HSBC : AGM statements (15-page PDF 204KB)

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28 April 2017

At the Annual General Meeting of HSBC Holdings plc, held at the Queen Elizabeth II Conference Centre, London today, the following speeches were given by Group Chairman, Douglas Flint; Group Chief Executive, Stuart Gulliver; and Chairman of the Group Remuneration Committee, Sam Laidlaw.

Let me start with the matter with which we opened last year's meeting.

When we met here last year, the share price was around 472p which we acknowledged was not satisfactory - today it is around 641p an increase of about 36%. Total shareholder return rises to 47.5% when we take into account dividends received since we last met. Some of this growth is of course due to the decline in the value of sterling and our UK-based shareholders benefit from the high proportion of our earnings that are generated in US dollar and US dollar linked currencies - but the improvement is certainly not all due to currency effects - in Hong Kong dollars total shareholder return since last year's meeting is 31%, lower but still a strong improvement from this time last year.

Clearly we do not intend to rest on our laurels - there is further value to unlock and if we are successful in doing so, this should be reflected in the share price, to the benefit of all shareholders - including the executive directors and senior executives who are largely paid in deferred shares.

Stuart Gulliver will in his report comment on the actions taken during the last year to improve performance and which have unlocked the value now recognised in the share price. More important, he will highlight the actions being taken to build on HSBC's distinctive competitive strengths and capabilities to create long-term sustainable value for shareholders. It is the sustainability of earnings that supports our capacity to return capital to shareholders by way of dividend and we are very conscious of the importance of dividends to our shareholders. In 2016 HSBC was the third largest dividend payer amongst global banks and the second largest dividend payer in the FTSE100. In the last six years since Stuart and I held our respective roles total dividends paid to shareholders have amounted to approximately US$55bn.

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Registered Office and Group Head Office:

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Incorporated in England with limited liability. Registered number 617987

Our objective is clearly to build on this strong history and as Stuart said in his statement accompanying the Annual Report and Accounts for 2016, our current intention is to sustain the annual dividend at the current level for the foreseeable future, based on our assessment of the long-term earnings capacity of the Group and reflecting current uncertainties.

It is right to be both cautious about the future at the same time as strengthening our capacity, capabilities and resilience to be able to respond to both opportunities and challenges. We are doing both. 2016 will be long remembered for its significant and largely unexpected economic and political events. These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world. The uncertainties created by such changes temporarily influenced investment activity and contributed to volatile financial market conditions. Against this background, HSBC's performance in 2016 was broadly satisfactory and Stuart will take you through this in his remarks.

The first few months of 2017 have underscored the scale of geopolitical uncertainties the world economy is currently facing, in addition to the recurring uncertainties and challenges experienced through normal economic cycles. These challenges are also arising at a time of significant changes in our industry including technological transformation, continuing regulatory change, ongoing public policy debate around the shape and structure of our industry's business models and challenge from new entrants including from sectors not traditionally involved in financial services.

Additionally we are investing to address heightened risks from cyber crime, expanded expectations around our industry's role in combatting financial crime and terrorist financing and growing conflicts between ease of access, financial stability and privacy. And here, in the UK, one of our two home markets, over the next two years, we face the additional challenges of ring-fencing our personal and commercial operations into a new stand-alone bank and addressing the changes faced by our customers and ourselves as the UK negotiates new trading and market access arrangements with the EU upon the UK's departure from that union.

It would be wrong however to focus only on the risks and uncertainties; in many ways these challenges play to the strength of your Group as it will take considerable resources, financial, operational and management to deal with all of the above successfully. We are well prepared. In recent years the Group has improved its productivity, embraced technological change and invested heavily in recruitment and training, including to reinforce standards of business conduct and financial crime responsibilities. We have reinforced our strong capital position and are highly liquid.

And the underlying drivers of future growth remain intact and play to HSBC's strengths - urbanisation in emerging markets, growth in infrastructure financing, including China's Belt and Road initiative, financing the lower carbon future involving the 'green bond' market in which HSBC is a leading participant, further internationalisation of the renminbi as China's share of global trade and investment flows expands and addressing the retirement needs of ageing populations. HSBC is well positioned to benefit from all these macro trends having invested in the networks and capabilities necessary to be highly competitive.

And at the micro level strategic actions taken by management are now bearing fruit. Let me highlight three by way of illustration.

Greater focus on the trade and investment corridors where HSBC has strong market positioning have generated solid market share gains and broader product penetration, particularly in servicing outbound China investment flows. This is recognised in the many leading industry awards attained by HSBC last year. I hope that the animated film you saw at the beginning of the AGM also brought this to life for you.

Significant investment in technology and process redesign is now not only delivering greater cost efficiency but enabling us to serve customers better. This year, customers will see the progressive launch of applications that will materially improve their digital experience, enhance their online security and bring greater personalisation of product offerings.

As the Group has reshaped its business models to meet current regulatory and public policy mandates, dedicated management action has been successful in replacing substantially all of the revenues given up through continuing run-off of legacy portfolios, reducing our trading books and applying risk mitigation in areas exposed to higher threat of financial crime. HSBC is undoubtedly safer today from the threat of financial crime because of the investments we have been making in our Global Standards programme. The Board remains fully committed to building on this progress and is encouraging management to explore how to harness the enhanced capabilities now evident through use of shared utilities and artificial intelligence.

On regulatory matters it is worth drawing shareholders' attention to two matters.

First, as one of the most significant international universal banks, a consistent global regulatory framework matters a great deal. Some 10 years post the global financial crisis with so much progress achieved, a failure to finalise the regulatory framework and so risk fragmentation of the global accord would be a severe setback both to financial stability and to the efficient allocation of capital in the global economy. That is why we have added our voice to industry bodies urging an early global agreement

on unresolved issues, followed by an extended period of regulatory stability to allow familiarity and experience to be gained from what has been put in place.

Second, it is worth pointing out the tangible benefits that accrue to shareholders from better regulation and working with our lead regulators to demonstrate the resilience delivered by an enhanced capital position combined with a comprehensive resolution strategy. These factors contributed to our ability to return capital to shareholders by way of share buyback last year and again in the first part of 2017.

I should say a few words on Brexit. Since we finalised the Annual Report and Accounts, the UK has now triggered its formal exit notice with its position clearly set out in a letter from the Prime Minister. And last week's announcement of an early General Election in the UK adds to the number of important elections taking place

in 2017.

The scale of the challenge of negotiating across the entire economic landscape, as well as addressing the legislative and other public policy adjustments that will be required, has become clearer. It is however very early in the process with no substantive negotiations having taken place. There is however a widely held recognition, shared by the UK Government, that an implementation phase is needed between the current position and the one that is ultimately negotiated; we strongly endorse this view.

Since the referendum result we have focused on helping clients understand the implications for their businesses of leaving the EU and addressing the personal concerns of many of our staff based in the UK who are domiciled in an EU member state. We have also been responding to UK Government outreach seeking guidance on which elements of the current EU-based legal and regulatory arrangements it should focus on to preserve the essential role that financial markets based in the UK play in supporting European trade and investment activity. For our own part, we have broadly all the licences and infrastructure needed to continue to support our clients once the UK leaves the EU. This largely derives from our position in France where we are the sixth largest bank with a full range of capabilities. Current contingency planning suggests we may need to relocate some 1,000 roles from London to Paris progressively over the next two years, depending on how negotiations develop. This is as we have reported consistently since the question arose. Our clear preference is to retain as much activity in the UK as we can, but clearly this is dependent on the outcome of the negotiations.

Since we reported to you with our full year results for last year, economic projections have continued to improve. The two interest rate rises from the US Federal Reserve are positive given our liquid balance sheet. The US and China continue to drive global growth and so it was encouraging that the recent Mar-a-Lago summit between