HSBC CEO: Consideration of Buybacks Brought Forward

You know reasons to be cheerful in the first flush pre-tax profits doing very well special dividend and maybe you'll speed the buybacks But I just wonder what level of caution you have because I look at the net interest income guidance. It's a 36 billion. That's lighter than the fourth quarter on an annualized basis. How cautious are you. So Manus thank you for having me. It's good to be here. And yes I'm pleased with performance in 2022.

We delivered an increase in adjusted pre-tax profits of 17 percent taking us to 24 billion. We delivered a roti of 9.9 percent after significant items and the loss on sale of France. But before that significant item it was in 11.6 percent return on tangible equity which puts us in a good position to deliver the 12 percent plus return on tangible equity in 2023. But Manus if you just allow me a few more comments I'd also like to reflect on the change that's taken place over the past three years. If you go back three years ago as you will know we were very dependent on profit generation coming from two principal markets Hong Kong and the UK with a strong international banking franchise overlaying that with transaction banking and international wholesale banking.

Well I'm really pleased of three years later is a radical change in the profit generation by geography. The Middle East alone last year generated 1.8 billion of adjusted pre-tax profits. Our troubled market in Europe three years ago produced an adjusted pre-tax profit of two billion dollars. Our US business again troubled three years ago produced an adjusted pre-tax profit of one billion. And even within Asia we got good diversification outside of Hong Kong and China. We generated more than four billion dollars of adjusted pre-tax profit in 2022.

So that gives me a solid base of geographic profit generation supported and overlaid with a strong international banking franchise and a market leading transaction banking franchise. So that gives me confidence in our 2023 forecast. Now to come to your point on that interest margin. Our guidance on N. I. I. is 36 billion plus in excess of 36 billion.

We believe that we still have upside our N. I. I. in 2022 was 32 and a half billion. We guide into in excess of 36 billion in 20 23. So good growth. There are some uncertainties on the horizon but we're still positive.

We know where consensus is at the moment. And we think consensus is in a reasonable position. So we're not looking to change guidance on N. I. I. or and I think we're pretty confident we have good prospect of delivering our return next year. So that I mean that's a fairly solid footing and a guidance as you say in excess of the 36.

Look you're in the sweet spot for payout. You've told us a special dividend this morning. What I want to get a sense is will all the proceeds from the sale of Canada go to a buyback. What does it take to assure the move to a buyback in Maynard. No. Well listen we first of all have to close that transaction. We're aiming to close that by the end of this year.

What we've signaled today is our first and priority use of some of those buyback proceeds will be a 21 cent special dividend. We think it's important to make that the first use. Thereafter as we close the transaction will make a decision of how much additional distribution we do via buyback and how much we retain for internal use. We're not making that determination at this point in time. We'll make that determination on closure. But I think I'd go beyond just the special dividend and the use of Canada proceeds. What I think we've signaled in these results is good profit generation.

A 50 percent payout ratio gives us good return to shareholders via dividends. It gives us also then the ability to use the remaining 50 percent for growth and for buybacks. And I think that's the difference today. A radical difference to three years ago where we were over distributing one could argue towards dividends. We were sometimes in a payout ratio of 70 80 90 percent. Where is it reasonable for the market. I was a CEO Ralph Hammers a few weeks ago.

He's paying out five billion. I was with Andy Halford and standard charters last week. He's paying out a billion. He's got a whole set of other issues to deal with. Not like you. What is reasonable in the scale of buyback that the market can assume. No.

If and when you take it and present it later this year. We're not guiding at the moment on the quantum of buybacks. We'll deliver that results on the quantum quantum of buybacks later. What we have announced today is that the process for considering a buyback buyback. We're accelerating from the second half of the year to be a process that completes at or around Q one results. So we're pulling that forward by around about six months. I think that's an element.

An indication of our confidence in the profit generation capability of the bank. When I look at the lines on credit losses in China six hundred million dollars. But you say the headwinds will subside and use words like normalize. Is this peak credit losses in China. No. When does that normalization arrive. Can I push aside a complete implosion in China now off your radar.

Well I think we're comfortable with where we struck the provisions on the 31st of December. And since the 31st of December one could argue the environments in China generally for its economy and commercial real estate has improved. We saw some of the policy announcements that were made in early January. The supply side is benefited by the provision of more liquidity by the Chinese banks and the Chinese government. The relaxation of some of the regulatory constraints that were on the sector. Plus some of that extra liquidity has been made available for the offshore debt as well. And that's an important move that took place in early January and clearly we welcome that.

So the sentiment has improved in Q one in January relative to where we were in Q four. I think there's still a lot of work to do on commercial real estate in China. But we're comfortable with our provisions at the end of December.

Asia, Banking, Buybacks, CEO, CEO Interviews, China, Commercial Real Estate, Credit Markets, Europe, HSBC Holdings Plc, Manus Cranny, Noel Quinn, Real Estate, dividend, earnings