12th Apr 2019 12:45
LONDON (Alliance News) - Speaking at the FTSE 100-listed bank's annual general meeting on Friday HSBC Holdings PLC Chair Mark Tucker said the global economy is "much less" predictable than a year ago as he expects the ongoing trade war between China and the US to affect sentiment through 2019.
At the AGM, held in Birmingham, Chief Executive John Flint reiterated HSBC's "important" target of achieving positive jaws in 2019.
The jaws ratio - a key financial performance indicator - is the difference between the percentage growth in income and the percentage growth in expenses.
Discussing global macro issues which HSBC is more susceptible to than most, due to its strong exposure to Asian markets, Tucker said systems of global trade "remains subject to political pressure" with the differences between China and the US likely to continue to "inform sentiment through the rest of 2019".
Tucker added that he hoped the dialogue between Washington and Beijing has a "positive outcome".
Tucker said: "Global growth is slowing, largely as a result of weakness in Europe although the economic outlook is also softer in the US and in Asia."
Until the issue between the two global superpowers becomes clearer, HSBC will instead focus on "making the most of the opportunities that unquestionably exist", in particular the lower barriers to trade.
Tucker said the Comprehensive & Progressive Agreement for Trans-Pacific Partnership - the EU's bilateral agreement with Japan and Singapore alongside the US-Mexico-Canada trilateral trade pact provides HSBC with "important counterweights" that could stimulate international trade in the year ahead.
HSBC noted recent developments in China to liberalise financial markets. Last month, the National People's Congress outlined a series of further steps that, according to Tucker, will form China's response to "changing external conditions".
He added: "They are also part of the much longer process of gradual reform and opening up that has transformed the Chinese economy and created opportunities for domestic and international customers and investors."
In the US, Tucker expects the Federal Reserve to "adopt a more cautious stance" through the rest of 2019.
Turning to the UK, Tucker noted "understandable" caution exhibited by customers in the UK, given the "uncertainty surrounding Brexit", but was unable to offer any reprieve replying the uncertainty "seems likely to continue for some time".
Tucker added: "While there are undoubtedly more risks to global economic growth than this time last year, we remain alert and continue to model and anticipate a wide range of scenarios as part of our risk management."
CEO Flint added the future path of interest rates is adding to uncertainty surrounding the global economy.
Flint said: "This is yet to translate into higher credit losses, but that could change if the global economy deteriorates."
He said HSBC remains committed to the targets the lender outlined last summer. In June, HSBC said it targeting a return on tangible equity of more than 11% by 2020. It also plan to invest between USD15 billion and USD17 billion dependant on "achieving positive adjusted jaws each financial year."
"The strategy is working, I'm encouraged by our progress and I'm confident for the year ahead," said Flint.
The lender reiterated its objection to resolution 17, advising shareholders to vote against the measure. The concerns were raised by the Midland Clawback Campaign Group, who want HSBC to "abolish, or effectively remedy, the unfair discriminatory practice".
Chair Tucker said: "While we appreciate the Midland Clawback Campaign Group for their constructive engagement with Ian Stuart, Chief Executive of HSBC UK, we cannot support this resolution and we recommend that shareholders vote against it."
The scheme relates to former Midlands Bank employees having their pension payments reduced when they start receiving state pension payments.
Tucker added: "We understand this issue is very important, and that many of the people involved devoted substantial portions of their working lives to Midland Bank and then HSBC.
"We have given it a significant amount of time and consideration and have listened carefully to the points raised by the campaign group as well as those made by MPs on behalf of their constituents.
"But we must be fair and equitable to all remaining 140,000 members of the UK pension scheme, more than half of whom are defined contribution members, and not just to those final salary members who would benefit if the state deduction ceased."
HSBC said that it will reduce the amount of money executive directors can receive in lieu of pension contributions, following criticism of its previous policy.
The bank clarified that for any new executive director, the cash in lieu of pension allowance will reduce to 10% from 30% of their base salary.
Additionally, HSBC's three executive director board members have agreed the reduction in their pension allowance, as a results of increasing scrutiny from investors and other stakeholders on overall executive pay.
The bank's move follows similar reductions in pension allowances at other major UK banks.
Shares in HSBC were up 0.9% Friday at 657.30 pence each.
Related Shares:
HSBC Holdings