Welcome, and thank you for standing by. All participants will be able to listen only until the question and answer portion of today's conference. At that time, to ask a question, please press star one. Today's conference is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the conference over to Georges Elhedery. Thank you. You may begin. Thank you, operator. Hello everyone, thank you for joining us. I'm Georges Elhedery, I'm Group CFO, and I'm joined on this call by Faisal Yousaf, our new Group Treasurer, Richard O'Connor, our Global Head of Investor Relations, and Greg Case, Head of Debt Investor Relations. I'll speak about a couple of items relevant to this audience, and then Faisal will give you an update on the balance sheet, after which, we will go straight into Q&A. I'll keep the opening remarks relatively brief, as I'm sure you've had a chance to digest the results since we published them in early August. I won't be referencing any slides as we go through this, but there is a fixed income investor deck on the IR website. We announced a good set of second quarter results. The annualized return on tangible equity for the first half stood at 22.4%, or 18.5% if we exclude the provisional gain on SVB UK, and the reversal of the impairment of the sale of the French retail business. Revenue was up 38%, and we've seen growth in all three lines of business. Despite the inflationary environment, cost growth in the quarter was restricted to 1% compared to last year's second quarter, and based on our cost target basis, we remain on track to meet our 2023 cost target. The ECL charge was point nine billion dollars, 35 basis points of gross loans. This includes circa $0.3 billion for our mainland China commercial real estate exposure that is booked in Hong Kong. Finally, our CET1 ratio remains strong at 14.7%, which allows us also to announce a dividend of $0.10 per share, interim dividend of $0.10 per share, and a second share buyback of up to $2 billion, to be executed in around three months. With that, I'll hand over to Faz. Faz, over to you. Thank you, Georges. Hi, everyone. I'm Faz Yousaf, Group Treasurer. I'm excited to be here today and looking forward to engaging you all over the coming weeks and months. Firstly, before I move on to the Q2 update, I wanted to give you a bit about my background. So I've been at HSBC for over 22 years, in that time spanning many roles across finance and risk. Most recently, as Global Head of Trade and Treasury Risk. I'm excited by the new challenge, and I'm looking forward to further shaping and delivering the ambitious treasury agenda that we have here at HSBC. Coming back to the second quarter, our financial resources remain in solid shape. As Georges mentioned, our CET1 ratio was 14.7%, flat on the quarter, with 3.8 percentage points above our MDA level. Attributable profits added 0.8 percentage points to the ratio, but were fully offset by the dividend accrual for the second quarter and the first quarter buyback. Our CET1 ratio remains above our planned operating range, which to remind you, is 14%-14.5%, albeit the current buyback is expected to lower the ratio by about 25 basis points. Additionally, we expect the rerecognition of impairment of our French retail business will further reduce the ratio by approximately 25 basis points. We expect to recognize this loss in the second half. With respect to liquidity, remember that we primarily manage liquidity at individual legal entity level, so our liquidity story is more complicated than the group LCR. We show the LCRs of our major entities on slide 14 of our fixed income investor deck, and I would urge you to note the strong ratios, all of which are above the group ratio of 132%, demonstrating our conservatism that's baked into our group LCR calculation. In high level terms, we have $796 billion of high quality liquid assets on the balance sheet, of which over $300 billion is in cash. Our funding position remains enviable, with a loan-to-deposit ratio of 60%, giving us a very significant deposit surplus. Our MREL ratio was 31.2% of our RWAs, which is 4.8 percentage points above our 26.4% requirement, and we expect to continue to maintain a prudent buffer over that requirement. Our issuance, starting with Wholesale Senior, well, we've issued just under $16 billion so far this year after the $3 billion issuance in August. We have a plan of $17 billion-$20 billion for the year and currently expect to be at the lower end of that range. As such, we have limited further needs and expect negative net issuance in the second half. Of course, I would not rule out pre-financing for next year in Q4, but this would be a decision taken closer to the time. In terms of Tier 2, we've issued $3 billion so far in 2023, and that's against the plan of $4 billion-$5 billion, and again, we currently expect to come in at the lower end of that range. Finally, we came into the year with relatively modest AT1 needs, only around $2 billion, and covered the need in February. We've announced the call of our AT1 callables this year, totaling $4 billion, and so we'll see another year of net negative issuance in this asset class. Overall, in summary, our profitability, capital, funding and liquidity position leave us well placed, and our business model offers bondholders one of the most diversified banks in the world. On that note, let's open the call up for Q&A. Operator? Thank you. If you would like to ask a question, please press star one. You will be prompted to record your first and your last name. Please unmute your phone when recording your name, and to withdraw your question, press star two. Once again, to ask a question, please press star one. Our first question comes from Lee Street. Your line is open. Hello all. Thank you for doing the call, and thanks for taking my questions. I have three for you. Okay. Hi, Lee. Welcome. Please go ahead. His line dropped. I apologize. One moment. No problem. Okay, maybe we can get Lee back. Operator, can we take the next call? Yes. Our next question comes from Robert Smalley. Your line is open. Hi, thank you very much for doing the call. I just wanted to ask about capital generation, and I know in your fixed income presentation, you put that first and foremost. I think it's, thank you for that. I think it's an underappreciated credit metric. Could you talk about what you think the realistic running rate for capital generation would be over the next several quarters? Number one. Number two, do you think that we're kind of at peak levels there, or do you see any kind of expansion in the capital generation rate? And then three, if you could talk a bit about the experience in the U.K. You saw a bit of margin expansion doing a little bit better than peers. Just what's going on in the general environment, margin-wise, and then if you could address credit quality, I'd appreciate it. Thank you. Okay. So, thank you very much, Rob. Let me start with the capital question. So we are in a position, as you will have seen, where we are very capital generative. We guided to an NII for the full year of greater than $35 billion. That's updated for on this half. We are not guiding to 2024 at this stage, but all of the metrics from our perspective look very positive for the forthcoming years. And we are working to ensure that we have stable NII for the future. So there are various things that we're doing in that regard, and perhaps I'll call out just a few of those. So first of all, we have, as you will know, been working on a program of structural interest rate hedging that is progressing well. And you will have seen that our sensitivity over the half has come down from where it was at the end of 2022 at around $4 billion for our 100 basis points move down in rates. That has come down to $2.6 billion. There are various factors that drive that, but about a third of that number is down to our structural interest rate hedging program, and we'll continue that program over the course of H2. We're also working on diversifying our revenue base, so we're moving to a number of initiatives to generate greater fee income. You will have seen that in the equity call and the full call at half year. So overall, I would say from a capital generation perspective, a very positive outlook. Perhaps I will pass to Georges to talk about the U.K. and the U.K. market, if that's okay. Sure. Thanks, Faz. Thank you, Robert. I would, I would also highlight in the capital generation, kind of as an addendum to Faz's point, the intended sale of our Canadian business, and you may have seen very recently, a Competition Bureau in Canada giving the go-ahead. Obviously, additional regulatory approval and ministry approval are required, but that sale should provide us with increased capital, which we've initially. W ell, we've already indicated we would use $4 billion of which, so of about an amount of $9 billion-$10 billion, we would use $4 billion of which, as a priority use for a special dividend of $0.21 per share, and then the rest will just become excess capital available for share buybacks or other capital actions. On the specifically on the U.K. margin expansion, the first thing I want to highlight, Robert, it's very important that we are passing through to customers, you know, the majority of the rate increases that we have seen of late. In particular, we've passed through to our retail savings accounts, instant access retail savings accounts, more than 70% of the most recent increases we've seen in the U.K.. So therefore, it's very important to position this. The overall pass-through on some of the instant savings accounts now is close to 50% on a cumulative basis. So the reason why our NIM has performed compared to other peers, and I'm only going to give you some elements, obviously I cannot comment on other peers. The first element is we have a materially smaller fixed rate consumer lending book, which, in the market had suffered, you know, some reduction due to, you know, customers repaying some of these, consumer loans. We did not have this dynamic manifest in our books. The second one is that we remain, you know, we continue to have a very strong franchise in deposits and have therefore, you know, kind of helped us not have to pay up for some of the flighty deposits. And, you know, as a reference, our term deposits remain a small single digit percentage of our overall, portfolio. And the, third thing, to call out is also the fact that, a large mortgage book with a growing market share in mortgages. Now, our new business market share is just shy of 10% against the back book market share of, you know, in the mid-7%, is giving us additional impetus, if you want, on the NIM, given where mortgages have been struck. So these are some of the metrics that have allowed our NIM to perform as you've seen in Q2. A word of caution, though, we do believe that at these levels, we're probably going to see more stable NIM than any additional expected increases in this space. Thank you, Robert. Thanks for all the detail. It's greatly appreciated. Thank you. Robert, just promise, did you have two other questions there? Credit quality U.K., which I'll, I'll tell you. Look, you saw in Q2 U.K. credit quality went back normal, when you look at the basis point charge. And so it's actually been better than some other companies would say. Two areas we are watchful with the market segment, early warning indicators on areas like, like mortgages or cars, but generally U.K. credit quality is bearing up pretty well in a tough economic environment. But I'd say the charge very much for Q2 was, was at a pretty normalized level. Two other quick points to cover, Robert. Look, you're clearly aware, the building blocks, the guidance to mid-teens ROE. We were, we were, we were above that in the, the first half. That excludes the count of the gain, and also our guidance for short term, you know, pretty cautious on, on loan growth versus our, our medium term, mid-single digit growth for obvious reasons. Pretty muted loan demand in Hong Kong and U.K. at the moment. We're not there longer term, but certainly, near term, that will be the case. You've got the contenders on the, on the website, and that's up to date, so you've got all the building blocks there. The one thing I would say is clearly the associate income doesn't flow through automatically to capital. Obviously, the dividends from the associates, which are public, and you can get them off Bloomberg in five seconds, do flow into capital. So you just need to make that adjustment along with other adjustments as you do your capital model. Okay? Great. Great. Thank you. Next question, please, Julie. Thank you. Our next question comes from Lee Street. Your line is open. Hello. I'll try again. Three from me, please. Any area... I mean, there's been a lot of changes in the group structure and things you've sold in the last few years. Just any areas at a broad level where you think the group structure can be improved as you look out from here? Secondly, you know, welcome to the new treasurer, but the incoming new treasurer, any areas where you see scope for optimization within the HSBC liability structure? And then a more detailed one to finish, just why run such a large MREL headroom in the region of 480 basis points? Is that sort of a mix of how it works across each individual, you know, resolution entities, or just why that's so large? That'd be my three questions. Thank you. Okay. Thank you very much, Lee. I think I'll probably start with the treasurer question and then go into group structure and then the MREL. I officially moved into role on the first of July. I'd start by saying, look, I'm very familiar with HSBC having been here some 22 years, as I said earlier. The strategy that I will adopt as group treasurer will be consistent with that of my predecessors. There's no radical change that we'd expect to see, certainly in the short term. Our strategy is entirely aligned to the overall group strategy. From my perspective, probably I've got four high-level priorities that I would call out. The first is really protecting and safeguarding what is a very strong capital liquidity deposit base and an overall balance sheet. And that's working with our global businesses and global functions in order to do that. The second is really around optimize and enhance. So, what I want to do is apply a commercial lens to optimize where we use our financial resources across the organization, to benefit shareholders, investors, and the like. The third area, which is ever present, I think, is regulation, and we've got a substantial program of regulatory change that we need to deliver on. And that's a priority, and I suspect we'll touch on it a little bit through the course of the call, but we've obviously got our commitments in terms of resolvability and recovery, and the legacy stack is one area that I'll be very focused on as I move through the role. We've got LIBOR cessation as well, which is another area of regulatory change, and overall, and the overall Basel III framework as well. The fourth and final bit that I would call out is technology and analytics. So, that's gonna be an area of focus for me. I will be looking at optimization, digitization, and making the best use of technology and advanced analytics within our treasury capabilities at HSBC. So to go on to your specific question about the liability structure and whether, you know, there's scope for optimization of the liability structure. You know, it's something we'd always look at, and I have looked at over a period of time. There's nothing that I would call out, obviously, at this point in time, but, you know, we'll continue to look at that as we go ahead. Equally, in terms of the group structure, as you allude to in your question, we've made a lot of changes over the past two years with the disposal of the French retail business and of our business within Canada. Add to that, the restructuring in Oman and the completing of the disposal of the Greek business as well, and the announcement that we will be winding down our operations in Russia. So there's a lot of things that we've been doing in a very short space of time. We'll continue to look for opportunities, but we'll obviously announce those as and when we go along. Finally, in terms of our MREL and the MREL structure, there are various drivers for that. At the moment, the overall buffer that we run is around 4, 3.8 of 4.8 is CET1. Sorry, what? So, so Lou, yeah, so I think it's fair, fair to highlight, we have 4.8 percentage point buffer right now, but important to note that 3.8 of that is CET1. So that's, that's effectively the buffer that we're running in CET1. And, and right now as well, you'll note we're, we're operating at 14.7, so we are operating kind of about 50 basis points above the midpoint of our range. So naturally, that buffer will likely come down modestly over time and will be primarily still CET1, and we'll run a, you know, small buffer in, in other MREL instruments. All right. That is very clear. Thank you very much. Okay. Brilliant. Thanks, Lee. Julie, can I have the next question, please? Thank you. Our next question comes from Daniel David. Your line is open. Hi, good afternoon. Hi, Dan. Thanks for doing the call. I have three as well. The first one was just kind of following on from what you were saying about optimal levels of capital. So I guess you've been shrinking that Tier 1 stack with calls larger than you've refinanced. And I guess I'm just interested, is this level now, Tier 1, kind of where you see yourself longer term, or could we maybe expect you to increase it back to kind of more historical levels when double leverage was kind of a bigger factor? Secondly, I guess on the legacy, it would be remiss of me not to bring it up. You've done an awful lot, and that's been acknowledged. I guess the one part of the stack that I think you kind of haven't touched yet is the make-whole bonds, so the 10.176 and the 5.844. I guess my assumption is these bonds have to go eventually. Is that something you're waiting for? Is that something we should be watching out for, I guess? Is it rates peaking? Is there anything else that we should be looking at? I'm just interested to hear your thoughts with regard to that. Finally, just on LIBOR, I guess you've got a number of AT1s with fallbacks which are defined. I'm just interested to hear how you're thinking about those, specifically the New York law AT1s, which have got problems with the reference to mid swaps in short, so would be appreciated. Thanks. Okay. Thank you. Thank you very much. So perhaps, perhaps start with the, Tier 1 or AT1 stack. Our funding plan for this year in, senior holdco, which is 17-20, as I said, and in Tier AT1 was two billion, and in Tier 2 was around $4 billion-$5 billion. Now, we're very close to meeting those levels, and I said- as I said right at the beginning, we'll be pitching for the lower end of those ranges. On a go-forward basis, I think that's broadly where we will be looking to issue. That's, I'd expect a fairly stable funding plan over the period. Now, if we focus in and Zoom in onto the, onto the AT1, we've been net negative in terms of issuance this year and indeed for the last couple of years. So, this year we've issued two, but called and redeemed around four. On a go-forward basis, I think we will be, by and large, with all things being equal, RWAs and the like, net flat in terms of our issuance for AT1. So that's probably the best guidance I can give you at this stage. Onto legacy and the make whole piece. I mean, overall, it has been a considerable focus for us, and we've reduced the legacy stack by around $6 billion over the past couple of years, albeit we have still approximately $8 billion to go. We would like just for the make-wholes, the legacy Tier 1 make-wholes, just like the rest of the legacy stack, we'd want to redeem them if we can, but at a reasonable cost. The economics are extremely important for us, and we have a duty to our shareholders, and any actions that we take would obviously need to be fully justified. As we've said on prior fixed income calls, the economics here aren't really ideal. And as such, we continue to look at the options. I think you can probably conclude, given that we've had that these have been available to call for a little period of time, that the economics on the make-whole calls that we have are not economic at this point in time. So we'll continue to look at it, but there's, there's nothing more really, I can add at, at this point in time. Finally, on, on LIBOR, look, it's another area of focus, for us. We've made some progress there, as you will have seen from the announcement in June. We want to work together with our investors to reach a solution that's mutually agreeable and in line with, with the regulatory, requirements. However, you know, in some cases, this is not, not entirely possible. In the case of the New York, instrument, a consent solicitation isn't an option for us, because under New York law, we would require 100% of bondholders to agree to any change. So then, that makes the, those, swap reset instruments a little harder to deal with. We'll look at options. We'll continue to focus on it, but, but that's, that's where, where we are at the moment. As you well know, in, in 2021, we undertook consent solicitation on some of our sterling and Singapore English law securities. It was very pleasing because we were, we were able to, remediate the sterling ones. We got, we got that passed. The Singapore ones weren't able to pass, but we've, we've since redeemed those. So there are multiple actions we can take with this, and we'll look at all of them for all of the LIBOR-based instruments. Thanks. Really clear. Can I just go just one point on the make-wholes. I guess you referred to the economics and others talk about economics and the range. Are you just referring to the day one impact of buying these back, I guess, or is it kind of an NPV of the future cash flows less the cost on day one? Is there something else to it? Yeah, so we typically consider the transaction as a whole. So if we were looking to either exercise the make whole or repurchase the bond, and in any case, we'd always look at the NPV, taking into account all the cash flows, and comping that against what we think our long-term cost of capital is. As Bob mentioned, though, what I would say is, of course, we're not absolutely clinical on that point. We are willing to take a loss, but I think that's part of the broader conversation. It just has to be proportionate, and that's what we'll assess over time. Understood. Thanks a lot. Thanks, Dan. Thanks. Thanks, Dan. Thank you. As a reminder, if you would like to ask a question, please press star one. Our next question comes from Paul Fenner. Your line is open. Hi, team. Thanks a lot for the call. I just got one of my questions have been answered. I just wanted an update. It's been a while since the end of the first half. What's going on in terms of China and Hong Kong real estate? You know, what trends you're seeing there. Are things getting, you know, significantly worse? Just you know, any color that you can provide there. Second, you've provided an ECL charge outlook for the full year of about 40 basis points. Have you? Is there a guide that you can give us for where, what you think that's gonna look like in 2024? I don't know if you've provided that. And then lastly, you mentioned the sale of France. I just wanted to, a quick update on that, where we are, what the timing now looks like, and what the risk to that is. Thank you. Okay, so I'll pass over to Georges for this. Yeah, sure. Thanks, Paul. So on the China commercial real estate, look, as we indicated at the interim results, the piece that remain of a concern, of a more material concern to us is the offshore piece, the piece that's booked in Hong Kong, and the portion of which is unsecured. So that is the one that remain a cause for concern. We had, at the year end, if you recall, I mentioned the plausible downside scenario of $1 billion addition with ECL. By the end of H1, we had taken in aggregate about $300 million against that portfolio, you know, towards that plausible downside. I think when you look at the events that took place in August, I would point really to two indicators. The first one is we continue to see policy measures being constructive and supportive of that sector. We've seen these policy measures practically every week, a series of measures that are meant to structurally and more sustainably kind of support the sector going forward, which is a positive outcome. But we equally continue to see deterioration of the financials of some of the borrowers, and that deterioration is unfortunately continuing to happen faster than the benefits of some of these policy measures may, you know, come in. So as a net effect, if you want, of these two, we're looking at it more cautiously now than we were early August. I would say the plausible downside indicated at this stage, we believe remains valid. We believe in terms of quantum, we believe though, that the probability of the plausible downside has increased following the events of August, and we continue watching this space, and we do expect indeed to give you additional guidance at the Q3 results in a couple of months. On your NCL, so we indeed maintain 40 basis points for this year. We did factor in some of the, you know, possible, you know, some of the possible adverse events that could take place in Hong Kong and the U.K.. We indeed are seeing those events in Hong Kong materialize related to this China offshore real estate portfolio, commercial real estate portfolio. Whereas we do see things more resilient, as Richard mentioned earlier, more resilient in the U.K. and the indicators holding up quite well. You know, this is kind of why we're very comfortable. We remain comfortable with the 40 basis points. We haven't given any guidance for 2024. I can only point you to our mid- to through-the-cycle guidance on ECLs of 30-40 basis points, that range. As a through-the-cycle, we will be giving any further 2024 guidance when we give more granular guidance to 2024. At this stage, we are only committing to a mid-teen return on tangible equity for 2024 as the only guidance that's very specific to 2024 on our regards. On the sale of France, so look, as Faisal mentioned, we continue to expect that we will have to reinstate the 25 basis point impairment or $2.2 billion impairment of that sale, sometime in H2. We had initially communicated an ambition to execute it on the first of January. Obviously, that, you know, the risks around that timing, you know, are there, but you know, it's the kind of the main risks to call out is the process of regulatory approval. The transaction is more complex than the one we signed originally. It has more parameters to it, and therefore requires, you know, more evaluation of the times. But, as you would expect, the moment we see this to become a highly likely transaction, we will reinstate the impairment, and probably give more guidance at that stage as to more exact timelines. Thank you. Sorry, so just to be clear, that you expect to potentially, if things stand as they are, you expect to take that charge in Q3. Is that right? The expectations we can share is H2. It is probably premature to call Q3 versus Q4, but H2 remains a reasonable expectation. Okay. Well, with new completion now, what in H2 2024, is it... Does it take that long or quicker? No, well, well, look, I mean, the initial, you know, initially ambition date to completion remains at this stage, first of January 2024. But, you know, obviously, that date is at the risk of a delay due to the delays with regards to regulatory approval. And we haven't given a new date, if you want, at this stage. We're, you know, we're, we're probably gathering our thoughts now and you know, assessing where we stand in September after the August holiday, and particularly also some of our regulators were on, you know, their reviews. And we will be giving you more guidance on that at our Q3 results. Okay, thank you. But you should—you can now more easily expect the delay. I wouldn't be able to comment as to whether it's an H2 2024 or whether it remains an H1 2024 transaction. It's too early at this stage to make this description. Thanks, Georges. Thank you both for Thank you. Thank you. Our last question comes from Ivan Zubov. Your line is open. Yes. Hi, good afternoon. Thank you. I just had a quick follow-up question on the legacies. Basically, you know, thank you very much for mentioning the economics being the key criteria. But there is a very different economics on the $10.176 dollar legacy, Tier 1, where the makeup price is $130, and the sterling, the price is about 844, where it's GBP 106. So, you know, should we look at these, this decision as a package, or could you potentially make a different decision on those different bonds? Thank you very much. Yeah, wouldn't ever rule anything out at this stage, either. And I think the economics is, it's important to come back to that point that I mentioned to Dan earlier, that the economics isn't just about the upfront hit, it's about funding it as well. So, you know, we'll take into account the upfront costs, and then, of course, as you get either the bleed or the benefit through the P&L over the periods of the effectively the par call date around 2030. So we bake it all in when we consider the economics. Perfect. Thank you so much. Thanks, Ivan. Thanks, Ivan. Okay. So thank you, thank you very much, everyone. I hope this call was useful for you. If you, if you do have any further questions, please take help with Greg and the IR team. Thank you. Thanks, everyone. Thank you. Bye-bye. Thank you for your participation. 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