the 2.5% mark, that is captured in our guidance. And we look at a few plausible downside scenarios as well before we give a full guidance.

Thank you. Our next question on the Zoom is from Ben Toms at RBC.

Firstly, on your RoTE guidance of greater than 17%. I'm just looking for some commentary about how sustainable you feel that guidance is beyond the announced planning horizon. So how much do you feel this guidance isn't all weather guidance post all the investments that you've been making into the business?

And then secondly, on the Hang Seng synergies on Slide 13, can you mind just talking a little bit around why you've adopted 2 buckets that you've labeled synergies and upside. Is the upside bucket basically where there's a lower degree of certainty over the synergies? So what type of synergies fall into each bucket would be useful. And presumably, there's no incremental restructuring costs associated with the upside bucket on top of the $0.6 billion.

Thank you very much, Ben. On the Hang Seng guidance, what I will share is we do have the management ambition, and we do have comprehensive sets of plans to achieve the full $0.9 billion upside with the restructuring costs that we've called out. I'll let Pam give you the details.

On the RoTE guidance, we are not guiding beyond our horizon, but you should always assume that we are ambitious. Pam?

Thank you, Georges. And just to say on our RoTE guidance, we continue to see a positive momentum in our businesses. And as we said earlier, we are investing for growth. But of course, the targets are only for 3 years.

So in terms of the Hang Seng synergies, you're quite right, the $500 million is what I would call the reported synergies following accounting rules. The $400 million synergies are depending to some extent of markets and customer behavior. So there is some degree of uncertainty, and they don't strictly fall between what is considered to be accounting reported synergies. So that's the reason why they're too separate.

Both these synergies, the plan to get that $900 million benefit is by the end of '28. And the restructuring cost of $600 million covers the benefits across both buckets. And now beyond that, we actually believe, as it says on the slide that at some stage, the credit cycle will be normalized. So there will be some benefit coming from there. There will be more growth in lending as well as overall Hong Kong growth, which we will continue to be very well positioned for because of the redeployment of the cost allocation that we have, there will be a fair chunk that obviously goes into Hong Kong, which is a core market on our strategy.

Yes, we have a question in the room next, Melissa. Sorry, you're allowed to introduce yourself fully.

I'm Melissa from Goldman Sachs. Just two questions. In terms of the strategy that you have, the rising to 5% revenue growth. Just wanted to see if you can give about CAGR growth instead. So we can understand the pathway there. In terms of that, I suppose, will it be coming largely from the nonbanking NII portion? Or will it be from the banking and NII? So that's my first question.

On the second question, perhaps on the restructuring cost at HSP of $0.6 billion. Can you just give a little flavor about what is it that we are doing in terms of the restructuring that we need such a cost focusing on in terms of delivery and then how we will see the revenue synergies. And in terms of the revenue synergies can it be as quick as next year? Or will it be more heavy into 2028 as per your 3-year guidance rising to 5%?

Thank you very much, Melissa, and Pam can address both questions.

Thank you, Georges. So firstly, we've said that revenue growth is positive each year, but it's also progressive and reaching out to 5% by '27 to '28.

In terms of the underlying building blocks we said to you that in 2026, where we have given the guidance on banking NII, it's a low single digit. So therefore, similar to the prior year, we will see more positive growth momentum on the fee-generating businesses. And beyond 2026, Banking NII, of course, we look and see where the guidance is, where it is, where the rates are and what's the timing of the rate cuts as we go into '26, but we are continuing to invest in our fee-generating businesses so we see that momentum in those businesses, including Wealth, which really underpins this revenue growth and wholesale transaction banking to continue. And I'm hoping that at some stage, we'll see a little bit more of growth on the balance sheet in terms of lending beyond U.K. that we have already seen.

Now in terms of the restructuring costs. There are a couple of elements that drive it. One is there's some organizational alignment. So there will be some roles, which will evolve and teams that will be realigned, but a large chunk of this is really in terms of technology. So the investment in technology so that we can better harmonize our technology and better get results from the technology investment we have across both the Green and the Red brand. And this is really quite critical for us in order to achieve the overall ambition of the $900 million because it's the $900 million ambition just to reiterate, it's not just a cost story. It's a revenue and a cost story, and this is an investment for growth, and that's how we look at it. And we plan to spend restructuring costs of $600 million across the 3 years. And of course, this will be spread through these 3 years, we are not saying any more.

In terms of revenue synergies, we strongly believe that by the privatization of Hang Seng Bank, our ability to be able to provide a broader product proposition into the Green band is highly enhanced. So we'll have better Wealth products for our retail customers. We have capital markets and broader wholesale transaction banking products for the wholesale customers, but more importantly, we will be able to have access for the same international network that we have for the Red brand also within the Green brand. And last but not least, we will have more balance sheet flexibility in terms of how we leverage our treasury capabilities, but also in terms of upstreaming and downstream capital, and this will all be done over the next 3 years.

Thank you. We'll go back to the Zoom. The next question will be from Aman Rakkar at Barclays.

I had two questions, please. So one is around capital. It looks like a decent chance that you'll be within your target CET1 range in Q1 based on historical and perhaps projected capital generation kind of estimates. Obviously, it raises the prospect as to whether you might be able to reintroduce buyback earlier than planned. I don't know if you're able to kind of comment on whether that's a realistic or plausible scenario. But I guess more specifically, just interested in the capital allocation thought process from here? Clearly, your stock is trading at a level now where the return on investment around buyback might be beaten by alternative uses of uses of capital. Obviously, you did it with Hang Seng, but should we be thinking about inorganic growth as well as the compelling organic growth within your footprint?

And then I just wanted to ask around banking NII, please. Clearly, that kind of Q4 jumping off point is flattered by $100 million. I don't know if there's anything else that you direct us to kind of strip out of that number in terms of deposit catch-up or the impact of HIBOR. And I was particularly interested in what your deposit growth assumption is that sits behind the guidance you've given '26, please, because I think that could be a sensitivity around the ultimate outturn of banking NII in '26.

Thank you, Aman. Pam is best placed to answer both, but I want to share a few thoughts about our philosophy on capital. First, we remain capital-generative as you've seen from our targets, but also as we've experienced over the first 1.5 months in the year in 2026. So we're very pleased to see that our capital generation is strong. But our first priority is now restoring the CET1 ratio following the privatization of Hang Seng, which we estimated to take us 3 quarters. But of course, we do that assessment quarter-by-quarter.

But I don't want to point out to the increased dividend we are paying this year, $0.75, $0.45 on the fourth quarter, which is on a full year basis, 14% higher than last year. So we are distributing through dividends. What I wanted to share about the discipline how we use capital, we've shared it in February 2025 Aman, we've set ourselves 4 key criteria. They are a high bar, and we strictly adhere to them in the way we look at inorganic opportunities. In so far, that these 4 criteria are met like in the case of Hang Seng privatization, then we will consider inorganic. But if one of these criteria is defeated, then our preference will be to utilize or return any excess capital back to our shareholders in the form of share buyback. Pam?

Thank you, Georges, and thank you, Aman, for your questions. So firstly, as Georges said, we continue to remain highly capital generative. We've had a good start to the year, as I called out earlier in my remarks. But as you know, we look at our share buyback decisions on a quarterly basis, and that will be a quarterly process. The starting point is clearly our target operating range, which we are working hard so that we can replenish capital that has been deployed in the Hang Seng Bank privatization. That's the first priority, as Georges said, and that CET1 operating range remains 14% to 14.5%. That's the one which underpins all the targets and guidance we have given today.

Just to clarify, in terms of our priorities from there on, of course, the priorities are 50% is the dividend payout ratio, which we have again reaffirmed. We would like to see balance sheet growth, and we want to invest for growth. That's if we can have growth at the right return levels. Our distribution priorities hence have not changed, and share buyback remains for us a useful tool to deploy surplus capital irrespective of where the share price is. So I think that's an important consideration for us going forward.

Next question. On banking NII, you're right, there was a $100 million non-repeat items. So if you take that out for modeling purposes, you come to $11.6 billion. There are no other one-offs. There was a higher HIBOR quarter-on-quarter, and HIBOR also stabilized. And that's why, as you remember, third quarter when we gave a more cautious outlook because we don't know where HIBOR would be. But having seen HIBOR stabilize, it gave us the upbeat on our banking NII results. We also saw low betas on saving accounts in Hong Kong.

And very importantly, we saw strong deposit growth, and we do expect this strong deposit growth to continue to be a key driver in 2026 along with the tailwinds of the structural hedge similar to last year and redeployment at higher rates. The only thing to bear in mind is that for this year, clearly, in Q1, given that there will be 2 days less there will be a headwind of $300 million in Q1. We have assumed, obviously, the rate changes, both that we've seen to date as well as projected for the year. But a lot depends on, as you can imagine, the timing of those rate changes, particularly in the U.S. dollar and sterling.

So we'll take the next question back on Zoom, Amit Goel at Mediobanca.

So two for me. The first one, just coming back on the upgraded RoTE targets. the 17% plus. I just want to check in terms of how you're thinking about that on a kind of year-on-year-on-year basis for '27 and '28. I mean are you thinking that RoTE kind of continues to improve? Or are you thinking more 17% is kind of a very acceptable and a good level and so any additional upside you would look to reinvest? And within that, I kind of note that on the LTIP, you've kind of brought up the lower end of the kind of the boundary performance to, I think, to 16.5% from 14%, but the 18% of the top end hasn't changed. So I appreciate that's done by the compensation committee. But I'm just kind of curious how you're thinking about what appropriate or sustainable level of return is.

And then secondly, again, just coming back, maybe more clarification on the Hang Seng Bank kind of benefit and restructuring charge. So I mean, I guess, I was curious, really, for a bit more detail on the $0.4 billion of additional benefit, I guess, from an accounting standpoint, can't be treated as a synergy what exactly that is? And within the restructuring charge, I think previously you said that there's actually going to be more of a less staff, natural -- there will be more natural attrition and redeployment. So there'd be very limited kind of day kind of costs. So I'm just curious what you're spending that money on?

Perfect. Thank you, Amit, very much for your two questions. Pam can address them, but just to talk about LTIP briefly. This is indeed the remuneration committee consideration. It reflects the performance that we will achieve in '26, '27, '28, which aligns to the guidance we're giving you. So there isn't more we can say at this stage. Apart from that, it is more ambitious and reflects our ambition to the business.

Thank you, Jordan. Thank you for your question. So firstly, yes, we have ambitions and our target is 17% plus each year. We are not giving a trajectory, whether it's the same or progressive but of course, we continue to grow our business and invest in it diligently, but the target is just 17% plus each year.

In terms of our -- the Hang Seng, firstly to call out, these are both benefits we are getting from a cost perspective but also a revenue perspective. So classically, what you would see in terms of cost synergies and all the restructuring is actually severance costs, that is not the case here. Because there is so much focus on revenue as well, a lot of the restructuring will be in terms of investment from a technology perspective. The cost synergies themselves, of course, there will be some realignment and evolution of roles and individual areas. It's not something which is going to lead to severance or staff reductions. There could be some rule changes, clearly. There will be some scale in product manufacturing and there'll be some technology harmonization.

Now when we think in terms of the 2 bits with the $500 million, the $400 million and why it so, clearly, from a cost synergies perspective, it's easier to call out. Revenue synergies, there are greater haircuts, but we do have very detailed comprehensive plans on how we are going to drive these revenue synergies. And those plans underpin the $400 million even though they were a haircut in the $500 million and just in total, to reiterate because there are lots of numbers going around. I appreciate that. Think of it as a $900 million benefit in those 2 buckets with different degrees of accounting rules and different probability of expectations and then an overall restructuring cost of $600 million to achieve that total.

And Amit, we are a net investor in people in Hong Kong. We are also investing in technology in Hong Kong to capture all these growth opportunities we have been talking about. Therefore, we do not expect, anticipate or plan any program of redundancies. We do, though, expect that some roles may need to evolve, and we are basically committing to training, reskilling to make sure that our own colleagues have these growth opportunities, career opportunities to be able to capture these roles in which we will be investing over the duration of our program of 3 years.

That's a meaningful number that we have already included in that $600 million restructuring costs for training and reskilling of our colleagues as their roles change and evolve.

Thank you. Will stay on the Zoom with Kian Abouhossein from JPMorgan. Kian?

First of all, Georges, congratulations. I have to say you really driving the bank to a better process and discipline. We haven't seen in HSBC before, if I may say so. To the questions, tech stack, can you go a little bit more into detail? You gave a number in 2022 that you're spending about 20% on IT as a percentage of expenses. Wondering if we should think about similar ballpark. Within that, can you go a little bit under the hood and discuss where are you on cloud transmission are you done? Where are we on platforms? Are you done? Or what platforms still have to be produced new or integrated data management? So I really want to understand a little bit what you're doing on the tech side.

And then CRE, this is still an area where I'm a little bit uncomfortable. Stage 3, CRE China 18% coverage, 16% on Hong Kong -- 14% sorry, on Hong Kong, stage 3. Can you talk a little bit where you want to drive that to? And clearly, I heard Pam's remarks about provisions and CRE was mentioned.

Perfect. Thank you, Kian, for your two questions and for your feedback. I'm going to take your tech question. Pam will cover the Hong Kong CRE. And I think it's a very important question. Thank you for asking it. We're indeed driving both performance and transformation with discipline, with precision, and we are doing it at pace. And we're very glad to see that the results of both performing, growing and transforming is delivering at pace, as you've seen in our 2024 numbers.

So in terms of tech, you could broadly assume that 20% is the cost that we are spending on technology. But the way we're talking technology now is, number one, we are thinking about all those legacy or nonstrategic applications, which are consumers of run-the-bank costs, consumers of maintenance costs, patching costs, license fees that we are going to very proactively demise at scale. And we're very pleased to be able to say that we've demised more than 1,100 applications this year -- well, in 2025, this is more than 1/3 of the about 3,000 applications that we have deemed nonstrategic and looking to demise. Just to give you a perspective, we run about 10,000 applications, 9,000 actually, of which 3,000 are flagged to demise over the horizon between now and 2028, and we're moving at pace for that. Now that demise will allow us to free up investment capacity to put it in new technology and new capabilities in tech space.

Cloud transformation, I think we are quite mature on cloud. I think we've moved from a cloud-first strategy where we moved many of our applications to cloud to now a more mature and therefore, more sophisticated approach to cloud by looking at optimization of hosting of applications. And therefore, we would look at any new applications or our existing stack, where it is better at. If it is on cloud where the majority is, then it will be on cloud, and then we will look at portability capabilities and resilience capabilities. And if it is on-premise, then or in the private cloud, then we will look at that. So I think we have matured our cloud approach, and we're already in a place where we want to be, but of course, we'll continuously evolve it.

If you ask me where is the biggest investment going into the new technology today, it is definitely going into generative AI. I want to just take a minute to explain how we're thinking about generative AI because that's quite important. We're looking at generative AI in 3 work streams. They're on the Slide 8 of the pack. The first work stream is we're making generative AI available to all our colleagues in time, 85% mostly now enabled to make sure that we are helping our colleagues upgrade themselves and become future-ready.

The first thinking is how can we bring our whole colleague population with us in becoming future-ready, generative AI enabled. They will have generative AI tools that they can use. They will have coding assistance or vibe coding assistance for those among our engineers, 31,000 already enabled, and we are seeing immediate productivity gains. We're seeing 60% speeding up in our unit testing. We're seeing 5x faster patching of code, patching of vulnerabilities and code, thanks to all these capabilities. This is our first mission. All our colleagues to benefit, to be trained, to be upskilled, to become future-ready, better version of themselves, more productive, better outcome for our customers.

The second work stream in generative AI is fundamental reengineering of our processes end-to-end. 50 of those processes are already under review. Some of them have already delivered and finished, such as onboarding and KYC, but all sorts of processes, including fraud detection and prevention, credit applications, capital allocations and what have you data -- visas and what have you to allow generative AI to help us redesign the process in a much simpler way and also allow gen AI to be integrated in the process to process data in a much more efficient way. The result of which is a more productive bank, more efficient bank and a safer bank with stronger controls, and more importantly, a very simple bank that will be able to ultimately deliver to our customers closer to near real time or real time at the highest possible standard that's available for us. And that is an ongoing journey.

The third work stream we're taking in generative AI is how we enhance customer experience at the customer touch points. So this is our relationship managers, wealth advisers, contact center operators. As they engage with customers, generative AI tools already rolled out, as you can see on the slide, will allow them to personalize at scale, to tailor-make, to customize at scale at the highest possible standards for our customers close to real time in a way that can allow us to deliver our capabilities to customers in a much more seamless, faster, better way. Customer experience will be materially enhanced.

Now today, we will have operators using this generative AI at the service of our customers, but you can envisage that in a few years' time, we could possibly put these generative AI tools straight for utilization by our customers. Those are the 3 work streams. What I want to say though is that we're doing this with safety and security at the forefront. We're doing this in a way that we can review, monitor and audit everything we're doing in the space as a critical standard, and we're doing this in a way to keep control, resilience and human accountability always there because we are a regulated industry and our customers' trust is the most important asset, and we will do everything to make sure customers trust is always protected and nurtured.

Thank you for that question. I'll hand over to Pam on Hong Kong.

Thank you, Kian. So just looking overall in our guidance, around 40 basis points guidance for 2026 considers all our portfolios. And of course, Hong Kong commercial real estate as well as the very small residual amount of China commercial real estate, and we look at a range of plausible downside scenarios before we give you this guidance. So just unbundling a bit. The China commercial real estate portfolio has really come down. It's now less than $1.5 billion, and our ECLs this year for this was below $200 million. So in that context, the names that have left that portfolio that's left, we feel much better about it compared to where the other portfolio was when we first started with it.

Now when you think in terms of Hong Kong commercial real estate, firstly, I'm going to give you a bit of an update on the 3 segments within this Hong Kong commercial real estate portfolio and then how we look at the names, particularly the credit impaired names. Now the first one, we've been calling it for a year, and now I'm very pleased to say that the residential component of Hong Kong commercial real estate is near normalized. And I say that because whether I look at in terms of price increases, HPI has been up 5% year-on-year in 2025. But more importantly, we've seen a 10% growth and also sales volume. Rentals have already stabilized both in terms of the rental demand as well as the rental pricing.

Now when we look at retail and the office space, of course, there are pockets of distress in it. But just as a broader context, we saw retail sales also in Hong Kong in May turn into positive. And they are now up year-on-year at 6.6%. But of course, this alone is not going to solve the problems of the retail sector because peoples retail shopping patterns have changed. They don't necessarily need to go to shops on malls, et cetera. Having said that, as there is more consumption in Hong Kong, we are seeing this shift from shopping places being changed into more food and beverage and so on, but there will be pockets of stress in it, and that will be coming from mainly oversupply at this point of time.

Now office is the sector we are watching very carefully, because recently, we have seen both in terms of rental demand and in transactions for the best properties with the best spec in central in the best areas, there are some green shoots. But the downside is, at this point of time, vacancy rates starts are still around 17%. So that's what we will be managing through and following up very, very carefully. Having said that, in Hong Kong, we are not a distressed seller. It's a market we are deeply embedded in. We really understand well. But we are very resilient in terms of how we do our valuations. So we go and look at valuations, including distressed valuations. And we look at with our collateral position, and we stay well collateralized. And we've been following through this very closely over the last couple of years.

The one metric, which I personally follow, though my job has changed now, is what happens to credit impaired names. And the exposure that you need to focus on is credit impaired names, which have an LTV over 70%. Now this number has grown and it now stands at $1.9 billion. But the ECLs against it have also grown, and they have grown to around $900 million. And if you go back quarter-on-quarter, that differential between the ECL number and the exposure sits around $1 billion number. So that's where you think your risk is. And of course, you have to see if some of the substandard names don't fall down and so on.

So overall, I would say, given what we are seeing and particularly to notice that in this quarter, we had a stage 3 against one name, but the macro environment in Hong Kong was positive. And as a consequence, through IFRS 9 calculation, those 2 almost offset each other. So in that broader picture, we feel very comfortable with the 40 basis point guidance.

We will take Rob Noble at Deutsche Numis next.

Just on net -- sorry, noninterest income in 2026, what are the negatives in noninterest income for next year? So if you were to grow the same level, which was, I think, the low teens in 2025, you would blow through 5% revenue growth in '26, let alone in 2028. So why aren't you -- why are we much more positive on revenues than you're kind of sat now?

And then secondly, just on Hang Seng, what's the difference in the local capital requirements in Hong Kong and the U.K.? Does the transaction change anything in terms of minimum group regulatory requirements and how we manage capital through the group?

Okay. Rob, thank you very much. Let me address your first question, and Pam may add to it and address definitely the Hang Seng capital question. So the 90% or more of our noninterest income, and therefore, our fee or other income is driven by transaction banking and Wealth. So looking at the dynamic in these 2 will give you a good perspective of how our non-NII is evolving. Transaction banking, we've reported full year growth of 4% year-on-year. We are seeing continued momentum in this space. We are a leader in practically all the aspects of transaction banking that we prosecute with our clients. We've been voted by 30,000 of businesses as the leader in payments, both in products, services and technology. We've been 9 years consecutively a leader in trade. We've been voted by corporates using foreign exchange as the leader in servicing them with foreign exchange. We continue investing in this space. We continue expecting resilience in this space, in particular in trade. And I can talk more to trade if desired.

As you look at Wealth, Wealth remain unequivocally one of the strongest growth opportunities, in particular, one, given our footprint, where we are focusing on Asia and the Middle East and the underlying growth in Asia and the Middle East of Wealth is very strong and our ability to capture more market share is very strong. We're already a leader in Wealth in Asia, if you look at Wealth balances. And that's an area where we can benefit from this underlying structural growth opportunity.

And second, Wealth because we are also accelerating our investments in this space. You've seen we've launched 26 or 27 wealth centers in 2025, taking the total to 64. We're hiring relationship managers, wealth advisers. We're empowering ourselves with generative AI wealth capabilities. We're building technology. We're creating a comprehensive set of products, and we continue investing in this space. So we do believe they remain -- Wealth remains a very strong growth opportunity, albeit we have dropped the guidance on that. And the idea is to give you an overall revenue guidance, which is better encompassing the overall opportunities and probably more relevant for your forecasting. Pam?

Thank you, Georges. So firstly, the only comment I'll make on Wealth is, as Georges said, we are very comfortable in our broad-based product proposition. But the only thing we need to remember is that this year, with how the markets have performed, therefore, on some of the Wealth that is generated through transactional kind of activity, we just have to see how that progresses in next year. We're not going to make a call out on how volatile or otherwise markets are going to be in 2026. So if there's anything that's what would have been a good consideration because we have to look at plausible downsides clearly in giving our guidance as opposed to just a base case or an optimistic case. So that's all I would say on that.

Now from a Hang Seng capital perspective, we have already got the $3.8 billion benefit, which comes from the disallowed minority capital, which we don't need to have an impact on our CET1 anywhere. So that's a positive straight on. But generally, in a broader picture, across all our subsidiaries, which are 100% owned, we do have more flexibility in terms of how we move our capital, whether it's upstreaming or downstreaming, obviously, subject to what we consider the mark-to-market outlook is, where our portfolio is and subject to sort of regulatory discussions. So all in all, it does give us a better ability to move capital around the group and be more efficient in the deployment of capital.

The next question we will take again from the Zoom is [ Chen Li ] at China Securities.

I have a question about preservation of Hang Seng Bank. Could you provide further information about the growth opportunities? I want to know that in which aspects of the Wealth Management business will have more -- stronger synergies with Hang Seng Bank? And what are other outlooks for the Wealth balances and the Wealth Management margins?

Okay. Chen, thank you very much. I'll hand over to Pam, but remember what we said at the announcement on the 9th of October of our intent to privatize Hang Seng is these are commitments we are holding. Hang Seng Bank will retain its own authorized institution and governance. It will retain its own brand in Hong Kong, of course, as a major community bank and the largest local bank. It will retain an independent customer proposition that will compete in the market for all customers. It will retain its branch network. And that proposition will remain intact with a distinctive cultural strength and customer proposition, customer experience strength that Hang Seng has been known for, for practically a century in Hong Kong. What we are driving through these privatizations is better efficiencies in cross-selling or better efficiencies in aligning back office or manufacturing capabilities that are not related to the customer proposition. Pam?

Thank you, Georges. So firstly, as Georges has said, that the positioning of Hang Seng Bank as an iconic community bank in Hong Kong stays. What we will endeavor to do is that post the privatization, we don't have that arm's length relationship restriction that prevents us to do more in terms of product proposition offerings and cross referral to our customers and also in terms of the investment dollars that we spend, we can't spend them if it's on the same product, on the same customer journeys seamlessly across both the Red brand and the Green brand. So that gives us a very good position that as these 2 stand-alone brands, our ability to lean into the growth in Hong Kong and the macro opportunities, including cross-border will be available to the broadest customer base while maintaining that community element of service for those customers. So that's how we are looking at it. And we will look at, obviously, Wealth products as well as pricing margins so that we can really make them more easily available for our customers.

Chen, we are the market. We are the market leader in Hong Kong, undisputed. We are consolidating and cementing this leadership. Hang Seng Bank privatization will allow us to consolidate that leadership even further in all sorts of a broad range of products and services. And we have a leadership position in capturing these growth opportunities that Pam was talking about in Hong Kong as a super connector between the Mainland and the world, as poised to become the leading cross-border wealth hub on the planet before the end of the decade. And it's really a privilege to be in the position we are in to be able to capture this with the full HSBC and Hang Seng propositions. Thank you, Chen.

So I will take the next question from Ed Firth at KBW.

I just had two questions. One, just talking about the HIBOR benefit in Q4 for your net interest income. I think one of your peers talked about it as a temporary benefit. And I guess I'm not close enough to the franchises and how you price, et cetera, domestically. But I guess, do you know -- is there anything peculiar about you or some of the peers about the way you repriced CASA accounts or something in Q4, which would mean that yours should be sustained, but somebody else's might be temporary. So I guess that's the first question.

And then the second question is, I guess, it's slightly an extension of Rob's question. I'm not quite sure what is so specific about 2028 that means you can get 5% revenue growth there, but I assume you don't feel you can before then. And I know that at the moment, in '26, we've got some headwinds from interest rates, but you've also got a very strong tailwinds around things like Wealth Management, Pam highlighted that. And '27, I guess, should be a reasonably normal year. So I'm just wondering, is there something that I need to think about that you can see that is happening from '28 and beyond that will make your revenue growth better that we're not seeing today?

Okay. Thank you very much, Ed, for your two questions. Pam, do you want to address that?

Yes. So let me just unbundle the situation with regard to HIBOR. So in the fourth quarter, HIBOR stabilized. And we had called out in the prior quarters that in 20 -- and I'll come to Q1 in a second. That in Q2 and Q3, HIBOR was very volatile. And we were looking at the comparison for a HIBOR close to a 1% where it has an impact of about $100 million in terms of banking NII on a monthly basis and then stabilizing to something which is in the 2% mark. We look at HIBOR on a 1-month HIBOR basis. We feel very comfortable as long as HIBOR is around 2.25%, 2.5% and so on. I fully recognize that in -- and I don't know what other peers would say, like what tenor of HIBOR rate is most relevant for them. I'm just telling you from our perspective.

Now in Q1, HIBOR has fallen, but we have to see the context. There's been a range of IPOs that normally happens. When there's that demand for HIBOR fluctuation, but it has fluctuated within a narrow range. So the impact isn't there. Also, last year, in Q4, there was a benefit of lower betas. So when HIBOR went up, the same impact wasn't there on the savings rates. Of course, we'll have to look at betas, how they evolve. And then we have a very strong deposit franchise. And I think that's a differentiator in terms of the CASA level that we have, in terms of our accounts. And therefore, we have a good positioning where that deposit base helps us on the banking NII more than most of our peers.

Obviously, in terms of both banking NII this year and also our ambition, it's the rate headwinds. And as I said earlier, it's the timing of the rate headwinds. If they're delayed, of course, it becomes less of a headwind. If they are earlier, then there is more sensitivity to it. So I would say from a Wealth business, as I also alluded to earlier, yes, the growth is very strong whether its asset management, Wealth products, insurance, it's broad-based growth. But last year, there was a great advantage or a tailwind coming from markets, which gave us a lot of uplift on the transactional-based fee income. We can't assume that for this year. Of course, if markets stay well and that happens, then that's a positive tailwind. So that's how I would look at it.

Yes. And I would look at '28, not specifically as the year '28, but as what would we believe our long-term structural opportunity to grow. It's our guidance for '28, but we've delivered 5% revenue growth in '25. We've delivered 4% in '24. So it's just the footprint we are in and the capabilities for us to capture the growth is there.

And we like to be cautious to we have to consider downside scenarios as well. We don't always take the best case. That's all I would add.

Many thanks. We have probably time for a couple more questions. We'll take Alastair Warr at Autonomous next.

Two questions. Back to Hang Seng Bank, I'm afraid. You touched on potential upside from asset quality improving. I just wondered if that's something you're thinking about in terms of maybe more active steps? Or is this just about being patient with the property cycle?

And then just on the Wealth side for a second question. It looks like there's a bit of a slowdown in the new account opening in the fourth quarter if you've got 1.1 million for the year and you were running at about 300,000 a quarter. Is that just seasonal or anything changing there that we should be aware of?

Thank you, Alastair. Pam, you can.

So just in terms of the asset quality, the comment I made was that if you look at Hang Seng's pre-impairment margins, they've been very strong. If you look at what Hang Seng's ECL charges have been prior to '22 versus in '24, '25 and even the run rate for the first half of the year and then what's consolidated for the full year, that's what I meant by the overall improvement, and that would be both for Hang Seng Bank as it would be for HSBC Red brand, and that's the only way to look at it. In terms of our own policies or processes and how we manage exposures, both for the Red brand and Green brand, they are highly aligned, how the rigor we follow through them, I don't expect any of that to give us either a tailwind or a headwind.

So in terms of the new-to-bank customers, yes, it was 1.1 million, just to clarify for the Red brand. And the fourth quarter also had a good number. We believe that this new-to-bank customers is a huge growth opportunity for us. However, we are trying to be now a little bit more selective on the acquisition because we have now had a 3-year trend on how the acquisition has happened in between the lower end of the customer base and the more premier. We have added a fee for the new-to-bank customers who have a balance less than HKD 10,000. And because of that, we expect that there would be slightly slower acquisition in 2026. But the focus on our affluent customers is going to continue.

The focus of the improvement in our overall income, whether it's through deposits, Wealth products, insurance is very healthy coming from these new-to-bank customers. So we don't see any change. We just don't want people to say that every month is going to be like 100,000 number because it's like almost like a ticker number because that's what the trend was. There will be fluctuations and changes month-to-month and quarter-to-quarter, but nothing material to call out as such.

We'll take Kendra Yan at CICC.

My question is kind of related to micro side. As the newly nominated U.S. Federal Reserve Chair has proposed interest rate cuts and balance sheet reduction. Could you please share your macro assumption behind the future 3 years guidance? And are there any risks that we need to pay attention to?

Yes. Thank you, Kendra. We can do that, Pam?

Yes. So just as I said earlier, Kendra, when we look at our guidance, we look at plausible downside scenarios. That include interest rate cuts, both quantum as well as duration. This time around, as we said, the starting point for the guidance for this year was the January year-end cuts, but we also stress test our portfolios on a regular basis for a range of scenarios. And we consider those and the impact on ECLs also on a weighted average basis when we look at our overall portfolios.

We have looked at the -- some of the macro I would say, recent news, whether it's to do with private credit or otherwise because as I said earlier, we look at second and third order risks that may come from some sort of a macro event or issue, even though our own underwriting practices are very stringent and very rigorous in this respect. What I will say is that despite the evolving scenarios that you are facing on tariffs and trade, our business has been really quite resilient. And that has -- overall, it is up 2% year-on-year in 2025. In a complex market as this landscape evolves, our relationships and engagement with clients gets even stronger. We have taken market share in corridors through -- in Hong Kong, U.K., Asia overall as supply chains are moving and corridors are shifting.

So I would say, overall, if I think in a macro sense, there are headwinds and tailwinds as well as for the world at large, but also for HSBC. We look at specific idiosyncratic factors that could impact us, any risk concentrations we may have in our home markets, and that's all part of our guidance. And that's why I said to you earlier or to the earlier question that when we give our guidance and our targets, we like to be rightfully conservative.

But the most important thing is through this period, we have made an assumption that we will continue to invest for growth. We have the right strategy. We have the right priorities. We have the focus to retain and win market share and we will continue to do that with the basic underlying principle that Georges called out earlier, we are here to serve our customers, and it's the strength of our relationship with our customers that gives us the confidence for our guidance and targets.

Yes. Thank you, Georges. So we'll just take a final question today from Katherine Lei at JPMorgan.

Okay. My question is still on revenue side, right? I think the 5% revenue growth in 2028 and then the above 17% RoTE guidance, I think there's 2 key drivers. One will be on NII and then the other will be on Wealth. But my question is that on NII, what is -- like what gives HSBC the confidence that on the sustainability of the deposit growth? Because one trend we noted is that, say, for example, in China, with RMB appreciation and also China start to taxing its citizen globally, will that actually slow down, say, for example, Chinese nationals coming to Hong Kong to open new accounts and then the money flow movement? So can we be more a bit specific on what are the key drivers and then the key path on the deposit growth? This is number one.

Number two, I think is still on -- number two is on Wealth and on that trend, right? So what do you think that will have an impact on our Wealth as well?

Okay. Thank you very much, Katherine. Let me address them in reverse order. I'll speak a little bit about Wealth, and I'll share some thoughts about deposits and Pam can give you additional granularity to address your question. Wealth remains structurally a very important growth opportunity for HSBC, as we said specifically that we are aligning our Wealth footprint, Asia and Middle East to where the Wealth is growing fastest in the world in Asia and the Middle East. Also our ability to capture wealth all the way from the premier customer base, which is the affluent middle class all the way to the high net worth means we have a better catchment of all these opportunities.

We're also present in a number of onshore markets such as China onshore. We are the leading international wealth manager in China, Mainland China onshore, which is not dependent to flows outside China, for instance. We're investing in India. We, of course, have big wealth hubs in places such as Hong Kong, of course, Singapore, the UAE and a number of other markets. The challenges possibly to anticipate is there is a turnaround or a change in the overall outlook of investment because inevitably, wealth will depend on the underlying performance of the invested markets. And if there is -- today, there is a strong resilience in these markets, which is what we -- our customers are also looking at. But that is, of course, always a risk that we need to be watchful of. We're also investing to gain share. We're investing to diversify the product offering and to diversify the wrapper offering all the way from insurance to asset management to other forms of brokerage, et cetera. So that we are able to meet the varying wealth customers' needs in how they look at their investment requirements.

Finally, we're also investing in generational wealth, specifically supporting transfer to the youth or the next generation or transfer between wealth centers in a way our footprint allows us to do that is competitively very strong compared to a number of our peers who are offering wealth from very, very few number of hubs, okay? That's the wealth.

Now with regards to deposits, Pam will give you a better answer in the details you're asking for, but let me tell you one thing about deposit. It is the foundational product on which our customers' trust is expressed with HSBC, and this is how we look at it. Customers trust us with their deposits. That's the starting point of any possible service and proposition in transaction banking, payment, financing and otherwise. So we cherish this asset class. We have always cherished it, through thick and through thin, in good rates and bad rates, and we will always focus on what it takes to make sure our customers trust us, the financial strength, the level of service so that we earn their trust with their deposits.

When you look at our deposit base, it has grown in every business. It has grown, and we are highly surplus liquidity in every currency, every major currency, in every major geography. So there is a deep rooted across our 4 businesses and across all the geographies where we operate. a deep-rooted trust, which we nurture to support customers giving us their deposits and using us as their deposit bank by preference or by excellence that can support, if you want, our outlook on our deposit growth. Pam?

Thank you, Georges. And Katherine, a really good question to close on. We have seen deposit growth, as you've seen in our new disclosures on Wealth across the spectrum of our customer base, premier, private bank, retail in every market, in every jurisdiction, even when there isn't a home market, and that really underpins the growth that we are seeing in our banking NII. We have taken very conservative trajectory on loan growth. I'm hopeful at some stage, loan growth will also pick up, which will then also support the banking NII if from an interest rate perspective, the timing of the interest rate becomes a headwind in one of those plausible downside scenarios. We have a structural hedge, which is continuing to be a tailwind given all the work we did a few years ago. We will also continue to build on the structural hedge, even though the largest increases we have done are -- have been behind us now.

So if I look at all of these things in the round, and I look at the momentum of the business that we have seen in the first sort of 7 weeks of this year, that gives us confidence for our banking NII guidance for 2026. If you underpin that just based on the fourth quarter, obviously, it will give you a number of [ $46 billion ]. But we are not calling that out because we are very cognizant of the headwinds on interest rates. And you're right, the interest rates in the U.S. is down 50 basis points, U.K., 25 basis points just year-to-date with further 2 to 3 rate cuts to happen.

So with that, I think in the round, we feel very confident that the banking NII, which is, again, the trust of our customers and what we are doing everything to preserve that trust and to build on those relationships, because I'll just end with one thing. We are fundamentally a relationship bank. We have a full-service suite of products we offer to our customers. So for our guidance, for our targets, we look at that full range. We are not a product proposition-based bank, in which case, some of the comments you made will obviously be a bigger headwind.

Perfect. Thank you, Pam, and thank you, Katherine, for your last question. Thank you, everyone, for joining us. We are pleased to report strong revenues, strong profit, strong returns and strong distribution to our shareholders. We are confident we can navigate the challenges ahead of us from a position of strength, and this has allowed us to put ambitious targets about our revenue growing every year for '26, '27, '28 rising to 5% in '28 as well as our return on tangible equity delivering 17% or better every year over that period with a 50% dividend payout ratio, all excluding notable item. Thank you very much for joining us this morning or this afternoon, and I hope you have a good day.

Thank you.

Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect.

Good afternoon, everyone, and thank you for joining us. My name is Jason Napier. I run financials research for UBS here in Europe. I'm thrilled to have Pam Kaur with us today from HSBC, the CFO.

You've been in the seat now for nearly a year. I assume there are days when it feels like it's longer than a year. But you've been with HSBC since 2013, predominantly in risk functions. Would you mind just giving us a little bit of a sort of a potted history of your roles at the firm, and then we'll move on to talk a little bit about what you found when you were made CFO.

Thank you, Jason. So I've been with the firm since April 2013, and I've always been on the top table as part of the Management Board, and then we have the Group Executive Committee, and now it's an Operating Committee. And that says in itself how the momentum in the organization has changed. It's become much more operational, execution driven. And as a starting point, when I joined in this role, I had been working with George on what was the clear direction of travel for us. And the clear direction of travel has been initially how do we simplify the organization. We reduced the number of our operating committee members from 18 to 12, and that says a lot in terms of the number of decision-makers you have and as a consequence, the agility in the decision-making. So that's a change from the past.

Also in terms of a business, we have the conviction to clearly call out the 4 key areas that we want to invest and grow in. The 2 home markets, and we are very blessed to have 2 home markets, plus 2 very important businesses, one driven by our international network, our presence in 50-plus countries, as well as the Wealth business, which is very natural for us given our heritage and our positioning in the highest growth markets of Asia and the Middle East.

With all that, in the organization, I feel now the focus is truly on growth. And it's not because my roles have changed; in the past I was a defender and I'm not so much playing defense, but it's just where we are in our own journey. When I joined, we had to go through the DPA, the derisking of the organization. Obviously, in my time as the Risk Officer, there were multiple macro challenges that we navigated very ably. And now we feel, with the conviction we have in the focus of the areas we have and the scale we have, we have momentum behind us, and that's delivering us the results as well as the ability to invest in the areas that truly matter to us where we can drive operating leverage.

So an exciting time for HSBC, but having been there for a long time, not many surprises. So in terms of sort of -- it's just starting on the job day 1 and being able to hit the ground running, that has been little easier, though I must say, even this year, the macro environment always gives you challenges, and through that, opportunities as well.

Yes. Perhaps you could talk a little bit more about the agility and the pace of change. There are some folks I know inside the bank that are saying they've never seen anything quite like this from this bank before, but specifically from the outside, new divisions, or 18 to 12, does that really accelerate the metabolic rate of the bank? How are you making it more agile and faster to do things?

So let me talk a little bit about what we have done in terms of streamlining the footprint. We have so far announced 11 transactions this year. And we are also in progress of completing 3 very specific strategic reviews, Australia, Indonesia, Egypt for our retail footprints. That to me shows that it's not just you make a decision, but how quickly you follow through on that.

We are also delivering on the savings that we said we would deliver actually ahead of target in terms of $1.5 billion simplification savings, which we want to bring to the bottom line at the end of next year, we've already taken actions for $1 billion of those, so by the time they come into the P&L, going through into next year. But the cost that we have taken to the bottom line this year would be $400 million compared to where we thought we would be at $300 million. So we're ahead of target. So that gives me a huge degree of confidence.

Also, when we are redeploying our cost base from some of our subscale businesses into high-growth areas, we don't wait for everything to finish. We have the agility to say when you have $20 million, $30 million, $40 million, whatever available, it comes straight to the top of the house. And we have a list of growth priorities over and above which we have already committed to in our investment for the year, which are literally queued up and prioritized. And once that money is available, we immediately lean in to support those areas of growth. And one area this year was security services, where given some new customer mandates we were getting as well as increased volume we wanted to invest.

So that gives me another touch point. And I'm a great believer to say, if I can't actually inspect and see the touch points, I don't really believe. I'm a lady of numbers. That's how I work. So that, to me, was very important to see that through. But underpinning all of this is the cultural change in the organization. And that cultural change is being driven through how we lead program. The things we want to lean in more in our culture in terms of accountability, speed of execution, simplicity of decision-making and frankly, trying to move away from the acronym, which we don't really like of HSBC, how simple becomes complicated. That's what I heard when I joined. So I really have to make sure that by the time I retire many years from now, that's in nobody's even distant memory. So that's kind of one touch point.

Now obviously, when you're going through change, there is going to be a degree of concern, a degree of people feeling a little uncertain. But I think that's healthy, because that keeps us on our toes, that makes us constantly able to respond to the challenges we face as opposed to just think what we always did, if we continue doing, we will progress. Having said all that, there are things about our culture, which are very strong. For example, collaboration, which really helps us to drive cross-sell and revenue flows through our various business lines.

So we have such a precious commercial banking business in many markets because we actually go and bank not just top local corporates, but we go further down the chain for mid-market and smaller corporates. And they give us the natural flow and connectivity to their entrepreneurs and employees as they get through their wealth journeys, and that helps our Wealth business. So those things we want to absolutely preserve, but we just want to keep that momentum going, and this is just the start.

So as you mentioned, there have been additions to the list of businesses that are up for review and the disposals are not all complete. I wonder -- just the spreadsheet jockey and me is interested in whether you have negative operating leverage, the revenues go away, the costs don't quite -- or they're reinvested elsewhere. How big a deal is that for the next year or 2 in your mind?

Thank you, Jason. That's a really important question. From my perspective, I look at each of these individual announcements we've done and also we're kind of 2/3 of the way in terms of thinking of things that we know we are going to derisk and particularly in market participation choices rather than for geographic footprint shifts. Most of them individually are a couple of hundred million maximum from a revenue perspective. So overall, even if I add it all up, it's not going to be a material drag on HSBC's revenue.

From a cost perspective, it's the agility with which you deploy the cost transfer from what's available to where you want to go next. And for that, the preparedness and prioritization upfront is really important rather than having a scramble to say, I suddenly have money, now where do I invest. So we've got that pretty well ironed out. So from an operating leverage perspective, given the positivity and the tailwind we get from these investments, as you've seen in our results, particularly through the Wealth business, but also transaction banking, as well as investment in Hong Kong this year, the benefit we get there leaves very little, what I would call, drag factor, if any at all, in terms of these divestments, because these are areas we are divesting either because we don't have scale, or we don't have a competitive strength and advantage, or frankly, they may be, from a revenue production, of a certain scale, but they have low returns.

Right. You referenced investing in Hong Kong. And disposals aside, the biggest announcement over the last few months was the offer to purchase the Hang Seng minorities. I appreciate there are legal structures around the things you can say, but what can you say? This is a $13 billion investment in one of your home markets.

So what I'd say firstly is, it's on strategy. It's in a market that we understand well. It's in a market where we have a lot of confidence, both in terms of it being the largest cross-border hub for Wealth going forward, but also from the capital markets opportunity perspective. It is also an entity we know. So when you're acquiring something that you know well, there is less risk for a negative surprise.

From our perspective, what it really gives us is an on-strategy opportunity to scale up and grow in some very specific areas like leveraging the revenue-generating capabilities on the fee income side in terms of wealth products for the retail customer base in Hang Seng as well as capital markets and bringing to bear our international network and transaction banking more to the wholesale side, because given the fact it's a listed company, from a competition rules perspective, at this point of time, that cannot be done. So that gives a real important revenue-generating leverage from the transaction perspective.

In terms of the other criteria, I mean we do stand by the criteria we called out in terms of our acquisition hurdle rate. So we are very comfortable on strategy, scale, growth, not a distraction to organic opportunities, because the organic opportunities trajectory should continue. And given it's a known quantity, we don't think this would be a distraction. But last, but most importantly, even though we haven't called out synergies as of now, given the qualitative feedback I've given you, we feel very comfortable that it is accretive from an EPS perspective compared to share buyback.

The -- and I'm not sure whether you'll be able to add to that in any detail, but the gap between the RoTE of Hong Kong as it stands as a group and the RoTE of this business, is it -- because it's really a pretty efficient business from a cost-to-income perspective. Should shareholders be of the expectation that there can be a bridging of that gap somehow? Is that a realistic expectation? Or is it just a different mix of business?

Some areas are easy to call out. So for example, in terms of the capital, which relates to the $3 billion plus for the minority shareholders, that comes to holdings straight away. So that is a benefit upfront. So that makes it a more efficient business.

In terms of the mix of business you can do, in terms of the balance sheet-driven business as well as fee income, that gets to be healthier. That gives the performance of the business some degree of stability even when it's going through a cycle from a credit crunch perspective. So those are the areas I would look at would be supportive of closing the gap.

That's helpful. And so if I turn to Q3 results, very strong in net interest income, up. Despite the fact that the cuts aren't over, you managed to produce sequential growth in NII. The hedge is rolling. That looks like to us might be $1 billion of tailwind next year, loan growth. Should we get better loan growth, could do much the same? Is it outlandish to think that next year, NII might be roughly flat or even up on this year?

So I'm not going to give a guidance for 2026, but nice try. I'm going to try and give you some qualitative considerations. So firstly, if I look at just the fourth quarter compared to third quarter, I don't see any big surprises. It's continuing well. Deposit momentum continues. I expect the deposit momentum to continue into next year. We have strong customer franchise, customer relationship-driven franchise with a great trust from our customer base in all currencies, in every jurisdiction, in all markets. So we feel very happy about that.

If I look more broadly into some other tailwinds, you're quite right. The structural hedge tailwind of circa $1 billion continues into next year. Of course, there's a headwind in terms of what the market is calling out 3 rate cuts from the Fed and 2 from a sterling perspective. But then there are other compensating factors that HIBOR being stable, and we had HIBOR as a headwind in the second and third quarter. So that continues well where it is. And last but not least important is the deposit migration trend, when interest rates are falling, works as less of a headwind and more of a tailwind in terms of the proportion of time deposits to CASA. So all in the round, feel comfortable for next year, but not giving any guidance.

No, that's fair. That's reasonable. I had to have a go. The other highlight of Q3, of course, was phenomenal numbers out of Wealth and Insurance. Everybody, I think, has got their favorite stat of just how big the opportunity might be there. The Mainland Chinese deposit base at $43 trillion versus the U.S. at $17 trillion is mine. Could you talk about the sustainability of the growth you're seeing? And perhaps with your CFO hat on, how far into the future that projects, things like the unwind of the Insurance CSM and so on, does that derisk the outlook for that business a little?

So a couple of things from a macro perspective. We are in a unique position, given our Asian heritage, to be in prime position, not just in Hong Kong, but in many other markets, which are part of the Asia growth wealth story. And if Asia wealth is growing at 8% to 10% per annum, of course, we feel confident and comfortable that we should be able to maintain our mid-teens growth levels over a midterm perspective, or longer. So that's kind of the starting point for us.

Of course, every quarter, there are going to be some ups and downs. So if I just unbundle a few of the drivers, I'll come to insurance straightaway, which has had a spectacular quarter and few quarters. Now it's perhaps the most annuity-driven business, because as you write the business with IFRS 17 for the next 9 to 10 years, you know that income is going to flow through. And our Insurance CSM balances at $14.6 billion, up $2.4 billion year-on-year, shows you that that's going to continue.

We have strong growth in our customer numbers, overall customer numbers, but also our premier customer numbers, and that's not just in Hong Kong. We see that growth in Singapore. We see that also in the UAE, Mainland China and India, albeit from a smaller baseline. If I like -- more broadly, there are some unique factors for this year. The equity markets have been very strong. That sort of helps. But having said that, there's a normal activity level, which is quite high in terms of transaction activity as customers rebalance their portfolios. So I think that should continue.

So overall, in line -- look at even in terms of net new invested assets, they've gone up $76 billion in the last 1 year. They're sitting at $1.5 trillion. We are one of the major wealth providers in Asia on top of a deposit base globally, which has grown another $86 billion over the last 1 year, and that's sitting at $1.7 trillion. So it's a very diverse flow of income coming through the various -- both from a wealth perspective and a deposit base. And I think the deposit base is important, because once the customers trust you with their money from a deposit base, the next step always is Wealth, Insurance products, and we see that migration through. So strong underpinnings of customer trust, a real unique position in a high-growth region, and then with the strong product proposition and flow of products, including annuity income flow from CSM makes us quite comfortable in terms of the future of the IWP business.

Looks like a great part of the story for the bank. Just a follow-up from me. Insurance is often the gateway product for the folks who are taking Wealth to Hong Kong. You've exited manufacturing in a number of parts of the world. Is it important to be a manufacturer, do you think, in Asia from an Insurance standpoint?

I think from an Insurance standpoint in your major market, from a Hong Kong perspective, absolutely yes. But our biggest driver from Wealth is our distribution capabilities.

Right. Okay. We, in our team, for the last 10 years have produced an annual conglomerate piece of research where we check whether the conglomerates grow faster, have higher returns, are less volatile than the footprint that they tend to inhabit. And for an awful long time, the answer to all of that was no. They grow slower, they're more volatile, and their returns are lower. That's no longer the case, and it's demonstrably not the case for HSBC anymore. Could you talk about the growth potential? Because if you're going to run the complexity of a bank that's in 50 countries, you need a payoff either around risk or growth, or maybe both. Could you tell me a little bit about how you see the medium-term growth for the business?

So firstly, we are very much a customer relationship-led franchise. So that is important for us. We have strong risk parameters within which we operate, and we want to do more things with our customers. So that gives us an ability and a focus, particularly in our key jurisdictions to grow more. That's the starting point. We have a wonderful deposit franchise, and that is one of our biggest money earners when it comes to banking NII. That is also a starting point when you want to then do Wealth products on the retail side.

If I look at from a wholesale perspective, there are a few areas where we really are #1 or close to #1, and we want to double down on that, whether it's in payments, whether it's in FX, or indeed trade. And I just want to share with you. Given this year all the issues we've had from a trade perspective and tariffs and some of the recent surveys we did about 7,000 customers, about 80% of them are looking at how they can diversify their supply chains. And 90% say that their banks are becoming even more important for them because they're looking at different trade corridors.

Now we have 5,000 specialists, not just in U.S. denominated sort of dominated corridors, but across the board. So that gives us a real cutting edge to lean in. Now all said and done, we have also done divestments. But certain aspects of our business have continued to grow. And I'll just give you a few pointers. So our deposits since 2019, and we've been derisking all this time, have still continued to grow at 4% per annum. So that means that provided the focus stays on the areas we really want to grow deep into, and we manage what I call the crown jewels of the franchise, there is that growth momentum.

The difficulty that happens when you're in conglomerates is, if you're not disciplined and you want 1,000 flowers to bloom in 100 countries or whatever, then your investment decisions get marginalized, because they get shared within a very large family. But if you're very clear about this is what you're investing for growth, this is what you are investing as an enabler for that growth, and that's the rest, and that's the shift in how we are managing the bank now.

Are there any questions from the audience? We've got about 3 or 4 minutes left.

Just wanted to clarify, the Wealth guidance was a double-digit wealth guidance. So I just want to clarify that. See, it's my IOR keeping me in touch.

[indiscernible].

So how complicated becomes simple? Yes, exactly. I don't want to give up on our Hong Kong, Shanghai banking heritage, but that's a fair comment. So really, what I would like is that the bank has looked at its footprint pretty much similar to where it's today. I don't think that's going to change so much. There will be some streamlining from a market participation context. But there will also be a much better balance while maintaining a very strong banking NII in terms of fee income generation. So we started with sort of 2:1. An ideal would be to keep your banking NII in a very strong, healthy place where it's today, but grow the fee income to be much closer to be in balance with banking NII.

And then more importantly to that, from a workforce perspective, it's a workforce which, from a skill perspective, is much more enabled to lean into the future in terms of the new trends, whether it's coming from AI and deployment of technology. And underpinning all of that, that we still retain our customer franchise and culture.

And perimeter wise?

so perimeter-wise, I think having sort of 50 countries as a presence in terms of the international network, that's pretty much there and thereabout. The question really would be which are the countries where beyond the wholesale international network, you also have the retail presence to sort of lean in. And those should be the countries where there is either existing scale and wealth opportunities, or indeed where there is a potential trajectory to be able to build that. So that's where you're seeing we're making some of the market participation choices to come out of those countries where we are subscale and we don't have that competitive advantage.

Certainly, if you're moving towards a footprint that emphasizes scale, higher return businesses over time, all the metrics do get better. One of the questions that comes up in all the meetings with all the banks upstairs is, is AI a game changer for the efficiency of the bank? It's very early doors. What are your initial impressions on that question?

So I'll just share with you, we have deployed AI in some of the areas already. And one area was our dynamic risk assessment, and that is all in sort of financial crime and risk monitoring space. And it's been very effective. We're leading edge there. We are in partnership with Google. Other banks are following suit on the tools that we have developed. It's been accepted by regulators. And the amount of scalability you get from a tool like this, and given all the challenges we've had, Russia, Ukraine new sanctions, et cetera, that has been remarkably helpful.

So our view is, from a productivity perspective and a driver of operating leverage and efficiency, it is very important. Having said that, there is still going to be a very important rule for a human in the role, because I believe AI should be a tool for a human to use rather than the human being the tool for AI to use.

On that upbeat note, thank you very much, Pam. We really appreciate you being here. Thank you.

Thank you.

Welcome, ladies and gentlemen, to the analyst and investor webinar on the 3Q results for HSBC Holdings plc. For your information, this call is being recorded.

I will now hand over to Pam Kaur, Group CFO.

Welcome, everyone. Thank you for joining. We are making positive progress towards creating a simple, more agile growing HSBC. The intent and discipline with which we are executing our strategy is reflected in the momentum this quarter and our target upgrades. Most notably, our annualized RoTE of 17.6% year-to-date excluding notable items.

Throughout this presentation, I'll focus on year-over-year comparisons. This will exclude notable items and be on a constant currency basis. The equivalent comparisons on a reported basis can be found on Slides 16 and 22.

Let's turn straight to the highlights. We reported a strong quarter. Total revenues grew $500 million to $17.9 billion. Wealth had another good quarter, with 29% growth in fee and other income. Our customer deposit balances stand at $1.7 trillion. If we include held-for-sale balances, these grew by $86 billion. We are also investing for growth.

On 9th October, we announced our intention to privatize Hang Seng Bank. We see this as a compelling opportunity. Let me set out clearly our reasoning. First, it meets all four of our criteria for acquisitions. Second, we see good growth in Hong Kong in the years ahead. It's a business, in a whole market we know very well. Third, we see an opportunity to create greater alignment for better operational leverage and efficiencies. Fourth, we are acquiring a business with structurally high pre-impairment margins. And while we are not calling the credit cycle, we believe it is a cycle. Fifth, we are removing a $3 billion capital inefficiency.

This is a transaction which we initiated as a growth investment. It is also a statement of our confidence in the outlook for Hong Kong. We are in an offer period, so we are unable to give more details on synergies at this stage. What I will say is that consolidating the noncontrolling interest from the profit and loss increases our profit attributable to ordinary shareholders.

We have also said that we see the potential for additional revenue through expanded capital market products to Hang Seng commercial clients and Wealth products to its affluent clients. And we can simplify and streamline decision-making processes, improve operational risk management and better align operations, which we expect will result in efficiencies.

We are confident the integration will not distract us from organic growth and it's more value generative than a share buyback.

Turning now to upgrades. We are delivering against the targets we set out to you. We are now upgrading two items: our 2025 banking NII to $43 billion or better, our 2025 RoTE, excluding notable items to be mid-teens or better. We remain disciplined with our shareholders' capital, investing it where we see growth, exiting businesses with the intention to redeploy the costs where we don't.

We are progressing at pace with the exit of nonstrategic activities. This quarter, we have announced the exits of HSBC Malta and Retail Banking in Sri Lanka. This brings our total announced exits to 11 so far this year.

Last week, we announced that we are conducting a strategic review of our Egyptian retail banking business. The review will not include our wholesale banking activities in Egypt, which remains an important market and one we believe has strong potential for growth. Finally, we are on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis.

Let's now turn to the firm-wide financial results. First, the income statement. Annualized RoTE was 16.4% in the third quarter or 17.6% year-to-date, both excluding notable items. Revenue grew 3% year-on-year to $17.9 billion in the quarter. This was driven by a return to growth in banking NII and strong fee and other income. Profit before tax was $9.1 billion.

Looking at our capital and distributions. Our CET1 capital ratio is 14.5%, and we continue to target a dividend payout ratio for 2025 of 50% of earnings per ordinary share, excluding material notable items and related impacts.

Let's now turn to our business segment performance. We grew total revenue by 3%, and each of our four businesses returned greater than mid-teens annualized RoTE.

Moving now to banking NII. $11 billion this quarter is a return to growth driven by deposit volumes. We are raising our full year guidance to $43 billion or better. I know you will have questions on the outlook. So I'll note here the multiple drivers of banking NII. HIBOR, which has recovered; deposit growth, which continues; interest rates, where the Fed is still cutting. We have grown our structural hedge to $585 billion and its rolling on to higher yields. I'll also just mention that the chart on the left is on a constant currency basis, while our full year guidance is as reported. There is a reconciliation in the footnote.

Turning now to wholesale transaction banking. We are pleased with our strong ongoing customer engagement. This year has really validated the strength of our franchise in a range of economic and tariff situations. Both payments and trade grew again in the third quarter. In trade, I would note the first half was particularly strong as we supported customers to navigate a fast-changing trade landscape.

In security services, fee and other income grew 15%. This was due to higher asset balances given improved valuations and new customer mandates in Asia and the Middle East. In FX, performance reflects lower currency volatility and a strong prior year comparison. Looking through this, performance of $1.3 billion was strong.

Turning now to Wealth. We delivered 29% fee and other income growth to $2.7 billion. This shows our strategy is working. Net new invested assets were $29 billion, with more than half coming from Asia at $15 billion. This takes total invested assets to $1.5 trillion. Wealth was driven by all four income lines. Our insurance CSM balance is up by $2.5 billion year-to-date. This is driven by strong new business. I would note that we review our insurance assumptions in the third quarter, favorable experience and strong market performance slightly flatter at these figures.

Private Banking grew 8%; and Asset Management, 6%, respectively. Investment distribution also performed very well, up 39%, reflecting strength in our customer franchise in Hong Kong. And Wealth is not just a Hong Kong story. It runs across our Asian franchise with double-digit fee and other income growth in Singapore, Mainland China and other markets.

We are providing you with a little extra color this quarter on our Hong Kong flows on the next slide. We are pleased to have added 318,000 new-to-bank customers this quarter. This brings us to more than 900,000 year-to-date. What this slide shows, over a slightly longer period is that nonresident customers have been a significant driver of customer activity and balances. These new-to-bank customers have contributed up to 1/3 of flows across deposits, investments and insurance. We see new nonresident customers as a significant and long dated opportunity for the bank.

Now let's turn to credit. ECL of $1 billion is flat year-over-year and down modestly on the second quarter. We retain our full ECL guidance of around 40 basis points. Our ECL charge this quarter includes $0.2 billion Hong Kong commercial real estate. On Slide 19, you will see we have updated the Hong Kong commercial real estate slide we showed you at the half year. Other charges include $150 million from a Middle East-based customer, $0.3 billion in the U.K., $0.2 billion in Mexico and a $0.1 billion release due to improved economic assumptions.

Now let's turn to costs. We remain on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Year-to-date, we have taken actions to realize $1 billion of annualized simplification savings with no meaningful impact on revenues. We continue to expect $0.4 billion simplification savings to be realized in the full year 2025 P&L.

It's worth noting that there is some slight seasonality to costs in the fourth quarter, which also includes the U.K. bank levy. This quarter, we have $1.4 billion of legal provisions on historical matters, which don't impact our ongoing business. They consist of $1.1 billion, as you will have seen in yesterday's announcement relating to made-of litigation, which is a material notable item and, therefore, does not impact any dividend, and $0.3 billion related to historical trading activities in Europe, which is a notable item.

I would also just draw your attention to Appendix Slides 16 and 17, where we detail recent and potential future notable items. This leads us to our exit of nonstrategic activities, which we will discuss on the next slide.

We are progressing at pace. With our exit of nonstrategic activities, this slide sets out that progress. The red boxes show the exits announced in each quarter, the gray, those in prior quarters. Given the phasing of the sale processes, only Grupo Galicia is currently complete with others to follow.

In the third quarter, we have announced Malta and Retail Banking in Sri Lanka. Last week, we announced that we are conducting a strategic review of our Egyptian retail banking business. As I said earlier, the review will not include our wholesale banking activities in Egypt, which remains an important market. As a reminder, costs released from the exits of a nonstrategic activities will be invested in our priority growth areas at accretive returns.

Now let's turn to customer deposits and loans. Including held-for-sale balances, we've had another strong quarter with $86 billion of growth in deposits in the last 12 months. By business, there is some volatility this quarter. Silver bond subscriptions in Hong Kong moved deposits from Hong Kong business to CIB for a few days over quarter end, benefiting CIB balances. CIB also benefited with -- from some large client deposits, which may be short dated. Overall, we see good momentum in our customer deposit franchise.

In the U.K., lending was the standout. We saw continued growth in mortgages and our commercial lending book. Infrastructure being a key area of focus. In our U.K. business, the book has grown 5% year-over-year, which includes a drag from the repayment of COVID loans. We see low levels of household and corporate debt in the U.K., which we expect to provide a platform for the continued growth of our franchise. In Hong Kong, we saw customer repayments and corporate deleveraging notably in the commercial real estate space. Credit demand remains muted.

Now turning to capital. Our CET1 is 14.5%, reflecting strong organic capital generation during the quarter. We said with the announcement of the Hang Seng offer that we do not expect buybacks for the next 3 quarters. That is, of course, dependent on underlying capital generation with strong profitability and currently modest loan growth via highly capital generative.

Finally, let's turn to targets and guidance. In summary, the intent with which we are executing our strategy is reflected in the growth and momentum in our performance this quarter. It again shows discipline, performance and delivery. Discipline in the way we are applying strong cost control. We are on target to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Our simplification saves are ahead of our previous expectation. We have announced 11 exits so far this year. We will continue to progress at pace and invest costs released from exits into priority growth areas.

Performance in our earnings. Each of our four businesses is making mid-teens RoTE or better, excluding notable items. Delivery, our third quarter results show that we are creating a simple, more agile growing HSBC. Revenues grew and excluding notable items, our year-to-date 17.6% RoTE demonstrates that we are delivering against the targets we set out to you. That is why we expect 2025 RoTE, excluding notable items to be mid-teens or better.

With that, I'm happy to take your questions.

[Operator Instructions] Our first question today comes from Aman Rakkar at Barclays.

I wanted to ask about banking NII rather predictably, please. So just at face value, your guide does imply a decent step off in interest income in Q4. But I don't think that you really mean that. I just wanted to kind of check in around what your expectations are for net interest income in kind of Q4.

I guess I'm particularly mindful of the tailwind from average HIBOR in the quarter alongside things like the structural hedge and hopefully, balance sheet momentum. My best guess is that Q4 NII is actually up Q-on-Q. But any color you can give us there in terms of what you mean and what the drivers are, would be very helpful.

And then the second question is around deposits. And I'm interested in your take on the sustainability of the kind of current 5% underlying deposit growth that you're benefiting from at a system level. Obviously, Hong Kong year-to-date has been a key driver of that. And how sustainable do you think this level of pace is? And what confidence does it give you around things like net interest income growth next year?

Thank you, Aman. So firstly, on banking NII. I want to say that we are not walking back the Q4 as a starter. As the maths would show, we are saying that the banking NII would be no less than $10.6 billion.

So absolutely, that's why it is $43 billion or better. And you are quite right from a balance sheet momentum, we see that continuing from the third quarter onwards, albeit there can be a few seasonality fluctuations. HIBOR is a tailwind, structural hedge is a tailwind, but we should be mindful that the U.S. dollar rate curve will be a headwind. So that's where we are on banking NII.

In terms of deposits, and as you know, we are not giving a guidance on banking NII for 2026. But our deposit franchise is very strong across all markets, all currencies, all business areas. So it's not just dependent on Hong Kong dollars. But of course, we are very pleased with our preeminent position and strength in Hong Kong, which is a key driving force for the deposit growth. So very positive on deposit growth from here on as we've had before.

Our next question today comes from Guy Stebbings at BNP Paribas.

The first one was back on bank NII then one on insurance. So obviously, quite a big move in the banking in our guidance. Outside of HIBOR, is it really the deposit strength that's the delta in terms of the guidance here? I mean you also referenced yield curve steepening. So I'm just wondering if you would encouraged to think about anything above and beyond the structural hedge roll when you think about yield curve steepening when it comes to NII?

And then on insurance, really strong quarter, but there's quite a lot going on there, I think, so 46% growth. But you mentioned model changes, experience variance. And then if you can help quantify that, I think there might have been $150 million or so type model changes. I mean if that's the case, we're still talking about a sort of 20% clean run rate. So if you'd encourage you sort of think along those sorts of lines in the CSF now at $50 billion, it looks like a very sort of useful underpin from here?

And if I can sort of briefly flip on that. There was $1.1 billion of CSM build year-to-date from economic factors. I'm just interested how much of that is sort of purely lumpy items? Some of your peers show the normalized unwind or expected return of in-force, which can be sort of quite material and a consistent tailwind to the CSM built above and beyond the new business systems. So I'm just wondering whether we should treat that $1.1 billion boosters very much one-off or an element of that is repeatable, if you like?

Okay. Great. Thank you, Guy. So firstly, in coming -- so with your question on banking NII. So it's -- our deposits strength, as I've called out, but our structural hedge is also important tailwind for us on banking NII and the stabilization of HIBOR, which impacted banking NII almost equivalently on the negative side in Q2 and Q3, is not expected for Q4 and has not shown that at all in Q4 so far.

The insurance growth, you're again right, it's -- the one-offs are circa $150 million, as you've called out in terms of the change in assumptions, which is a normalized annual process that we go through. So we are very pleased with a very strong CSM and balance build, which gives the underpin in terms of the growth in this business. In terms of any one-offs or lumpy items, nothing material to note, but I'll ask our IR team to follow-up with you.

You can see some of the walk on the CSM balances on Slide 21.

Our next question today comes from Katherine Lei at JPMorgan.

I also have a follow-up on NII and then I would like to ask about Hong Kong CRE. On the NII line, I noticed that in Hong Kong, the composite deposit rate actually comes significantly in 3Q. I think this is because that this move -- migration from time deposit to demand deposits and also that banks generally lower the time deposit rates.

So into 3Q -- into the 4Q because of the rebound in -- because of the rebound in HIBOR, do we expect some of the reversal of that decline in composite deposit cost? Will that lead to some sort of risk to the banking NII? This is number one question.

And then have we seen any like further migrations or what's the trends of deposits in CASA deposits? And then the next question will be in Hong Kong CRE. We noticed that the Stage III loan ratio increased from 16% to 20%, but however, if we look at the impairment charges on Hong Kong CRE, this quarter is actually lower than that of last quarter. So I would like to have some color from management say, for example, what is the latest trend in terms of the asset quality? And what is our thought behind that while the Stage III loan ratio continued to increase, but then we slow down the pace in making provision against Hong Kong CRE risk.

Thank you, Katherine. So in terms of HIBOR, it continues to be a tailwind from a deposit perspective, we see the trends from sort of prior quarters, continuing to Q4, so nothing much to call out there.

Specifically, yes, there has been some small rise in time deposits, but that is all factored in terms of our banking NII guidance. And I'm speaking both from what we saw at the end of the September as well as the ongoing trend. The banking NII, as I've said earlier, in addition to HIBOR, the structural hedge also continues to be a tailwind for us. And that is the reason why we have obviously upgraded our banking NII guidance.

And you know we are very conservative in HSBC. It takes a lot for us to upgrade the guidance and also to add the word or better. So take from that what you will. In terms of Hong Kong commercial real estate, I would like to take a little bit of time to share with you our reflections in the Hong Kong commercial real estate.

So firstly, in terms of residential properties, the trend has stabilized and is getting stronger. The resi property index has grown 2% year-to-date. September transaction volumes were up 79% year-on-year and the valuations as well as rentals have held well. We have also seen some supportive developments in the retail sector. Hong Kong retail sales have grown since May and are up 4% year-on-year in August. It is also underpinned by increase in year-to-date tourist arrivals of 12% year-on-year.

Now if I look at the office sector, of course, the office sector continues to be challenging and under pressure, and we expect that to continue through most of next year as well. However, there has been a slight uptick for take-up for grade A office space. So this is in the best locations with the best specs and that is an improvement, which we see quarter-on-quarter.

As you know, our portfolio is well collateralized. This quarter, of course, there was some slippage, which is expected as part of our review in as things move through from some good to satisfactory, substandard to impaired, but there were names which you are aware of, no big surprises. And hence, the ECL pickup was relatively modest.

Our next question today comes from Ben Toms at RBC.

In relation to the $1.1 billion provision in relation to Madoff litigation. [indiscernible] the ongoing cases with a cumulative total contingent liability of, I think, greater than $5 billion. Can you just provide that the case that was decided last week does not set any legal precedent for the other 4 cases? Especially the 3 cases that are in the Luxembourg courts where there's a more material exposure?

And can you confirm that the litigation charge does not change your aspiration to resume the buyback at half 1 '26? And then secondly, on Slide 10, which is a really nice slide, you made 11 disposals year-to-date. It can be quite difficult sometimes to track the transactions coming out of the P&L. Is it possible to give us some idea of the annualized cumulative PBT lost as a result of these sales? Although the transactions may be RoTE positive together, it just be good to get a sense of the PBT headwind going into next year?

Okay. Thank you, Ben. So firstly, on the Madoff litigation provision charge, you can expect that we did a thorough exercise with advice from internal, external counsel as well as colleagues in the accounting function to determine what would be our best judgment on this case. In terms of the other cases, of course, we look at read across and those gets factored in. But each case has very distinct factual considerations. So there's nothing more to add on that other than what we've already called out as disclosures in the midyear. So please don't read more into that. As you know, on this case, we won on the cash side of the element of the case, but it was the securities element that we are providing against.

In terms of our share buyback and announcements at the time of Hang Seng privatization offer. As you can imagine, this case has been pending for a while. We had looked at all kinds of downside scenarios. So when we came with our view of suspension of share buyback for the Hang Seng offer for up to 3 quarters, we still stand behind that number, that was all included.

As you know well, we will go through a rigorous process every quarter. We continue to be highly capital generative as you've seen with also the upgrades on our guidance. And once we look at that, we see where the organic growth opportunities are. Obviously, in organic, that's where the Hang Seng privatization offer comes in and then the residual after obviously, looking at the 50% dividend payout, which is a key element of our capital distribution, then we look at share buybacks. So I don't expect any headwinds in that, the up to 3 quarters still holds.

In terms of the 11 disposals, I note to your point, these are all relatively, as you can see, small disposals. What is very important is each time disposal happens and it's completed like we had the Grupo Galicia, but also as we did with the closure of the investment bank, we immediately reinvest, and the kind of areas we've invested and we've actually seen the benefits come through is we have invested in the U.K. And as you see, we have seen some loan growth in the U.K. We have invested in Wealth, both in the U.K. and Asia and the Middle East. And of course, the numbers speak for themselves.

But also we take very specific opportunities where we see either growth in volumes or new customer mandates as we saw in security, services so that we can be in a prime position to take those opportunities. So that's an ongoing piece of work. We don't stop at the end of each quarter or regularly to see what we need to reinvest as soon as we have the money available, we reinvest.

We will take our next question today from Joe Dickerson at Jefferies.

I just -- it's just more of a conceptual question really in terms of the return profile of the bank. I guess why isn't this -- why isn't HSBC post-Hang Seng integration more of a high-teens bank than a mid-teens bank?

I mean, clearly, the exit rate for this year on banking NII is going to be much higher, I think, than what most analysts would have thought, particularly given that the HIBOR move, you only had about 6 weeks of that embedded in Q3. So you get a full quarter of that in Q4.

And effectively, you feed that through to next year. And yes, you can have lower rates, but ultimately, you probably have a structurally higher banking NII given the deposit mix. And then if you look at your invested assets, in Wealth, you clearly have a strong business there that continues to grow and the marginal ROE is much higher and throwing Hang Seng, you're 70, 80 bps just from the minority deduction. I guess why don't we get to a number that's in the high-teens here as opposed to mid-teens?

Thank you, Joe. It's a really good question. As you can imagine, we in the bank obviously reflect on this very closely as well. And you'd see that we have upgraded obviously, our guidance for this year. But let me just remind you, when we came up with our target of mid-teens RoTE for the medium term, '25, '26, '27. That's a target. There's nothing that says that you will stop working once you achieve the target.

You continue to work to both achieve to target as well as to improve on the target. In terms of the target itself, we are not making any change. We will, of course, reflect on it as we go through our year-end results and go into next year and give greater details on our forward-looking guidance. But just remember, a target is something that you have to achieve or better. Target is not where you stop.

Our next question today comes from Kendra Yan at CICC.

My question -- my first question is regarding to the Wealth management revenue. We've observed a very strong -- very rapid growth rate in the third quarter. Could you elaborate on the key drivers behind this performance and its sustainability? And my second question concerns is about the credit risk. In recent weeks, we've seen some risk involving the U.S. market, like the small and medium-sized banks in the U.S., they have some risk.

And also the JPMorgan, they cautious the market about the credit risk during its earnings call. Although HSBC's primary client base is not in this segment, but still I'd like to ask whether HSBC has any exposure or concern in loans to nonbank financial institutions or say, those private credit corporate sector?

Thank you, Kendra. Two really good questions. So firstly, in terms of Wealth, we are very comfortable with our medium-term guidance of a double-digit growth in fees, though obviously, quarter-on-quarter, it can vary.

So what has been really strong this year has been investment distribution notably in Hong Kong and strong equity volumes. As I said earlier, our insurance business has continued to grow, and that momentum is helped both in terms of existing client base, but also the new clients we are onboarding in Hong Kong, in particular.

Obviously, strong equity markets have been favorable, and that becomes a lever for Wealth in terms of both the sentiment and the activity we see. But overall, not changing our guidance, but very optimistic for Wealth in future, as seen from Q3 results. And of course, be mindful there are some seasonal fluctuations, Q4 can be a little less in Q1 more, but we'll see how it progresses. So far, all on a very good trajectory.

From a credit risk perspective, and as you can appreciate, I've been a Chief Risk Officer for 5 years. So indulge me, I'll share my thoughts on that with you. Private credit as a sector, of course, is going to have stronger players and weaker players. What is very key is how you do the due diligence and what are the kind of underwriting standards you apply in this new area.

You are quite right. This is primarily U.S.-driven, 80% a U.S.-driven business, and our footprint in U.S. is relatively small. All I can tell you is that our direct exposure in the private credit space is single billion dollars. We apply the same strong credit underwriting principles there. So I'm very comfortable in that space.

What I do want to call out is, you're right, it is always the second and the third order risk that you should be very mindful of, which are not your direct exposures, but exposures you may have through weaker counterparties. We have always taken a very conservative view in terms of our exposures to smaller banks, regional banks in the U.S. and elsewhere. We've been doing that right through the COVID period, through Russia, Ukraine, through inflation, high interest rates, so on as well as exposure to smaller hedge funds.

Having said that, we closely monitor this space because you can never get too comfortable in the space, and good risk management really means looking forward to see what else can impact the overall ecosystem, which then can cause indirectly concerns to all participants.

Our next question today comes from Kian Abouhossein at JPMorgan.

Just to come back on the NDFI exposure because you mentioned private credit just now a single digit. NDFI would be similar. Clearly, you get your U.S. legal entity exposures, whether the branches, which is below $10 billion. So should we see that as overall group exposure roughly for total NDFI, can you confirm that?

And then secondly, on tariff scenarios, you gave an impact scenario or sensitivity scenario of low single digit on group revenues before Clearly, things have changed, but also that was on a very specific part of your business. So I'm just trying to understand how you're thinking about impact scenario going forward in the current situation and expectation of a trade deal? And secondly, also what the impact has been so far?

So let me come through the NBF exposures. As you can appreciate, NBF is a very broad industry. My comment on our disciplined and conservative approach to weaker NBFIs holds. So from an exposure perspective, both in terms of quantum that I've called out and beyond, I am very comfortable in terms of our approach to date as well as going forward.

For the tariff exposure and the impact, as you've seen, the trade segment has continued to perform well. We have the advantage that as much as there is an impact on U.S. dollar-related corridors. There are other corridors, which are growing, which we have a strong presence in, whether it's India, U.K., Middle East, Asia, Intra Asia. So that's been quite good for us. So overall, guidance that we've given on the direct impact of tariffs has not changed.

And of course, we look at that as part of our downside risk scenarios even for the ECLs. From an overall view on the macro environment with all the trade deals being done, I'll just give one reflection that our probabilities that we give to our upside, downside in base case scenarios have now normalized, and that's resulted in some modest releases of ECLs because we think the situation is improving compared to where they were more weighted towards the downside scenarios in the previous quarters.

[Operator Instructions] We will take our next question today from Amit Goel at Mediobanca.

So two questions for me. The first, just on the U.K. business. It looked like there's a bit more investment and there was also a little bit of a tick up in the impairment rate versus prior quarters. So just wanted to check what kind of investments you're making there for what kind of opportunity? And then on the impairment, what's driving that?

And then the second one is just a follow-up on the Madoff litigation. I'm just kind of curious what is really the range of outcomes? I know obviously, it says that it could be materially different to the provision. There are a lot of kind of numbers in the release. So just curious how you see that range? And I was also kind of curious why a provision wasn't taken in December '24 when you had the original ruling that went against?

Okay. Thank you, Amit. So first on the U.K. business, we have continued to invest for Wealth, both in terms of hiring of RMs to grow our premier customer numbers and to sell more Wealth product for the customers who we already have very strong deposit base with. We are also investing as we've opened a new Wealth center in the U.K. in this space. And then business banking has been important for us for investing in, in terms of customer service, customer journeys, and that's primarily a liability-driven business.

Having said that, we are very pleased that our corporate lending book in the U.K. has shown sustainable growth in the sectors that we have lent into, so more into the new economy sectors, into infrastructure, into social housing, into innovation and so on. So that has been really positive for us.

From an impairment perspective, just to give you a context, a $300 million charge in a quarter for the U.K. is not abnormal. In prior quarters where we had to release the charge can fluctuate between $200 million to $300 million. In terms of the specifics, there were a few single name defaults, but they are all of very small amounts, so nothing notable. And no specific concentration in any sector. So I feel quite comfortable in that space.

From a made-of perspective, just to be clear, we had an appeal as of December, and the outcome of the appeal was only known to us on Friday, the 24th of October, and therefore, we gave our RNS and announcement on the provision yesterday. So the provision we have given is our best judgment of likely outcomes. It's not a midpoint. It's not a broad range as people may think, but it's just our best judgment based upon advice from both internal and external legal counsel.

Our next question comes from Kunpeng Ma at China Securities.

It's [ Chen Li ] from China Securities. And I also have the questions about the Wealth management because of the further interest rate cut. So will the nonresident new customers in Hong Kong will slow down or keep stable? And also, how would the migration of retail deposits into wealth management products impact our wealth management revenue?

Thank you. So on Wealth management, the growth of wealth management that we've seen comes both from new customers, but primarily from our existing customer base in Hong Kong. We do not believe that at a normalized HIBOR rate, which we've had seen for quite a long period of time despite the fluctuations we've had earlier this year that, that should have an impact on both the appetite of our customers for Wealth management products, their desire to diversify and our matched product offering, which is in a prime position to meet their needs.

So I don't think there is anything more to call. Obviously, a positive stock market is good optimism factor and encourages customers to invest even more. But the baseline growth that we are seeing quarter-on-quarter is very much expected to continue.

Our next question today comes from Alastair Warr at Autonomous.

I just wanted to quickly return to the Hong Kong CRE question. You saw as you touched on yourself some downward migration. You said before, you've been focused particularly on the higher LTV problem loans.

And those have gone up quite a bit again, third quarter versus the half year. So could you just give us a little bit more about what's going on in collateral there in the background, why the ECL would be able to come down by quite a bit in terms of, say, individual clients posting more collateral, what the values have been doing in the quarter?

So thank you for the question, Alastair. So in terms of the Hong Kong CRE, you're right, if you look at the LTV, 70% plus the number, which has grown. But in the same note, we've taken more provisions. So net of the provisions quarter-on-quarter, that number has pretty much stayed steady around the $900 million.

Now in terms of valuations, of course, we look at valuations across the board. And particularly for these, we look at them on a quarterly basis as well as if there are any transactions or events that cause us to pause and look at the valuations, again, we are looking at that. The real distinction between perhaps what you saw in the middle of the year and now is that there is no individual surprise name or situation.

And overall, in Hong Kong CRE, retail has got better, residential, as we know, has stabilized. And on the office space, which is challenging, we are not so far seeing improvements, which are coming from the momentum even slight as it may be in terms of A-type properties going into the rest of the office space. So hence, I think that challenge will continue.

Our last question today will be from Andrew Coombs at Citi.

A couple of questions, please. Firstly, just to follow up on divestments. You've now announced Sri Lanka, you've talked about Egypt retail being up for review. I see there's no mention of Australia or Indonesia in the slides this time, whereas there was in Q2. Can you just provide us with an update there? Particularly Australia because that is a potentially more sizable divestment.

And then the second question, just on the new disclosure on Slide 7 where you provided the resident versus nonresident split of the additional customer in Hong Kong. Perhaps you could just give us an idea of what the split is of the stock as well as the flow. How that changes with Hang Seng Bank if you were to combine the two, not just look at the Red brand and how the revenue margins compare between resident versus nonresident?

Thank you, Andrew. So firstly, your questions on the divestments that we had called out in terms of strategic reviews. There is no further news. They are continuing through that strategic review process. So that's why we haven't called out anything specific here.

It's work in progress, no turning back as such. So the slide that we have said on the resident and nonresident, the reason for that slide is really twofold. Firstly, to explain to you that why this growth and the reasoning of how it's grown up since the borders opened up in '23 and see that trajectory, and that shows how the trajectory is continuing. However, it does show that fundamentally, the customers who are coming in to begin with are coming with small balances, and it's a deposit-led growth story.

There is also an uptake on insurance, which is a preferred product. So we called that out. The other Wealth products, it takes time to convert. Overall, if you look at the premier customer base between the start and the end, it stays pretty much stable, 15% to 16%. So that's how I would look at it. And new customers coming in, in terms of a trajectory has continued pretty consistently at least through this year at 100,000 plus every quarter. It's a little higher than what it was in '24, which was a little hard to begin with from where it was in '23. So you can see that as a continuum.

In terms of Hang Seng, they don't do a third quarter filing. So I don't want to say anything about that. There's no news to share. They are a listed company in their own right. But obviously, as we have talked about the opportunities for revenue growth and operating leverage as part of our offer that does call out that from a revenue perspective, particularly on Wealth products, we will have greater opportunities to leverage the Wealth products in the Red brand, for the Green brand customers, both existing and new, which continue.

Thank you, Pam, and thank you all for your questions today and for joining our webinar on the 3Q results for HSBC Holdings plc. You may now disconnect your lines.

Thanks, everyone, for joining. We'll kick off the session. So delighted to be joined here with Pam Kaur, HSBC Group's CFO.

[Technical Difficulty]

Okay. Cool. All right. So apologies for that disturbance and sorry for that. I think let's proceed anyway and fingers crossed this kind of results itself.

Okay. It's been a year since George took over as CEO, almost a year since you were appointed. Can you reflect on what's been done and what there is to do from here?

Thanks, Aman. We've made a strong start in terms of our priorities, so fundamentally to refocus the business and to invest for growth. And the 4 key businesses that we have elevated in our franchise, Hong Kong, U.K., Wealth and CIB are all progressing well. They've had good above mid-teens RoTE delivered and there has been revenue growth. But just as a context, if I think about what our predecessors had to face, they were in a world where we had regulatory headwinds, including the DPA, they were also trying to look at our legacy portfolio and to reduce it. The interest rates were near 0.

And there was a structural cost base, which was from our legacy local bank footprint that was an overhang. Now as we got into it from this time, right from the start, we wanted to simplify the organization. We wanted to make sure that we take out the duplicate costs as well as in refocusing the business, reduce the footprint in terms of exits of nonstrategic subscale, low-return businesses.

And with that in mind, we have progressed and are now in a really good position that the investments we are making in the 4 priority areas can really be meaningful to drive growth. As part of that, we are also looking at how we drive the overall culture of the organization under this new structure, and that is going to be a very important underpinning as we continue to deliver.

Interested in the kind of time line of the kind of new strategic plan that's been put in place, how quickly do you envisage the kind of benefits -- realizing the benefits of the strategic plan?

So you've got $2 billion, $1.5 billion numbers. It's always interesting when you've got 2 exactly same size numbers to deal with. But the first $1.5 billion, which is the cost saves from simplification, which will be delivered by the end of next year. We are already ahead of target. And we called out at midyear that by the end of this year, we will not take $300 million as we first announced, but indeed $400 million down to the bottom line.

And we do that under Project Cedar, so that's progressing really well. We have seen some of the exit restructuring costs already come into Q2, but the benefits accelerate as you go into '26. Now in terms of the other $1.5 billion, we have strong momentum in terms of the deals we have announced. We've announced 7 at half year, but we also have....

[Technical Difficulty]

Okay. I think that is a positive resolution. I think that's -- I think -- yes, exactly. Okay. All right. Well, I obviously apologize for the interruption...

So I was talking about the second $1.5 billion, so both in terms of the strong pipeline as well as the deals that we have already announced. And we have looked at obviously countries. We looked at market participation, and we have looked at individual business areas. Now some of these are very quick to do and the benefits are quick to realize like we had with the Investment Bank and exit of M&A and ECM in U.K., Europe and the U.S. While the others, the country deals, they take longer and their benefits will come further down. But we feel that the weight of those benefits coming through will progressively increase through '26 and into '27.

Taking a step back then. I'm interested in your assessment of growth. I mean there's a lot going on across your footprint, divergent growth trends, complex geopolitics. Obviously, we're navigating a volatile trade policy backdrop as well. What's your kind of broad-based characterization of your operating environment?

So by the way, just as a starting point, we are managing the bank to a mid-teens RoTE. We printed 18% ROTE at half year. All four businesses are growing at mid-teens RoTE or better, and all four are growing. But just unbundling, if you look in terms of tariffs and trade, we are the #1 trade bank. In this second quarter year-on-year, our trade fees have grown 4%. Trade balances are up. We are in a unique position to engage with our customers who are all facing a fundamentally different world. Having said that, trade is a small contributor only to our overall revenues. The real driver for revenues in our wholesale transaction banking is payments and FX, and that is benefiting from strong customer flows.

Some of it obviously is related to the market volatility, like for FX. But overall, we see that growth and that momentum. If you look at Hong Kong, we've had a second quarter with all its challenges. We've had HIBOR at a very low level. We've had ECLs that are heightened. Despite that, we have a 35% RoTE. Fundamentally in Hong Kong, yes, asset growth has been muted, but deposits have grown 9%. Then if I look at the wealth business, the wealth business has a double-digit growth trajectory.

Wealth fees have grown more than 20%. We are well engaged in terms of the insurance business, both in terms of Hong Kong as well as the balances growing globally. So all in all, as a consequence of our focused growth objectives as well as the structural benefit of some of the geographies that we are in. We are in a very strong capital generation capacity and feel very comfortable as a consequence in terms of our distributions and our targets to manage the bank to mid-teens RoTE or better.

Banking NII, you reiterated your full year '25 guidance at circa $42 billion with H1 results. I mean you alluded to the step-off in HIBOR at the time of results. It was down some 300 basis points Q-on-Q. Thankfully, it's kind of rebounded somewhat since pretty significantly. Interested in the confidence that sits behind that guidance at this level.

So at half year, we are pretty comfortable because, of course, there was a headwind from HIBOR. And we also called out that if it continued to be at the 1%, we would have that $100 million per month headwind for the rest of the year. We had the benefit, obviously, of a weaker dollar. Now with HIBOR having normalized above 3%, of course, we are even more comfortable. So from a banking NII perspective, it's all in a good space.

We have our structural hedge, which has been doubled over the last 3 years, sitting at $578 billion. We have reinvestments of the hedge coming sort of $25 billion per quarter, and that gives us an additional tailwind from reinvestment of a 1% higher yield. So overall, from a banking NII, very comfortable, underpinned by a very strong deposit growth of 5%, $83 billion year-on-year from a group perspective.

Yes. I wanted to build on that actually. I mean, money flows into your business, they're remarkable, right? I think there's -- I think, $83 billion or 5% deposit growth over the last 12 months. And then you've also got additionally $75 billion of net new invested assets that are coming through into the wealth business. Obviously, Asia, in particular, Hong Kong is the kind of key focal point here. But presumably, this gives you a level of confidence in the earnings -- a pretty significant confidence in the earnings outlook. Is that right?

We are very comfortable with our earnings outlook. From a deposit perspective, that is our crown jewel. We have high-quality, sticky deposits. We never have to overpay for our deposits. We maintain our share and grow. And it's not just in Hong Kong and U.K., it's in every major currency as well as in every country that we operate where we have a deposit surplus. Now in terms of the other income flows, yes, from a net new invested assets, we have clearly invested from a wealth proposition.

A key driver of that is transactional activity in Hong Kong. There is also new customer inflows. We're seeing 100,000 new customer inflows coming every month. They're not all wealth customers, but they give a very good starting point to build them into wealth customers as time progresses. In addition to that, there is a good momentum on wholesale transaction banking. So overall, it is a good outlook for a revenue generation in all 4 pockets of the business that we are in and revenue generation, which is coming from quality annuity-like earnings rather than just event earnings.

One area, I guess, that you've been running below target is loan growth. You've got an aspiration to grow the balance sheet at a mid-single-digit growth rate. You've been impacted by deleveraging in places like Hong Kong. I'm interested in when you -- when is it realistic to think you might actually realize that level of target loan growth?

You're absolutely right. Loan growth is low because customers are not making those capital expenditure decisions. We have a strong capital base. We have the risk appetite. We have lines available to our customers. Utilizations are low. Having said that, there are pockets of the business where we are seeing some early growth. So in our U.K. Commercial Banking, there has been growth in very specific sectors that we have targeted. And they tend to be the new energy sectors. It tends to be biotech, pharma, IT sectors as opposed to real estate and other areas.

So we are leveraging both our understanding of the sectors through obviously our Innovation Bank, SVB as well and in a targeted way, making sure that we can be there to respond to our customers as and when they need us. From a Hong Kong perspective, 2 things have happened. There has been a little bit of growth outside real estate, but we've also seen some of our very large developers, which are part of our unsecured portfolio, they have been deleveraging. And as a consequence, overall, Hong Kong is muted. And across the world, that growth is muted.

I think 2 factors will be really important to see asset growth again pick up. One will be if the world is in a more stable environment, both from a interest rate trajectory, but also in terms of macroeconomic uncertainties. And as that comes through, hopefully, through next year, we can get more close to our asset growth targets. But having said all of that, the banking NII's main driver is the deposit franchise.

Yes, exactly. Okay. So I might take this as an opportunity to ask some of the ARS questions [Operator Instructions] Okay. What would cause you to become more positive on HSBC shares? One, better NII, better fees, better cost control, asset quality, capital return, trade policy certainty or easing in geopolitical tensions. I mean that last one feels a distant prosper really isn't it?

That's a question that always comes.

Yes, I know, yes.

Okay. That's it.

So yes, easing in geopolitical tensions, greater capital returns, better NII's, pretty broad distribution of responses there, to be honest with you. Let's move to the second ARS, please. What you...

[ We talked about the ] banking NII, geopolitics will be what it is. And the third one was...

Capital returns.

Capital returns, yes. Okay.

Second ARS. So what are you most concerned about at HSBC, weaker earnings, weaker capital, distributions, reg risk, political risk, M&A risk -- political risks and then weaker earnings. Yes, political risks.

So I just want to say on political risk. We have lived in a world where you have these geopolitical tensions at different times of different degrees. We have strong franchises, which each in their own right are performing well and giving high-quality earnings and we engage with our customers as and when they need us rather than get caught in the politics. And even in a time like tariffs, our engagement with our customers has been very important in supporting both the economies of the countries we operate in and our customers.

Let's do the third ARS, please. How do you expect HSBC's RoTE to develop over the next couple of years? So for example, 27% relative to this year's. Significantly higher, modestly higher, in line, modestly lower, significantly lower? Modestly higher? Okay. I mean you're already operating well above your mid-teens target in H1. So let's say people are right...

Hope they're right and we continue to stay optimistic.

Turning back to the business then. So Wealth Management, you alluded to it earlier on that key driver of the business. You saw revenue growth of 22% in Q2, driven primarily by Asia and in particular, Hong Kong, which is, as we alluded to, is benefiting from very strong inflows at the moment. But you're also targeting market share gains, increased investment. I'm interested in how sustainable this level of revenue growth is? And can you talk to the differing contributions from the market backdrop and the share gains that you're looking to execute on?

I think we need to sort of dial back a bit to see where do we have really a preeminent position as a competitive strength. So whether it's in Asia or the Middle East. We are one of the largest international banks. We are well respected. We have an iconic brand, whether it's Hong Kong, whether it's India, whether it's the UAE, Singapore, Mainland China. In all those areas, of course, there is strong competition.

So we are very much focused in terms of the hiring of RMs in strengthening our product proposition, continuing to deliver good customer service as well as we've opened 16 new wealth centers. In addition to that, we have a strong home market in the U.K., where we're just trying to convert the customers who are already with us in terms of their deposits to be able to do more with our customers in terms of their wealth needs. And therefore, we have targets which are in the U.K. as well to make up the top 5 wealth provider to increase our premier customer base, double it up from $1 million to $2 million, have $100 billion in net new invested assets.

So we have a focused but very targeted approach in all these markets. So what is happening in some of the high-growth markets is there is a growth in the middle class. And our sweet spot is really working with customers whose assets under management is sort of $100,000 to $2 million. What we need to do there is increase the RM coverage, make sure that the product proposition is on target, the customer journeys are simple, and we have the right technology enablement for that. That has helped us both in terms of getting net new customers like in a situation like in Hong Kong, and I'll talk a little bit about it, but also do more with our existing customers.

If I look at Hong Kong, yes, we have benefited from strong transactional activity in Hong Kong and the Southbound Connect, which caused a headwind from a HIBOR perspective is actually a tailwind in terms of the wealth proposition. And if you look at the flow of new customers, having 100,000 new customers every month in Hong Kong, who are not wealth customers because they come with a small savings to begin with, but who could, over time, and we monitor it very closely, become wealth customers, that gives us the confidence that we will continue to generate double-digit growth in the wealth proposition.

You alluded to relationship managers. Are you accelerating hiring of RM...

Absolutely. We are accelerating hiring relationship managers in Hong Kong, in the U.K., in Singapore and in UAE. And in the other markets, we are ensuring that we continue to drive the business, which we bought from Citi, which was in Mainland China, which is the Citigold space in terms of driving our wealth proposition.

Perfect. I wanted to turn to one of your other major businesses, CIB, many moving parts there when I think about it, you've got underlying growth, targeted investments, but you've also got an overhang from tariffs, which at face value feels like a kind of complex impact on the business, maybe a headwind for trade, but volatility boosting global FX. I think I struggle sometimes to get a clean read on what to think about for this business going forward. So I'm interested in how do you think about the outlook for CIB from here? And if I can ask as part of that, have you seen any meaningful impact on customer behavior from tariffs so far?

So let me start with tariffs, though they are probably the smallest contributor overall in CIB's transaction banking. From a tariff perspective, customers are engaged with us to understand how they can evolve their business models. They are not making decisions as such in terms of capital expenditure and to change their business models. There have been some opportunities where the customers have said like in -- for the U.S. importers that they need more operating capital to pay up the upfront tariff duties. So in that, we've obviously created the trade pay product, and that's going well.

So that customer level engagement is very active. But so far, we do not see stress on that customer base either individually or at a sector level. And how we look at that is in terms of the customer behavior, the balances they hold with us are pretty stable and the drawdowns they are having on the approved lines have not increased like they had increased during the COVID period. So overall, that they're managing through that well. If I look sort of beyond the tariffs business, as I said earlier, the wholesale transaction banking, payments and FX, we have invested in this business as well as trade. We have had multiyear programs to invest in these businesses, and they are actually reaping the benefits. So now when we have increased volumes in payments in FX, it's gone pretty smoothly.

In addition, in Security Services, as our customers want to add more banks for some of the products that they want to put for custody, they absolutely are leaning on to us, and we are winning new mandates. And with those new mandates, we see there's growth for the Security Services business as well, particularly in Asia.

And if I go beyond the real driver for the CIB is also going to be that we do more balance sheet velocity and significant risk transfer. This is an area where we have been slower in the past. We've always had a strong balance sheet and the capital position. So we haven't done as much as some of our peer banks. And with that, we are hopeful that as growth opportunities on the asset side there, doesn't actually increase our RWAs, and that will indeed then have a benefit and a tailwind for our overall RoTE.

Just a potential follow-up on the tariffs point then. You laid out a kind of low single-digit percentage hit to revenues from a plausible downside tariff scenario in April, but obviously, a lot shifted on the policy front since then. Is that still the right way to think about a potential downside?

So we continue doing lots of downside scenarios. We refresh them at every quarter. So overall, absolutely the low single-digit impact and the direct impact of tariffs is unchanged. In addition, what we go and look at is that from a second order, whether you're a trade bank or not, what will be the impact from an interest rate and a GDP perspective. And in those sort of downside scenarios, it obviously is going to be a little higher. So that's how we work it through.

Okay. Fair enough. Yes, I wanted to ask about asset quality then just shifting it. You increased your full year '25 ECL guidance with 2Q results to circa 40 bps. Previously, you were targeting 30 to 40 driven primarily by Hong Kong commercial real estate, where conditions have been challenged for much of this year. Interested in your assessment of the risks from here and in particular, whether you see scope for further material provisions from here or not?

So firstly, when we look at our provisions in our overall guidance for circa 40 basis points, we obviously look at the outlook for the rest of the year, and that's how the guidance is built. We build that in and Hong Kong CRE is a clear component of that. But if I look at overall on real estate, the residential real estate in Hong Kong has now come into a much better position compared to where it was 18 months ago, both in terms of prices being firm, rentals holding and volume of activity in terms of the residential real estate. So we see no issues from a residential real estate perspective.

And this is as a continuation of some of the measures that the government had taken 18 months ago, and we are now seeing the benefits of those measures play out. Now from a commercial real estate, there are some structural issues. There's an oversupply in terms of office space. The government is taking measures now to reduce that, but it will take time for that to really work its way through the system. I would say, the next sort of 12 to 15 months through most of '26.

But there is a distinction between that office supply, where it is, the quality of the office space. So therefore, some of the larger developers who have sort of prime properties and diversified cash flows, they have lesser pressure compared to what you say, the smaller or the midsized developers. That's where the real pressure is. The other element is with regard to retail and shopping malls. But some of those consumer behavior patterns have changed as a consequence of this pressure on retail and shopping mall properties.

Now just in the last few months, we've seen a little bit of uptick, but I'm not going to make a big conclusion based on a few earlier green shoots in the last few months. And it goes 2 ways. If you have people in Hong Kong who can then go and do their shopping cheaper by going to Shenzhen, they go across the border. But then as you have all this flow of customers who are coming through to open accounts and participate in overall the opportunities in products, et cetera, available in Hong Kong, they also shop in Hong Kong. They go to restaurants, they go to bars. And so that kind of creates a little bit of economic activity.

Now having said all that, from our perspective, the $32 billion that we have in terms of our overall exposure that we call it [ maybe ] 44% of it is unsecured with the large developers, 95% investment grade. So there's a pretty comfortable space. The stress really comes through the secured portfolio. And within that secured portfolio, the impaired portfolio increased by $600 million to $5.1 billion. There are ECL allowances of $500 million against it. And the subset of that, which we're most focused on is of that $5.1 billion is the $1.4 billion where LTVs are greater than 70%. So that's the sort of overall picture of how we look at it, and that's all factored in as part of the ECL guidance.

Okay. Thank you very much for that. So maybe let's return to the ARS questions, please. So how do you see potential risk to HSBC's capital and dividends from here? One, upside on better earnings; two, upside on lower capital requirements; three, downside risk on weaker earnings; four, downside risk on higher capital requirements; five, downside risk on acquisitions. Okay. That's a pretty positive response there. Generally speaking, 2/3 of people see upside risk to your kind of capital returns outlook, the downside risk on weaker earnings. Okay, fine. Can we move to #5, please? So how would you view significant acquisitions for the group?

Right. So something I guess [indiscernible] negative. I mean, generally -- it seems like generally speaking, people would prefer the capital back, right? You've got 24% of people are marginally positive. Everyone else would either view it negatively or full return prefer the -- I mean, can I ask you about the appetite for M&A or the kind of appetite for HSBC to...

Well, I think it's fair to say that in the past, historically, and I'm going back many years, perhaps the discipline and the focus on strategy on acquisitions was not as much as it should have been. So for us, acquisitions is a very high hurdle rate to cross. And that really means, firstly, it has to be absolutely on strategy. It also has to be in areas where we are got scale.

We have competitive strength, and we can drive operating leverage and superior earnings. And more importantly, we are doing well enough on organic growth, whether it comes into our RoTE targets, whether it's in terms of driving performance. So we don't want to do acquisitions that we don't either quite understand or will be a distraction. So that, to me, is really important and they have to be at the right value and price.

Let's do the final ARS question, please. Where would you like to see HSBC -- most like to see HSBC invest for growth?

Wealth Management, wholesale transaction banking, loan growth across the footprint for inorganic. Wealth Management and a return to loan growth. But yes, primarily Wealth Management.

Yes. And Wealth Management is something we are very much focused on across all our geographies. And it's really important to say when people go for wealth, management and acquiring customers, we have a natural home advantage because we have those customers already with their deposits with us. They trust us. They believe in us. Also, we have a very strong footprint in terms of commercial banking in many geographies. So most banks will have a commercial banking footprint in their home markets. But we go in many geographies, which are high-growth geographies, not just doing multinationals and large corporates, but we go in terms of mid-market as well.

So as those businesses grow and those entrepreneurs wealth grows, we have worked with them. We have engaged with them. We have supported them. They are loyal to us. So that's where we get a lot of our private bank and wealth customer base. So both from the deposit base from the 100,000 AUMs to 2 million and at the top end as they grow, that continue. And that is our very critical competitive strength compared to other sort of pure-play private banks, and these are in high-growth areas. And we are -- what they're doing differently, to be fair to what we've done before, we know our focus areas, and we want to invest there meaningfully.

We don't want to dissipate our investment in a lot of different areas and then not make a real difference where it matters. That's the big difference. I would say in wholesale transaction banking, it is really important for us to maintain our position as a top 1, 2 or 3 player and that's what we are doing in terms of multiyear programs so that investment for growth is not that something we sort of have to relitigate every year, but there are longer programs that we are working through. And underpinning all of this, we have taken costs out to drive operating leverage, but we will continue to drive streamlining benefits and higher productivity by looking at areas where we can drive productivity through AI. So every time we want to grow, we won't say we want to increase headcount so much in an offshore low-cost center. But actually, we don't need to grow it one for one because we have some AI benefits, and we have some good cases on that, too.

Opening the floor if anyone's got any questions, please feel free to ask. I'll give you guys a minute to think. I wanted to ask around, I guess, around capital. You're highly generative at the moment, particularly during a period of subdued loan growth. And together with the strong capital position, which has been boosted by disposals, you've been executing quite strongly on distributions, including a rolling series of buybacks that are roughly $1 billion kind of per month run rate. Looking forward, how should we think about the sustainability of this level of capital return, particularly if and when loan growth recovers?

Okay. So firstly, we don't give a target for share buybacks. We do share buybacks, and we have done at a $3 billion per quarter, but that's -- because that's from an execution of share buybacks, that's the sort of maximum we can do and we have done. If I look at the capital overall, we operate within a 14% to 14.5% CET1. So it's not one number. It's a range. We are capital generators. We expect to be capital generators given our RoTE targets. And we have a very clear dividend payout of 50%. And that dividend payout, we feel is right, and we will continue with.

For the residual, obviously, the first point is balance sheet growth, and we would love to have balance sheet growth, and we are ready available with very liquid strong balance sheets across the board. But we've said that's going to be probably not subdued and muted, but at best kind of mid-single digit. The next comes is in terms of acquisition. And with a high hurdle rate, we will be looking at opportunities, but only if they fall bang on our strategy. And then the share buyback is a residual.

So it's a really very simple math and exercise, which we do on a quarterly basis. We don't have any sort of view that if the price book to value is x, then what should the share buyback be? We are looking at share buyback as a preferred method, but only when we look through all this. And actually, we would like to grow both organically and if there's an opportunity for an on-strategy acquisition with the right disciplines.

One final chance to ask questions if anyone in the room if you'd like to.

Just very quickly I want to ask on RM hiring. Where are you hiring [indiscernible] or is it already also organic kind of growth [indiscernible] talent and how easy it is to do that relative to...

So thank you. Really good question. So first, we have to look at what segment of the wealth we are referring to. So when you look at the lower end of the wealth business, we are very much hiring from the market, but these are also RMs who we are then training internally in terms of the product proposition because it's not so much as they are gathering customers new. We have those customers already. They are doing that cross-sell and providing the wealth proposition to those customers. So that's very much driven by our own training programs that we have, and we have that critical mass of existing RMs who are upgrading or the new that we are hiring.

Clearly, in terms of the private bank business, we are looking at both hiring from the markets where they have those strong customer engagement, but also to build on our existing. Overall, we tend to do more in terms of our existing customer base, whether it comes through the wealth route or indeed the corporate route because we have this sort of multi-business proposition in all our large markets. We don't rely on RMs to bring in customers. We have our customers. We rely on RMs to be able to meet the wealth needs of those customers in a safe, stable, secure manner.

So it's very different when you say classically, people say, can I get somebody's RMs and then bring their business in, in terms of customers. We have those customers. These customers already across through our business areas have their deposits with us. They trust us. They don't need to be introduced to us.

I'm going to ask one very, very final question. This will be to close the session out. But just around deregulation, it's just a big theme at the conference so far. I guess there's a sense of optimism around deregulation and the impact on financial services in the U.S. I guess in the U.K., the U.K. also want to drive to deregulate -- yourself as a firm, you've been kind of vocal proponents of easing capital requirements, easing requirements, including areas like ring-fencing. I was just interested if there's any particular areas that you're optimistic around.

I'll start with a positive. So I've been in banking for 35 years. And this year was the first time where the U.K. regulators have actually put growth as part of their objectives, both the FCA and the PRA. So I've seen that in other markets, particularly Hong Kong, Singapore, where they're very growth oriented. So that's a good start. Having said that, as a backdrop, when ring-fencing was done, we created a very large ring-fenced bank. But the non-ring-fenced bank, we actually reduced our balance sheet size to meet the regulations as they were then.

So from our perspective, regulation has to be proportionate. Some of the engagement that has been happening on Basel III and its implementation, both time line as well as the qualitative implementation gives me optimism for the future. But clearly, what's happening in the U.S. at the moment, the gap between the U.S. pro-growth agenda and U.K. and then Europe, I look at it really in that order, has to catch up. and we'll have to just see how that progresses. So that from an investment perspective, as a global bank for ourselves, U.K. continues and remains attractive, but also for our customers who have choices on where they want to invest, U.K. doesn't lose a competitive edge.

And the next sort of 12 months, 12 to 18 months will be critical to really have those right moves. And businesses want predictable, sustainable environments to operate in. They don't want sort of chop and change and windfalls and taxes or whatever because what's the windfall today versus tomorrow, they don't -- they can't really predict. So predictability is a very important cornerstone that U.K. needs to follow through on. And that's one of the reasons why Hong Kong does well because it's a very predictable growth-oriented market environment with a very viable economy and a very large Mainland China flow coming through it.

Okay. Perfect. With that, we'll bring the session to a close. Thanks, everyone. Thank you very much, Pam.

Thank you.

Welcome, ladies and gentlemen, to the analyst and investor webinar on the 2025 Interim Results for HSBC Holdings plc.

For your information, this webinar is being recorded.

I will now hand over to Georges Elhedery, Group CEO.

Welcome all to today's call. I'm joined by Pam. Before Pam takes you through the second quarter numbers, I will cover three items: our first half performance, the external environment, and the progress we're making against the targets we set out.

Turning to our performance. The momentum we saw in the first quarter continued into the second quarter. Our half year performance was strong. Excluding notable items, revenue in the first half grew 6% to $35.4 billion. Profit before tax was 5% higher at $18.9 billion. On the same basis, annualized return on tangible equity was 18.2%, up 1.2% year-on-year.

Our four businesses sustained momentum in their earnings. In our Hong Kong home market business, we attracted 100,000 new-to-bank customers every month this year on average, reflecting strong customer growth and solid deposit inflows. In our U.K. home market business, our loan book grew by $6 billion over the quarter on a constant currency basis. We were particularly encouraged by signs of recovery in lending growth in commercial banking, with loans growing by $3.5 billion on the same basis. We grew fees and other income in both Wealth and Wholesale transaction banking.

For the second quarter, we announced a $0.10 dividend per share alongside a share buyback of up to $3 billion. This brings total shareholder distributions in respect of the half year to $9.5 billion.

Turning to the external environment. We entered this period of uncertainty from a position of strength. In this complex environment, customers are looking for a trusted financial partner. Our differentiated strength are clear.

First, our hallmark financial strength underpinned by a strong balance sheet and high-quality credit portfolio has helped us deepen our customer relationships and grow deposits by $83 billion from the same period last year. This is after adding back balances held-for-sale. Our $1.7 trillion deposit base drives the lion's share of our banking NII. Despite HIBOR headwinds, other tailwinds have allowed us to reiterate our full year banking NII guidance of around $42 billion. In Hong Kong Commercial real estate, while some short-term challenges remain, we are confident in the overall credit quality of the book.

Second, our long-standing experience of facilitating financial flows globally, and our international network, especially across the world's fastest-growing trade and investment routes. We delivered 5% growth in wholesale transaction banking fee and other income in the second quarter. Our trade fees and other income grew by 4%, reflecting our leading position across fast-growing intra-regional trade corridors as well as our continued investments in services trade sector. We have 5,000 trade specialists in more than 50 markets operating on both sides of trade flows. They bring significant expertise and real-time insight to our customers.

And third, we are seeing continued momentum in our Wealth business. We are ideally placed to capture the increasing number of affluent and high net worth customers in the fastest-growing wealth markets in Asia and the Middle East, where we are investing at scale.

Turning next to the progress we are making against our organizational simplification targets. As set out in February, this initiative is meant to make the group simple and more agile. Cost efficiency is one of the benefits. We are on track to deliver the circa $1.5 billion of simplification saves by the end of 2026. To remind you, these are primarily through the deduplication of roles and will have no meaningful impact on the revenue. The sales will be taken straight to the bottom line, $0.4 billion of which will be in the P&L in 2025 revised upwards from $0.3 billion. And the full $1.5 billion will be fully realized in 2027. Pam will go into more details.

Turning to the progress we're making in our exit of non-strategic activities. We are progressing at pace. We have rigorously reviewed our portfolio against our strategic priorities. Since the first quarter results, we have announced the sale of our business in Uruguay, U.K. life insurance subsidiary, German custody business and German fund administration business, our stake in Grupo Galicia, and our French portfolio of home and other loans retained following the disposal of our retail operations in France.

While Asia is at the heart of our growth strategy, we want to provide clarity on our footprint in Asia. Earlier this year, we commenced a targeted strategic review of our detailed business in four markets in Asia. Three of these reviews, Australia, Indonesia and Sri Lanka are ongoing, no decisions have been made yet. The fourth in Bangladesh has completed and we will start to wind down the retail business there in the second half of this year.

To be clear, our CIB business, our Corporate and Institutional Banking business is unaffected by these reviews, and all four markets remain critical to our international network for CIB customers. Costs released from the exits of our non-strategic activities will be invested in our priority growth areas. These are areas where we have clear competitive advantage and can generate accretive returns.

Let's turn to them now. We are investing with intent. In our home markets, we said we would expand the number of wealth centers and enhance our wealth capabilities. In Hong Kong, which is set to become the world's leading cross-border Wealth hub we have opened one new state-of-the-art wealth center with two more openings in the coming month.

In the U.K., we have opened our first wealth center in London and reduced the threshold for wealth investments. We have also relaunched our premier Wealth brand targeting mass affluent customers. In the U.K. also, our improved coverage model for SME banking is bringing our relationship managers closer to customers. This is reflected in our Trustpilot score, which has improved to a 4-star ranking.

In CIB, we launched HSBC TradePay for import duties, a targeted financing solution for our U.S. customers, which simplifies the payment of import duties whilst helping them optimize working capital. We have also launched HSBC Tokenised Deposit Services in Hong Kong and Singapore with the U.K. and Luxembourg expected to launch in September and the U.S., UAE and other markets in 2026.

This next-generation programmable cross-border payments move money in real time, always on, way across our network. There is a step towards our ambition of delivering global instant cross-border payments. We have also enhanced our payment tracking solution, which now provides a global view of payment status improving our client experience.

In we have opened 13 dedicated wealth centers including in Mainland China, Singapore and Malaysia. We have also refreshed our premier banking proposition, which we launched in the UAE, India, Malaysia and the U.S. in the second half of this year.

In the UAE, which is home to more than 200 nationalities, we have simplified our onboarding process for certain customers to open a bank account before they relocate into the UAE. Each of these will drive customer acquisition, deepen wealth penetration, grow our share of mandates and enable us to capture greater share of corridor flows.

Finally, we are modernizing the bank through AI, GenAI and Automation. We are improving our technology productivity with coding assistance. Today, more than 20,000 engineers are 15% more efficient in coding, because of our new tools. GenAI is being used across five CIB markets to bring process efficiency to our credit analysis write-ups.

We're also focused on improving customer service through AI-supported mobile apps and strengthened contact center capabilities. The key message is we have continued ramping up investments in these areas. Further momentum will build as our exits complete releasing investment capacity to redeploy into our priority growth areas in line with our disciplined cost and capital allocation framework.

In summary, we enter this uncertain macroeconomic environment from a position of distinctive strength, underpinned by our hallmark financial strength, our global connectivity and our expertise. We remain well positioned to support our customers as their trusted financial partner. We have strong momentum in our business and are well positioned for growth. We're investing for growth, and we are delivering growth. And we are executing our strategy with discipline and at pace.

The positive progress we're making gives us confidence in our ability to deliver our targets. We reaffirm our mid-teens return on tangible equity guidance, excluding notable items for each of 2025, '26 and '27.

Let me now hand over to Pam. Thank you.

Thank you, George. Thank you, everyone, for joining. At full year, I said we would focus on three things: discipline in the way we prioritize and maintain strong cost control while ensuring investment rigor for growth; performance in the way we gear our financial strategy, towards achieving our mid-teens returns target; delivery in the way we enhance operating leverage and support our customers. The second quarter numbers show discipline, performance, and delivery across the bank.

Let's turn to the details. First, the income statement. I'll be excluding notable items of $2.8 billion this quarter from my performance commentary. Of the $2.8 billion, $2.1 billion are related to Bank of Communications, $1.1 billion of this results from its share issuance, which diluted our interest to 16%. It is booked in other operating income as flagged in the first quarter. The balance, a $1 billion impairment is booked in associates. A separate $0.7 billion relates to restructuring and other charges, which are in the cost line.

Slide 22 sets these figures out. Annualized return on tangible equity, ROTE, was 17.7% in the second quarter. Revenue grew 5% year-on-year to $17.7 billion. This was driven by fee and other income. Profit before tax was $9.2 billion stable year-on-year. We have revised our full year ECL guidance to around 40 basis points from 30 to 40 basis points. The increase in the second quarter ECL partly relates to Hong Kong Commercial Real Estate, which I will discuss further. We remain on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis.

Looking at capital and distributions. Our CET1 capital ratio was 14.6%. We have announced a second interim dividend of $0.10 per share alongside a new share buyback of up to $3 billion. We have now reduced our share count by 13% since the first quarter of 2023. As always, a decision on future share buybacks will be made on a quarterly basis and depends on organic capital generation and the capital needs of the business. The 50% dividend payout is at the top of our capital use hierarchy.

Then we look to grow the business, where we see significant opportunities over time. We then absorb other capital demands that emerge, the buyback is the flexible residual means of capital distribution.

Let's now turn to our business segment performance. Our four businesses performed strongly with revenue growing in each. Each one is making mid-teens RoTE or better. In Hong Kong, we attracted a further 300,000 new-to-bank customers in the second quarter, representing 600,000 for the first half. We also grew deposits by 9% over the last 12 months on a constant currency basis.

In our U.K. business, our loan book grew by 4% year-on-year on the same basis with mortgages and commercial lending standing out. Since we relaunched our U.K. Premier proposition earlier this year, we have seen our average weekly customer acquisition more than doubled.

In IWPB, fee and other income grew 21% year-on-year. Across our Wealth businesses, fee and other income grew in the second quarter by 22%. Across these Wealth businesses, we attracted net new invested assets of $22 billion in the quarter with $11 billion booked in Asia. For the last 12 months, net new invested assets was $75 billion. In wholesale transaction banking, we grew fee and other income by 5% and on a constant currency basis year-on-year, given market volatility.

Moving to the group revenue story. Revenue grew 5% year-on-year to $17.7 billion. This was driven by fee and other income, which I'll discuss further in a moment.

On banking NII. Banking NII remained broadly stable on the first quarter, reflecting lower interest rates, partly offset by the repricing of the structural hedge. Our structural hedge, now $578 billion has reduced the sensitivity of our revenues to interest rate cuts.

Regarding HIBOR. As a reminder, under the linked exchange rate system, the Hong Kong dollar is maintained within a trading band via the HKMA's commitment to buy or sell Hong Kong dollars when the exchange rate hits either the strong side or weak side of the band.

During the second quarter, we saw market-driven interventions after the Hong Kong dollar appreciated to the strong side, which added liquidity to the market and led to a notable drop in HIBOR rates. Forward market indicators suggest that the 1-month HIBOR is expected to rise gradually back above 2% during the third quarter. We remain confident in the prospects for our business and in the outlook for Hong Kong.

Slide 24 in the appendix sets out more detail around Hong Kong dollar sensitivity. We still expect banking NII of around $42 billion in 2025. Within this, lower HIBOR is a headwind, a weaker dollar is a tailwind. There are many other moving parts.

Moving to fee and other income. As I mentioned, wholesale transaction banking grew 5% year-on-year. This reflects how closely we have been working with our customers to adapt to a changing operating environment. We are pleased this translated into strong revenue.

Growth was driven by a strong FX performance, up 7%, capturing elevated client activity due to market volatility and geopolitical events. Global Trade Solutions increased 4% and driven by guarantees as we supported customers to build out infrastructure and expand production facilities.

Securities Services was up 3%, due to higher asset balances as a result of improved valuations and new customer mandates, particularly in Asia and the Middle East.

Global Payment Solutions increased 1%, including higher volumes in cross-border and real-time payments.

In Wealth, fee and other income increased 22% year-on-year with growth across all products. This represents our sixth consecutive quarter of double-digit fee growth as the strong momentum from the first quarter continued in the second quarter. We also benefited from higher customer activity levels in Asia, particularly in Hong Kong, where the stronger stock market drove greater customer activity.

The investments we are making in our Wealth business are translating into results. $22 billion of net new invested assets, $11 billion of which were in Asia, $13.5 billion CSM balance, a new record. Wealth invested assets are now $1.4 trillion, up 12% year-on-year. Our $75 billion of net new invested assets over the last 12 months show that while an element of our second quarter performance was transactional, there are many positive drivers of our business.

On credit, our second quarter ECL charge was $1.1 billion. This includes some corporate impairments in the U.K. and U.S., Mexico retail and an ECL charge for Hong Kong commercial real estate. A part of this quarter's Hong Kong ECL reflects commercial real estate, model updates and adjustments. The balance reflects what is still a weak commercial real estate market. Office rents are still declining somewhat. Office and Retail values are softening.

Slide 25 in the appendix provides more detail on the portfolio. Challenges are concentrated in the secured portfolio, particularly with Retail and Office property collateral. Credit migration in the first half was predominantly in this book.

We are now guiding to a group ECL charge of around 40 basis points for the full year 2025. This new guidance includes our updated outlook on Hong Kong commercial real estate.

On costs. We are taking a disciplined approach to cost management and are on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. We are also on track to deliver $0.4 billion of simplification savings into the P&L in 2025. This is an improvement compared to our previous expectation of $0.3 billion. Overall, in the first half, we have taken actions that deliver $0.7 billion of future cost saves.

In 2025, we expect to have taken actions that will result in saves of $1 billion. In 2027, the full $1.5 billion of cost saves will be in the P&L. As George highlighted, we are also making positive progress in our reallocation efforts. We have announced seven exits since the first quarter. As we exit non-strategic activities, we will be accelerating investment into our four businesses. George set out earlier the progress we are already making.

On loans and deposits. The loan book was broadly stable with growth in the U.K. Deposits, a structural source of strength for us were up 5% or $83 billion over the last 12 months. Adjusting for the balances we have reclassified to held-for-sale, notably relating to our custody business in Germany in the second quarter. When combined with the $75 billion of net new invested assets over the same period, these show potential drivers of future income.

Turning to capital. Our CET1 ratio was 14.6%. Overall, we have delivered a good capital number this quarter even with the capital consumption. We have accrued $0.39 of dividends per share in the first half against the $0.20 per share announced year-to-date. We expect the $3 billion buyback we announced today to have an impact of around 0.4 percentage points.

In summary, our second quarter results show disciplined performance and delivery. Discipline in the way we are applying strong cost control. We are on track to achieve our target of around 3% cost growth in 2025 compared to 2024 on a target basis. Our simplification saves are ahead of our previous expectation.

We are also progressing at pace with our exit of non-strategic activities and are redeploying into priority growth areas.

Performance in our earnings, each of our four businesses is growing revenue and each one is making mid-teens RoTE or better.

Delivery. These second quarter results show the way in which we are supporting our customers. Our 5% revenue growth and 17.7% RoTE show we are delivering against the targets we set out to you.

Louis, can we go to Q&A, please?

[Operator Instructions] Our first question today comes from Benjamin Toms at RBC.

The first one is on your banking NII guidance of $42 billion. You've also provided some useful guidance on 1-month HIBOR sensitivity at 1%. Can you just give some more color on the assumption that you've made within your banking NII guidance in relation to the time it will take HIBOR to return to normalized levels.

And then secondly, on cost of risk, the guidance range is 30 to 40 basis points, and you've been at the top end of that range now for a couple of years. Is it a sensible assumption really to think that you'll remain in the top half of this range for at least FY '26?

Benjamin, thank you very much for your question. I'm going to ask Pam to address both your Banking NII and your ECL guidance.

Thank you, Benjamin. The $42 billion guidance includes market expectations of HIBOR, implied above 2% in third quarter. So we already said that HIBOR at a 1% impacts us by $100 million per month. So if you look overall, our HIBOR expectations as well as the impact of the $100 million, all these are included when we look at our overall confidence in the BNI guidance for the year.

The BNI guidance is not just based on the forward curves. As we know, in Q2, a very low HIBOR impacted us for around 6 to 7 weeks. We have given more detail of it in the appendix. But a couple of things have moved around. The time deposits are now 4 points lower, and you look at those factors. And as we look for the rest of the year, there will be some upside and downside, obviously, also in terms of the timing of when the HIBOR shifts happen as well as the dollar depreciation, how long it continues. In Q2, it was a tailwind for us.

In terms of ECLs. So from an ECL perspective, we only give you the '25 number. It's fair to say that we have always in the last few years, stayed between the 30 to 40 basis points, sometimes a bit to the upper end. So we're not giving any guidance beyond 2025 at this stage.

Ben, thank you very much for the question.

Our next question today comes from Kian Abouhossein at JPMorgan.

Two questions. The first one is related to tariffs. You gave a guidance of 5% impact on revenues. And I just wanted to see how we should think about that going forward as you don't see anything in the numbers today.

And the second question is related to Stage 1 and Stage 2 movements. So clearly, your Stage 2 has deteriorated. You discussed PDs, which have been adjusted. And I'm just trying to understand a little bit more detail around your movements, in particular in the corporate and commercial bank in terms of potential realized losses, but also model adjustments versus environment.

Kian, thank you very much for the question. I'm going to make some comments on your tariff question, and will ask Pam to talk to these scenarios. And I'll ask Pam to address your Stage 1 and Stage 2 questions.

So on tariffs. First, tariff has never been a new feature of global trade, has always been there. Although we've seen recently a more significant shift in the U.S. state of policy, that's created more uncertainty, but at the same time now as we're encouraged to see that more agreements are being concluded, and this is giving us more -- ideally, more certainty as we look in the future.

But the important things to call out. One, as you did see from our Q2 results, our trade fees and other income has grown by 4%. And the reason is multiple. First, we are positioned across some of the fastest-growing trade corridors on the planet, specifically the ones within Asia, between Asia and the Middle East and various parts of the world, where trade continues to grow significantly higher trends than some of the more traditional trade corridors. And where we have a leadership position across these intra-Asia, Asia, Middle East corridors.

Second one is, we kept investing at base in our services trade sector. And now we have capabilities there, and we're able to capture a much faster growth in services trade sector than what has been the growth exhibited in the goods trade sector. And that's another area of strength for HSBC.

And third, even in trade in so far that the U.S. is involved and imports into the U.S. Some of the unique propositions we've put forward such as TradePay has given unique support to U.S. importers in helping them manage their working capital facilities and helping them meet their duty, the duties they're due to pay on for tariffs, in a way that allowed us to continue growing our business and gaining share.

You put all of this together. You put the expertise we have with more than 5,000 trade specialists across our 50 -- more than 50 markets where we operate. And you can see the resilience of our business to uncertainty. Actually, it is a period where we can differentiate, continue gaining market share, deepening customer relationships, acquiring more customers. And this is what we envisage for the expertise we have and the strength we have in our trade business.

Now with regard to scenarios, I would like Pam to take you through it, but remember, some of these scenarios are including extreme market movements such as interest rates at 1%, which have a material impact beyond what is the pure trade impact in our business. Pam?

Yes. Thank you, George. So firstly, in terms of our scenarios, we continue to update them on a quarterly basis. I just want to reiterate, we are still comfortable that the impact on revenue that we highlighted in the first quarter of low single digit from tariffs is still the same.

When you look at scenarios more broadly and you look at the lower interest rates, then whether you're a trade bank or not, it would affect us like any other bank if interest rates go well below 2% in the 1% territory. So that's the kind of broader piece in terms of the downside scenarios.

I also want to share with you that when we look at our customers and our portfolio so far, the customers are impacted by tariffs from a credit perspective, they're holding well. We are seeing no early warning signs or triggers of either lower deposits or additional drawdowns.

Now coming on to the ECLs in terms of the model update. So the model update was looking at really PDs and looking at them in a more calibrated way across our portfolio. And in Hong Kong, it increased the allowance number going to Stage 2, as we have already disclosed.

But on the other hand, in the U.K., it was a release. Some models when the calibration happens, some markets goes up, some down. So I just wanted to share that with you overall. And the vast majority of the model changes was actually due to PD migration. And then you can imagine how it varies from market-to-market.

Thank you very much, Kian.

Our next question today comes from Kunpeng Ma at China Securities.

I have two questions on impairments. The first one is related to the BoCom impairment, especially that one with the VIU test. It seems that you conduct VIU test every quarter. So you -- but you don't charge impairments every quarter. It seems that the impairment charge always come together with other bad news.

When you first charge the VIU impairment in the fourth quarter of '23, you got French disposal loss, you got a slight miss on the cost control. So you charge the first time. And in this quarter, you got the BoCom dilution impairment.

So I also cover Chinese banks. Their fundamentals are weak. But there were no sudden drops in fundamentals in the second quarter. So it seems that VIU impairment charge always come together with other bad news. So can you please share us a little bit some more color on the factors triggering that kind of VIU impairment charge. That's the first question.

The second question is that can you share us some views on a little bit longer term on the Hong Kong CRE outlook. You increased the credit cost assumption going forward due to the Hong CRE pressure. Is there any chance that the Hong Kong CRE pressure will further increase your ECL assumptions going forward? Yes, I have those two questions.

Kunpeng, thank you very much. I'm going to take your second question first and give you some outlook on the Hong Kong CRE. Pam can then give you additional details on ECL and can address your first question about BoCom. I'll make one comment on BoCom.

So with Hong Kong CRE, firstly, Kunpeng, as you may expect, we know this market very well. We've been in Hong Kong for 160 years involved in this sector. And we're comfortable with the position in this market. That's very important to call out.

Specifically, as regards residential development, this has stabilized. This has stabilized and we're encouraged by that. We stabilized mostly because of policy support measures that have been taken as well as because of robust rental market more recently. But when we look wider in the CRE space, specifically around the office CRE space in Hong Kong, we're still struggling because of some oversupply in this space. Now we are encouraged by some additional government action taken to restrict land sales and office CRE, and this should work its way into the medium term by restricting supply and supporting if you want the recovery of pricing in this space, but there will be some short-term pressure.

Now of the exposure we have in Hong Kong CRE, we basically called out less than 5% of it, around $1.5 billion of that exposure, where we continue to look with focus and attention. That $1.5 billion is to the weak lenders that are either substandard or credit impaired where the loan to valuation of the collateral is above 70%.

Now against this $1.5 billion, we have $0.5 billion ECL. So it gives you a quantum of what is a worst-case scenario in the space, it can be. And that is the segment we're looking at. Across the wider spectrum on Hong Kong CRE, what I can say is our mission, obviously, to continue to support our customers as they work through some of the short-term challenges they're going through. But that in the medium to long term, we remain confident in the supply-demand dynamic in Hong Kong and the appeal of the Hong Kong real estate at large, and therefore, remain constructive and optimistic about the medium to long term.

On the comment I want to make on BoCom is purely coincidental. There is no correlation whatsoever between an accounting process related to the VIU process versus any other information. But remember, the BoCom impairments have no CET1 impact. They have no CET1 ratio impact. They have, therefore, also no distribution impact in terms of dividend or share buyback. So I really encourage you to look at it as a pure accounting but no actual economic impact to the bank. Pam?

Thank you. I'll take the question on Hong Kong CRE first and then on BoCom. So in Hong Kong CRE, our book is down $1 billion to $32 billion, and it's mainly because of repayments done at the unsecured end of the book, where the exposure is mainly to very strong diverse conglomerates, which are nearly 95% rated strong or good and have had very little impairment. That's 42% of our limits. So the increase that we have seen in the impaired book, you're right, it's $600 million is largely to the secured side of the portfolio. And the ECL Stage 2 allowance increase is entirely due to model. So out of that, the charge we've taken of $400 million, the quarter, $100 million is due to the modeling charges.

As George has said, the area we are most focused on is the substandard and the credit impaired side of the book, where the exposure is $1.4 billion. There is already an existing ECL charge of $500 million. So you can see further down what it means from an outlook perspective.

Overall, when we have refreshed our ECL guidance, we obviously stress it with upside, downside and some fairly stringent requirements, and we continuously monitor our book, and we think that overall guidance that we have given in terms of around 40 basis points captures the entirety of the risk in the Hong Kong CRE book as we look at it now.

So on BoCom, and as George said, of course, we don't link impairment timing to anything else. It's a retained quarterly accounting process. Again, we use our models. It's a value-in-use model. It is very sensitive to input factors. So even a small shift in basis points can make it move up or down.

And when we make an impairment, it's because the fair value from the model is below the carrying value. We have already given you details on the model sensitivity to the various inputs in our annual report, and nothing has changed in that process. Just to reiterate, we don't expect any impact on CET1 from any further impairments. We also have no impact of this on our distribution or dividend policy. And the model will do what the model does. Every quarter, we look at it and make changes accordingly.

Kunpeng, thank you very much.

Our next question today comes from Aman Rakkar at Barclays.

I had a couple of questions, please. One on net interest income and one on costs. So sorry, two-part question on NII. So just the face value, your banking NII guide at circa $42 billion for the year, given that you're kind of annualizing at $43 billion H1, does it actually imply a pretty marked step off in net interest income in H2? I kind of just want to query whether you really mean that or not.

There's obviously lots of moving parts at play here. But it implies a run rate for net interest income in H2, which I guess people carry over into '26. So yes, I don't know. Is there an element of conservatism in that $42 billion? Is there just too much uncertainty around HIBOR?

The kind of second part of that first question, if I may, is just can you help me understand the levers that you're pulling and able to continue pulling from here to offset this HIBOR decline. So I'm specifically thinking about deposit pass-throughs.

The second question is around cost, please. So I'm just interested in how hard you are running. You're pushing the organization right now to realize the cost savings, because outside in, I think you're kind of leading a bit of a quiet revolution across the firm to the extent that you can. And I'm hopeful that you can realize additional cost saves over time.

So George, I'm really interested in your reflections on how -- is this -- are you running max capacity now in terms of what you're trying to do? And just a modeling point to me, next year, I think it should be flattish costs next year. I don't think consensus has got that, but a 3.5% inflation rate on costs and the $1.1 billion of gross saves tells me it should be flat next year. So if you can comment on that as well, that would be great.

Okay. Aman, thank you very much for the questions. Let me -- I'll deal with your cost question first since you've called this one out clearly to me, and then I'll give some comments in Banking NII, but Pam can give you -- can elaborate better on the movers and shakers of our Banking NII.

So first, cost discipline in grading the firm quarter-after-quarter, year-after-year, it's a commitment we have to this discipline. It's our confidence in our ability to meet the commitments we have. And it's the fact that we are on track on all the cost items, be it our underlying cost or the cost saves. So that one doesn't change.

In terms of the cost takeout. The cost takeout that's taking place now that we're calling out is a cost takeout related to organizational simplification. Remember, it is intention to simplify the organization, make us simple and agile. But there is obviously an ancillary benefit, which is a cost reduction from deduplication of roles with limited impact on our revenue generation capabilities. That one is moving at pace, and we just revised upward to the saves we can achieve this year to add to the target of $1.5 billion, which we will take to the bottom line, and we expect to achieve by the full year 2026.

There is another cost takeout, which is exiting of non-strategic activities. We announced seven exits since the Q1 results. These in total will add up to about $1.5 billion of cost takeout. About 1/3 has already been announced, a 1/3 has been worked on. And we intend once these cost saves are achieved to reinvest this into our core revenues growth areas, strategic areas where we have competitive advantage and can generate accretive returns.

But this is not the only levers we have on cost. We continue working at our operating leverage and cost. As you know, efficiency and productivity drives, including through GenAI, Automation and other modernization of our capabilities will continue as a matter of regular course of business, and these improvements will continue helping us manage our costs.

I'm not going to comment on 2026. We have not guided to it. But just given the amount of sales we expect to achieve from the simplification '26.

Look, on Banking NII, the one comment I'd like to make is that we continue growing our deposit base and continue being extremely liquid to support growth in loan as and when our customer starts investing again. We called out $83 billion growth in our deposits over the last 12 months. That's a 5% growth in our deposit base. And our deposits drive the lion's share of our Banking NII, and that's a very important lever in the growth potential we can achieve in Banking NII in terms of volume growth. Pam?

Thank you. So Aman, just a quick comment on cost. The cost discipline will very much continue, not just into '26, but further on as well. And we also said earlier, we will continue to invest in ways of increasing our productivity, and that will be something which will be a priority for us. And that's something we can control. And we have shown you a good track record in the first few quarters, and we continue to focus on that.

Now coming down to banking NII, you're right, around $42 billion. You may deem it to be conservative. If you just do the simple arithmetic in terms of what the run rate takes us to. And this quarter, and we had, obviously, the headwind from HIBOR, but it was offset to some extent by a weaker U.S. dollar. So the timing of how long the U.S. dollar depreciation continues and on HIBOR also is important.

We are assuming that there will be a sharp normalization of HIBOR within this quarter to around the 2% mark. Obviously, any delay, even this delay of July month costs $100 million at a 1% HIBOR. What we will have as a benefit still coming in the rest of the year is the structural hedge, which is a tailwind. We've got a reinvestment of $55 billion in the second half at 2.8%. We have to reinvest. And if there's an improvement of 2% on that in terms of the reinvestment rates as they stand. So that obviously is a tailwind.

Now the balance sheet growth has been a real positive, and it's mainly driven by deposits. Our Hong Kong time deposit migration in a lower interest rate was sort of 4 points into Q2, but obviously, this can move up or down.

Now in terms of levers to offset the HIBOR pressures, the Hong Kong time deposits were repriced. We also saw some balance sheet growth happening, because part of the weakness of the HIBOR was because of the strong Sounthbond connect inflows into Hong Kong and that immediately gave us the benefit into our deposit line. We have been also active in markets treasury. The benefit of that goes into fee and other income. So all in all, there are a number of areas which we can pull levers to be very confident on our around $42 billion guidance for Banking NII. But as always, we will be conservative, realistic and if we outperform, we outperform.

Okay. Aman, thank you very much for your question.

Our next question today comes from Kendra Yan at CICC.

I have two questions. The first is about the non-interest income. I think that HSBC delivered quite strong non-interest income in both quarter 1 and quarter 2, primarily driven by the Wealth Management, FX and the capital markets-related business. So I wonder how you see the sustainability of this momentum going forward?

And the second question is about the stablecoin. Because there are several countries and areas have introduced stablecoin related regulations. How does HSBC view the cryptocurrency, this area? Have you like, have some initiations in this area or we will maintain a cautious approach on this area? That's my two questions.

Thank you very much, Kendra. Let me start with the stablecoin question, and then I'll give you some of my kind of comments on non-NII Wealth effects, et cetera, and Pam can elaborate further on that part of the question.

Okay. So on digitized means of payment, we have launched Tokenised Deposit Service for our wholesale customers. It's live in Hong Kong, Singapore. It will be live in September in the U.K. and in the Eurozone. And then, early in 2016, it will be live in a number of other countries, including the U.S., the UAE and other. This will allow our wholesale customers and is already allowing our wholesale customers to do cross-border transactions between -- with their suppliers or the other kind of counterparties on a real-time basis and on an always on as in 24/7 basis.

So that service is live and is developing, and we continue investing in it. It's programmable, and it basically leverages the blockchain technology. So we're very pleased with this development.

Now beyond what we already offer in terms of Tokenised Deposits, we are watching very closely the regulatory developments around stablecoin, very encouraged about Hong Kong, indeed issuing regulation there. Obviously, the U.S. with the Genius bill is publishing regulation there. So what we will monitor, one is that the regulation addresses all our regulatory-related concerns such as financial crime, prudential and other risks. We will also monitor the issuers of stablecoin and their compliance with this regulation.

And then subject to those, we will evaluate all potential banking services we can do with them or customers involved with these issuers. So that we expect to move at pace.

With regard to other crypto, at this stage, we have no appetite to involve in other kind of algorithmic or other non-pegged cryptocurrencies. As an asset class, we still do not have risk appetite to be involved in that space.

Okay. Now with regard to our non-NII, there are a few comments I want to make and I'll hand over to Pam, is it's a very important area for us. It's a very important investment area for us.

Let me talk about, first, transaction banking, we have a leadership position. We're a top 2 player in global transaction banking and payments and FX and trade with the TradeBank for 7 or 8 consecutive years, the largest trade bank. It's an area of unique strength, unique expertise. It's an area of continued investment both in digital capabilities and customer servicing. And we continue to see this area as resiliently growing and as demonstrated, 5% growth in Q2, of which 4% growth within trade itself, that resilient underlying growth is due to the fact that we continue deepening customer relationships, gaining market share and acquiring new customers through all our expertise and our investment.

The second one I want to talk to is Wealth. Six consecutive quarters of double-digit growth. Our target there is to grow in the medium term at double-digit rates, but that could be volatile from a quarter-to-quarter, right, based on market conditions. But this is also an area of active investment with intent.

Our footprint, our brand, our heritage in Asia and the Middle East, in particular, give us unique strength to be able to accelerate this growth and continue gaining market share and benefiting from the underlying growth in the market. And we've demonstrated a number of initiatives that we've already rolled out, be it in wealth centers, relationship managers or technology capabilities, digital capabilities, we've been rolling out to our customers.

And last but not least, capital markets and advisory, our debt and equity trading, all of whom have benefited also from our focused investment and our capabilities to be more meaningful and relevant for our customers and deliver growth as we did also in Q2.

Pam?

Thank you, George. Thank you, Kendra. So we have been focusing on growing our fee and other income. As George has said, it's been a focus area, and we've seen strong performance. Now albeit in the last two quarters, there has been the tailwind of market conditions. And it's hard to predict when these sort of transactional tailwinds will fade away. But nevertheless, if you look at the various spots that build up to this fee and other income, FX was up 7%, a very strong position in FX. There's a baseline that will always be a growth engine.

Investment distribution was up 24%. Private banking was up 12%. And there are also other annuity revenues, which are like our net new invested assets, which are up $75 billion over the last 4 quarters, so not really helped just by tailwinds and also the insurance CSM balance is at record levels, and that will just strip into the P&L over time. So that's also like an annuity.

Now there's just one or two items, which I would call one-offs or specifically volatile beyond the sort of transactional tailwinds. One is the Argentina hyperinflation which was the $200 million impact in Q2 of '24, obviously, was not a repeat in Q2 of '25, but with Argentina gone and that, sort of, is not going to be, again, coming into the comparison. And the other was a $100 million related to markets treasury activity, and that will be volatile, a little change from quarter-to-quarter. So overall, very comfortable with the core of the growth with some moves from quarter-to-quarter.

Kendra, thank you very much for your questions.

Our next question today comes from Joseph Dickerson at Jefferies.

Just a simple follow-up on the Hong Kong CRE, which I think you've done a pretty good job of addressing. I guess what drove the timing of this charge? Because the, some of the dynamics that you point out in the interim report, you could have easily argued were there in Q4. So I guess what drove the timing of today versus Q4? And then is there any way to gauge what you think the appropriate coverage level is? Because clearly, I think you also had about 20 bps of credit risk migration in last year's CET1 from this. So, I'm just trying to walk through the moving parts to dimension any further charges?

Thank you, Joe, for the question. I'm going to make a couple of comments, but ask Pam to address your question. The first one is to reiterate the fact that we are comfortable with our position in Hong Kong CRE. We've explained the area of specific focus and we've captured the outlook for 2025 in our revised ECL target.

Pam, you may want to elaborate on that one?

Yes. Thanks. So a really good question. So firstly, part of the charge we said is the model change and the model changes happen periodically, and that comes -- that's only $100 million. The key thing that we look at every quarter, and we looked at the last year-end as well as we look at, obviously, valuations.

Now valuations is an ongoing process. You see the valuations in terms of orderly valuations. But the valuations also get impacted even on the performing book, when you see some distressed valuations. And already, we had started considering distressed valuations as part of our ECL charge for the year-end by giving some probability for those distressed valuation and this lag on a performing book because the book is still performing on the valuations as it comes as part of our credit processes, we do a read across to the book.

Now generally, the LTVs have remained strong. So just to say the LTVs, which have gone higher than 70% is still a very small portion of the book. But while we have focused on this we are, as in every quarter, looking at the rest of the book. The real challenge continues with the oversupply in the office space. Now it's not across everywhere the same. It depends upon the location of the office space. It depends upon the quality of the building. Has it been new refurbed or otherwise. So that's the piece that we also then bear in mind when we look at the valuation shift to say, is there any greater calibration or divergence from the kind of property, the use of property. And the overall liquidity in the market in terms of actual transactions has been relatively low.

Our next question today comes from Gurpreet Singh Sahi from Goldman Sachs.

I have two, please. First is on FX. Good to see strong growth all across non-banking NII. But on FX, you called out good growth. But I wonder, we've seen some unusual currency volatility in the quarter. Did that not lead us to generate like above normal FX growth and at 7%, do you call it above normal? So what were -- just thinking of, what were our clients' feedback? Were they churning portfolios more hedging, et cetera, during the quarter on FX? And then -- because I see it's Q-on-Q also it's down.

And then on loan growth is the second part. We see some pickup in the U.K. book. But then in Hong Kong, China region, with the lowered interest rates, are we seeing client demand come back in for loan growth? And how do we see the outlook there?

Gurpreet, thank you for your two questions. I'll take the first question and make a comment on loan growth and Pam can explain a little bit the outlook in the various segments of the world.

So yes, FX has benefited from increased customer activity due to higher volatility. This is something that is difficult to forecast. But what is important to note is that it remains one of our core capabilities in transaction banking, and we remain one of the top players, I would say, top 2 global players in the space.

And therefore, we do have a leadership market share in this space and capture client activity. It's difficult to forecast what kind of volatility we may see going forward in foreign exchange, but we will continue being one of the main counterparties to support our customers' hedging activities.

So on loan growth, I was actually particularly encouraged with the U.K. commercial banking corporate loan growth. It's early to call it a trend, $3.5 billion growth, but it is definitely a green shoot in the space where it has been subdued for many quarters now. So we have seen the U.K. credit book remained very resilient through the last few years, but we haven't seen it grown.

And hopefully, with more clarity about the U.K. and the tariffs related to the U.K., we can see more investments taken through. The additional comment I would like to make about the U.K. specifically, and then hand over to Pam, is that, we're very encouraged by the U.K. having also moved at pace in their trade negotiations with trade agreements now concluded with the U.S., with the EU, since Brexit, and then more recently, with India, which is a historic trade deal where we have a very vibrant business corridor going on between the U.K. and India. And we're frankly very, very excited about supporting our customers along this corridor kind of realize the benefits in their businesses. Pam?

Thank you, Gurpreet, for the question. So just to make a comment on FX, of course, there's a transactional nature to FX, but we are very engaged with our customers, and we have been capturing flows well. And at the back of that, we are accelerating our investment in this business to grow medium term, so that we can best -- be best positioned to support our customers.

From a loan growth perspective, so in Q1, we saw growth in Asia, ex Hong Kong, China. And that's been stable, but it's sort of moving along and obviously, Q2, given some of the tariff news, people were slower in terms of making their decisions. In the U.K., our growth is good, but also our focus was very much across sectors, which were growing. So whether it's in the infrastructure space and so on. So we were well focused, and that held us well. We are doing the same engagement level on our customers across the globe.

And from a growth perspective at the back of the interest rates coming down, the other factor, which is very important, and we've called it out before, is macro uncertainty. So when this macro uncertainty continues, the CapEx decisions are delayed. However, from a working capital, we see some early engagement where people are looking at how they shift and change some of their business models and so on.

What I do want to say is that overall, where we have good benefit still coming through from an NII line is deposit base, which is, as I've called out, up sort of $83 billion year-on-year. So that stays a very strong component as part of our NII business. And I would say from an FX perspective, the other thing to bear in mind is we're seeing strong flows into Hong Kong, through the depressed HIBOR, so that is another factor to balance overall in our outlook.

Very good, Gurpreet. Thank you very much for your question.

Our last question today comes from Katherine Lei at JPMorgan.

I have three questions. The first two is for Pam. I think it's just for housekeeping for our model update. The first is that, I want to ask about what's the factual deduction like the outstanding of -- like, what is the -- like outstanding part of the threshold deduction related to the BoCom? If there is further impairment on BoCom? Let me ask this one, if there's further impairment on BoCom, what would the amount be in order for that future impairment to have an impact on your CET1 ratios and share buyback and EPS and so forth? So this is number one.

Number two is related to the $0.6 billion of restructuring-related costs, like what portion of it is in the notable -- is in a material notable items, i.e., what I mean is that, what portion of the $0.6 billion has no impact -- has no impact on EPS and what portion of it may have an impact on EPS?

And then the last question is for George. I think, it's still on the Tokenised Deposit part. So may I know like for this Tokenised Deposit, is it only for HSBC clients or are also available for HSBC's clients' clients? Is that on public chains, i.e., does it mean that, can clients basically use this Tokenised Deposit to transact crypto assets? So, say for example, if they want to trade become or other crypto assets, can they use this Tokenised Deposits to facilitate that?

Thank you, Katherine. So let me then answer your third question. I'll ask Pam to address the first two. So today, this is available to HSBC's clients and any white-listed clients' clients or clients counterparties. But ultimately, they need to go through the HSBC standards for know your client, financial crime checks, among other kind of checks. So the capabilities will be extended, but will be expanded to who, in a way, where we remain very comfortable with the KYC considerations to be able to onboard them as clients or future clients.

We are looking, obviously, on stablecoin developments. We believe it is still early to understand how some of these stablecoin issuers are able to KYC the wider client base. Some of them are. But obviously, the regulations is going to dictate for those who will be effectively white-listed what these requirements are, and we will evaluate accordingly over the next few weeks and months as this is developed.

Your first question is related to BoCom. And your second question is related to the restructuring-related costs and whether they will be treated as notable or materially notable. Pam will address both, but let me say one thing about BoCom is, we have ample room for any potential future impairments, whether they happen or not before this even comes near affecting CET1 or CET1 ratio or our distribution capabilities.

Pam can talk through that.

Yes. Thank you, Katherine. So we have $14 billion of threshold deductions, Slide 33 of the deck. And on Slide 28, we give you more details on BoCom, including the market value in the footnote, which is the $13 billion. So as George says, even if there was an impairment to market value, it will have no material impact on CET1. And in terms of restructuring costs, they are a notable item, but they're not a material notable item for the dividend.

That ends today's Q&A. And now I will hand back to George for closing remarks.

Well, thank you, everyone. I really want to take this opportunity to thank you for your questions. Alistair and the Investor Relations teams are available for any follow-up questions. Meanwhile, Pam and I look forward to speaking with you again soon. Please enjoy the rest of the day. Thank you very much.

Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect your line.