HSBC Holdings plc (HSBA) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and a warm welcome to the 2024 Annual General Meeting for HSBC Holdings plc. My name is Mark Tucker, and I am your Group Chairman. I'm delighted that the Board of Directors have joined me on stage today. Kalpana Morparia, is unfortunately unable to be here in person, but she has joined us virtually. We announced on Tuesday that Noel Quinn, your group Chief Executive, has decided to retire from the bank after nearly five years in the role. I would like to begin by thanking Noel for his unwavering commitment and dedication to HSBC, which he joined 37 years ago. I would also like to thank all the shareholders joining us in person today and all those joining online. We greatly value your thoughtful and constructive engagement. I'm pleased that this hybrid format has been well received over the last few years and that it gives you, our shareholders, more flexibility on how you choose to attend the AGM. I should say that it is possible that a technical issue could impact the virtual connection. If that were to occur, we will do our utmost to fix the issue as quickly as possible. We would, of course, keep you fully informed. And over here, we appreciate your cooperation and understanding. Our meeting this year is taking place in London. We are in Greenwich on the banks of the River Thames just across from our global headquarters in Canary Wharf. Three months after HSBC was founded in Hong Kong in 1865, we opened our first London office to connect the East and West and to facilitate local and international trade. We established a critical link between the Asian business of the bank and the world's financial center. That objective along with our presence here in London are as relevant and significant today as they were 159 years ago. And they help explain the strength of our international model at a time when our clients and partners are working with us to navigate a changing world and make the most of the opportunities that are emerging. I will now proceed to open the voting by poll. In accordance with the company's articles of association, I give formal notice that I demand a poll on each of the resolutions numbered 1 to 17 as set out in the 2024 notice of meeting. I would like to propose with your consent that this notice be taken as read. Are there any objections? Thank you. Voting is now open. I will ask Aileen Taylor, our Group Company Secretary and Chief Governance Officer to explain how shareholders can vote today. Aileen?

Thank you, Mark. Voting on all resolutions set out in the 2024 Notice of Meeting will remain open until after we have taken your questions. This means that you may cast your votes whenever suits you during the meeting, and you will be informed when the meeting is about to close. I will now take you through the process for casting your votes. First, I will explain how those of you attending in person can cast your votes. I will then explain how those of you attending virtually can cast your votes. All shareholders attending in person will have received a voting handset and smart card at registration. The welcome leaflet you received provides simple instructions on how to vote. If you have an issue with your handset, please let an usher now, and they will assist you. As a reminder, you can cast your votes on each resolution by selecting the number of the resolution and then pressing the following: number one, if you wish to vote in favor; number two, if you wish to vote against; or number three, if you wish to withhold your vote. Please note that a vote that is withheld does not constitute a vote in [ law ] and it will not be counted in the calculation of the proportion of votes for or against a resolution. If you make a mistake or change your mind, just select on the handset, the number of the resolution you wish to vote on and press #1 to vote in favor; #2, to vote against; or #3 to withhold your vote. Please do so before the voting closes. There is also an option available on the menu for you to cast all of your votes in accordance with the Board's recommendations, if you find that more convenient. I will now explain how shareholders joining online through the Lumi platform can vote. When you click on the voting icon, the voting option that are available will appear. Select the option that corresponds to how you wish to vote on each resolution, for, against or withheld. The option will change color and a confirmation message will appear to show that your vote has been cast and received. Please note that there is no submit button. If you make a mistake or wish to change your vote, simply reselect the correct voting option. If you wish to cancel your vote, select the cancel button. You will be able to change or cancel your vote at any time whilst the poll remains open. Please refer to the instructions on the information page of the website if anything is unclear. For all shareholders attending today in person or virtually, if you previously returned a proxy form, you may recast your vote now if you wish and your proxy form will be disregarded. All shareholders will receive due warning when voting is about to close, which will be after we have finished taking your questions. Before I hand back to Mark, all shareholders in the room who wish to ask a question should have registered your question before entering. If you have not registered a question that you would like to ask, please go to the back of the room or a member of the HSBC team will register your question now. Let me now hand back to Mark.

Aileen, thank you. When we met last year, you will recall that we debated the resolutions tabled by a small group of shareholders who proposed strategy and structure reviews for your bank and a restriction on your Board's ability to set the dividend. Noel and I set out the clear and compelling reasons why we believe that it was in your best interest, as well as those of our clients and customers that we stay the course and deliver on our current strategy. I am pleased to say that the overwhelming majority of shareholders agreed with us. That agreement was expressed very clearly when you had the opportunity to vote. A year later, you can see the value of your support for the Board's recommendations, which is clearly demonstrated by, firstly, the improved financial performance of the group; and secondly, the increased returns that we delivered in 2023. Let me expand briefly on performance and returns. I'll start with our improved financial performance. 2023 was a very strong year for HSBC. We reported record profits before tax, which exceeded USD 30 billion for the first time in your bank's 159-year history. Our reported return on tangible equity was 14.6%, which was our best performance in over a decade. We also demonstrated good broad-based profit generation through geographic and business diversification. This performance points to the fact that our international strategy is working. Our first quarter results, which were announced earlier this week provided further evidence that our strategy is delivering. Noel will speak to the first quarter results in a minute or two. Let me now turn to how our performance both in 2023 and in the first quarter of 2024 has enabled us to reward you, our loyal shareholders. Our 2023 record profit performance allowed us to announce a full year dividend of USD 0.61 per share, which was our highest full year dividend since 2008. In total, we returned approximately USD 19 billion to shareholders in respect of 2023. This included the three share buybacks announced last year, totaling USD 7 billion. And on top of that, we announced during our annual results presentation in February, an additional share buyback of up to USD 2 billion, which has now been completed. Earlier this week at our first quarter results, we announced a further USD 8.8 billion of dividends and share buybacks. This consisted of our first interim dividend for 2024 of USD 0.10 per share, a special dividend of USD 0.21 per share, following the completion of the sale of our Canadian business, which will be payable in June alongside the first interim dividend and a new share buyback of up to USD 3 billion, which we expect to initiate shortly and aim to complete within three months. Looking ahead, the dividend outlook remains strong. Our dividend payout ratio for 2024 remains 50%, excluding material, notable items and related impacts, and we continue to target a mid-teens return on tangible equity in 2024. We remain very focused on and committed to rewarding you for the trust that you have placed in us. Despite the continuing uncertain economic environment globally, we are confident that we can continue to deliver good performance and returns. Higher interest rates in Western economies are still weighing on global growth, with HSBC's economies forecast to come in at 2.6% in 2024 and 2025. Inflation data remains key to the global interest rate outlook. Central banks are closely and carefully watching the data and need to be confident that inflation will continue to head down to target on a sustainable basis before lowering rates. Our economists continue to anticipate a gradual reduction in inflation with our global inflation forecast at 5.8% in 2024 and 3.8% in 2025. We expect the ECB and the Bank of England to cut rates in June, cutting also in total by 150 basis points by year-end '25. We expect the Fed to cut in September cutting by another 100 basis points by year-end '25. However, with growth in employment numbers holding up and inflationary pressures lingering, that relative certainty in the Central Bank decision-making process is not easy to achieve, and it may not be a steady path. But the silver lining of stronger economic numbers, even with some recent stubbornness on inflation, means that the economies are broadly resilient. And all of this is occurring in an increasingly unpredictable context. The wars between Russia and Ukraine and between Israel and Hamas continue to have a devastating humanitarian impact and to cause significant economic disruption. This year will also be the biggest election year on record. More than 4 billion voters will go to the polls. The U.S., U.K., India and Mexico among the countries holding national elections. The outcomes will have implications that go beyond the national realm. They are to likely to impact international security arrangements, trade and green policy to name just a few. Through all of this, our focus remains on executing our strategy, navigating the challenges and making the most of the opportunities. Before I invite Noel to share his views on your bank's performance, I would like to add that what I have said earlier on about his decision to retire from the bank. The board and I would like to pay tribute to Noel's exceptional leadership. As Group Chief Executive, he drove our transformation strategy, creating a simpler, more focused business. This enabled us to deliver the improved performance I just outlined and to create a platform for future growth and development. It has been a pleasure and privilege to work with and alongside him. Let me now hand over to Noel.

Thank you, Mark. I'd like to begin by saying how grateful I am to you and to the Board for all of your support, guidance, friendship and partnership. I am proud of what my HSBC colleagues and I have achieved together over the past five years. Over that period, we have hit some significant financial milestones, a number of which I will talk about today. We have also created a more focused business and I believe we have built a strong platform for the bank's next phase of development and growth. I'd also like to thank you, my fellow shareholders for your continued support. Leading our bank over the past five years has been an absolute privilege as well as a great responsibility. My goal has always been to deliver the improved financial performance and returns that we all wanted to see and you deserve. As Mark said, we were therefore pleased with the performance of the bank in 2023 and in the first quarter of 2024. Our strong financial performance was reflected in the significant amount of capital distributions that we announced for 2023. At $0.61 per share, the full year dividend was well above pre-COVID levels, whilst importantly, also still enabling us to retain a good proportion of our earnings to invest in the future of the business. As Mark said, it's also the highest full year dividend since 2008. In total, we returned around $19 billion to you, our shareholders, through dividends and share buybacks in respect of 2023 and the trend of strong capital distribution continued in the first quarter of this year. I was really pleased to announce a further $8.8 billion of distributions earlier this week. As Mark indicated, this included a first interim dividend of 2024 of $0.10 per share, a share buyback of up to $3 billion. And importantly, a special dividend of $0.21 per share as the first priority use of the proceeds from the sale of HSBC Canada, which will be payable in June. As I said, the key driver for the strong distributions was the improved financial performance of your bank. 2023 was a very good year for HSBC. Our reported profit before tax was above $30 billion for the first time ever. Strong revenue growth across all three global businesses helped us to achieve our best return on tangible equity in more than a decade. And importantly, there was the good broad-based geographical growth, which underlines the value of our model. Our strategy is working. And there was further evidence of this in our first quarter results, where we reported $12.7 billion of profit before tax for the first quarter. On an annualized basis, we delivered a return on tangible equity of 26.1% or 16.4%, excluding notable items. And we are on track to meet all of our 2024 guidance, including our mid-teens return on tangible equity, excluding notable items. And our commitment to limit cost growth to around 5% on a target basis. So your bank is performing well, and more importantly, has strong momentum. We have also built a strong platform for future growth. Given the strength of our balance sheet, we have benefited from supportive interest rates. But we have worked hard in recent years to reduce our sensitivity to interest rates going forward. And we are focused on implementing revenue growth strategies that can offset the impact of declining interest rates. Let me describe just a few. The first opportunity is continued growth in our two home markets of the U.K. and Hong Kong. In the U.K., we have good traction in Commercial Banking and in Wealth and Personal Banking. We were the #1 bank for U.K. large corporates as well as the best bank in the U.K. for SMEs as assessed by Euromoney. We also attracted over 1 million new to bank customers here in the U.K. last year, and we've had steady mortgage growth and have taken market share in mortgages. And we are ideally positioned to capitalize on the wealth accumulation in Hong Kong and Mainland China, driven by rapid urbanization across Mainland China, and the increased use of the Connect schemes with Hong Kong. And as Hong Kong plays a key role, facilitating investment by developing trade corridors like those between Asia and the Middle East. The second opportunity is to grow our strong international franchise. We ranked #1 for trade revenue globally last year, second by revenue in our payments business. And we've been #3 globally by revenue, in FX, foreign exchange, since 2021. But there is a significant amount of untapped opportunity within our existing client base, which can drive revenue growth in the face of declining interest rates. To provide some evidence of this, we grew revenues from clients who bank with us in more than one market by 29% in 2023. In recent years, we have also ramped up our investment in our Wealth and Personal Banking International business. 40% of Wealth and Personal Banking revenue already comes from international customers, and we believe we can take it much further. And I'm pleased there was a very strong performance in wealth in the first quarter with revenue up by 12% on the same period last year. Alongside this, we will continue to diversify our revenue geographically. And by maintaining a tight cost discipline, we will invest in growth areas, including new technology. And our new global HSBC innovation banking proposition which has got off to a very good start since launching last June. Before I hand back to Mark, I also want to speak about an area of our work that is incredibly important to all of you, to the bank and to the communities we serve. Supporting the transition to net zero is one of HSBC's four strategic pillars. As one of the world's largest international banks with a presence in the regions and sectors where the most significant change is needed, we are well placed to support the transition. The transition is driving huge demand for finance. Estimates indicate up to USD 40 trillion will be required globally by 2030 and around 60% of which will be needed in ASEAN and the Middle East. So we operate in places where we can have a real impact. As you know, we set an ambition in 2020 to become a net-zero bank by 2050 and net zero in our own operations by 2030. In January, we published our first net-zero transition plan. It sets out for the first time in one place, how we intend to channel the distinctive strengths of HSBC to have a meaningful impact on emissions reduction in the real economy. We want to be clear about our approach and the changes that are underway. But we also cannot do it alone. Our ability to transition relies on decarbonization in the real economy happening at the necessary pace. Our customers and the industries and markets we serve will need to transition effectively supported by strong government policies and regulation and substantially scaled investment. Engagement and collaboration are therefore central to our approach. As a bank, our success depends on enabling our clients to succeed. That's why our goal is to work with our clients to understand their transition plans to get to net zero and to help make them a reality. We don't have all the answers, but our approach and transition plan will evolve over time as we and others learn more. Science evolves and new technologies emerge at scale. To conclude, I'm pleased you are seeing the benefits of our strategy through increased returns and dividends. Our strategy is working, and we remain focused on delivering the returns that we all want. Thank you again for your continued support. And Mark, back to you.

Thank you. Let me now turn to the formal business before us today at our AGM. Full details of all the resolutions being tabled are included in the notice of meeting. But let me say a few words on Resolutions 4A to 4N concerning the election and reelection of directors and Resolution 17 that was requisitioned by shareholders on behalf of the Midland Clawback Campaign. On Resolutions 4A to 4N concerning the election and reelection of directors. Since the last AGM, three new independent nonexecutive directors have joined the Board. Ann Godbehere joined on the first of September 2023. Ann brings deep financial acumen and extensive financial services experience gained over a 30-year international career in insurance, retail and private banking and wealth management. Ann's extensive public listed company board experience means that she is ideally placed to assume the role of Senior Independent Director at the conclusion of this year's AGM. Brendan Nelson also joined on the 1st of September 2023. Brendan is a qualified chartered accountant with significant global business and financial service experience having spent over 25 years at KPMG. His U.K. and international financial expertise and experience as Audit Chair at U.K.-listed companies will be particularly valuable in his leadership of the Group Audit Committee, which he took over as Chair on the 21st of February 2024. Swee Lian Teo joined on the first of October 2023. Swee Lian brings extensive experience within the international financial services industry, having previously spent over 27 years with the Monetary Authority of Singapore. On the sixth of December 2023, we announced that David Nish will retire from the Board at the conclusion of this year's AGM. David has made invaluable contributions to the Board over the past 8 years, particularly in recent years as Chair of the Group Audit Committee and as Senior Independent Director. I would like to thank David warmly for his consistent and thoughtful counsel and guidance. David is, of course, here today, and we wish him the very best with his future endeavors. A heartfelt thank you, David, for all that you have done for HSBC. These changes mean that subject to the election and reelection of directors today, your Board will comprise 2 executive directors, 11 independent nonexecutive directors and myself as Nonexecutive Group Chairman. To reiterate, we recommend that you vote for resolutions 4A to 4N. One resolution has being tabled by shareholders, Resolution 17. Resolution 17 was requisitioned by shareholders on behalf of the Midland Clawback Campaign and is another approach to the same issue that the Board has very carefully considered and which over the last five years has been overwhelmingly rejected by shareholders at each AGM. We fully understand that this is a very important issue to the members of the Midland Clawback Campaign, and we thank those of you in attendance today and joining virtually for your service to the Midland Bank and subsequently to HSBC. Our position has consistently been and remains that the removal of the state deduction will constitute a retrospective change that would benefit a particular group of members and would be unfair to other HSBC pension scheme members. To reiterate, our position is unchanged, and we therefore recommend that shareholders vote against Resolution 17.We will now move to Q&A. We will be taking questions on any of the resolutions from shareholders attending in person and virtually through the website or by phone. For those shareholders asking questions virtually, please follow the instructions on the website. If you have a question that is specific to an individual customer relationship, please contact our dedicated customer support teams. Their contact details are available on the HSBC website. Thank you to those shareholders who have submitted their questions in advance of the meeting or have preregistered them in the room. If you have not preregistered a question and would like to do so, please go to the back of the room now, where a member of the HSBC team would assist you. We introduced this preregistration system to make the Q&A part of the AGM more efficient and to allow for more shareholder questions. By grouping questions, we can ensure that we cover a wider range of topics without having to deal with the same question multiple times. Thank you for your cooperation. Before asking your question, whether in person or by phone, can I ask you to state your name and confirm that you are a shareholder or give the name of the shareholder that you represent. Every effort will be made to give shareholders the opportunity to ask a question if they wish to do so. In order to allow as many shareholders as possible to participate, I will be grateful if you could please limit yourself to one question relating to the business of the meeting and keep it brief and to the point. Questions submitted prior to the AGM have received a response directly or will be addressed today at the meeting. Can I also remind everyone who wishes to vote to do so before the end of the Q&A as the voting will close after the Q&A. Can we take the first question, please?

Thank you, Chairman. The first question is in the room with us and comes from Nancy.

Thank you. Good morning, [ Nancy Ball ], shareholder and Chair of the Midland Clawback Campaign. Today, you're directing shareholders to vote to remove the cap on bankers' bonuses and to vote in favor of directors' remuneration. Noel Quinn, you've received an uplift in 2023 on your single figure remuneration from GBP 5.6 million to GBP 10.5 million. That's an increase by my calculation of 96.1%. I would like to wish you well as you leave. However, you may perhaps like to take the opportunity before you go to reflect on how you could have and should have supported your former Midland Bank colleagues in their retirement. [ Ann Watts' ] bank pension, GBP 8,556 per annum. State deduction, AKA clawback, GBP 1,971, a reduction of 23%. [ Terasita Rainsford ] Liverpool, bank pension, GBP 6,168. State deduction, clawback GBP 1,458, a reduction of 24%. You're also directing your shareholders to vote against Resolution 17, stating that it will not be in the interest of the company or the shareholders. This is simply not true, and you know it. But let me tell you, in reality, what's not in their interest. Since the year 2000, HSBC Group Holdings have paid exactly USD 7,447,807,161 in 83 separate violations. At an exchange rate of $1.25 to the pound, this equates to GBP 5,958,245,729. We've heard all of your arguments. You tell us clawback is legal, so was PPI and so was hanging. When the Labor government legislated on integrated pensions in the 1940s post war, you tell us clawback was clearly and consistently communicated. That's boulderdash. Do you know how ridiculous you're beginning to sound? Scheme members never knew, the newly retired are just becoming aware and the administrators keep making error after error because they don't even know how to calculate clawback. It's a shambles. When are you going to listen to us and believe our story? This bank trusted us to work in the business, and we did with complete integrity for many, many years. So what happened to us when we retired? Did we all become liars overnight or stupid? Yes. Myself and [ Len Aspell ] met with [ Jim Coilin, David Lister ], two independent nonexecutive directors to discuss the Midland section DBS. They advised us that they would refer matters back to two of the bank's governance committees. We waited for four months, nothing happened. I chased David Lister via e-mail who didn't even have good grace to reply. I then received a poor response from [ Julian Russell ]. From his reply and a subsequent e-mail he sent to [ Len ], it was patently clear that governance and impartiality was not followed. I would like that noted in the minutes today. [ Len ] and I have not decided on our next move, but we know the prudential regulatory authority to whom you have just had to pay GBP 57 million, will take a dim view. So I'm appealing to the shareholders today to vote against the remove [ of cap on the [indiscernible] and to vote against directors remuneration and to vote for Resolution 17. I've got two questions. [ Lee Davis ], Head of Shareholder Governance, states in an e-mail, and I quote, "Furthermore, the bank does not consider that there are alternative means of achieving its aim in a more proportionate way or indeed in a way, which would remove the inequality as between higher and lower paid members." So he acknowledges the inequality and disparity. So one of yours is now one of ours. The Equality and Human Rights Commission acknowledge the inequality. Researchers at Exeter University argue the policymakers and the bank should act. Do you really need to wait for the law to change this outdated law before you remove or cap this miserable, miserly, outdated penny-pinching practice? And my second question, Mr. Tucker, have all the former Midland staff except for Noel Quinn, the chosen one, suddenly, in retirement, as they lay sleeping in their beds, lost their integrity and become liars overnight?

Thank you for your two questions. We understand this is an important and emotional subject. And many of you devoted significant parts of your life, of your working lives at Midland Bank and HSBC. We have discussed this issue, as I said earlier, many times. Comprehensive legal reviews have been conducted over several years. They involved advice from the banks and the trustees' leading council. There was also a consideration and rejection of the campaign group's claim by the Equality and Human Rights Commission. Further research would only involve duplication of work already undertaken and concluded and the work by Exeter University confirmed that the state deduction is lawful. It is not discriminatory and it was properly communicated to scheme members throughout.

You sound ridiculous, I'm sorry, you keep saying the same thing over and over and none of it is true, none of it is true.

We have clearly set out our position over many years, and you'll see in Appendix 3 of the notice of the AGM and shareholder resolutions. I won't go over the key points again. I've just gone over them. We've had the conversation, we will remain focused on ensuring and advising our shareholders to vote against Resolution 17.

Well, I will say Mr. Tucker and to the rest of the Board, especially the ladies sitting up there, you're lagging behind in societal enlightenment. You're rolling along on your gravy train, shame on you all. And as for the women up there, you are a poor reflection on sisterhood because it's mainly women and the lowest paid that have been -- Yes. And we're not liars, we are not liars. We never knew, I never knew. All you needed to do was tell us we had an integrated pension. We were told for years to said final salary and that wasn't true. That was not true. We had an integrated or a bridge in pension. Why wasn't that mentioned? We're not stupid. I worked for the biggest, the largest global financial institution in the world. While I was doing business for you, I was one of your top performers, I think, one of the top 300 one year. I thought you have my back. But oh no, you didn't. No, you didn't. Shame on you all.

Can I take the next question, please?

The next question is in the room and comes from [ Jean Martin ].

Good morning, members of the Board. My name is [ Jean Martin ], and I'm asking a question that relates to HSBC's Green Finance strategy on behalf of ShareAction, and a group of 16 investors. Those 16 investors are [ Academic ] pension, Axiom Alternative Investments, [ Kendram ], Cardano, Crédit Agricole, Ethos Foundation, Ethos Engagement Pool, Epworth Investment Management, EQ Investors, who's also in the room, La Française Asset Management, Folksam, [indiscernible], Jesuits in Britain, Royal London Asset Management and River Global Investors. In November 2023, ShareAction published an analysis of the Green Finance targets and disclosure of Europe's largest 20 publicly listed banks. We found that our targets and disclosures are not fit for purpose and could lead to misleading claims. In our report, we praised HSBC for the granularity of its Green Finance disclosures. As opposed to many other banks, HSBC provides a breakdown of its financing by products and services, type of financing and region once that financing has happened. We also recognized the group's commitment to support climate mitigation and adaptation efforts in the global South, again as opposed to other banks. However, other aspects of HSBC's Green Finance strategy lack specificity and failed to align with leading practice. For example, while we welcome HSBC's ambition to provide and facilitate between USD 750 billion to USD 1 trillion of sustainable finance and investment by 2030. It's not currently possible for investors to know what the group's sustainable finance ambitions are across environmental and social themes. We have two questions for you today. Firstly, could HSBC provide investors with a breakdown of how its sustainable finance targets will be spent across social and environmental themes? And secondly, will the bank set sector-based green finance targets, including a renewable energy target as some of its European peers have done? We would welcome a meeting to discuss these two asked with you. Thank you.

Thank you for your question. And again, I would like to thank ShareAction, I think, for their constructive engagement over a number of years on a range of topics relating to climate strategy. And again, thank you for recognizing the good progress that we've made. In 2020, we set out an ambition to provide or facilitate between USD 750 billion to USD 1 trillion of sustainable finance and investments by 2030 in support of the transition to net zero and the Sustainable Development Goals. Between 2020 and the end of 2023, we provided and facilitated $294.4 billion of sustainable financing and investment. The full breakdown across green, sustainable and social products is set out on Page 49 of our annual report. For example, in 2023, social use of proceeds made up $8.4 billion of the $83.7 billion of total sustainable finance and investment in 2023. As you mentioned and as outlined in our net-zero plan in the chapter on measuring progress, our published data dictionary, defining our sustainable finance and investment continues to evolve and is reviewed annually to take into account developments in the market both in terms of standards and taxonomies that we follow in our labeling. We look forward to ongoing engagement with you on this important issue as the situation continues to evolve. On your second question regarding the bank setting sector-based green finance targets. Again, thank you for your question. We had a clear and transparent set of policies around project financing and we remain committed to becoming net zero in our financed emissions by 2050. Our approach to target setting and policy implementation is set out in our net zero transition plan. We are focused on delivering our 2030 targets and implementing our current policies. We focus our efforts on where we can drive the most material and implementable change. Whilst we have been clear that we may review our policies and targets over time, it wouldn't be appropriate to speculate on how our policies and targets may evolve in the future today. Thank you for your question. Next question, please.

The next question is in the room and comes from Leonard.

Thank you, Chairman. My name is Len Aspell. I'm a shareholder, and I'm also the National Chair of Horizons, the Association for former Midland and HSBC employees. How does the Board reconcile its position of removing the limitations for fixed and variable pay for executives against the decision made by the U.K. bank to keep pensions in payment well below the rate of inflation for the last three years by employing the caps of 3% or 5% and issuing any inclination to exercise the discretion allowed under the pension scheme trust [ deed ] and rules? Furthermore, for 2024, the bank ignored the views of the independent pension scheme Board who had suggested the bank exercise discretion in relation to the lowest paid pensioners. 30,000 of the bank's U.K. pensioners received less than [ GBP 10,000 ] per annum, and many of those are women who were paid less than [ GBP 5,000 ]. Indeed, the average pension for women have been around [ GBP 6,500 ] against the average male pension being [ GBP 22,600 ]. I wrote the Chief Executive of the U.K. Bank on the ninth of September last, seeking an increase beyond the caps, particularly for those impacted the most by the continued high level of inflation and stating that Horizons believed it really was time for the bank to acknowledge the hardship caused to those least able to cope. I pointed out that the bank had rightly supported its active staff in 2023. And indeed also paid a minimum of GBP 1,400 to its staff in 2024. I asked the bank to exercise the discretion allowed and built into the trust [ deed ] for just such circumstances. I also offered to engage with the bank's performance and reward team, together with the pension scheme executive in how any discretion might best be achieved and at the very least, asked that it should engage in consultations in a much more open manner than has been the case in the recent past. Lastly, I stated it was not appropriate to rely upon pensioners to seek a payment via the hardship fund of The Bank Workers Charity. But rather, it was for the bank to protect the value of pensions in payment against the vagaries of high inflation. Many of your pensioners provided decades of loyal service to the bank. I said it was time for the bank to show some loyalty to those who served them so well in the past. I am greatly saddened to say that I was not advised directly of the outcome of the review, but rather a U.K. CEO asked the Chairman of the Pension Board to pass on the bank's response. How discourteous was that? And how does it fit in with the group's values? It's not an insult to me, it's an insult to all of your pensioners. Having received the copy letter from [ Russell Pico ], he was then asked to convey to me that the letter was not for publication to those I represent. No discretion was exercised, but the promise was made of a new, easier claims process to approach The Bank Workers Charity for a charitable hardship payment. And the bank was to provide GBP 5 million, an amount that represents a fraction of what the trustee Board and Horizons sought to support the lower-paid pensions. Six months on and we have had no meaningful involvement in how the new fund will work, and we still await arrangements to be put in place. The bank pensioners are proud individuals and should not have to go like Oliver Twist with their begging bowl for a charitable handout of crumbs from the master's table. So I repeat, how does the Board reconcile the position towards its directors with the plight of the lowly paid pensioners? And I would appreciate your comments and justification, please.

Thank you for your detailed question. I thank also to Horizons to the organization we represent on the valuable work and engagement that you do on behalf of HSBC pensioners. Clearly, you've raised a number of issues and let me try to address each of those issues in turn. First, on executive remuneration. We're seeking shareholder approval today for the Group Remuneration Committee to use its discretion to set an appropriate variable to fixed pay ratio where regulations allow for those colleagues deemed to be material risk takers. The committee will take into account all relevant factors when setting the ratio, including the firm's business activities and associated prudential and conduct risks. What this does is it allows us to have flexibility to reduce fixed pay costs over time and increase the amount of pay that is variable and subject to the delivery of performance. It also strengthens our ability to recruit and retain people in competitive markets, where many of our international competitors do not have similar restrictions. Your Board considers for those reasons that Resolution 3 is in the best interests of the company and its shareholders and recommends that you vote in its favor. The second issue, again, on the separate issue of pension increases. The pension scheme provides annual guaranteed increases to pensions which are intended to address the impact of inflation. For 2024, we estimate the increase to be around 4.3% on average. That increase will be awarded to pensioners in 2025, the increase that will be awarded to pensioners in 2025 is subject to review this year and will, of course, consider the cost of living pressures experienced by pensioners in recent years. The scheme's increases are capped and will depend on the individual's period of service. Clearly, the high levels of inflation in markets like the U.K. have had and continue to have a very serious impact on many colleagues. And that is why we set up a support fund in May 2021 to provide extra money to those most in need. It is available for eligible employees, their dependents and former colleagues and a general living grant is available, which was increased in 2022 in light of the cost of living crisis from a maximum of [ GBP 500 to GBP 2,000 ]. It can also be applied more than once. We've committed a further, as you mentioned, a further [ GBP 5 million ] to the support fund and are committed to working with the trustee to ensure that the pensioners are aware and able to access the support available to them. Communications promoting this support fund will be issued to all pensioners shortly. And I apologize on behalf of my colleagues and the company for not coming back to you soon and as clearly as we should have, and we will remedy that. Finally, on the state deduction, we have already discussed this issue, and I do not intend to go into this issue in detail again. But I do recognize the widespread interest and we will reiterate that our position on removing the state deduction has been clear and consistent. It would represent a risk retrospective change that would benefit a particular group of members and will be unfair to other HSBC Bank pension scheme members. Len, thank you for your question, and we will continue to engage with Horizon. Next question, please.

The next question was submitted online and comes from [indiscernible]. HSBC has exited from multiple markets in the past decade where it lacked scale. At the same time, it is doubling down on international connectivity to take advantage of reglobalization. How does HSBC ensure past mistake in global expansion would not be repeated? And how does current strategy differ from the past?

Let me pass to my Chief Executive to answer that.

In terms of the markets we're exiting, they have been largely markets or business lines in countries where we had insufficient scale in domestic banking to compete effectively with local banks. What we have protected is our international footprint in the key markets that contribute to global trade GDP and global capital flows, which we estimate to be around 50 important markets in the world. So we're expanding our connectivity between those markets, but we're not looking at going on a new expansion phase of incremental countries. It's more expanding within the current country footprint. Thank you for your question.

The next question was pre-submitted by [ Isabela ] [indiscernible] on behalf of Fair Share, an educational foundation. HSBC has adopted an iron, steel and aluminum decarbonization target to reduce its average emission intensity for its steel portfolio, 41% by 2030 against the 2019 baseline. However, according to [ Reclaim Finance's ] report on commercial bank finance for the steel sector, stealing our future, the bank is propping up coal-based steel. HSBC Brazil as an outstanding loan with Ternium Brazil maturing in August of this year. Ternium Brazil operates a massive polluting steel plant in the west zone of Rio de Janeiro and is responsible for over 50% of the city's greenhouse gas emissions. Recent monitoring by citizens has also shown that local residents have observed an increase in respiratory, heart, skin, cancer and mental health ailments due to the particulate matter and graphite that the plant emits. Ternium is actively extending the lifetime of its coal-fired steelmaking furnaces. So my question is this. In line with your new target, will HSBC commit to adopting a policy for the steel sector that ends new finance for super polluters like Ternium and instead prioritizes finance for steel companies that are transitioning to fossil-free steel?

Thank you for your question. And again, let me be clear, first of all, that we cannot comment on any client relationships, but let me give you some context around that. In our net zero transition plan, we outlined how we have set a target to reduce the emissions of our iron, steel and aluminum portfolio by 2030, which represents a 42% reduction versus the 2019 baseline. We aim to engage with the most material iron, steel and aluminum customers on their net-zero targets and on their transition plans. Making progress towards our target necessitates steering our portfolios towards customers that are moving towards lower emissions intensity businesses, including lower emissions intensity steelmakers. As we move towards 2030, alongside standard risk-return parameters, we expect to manage our portfolio, taking into consideration our customers' transition plans and financed emissions implications. Again, thank you for your question.

The next question is online and came from [indiscernible]. Would it be possible if shareholders' dividends once allotted, could be automatically changed to shares as practiced before?

We reviewed this practice before. Two years ago, we changed that practice and we have no plans to change back again.