Hello everyone. Welcome to the HSBC Fixed Income call for our full year 2022 results. Thank you for joining us. I'm Carlo Pellerani, Group Treasurer, and I'm joined by Richard O'Connor, Global Head of Investor Relations, and Greg Case, Head of Debt Investor Relations. As usual, I'll mention a couple of things in the results, then a quick update on financial resources, and finally, we'll go into Q&A. I will not be referencing any slide as we go through. In terms of results, I just would like to mention 3 points. 9.9% ROTE for the year. 1.6% up on the back of higher NII and good cost controls, which more than offset a higher ECL charge. We expect ROTE to improve to above 12% this year. Second, in terms of balance sheet dynamics, the reported loans and deposit numbers need to be read carefully because they include adjustments for the Canadian and French sales and effects. If you exclude those, loans actually decreased by $25 billion only in the quarter, and deposits were flat. Finally, credit quality remains quite solid. Full- year ECL charge equivalent to 35 basis points of gross loans. Stage 3 loans remain low at 2.1% of total loans. At this stage, we still see limited signs of deterioration in the loan book, and we are flagging an ECL charge of around 40 basis points for the year. Now on to financial resources, starting with capital. Our CET1 ratio, as you saw, was 14.2%, which is 80 basis points up in the Q4, thanks to profits and lower adjusted RWAs. We are now inside our CET1 target of 14%-14.5% and 3.3 percentage points above our MREL requirements. Second, on liquidity, it remains quite strong, most importantly at the legal entity level, but also reporting a 132% group LCR with total gross HQLA of over $100 billion. Our loan- to- deposit ratio is quite low at 59%. Hence, we have a meaningful deposit surface, which positions us quite well in this higher rate environment. Our MREL ratio is at 30.1%, which compares very favorably to our 26.4% requirement. We intend to continue to operate with a prudent buffer over that minimum. From a funding perspective, we expect to issue a similar amount of gross debt to the one we issued last year, targeting $70 billion-$20 billion of HoldCo senior, $4 billion-$5 billion in Tier 2s, and about $2 billion in AT1s. On legacy capital, good progress in 2022. We reduced the stack by over $4 billion. We will continue to monitor the market for cost-effective options to manage this stack down over time. In summary, a good year. The group now becoming very capital generative. Our capital funding and liquidity positions leave us well placed to continue growing, and we believe our business model offers bondholders one of the most diverse sets of revenue streams in global banking. On that note, let's open the call for Q&A. I'll hand over to Greg. Thanks, Carlo. Hi, everyone. As we did last time, we'll be taking questions over Zoom. If you want to ask a question, please, can you raise your hand to signal that you want to ask a question, and you'll need to ensure your line is not muted when we come to you. I'll just give everyone a minute to signal for questions, and you can also ask a question via the chat function. First question comes from Lee Street from Citi. Lee, your line should be open. Lee, we can't hear you, sorry. Shall we move on to Dan David from Autonomous? Afternoon all. Hopefully you can hear me. Yeah, we can hear you. Thanks, Dan. Success. Great. Congratulations on the results, and thanks for taking my questions. I have three. Just wanted to touch upon the AT1 call, the $6.25. Was this decision taken on an economic basis? You mentioned before the call that the market wasn't pricing in the risk of extension. I guess if I look at your spreads today and also your issuance plan versus your total calls this year, it suggests that it could have been called outright, similar to what you've done in previous years. On the legacy, could you just remind us of your priorities, whether anything's changed there? Just focusing on the make-whole call. You've talked about economics there in the past as well. I'm just wondering if you can provide a guide as to what sort of P&L or CET1 impact you'd be willing to book. I guess I'm looking at the exercises that you've done so far and kind of thinking of 1 to 2 points that you've kind of paid. Is that reasonable, or should we expect that you'd maybe take a larger hit as a result of the need to get rid of these securities? Finally, just a quick one on LIBOR. Do you intend to use the synthetic extension on your dollar Discos post June 23? Thanks. Hi there. Thanks very much for the three questions. On the AT1 call to start, yes, the decisions that we make are on economic terms. Now, the way that those economics are calculated are, you know, a little bit more complex than just calculating the PBE of the transaction. Broadly speaking, what we do is we take into account three components. One is the PBE of a call versus automatically issuing the full amount. Second, what is the full amount that we need outstanding, and whether we're gonna have a period of time or an amount outstanding to replace that call, which is smaller, and as a consequence, there is a cost of carry that we are avoiding. Third was what is the impact on the future spreads and the Asian markets. When you put all those things into account, it's a little bit of an art rather than a full science. We put all those things together and we come up with the results. You saw on the back of that we decided to call the transaction. That's probably all I can say on that one. In terms of legacy, you might remember from previous calls that I described that I think of these in two dimensions. There is a dimension which is how complex the securities are from a resolution perspective, and on the second dimension is what is the call of taking those securities out. When you put all those two dimensions together, we end up with a pecking order that has, broadly speaking, four buckets. The first bucket is the holding company near low securities. Those are in the first bucket because they are out of our resolution entity, the holding company, and there is a lack of contraction rights of recognition of the Bank of England bail-in-able rights. Those are the first priorities. Second, we have the HB, the non-ring-fenced bank fixed rates Tier 2s. We have the DISCOs, and then we have everything else. As you saw, we progressed along the first two buckets last year and those buckets continue to be, you know, the most important, and we'll progress down from that priority list. Third on synthetic LIBOR, all I will say is at this stage, the consultation on synthetic LIBOR hasn't concluded, we'll have to wait for that before we can do anything about it. Thanks, Dan. We've got some questions in from Lee. I'll just read them out. I think he's having some trouble joining. Firstly, he asks a high- level question with all the changes in the business model in recent years, which banks do we regard as our main peers? Additionally, what's the plan for the $4.3 billion of legacy that loses capital value in 2025? Linked to that, should we assume that the $4 billion-$5 billion of Tier 2 will be a normal run rate over the next few years? Thank you. Thanks very much, Lee. On the first question, HSBC stands pretty much on its own in the type of business model that we have, so we don't quite see ourselves having a very comparable peer around the globe. What we do is we look at each of those markets, and we compare ourselves versus more local peers with, of course, the caveat that the value of our franchise is actually international connectivity. It's difficult pretty much to give you a few set of peers that you can compare us against. In terms of the legacy, securities losing value in 2025, what we're doing is we are pre-funding that, those amounts over the next few years to avoid a big cliff risk in 2025, and that's incorporated into the $4 billion-$5 billion that we are flagging for this year for Tier 2. Then on your third question, looking forward, and I would say this more broadly across all the components of the stack. We are now more or less at a level where the distribution of the different components of the stack are pretty much where we think they should be. From this point, we are about refinancing and financing growth. If you take the current amount of standing and you divide them in a, I don't know, five to seven year average maturity, you end up with an annual amount of issuance, which is not that dissimilar to what we are doing this year, and that includes also the Tier 2. Somewhere between, let's say, $3 billion to $5 billion on a stable basis every year. Richard, do you wanna co-comment anything else, especially on the first question? Yeah. On the peers, Lee, it's a very good question. Clearly, we can do benchmarking, for example, our UK ring-fence bank versus our big peer banks, and we do so. Same in what we call GBN, same in interest rates in China, and obviously in our own market of Hong Kong versus other large Hong Kong banks. The short answer is that, you know, at the group level, there's no one, as Carlo said, there's no one sort of direct or totally direct peers. In trade, we've obviously got three or four banks who are also global but much smaller than us. We're double the size of number two. For example, in transaction banking, it's basically us and Citi, then you go down to peers who are a lot smaller than us. You won't have seen it yet, but just so you're aware, the peer group for remuneration purposes has changed this year, there are more Asian peers within it. We have made a few changes to peer group to basically make it more Asian centric as the, as I said, the gravity in... for the bank moves more to more to Asia. That's under one accounts, if you want to have a look at that. Yeah, sure. One last piece of Lee's question. He also asks, as it relates to the securities with LIBOR-based coupons, should we be expecting LIBOR consent solicitations to be announced by June 30th? Lee, as we have said before, we have no intention of leaving investors with LIBOR risk without before offering them a modern alternative. That is of course depending security by security when that impacts you. In the case of the Disco specifically, there is a more closer timeframe for us to look at that. You should expect something imminent from us in terms of offering remediation for those. The form of that offering is still under discussion. We haven't concluded what is, but you should expect something imminent in that regard. Thanks for your question, Lee. The next question has come from Rob Smalley from UBS. Rob, your line should now be open. Hi. Thanks for taking my questions and doing the call. First on net interest margin developments, we've seen, and you're projecting, continued strong growth in the margin, even with a 50% passthrough of an increase in rates. Could you talk about the development particularly Hong Kong versus the U.K.? I think that some of your peers in the U.K. are seeing peak net interest margin now, and where are you seeing growth in yours? That's the first question. Second, U.K. related again. You have a lot of liquidity at the bank. Any other plans to deploy it in any other way? I know that the easy answer is if we could, we would have already. Anything that changed there. Finally on the ECL charge, $600 million for mainland China, $800 million for the rest of the book. Could you talk about the methodology there, whether there's idiosyncratic risk in there, how much of that is model- driven, and how you came to that number? Thanks. Thanks. Thanks, Rob. Thanks for the questions. Let's start with NII. As you saw, we had NII for Q4 of $9.6 billion. If you annualize that number, it gives you about $38 billion of NII. We had a lot of questions earlier today as to what should be our guidance of NII for the full year. What we have said is we haven't changed our guidance. What we are saying is that we are flagging more than $36 billion of NII for 2023. The way we think about it is there are a few tailwinds and there are a few headwinds. On the tailwind side, we have still components of the rates that haven't repriced... The rates that we have seen so far that haven't repriced yet in our books. That's a tailwind. There are some potential additional rate moves that are still in the tailwind. You know, FX calculations gives us about half a billion upside versus when we flagged that, more than $36 billion. Conversely, there are a few headwinds. The headwinds are potential increases in pass-throughs. Our pass-throughs so far have been inside the 50% long-term averages. We're expecting from this point on the pass-throughs to start to become closer to the 50%, which implies more than 50% from this point on. An additional tailwind, an additional headwind is also on the migrations of clients from savings accounts to time deposit. That is particularly relevant in the Hong Kong market, which is extremely competitive, much less so in the UK market. When you put all those things together, we end up with a guidance, and we provide at least $36 billion and more than $36 billion for the year. In terms of the UK, the UK market is starting to see some sign of competition in the UK market, but is still far from what we see in Hong Kong. At the moment, we're quite confident with the guidance that we have given. In terms of liquidity, indeed, we are a bank that ends up having a lot of liquidity. What we have done over the last few years is we have become very deliberate about our liquidity management, which clearly is helping us in this upcycle. Having surplus liquidity in these increasing rate environment is a competitive advantage. Broadly speaking, we created a framework to look at surplus liquidity in each of the entities that looks at what that liquidity should be, and then we look at what the surplus in each of the entities is, and then we lay out a framework that looks at how we deploy that liquidity, how do we invest that liquidity or how do we reduce it if deploying and investing are not appropriate. Deploying is about business opportunities. Investments are at the margin, if you have the liquidity, what you can do without increasing the risk profile for the bank. Reduction is about offering different products to our clients and potentially finding intercompany solutions. We put all those things together. We are quite active. I would say, given the current rate environment, the reduce dimension has become less of a priority than it was when we started this a couple of years ago. Richard, you wanna cover China? Yeah. The book. The ECL charge, as you expect, is on a bottom-up basis. You're right to some extent, the $600 million on China still are. Is based on a sort of bottom up view of our particular borrowers and their particular situation and circumstances. Clearly we then look at it at a, an overall provision coverage level. Is that sensible? What's the downside scenario? What are the, what appears within and so on and so forth. As we said this morning, we're comfortable with that charge as at 31st of December. We also said that the situation in that sector has improved since the year end. It's still very early days. I think there's still a lot to work through, but I think you've seen positive policy developments in the last couple of months. Whereas in Q4, you did see some deterioration. It's still, we're still very watchful on that sector, but, more positive. The rest of the book, not much to say really. 30 basis points broadly spread. U.K., a pretty normal charge. Mexico, a pretty normal charge. Those are our big books. Again, broadly split between return and wholesale. No big tool frees in there or no big sort of overlays or what are called FEC adjustments for economic guidance adjustments. A pretty standard quarter for the book outside the China CRE $600 million charge, which we called out separately. Can we assume that the go forward, ECL, from a model- driven basis, without anything idiosyncratic should be around 30 basis points, you know, over the next several quarters? We guided to 40 and as you know our sort of guidance range if you like, is 30-40. We're at the top end of that range. That reflects a, you know, a difficult set of economic circumstances at the moment, with high inflation, you know, and so on and so forth. Some companies going through cashflow difficulties, same in the retail sector. That's the reason why we've struck it at the top end of the range. Obviously China CRE, as we mentioned already, has, you know, we've been making provisions there over the last 18 months or so. You know, 30-40 is our guidance range and for now we're sitting at the top end of that range given our caution early in the year and given the economic circumstances which much of the world has found itself in the last few months. Thank you. Thanks, Rob. We've got some more questions submitted over chat. From Rob Thomas at T. Rowe Price. Rob asks, outside of China CRE, are there any areas of particular concern that you're monitoring closely? Also can you update on the progress of the sale of the Canadian business? How is this transaction to occur, and what's the timing? On the first look as you'd expect, you know, our two big books are booked in Hong Kong and the UK. Clearly in Hong Kong, it's the Hong Kong books, China CRE, which has been the issue. The book outside of that has been very, very, very solid and remains so during 2022. So clearly whilst we're obviously watchful on the market, it's a big market for us. It has had economic difficulties in the last year. Touch wood, it seems to be coming out of those difficulties with reopening pretty strongly, albeit it's still early days there. Certainly all the, all the signs are positive, you know, in terms of Hong Kong recovering during 2023 and beyond. And our other big book is UK. Again, it's really we watch them on small businesses and small and mid-sized companies, the most sector, some of whom have cashflow difficulties. As you're aware, a fair chunk of the small business market is government- guaranteed. Even there we're obviously watchful. Those are the areas where we're really watchful. Elsewhere in the world, I suppose it's idiosyncratic risk, a particular company in a particular sector. You can get one or two of those each quarter. I would say those are the major points which we're watching at the moment. In terms of Canada, nothing to add to. We only just announced it a month or 2 ago. We're working through the regulatory processes, as you would expect. That's on track with nothing more to say. I would expect us to give you a more fulsome update on where we're in that process, probably at the half- year. You know, we do continue to think that it will that it'll take much of 2023 to work through all the various regulatory and other processes we've got to work through. Thanks for the questions, Rob. Another question submitted via text is, it's come from Paul Fenner-Leitão from Société Générale. I think Paul, we've covered your first question. On the other two, specifically on Stage 2, a big jump in total balances but no change in provisions. Why is that? What can we expect for the remainder of the year? Paul notices the jump is in retail, you would have thought that corporates would have been the most volatile in the Stage 2 balances. I mean, it's a methodological change on UK mortgages. Nothing to flag, it's just a methodology change. UK mortgages do perform well for us. It's a very solid asset class. Really, and it's explained in the board accounts in more detail. It's more of a technical change than anything else. I wouldn't flag anything there particularly. you know, more or less concerned, but the entities perform very well for us. Nothing much to say again in Stage 2 in wholesale. Obviously, you've seen some of the China CRE book go from Stage 2 to Stage 3 during particularly Q4, but also some in Q3 as well. Nothing else to call out there in terms of anything more than normal quarterly volatility in the wholesale Stage 2 area. All right. Thanks for those questions, Paul. Just a reminder, if you do want to ask a question over the phone, please do raise your hand. We have some more questions submitted over text from Ellie Down at Morgan Stanley. Ellie, I think we've answered a couple of the questions that you submitted, but there's a couple here that we should cover. Ellie says, I noticed that your AT1 insurance plan is $2 billion and is less than total redemptions for all the AT1 calls you have this year. Given you've been operating above the efficient AT1 level and regulators happy for you to reduce your AT1 bucket in calling all of those and not replacing. Hi, Ellie. Thanks for the question. Yes. The answer is yes. The reason an AT1 bucket specifically in terms of regulatory requirements, right? There is a Tier 1 bucket. We look at the Tier 1 in totality. Where the amount of Tier 1 that we're issuing this year in comparison to the calls is indeed part of the plan to normalize the total amount of the AT1 stack to the levels that I flagged we think we are comfortable with. Yes, we are comfortable with that and also the discussion with the regulators is consistent with that. I think, looks like last one, from Ellie as well. Does the sale of the Canadian operations free up some cash for the redemption of legacy securities trading above par? That's a creative connection between one area and another, which we don't, we don't quite connect at all. The way we think about the Canadian proceeds is priority one is to pay an extraordinary dividend that we are foreseeing to be $0.21. After that, it's gonna be a combination of additional buybacks and investment for growth. We haven't quite decided what the proportion of the last two are. That's the way we're thinking about it. Perfect. Okay. Well, that wraps up the call. Thank you very much everyone for dialing in and for your questions. Please do let us know via the usual channels if you have any further follow-up questions. Thank you.