I reached out to Richard O'Connor, Global Head of Investor Relations, who is actually in Hong Kong, and Greg Case, Head of Debt Investor Relations, who was with me in London. I'll start by mentioning a couple of highlights from the results, then I'll do a quick update, as usual, on financial resources, and then straight into Q&A. I will not be referring to any slides as I go through. Three highlights from the results. First of all, 9.9% ROTE for the half-year, largely driven by higher NII and good cost control, more than offsetting higher ECL charge. Importantly, we are now expecting to improve our ROTE to above 12% in 2023, which is well ahead of our cost of capital. Second, in terms of balance sheet dynamics, $33 billion of adjusted loan growth in the half-year, largely in mortgages and trade, alongside $24 billion growth in adjusted deposits. Lastly, on the results, credit quality remains quite good. ECL charges equivalent to 21 basis points of gross loans for the half-year. Stage 3 loans stable at 1.8% of total loans. We are flagging that despite the fact that our early warnings indicators are not yet showing any signs of stress, we have an expectation for ECL charge to normalize towards 30 basis points in 2022. Onto financial resources. Let's start with capital. Our CET1 ratio was 13.6%, which was down from 15.8% at the end of the year. The reduction mainly driven by timing differences in fair value OCI securities and some RWA growth. We remain 2.9 percentage points above our MDA hurdle, although we are below our target operating range of 14%-14.5%. We expect the CET1 ratio to trough in Q3, given headwinds that we have previously mentioned on the sale of our French retail business and some other M&A that is completing. We expect strong earnings and management actions will help us lift the capital back into our target range during the first half of next year. In terms of liquidity, it remains strong, most importantly at a legal entity level, but also you can see that in the overall group LCR ratio of 134%, and we still have an HQLA on a gross level of about $800 billion. We have a loan to deposit ratio at 62%, which positions us quite well actually in the current rising rate environment. Our MREL ratio 28.7% compares favorably to a 26% requirement, which as you will see is still the sum of the parts calculation. We intend to continue to operate a prudent buffer over that minimum. From a funding perspective now, we have made good progress in this year in, let's call them interesting markets. We have issued $8.4 billion of Senior holdco and $2.6 billion of Tier 2. As you would have seen in our deck, we have now increased our funding plan for the year by about $7 billion in Senior holdco and $1 billion in Tier 2, which positions us kind of halfway through the overall funding plan at this point. The reason for increase in the funding plan is to offset negative market moves that we have seen that impact the liability value of our reg bonds. Just to flag that impact over time will unwind as those bonds fall to par. As a consequence, of course, we're expecting that this will reduce funding needs in future years, all else equal. As mentioned at the full-year, we continue to expect not to refinance any AT1 calls that we may look to make in 2022. I'm pleased to just have announced literally before this call an exchange offer targeting some of our older legacy Tier 2 securities issued by our holding company. You will find an overview of the transaction that is being included any second in our updated investor deck on the website. The transaction is a par for par exchange offer, which is the most logical structure given the practical challenges that exist with consent solicitation near globe. We plan to use exchange accounting, which minimizes the cost of the exercise for us. Having said that, we're also offering a $0.35 incentive payment in order to encourage everyone's participation. Just to close on broader legacy capital, as I'm sure there will be some more questions about it, I just want to remind everyone of our position on those. We are aligned with the Bank of England in our commitment to reducing the stack over time. However, doing so cannot come at any cost. We're willing to take some, you know, some cost to exit those positions. As we have flagged in the past, we have made some historical hedging and accounting decisions that make the economics of taking, let's say, the full stack, not really currently feasible or rational. We will continue to monitor the portfolio, and if further opportunities arise, we will take them. In summary, a strong half-year result with a clear path to solidly returning above cost of capital. Our financial resources of capital funding and liquidity leave us all well placed to continue growing. Our business model continues to offer bondholders one of the most diverse sets of revenue streams in global banking. That's all I thought of saying, so I'll stop here and let's open up for Q&A. I'll hand over to Greg. Thanks, Carlo. Yeah, hi, everyone. We'll be taking questions over Zoom, so a little different to our previous setup. If you want to ask a question, you can use the Raise Your Hand function, you'll see at the bottom of the screen, and we'll open up your line, and please do make sure that when we do that you've unmuted. I think Zoom tends to leave you muted if you don't. There is also the Q&A function at the bottom if you'd like to ask one via text, but of course, it would be great to speak to you in person if possible. I'll just leave it a minute and let some of the questions come through. Our first question comes from Dan David of Autonomous. Dan, your line's open. Hey, Greg, Carlo and Richard. Thanks for doing the call and taking my questions. I've got a couple. The first one is just on issuance. I hear you on no new AT1 issuance for potential refinancing next year. However, I guess I'm looking out to next year, and I think you've got quite a heavy potential call schedule. Would you look to AT1 markets this year to potentially get ahead of your refinancing needs next year? Then, secondly, as expected, a few questions on legacy. I've yet to see the details of the exchange, but welcome that. I hear your comments on the RAF and where we're headed. I'd just like to drill down on that a bit more, and I realize you're probably limited in what you can say. I'm just interested by what the PRA have told you, if they've given you targets to reduce by an amount per year? Then also just on the reasonable economics point, hear your comments on taking a small AT1 cost. Do you need to get back to your kind of AT1 target range before you can take AT1 costs as a result of potential legacy calls or MRELs? Also if you can give us any guidance as to what is reasonable, that would be really interesting. Thanks. Hi, Dan. Thanks for your questions. On AT1, first, this year was a transition year. You might remember that we mentioned that we were overweight AT1s and underweight Tier 2, so this year was rebalancing with the actions that we're taking this year that pretty much brings us in line. Going forward, it's all about maintenance and refinancing. Yes, to your point, it is always a possibility to try to pre-finance some of the potential call for next year. That is something that we would leave open, market conditions dependent. In terms of the legacy stack, no, we haven't had specific targets from PRA or Bank of England about it. It has been just more a generic discussion. The way I would characterize it is that kind of everyone would rather not have those securities outstanding because they're a little bit of a nuisance to have those securities outstanding from a resolvability perspective. To give you some guidance in terms of cost, I guess the best I can do is to give you a sense of how I think about those securities. The way I would describe them is there are like two dimensions to the equation. The first one is how challenging each of the securities are from a resolution perspective. There is a pecking order of those securities. I would call out that our securities from the holding companies were the most complex from a resolution perspective because they're issued from the holding company. They do not have the contractual recognition of the Bank of England bail-in powers, and hence they create this potential infection risk. The way we're dealing with those is clearly with the exchange and then to voluntarily be recognized from 2025. Then you go from that point on, and the rest of the entities are, you know, still a challenge, but they're less problematic than I guess from a holding, the ones from holding. Then you have the other dimension, which is the cost. That dimension is driven by what is the accounting and hedging arrangement that we have on those bonds, whether they have significant optionality value and so on and so forth. When you put those two dimensions together, you end up with a pecking order, which is broadly as follows. The first is the holding company securities, then is the subsidiary securities that are fixed rate instruments, then you have the floating rate securities, and maybe lastly, you have the legacy Tier 1 securities. Obviously we are announcing today an exchange for the holding securities. We will continue to assess one by one all the other securities to assess, you know, their economics. That hopefully give you a little bit of a guidance of how we are thinking about it. Thank you for that. Can I just ask on the legacy Tier 1s coming bottom of the list, is that more because of cost rather than kind of the problems they pose? Predominantly, I would also say that some of those securities we are able to bail-in the guarantee on the securities. Technically it is executable. There is some complexity, but it's executable. Yes, you can assume, given that those securities have been, you know, outstanding for a while, and we haven't called them that the economics are not particularly attractive. Okay. I've probably taken too much of your time, but thank you for that. It's really helpful. Thanks. Thanks, Dan. Next question comes from Ellie Dann from Morgan Stanley. Ellie, your line's open. Hi there. Thanks for taking my question. My question's regarding the upcoming AT1 call. That's the 5.25% in September of this year, which has not yet been pre-financed. Considering you've got no plans to issue AT1 this year, I was wondering what your thoughts are on this call. I know that you're well above your efficient level of AT1 in terms of MDA in excess of about $4.8 billion. My assumption would be that the supervisor would allow you to call this bond if you wish, without re-refinancing. Interested to hear your thoughts. Yes. Hi, Ellie. Thanks for the question. We have no impediment in calling that from a regulatory perspective, to your point. We are as usual in the middle of the call period, so we'll take advantage of that period. We haven't announced anything to date, but you shouldn't read anything into that. We will continue to assess, and we will make an announcement when that is appropriate. Okay, thanks. Great. Thanks, Ellie. We've got a few questions in from Richard Thomas at Bank of America. Let me just read one out. Richard asks about the Ping An situation, and people are asking him a little bit about the potential for HSBC to be broken up. I was wondering if you could just maybe run through a summary of HSBC's current views. Richard O'Connor, why don't you take that? You are well versed after this week. Yes. Thanks, Carlo, and good afternoon, everyone. Look, not much to add to what you saw on the call yesterday morning. We continue to engage with all our shareholders on all proposals for enhancing shareholder value. We made a number of announcements yesterday which are intended to do that, including some very firm dividend return announcement. We think that the strategy is definitely working. We're not gonna talk about individual shareholder discussions on any call. I think we said very clearly yesterday on the slides some of the issues which we leaked in the press. At this stage, we don't see that there's value to those proposals versus the very clear what you might call plan and strategy to improve returns, improve dividends. Obviously, improve capitalization over the coming quarters and in the years. We continue to engage with all shareholders. We had a further meeting today in Hong Kong with our retail shareholders, and the same issues were discussed there as they were yesterday in the call yesterday. I don't think there's any further, Richard, to discuss over and above what was Thanks, Richard. Another one from Richard Thomas before we move back to the phones. Probably one for you, Carlo, on legacy. Richard says that a few of his clients have pointed out to him that we've changed our stance on legacies between year-end and now. Is that your sense of things? How do you think our messaging has evolved over the course of this year? No, I wouldn't say that we have changed our stance. It's pretty much the same that it was at that point, which is it is a combination, as we have said in the past, of what is the complexity from a resolvability perspective and a cost. I would just say that we're just providing further clarity on that and, you know, pleased that we're making steps with the. Thanks, Carlo. Next question comes from Robert Smalley. Rob, your line is open. Please go ahead. Hi. Thanks for taking my question, and thanks for doing the call. On the call yesterday, it was mentioned that you did a study of potential impact of a downgrade, and you thought it would be 25-50 basis points across the liability stack. Could you talk about what went into that and how you came to that conclusion? That's first question. Second, as you went over your review, MREL, Tier 2, et cetera, did anything else come out in terms of efficiency, now that you've scrubbed down everything, should we look for any changes? Should we look for any changes in your MPE strategy, funding strategy at the subsidiaries, et cetera? Then third, with an increase in dividends, it is very clear that your equity holders are enjoy a dividend, and really a lot of them depend on a dividend from the stock, particularly retirees. Could you talk about any potential tension between increasing the dividend and the needs and desires of debt holders to ensure that their debt will continue to be covered, particularly as the liability stack becomes more expensive? Thanks. Thanks for those questions, Rob. Maybe I'll ask Greg to cover the first question on the cost of that stack. Yeah, sure. Hi, Rob. The analysis is effectively based around the fact that, if you take a hypothetical split of the group and you split the Asia business away from the rest of the group, then that kind of let's call it rest of world co. Rest of world co versus its peers at its current rating arguably isn't sustainable. You're arguably a notch or two lower than current ratings today when you look at the peer group. When we look across not just the debt liabilities, but also the broader funding base of that group that does currently benefit from that ratings premium, that's the kind of funding differential that we thought could filter through. On your second question on efficiency, I mean, we have looked as deep as possible. The questions that were posed and the potential options. We haven't found opportunities for efficiencies. It's you know, naturally, when you hold a group together versus separating, there are some natural, you know, dyssynergies and inefficiencies around it, and that's really what dominates the analysis that we described yesterday and that Richard just highlighted. In terms of your third question on the trade-off of the reliance on dividends and the overall capital management, I think it was last year when we changed our capital policy. Historically, we used to have a fixed dividend component, and what we have made now is a payout which is linked with the profitability of the group. We think that is a sensible way of balancing all of these requirements. To the extent that the company is highly generative, then our dividends will increase. To the extent that it isn't, they will decrease. It creates like a natural stabilizer that we think is, you know, that's probably the best way of balancing all that. Carlo, let me just add to that, look, clearly in the second half of the year, we very fully intend to get back into the normal 14%-4.5% range. As Carlo said, the previous dividend policy was a fixed policy, which didn't really cover earnings and growth appropriately. We think this policy does that, and it does allow for. If we can achieve our return targets of 12%+, the group will be substantially cash flow generative, and there'll be a good policy to give dividends back to fund growth, but also to ensure that our debt holders have a very solid level of capitalization and liquidity, a very solid funding liquidity, which is the v ery conservative HQLA stance, and we fully commit to that today. Thanks for the complete answer, and thanks for doing the call. No problem. Thanks for your questions, Rob. The next question comes from the line of Robert Thomas. Rob, your line is open. Hi. Thanks for the call. A question. I just had a question on how you're thinking about calls on not just Tier 2s but also part of your senior stack. I mean, I think looking at the markets right now, there's a lot of extension risk priced into even some of the senior MREL bonds. I just wanted to see if you could walk us through how you assess determining economic value in those calls. If you were looking at possibly letting those go out to maturity, how do you assess what the value of that extension would be? Is it simply a part of your liquidity then, or would you need to then replace it with MREL? Hi, Robert. Thanks for the question. For senior debt, the call period that we have is really short. Those calls are designed to, you know, to optimize the treatment of those securities from an MREL perspective and to basically being able to reduce, if you want, the balance sheet when it's no longer effective. The intention for all those is, you know, it's to call them, right? For all the MREL transactions. That's the intention. Obviously, it is not something we would guarantee, but it is not designed to be valuable for us to call them. That's what I would say in terms of the seniors. Thank you. Thanks so much. Great. Thanks, Rob. We've got a question coming in from Phil. Sorry, I lost it. From Philip Middleton at Deka. Phil, your line's open. Yeah. Hello, everyone. Yes, we can hear you. Hi there. Great. Thanks for taking the call, making the call, and thanks for taking my questions. I got two. The first of all is on your China real estate exposure. I wondered a little bit, I mean, you took some provisions this quarter, but do you think this will be sufficient for the long run? The other point is in terms of issuing new senior bonds, which currencies would you prefer at the moment? Do you just look which currency would be cheapest or are other factors playing a role as well? Thank you. Hi, Phil. Thanks for the questions. Richard, you wanna cover China real estate, please? Yes. Thanks. Again, we covered it yesterday, but I'll just add a few additional comments. As you know, that sector came under stress from the second half of last year. We've taken cumulatively around $900 million of provisions. On average, $300 million of provision in the first half of the year, about $150 million each quarter as some medium-sized developers go to Stage 3. It's fair to say that sector is obviously going through some issues at the moment. However, the Chinese authorities are trying to stabilize the issue in terms of the developments and looking at a bailout fund or a fund of that nature. Our sense is that we've taken the appropriate provisions at this stage. When you look at the second half, we do think that within our ECL guidance, which we gave yesterday of towards 30 basis points for the full-year 2022, there will be further charges from China CRE as that impairment issue matures. Probably of the same nature we saw in the first half, $300 million or even slightly more. Indeed, if a large developer gets into further issues, then clearly there's. There may be $200 million on top of that. We do think it's an issue which will be ongoing. We think it's very much controllable from a group perspective, given it's a relatively small part of the group's loans and advances. The offshore book is about $12 billion or really only about 1% of the group's loans and advances. I think the authorities in China are trying to stabilize the position. Clearly, there will be, I think, further developments in the second half of the year. That's really our guidance at this stage. Central case is for some further provisions of about the same magnitude in the first half or maybe slightly more. We're watchful. We're managing the situation very carefully. I think the Chinese authorities will resolve it, but I think it'll take some time. I think this will take some time to resolve over the coming year or two. I'll give you some near-term guidance and let's see how we get on from there. Phil, for your second question. I mean, ideally we would try to match the issuances to our natural currencies, because that avoids some of the volatility in the capital stack that you have seen this quarter, for example. We have about 51% or so of our RWAs in dollars or pegged currencies. Then the next one down is sterling, which is about 17%, and then the remaining third in a combination of all the other currencies. That would be kind of the dream treasurer's approach. Unfortunately, the market is not quite there. The market is predominantly a dollar market. Invariably, what we try to do is we try to take pressure off the dollar market and try to diversify as much as possible. We look largely at that in a currency agnostic fashion. We always are keen to try to diversify. This year what we have done is we have done Swissy and Sing dollars in addition to euros and dollars. The last year we did CNH, Hongkies and also Swissy. We try to diversify away from dollars, but invariably, given the large funding pool in the U.S., we end up doing more in the U.S. than proportionately we would want to. Thanks, Phil. Next question comes from the line of James Hyde at PGIM. James, your line's open. Hi. I hope you can hear me. First question is, I just wanna have some more color on the risk-weighted asset reduction measures for H2. I understand France closing of disposal is one, but what other? Is it about continuing this more collateral taking? Is it more about offloading clients that don't meet ROE targets? I mean, I rather thought this was ongoing, and I just wonder how are you gonna accelerate this? Which was the impression I got from the call. Secondly, I see from at least the Bloomberg share register, there are a few more Chinese institutions in there. I just wonder if you know, beyond Ping An, have any Chinese institutions openly given support to current strategy? Thanks. Thanks. Thanks, James. To your point, the RWA approach is one that is dynamic, i.e. we look at it all the time. Given the temporary depression, let's call it, that we have seen on the CET1 ratio, we have decided to accelerate some of those. The focus is really on less profitable, less franchise clients alongside potentially some hedging opportunities that we have on some of the RWAs. That is the bulk of the actions that we are looking at at the moment. In terms of the Chinese institutions, Richard, you wanna cover that? Yes, I would. Hi, James. Look, there's a limit to what I can say 'cause obviously shareholder register, most is public. Obviously, I'm not gonna talk about any individual shareholder positions. You wouldn't expect me to. All in all, what I would observe is clearly there's a Shanghai-Hong Kong Stock Connect, and you have the daily data on that. You can see that the vast majority of that position, when you look at the Ping An filings, is the Ping An position. It's not just Ping An. When you do the math, there's a couple other institutions there who've taken advantage of that Stock Connect to obviously invest in Hong Kong and our Hong Kong stock, which we obviously very much welcome. More generally, when you go to the shareholder register on the Bloomberg register, then you will see a very large number of institutions in China and Asia on that register, and we very much welcome that. You know, clearly we are dual-listed in both Hong Kong and the U.K., and we're a key member of the Hang Seng Index, and therefore we welcome any Asian institutions, including Mainland China institutions and Hong institutions, on our share register. Indeed, part of the success of Hong Kong over the last few years has been the massive growth in the asset management industry in Hong Kong. There are well over 70-80 mainly China parent company asset managers now based in Hong Kong, investing in the city, investing in HSBC. James, I wouldn't take it any more or less than that. Very much it's something which we very much welcome. We very much welcome the internationalization of the China asset management industry investing internationally, and being part of our share register. Take it in that spirit, please. Okay. Thanks, Richard. Just another one for Carlo. I sort of am a bit surprised about the extent to which the market value of your liabilities affects MREL because from an accounting perspective, I mean, it's a lot of it is amortized cost. I just wondered, is it currency more than anything else that's caused the stepped-up issuance rather than actual fair value or spread-related fair value? Yes, James. I mean, first of all, the impact. The impact over the quarter was about $7 billion. About $4 billion of that was interest rate, and about $3 billion of that was FX effect. It was a combination of both. It is a curiosity of MREL valuation in which regardless of the accounting treatment, you de facto from an MREL perspective, you fair value it as a whole, and regardless of the way you are hedging it as well, because the hedges that you may take from an interest rate perspective are not bail-in-able from a MREL perspective. What you do is you determine how much capital you would be able to generate when you bail-in those securities, and that is the fair value at the moment. That's why it is exaggerated, and that's why perhaps it's more, it's larger than you would have thought. Oh, thanks, Carlo. Thanks, James. That's really instructive. I didn't realize that. Thanks. That's it for me. Thanks. Okay, great. Thanks, James. Just a quick opportunity for anyone, any last people to raise their hand for questions. I'll just give it another few seconds. Greg, just to say we got a chat Q&A on does the 30 basis point cause a risk on taking into account Chinese real estate bail-in or is this pre that or positive? What I would say is that our guidance for 2022 is towards 30 basis points, and yes, it does take into account our central view on issues in the China commercial real estate market. Just cover that one which came in the Q&A. Thanks, Richard. We've got another question from Olivia Duncan from Citi. Olivia, your line is open. Olivia? Second now. Olivia? Okay. Technical difficulties there, I think. I guess with that, I think we're out of questions. I'll hand back to Carlo. Yes. Yes, Richard. And Greg, I was just asked to clarify my answer to the accounting treatment. Greg, why don't you have a go because I think I said more and perhaps I confused things a little bit more, so. Yeah. Look, James, on the bond, while if you do put a bond in an amortized cost relationship, if you put a hedge on it, then it's in a fair value hedge relationship. What you do then is you'll fair value the bond from an accounting perspective for rate moves. As you can imagine, when rates go up, the bond liability value goes down. That's reflected in MREL. From an accounting perspective, the swap liability of course goes up by the same amount. You don't get a capital benefit. The swap, of course, isn't bail-in-able, so it doesn't benefit your MREL. That is effectively the mechanics. Okay. Thank you. I mean, thanks everyone for joining today. I hope the call was useful for all of you. If you have any further questions, please pick it up with Greg and the AR team. You will see updated materials on the web with the information about the exchange. Thanks very much. Until next time. Thanks, everyone.