HSBC 2015 Annual Report Download - page 13

Adapting HSBC
The plans that we announced at our Investor Update
are designed to grow income, reduce costs and
thereby increase our return on equity. There is a
lot to do to achieve our targets but we have made
a good start.
Reducing our risk-weighted assets (‘RWAs’) is vital
to achieving a better return for shareholders. In
2015, management action reduced RWAs by
$124bn, which takes us nearly half-way towards
our target to be achieved by the end of 2017. Much
of this reduction came from Global Banking and
Markets, although a large proportion also came from
Commercial Banking, accelerated asset sales in our
US Consumer and Mortgage Lending portfolio and
the sale of our investment in Industrial Bank. We
expect to deliver further RWA reductions in 2016,
in addition to a decrease of around $33bn from
the sale of our business in Brazil.
We have received a number of offers for our
business in Turkey since June, none of which
were deemed to be in the best interests of
shareholders. We have therefore decided to retain
and restructure our Turkish operations, maintaining
our wholesale banking business and refocusing
our retail banking network. This will provide better
value for shareholders and continue to allow our
clients to capitalise on HSBC’s international footprint.
Our cost-reduction measures are already having
an impact on our cost base and HSBC is now a
leaner business than at the half-year. All of our
initiatives to reduce costs are under way and
we expect further progress in 2016.
We continued to redevelop our businesses in the
US and Mexico over the course of 2015. These are
important businesses in the context of the wider
Group and we are committed to turning them
around. An increase in cross-border business
across the NAFTA area and improved collaboration
between global businesses helped to generate
increased revenue. They remain works in progress.
‘ The plans that we announced at our Investor
Update are designed to grow income, reduce
costs and increase our return on equity. There
is a lot to do to achieve our targets but we have
made a good start’
We are investing in areas of the business that
extract the greatest gain from our international
network and market-leading strength in Asia.
Investment in flagship transaction banking products
helped to increase our market share, particularly
in Payments and Cash Management, Foreign
Exchange and Securities Services.
The development of our Asia businesses is
gaining momentum and we achieved growth
in excess of GDP in seven out of eight of our
priority Asia markets.
We continue to expand our business in the Pearl
River Delta and reached a number of milestones
in 2015, including the signing of an agreement
to form the first majority foreign-owned securities
company in mainland China. When approved,
this will allow us to engage in the full spectrum
of securities business in the country.
We remain the world’s number one bank for offshore
renminbi services and increased revenue by 3%
year-on-year in this vitally important growth market.
Summary and outlook
HSBC is better balanced, better connected
and better placed to capitalise on higher return
businesses than it was 12 months ago. Our
universal banking model is generating higher
income from collaboration between businesses
and our operating expenses and capital ratio
are trending in the right direction. Maintaining
these trends while boosting revenue will be
the principal challenge in the year ahead.
The current economic environment is uncertain,
but our diversified banking model, low earnings
volatility and strong capital generation give us
strength and resilience that will stand us in
good stead.
We remain focused on delivering our nine remaining
strategic actions by the end of 2017.
Stuart Gulliver
Group Chief Executive
22 February 2016
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HSBC HOLDINGS PLC
11
Group Chief Executive’s Review