HSBC Holdings plc (HSBA) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody, and thank you very much for coming along to this session. Very pleased today to be joined by Georges Elhedery, CFO of HSBC. So I'm sure you all know very well. So Georges, I want to start off our discussion today by talking about some of the near-term revenue targets and especially those that we sort of saw set out during the reporting season.

So you've given us some pretty clear guidance on banking NII for 2024. And there's a lot of sort of -- it's based on a static balance sheet and 50% pass-through and things like that. I just wonder if you could talk about -- some of the things that could vary and could ultimate guidance and what would be the sensitivity for example, to a change of pass-through rates or what have you.

Very good. Thank you, Nick, for having me. Thanks, everyone. So of our earnings about -- so of our revenue, about 2/3 is driven by banking and so it's effectively the strength of our balance sheet, combined with obviously the rate cycle that we're in, that's driven the benefit. We're looking at 2024 with an at least $41 billion guidance with the current assumptions in the lower end of the range of -- number of reasonable assumptions we've taken on tailwinds and headwinds to our NII. I think the quite an important component, which we disclosed is that the sensitivity of our earnings to wait have more than reduced over the last 18 months. It was about $7 billion or more than $7 billion per 100 basis points dollar shift -- a static balance sheet assumption, 50% beta assumption that at the year-end has reduced to $3.4 billion. So historically, we've been rightly perceived to be a highly rate-sensitive bank. There are grounds now to believe we are less highly rate-sensitive bank, in good part due to the actions we've taken to put stabilization, structural hedging in our balance sheet. We recognize there will always be rate sensitivity in our balance sheet because of, in particular, our deposit base in Hong Kong, a substantial deposit base. But structurally, the market doesn't have enough instruments for us to invest in to provide us that stability in the medium, long term. So there will always be a component of rate dependence on our balance sheet. That's a structural situation. The assumptions of this $3.4 billion is based of a 50% beta rough estimate, if the beta assumption you'd like to use is 10% higher or lower, you're talking about $600 million, more or less to the $3.4 billion sensitivity, which is a reflection of where our -- essentially our savings accounts done.

Okay. And I mean, just talk about Hong Kong deposit flows in a minute because, obviously, I think you went out deliberately to get a lot of time deposits in the fourth quarter. But with the rates in the 3% to 5% range, which I guess is where we're roughly going to be, how sensitive is that Hong Kong dollar deposit base to sort of going back into CASA? Or does it stay in time positive to think at that level?

Okay. So I would -- the strength of our franchise in Hong Kong means that many, many, many of our customers use us for their transaction bank. So this is why when you look at the term deposit mix in our balance sheet, 34% at year-end, it is a good 20-plus percentage point, 24 percentage points below the market average at 58%. And that's a testament to the fact that many of our customers use us as their transaction bank, their salary bank, their mortgage bank, whereas every dollar invested or deposited elsewhere, half of it is -- or more than half of it elsewhere is used purely because the rates are attractive. And we are -- we have the privilege that our customer base is much more stable. This did mean obviously that we continue to see some migration 34%. It was about 1% per month that we've seen over the course of '23. We have grounds to believe this will slow down as we look into '24 but there is potential for additional migration. This is factored in our at least $41 billion guidance for bank NII. In terms of when will we see a reversal of that trend, it's probably a bit early to talk to a reversal. It's probably more opportunity to talk about stabilization at some stage in '24, then talk about reversal. A couple of things that I want to highlight. The first one is, these term deposits are inherently short term, they're 1 month and 3 months, which means we get to reprice and react to market evolving circumstances fairly quickly. We're not stuck longer than 3 months before we can react and readjust our pricing. Second, the campaign we conducted late November, early December was a commercially driven campaign. It's in the circumstances where many of the Chinese companies paid bonuses early in December. And we thought this could be a very attractive amount that our customers could use for their wealth investments. But we also realized that many customers are reluctant to invest in wealth just before year-end stake. So we would like -- we would -- we had liked to offer them a bridge so that they're able to retain it and then for the future, use it in what could become our future NNIA, net new invested assets. And we use this deposit campaign as a means to bridge over the year-end. Again, most of which have matured because we're already in March. Some of them may roll, the rates today are 50 to 100 basis points lower than where they were in December. Some of them may decide to do something edge of the money, and some of them, of course, will be our wealth customers, wealth NNIA and waiting.

Perfect. And I think during the results, you spoke about a loan pickup in the second half of '24. And obviously, we've still got differential in rates between U.S. rates and Chinese rates. We've still got relatively slow GDP growth. Where does that pick up in loan growth come from, do you think?

Yes. Okay. So the area where we've seen continued loan growth. One is mortgages, particularly true in the U.K. and Hong Kong, where both balance sheets grew in mortgages. And two, in geographies such as Southeast Asia, South Asia, India and the Middle East, where the economic activity, underlying activity supported continued loan growth, including in wholesale and retail. The areas where we certainly have seen a much slower growth, [ H2 ] contraction in '23, have been the commercial or corporate space in the U.K. and in Hong Kong. Those are the 2 drivers that now we expect some stage in '24, more like second half of '24 to resume growth. Why is that? A couple of considerations. The first one is with timing the H2 rate cuts with an increased corporate pipeline to at some stage, with possibly some lag factor, but at some stage, translate into actual drawdowns. In the context of soft landing of the economies or addressing inflation but without any hard landing concern, which is not the base scenario. And then the second one is in Hong Kong, we recognize the inherent growth in Hong Kong that's been now GDP forecast to be 2.8% this year, 2.8% next year. Clearly pick up policy measures taken to support also a number of areas such as the housing market 2 weeks ago. That will pick up loan growth. The part that we still don't expect to see it growing this year is the mainland borrowers who have used Hong Kong as a base to borrow offshore, those may not come this year because those are more dependent on the differential between the rates of onshore versus the Hong Kong rate or dollar rate. And as long as that differential is favoring borrowing onshore, it is likely they will continue borrowing onshore this year.

Okay. Perfect.

We continue to target mid-single-digit loan growth and balance sheet growth, if you want, in the medium term, but I recognize this year, first half is a little bit more subdued.

And then maybe if we just talk a little bit about shorter-term noninterest income growth. I mean I think we're looking at sort of mid-single-digit type level. What do you think the risks or the swing factors in that could be?

So again, if you look at the -- last year, we generated $21 billion and change billion earnings from non-rate -- nonbanking NII, nondirect rate dependent. Half of it is from transaction -- the wholesale transaction banking. That includes payments, trade finance, fees, foreign exchange and security services. And about 1/3 of it is from wealth, private bank, insurance, investment distribution, et cetera. So between the 2 wholesale transaction banking and wealth, you're probably covering 80% of our non-rate dependent earnings. These are 2 areas that are highly strategic for us. These are 2 areas that we continue massively investing. And these are 2 areas that either were already in a dominant position or have really the right to become a dominant player. In transaction banking and trade, we're #1 bank in payments were top 2 bank and foreign exchange, we're a top 3 bank in security services with the largest sub-custodian in Asia and the Middle East. So we're -- we're going to leverage our market position, the underlying growth opportunity in the space and continued win in market share to grow. They will be heavily dependent on technology investments, and you've probably seen already that we continue heavily investing in technology, in particular, to support these activities. In wealth, in Hong Kong, we're already a powerhouse, but we recognize we can do more in other parts of Asia and the Middle East, particularly Southeast Asia, in general, the Middle East and obviously, a number of investments we're doing in China, both the private bank and insurance. For us, this is a very important driver to generate non-rate dependent revenue growth. It's an area where we decided this year to accelerate investment in so that we accelerate some of that growth potential coming from this space. We like it. We think we have a great deal to win in this space. We can leverage a very strong Hong Kong platform across the wider Asia, Middle East region. We can leverage technology build-out in retail and in other wholesale activities to support and scale, if you want the capabilities for wealth. And we also leverage client acquisition because now 60% of our wealth clients are internally referred clients, either from our retail bank or from our wholesale bank, which is a much cheaper acquisition than, say, a boutique private bank trying to set up office in Southeast Asia. And those drivers mean we think we're still punching below our weight, and we can gain much more share than we are today. Outside of Hong Kong, where we have substantial share already.

So I'm going to -- I want to talk a bit more about the medium-term drivers. But before we do that, let's see what the audience thinks the medium term drivers are going to be. So it was a question of polling question. And the question is, what is HSBC's biggest challenge over the next 3 years? Is it one, falling interest rates? Is it two, softer China GDP growth? Is it three, managing cost growth? Or is it four, delivering on noninterest income growth? I wasn't expecting that. Interesting. So maybe we should talk about some of the medium-term drivers -- with that in line. So I think one of the things that -- and maybe it's accounted to the softer China GDP growth, what are the things you presented in the results was a nice split of your client base, both on the wholesale side and on the retail side in terms of international, domestic, multi-jurisdictional, et cetera. So if we talk about wholesale client revenue, first of all, I think you highlighted $20.4 billion of that was from multi-jurisdictional clients. So in a more fragmented world, I guess the question is, do you think growth in those revenues becomes faster or slower. And what are the drivers from that? And I guess, linked to it, how much competition are you seeing for those clients at the moment?

Yes. So out of the overall wholesale clients, so GBM and CMB client generated revenue, 62% or $20.4 billion is from clients who operate with us in multiple jurisdictions. And importantly also, 2/3 of that revenue is generated outside the client's home market. In the home market, we may be doing some head office activity like relationship facility or like maybe that capital market at the head office 11. But it's really in their network where we're doing a lot of our transaction banking, trade finance, payments, foreign exchange capabilities, which constitute about 2/3 of the revenue we make with these clients. So it's a very important point on that. So just briefly to say the remaining 38%, a big 1/3 is U.K. domestic only. U.K. is a home market for us, and we service clients domestic only in particular, business banking and SMEs. Hong Kong is another 1/3, domestic only clients. And again, Hong Kong is a home market and we care about serving SMEs and business banking clients and domestic only clients. And the third, smaller 1/3 is domestic only client outside our 2 home markets, there are 2 ways we go with these clients, either we're supporting them become international and take their international needs through our network or they're actually clients that we're looking to terminate relationships with because we can't offer differentiated value if they're in a domestic market, that's not the whole market. We're not giving them what HSBC is good at, and we will exit them. But that forms a strategic view of how we look at our clients. In this international client or a multi-jurisdiction of client earnings. Actually, this is an area that continued growing, partly supported by rates, partly supported by activity. But a few things to call out is while the world has become more -- has more friction in the way you conduct international business, there are more barriers, more tariffs, more selective decoupling considerations, some derisking of supply chain considerations. The reality is the trend hasn't changed. The trend continues for more, except that it's become more fragmented. In a world where you have more legs to a transaction involving more jurisdictions and more currencies, actually, we HSBC thrive because the level of -- the presence we have in all these countries is such that fewer and fewer of our peers are able to offer service in all these jurisdictions. Second, the level of competence and understanding we have in these markets mean that the clients want us more and more to give them advice so that they stay -- they're doing the right thing in the right way with the optimal route. And third, this is kind of a sort of a lining in an unfortunate outcome, which is a world with friction is that one transaction that used to be one leg trade, say, between the China and the U.S. has transformed into a multi-leg transaction where parts are shipped to Vietnam, then they're shipped over to Mexico to be assembled and they shipped back to the U.S. and net-net, it's still one trade transaction, but the multi-leg aspect of it, the multi-financing requirement, the multicurrency involves give us even more room to be involved and effectively generate earnings on supporting clients through this friction. So we become -- the world has provided us with less competition with this fragmentation and friction means more of our environment is needed to help clients get through these complexities. And we get paid for that support, but the trend continues in the space of continuation of bifurcation of supply chains, et cetera.

And if I was to ask a similar question on the retail side of the WPB side, maybe what have the trends been like in terms of increases? Has that bit grown faster or slower than the pure domestic clients? And what do you think will happen there?

So I think in WPB, this is, again, a quite recent business proposition that we put a lot of focus on, which is serving international clients. WPB kind of our story is relatively simple. We have 2 home markets, U.K. and Hong Kong with scale, we service all customer groups from mass to affluent and going through all categories. We have universal proposition, that's the essence of what you do in the home market. And we're lucky to have 2 and we're even more lucky that the 2 of these home markets are profitable markets. They happen to be banking friendly markets. Outside these 2 geographies, essentially our network is geared towards affluent and wealth. And therefore, naturally, your target customer base tend to be more internationally minded and mobile with needs across multiple jurisdictions. And our servicing is now more and more geared to be able to support them. We reported that 40% of our revenues now is from international clients, half of which are multi-jurisdictional, they bank with us in multiple countries. The other half are either foreign residents or nonresidents banking with us in a jurisdiction, and the kind of support we offer them for let's say foreign residents, we have services that can allow them to open a bank account before they even set foot in the country. So kind of services some of our competitors. That's 40% of our earnings. We do see this to be a substantial share of the growth in our earnings.

Okay. Perfect. I'm just going to open it up before we go into some of the topics. If there are any questions gentlemen now, please.

Just this last point about, we'll take your jurisdiction clients and so on. Could you please reconcile that with the fact that you have reduced your exposure to the U.S., you have pretty much exit at Brazil, you just sold France, like how does it go forward?

Yes. So for wholesale, for wholesale, so for France for Continental Europe, we retain our wholesale capabilities, we sold retail in France. Likewise, in the U.S., we reduced our retail presence by retaining wealth proposition, but we exited our mass proposition in the East Coast. We exited our mass proposition on the West Coast, and we previously exited our mass credit card proposition, but we retained if you want the wealth proposition with about 20 branches, a little bit more than 20 branches. For wholesale, we retain full service. But the service we offer U.S. or French for that matter, corporates onshore is only in so far that we support their businesses internationally. We are not and we do not pretend to be a competitor for domestic-only businesses for domestic clients in their domestic market. We think that space is quite well competed and this is -- whereas for their needs internationally, if that means we support them domestically for certain kind of activity, will be there but we will capture the lion's share of the international activity because then the competition is much scarcer when it's talking about Asia or Middle East. You did mention Brazil. We have now relaunched for about 4, 5 years since the end of the long compete with Bradesco, who acquired our business. We've relaunched a wholesale proposition and meant to support international clients going into Brazil or Brazilian international clients going outside Brazil, again, not competing in the pure domestic business. Thanks for the question.

Okay. Maybe I can move on to costs.

Okay.

So I think this year, the target is 5% cost growth. I would be interesting to know what we're expecting going forward? Do you think you can manage it more slowly? I think you've spoken about sort of after effects of inflation. And is there any slowdown in cost growth going forward entirely inflationary or have you got scope to manage investment?

Okay. Thanks, Nick. So look, clearly, we have no intention to hold 5% as the target for future years. There was a specific 2024 guidance, which is specifically applicable for 2024. In a context where, on the one hand, we have a flow-through quite high '23 inflation, which we needed to reflect partly in our wage inflation and another context where we wanted to accelerate some of the growth that we could drive from the non-rate earning businesses considering that we're transitioning from a growth generated from rate earning businesses that will slower -- that will be slower to what we intend to be faster growth generated from the non-rate earning businesses, right? And it was important for us that we can kind of turbocharge some of the investments needed, specifically in wealth because it was important for us that we start seeing those benefits come through. Now if you ask me if we're doing a good job at it? I can point you to a number of considerations like net new invested assets. In '21, we reported $64 billion net new invested assets, in '22, we reported $80 billion, in '23 we reported $84 billion. To put in context, this is starting position $1 trillion AUM. So that's an 8% practically 6%, 8%, 8% growth in our AUMs generated by acquisition of new assets. It's certainly a trend that we intend to push for and certainly one of the growth indicators in our product. Those are the 2 main components, inflation and the turbocharging of some of the non-rate earnings that feed into the 5%. It's not the intention that this becomes anywhere near a norm going forward, and we see ourselves coming off that. We have to recognize inflation outlook is improving. So already at component is going to ease.

Okay. And then maybe if we can touch on capital returns as well. So I guess the big question is how you think about capital returns? There's obviously alternative uses of capital, whether it's loan growth or bolt-on acquisitions, which you have been doing over the last 2 or 3 years or was resetting capital to shareholders. So maybe if you could talk a little bit about the thought process and how you weigh share buyback to dividends versus all those other things? And if -- hopefully, multiples go up and share buybacks to become more expensive. How do you think about it then?

Yes, I'd like to face that problem at some stage. But for the moment, the -- so we returned last year, $19 billion capital. Profit attributable to our shareholders was $22 billion. So the lion's share of the profit we attribute to our shareholders has been returned to shareholders, $12 million in the form of dividend with a $0.61 dividend, 50% payout ratio and $7 billion in the form of buyback over 3 quarters, which we started at the end of Q1 and done throughout. For '24, we continue guiding towards a 50% dividend payout ratio. And we did the first -- or we are in the process of doing the first $2 billion buyback. And again, it remains my intention to have a rolling series of share buybacks. What can support the rolling series of share buybacks, one, the closure of the Canada transaction, which will give us before special dividend, 1.3 percentage points of CET1 ratio addition. We're minded to use $4 billion of the $10 billion or about 0.5% CET1 ratio for a special -- for consideration for a special dividend of $0.21 and then the rest, [indiscernible] as capital surplus, which will be here also to support rolling share buybacks. That's the first one. And the second one, why we're able to consider a rolling set of share buybacks, we continue to be highly capital generative and our forecast will allow for continued buybacks. I look at buybacks for 2 benefits. The first one is I realize it's an attractive mechanism to return capital to our shareholders. The second reason is we're reducing our share count, with $7 billion, we reduced it by 4.6%. If we can manage this trend for another year or more, we could possibly reduce our share count by 10% or 15%, that means 10% or 15% progressivity to our dividend, everything else being equal. So there is, therefore, a future protection of our dividend per share by reducing the share count. That's the mechanism that we look at buyback. We will have capital to support loan growth. Our forecast today will support what is our aspiration for the mid -- sorry, mid-single-digit percentage point growth in our balance sheet, which will have capital for based on our working assumptions now. And obviously, we will have capital to consider attractive strategic bolt-on acquisitions, if and when. And just answering your final question, what are the criteria to look at inorganic, one strategic fit, wealth in Asia would be a strategic fit, but not only there are areas where we can accelerate some of our organic growth through inorganic. Second, that the financials need to work out, of course, both in terms of the price as well as the synergies achieved, et cetera, all of which M&A specialists understand. And third, that it is more accretive than a share buyback. If a share buyback remains more accretive than the current consideration has been share buyback is the benchmark that we need to be to consider an organic acquisition. Now obviously, the share buyback accrete kind of benchmark at a higher level of share price will become less of a hurdle at a lower level of share price becomes a higher hurdle for inorganic because it remains cheap to buy back. So that's how we measure the...

Perfect. I'll throw it open again for any questions. Okay. So maybe we can talk a little bit about credit quality. It seems to -- it was the thing that didn't really come up in the Q4 numbers. So the exception of China CRE, which I think is story we've gone over lots and lots of time. It all seems to be relatively well controlled. Again going back to that polling question where [indiscernible] slower Chinese GDP growth was an issue, how have you factored that into the way you look at your book across the region? I mean other any risks from that to your sort of credit quality?

Yes. So when I -- the concern about the slow China GDP growth isn't for us an ECL or credit charge concern, think our book in China or with the Chinese corporates that bank with us internationally is in a good place. We're quite comfortable. Obviously, the area we're not comfortable has been the China commercial offshore commercial CRE exposure. And we've provisioned to that effect and without going into details, most of the problems feel now behind us rather than ahead of us, but we still expect some lingering problems to surface from time to time over the course of '24 and possibly beyond. So therefore, in terms of our ECL, we're comfortably guiding towards a 30 to 40 basis points medium-term target for medium-term expectations for ECL. For '24, we hit the upper end of that range at 40 basis point. There isn't a specific concern. There is just a generic concern that the high rate environment impact on many of the corporate borrowers hasn't flown through fully yet. We've seen very resilient economies like the U.K., which is a very encouraging sign, but we have to recognize that uncertainty remains and we needed to factor in some of that uncertainty as we're looking for this year, specifically. Maybe addressing the China slowdown. Our working assumption is there may be -- well, first slowdown, let's put it in context is still 4.5%, 5% GDP growth economy, but recognizing some of the challenges the Chinese economy is facing in the short term. Our house view is that -- and it's highly substantiated house views, a lot of engagement with a number of parties in onshore in China or outside opining on China or study in China. The Chinese economy has been in the phase of growth quite heavily reliant on infrastructure, on real estate and on heavy exports. It's reached a maturity level where it's about time to transition to avoid phoning in the mid-income trap. It's also accelerated with some of the tariffs, et cetera, that have made exports a little bit more frictionful and that's made real estate challenges that's made real estate investments, less growth other than. So there was a strong economic and policy rationale to transition the economy into a new format. The new format is desired to be consumer led or more consumer enabled, like you would expect in a more mature economy, some of the Western economies, for instance, more higher-end technology or higher end production capabilities related and more sustainability related. And this is where the EV batteries, et cetera. So then, this is where all renewable energy production capabilities over. That transition, we strongly believe is the right transition at the stage of evolution of the China economy, but that transition comes with short-term friction. And we're going through short-term friction. And the short term could be a year, 2 years, but we have to acknowledge that the transition is needful. The medium, long-term outlook for us remains strong. We just need to go through the transition. Now there are 2 ways you can go through that couple of years transition. The one way is you let market forces try to clear up the way into the new economy or two, you throw public money assets. The perception is that -- and the feeling is that market forces remain always superior even though the pain is a little bit longer than creating fiscal future trouble by throwing money at things and possibly creating bubbles and creating deficits that in the future will come to haunt you. So we support intellectually that approach. We recognize that, that approach will take longer than if you just through money at it. But it doesn't change the medium-term long-term outlook.

Okay. No. So that's useful. I think the other thing that was in the Q4 chart was overlap in Mexico, and consumer credit. And I seem to remember someone mentioning some of that you're looking at expanding unsecured lending globally. I just wonder if you could talk a little bit how much of a change is this and what's happening there?

Yes. I mean I'll be a little bit more cautious. It's not -- so we're looking to grow our unsecured lending in the U.K. and Hong Kong as our home markets. I have to remind U.K. and Hong Kong, our retail book is 90% secured, 10% unsecured. We think this is an overly cautious book and therefore, allowing for some additional growth in the unsecured, again, with the mindset that we are at 90% secure, 80% of which are mortgages gives us room to take on a little bit unsecured risk. That's in our 2 home markets. Mexico unsecured business has been growing already. There is no seismic shift there. It's just the steady natural growth that we have in this market. And the credit card offering in Southeast Asia, which was a missing component in our toolbox and which we are complementing now with our capabilities and credit card and secured in Southeast Asia.

Are there any more questions from the audience? Maybe we could see any. Maybe we can go and talk, I mean we spoke about the international component of the wholesale bank, and we spoke about the international component of the retail bank. Obviously, you've got an investment bank as well. So maybe you could talk a little bit about what you're doing there. Is there again, an advantage to you in Hong Kong, if people are less focused there. I mean, what are the growth prospects involved, is there any expansion of product capability you're looking at?

So our investment mix in the investment bank are essentially focused around kind of putting us in the leading position in Asia and the Middle East. We recognize we have a U.K. hub for international skills and capabilities, a highly competitive market, but this is where a lot of your most up-to-date skills, et cetera, get produced, and that's our U.K. hub. We have smaller hubs in the U.S. and Continental Europe, and that's to support where international needs are you can have a U.S. issuer, but issuing with a target for Asian investments or you can have an Asian issuer and expecting U.S. asset managers to buy into it and you do need international connectivity. But the leading edge of this proposition is based on Asia and the Middle East. That's the starting position. Second, it's meant to support what our core customers need. So we're not in any product push consideration where very much client needs related. So for instance, we're in capital markets because we're one of the biggest financing houses, and we think facilitation of financing through that capital markets is equally important to our customers who are also using balance sheet financing. We understand that the equity market development or the financial market development of many countries in Asia and the Middle East is still behind the level of penetration you have in the West. And therefore, structurally, you have multiple decades ahead of us of continued financial market penetration, capital market development, and therefore, being at the forefront of that market supporting a lot of the Western asset managers, invest access custodized et cetera, their assets in the East is very important with the structural growth inherent in the market that remains very attractive. And this is how we're positioning our offering.

Okay, okay, okay. Just check again if there's any questions.

Not sure if this is related to the fact that there is lunch served.

It could be, yes. And maybe the other thing -- we want to go back to that cost point. So we spoke a little bit about how you're investing in the new areas you're investing in. What is the -- and you've got as CFO, you've got -- you've got to manage overall costs within the scope of the rest of the P&L. How do you get that across the business units? Because I'm sure they're always asking for extra money. So how philosophically do you go through this and persuasive but it's right to be below 5%?

Yes, the internal workings of a day in the CFO is like. So I don't envy anyone but what's very important is that the whole group Executive Committee is committed to an overall cost envelope that we think we can afford or our shareholders will accept for us to spend. And that's on debatable. That's not even a consideration. That is a starting position. We can be off by a percentage point on the whole envelope. By and large, we're kind of -- if you want, as a CFO, the starting position is, I'm comfortable we're all aligned around what is the envelope we can afford. It takes away 50% of the trouble in my job, simple and with the support of the CEO. When the next 50% is how do we split it, what are the strategic levers in which we invested? I think more and more, and certainly eye evidence personally last year since I was kind of running it more and more, those decisions now are take an enterprise level deeper and deeper in the organization. So we're not federating cost and letting prioritization take place in silos. We're getting more of it pulled to the center and making enterprise-wide prioritization and then reallocating it based on that prioritization. It gives me therefore, a stronger sense that we're spending our money where we -- on an enterprise basis, I think we should be spending it on rather than sometimes deferring to 2 further out silos and understand whether it made sense or not. So that clearly is the process in which we have been reshifting and continue shifting. And then the second one is, when you run such a process, your levers become easier and easier to identify, if you see that your cost is not running on target. Do you have for any reason, pressure on cost for any unforeseeable challenging reason, you will have better and better visibility at the center on the leverage you utilize. You could argue this is how we should run. This is how we should run, no question about that. But maybe historically, we've been a bit more federated than what our aspiration would have been, and we're clearly shifting away from that model.

But I think unless there's any one last question. Yes. I may deal with that.

I have a question about China. I just wanted to have your view about China concern about I would say the investment trend in China, I have read that FDI have reached a record low. So are you concerned about the future of China in fact?

Two-pronged answer to that question, and thanks for the question. Indeed, the FDI numbers have shown material drop, if you want. Two-pronged answer. The first one is China has a lot of capital to invest domestically already. And we've seen that in -- I mean, you've probably seen the development of the EV industry from literally Norway 10 years ago to where it is today. Most of that is domestic capital recycled into that. And not only do you have only domestic capital, you also have fiscal capacity, not in the form of subsidies or in the form of to support some of the growth areas generate. So it is not necessarily a drag per se on growth potential because of that foreign capital -- because of the domestic capital availability. The second one, I would say, is it's clear definitely to us that the authorities and policymakers are taking every step to make it even more accessible or easier for foreigners to come and invest in China. I mean, look, we've acquired Citibank business daily swiftly in China, Citibank's Wealth business, we've increased our shareholder in our insurance JV from 50% to 100%. We've increased our ownership in our investment bank JV from 50% to 90%. We are now more than half a dozen licenses for our Pinnacle technology-based insurance proposition. We have license of Type A that capital market issuer, in China, which was a license we're waiting for, for many years. So we're seeing all the measures being more and more to simplify and ease and attract more pointer. So I would say probably if we see some try, they will definitely see the ease of doing it compared to how it was a few years ago and whether the trend turns is to be seen.

Georges, thank you very much. Thank you.

Thanks for having me.