Transcript now

Cheltenham Business Pride Conference
26 November 2008
Going Forward into 2009
Dave Thomas
HSBC Bank plc
Senior Commercial Manager
Gloucestershire
1
HSBC Group Introduction
The World’s The HSBC Group is one of the largest banking
organisations in the world.
Local Bank
With our network of over 10,000 offices in 82 countries in
Europe, Asia, the Americas, the Middle East and Africa, we
are ‘the world’s local bank’.
Our regional businesses give you locally-tailored products
and services wherever you are in the world
 Our network provides a comprehensive range of financial
services: including commercial banking; corporate,
investment banking and markets; & private banking.
2
Commercial Banking
 HSBC’s
Internationality
is a key
strength. We
are embedded
in more
countries than
any other bank
and therefore
positioned to
serve trade
flows
 HSBC Commercial Banking specialises in services for small and
medium-sized enterprises around the world
 We have 3 million customers worldwide that include
incorporated businesses, trading entities, partnerships, sole
traders, clubs and associations
 Commercial Banking has over 6,400 relationship managers and
operates in more than 65 countries
 ‘Global Links’, our cross border referral and tracking system
connects our relationship managers in a virtual network
facilitating our clients’ global requirements
3
HSBC Group History Timeline
HSBC was founded in
1865 in Hong Kong
2006
Grupo Banistmo S.A.
2005
Further 9.91% Ping An Insurance
Metris Companies Inc
Company
Bank of Bermuda Limited
19.9% Interest in Bank of Communications Limited
2004
2003
Since the mid-1950s,
HSBC began to
acquire, create
subsidiaries and
expand rapidly
Household International, Inc
GFBital
IRB Finance Berhad
2002
2001
2000
CCF
China Securities Investment Trust Corp
PCIB Savings Bank
Republic New York Corp
One of the largest
acquisitions in history
Acquisitions
was made in 1992
when
Holdings
NewHSBC
businesses
plc
acquired the UK’s
established
Midland Bank plc
Other
HSBC Bank Brasil SA - Banco Multiplo
HSBC Bank Australia Ltd
Egyptian British Bank SAE
1992
HSBC Bank Canada
Marine Midland Bank
HSBC Holdings listed on Paris Bourse
HSBC Holdings begins trading on NYSE
Roberts SA de Inversiones
James Capel & Co.
Carroll McEntee & McGinley
Equator Holdings Ltd
Antony Gibbs
HSBC Investment Bank Asia Ltd
Trinkhaus & Burkhardt KgaA
British Arab Commercial Bank Ltd
1982/3
Samuel Montagu & Co. (now HSBC Republic Bank (UK) Ltd
1981
British Bank of the Middle East and The Mercantile Bank
1980
Demirbank TAS
Midland Bank plc.
1997
1986
Egyptian British Bank
Mid-Med Bank
HSBC Investment Bank
1999
10% Interest in Ping An Insurance Company of China Limited
4
Europe
Russia
Ireland
UK
Germany Poland
Slovakia
France
Kazakhstan
Czech
Republic
Spain
Spans 16 countries
Turkey
Greece
Armenia
Malta
Cyprus
Israel
Investing in some of the fastest
growing economies in Europe:
 Turkey
 Poland
Commercial Banking Presence
 Spain
5
Asia Pacific
Commercial Banking Presence
Lebanon
Jordan
Korea
China
Japan
Kuwait Bahrain
UAE
Pakistan
Qatar
Taiwan
Egypt
India
Saudi Arabia
Oman
Macau
Bangladesh
Thailand
Singapore
Sri Lanka
Mauritius
Spans 30 countries and
territories across Asia-Pacific
and the Middle East
Vietnam
Hong
Kong
Guam
Philippines
Brunei
Malaysia
Australia
Indonesia
New Zealand
6
Americas

USA
Spans 9 countries in the Americas
including the five largest regional
economies:
Canada
 USA
 Canada
USA
Mexico
Commercial Banking Presence
 Brazil
 Mexico
 Argentina
Panama
Brazil
Uruguay
Argentina
7
HSBC Group Financials: Ratings
High agency ratings
HSBC Holdings plc
HSBC Bank plc

long-term rating AA
long-term rating AA

long-term rating A+
long-term rating AA-

long-term rating Aa2
long-term rating Aa2
8
Looking over the precipice
9
America: the Great Depression
20
27
24
15
10
18
5
15
0
12
9
% of workforce
annual % change
21
-5
6
GDP (LHS)
-10
3
UNEMPLOYMENT RATE (RHS)
-15
0
1929
1932
1935
1938
1941
1944
10
Japan: the quicksands of deflation
7
8
6
GDP (LHS)
5
OFFICIAL INTEREST RATE (RHS)
7
annual % change
6
4
3
5
2
4
1
%
3
0
2
-1
1
-2
-3
0
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
11
Sweden: a short sharp shock
5
6
4
4
3
0
2
-2
1
-4
% of GDP
annual % change
2
-6
0
-8
GDP (LHS)
-1
GOVERNMENT
BALANCE (RHS)
-2
1986
1988
1990
1992
1994
1996
1998
-10
-12
2000
12
Private Frazer: We’re all doomed !
13
HSBC outlook – a bumpy road ahead
 The perfect storm !
14
Global financial crisis – the perfect storm !
 A year in and the credit crunch is still biting hard
 Steady stream of high profile casualties
 Bank of England intervention to restore confidence and trust:
- £50bn available to shore up bank balance sheets
- Additional £100bn of short term loans
- £250bn of guarantees for inter-bank lending
 Major World Central Banks coordinate rate cuts
 Real risk to the prospects for the major economies
 What next ?!
15
The US economy – the bubble has burst
3.0
400
2.5
GDP QUARTERLY GROWTH, %
2.0
200
1.5
1.0
100
0.5
0
0.0
-0.5
-100
-1.0
US GDP GROWTH (LHS)
-1.5
EMPLOYMENT (RHS)
AVERAGE MONTHLY CHANGE, 000s
300
-200
-2.0
-300
1998
1999
Source: Thomson Financial Datastream
2000
2001
2002
2003
2004
2005
2006
2007
2008
16
US housing market – root cause of the current banking crisis
20
20
% Yr
15
% Yr
15
10
10
5
5
0
0
OFHEO house price index
-5
Median single-family EHS price
-5
-10
-10
00
01
Source: Thomson Financial Datastream
02
03
04
05
06
07
08
17
The UK’s logjammed money markets
7
3-MONTH LIBOR
UK BANK RATE
interest rate, %
6
5
4
3
2
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
18
HSBC outlook – a bumpy road ahead
 The perfect storm !
 US, Europe and UK are flirting with recession
19
End of the golden years – GDP growth
4.0
US
UK
Euro-15
3.0
2.0
1.0
0.0
-1.0
-2.0
2007
Source: HSBC
2008
2009
20
Eurozone growth - into reverse
annual GDP growth, %
4.0
3.0
2.0
1.0
0.0
-1.0
2007
EURO
AREA
2008
GERMANY
2009
FRANCE
2010
ITALY
SPAIN
21
The euro area – dismal surveys
62
MANUFACTURING
SERVICES
PMI survey, % balance
58
54
activity
expanding
50
activity
contracting
46
42
2003
2004
2005
2006
2007
2008
22
Brace for Recession (UK GDP)
5.0
%
QUARTERLY
4.0
ANNUAL
3.0
LONG TERM AVERAGE
2.0
1.0
0.0
-1.0
2000
Source: ONS
2001
2002
2003
2004
2005
2006
2007
2008
23
Widespread weakness (UK GDP)
Agriculture
M anufacturing
Construction
Distribution
Trans/Comms
Bus Serv & Fin
Public Sector
-2
-1.5
-1
-0.5
0
0.5
GDP growth (%) Q3 on Q2 2008
Source: ONS
24
GDP - PMI Surveys weakest in the survey’s history
64
62
PMI survey, % balance
60
58
56
54
activity
expanding
52
50
activity
contracting
48
46
MANUFACTURING
44
SERVICES
42
40
2002
2003
2004
2005
2006
2007
2008
25
HSBC outlook – a bumpy road ahead
 The perfect storm !
 US, Europe and UK are flirting with recession
 Consumer spending – from key driver to absolute decline
26
The consumer – all shopped out
8
40
RETAIL SALES (LHS)
CONSUMER CONFIDENCE:
MAJOR PURCHASE NOW? (RHS)
30
6
20
5
10
4
0
3
-10
2
-20
1
-30
0
-40
2001
Source: ONS, GFK
2002
2003
2004
2005
2006
2007
index
annual growth %
7
2008
27
Labour market
“It’s a recession when your neighbour loses his job,
It’s a depression when you lose yours”
President Harry Truman
28
Labour market – heading south
30.0
7.0
Employment (Left Hand Scale)
%
29.5
6.5
Unemployment rate (Right Hand Scale)
MILLIONS
29.0
6.0
28.5
5.5
28.0
5.0
27.5
27.0
4.5
2001
Source: ONS
2002
2003
2004
2005
2006
2007
2008
29
150
30
125
25
20
100
15
75
10
50
5
25
0
0
-5
MORTGAGE APPROVALS (Left Hand Scale)
-25
annual % change (latest 3 months)
000s (average latest 3 months)
Housing market – the roof has fallen in
-10
HOUSE PRICES (Right Hand Scale)
-50
-15
2001
Source: Bank of England, Halifax
2002
2003
2004
2005
2006
2007
2008
30
HSBC outlook – a bumpy road ahead
 The perfect storm !
 US, Europe and UK are flirting with recession
 Consumer spending – from key driver to absolute decline
 Scope for Bank of England to cut rates further
31
The Inflation story takes a back seat
5.5
5.0
CONSUMER PRICES INDEX
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2000
Source: ONS
2001
2002
2003
2004
2005
2006
2007
2008
32
A bumpy ride for equities
indices (rebased, Jan 2007 = 100)
110
105
100
95
90
85
80
75
70
65
FTSE-100
60
S&P 500
55
50
NIKKEI 225
45
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
33
Oil – froth and fundamentals
150
140
130
$ per barrel
120
110
100
90
OIL PRICE
80
70
60
50
40
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
34
Radical measures taken
8
f
o
r
e
c
a
st
BANK OF ENGLAND
7
US FEDERAL RESERVE
interest rate, %
6
ECB
5
4
3
2
1
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
35
HSBC outlook – a bumpy road ahead
 The perfect storm !
 US, Europe and UK are flirting with recession
 Consumer spending – from key driver to absolute decline
 Scope for Bank of England to cut rates further
 Fiscal (tax) policy to play a role
36
National Debt – up, up and away
£ billions
700
45
650
Net Debt (left hand scale)
600
% GDP (right hand scale)
%
40
550
500
35
450
400
30
350
300
25
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
37
Breaking the elastic
44
42
Sustainable Investment Rule
% of GDP
40
38
PUBLIC SECTOR NET DEBT
36
EXCLUDING NORTHERN ROCK
34
32
30
28
2001
2002
2003
2004
2005
2006
2007
2008
38
HSBC outlook – a bumpy road ahead
 The perfect storm !
 US, Europe and UK are flirting with recession
 Consumer spending – from key driver to absolute decline
 Scope for Bank of England to cut rates further
 Fiscal (tax) policy to play a role
 Sterling (like UK plc) remains highly volatile and unpredictable
39
GBP/USD – Savagely cut
2.05
2.00
1.95
1.90
1.85
1.80
1.75
1.70
1.65
1.60
1.55
1.50
1.45
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
Source: Thomson Financial Datastream
40
GBP/EUR – reached a new plateau?
1.40
1.38
1.35
1.33
1.30
1.28
1.25
1.23
1.20
1.18
1.15
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
Source: Thomson Financial Datastream
41
A deep recession
5.0
annual GDP growth, %
4.0
LONG-TERM
AVERAGE
forecast
3.0
2.0
1.0
0.0
-1.0
-2.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
42
Every dark cloud…..
43
A historical perspective
8
7
annual GDP growth, %
6
5
4
3
2
1
0
-1
-2
1972-77
1978-83
1988-93
1998-2003
2007-2011
44
Going Forward - Considerations

Careful Cash Management
 Despite its woes, the Banking Industry should be helping
its customers
 Forward Exchange
Protection
45
If you can keep your head when all around you have lost theirs, then
you probably haven’t understood the seriousness of the situation.
46
ABC
47